Exhibit 3







MANAGEMENT'S RESPONSIBILITY FOR


CONSOLIDATED FINANCIAL STATEMENTS





The accompanying consolidated financial statements of Claude Resources Inc. are the responsibility of management and have been approved by the Board of Directors.





The consolidated financial statements have been prepared by management in conformity with Canadian generally accepted accounting principles. The consolidated Canadian financial statements include some amounts that are based on best estimates and judgments. Financial information used elsewhere in the annual report is consistent with that in the financial statements.





The management of the Company, in furtherance of the integrity and objectivity of data in the financial statements, has developed and maintains a system of internal accounting controls. Management believes the internal accounting controls provide reasonable assurance that financial records are reliable and form a proper basis for preparation of financial statements and that assets are properly accounted for and safeguarded. The internal accounting control process includes management's communication to employees of policies which govern ethical business conduct.





The Board of Directors carries out its responsibility for the consolidated financial statements in this annual report principally through its audit committee, consisting primarily of outside directors. The audit committee reviews the Companys annual consolidated financial statements and recommends their approval to the Board of Directors. The shareholders auditors have full access to the audit committee, with and without management being present.





These consolidated financial statements have been examined by the shareholders auditors, KPMG LLP, Chartered Accountants, in accordance with Canadian generally accepted auditing standards and their independent professional opinion on the fairness of the financial statements is attached.

















/s/ Rick Johnson


Vice President Finance &


Chief Financial Officer


Saskatoon, Canada


March 1, 2004





AUDITORS' REPORT





To the shareholders of Claude Resources Inc.





We have audited the consolidated balance sheets of Claude Resources Inc. as at December 31, 2003 and 2002 and the consolidated statements of earnings (loss), retained earnings and cash flows for each of the years in the three year period ended December 31, 2003. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.





In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2003 and 2002 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2003 in accordance with Canadian generally accepted accounting principles.











/s/ KPMG LLP


Chartered Accountants





Saskatoon, Canada


March 1, 2004








Consolidated Balance Sheets


DECEMBER 31


(CANADIAN DOLLARS IN THOUSANDS)





2003


2002(restated**- Note 2)**AssetsCurrent assets:Cash

$
3,259

$
-Short-term investments


-


300Receivables


2,512


2,174Inventories (Note 3)


3,801


3,366Shrinkage stope platform costs (Note 4)


6,678


5,852Prepaids


259


32816,509


12,020Oil and gas properties (Note 5)


4,766


3,411Mineral properties (Note 6)


26,932


17,338Investments (Note 7)


1,660


619Deposits for reclamation costs


1,950


1,425$
51,817

$
34,813Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness

$
-

$
1,628Payables and accrued liabilities


4,535


1,940Demand loan (Note 8)


-


110Current portion of obligations under capital lease


54


514,589


3,729Obligations under capital lease (Note 9)


59


122Asset retirement obligations (Note 10)


1,903


1,770Shareholders equity:Share capital (Note 11)


38,706


24,525Retained earnings


6,560


4,66745,266


29,192Commitments and contingencies (Note 10 and Note 16)Subsequent event (Note 18)$
51,817

$
34,813





See accompanying notes to consolidated financial statements.





On behalf of the Board:





(signature)
(signature)William R. MacNeill
Jon R. MacNeillDirector
Director








Consolidated Statements of Earnings (Loss)


YEARS ENDED DECEMBER 31


(CANADIAN DOLLARS IN THOUSANDS)





2003


2002


2001(restated


(restated- Note 2)


- Note 2)Revenues:Gold

$
25,807

$
20,363

$
19,524Oil and gas:Gross revenue


9,368


7,043


9,024Crown royalties


(2,346
)

(1,748
)

(2,672
)Alberta Royalty Tax Credit


539


440


619Overriding royalties


(4,077
)

(2,929
)

(3,885
)Net oil and gas revenue


3,484


2,806


3,08629,291


23,169


22,610Expenses:Gold


18,041


16,070


15,817Oil and gas


1,260


1,138


1,498General and administrative


2,057


2,218


1,918Interest and other (Note 12)


101


(84
)

(30
)Provision for income taxes (Note 13)


63


31


2621,522


19,373


19,229Earnings before the undernoted items


7,769


3,796


3,381Depreciation, depletion and accretion:Gold


5,369


4,934


5,231Oil and gas


507


469


377Net earnings (loss)

$
1,893

$
(1,607
)
$
(2,227
)Net earnings (loss) per share (Note 14)Basic and diluted

$
0.04

$
(0.03
)
$
(0.05
)





See accompanying notes to consolidated financial statements.








Consolidated Statements of Retained Earnings


YEARS ENDED DECEMBER 31


(CANADIAN DOLLARS IN THOUSANDS)





2003


2002


2001(restated


(restated- Note 2)


- Note 2)Retained earnings (deficit), beginning of yearAs previously reported

$
3,672

$
5,181

$
(32,636
)Effect of change in accounting policy (Note 2)


995


1,093


1,137As restated


4,667


6,274


(31,499
)Reduction of stated capital (Note 11)


-


-


40,000Net earnings (loss)


1,893


(1,607
)

(2,227
)Retained earnings, end of year

$
6,560

$
4,667

$
6,274





See accompanying notes to consolidated financial statements.








Consolidated Statements of Cash Flows


YEARS ENDED DECEMBER 31


(CANADIAN DOLLARS IN THOUSANDS)





2003


2002


2001(restated


(restated- Note 2)


- Note 2)Cash provided from (used in):Operations:Net earnings (loss)

$
1,893

$
(1,607
)
$
(2,227
)Non-cash items:Depreciation, depletion and accretion


5,876


5,403


5,608Net change in non-cash working capital:Receivables


(338
)

(1,475
)

1,676Inventories


(435
)

1,280


(528
)Shrinkage stope platform costs


(826
)

(3,021
)

1,911Prepaids


69


(78
)

117Payables and accrued liabilities


2,595


(174
)

(2,087
)Cash from operations


8,834


328


4,470Investing:Short-term investments


300


(300
)

-Investments


(1,041
)

115


-Mineral properties


(14,864
)

(8,180
)

(3,983
)Oil and gas properties


(1,828
)

(730
)

(818
)Increase in investments


(525
)

(768
)

(657
)(17,958
)

(9,863
)

(5,458
)Financing:Issue of common shares, net of issue costs


14,181


6,163


1,469Demand loan repayment


(110
)

(328
)

438Obligations under capital lease:Proceeds


-


214


-Repayment


(60
)

(41
)

-14,011


6,008


1,907Increase (decrease) in cash position


4,887


(3,527
)

919Cash position, beginning of year


(1,628
)

1,899


980Cash position, end of year

$
3,259

$
(1,628
)
$
1,899Supplemental cash flow disclosure:Interest paid


111


102


176Income taxes paid


63


31


26





See accompanying notes to consolidated financial statements.








Notes To Consolidated Financial Statements


YEARS ENDED DECEMBER 31


TABULAR DOLLAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT AS OTHERWISE NOTED





Operations:





The operations of the Company consist of the following:





SEABEE GOLD MINE





The Seabee gold mine, owned 100% by the Company, is located 125 kilometres northeast of La Ronge, Saskatchewan. Mining of the ore reserves commenced in November, 1991 with commercial production achieved in December, 1991.





OIL & GAS





The Company, through its wholly-owned subsidiary 574095 Alberta Ltd., has a participating interest in the Nipisi Gilwood No. 1 oil field and the Edson Gas Unit No. 1 gas field and associated gas plant and gathering lines. Both areas are considered mature and are operated by others. The areas are also subject to an overriding royalty.





In the Gainsborough area of southeastern Saskatchewan, the Company owns a 75% working interest in six vertical producing oil wells, one water disposal well and a 33.75% working interest in three producing horizontal wells.





1. Significant Accounting Policies:





The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Generally accepted accounting principles require that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the year. Actual amounts could differ from those estimates.





A summary of significant accounting policies is as follows:





CONSOLIDATION PRINCIPLES





The consolidated financial statements include the accounts of the Company and its subsidiary. Interests in joint ventures are accounted for by the proportionate consolidation method.





CASH





Cash and cash equivalents include cash and short-term investments which, on acquisition, have a term to maturity of three months or less. Cash position consists of cash and cash equivalents less bank indebtedness.





SHORT-TERM INVESTMENTS





Short-term investment certificates are carried at the lower of cost and market value.





INVESTMENTS





Investments are carried at cost or at cost less amounts written off to reflect an impairment in value that is other than a temporary decline.





DEPOSITS FOR RECLAMATION COSTS





Deposits for reclamation costs consist of investment certificates held as security for reclamation requirements and are carried at cost.








INVENTORIES





Gold inventory, which includes gold bullion, gold contained in the milling circuit and in stockpiled ore on surface, is valued at the lower of cost and net realizable value. Costs include labour, equipment costs and operating overhead. Material and supplies inventory is valued at the lower of cost and net realizable value.





SHRINKAGE STOPE PLATFORM COSTS





The Company utilizes the shrinkage stope mining method to mine its ore body at the Seabee mine. Under this method, ore used as a working platform to access and mine further ore is valued at the lower of cost and net realizable value. Costs include labour, equipment costs and operating overhead. This broken ore is reclassified to inventory once transported to surface.





OIL & GAS OPERATIONS





The Company follows the full cost method of accounting whereby all costs relating to the exploration for and development of oil and gas reserves are capitalized. Such costs include land acquisition costs, geological and geophysical expenses, engineering fees, related direct administrative expenses, the costs of drilling both productive and non-productive wells, including production equipment, the fair value of retirement obligations and the cost of constructing processing facilities. Also capitalized are identifiable carrying charges on undeveloped properties. Proceeds received from disposal of property interests are credited against accumulated costs except when the disposition results in a significant change in the depletion rate, in which case a gain or loss on disposal is recognized.





The carrying values of the Companys oil and gas properties are compared annually to an estimate of future net cash flow from the production of proven reserves, less future removal, restoration and capital costs as well as general and administrative expenses, financing costs and income taxes based on year-end prices and costs. Should this comparison indicate an excess carrying value, a write-down is recorded.





The costs related to petroleum and natural gas properties are depleted on the unit of production method based on the estimated proven reserves as determined by independent consultants, before deduction of royalties and after conversion to units of common measure based on relative energy content.





The Company is engaged in oil and gas exploration and production in Canada and substantially all of these activities are conducted with others. The accounts reflect only the Companys proportionate interest in such activities.





MINERAL PROPERTIES





All costs related to the acquisition, exploration, development and retirement of mineral properties and the development and retirement of milling assets are capitalized. Development costs at our producing property include only those historical expenditures incurred to extend reserves by converting mineralized material to reserves or for further delineation of existing reserves. Interest on debt associated with the acquisition of mineral properties is capitalized until commencement of commercial production. There have been no interest costs capitalized to date. Amounts reflected for mineral properties not in commercial production represent costs incurred to date, net of write-downs, and are not intended to reflect present or future values. The recoverability of the costs is dependent upon the discovery of economically recoverable ore reserves, the ability to obtain necessary financing to complete development and the development of future profitable production from the properties or realization of sufficient proceeds from the disposition of the properties.





Upon commencement of commercial production, the related historical accumulated costs are amortized against future income of the project using the unit of production method over estimated recoverable ore reserves. Estimated recoverable ore reserves include proven and probable mineral reserves. Costs which are not considered economically recoverable through mining operations, through sale of reserves, or are related to projects which are allowed to lapse, are expensed. Mining equipment is depreciated over its estimated useful life of three years on a straight-line basis.








The Company holds various positions in mining interests, including exploration rights, mineral claims, mining leases, unpatented mining leases and options to acquire mining claims or leases. All of these positions are classified as mineral properties for financial statement purposes.





When options are granted on mineral properties or properties are sold, proceeds are credited to the cost of the property. If no future capital expenditure is required and proceeds exceed costs, the amount is reported as a gain.





ASSET RETIREMENT OBLIGATIONS





The fair value of the liability for the Companys asset retirement obligation is recorded in the period in which it is incurred, discounted to its present value using the Companys credit adjusted risk-free interest rate and the corresponding amount is recognized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period, and the capitalized cost is depreciated over the useful life of the related asset.





REVENUE RECOGNITION





Revenue from gold sales are recognized when the rights and obligations of ownership pass to the buyer. Settlement adjustments arising from final determination of metal weights and assays are reflected in sales when determined. Revenue associated with the sale of oil, NGLs and gas represents the Companys share of the sale value of production during the year (Entitlement Method). Revenue is recognized when the rights and obligations of ownership pass to the buyer.





FOREIGN CURRENCY TRANSLATION





Revenue and expense transactions denominated in foreign currencies are translated in Canadian dollars at the rate of exchange prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated in Canadian dollars at the rate of exchange in effect at the balance sheet date. Exchange gains and losses on these transactions are included in earnings.





HEDGING TRANSACTIONS





Derivative financial instruments are utilized by the Company in the management of its foreign currency and commodity price exposures. The Company may enter into foreign exchange and gold derivative contracts to hedge anticipated sales denominated in US dollars. The Company assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.





Foreign exchange transaction gains and losses on foreign currency denominated derivative financial and commodity instruments used to hedge anticipated US dollar denominated gold sales are recognized as an adjustment of revenue when the sale is recorded.





Realized and unrealized gains or losses associated with derivative instruments, which have been terminated prior to maturity, are deferred under other current, or non-current, assets or liabilities on the balance sheet and recognized in income in the period in which the underlying hedged transaction is recognized. In the event a designated hedged item is sold or extinguished prior to the termination of the related derivative instrument, the hedge is no longer effective, or it is no longer probable that the anticipated transaction will occur substantially as and when identified on the inception of the hedging relationship, any realized or unrealized gain or loss on such derivative instrument is recognized in income.





INCOME TAXES





Future income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.








PER SHARE AMOUNTS





Basic per share amounts are calculated using the weighted average number of shares outstanding during the period. Diluted per share amounts are calculated based on the treasury-stock method, which assumes that any proceeds obtained on exercise of options and warrants would be used to purchase common shares at the average market price during the period. The weighted average number of shares outstanding is then adjusted by the net change.





STOCK-BASED COMPENSATION PLANS





The Company has two stock-based compensation plans which are described in Note 11. Under the share option plan, no compensation expense is recognized when stock options are issued to employees, officers or directors. Under the Employee Share Purchase Plan, compensation expense is recognized for the value of the Companys contribution to the plan. Under both plans, any consideration paid by employees, officers or directors on exercise of stock options or purchase of stock is credited to share capital.





2. Change in Accounting Policy:





Effective January1, 2003, the Company adopted the recommendations of CICA Handbook Section 3110, Asset Retirement Obligations. This standard addresses the accounting for the Companys legal obligations associated with the retirement of tangible long-lived assets resulting from the normal operation of those assets. The Company is required to record the fair value of the liability for the obligation when it is incurred and capitalize an equivalent amount as an asset to be depreciated over its useful life. An accretion component is charged each period for the interest on the fair value liability. The adoption of this policy has been applied retroactively.





The cumulative effect of the change in policy on the balance sheet at December 31, 2002, was to increase mineral properties by $130,000, decrease future asset retirement obligations by $865,000 and increase opening retained earnings by $1,093,000. The effect of the change in policy on the statement of earnings for December 31, 2002 was a reduction in earnings of $98,000 (2001 - $44,000).





3. Inventories:





2003


2002Bullion in-circuit

$
446

$
473Stockpiled ore


419


417Materials and supplies


2,936


2,476$
3,801

$
3,366





4. Shrinkage Stope Platform Costs:





2003


2002Stope Platform Costs

$
6,678

$
5,852





Shrinkage stope platform costs represent ore that is being used as a working stage, within the stope, to gain access to further ore. This ore is expected to be processed in the following 12 months. The processing of this broken ore occurs in accordance with a mine plan based on the known mineral reserves and current mill capacity. The timing of processing of ore has not been significantly affected by historic prices of gold.











5. Oil & Gas Properties:





Details of the Companys oil and gas property, plant and equipment are as follows:





****
****
****
****
****
**Accumulated**
****
****
****
****
****
****
****
****
**Accumulated**
****
****
****
********
****
****
****
****
****
**depreciation,**
****
****
****
****
****
****
****
****
**depreciation,**
****
****
****
********
****
****
****
****
****
**depletion and**
****
****
**2003**
****
****
****
****
****
**depletion and**
****
****
**2002**
********
****
****
**Cost**
****
****
**write down**
****
****
**Net**
****
****
**Cost**
****
****
**write down**
****
****
**Net**Property acquisition and drilling costs

$
11,304

$
9,775

$
1,529

$
10,731

$
9,625

$
1,106Gas plant and production equipment


7,940


4,703


3,237


6,696


4,391


2,305$
19,244

$
14,478

$
4,766

$
17,427

$
14,016

$
3,411





The Alberta oil and gas properties are subject to an overriding royalty. This obligation will cease when approximately $147,500,000 has been paid or when the properties cease to produce.





Amounts of the cumulative overriding royalty paid or accrued are as follows:





December 31, 2003
$113,599,000December 31, 2002
$109,522,000





6. Mineral Properties:







Details of the Companys mineral related property, plant and equipment are as follows:





Accumulated


Accumulateddepreciation,


depreciation,depletion and
2003

depletion and
2002Cost
write down
Net
Cost
write down
Net(restated- Note 2)Property acquisition and mine development costs

$
52,743

$
40,644

$
12,099

$
46,836

$
37,287

$
9,549Buildings, plant and equipment


62,340


51,614


10,726


55,824


50,055


5,769Exploration properties


8,866


4,759


4,107


6,780


4,760


2,020$
123,949

$
97,017

$
26,932

$
109,440

$
92,102

$
17,338





On December 15, 2000, Claude entered into an option agreement with Placer Dome (CLA) Limited (Placer) in respect of the Madsen gold exploration property.





This option agreement entitled Placer to earn a 55% working interest in the Madsen property by expending $8.2 million over three years and delivering to Claude a bankable feasibility study by the end of 2005. Placer may abandon the option at any time after spending $1.2 million. The option agreement was amended effective January 1, 2002 whereby Placer now has until the end of 2006 to earn a 55% working interest in the Madsen property under the same terms and conditions as described above.








Upon Placer fulfilling its obligations in respect of the option agreement, Placer and Claude will form a joint venture with respective interests of 55% and 45%. At Claudes request, Placer may earn an additional 5% of the project by funding Claudes share of infrastructure costs associated with any mine development on the property. Under the agreement, Claudes interests cannot be reduced below 40%.





7. Investments:





2003


2002Investments

$
1,660

$
619





At December 31, 2003, the quoted market value of the investments was $3.4 million (2002 - $1.0 million).





8. Demand Loan:





The demand loan bore interest at prime, was repayable in monthly principal payments of $27,406 plus interest and matured on May 15, 2003. The loan was secured by a general security agreement covering all assets of the Company, excluding oil and gas assets in Alberta.





The Company has a $2,500,000 operating line of credit which bears interest at prime plus 1.5%. These funds are available for general corporate purposes. At December 31, 2003, the bank line was unused.





9. Obligations under Capital Lease:





The obligation under capital lease bears interest at 5.4%, is due in 2006 and is secured by leased equipment. Estimated principal repayments on the capital lease are as follows: 2004 - $54,000, 2005 - $57,000 and 2006 - $2,000.





10. Asset Retirement Obligations:





The Company has accrued estimated future site reclamation costs for the following business segments:





2003


2002(restated- Note 2)Mineral properties

$
1,423

$
1,323Oil and gas properties


480


447$
1,903

$
1,770





Potential changes in regulatory requirements as well as the continuing process of evaluating reclamation alternatives result in an element of uncertainty in estimating these amounts.





The Company has estimated the total obligations associated with the retirement of the Seabee, Madsen and Tartan properties at December 31, 2003 to be $3.4 million. The $1,423,000 fair value of these obligations was determined using a 7.5% discount rate and an expected payment of obligations ranging over 11 to 16 years.





The Company has estimated the total obligations associated with the retirement of its oil and gas operations at December 31, 2003 to be $1.4 million. The $480,000 fair value of these obligations was determined using a 7.5% discount rate and an expected payment of obligations ranging over 9 to 22 years.





As required by regulatory authorities, the Company has provided letters of credit as security for reclamation related to the Madsen and Seabee properties in the amounts of $658,000 (2002 - $658,000) and $1,292,000 (2002 -





$767,000) respectively. As security for these letters of credit the Company has provided investment certificates in the amount of $1,950,000 (2002 - $1,425,000).





11. Share Capital:





AUTHORIZED





The authorized share capital of the Company consists of unlimited common shares and two classes of unlimited preferred shares issuable in series.





The common shares of the Company are entitled to dividends pro rated and, when declared by the Board of Directors, to one vote per share at meetings of the shareholders and, upon dissolution or any other distribution of assets, to receive pro rated such assets of the Company as are distributable to the holders of the common shares.





The first preferred shares are issuable in series and rank ahead of the second preferred shares and the common shares in respect of dividend payment, dissolution or any other distribution of assets. The other rights, privileges, restrictions and conditions attached to each series of the first preferred shares are fixed by the Board of Directors at the time of creation of such series.





The second preferred shares are issuable in series and rank ahead of the common shares in respect of dividend payment, dissolution or any other distribution of assets. The other rights, privileges, restrictions and conditions attached to each series of the second preferred shares are fixed by the Board of Directors at the time of creation of such series.





ISSUED AND OUTSTANDING COMMON SHARES





2003





2002





2001Number


Amount


Number


Amount


Number


AmountBeginning of year


49,459,477

$
24,525


43,053,853

$
18,362


40,224,866

$
56,893ESPP (a)


159,130


89


227,931


121


328,987


176Exercise of stock options (b)


35,000


20


90,000


74


-


-Reduction in stated capital (c)


-


-


-


-


-


(40,000
)Flow-through shares (d)


-


-


-


-


2,500,000


1,375Issue costs


-


-


-


-


-


(82
)Issued for mineral properties (e)


-


-


75,000


68


-


-Private placement (f)


-


-


5,000,000


5,000


-


-Issue costs


-


-


-


(509
)

-


-Exercise of warrants (f)


2,550,770


3,176


12,693


13


-


-Flow-through shares (g)


-


-


1,000,000


1,500


-


-Issue costs


-


-


-


(104
)

-


-Private placement (h)


2,500,000


3,750


-


-


-


-Issue costs


-


(223
)

-


-


-


-Exercise of warrants (h)


137,250


254


-


-


-


-Flow-through shares (i)


1,000,000


2,500


-


-


-


-Issue costs


-


(49
)

-


-


-


-Private placement (j)


2,500,000


5,000


-


-


-


-Issue costs


-


(336
)

-


-


-


-End of year


58,341,627

$
38,706


49,459,477

$
24,525


43,053,853

$
18,362





(a) EMPLOYEE SHARE PURCHASE PLAN (ESPP)





The ESPP was established to encourage employees to purchase Company common shares. Under the plan, eligible employees may contribute up to 5% of their basic annual salary and the Company shall contribute common shares in an amount equal to 50% of the employees contribution. Shares of the Company are issued to employees based on a weighted average market price over a specific period. During 2003, the Company issued 159,130 common shares (2002 - 227,931; 2001 - 328,987) for $89,000 (2002 - $121,000; 2001 - $176,000) pursuant to this plan. The





Company has reserved for issuance 1,750,000 common shares pursuant to this plan of which 1,155,350 shares have been issued.





(b) SHARE OPTION PLAN





The Company has established a share option plan under which options may be granted to directors, officers and key employees to purchase up to an aggregate of 5,000,000 common shares. Options granted have an exercise price of not less than the market price of the common shares on the stock exchange on which the shares are traded. Options granted expire 10 years from the date of the grant of the option.





For options outstanding at December 31, 2003 and 2002 weighted average exercise prices are as follows:





2003


Average


2002


AverageOptions


Price


Options


PriceBeginning of year


2,430,000

$
1.11


2,260,000

$
1.11Options granted


30,000


1.94


260,000


.99Options exercised


(35,000
)

.58


(90,000
)

.82End of year


2,425,000

$
1.13


2,430,000

$
1.11





For options outstanding at December 31, 2003 the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life are as follows:





Weighted


WeightedOptions Price





Average


AveragePer Share


Number


Exercise Price


Remaining Life$0.53-$0.90


1,051,000

$
0.61


8.04 years$1.16-$1.32


1,019,000


1.31


5.38 years$1.71-$3.05


355,000


2.13


4.22 years2,425,000

$
1.13


6.36 years





The fair value of stock options issued in the year was estimated using the Black-Scholes option pricing model with assumptions of 5 year weighted average expected option life, no expected forfeiture rate, 67.5% (2002 - 72.8%) volatility and interest rates ranging from 3.6% to 4.1% (2002 - 4.39% to 4.90%). For the year ended December 31, 2003, the Companys pro forma expense attributable to stock options was $10,600 (2002 - $52,000), pro forma net earnings for the year ended December 31, 2003 incorporating the pro forma expense attributable to stock options was $1,882,000 (2002 - net loss of $1,659,000) with basic and diluted earnings per share of $0.04 (2002 - loss of $0.03 per share).





(c) REDUCTION IN STATED CAPITAL





At the annual meeting of shareholders on May 23, 2001, a special resolution was passed reducing the stated capital of the Company by $40 million.





(d) FLOW-THROUGH SHARES





During 2001, the Company entered into a flow-through share agreement for the issue of 2,500,000 common shares at a price of $.55 per share for proceeds of $1,375,000. The Company was required to expend $1,375,000 in qualifying Canadian Exploration Expenses as defined in the Income Tax Act (Canada) prior to December 31, 2002.





(e) ISSUED FOR MINERAL PROPERTIES





During 2002, the Company acquired rights on mineral properties in exchange for 75,000 common shares of the Company having an attributed value of $67,500 ($0.90 per share).








(f) PRIVATE PLACEMENT





During 2002, the Company completed a private placement for the issue of 5,000,000 units at a price of $1.00 per unit for aggregate gross proceeds of $5,000,000. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to acquire one common share at an exercise price of $1.25 for a period of twelve months from the closing date. In partial consideration for the services provided to Claude in connection with the Offering, the Underwriters were issued an aggregate of 63,463 common share purchase warrants, each of which entitles the holder to acquire one common share at an exercise price of $1.00 for a period of twelve months from the closing date. All warrants have been exercised.





(g) FLOW-THROUGH SHARES





During 2002, the Company entered into a flow-through share agreement for the issue of 1,000,000 common shares at a price of $1.50 per share for proceeds of $1,500,000. The Company must expend $1,500,000 in qualifying Canadian Exploration Expenses as defined in the Income Tax Act (Canada) prior to December 31, 2003.





(h) PRIVATE PLACEMENT





During 2003, the Company completed a private placement offering of 2,500,000 units, each unit consisting of one common share and one half of one common share purchase warrant, at a price of $1.50 per unit, for gross proceeds of $3,750,000. Each whole purchase warrant will entitle the holder, upon exercise at any time up to and including January 31, 2004, and upon payment of $1.85, to subscribe for one common share. In partial consideration for the services provided to Claude in connection with the private placement, the Underwriters were issued 250,000 common share purchase warrants each of which entitles the holder, upon exercise at any time up to and including January 31, 2004 and upon payment of $1.85, to subscribe for one common share. At December 31, 2003, there were 1,362,750 warrants outstanding.





(i) FLOW-THROUGH SHARES





During 2003, the Company entered into a flow-through share agreement for the issue of 1,000,000 common shares at a price of $2.50 per share for proceeds of $2,500,000. The Company must expend $2,500,000 in qualifying Canadian Exploration Expenses as defined in the Income Tax Act (Canada) prior to December 31, 2004.





(j) PRIVATE PLACEMENT





During 2003, the Company completed a private placement of 2,500,000 units, each unit consisting of one common share and one half of one common share purchase warrant, at a price of $2.00, for gross proceeds of $5,000,000. Each whole purchase warrant will entitle the holder, upon exercise at any time up to and including June 23, 2005, and upon payment of $2.50, to subscribe for one common share. In partial consideration for the services provided to Claude in connection with the private placement, the Underwriters were issued 150,000 common share purchase warrants each of which will entitle the holder, upon exercise at any time up to and including December 23, 2004 and upon payment of $2.10, to subscribe for one common share. At December 31, 2003, there were 1,400,000 warrants outstanding.





12. INTEREST AND OTHER:





2003


2002


2001Interest expense

$
111

$
102

$
176Less: interest and other income


(10
)

(186
)

(206
)Interest and other

$
101

$
(84
)
$
(30
)











13. INCOME TAXES:





The significant components of future income tax assets at December 31 are as follows:





2003


2002(restated- Note 2)Future income tax assets:Mineral properties

$
31,055

$
35,635Non-capital loss carryforwards


5,690


8,892Asset retirement obligations


723


797Share issue costs


343


330Future income tax assets before valuation allowance


37,811


45,654Valuation allowance


(37,811
)

(45,654
)Future income tax assets

$
-

$
-








The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial income tax rate to earnings before income taxes. The reasons for these differences are as follows:





2003


2002


2001(restated


(restated- Note 2)


- Note 2)Earnings (loss) before income taxes

$
1,956

$
(1,576
)
$
(2,201
)Combined federal and provincial tax rate


44
%

45
%

45
%Expected tax expense (recovery)


861


(709
)

(991
)Increase (decrease) in taxes resulting from:Crown royalties


929


787


1,202Alberta Royalty Tax Credit


(224
)

(198
)

(279
)Resource allowance


(1,121
)

(395
)

(1,088
)Effect of change in effective tax rates


7,049


-


-Valuation allowance


(7,494
)

515


1,156-


-


-Large corporations tax


63


31


26Provision for income taxes

$
63

$
31

$
26





At December 31, 2003, the Company and its subsidiary had operating losses for income tax purposes approximating $15,000,000, which are available to reduce taxes in future years and expire over the period to the year 2009.





14. PER SHARE AMOUNTS:





Basic loss per common share is computed by dividing net loss applicable to common shares by the weighted number of common shares issued and outstanding for the relevant period. Diluted loss per common share is computed by dividing net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued. The calculation of loss per share amounts is based on the following: per share amounts have been calculated based on the weighted average number of shares outstanding during the year ended December 31, 2003 of 53,850,694 shares (2002 - 46,919,331 shares; 2001 - 40,622,346 shares).













2003


2002


2001(restated


(restated- Note 2)


- Note 2)Basic earnings (loss) per share:Net earnings (loss) available to common shareholders

$
1,893

$
(1,607
)
$
(2,227
)Weighted average number of common shares outstanding


53,851


46,919


40,622$
0.04

$
(0.03
)
$
(0.05
)Diluted earnings (loss) per share:Net earnings (loss) available tocommon shareholders

$
1,893

$
(1,607
)
$
(2,227
)Weighted average number ofcommon shares outstanding


53,851


46,919


40,622$
0.04

$
(0.03
)
$
(0.05
)





Excluded from the computation of diluted loss per share were:




i)
Options outstanding of 355,000 shares with an average exercise price of $2.13 (2002 - 1,344,000 @ $1.51; 2001 - 1,364,000 @ $1.49) as the options exercise prices were greater than the average market price of the Companys common shares.ii)
In 2002, options outstanding of 1,086,000 common shares with an average exercise price of $0.61 (2001 - 896,000 @ $0.53) as they were anti-dilutive.iii)
Warrants outstanding for 2,762,750 common shares with an average exercise price of $2.16 (2002 - 2,500,000 common shares with an exercise price of $1.25) as the exercise price was greater than the average market price of the Companys common shares. In 2002, warrants outstanding for 50,770 common shares with a $1.00 exercise price as they were anti-dilutive.





15. FINANCIAL INSTRUMENTS:





The Companys financial results are affected by the normal risks and capital expenditure requirements associated with exploration, development and production of mineral and oil and gas properties. Financial results are also affected by market prices for gold and oil and gas, changes in foreign currency exchange rates, interest rates and other operating risks.





To manage risks associated with prices for gold, oil and gas and changes in foreign currency, the Company may use commodity and foreign currency derivative instruments.





Financial assets which are subject to credit risks include cash and receivables and commodity and currency instruments. The Company minimizes risks on its financial assets by holding positions with credit worthy entities. Sales of commodities are to entities considered to be credit worthy.





Except as discussed below, the fair market value of the Companys financial assets and liabilities approximate net book value.





At December 31, 2003, the Company had outstanding forward gold contracts related to 2004 production of 6,000 ounces at an average price of US $388 per ounce with a market value loss inherent in these contracts of US $175,000. At December 31, 2002, the Company had outstanding forward gold contracts related to 2003 production of 8,750 ounces at an average price of US $307 per ounce with a market value loss inherent in these contracts of US $310,000. At December 31, 2001, the Company had outstanding forward gold contracts related to 2002 production





of 2,250 ounces at an average price of US $292 per ounce with a market value gain inherent in these contracts of US $34,000.





At December 31, 2003, the Company had outstanding foreign exchange contracts to sell US $9.8 million at an average exchange rate of 1.3446 CDN$/US$ with a market value gain inherent in these contracts of US $342,000. At December 31, 2002, the Company had outstanding foreign exchange contracts to sell US $5.3 million at an average exchange rate of 1.5871 CDN$/US$ with a market value gain inherent in these contracts of US $25,000. At December 31, 2001, the Company had outstanding foreign exchange contracts to sell US $5.3 million at an average exchange rate of 1.5844 CDN$/US$ with a market value loss inherent in these contracts of US $27,000.





16. COMMITMENTS:





During 1995, the Company entered into an agreement with Cameco and Husky Oil to explore the Amisk Lake region located 15 kilometres west of Flin Flon, Manitoba. Under this option agreement, the Company was required to spend $2.5 million by October, 1999, to earn a 35% working interest in the property. The Company has the option to earn an additional 35% interest by either spending a further $14 million on exploration and development or by bringing the property into production by October, 2007. Should the Company successfully complete this earn-in, the optionors must either elect to participate in the project and each repurchase a 5% interest for $2,357,500 or each sell 15% to the Company for $800,000. The Company can, at any time, lock in its working interest and elect to participate in the Amisk Lake Joint Venture. To December 31, 2003, the Company has spent approximately $3.4 million on this property. The Company has earned the rights to acquire 35% of the property, but has not exercised that option at December 31, 2003.





To satisfy its commitments pursuant to the issuance of flow-through shares, the Company is required to expend $2.5 million of qualifying exploration expenditures for tax purposes on or before December 31, 2004.





17. RECENTLY ISSUED STANDARDS NOT YET IMPLEMENTED:





i) Stock-based Compensation





Effective January 1, 2004, Claude will adopt the revised CICA Handbook Section 3870, Accounting for Stock-Based Compensation and Other Stock-Based Payments. Revised Section 3870 requires all transactions whereby goods and services are received in exchange for stock-based compensation and other stock-based payments to be recognized in the financial statements at fair value. This change effectively requires companies to expense the cost of stock options provided to employees. This requirement is effective for financial periods beginning on or after January 1, 2004. Adoption of this standard in 2003 would have reduced net earnings by $10,600.





18. SUBSEQUENT EVENT:





As of March 1, 2004, 1,138,450 warrants were exercised, pursuant to the January 31, 2003 private placement (see Note 11(h)), for gross proceeds of $2.1 million.





19. COMPARATIVE FIGURES:





Certain prior years balances have been reclassified to conform to the current financial statement presentation.





20. DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES:





These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada. The Company monitors differences between generally accepted accounting principles (GAAP) in Canada and the United States (U.S.), none of which have a material effect on the financial statements except as summarized below:














a) Balance Sheets





2003


2002(restated- Note 2)Mineral Properties  under Canadian GAAP

$
26,932

$
17,338Adjustment to reverse Canadian GAAP restatement (ix)


-


(130
)Cumulative exploration expenditures expensedunder U.S. GAAP (ii)


(4,107
)

(1,504
)Cumulative depreciation and depletion adjustment (iii)


1,239


955Cumulative write-down adjustment (iii)


(1,825
)

(1,825
)Mineral Properties  under U.S. GAAP

$
22,239

$
14,834Investments  under Canadian GAAP

$
1,660

$
619Unrealized gain on available-for-sale securities (v)


1,761


409Investments  under U.S. GAAP

$
3,421

$
1,028Payables and accrued liabilities  under Canadian GAAP

$
4,535

$
1,940Cumulative unrealized loss (gain) on derivative instruments (viii)


(215
)

440Payables and accrued liabilities  under U.S. GAAP

$
4,320

$
2,380Asset retirement obligation  under Canadian GAAP

$
1,903

$
1,770Adjustment to reverse Canadian GAAP restatement (ix)


-


865Asset retirement obligation  under U.S. GAAP

$
1,903

$
2,635Shareholders equityShare capital  under Canadian GAAP

$
38,706

$
24,525Reduction of stated capital (vii)


55,000


55,000Cumulative stock compensation costs (vi)


374


374Share capital  under U.S. GAAP


94,080


79,899Retained earnings  under Canadian GAAP


6,560


4,667Reduction of stated capital (vii)


(55,000
)

(55,000
)Cumulative exploration expenses (ii)


(4,107
)

(1,504
)Cumulative depreciation and depletionadjustment (iii)


1,239


955Cumulative write-down adjustment (iii)


(1,825
)

(1,825
)Cumulative unrealized gain (loss) onderivative instruments (viii)


-


(440
)Adjustment to reverse Canadian GAAP adjustment (ix)


-


(995
)Cumulative stock compensation costs (vi)


(374
)

(374
)Deficit  under U.S. GAAP


(53,507
)

(54,516
)Other comprehensive incomeUnrealized gain on available-for-sale securities (v)


1,761


409Derivative instruments (viii)


215


-Shareholders equity  under U.S. GAAP

$
42,549

$
25,792







b) Statements of Earnings (Loss)





2003


2002


2001(restated


(restated- Note 2)


- Note 2)Net earnings (loss) - under Canadian GAAP

$
1,893

$
(1,607
)
$
(2,227
)Adjustment to reverse Canadian GAAP restatement (ix)


-


98


44Net earnings applicable to U.S. GAAP


1,893


(1,509
)

(2,183
)Exploration expenditures (ii)


(2,603
)

(1,419
)

(85
)Depreciation and depletion adjustment (iii)


284


338


617Stock compensation costs (vi)


-


-


(57
)Derivative instruments (viii)


440


(451
)

11Net earnings (loss) before cumulative effect of change inaccounting principle


14


(3,041
)

(1,697
)Cumulative effect of change in accounting principle (ix)


995


-


-Net earnings (loss)  under U.S. GAAP


1,009


(3,041
)

(1697
)Available-for-sale securities (v)


1,352


365


(452
)Derivative instruments (viii)


215


-


-Comprehensive earnings (loss) under U.S. GAAP


2,576


(2,676
)

(2,149
)Net earnings (loss) per share under U.S. GAAPBasic and diluted

$
0.02

$
(0.06
)
$
(0.04
)





i) Cash





Under U.S. GAAP, cash and short-term investment amounts restricted against future use as a result of commitments related to flow-through share agreements must be separately classified in the financial statements. As a result, proceeds of $2.5 million from a 2003 flow-through share issue ($1.5 million from a 2002 flow-through share issue) would be classified separately as reserved cash.





ii) Mineral Property Exploration Expenditures





Mineral property exploration expenditures are accounted for in accordance with Canadian GAAP as disclosed in Note 1. For U.S. GAAP purposes, the Company expenses, as incurred, exploration expenditures relating to unproven mineral properties. When proven and probable reserves are determined for a property and a final feasibility study determines the economic recoverability of these reserves, subsequent development costs of the property are capitalized.





iii) Write-down of Mineral Properties





Under both Canadian and U.S. GAAP, property, plant and equipment must be assessed for potential impairment. If the cash flows are less than the carrying value of the asset, under Canadian GAAP and U.S. GAAP, the impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair value is calculated as the present value of estimated future net cash flows. Under both Canadian and U.S. GAAP, impairment tests are calculated with cash flows determined using only proven and probable reserves. Previously, under Canadian GAAP, the impairment loss was calculated as the difference between the carrying value of the asset and its recoverable amount calculated on an undiscounted future cash flow basis. The resulting difference in the previous period write-down between Canadian and U.S. GAAP also results in a difference in the amount of depreciation and depletion charged to earnings.





iv) Oil and Gas Properties





Under both Canadian and U.S. GAAP, property, plant and equipment must be assessed for potential impairment. Under both Canadian GAAP and U.S. GAAP, the impairment loss is calculated as the amount by which the carrying value of the asset exceeds the present value of estimated future net cash flows applying a discount rate of 10%.





Under both Canadian and U.S. GAAP, impairment tests are calculated using only proved producing reserves with oil, NGLs and gas prices at the year end date.





v) Available-for-Sale Securities





Under Canadian GAAP, portfolio investments are accounted for using the cost method. Under U.S. GAAP, portfolio investments classified as available-for-sale securities are carried at market values with unrealized gains or losses reflected as a separate component of shareholders equity and included in comprehensive income.





vi) Stock-Based Compensation





Prior to January 1, 2002, Canadian GAAP did not require transactions in which equity instruments issued for consideration of services performed to be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. U.S. GAAP did require the measurement of such consideration. Accordingly, in 2001, the fair value was estimated using the Black-Scholes option pricing model with assumptions of a 5 to 10 year expected term, 54.7% to 57.4% volatility, no expected forfeiture rate and interest rates ranging from 4.66% to 5.99%.





vii) Reduction of Stated Capital





Under Canadian GAAP and by special resolutions of the shareholders, the Company reduced its stated capital account by $55,000,000. This reduction in stated capital is not permitted under U.S. GAAP and accordingly, has resulted in a cumulative increase in the share capital account of $55,000,000 with a corresponding increase in the Companys deficit balance.





viii) Accounting for Derivative Instruments and Hedging Activities





In accordance with Financial Accounting Standards Board (FASB) Statement 133, Accounting for Derivative Instruments and Hedging Activities, the Company is required to recognize all derivatives on the balance sheet at fair value. Prior to January 1, 2003, the derivatives had not been documented as hedges under U.S. GAAP and accordingly, gains and losses were recorded in earnings. For amounts included in other comprehensive income for the year ended December 31, 2003, a gain of $441,000 relates to the hedging of foreign currency risk and a loss of $226,000 relates to the hedging of gold price risk. Of these amounts a gain of $215,000 is expected to be recorded in earnings during 2004.





ix) Cumulative Effect of a Change in Accounting Policy





In June of 2001, the FASB issued Statement 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and use of the asset. Statement 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value is added to the carrying amount of the associated asset. The liability is accreted at the end of each period through charges to operating expenses.





For Canadian GAAP, the cumulative effect of the change in policy on the balance sheet at December 31, 2002 is to increase mineral properties by $130,000, decrease asset retirement obligation by $865,000 and increase opening retained earnings by $1,093,000. Under U.S. GAAP no restatement of prior periods is required. The effect of the change in policy for the year ended December 31, 2003 was to increase earnings under U.S. GAAP by $995,000.





x) New Accounting Pronouncements





During 2003, the FASB issued Financial Interpretation 46 Revised (FIN 46 Revised) that requires the consolidation of certain entities that are controlled through financial interest that indicate control (referred to as variable interests). Variable interests are the rights or obligations that convey economic gains or losses from changes in the value of the entitys assets and liabilities. The holder of the majority of an entitys variable interests will be required to consolidate the variable interest entity. This change has not had any impact on these consolidated financial statements.