|                   |                                 |
|-------------------|---------------------------------|
|              |                            |
| William J. Biggar | Jeff Swinoga                    |
| President and CEO | Vice President, Finance and CFO |

----

|   | KPMG LLP                             |   | Telephone |   | (416) 777-8500 |
|--------|--------------------------------------|--------|-----------|--------|----------------|
|   | Chartered Accountants                |   | Fax       |   | (416) 777-8818 |
|   | Bay Adelaide Centre                  |   | Internet  |   | www.kpmg.ca    |
|   | 333 Bay Street  Suite 4600 |   |      |   |           |
|   | Toronto ON M5H 2S5                   |   |      |   |           |

|   | KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG           |
|--------|----------------------------------------------------------------------------------------------|
|   | network of independent member firms affiliated with KPMG International, a Swiss cooperative. |
|   | KPMG Canada provides services to KPMG LLP.                                                   |

----

|   | KPMG LLP                             |   | Telephone |   | (416) 777-8500 |
|--------|--------------------------------------|--------|-----------|--------|----------------|
|   | Chartered Accountants                |   | Fax       |   | (416) 777-8818 |
|   | Bay Adelaide Centre                  |   | Internet  |   | www.kpmg.ca    |
|   | 333 Bay Street  Suite 4600 |   |      |   |           |
|   | Toronto ON M5H 2S5                   |   |      |   |           |

|                                                    |
|----------------------------------------------------|
|                                               |
| Chartered Accountants, Licensed Public Accountants |
| Toronto, Canada                                    |
| February 23, 2011                                  |

|    | KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG           |
|--------------|----------------------------------------------------------------------------------------------|
|         | network of independent member firms affiliated with KPMG International, a Swiss cooperative. |
|         | KPMG Canada provides services to KPMG LLP.                                                   |

----

| December 31                                                         |   | 2010   |     |   | 2009   |   |
|--------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                                     |   |   |     |   |   |   |
| ASSETS                                                                   |   |   |     |   |   |   |
| Current Assets                                                           |   |   |     |   |   |   |
| Cash and cash equivalents                                                |   | $      | 75,159   |   |   | $      | 98,255 |   |
| Accounts receivable – Note 4                             |   |   | 80,683   |   |   |   | – |   |
| Taxes receivable                                                         |   |   | 734      |   |   |   | 204 |   |
| Inventories – Note 5                                     |   |   | 27,487   |   |   |   | 25,306 |   |
| Other assets – Note 6                                         |   |   | 27,551   |   |   |   | 2,495 |   |
|                                                                     |   |   | 211,614  |   |   |   | 126,260 |   |
| Mining interests – Note 7                                |   |   | 126,196  |   |   |   | 82,448 |   |
| Reclamation deposits – Note 8                                 |   |   | 10,537   |   |   |   | 10,503 |   |
| Total Assets                                                             |   | $      | 348,347  |   |   | $      | 219,211 |   |
|                                                                     |   |   |     |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                               |   |   |     |   |   |   |   |   |
| Current Liabilities                                                      |   |   |     |   |   |   |   |   |
| Accounts payable and accrued liabilities – Note 9             |   | $      | 40,799   |   |   | $      | 11,195 |   |
| Current portion of obligations under capital leases – Note 10 |   |   | 1,196    |   |   |   | 558 |   |
|                                                                     |   |   | 41,995   |   |   |   | 11,753 |   |
| Taxes payable                                                            |   |   | 936      |   |   |   | 1,573 |   |
| Asset retirement obligations – Note 8                         |   |   | 11,637   |   |   |   | 12,921 |   |
| Obligations under capital leases – Note 10                    |   |   | 1,195    |   |   |   | 576 |   |
| Future mining tax liability – Note 20                         |   |   | 1,207    |   |   |   | 127 |   |
| Total Liabilities                                                        |   |   | 56,970   |   |   |   | 26,950 |   |
|                                                                     |   |   |     |   |   |   |   |   |
| Shareholders’ Equity – Note 12                          |   |   |     |   |   |   |   |   |
| Common share capital and purchase warrants                          |   |   | 697,846  |   |   |   | 583,089 |   |
| Stock options                                                            |   |   | 3,661    |   |   |   | 2,704 |   |
| Contributed surplus                                                      |   |   | 26,269   |   |   |   | 19,608 |   |
| Deficit                                                                  |   |   | (436,399 | )      |   |   | (413,140 | ) |
| Total shareholders’ equity                                         |   |   | 291,377  |   |   |   | 192,261 |   |
| Contingencies and commitments – Notes 16 and 19               |   |   |     |   |   |   |   |   |
| Total Liabilities and Shareholders’ equity                         |   | $      | 348,347  |   |   | $      | 219,211 |   |

|                                  |                            |
|----------------------------------|----------------------------|
| André J. Douchane, Director | Steven R. Berlin, Director |

----

| Year ended December 31                                              |   | 2010   |        |   | 2009   |   |        | 2008   |   |
|--------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| Revenue – before pricing adjustments                          |   | $      | 99,714      |   |   | $      | –     |   |   | $ | 156,241 |   |
| Pricing adjustments:                                                     |   |   |        |   |   |   |        |   |   |   |   |   |
| Commodities                                                              |   |   | 8,941       |   |   |   | 4,614       |   |   |   | (40,667 | ) |
| Foreign exchange                                                         |   |   | (1,557      | )      |   |   | (595        | )      |   |   | 16,522 |   |
| Revenue – after pricing adjustments – Note 17 |   |   | 107,098     |   |   |   | 4,019       |   |   |   | 132,096 |   |
| Operating expenses                                                       |   |   |        |   |   |   |        |   |   |   |   |   |
| Production costs                                                         |   |   | 74,709      |   |   |   | –     |   |   |   | 115,037 |   |
| Smelter treatment, refining and freight costs                            |   |   | 4,779       |   |   |   | 109         |   |   |   | 20,342 |   |
| Royalty expense – Note 16(a)                                  |   |   | 4,202       |   |   |   | 201         |   |   |   | 5,588 |   |
| Inventory pricing adjustment – Note 5                    |   |   | –     |   |   |   | (3,634      | )      |   |   | 3,875 |   |
| Depreciation and amortization – Note 7(b)                |   |   | 13,175      |   |   |   | 269         |   |   |   | 36,026 |   |
| Asset retirement obligation accretion – Note 8           |   |   | 577         |   |   |   | 355         |   |   |   | 321 |   |
| Loss (gain) on disposal of equipment                                     |   |   | (270        | )      |   |   | (36         | )      |   |   | 2,466 |   |
| Asset impairment charge – Note 7(c)                      |   |   | –     |   |   |   | –     |   |   |   | 90,000 |   |
| Insurance recovery – Note 13                             |   |   | –     |   |   |   | –     |   |   |   | (13,800 | ) |
| Care and maintenance costs                                               |   |   | –     |   |   |   | 12,987      |   |   |   | – |   |
| Total operating expenses                                                 |   |   | 97,172      |   |   |   | 10,251      |   |   |   | 259,855 |   |
| Income (loss) from mining operations                                     |   |   | 9,926       |   |   |   | (6,232      | )      |   |   | (127,759 | ) |
| Other expenses                                                           |   |   |        |   |   |   |        |   |   |   |   |   |
| General and administration                                               |   |   | 10,676      |   |   |   | 9,021       |   |   |   | 7,666 |   |
| Exploration                                                              |   |   | 30,126      |   |   |   | 13,234      |   |   |   | 23,070 |   |
| Interest and other income – Note 18                      |   |   | (295        | )      |   |   | (1,957      | )      |   |   | 3,443 |   |
| Foreign exchange loss (gain)                                             |   |   | (23         | )      |   |   | 247         |   |   |   | 971 |   |
| Total other expenses                                                     |   |   | 40,484      |   |   |   | 20,545      |   |   |   | 35,150 |   |
| Loss before taxes                                                        |   |   | (30,558     | )      |   |   | (26,777     | )      |   |   | (162,909 | ) |
| Income and mining tax recovery (expense) – Note 20            |   |   | 7,299       |   |   |   | (3,237      | )      |   |   | 2,230 |   |
| Loss and comprehensive loss for the year                                 |   |   | (23,259     | )      |   |   | (30,014     | )      |   |   | (160,679 | ) |
| Deficit, beginning of year, as previously reported                       |   |   | (413,140    | )      |   |   | (383,126    | )      |   |   | (222,447 | ) |
| Deficit, end of year                                                     |   | $      | (436,399    | )      |   | $      | (413,140    | )      |   | $ | (383,126 | ) |
| Loss per share                                                           |   |   |        |   |   |   |        |   |   |   |   |   |
| Basic and diluted – Note 12(f)                           |   | $      | (0.16       | )      |   | $      | (0.29       | )      |   | $ | (1.94 | ) |
| Weighted average number of shares outstanding                            |   |   |        |   |   |   |        |   |   |   |   |   |
| Basic and diluted – Note 12(f)                           |   |   | 141,537,377 |   |   |   | 102,630,908 |   |   |   | 82,839,706 |   |

----

| Year ended December 31                                                    |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Cash provided by (used in)                                                               |   |   |    |   |   |   |    |   |   |
| Operations                                                                               |   |   |    |   |   |   |    |   |   |
| Net loss for the year                                                                    |   | $      | (23,259 | )      |   | $      | (30,014 | )      |   | $ | (160,679 | ) |
| Operating items not involving cash                                                       |   |   |    |   |   |   |    |   |   |   |   |   |
| Depreciation and amortization                                                            |   |   | 13,175  |   |   |   | 269     |   |   |   | 36,026 |   |
| Asset impairment charge – Note 7(c)                                      |   |   | – |   |   |   | – |   |   |   | 90,000 |   |
| Future income and mining tax expense (recovery) – Note 20                |   |   | (6,356  | )      |   |   | 1,038   |   |   |   | (2,121 | ) |
| Stock based compensation and employee benefits                                           |   |   | 1,752   |   |   |   | 1,156   |   |   |   | 1,945 |   |
| Loss (gain) on disposal of equipment                                                     |   |   | (270    | )      |   |   | (36     | )      |   |   | 2,466 |   |
| Other items                                                                              |   |   | 544     |   |   |   | (69     | )      |   |   | 6,819 |   |
|                                                                                     |   |   | (14,414 | )      |   |   | (27,656 | )      |   |   | (25,544 | ) |
| Changes in non-cash working capital – Note 21(a)                         |   |   | (59,478 | )      |   |   | 32,478  |   |   |   | 32,290 |   |
|                                                                                     |   |   | (73,892 | )      |   |   | 4,822   |   |   |   | 6,746 |   |
| Financing Activities                                                                     |   |   |    |   |   |   |    |   |   |   |   |   |
| Issuance of common shares and warrants, net of issue costs                               |   |   | 101,074 |   |   |   | 70,068  |   |   |   | 10,475 |   |
| Repayment of senior credit facilities                                                    |   |   | – |   |   |   | (4,448  | )      |   |   | (6,291 | ) |
| Repayment of obligations under capital leases                                            |   |   | (1,721  | )      |   |   | (1,951  | )      |   |   | (1,762 | ) |
| Reclamation deposit                                                                      |   |   | – |   |   |   | – |   |   |   | (317 | ) |
|                                                                                     |   |   | 99,353  |   |   |   | 63,669  |   |   |   | 2,105 |   |
| Investing Activities                                                                     |   |   |    |   |   |   |    |   |   |   |   |   |
| Acquisition costs, net of investment in Cadiscor Resources Inc. – Note 3 |   |   | – |   |   |   | (1,135  | )      |   |   | – |   |
| Additions to mining interests                                                            |   |   | (49,364 | )      |   |   | (12,205 | )      |   |   | (40,691 | ) |
| Proceeds on disposal of mining interests                                                 |   |   | 807     |   |   |   | 36      |   |   |   | 302 |   |
|                                                                                     |   |   | (48,557 | )      |   |   | (13,304 | )      |   |   | (40,389 | ) |
| Increase (decrease) in cash and cash equivalents                                         |   |   | (23,096 | )      |   |   | 55,187  |   |   |   | (31,538 | ) |
| Cash and cash equivalents, beginning of year                                             |   |   | 98,255  |   |   |   | 43,068  |   |   |   | 74,606 |   |
| Cash and cash equivalents, end of year                                                   |   | $      | 75,159  |   |   | $      | 98,255  |   |   | $ | 43,068 |   |
| Cash and cash equivalents consisting of:                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
| Cash                                                                                     |   | $      | 75,159  |   |   | $      | 97,969  |   |   | $ | 2,532 |   |
| Short-term investments                                                                   |   |   | – |   |   |   | 286     |   |   |   | 40,536 |   |
|                                                                                     |   | $      | 75,159  |   |   | $      | 98,255  |   |   | $ | 43,068 |   |

----

|                                                                          |   | Number ofshares |        |   | Capitalstock |   |    | Sharesissuable |   |   | Stockoptions |   |   | Warrants |    |   | Equitycomponent ofconvertiblenotes payable |   |    | Contributedsurplus |   |   | Deficit |   |   | Totalshareholders’equity |    |
|------------------------------------------------------------------------------------|--------|----------------------|-------------|--------|--------------|--------|---------|----------------|--------|--------|--------------|--------|--------|----------|---------|--------|------------------------------------------------------|--------|---------|--------------------|--------|--------|---------|--------|--------|--------------------------------|---------|
| Balance, December 31, 2007                                                         |   |                 | 75,770,570  |   |         | $      | 430,793 |           |   | $      | –      |   |   | $        | 1,673   |   |                                                 | $      | 13,193  |               |   | $      | 6,044   |   |   | $                              | 6,292   |   |   | $ | (222,044 | ) |   | $ | 235,951 |   |
| Transitional adjustment on adoption of inventory standard – Note 2 |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | (403 | ) |   |   | (403 | ) |
| Common shares issued/issuable:                                                     |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| For principal repayments on convertible notes payable                              |   |                 | 6,111,869   |   |         |   | 28,270  |           |   |   | 2,062        |   |   |     | – |   |                                                 |   | – |               |   |   | (6,044  | )      |   |                           | 6,044   |   |   |   | – |   |   |   | 30,332 |   |
| For interest payments on convertible notes payable                                 |   |                 | 165,185     |   |         |   | 714     |           |   |   | 18           |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 732 |   |
| Related to 2007 unit offering, net of issue costs                                  |   |                 | 2,800,000   |   |         |   | 9,575   |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 9,575 |   |
| Tax effect of flow-through shares                                                  |   |                 | –     |   |         |   | (1,452  | )              |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | (1,452 | ) |
| Warrants issued:                                                                   |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Related to 2007 unit offering, net of issue costs                                  |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | 899     |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 899 |   |
| Warrants exercised                                                                 |   |                 | 100         |   |         |   | 1       |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1 |   |
| Stock-based compensation expense                                                   |   |                 | 311,251     |   |         |   | 1,313   |           |   |   | –      |   |   |     | 632     |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1,945 |   |
| Net loss for the year ended December 2008                                          |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | (160,679 | ) |   |   | (160,679 | ) |
| Balance, December 31, 2008                                                    |   |                 | 85,158,975  |   |         | $      | 469,214 |           |   | $      | 2,080        |   |   | $        | 2,305   |   |                                                 | $      | 14,092  |               |   | $      | – |   |   | $                              | 12,336  |   |   | $ | (383,126 | ) |   | $ | 116,901 |   |
| Common shares issued/issuable:                                                     |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| On acquisition of Cadiscor                                                         |   |                 | 14,457,685  |   |         |   | 27,325  |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 27,325 |   |
| Related to conversion of convertible debenture                                     |   |                 | 2,457,446   |   |         |   | 4,644   |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 4,644 |   |
| For principal repayments on convertible notes payable                              |   |                 | 1,486,900   |   |         |   | 2,062   |           |   |   | (2,062       | )      |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | – |   |
| For interest payments on convertible notes payable                                 |   |                 | 14,738      |   |         |   | 18      |           |   |   | (18          | )      |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | – |   |
| Related to 2009 unit offering, net of issue costs                                  |   |                 | 18,400,000  |   |         |   | 51,333  |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 51,333 |   |
| Private placement of flow-through shares (net)                                     |   |                 | 4,000,000   |   |         |   | 14,077  |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 14,077 |   |
| Warrants issued:                                                                   |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| On acquisition of Cadiscor                                                         |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | 1,168   |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1,168 |   |
| Related to 2009 unit offering, net of issue costs                                  |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | 2,243   |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 2,243 |   |
| Warrants exercised                                                                 |   |                 | 1,115,997   |   |         |   | 3,167   |           |   |   | –      |   |   |     | – |   |                                                 |   | (866    | )                  |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 2,301 |   |
| Warrants expired:                                                                  |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Related to 2007 unit offering                                                      |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | (6,053  | )                  |   |   | – |   |   |                           | 6,053   |   |   |   | – |   |   |   | – |   |
| Stock options issued:                                                              |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| On acquisition of Cadiscor                                                         |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | 1,014   |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1,014 |   |
| Stock options exercised                                                            |   |                 | 85,800      |   |         |   | 113     |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 113 |   |
| Fair value of stock options exercised                                              |   |                 | –     |   |         |   | 119     |           |   |   | –      |   |   |     | (119    | )      |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | – |   |
| Fair value of stock options cancelled                                              |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | (1,301  | )      |                                                 |   | – |               |   |   | – |   |   |                           | 1,219   |   |   |   | – |   |   |   | (82 | ) |
| Stock-based compensation expense                                                   |   |                 | 205,510     |   |         |   | 433     |           |   |   | –      |   |   |     | 805     |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1,238 |   |
| Net loss for the year ended December 2009                                          |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | (30,014 | ) |   |   | (30,014 | ) |
| Balance, December 31, 2009                                                    |   |                 | 127,383,051 |   |         | $      | 572,505 |           |   | $      | –      |   |   | $        | 2,704   |   |                                                 | $      | 10,584  |               |   | $      | – |   |   | $                              | 19,608  |   |   | $ | (413,140 | ) |   | $ | 192,261 |   |
| Common shares issued/issuable:                                                     |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Related to 2010 unit offering, net of issue costs                                  |   |                 | 20,000,000  |   |         |   | 89,804  |           |   |   | –      |   |   |     | – |   |                                                 |   | 4,423   |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 94,227 |   |
| Tax effect of flow-through shares                                                  |   |                 | –     |   |         |   | (5,136  | )              |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | (5,136 | ) |
| Related to purchase of Vezza property                                              |   |                 | 1,368,421   |   |         |   | 6,500   |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 6,500 |   |
| Warrants exercised:                                                                |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Related to 2009 & 2010 unit offerings                                          |   |                 | 5,692,076   |   |         |   | 28,134  |           |   |   | –      |   |   |     | – |   |                                                 |   | (1,856  | )                  |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 26,278 |   |
| Warrants expired:                                                                  |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Related to convertible notes                                                       |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | (8,038  | )                  |   |   | – |   |   |                           | 6,445   |   |   |   | – |   |   |   | (1,593 | ) |
| Stock options issued:                                                              |   |                 |        |   |         |   |    |           |   |   |         |   |   |     |    |   |                                                 |   |    |               |   |   |    |   |   |                           |    |   |   |   |   |   |   |   |   |   |
| Stock options exercised                                                            |   |                 | 124,634     |   |         |   | 347     |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 347 |   |
| Fair value of stock options exercised                                              |   |                 | –     |   |         |   | 240     |           |   |   | –      |   |   |     | (240    | )      |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | – |   |
| Fair value of stock options cancelled                                              |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | (216    | )      |                                                 |   | – |               |   |   | – |   |   |                           | 216     |   |   |   | – |   |   |   | – |   |
| Stock-based compensation expense                                                   |   |                 | 85,093      |   |         |   | 339     |           |   |   | –      |   |   |     | 1,413   |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | – |   |   |   | 1,752 |   |
| Net loss for the year ended December 2010                                          |   |                 | –     |   |         |   | – |           |   |   | –      |   |   |     | – |   |                                                 |   | – |               |   |   | – |   |   |                           | – |   |   |   | (23,259 | ) |   |   | (23,259 | ) |
| Balance, December 31, 2010                                                    |   |                 | 154,653,275 |   |         | $      | 692,733 |           |   | $      | –      |   |   | $        | 3,661   |   |                                                 | $      | 5,113   |               |   | $      | – |   |   | $                              | 26,269  |   |   | $ | (436,399 | ) |   | $ | 291,377 |   |

----

| 1. | NATURE OF OPERATIONS |
|----|----------------------|

----

| 2. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|----------------------------------------------------------------------|

----

----

|   |  (a) | Asset carrying values may be affected due to changes in estimated future cash flows; |
|--------|-----------|--------------------------------------------------------------------------------------|

|   | (b) | Amortization charged in the income statement may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Overburden removal costs recorded on the balance sheet or charged to the income statement may change due to changes in the units of production basis of depreciation; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities; and |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | The carrying value of future tax assets may change due to changes in estimates of the likely recovery of the tax benefits. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------|

----

----

----

| 3. | ACQUISITION OF CADISCOR RESOURCES INC. |
|----|---------------------------------------------|

----

----

| ASSETS                                            |   |   |   |
|---------------------------------------------------|--------|--------|--------|
| Current Assets                                    |   |   |   |
| Cash and cash equivalents                         |   | $      | 7,248  |   |
| Taxes recoverable                                 |   |   | 461    |   |
| Inventories                                       |   |   | 420    |   |
| Other assets                                      |   |   | 559    |   |
| Future mining tax asset                           |   |   | 203    |   |
|                                              |   |   | 8,891  |   |
| Mining interests                                  |   |   | 40,090 |   |
| Reclamation deposit                               |   |   | 1,769  |   |
|                                              |   | $      | 50,750 |   |
| LIABILITIES                                       |   |   |   |   |
| Current Liabilities                               |   |   |   |   |
| Accounts payable and accrued liabilities          |   | $      | 3,531  |   |
| Current portion of obligation under capital lease |   |   | 7      |   |
|                                              |   |   | 3,538  |   |
| Asset retirement obligation                       |   |   | 4,291  |   |
| Long-term debt                                    |   |   | 11,066 |   |
| Obligation under capital lease                    |   |   | 27     |   |
|                                              |   | $      | 18,922 |   |
| Net assets acquired                               |   | $      | 31,828 |   |
|                                              |   |   |   |   |
| TOTAL PURCHASE CONSIDERATION                      |   |   |   |   |
| Common share capital                              |   | $      | 27,325 |   |
| Stock options                                     |   |   | 1,014  |   |
| Purchase warrants                                 |   |   | 1,168  |   |
| Convertible rights on convertible debenture       |   |   | 1,437  |   |
| Transaction costs                                 |   |   | 884    |   |
| Total purchase price                              |   | $      | 31,828 |   |

| 4. | ACCOUNTS RECEIVABLE |
|----|---------------------|

----

----

| 5. | INVENTORIES |
|----|-------------|

----

|                              |   | 2010   |   |   | 2009   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| Supplies                          |   | $      | 12,580 |   |   | $      | 12,555 |   |
| Gold inventory*                   |   |   | 5,928  |   |   |   | 4,890 |   |
| Crushed and broken ore stockpiles |   |   | 8,979  |   |   |   | 7,861 |   |
|                              |   | $      | 27,487 |   |   | $      | 25,306 |   |

| * | Gold inventory is comprised of unprocessed ore either in stockpiles or bins, unrecovered gold in either carbon or solution within the milling circuit, and gold-silver doré bars produced but not sold as at the reporting date. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | OTHER ASSETS |
|----|--------------|

----

|                         |   | 2010   |   |   | 2009   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Prepaids                     |   | $      | 2,555  |   |   | $      | 1,165 |   |
| HST receivable               |   |   | 2,830  |   |   |   | – |   |
| GST receivable               |   |   | 905    |   |   |   | 781 |   |
| QST receivable               |   |   | 1,385  |   |   |   | 494 |   |
| Warrant proceeds receivable1 |   |   | 19,777 |   |   |   | – |   |
| Other                        |   |   | 99     |   |   |   | 55 |   |
|                         |   | $      | 27,551 |   |   | $      | 2,495 |   |

| 7. | MINING INTERESTS |
|----|------------------|

----

| (a) | Mining interests are comprised of the following: |
|-----|--------------------------------------------------|

|                                                                 |   | 2010   |     |   | 2009   |   |
|----------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| Plant and equipment, at cost                                         |   | $      | 399,545  |   |   | $      | 389,153 |   |
| Underground mine development, at cost                                |   |   | 132,704  |   |   |   | 85,359 |   |
| Accumulated depreciation and impairment charges                      |   |   | (433,097 | )      |   |   | (416,917 | ) |
|                                                                 |   |   | 99,152   |   |   |   | 57,595 |   |
| Equipment under capital lease, at cost                               |   |   | 3,471    |   |   |   | 5,912 |   |
| Accumulated depreciation and impairment charges                      |   |   | (490     | )      |   |   | (3,453 | ) |
|                                                                 |   |   | 2,981    |   |   |   | 2,459 |   |
| Mining leases and claims, royalty interest, and development, at cost |   |   | 103,537  |   |   |   | 100,993 |   |
| Accumulated amortization and impairment charges                      |   |   | (79,474  | )      |   |   | (78,599 | ) |
|                                                                 |   |   | 24,063   |   |   |   | 22,394 |   |
| Mining interests, net                                                |   | $      | 126,196  |   |   | $      | 82,448 |   |

----

| (b) | Amortization expense is comprised of amortization of the following mining interests: |
|-----|--------------------------------------------------------------------------------------|

|                                                                              |   | 2010   |   |   | 2009   |   |    | 2008   |   |
|-----------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Capital assets (including plant and equipment, and equipment under capital lease) |   | $      | 12,299 |   |   | $      | 269     |   |   | $ | 34,466 |   |
| Mining leases and claims, royalty interest, and development costs                 |   |   | 876    |   |   |   | – |   |   |   | 1,560 |   |
|                                                                              |   | $      | 13,175 |   |   | $      | 269     |   |   | $ | 36,026 |   |

| (c) | Asset impairment charge |
|-----|-------------------------|

| 8. | ASSET RETIREMENT OBLIGATIONS AND RECLAMATION DEPOSITS |
|----|-------------------------------------------------------|

----

----

|                                                                  |   | 2010   |   |   | 2009   |   |
|-----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Asset retirement obligation, beginning of the year                    |   | $      | 12,921 |   |   | $      | 8,455 |   |
| Change in estimated closure costs                                     |   |   | 91     |   |   |   | 4,111 |   |
| Accretion expense (recovery)                                          |   |   | (1,375 | )      |   |   | 355 |   |
| Asset retirement obligation, end of the year – Note 2 |   | $      | 11,637 |   |   | $      | 12,921 |   |
| Reclamation deposits                                                  |   |   | 10,537 |   |   |   | 10,503 |   |
| Obligation in excess of deposit                                       |   | $      | 1,100  |   |   | $      | 2,418 |   |

| 9. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
|----|------------------------------------------|

----

|                                               |   | 2010   |   |   | 2009   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Accounts payable                                   |   | $      | 16,531 |   |   | $      | 6,282 |   |
| Unrealized loss on financial contracts1 (note 14c) |   |   | 11,098 |   |   |   | – |   |
| Other accrued liabilities                          |   |   | 13,170 |   |   |   | 4,913 |   |
| Accounts payable and accrued liabilities           |   | $      | 40,799 |   |   | $      | 11,195 |   |

| 10. | OBLIGATIONS UNDER CAPITAL LEASES |
|-----|----------------------------------|

----

|                                                               |   | 2010   |    |   | 2009   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| 2010                                                               |   | $      | – |   |   | $      | 605 |   |
| 2011                                                               |   |   | 1,307   |   |   |   | 255 |   |
| 2012                                                               |   |   | 980     |   |   |   | 254 |   |
| 2013                                                               |   |   | 221     |   |   |   | 109 |   |
| 2014                                                               |   |   | 50      |   |   |   | – |   |
| Total minimum lease payments                                       |   |   | 2,558   |   |   |   | 1,223 |   |
| Amounts representing interest at rates from 1.9% – 8.2% |   |   | (167    | )      |   |   | (89 | ) |
| Present value of minimum lease payments                            |   |   | 2,391   |   |   |   | 1,134 |   |
| Less current portion                                               |   |   | (1,196  | )      |   |   | (558 | ) |
|                                                               |   | $      | 1,195   |   |   | $      | 576 |   |

| 11. | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

----

----

| 12. | SHAREHOLDERS’ EQUITY |
|-----|----------------------------|

----

| (a) | Authorized and Issued Capital Stock |
|-----|-------------------------------------|

| (b) | Common share purchase warrants |
|-----|--------------------------------|

|                                                  |   | As at December 31 2010 |       |   | As at December 31 2009 |   |
|-------------------------------------------------------|--------|------------------------|------------|--------|------------------------|--------|
|                                                  |   | Warrants               |       |   | Amount                 |   |   | Warrants |   |   | Amount |   |
| Balance beginning of period                           |   |                   | 12,286,665 |   |                   | $      | 10,584 |   |   |   | 13,489,898 |   |   | $ | 14,092 |   |
| Issued pursuant to unit offerings, net of issue costs |   |                   | 10,000,000 |   |                   |   | 4,423 |   |   |   | 9,200,000 |   |   |   | 2,243 |   |
| Issued pursuant to acquisition of Cadiscor            |   |                   | –    |   |                   |   | – |   |   |   | 1,445,997 |   |   |   | 1,168 |   |
| Warrants exercised                                    |   |                   | (5,692,076 | )      |                   |   | (1,856 | ) |   |   | (1,115,997 | ) |   |   | (866 | ) |
| Warrants expired                                      |   |                   | (2,756,665 | )      |                   |   | (8,038 | ) |   |   | (10,733,233 | ) |   |   | (6,053 | ) |
| Balance, end of period                                |   |                   | 13,837,924 |   |                   | $      | 5,113 |   |   |   | 12,286,665 |   |   | $ | 10,584 |   |

| Issuance |   | Number of Warrants |       |   | Exercise Price |   | Expiry Date |
|----------|--------|--------------------|------------|--------|----------------|--------|-------------|
| Series A |   |               | 5,077,924  |   |           | $      | 4.25        |   | September 30, 2011 |
| Series B |   |               | 8,760,000  |   |           | $      | 6.50        |   | October 28, 2011 |
|     |   |               | 13,837,924 |   |           |   |        |   |   |

----

| (c) | Group Registered Retirement Savings Plan |
|-----|------------------------------------------|

| (d) | Private Placements |
|-----|--------------------|

| (e) | Corporate Stock Option Plan |
|-----|-----------------------------|

----

|                                       |   | 2010    |      |   | 2009                          |   |    | 2008    |   |
|--------------------------------------------|--------|---------|-----------|--------|-------------------------------|--------|---------|---------|--------|
|                                       |   | Options |      |   | Weighted-AverageExercisePrice |   |    | Options |   |   | Weighted-AverageExercisePrice |   |   | Options |   |   | Weighted-AverageExercisePrice |   |
| Outstanding, beginning of year             |   |    | 3,057,800 |   |                          | $      | 3.50    |    |   |   | 1,461,100 |   |   | $ | 5.10 |   |   |   | 356,433 |   |   | $ | 9.89 |   |
| Issued pursuant to acquisition of Cadiscor |   |    | –   |   |                          |   | – |    |   |   | 917,400 |   |   |   | 2.42 |   |   |   | – |   |   |   | – |   |
| Granted                                    |   |    | 1,105,000 |   |                          | $      | 6.14    |    |   |   | 1,180,000 |   |   |   | 3.16 |   |   |   | 1,110,000 |   |   |   | 3.60 |   |
| Exercised                                  |   |    | (124,634  | )      |                          | $      | 2.78    |    |   |   | (85,800 | ) |   |   | 1.32 |   |   |   | – |   |   |   | – |   |
| Cancelled/forfeited                        |   |    | (190,333  | )      |                          | $      | 4.80    |    |   |   | (414,900 | ) |   |   | 6.26 |   |   |   | (5,333 | ) |   |   | 10.82 |   |
| Outstanding, end of year                   |   |    | 3,847,833 |   |                          | $      | 4.22    |    |   |   | 3,057,800 |   |   |   | 3.50 |   |   |   | 1,461,100 |   |   |   | 5.10 |   |
| Options exercisable at end of year         |   |    | 1,742,833 |   |                          | $      | 3.64    |    |   |   | 1,217,967 |   |   | $ | 3.96 |   |   |   | 263,099 |   |   | $ | 10.23 |   |

| Exercise Price |   | Expiry Dates |                    | Options Outstanding atDec. 31, 2010 |   |      | Options Exercisable atDec. 31, 2010 |   |
|----------------|--------|--------------|-------------------------|------------------------------------------|--------|-----------|------------------------------------------|--------|
| $              | 1.32   |         | June 17, 2013      |                                     |   | 189,750   |                                     |   |   | 189,750 |   |
| $              | 1.85   |         | March 17, 2013     |                                     |   | 24,750    |                                     |   |   | 24,750 |   |
| $              | 2.20   |         | September 30, 2016 |                                     |   | 750,000   |                                     |   |   | 500,000 |   |
| $              | 2.85   |         | July 18, 2017      |                                     |   | 200,000   |                                     |   |   | 50,000 |   |
| $              | 3.03   |         | September 10, 2011 |                                     |   | 429,000   |                                     |   |   | 429,000 |   |
| $              | 3.22   |         | December 14, 2017  |                                     |   | 765,000   |                                     |   |   | 238,333 |   |
| $              | 3.31   |         | August 12, 2018         |                                     |   | 30,000    |                                     |   |   | – |   |
| $              | 3.39   |         | July 31, 2017           |                                     |   | 13,333    |                                     |   |   | – |   |
| $              | 4.18   |         | February 21, 2018       |                                     |   | 10,000    |                                     |   |   | – |   |
| $              | 4.75   |         | February 27, 2011  |                                     |   | 7,500     |                                     |   |   | 7,500 |   |
| $              | 4.83   |         | July 20, 2016      |                                     |   | 20,000    |                                     |   |   | 13,333 |   |
| $              | 5.22   |         | June 9, 2016       |                                     |   | 10,000    |                                     |   |   | 6,667 |   |
| $              | 6.24   |         | December 7, 2015        |                                     |   | 1,065,000 |                                     |   |   | – |   |
| $              | 6.47   |         | May 21, 2016       |                                     |   | 150,000   |                                     |   |   | 100,000 |   |
| $              | 8.40   |         | June 20, 2014      |                                     |   | 35,000    |                                     |   |   | 35,000 |   |
| $              | 8.83   |         | December 14, 2013  |                                     |   | 10,000    |                                     |   |   | 10,000 |   |
| $              | 8.87   |         | January 14, 2015   |                                     |   | 7,500     |                                     |   |   | 7,500 |   |
| $              | 10.18  |         | April 15, 2015     |                                     |   | 30,000    |                                     |   |   | 30,000 |   |
| $              | 11.90  |         | June 23, 2012      |                                     |   | 101,000   |                                     |   |   | 101,000 |   |
|           |   |         |                    |                                     |   | 3,847,833 |                                     |   |   | 1,742,833 |   |

----

| (f) | Reconciliation of the diluted number of shares outstanding: |
|-----|-------------------------------------------------------------|

|                                                  |   | 2010   |        |   | 2009   |   |        | 2008   |   |
|-------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
| Net loss available to common shareholders             |   | $      | (23,259     | )      |   | $      | (30,014     | )      |   | $ | (160,679 | ) |
| Weighted average number of shares outstanding         |   |   | 141,537,377 |   |   |   | 102,630,908 |   |   |   | 82,839,706 |   |
| Effect of dilutive securities                         |   |   | –     |   |   |   | –     |   |   |   | – |   |
| Weighted average diluted number of shares outstanding |   |   | 141,537,377 |   |   |   | 102,630,908 |   |   |   | 82,839,706 |   |
| Diluted net loss per share                            |   | $      | (0.16       | )      |   | $      | (0.29       | )      |   | $ | (1.94 | ) |

| (g) | Other Stock-Based Compensation – Restricted Share Unit Plan |
|-----|------------------------------------------------------------------------|

| 13. | INSURANCE RECOVERY |
|-----|--------------------|

----

| 14. | FINANCIAL INSTRUMENTS |
|-----|-----------------------|

----

----

|                      |   | 2010   |    |   | 2009   |   |
|---------------------------|--------|--------|---------|--------|--------|--------|
| Cash and cash equivalents |   | $      | 75,159  |   |   | $      | 98,255 |   |
| Accounts receivable       |   |   | 80,683  |   |   |   | – |   |
| Other assets              |   |   | 27,551  |   |   |   | – |   |
|                      |   | $      | 183,393 |   |   | $      | 98,255 |   |

| (a) | Currency risk |
|-----|---------------|

|                                     |   | US$    |   |
|------------------------------------------|--------|--------|--------|
| Cash                                     |   | $      | 1,651  |   |
| Accounts payable and accrued liabilities |   |   | (45    | ) |
|                                     |   | $      | 1,606  |   |

| (b) | Interest rate risk |
|-----|--------------------|

----

| (c) | Commodity price risk |
|-----|----------------------|

|                             |   | Total |   |   | In lessthan1 year |   |   | Between1 yearand2 years |   |   | Between2 yearsand5 years |   |
|----------------------------------|--------|-------|--------|--------|------------------------|--------|--------|-----------------------------------|--------|--------|------------------------------------|--------|
| Obligations under capital leases |   | $     | 2,391  |   |                   | $      | 1,196  |                              |   | $      | 933                                |   |   | $ | 262 |   |

----

|                                  |   | Quotes Pricesin ActiveMarkets forIdenticalAssets (Level 1) |    |   | SignificantOtherObservableInputs (Level 2) |   |    | SignificantUnobservableInputs (Level 3) |   |   | Aggregate FairValue |   |
|---------------------------------------|--------|------------------------------------------------------------|---------|--------|--------------------------------------------|--------|---------|-----------------------------------------|--------|--------|---------------------|--------|
| Cash and cash equivalents             |   | $                                                          | 75,159  |   |                                       | $      | – |                                    |   | $      | –             |   |   | $ | 75,159 |   |
| Reclamation deposits                  |   |                                                       | 10,537  |   |                                       |   | – |                                    |   |   | –             |   |   |   | 10,537 |   |
| Mark to market on financial contracts |   |                                                       | – |   |                                       |   | 11,098  |                                    |   |   | –             |   |   |   | 11,098 |   |
|                                  |   | $                                                          | 85,696  |   |                                       | $      | 11,098  |                                    |   | $      | –             |   |   | $ | 96,794 |   |

| 15. | CAPITAL DISCLOSURE |
|-----|--------------------|

----

| 16. | COMMITMENTS |
|-----|-------------|

----

| (a) | Sheridan Platinum Group of Companies (“SPG”) Commitment |
|-----|---------------------------------------------------------------------|

| (b) | Operating Leases and Other Purchase Obligations |
|-----|-------------------------------------------------|

| (c) | Mine production obligation |
|-----|----------------------------|

| (d) | Letter of credit and guaranteed investment certificate |
|-----|--------------------------------------------------------|

----

| 17. | REVENUE FROM METAL SALES |
|-----|--------------------------|

----

|                                       |   | Total  |    |   | Palladium |   |    | Platinum |   |   | Gold    |   |   | Nickel |    |   | Copper |   |    | OtherMetals |   |
|-------------------------------------------------|--------|--------|---------|--------|-----------|--------|---------|----------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|-------------|--------|
| 2010                                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |
| Year ended December 31                     |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |
| Revenue – before pricing adjustments |   | $      | 99,714  |   |      | $      | 56,887  |     |   | $      | 8,280   |   |   | $      | 27,196  |   |   | $      | 4,198   |        |   | $ | 2,443 |   |   | $ | 710 |   |
| Pricing adjustments:                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Commodities                                     |   |   | 8,941   |   |      |   | 7,417   |     |   |   | 649     |   |   |   | 428     |   |   |   | 183     |        |   |   | 275 |   |   |   | (11 | ) |
| Foreign exchange                                |   |   | (1,557  | )      |      |   | (953    | )        |   |   | (270    | )      |   |   | (172    | )      |   |   | (98     | )           |   |   | (59 | ) |   |   | (5 | ) |
| Revenue – after pricing adjustments  |   | $      | 107,098 |   |      | $      | 63,351  |     |   | $      | 8,659   |   |   | $      | 27,452  |   |   | $      | 4,283   |        |   | $ | 2,659 |   |   | $ | 694 |   |
| 2009                                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Year ended December 31                     |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Revenue – before pricing adjustments |   | $      | – |   |      | $      | – |     |   | $      | – |   |   | $      | – |   |   | $      | – |        |   | $ | – |   |   | $ | – |   |
| Pricing adjustments:                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Commodities                                     |   |   | 4,614   |   |      |   | 3,134   |     |   |   | 1,199   |   |   |   | 214     |   |   |   | (61     | )           |   |   | 139 |   |   |   | (11 | ) |
| Foreign exchange                                |   |   | (595    | )      |      |   | (451    | )        |   |   | (136    | )      |   |   | (94     | )      |   |   | 66      |        |   |   | 31 |   |   |   | (11 | ) |
| Revenue – after pricing adjustments  |   | $      | 4,019   |   |      | $      | 2,683   |     |   | $      | 1,063   |   |   | $      | 120     |   |   | $      | 5       |        |   | $ | 170 |   |   | $ | (22 | ) |
| 2008                                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Year ended December 31                     |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Revenue – before pricing adjustments |   | $      | 156,241 |   |      | $      | 75,779  |     |   | $      | 25,894  |   |   | $      | 13,097  |   |   | $      | 24,700  |        |   | $ | 14,027 |   |   | $ | 2,744 |   |
| Pricing adjustments:                            |   |   |    |   |      |   |    |     |   |   |    |   |   |   |    |   |   |   |    |        |   |   |   |   |   |   |   |   |
| Commodities                                     |   |   | (40,667 | )      |      |   | (25,254 | )        |   |   | (7,680  | )      |   |   | (98     | )      |   |   | (5,016  | )           |   |   | (2,185 | ) |   |   | (434 | ) |
| Foreign exchange                                |   |   | 16,522  |   |      |   | 8,726   |     |   |   | 2,988   |   |   |   | 2,123   |   |   |   | 1,495   |        |   |   | 955 |   |   |   | 235 |   |
| Revenue – after pricing adjustments  |   | $      | 132,096 |   |      | $      | 59,251  |     |   | $      | 21,202  |   |   | $      | 15,122  |   |   | $      | 21,179  |        |   | $ | 12,797 |   |   | $ | 2,545 |   |

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| 18. | INTEREST AND OTHER COSTS (INCOME) |
|-----|-----------------------------------|

----

|                                                    |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|---------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Interest on capital leases                              |   | $      | 142     |   |   | $      | 84      |   |   | $ | 173 |   |
| Other interest and financing costs, net                 |   |   | 424     |   |   |   | (121    | )      |   |   | 548 |   |
| Loss (gain) on investments                              |   |   | – |   |   |   | (676    | )      |   |   | 609 |   |
| Interest on convertible notes payable                   |   |   | – |   |   |   | – |   |   |   | 672 |   |
| Accretion expense relating to convertible notes payable |   |   | – |   |   |   | – |   |   |   | 3,372 |   |
| Interest on senior credit facilities                    |   |   | – |   |   |   | 82      |   |   |   | 649 |   |
| Interest on advance purchase facility                   |   |   | – |   |   |   | – |   |   |   | 64 |   |
|                                                    |   |   | 566     |   |   |   | (631    | )      |   |   | 6,087 |   |
| Interest income                                         |   |   | (861    | )      |   |   | (1,326  | )      |   |   | (2,644 | ) |
|                                                    |   | $      | (295    | )      |   | $      | (1,957  | )      |   | $ | 3,443 |   |

| 19. | CONTINGENCIES |
|-----|---------------|

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| 20. | INCOME TAXES |
|-----|--------------|

----

|                                                      |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|-----------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Income tax recovery using statutory income tax rates      |   | $      | (9,473  | )      |   | $      | (8,837  | )      |   | $ | (54,574 | ) |
| Increase (decrease) in taxes resulting from:              |   |   |    |   |   |   |    |   |   |   |   |   |
| Resource allowance deemed income                          |   |   | (315    | )      |   |   | 315     |   |   |   | 4,335 |   |
| Non-taxable portion of capital losses (gains)             |   |   | 296     |   |   |   | (141    | )      |   |   | 491 |   |
| Losses not tax benefited                                  |   |   | 8,628   |   |   |   | 8,587   |   |   |   | 47,922 |   |
| Non-deductible expenses                                   |   |   | 443     |   |   |   | 314     |   |   |   | 362 |   |
| Losses incurred in foreign entities, taxed at lower rates |   |   | – |   |   |   | – |   |   |   | 8 |   |
| Ontario Harmonization Transitional tax                    |   |   | (280    | )      |   |   | 1,966   |   |   |   | – |   |
| Ontario mining taxes                                      |   |   | – |   |   |   | – |   |   |   | (778 | ) |
| Other                                                     |   |   | (25     | )      |   |   | 1       |   |   |   | 4 |   |
| Renunciation of exploration expenditures                  |   |   | (5,136  | )      |   |   | – |   |   |   | – |   |
| Expiration of warrants                                    |   |   | (1,593  | )      |   |   | – |   |   |   | – |   |
| Corporate minimum tax credit recovery                     |   |   | (75     | )      |   |   | – |   |   |   | – |   |
| Difference in statutory tax rates                         |   |   | 104     |   |   |   | 76      |   |   |   | – |   |
| Quebec mining duties                                      |   |   | 127     |   |   |   | 956     |   |   |   | – |   |
| Income and mining tax expense (recovery)                  |   | $      | (7,299  | )      |   | $      | 3,237   |   |   | $ | (2,230 | ) |

----

|                                   |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Current income tax expense (recovery): |   |   |   |   |   |   |   |   |   |
| Income taxes                           |   | $      | (697   | )      |   | $      | 2,281  |   |   | $ | – |   |
| Mining taxes                           |   |   | (246   | )      |   |   | (82    | )      |   |   | (109 | ) |
|                                   |   | $      | (943   | )      |   |   | 2,199  |   |   |   | (109 | ) |
| Future income tax expense (recovery):  |   |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes                           |   |   | (6,729 | )      |   |   | 127    |   |   |   | (1,452 | ) |
| Mining taxes                           |   |   | 373    |   |   |   | 911    |   |   |   | (669 | ) |
|                                   |   | $      | (6,356 | )      |   | $      | 1,038  |   |   | $ | (2,121 | ) |
|                                   |   | $      | (7,299 | )      |   | $      | 3,237  |   |   | $ | (2,230 | ) |

|                                                |   | 2010   |    |   | 2009   |   |
|-----------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Long-term future income tax asset:                  |   |   |    |   |   |   |
| Mining interests, net                               |   | $      | 18,390  |   |   | $      | 36,108 |   |
| Deferred financing costs                            |   |   | 2,738   |   |   |   | 2,316 |   |
| Asset retirement obligation                         |   |   | 2,772   |   |   |   | 1,998 |   |
| Other assets                                        |   |   | 166     |   |   |   | 174 |   |
| Non-capital loss carry-forwards                     |   |   | 67,313  |   |   |   | 44,228 |   |
| Ontario corporate minimum tax credits               |   |   | 252     |   |   |   | 327 |   |
| Capital loss carry-forwards                         |   |   | – |   |   |   | 10 |   |
| Obligations under capital leases                    |   |   | 1,029   |   |   |   | 191 |   |
| Valuation allowance for capital loss carry-forwards |   |   | (92,660 | )      |   |   | (85,352 | ) |
| Net future income tax asset, long-term              |   | $      | – |   |   | $      | – |   |
| Future income tax asset (liability), current:       |   |   |    |   |   |   |   |   |
| Crushed and broken ore stockpiles                   |   |   | (60     | )      |   |   | – |   |
| Financial contracts                                 |   |   | 2,775   |   |   |   | – |   |
| Valuation allowance                                 |   |   | (2,715  | )      |   |   | – |   |
| Future tax asset (liability), current               |   |   | – |   |   |   | – |   |
| Future income tax assets (liabilities)              |   | $      | – |   |   | $      | – |   |
| Future mining tax liability, current:               |   |   |    |   |   |   |   |   |
| Crushed and broken ore stockpiles                   |   |   | (19     | )      |   |   | – |   |
| Financial contracts                                 |   |   | 943     |   |   |   | – |   |
| Valuation allowance                                 |   |   | (924    | )      |   |   | – |   |
| Future mining tax liability, current                |   | $      | – |   |   | $      | – |   |
| Future mining tax liability, long-term:             |   |   |    |   |   |   |   |   |
| Mining interests, net                               |   |   | 4,074   |   |   |   | 9,366 |   |
| Provision for mine closure costs                    |   |   | 1,047   |   |   |   | 496 |   |
| Mine restoration obligation                         |   |   | 595     |   |   |   | 729 |   |
| Valuation allowance                                 |   |   | (6,923  | )      |   |   | (10,718 | ) |
| Future mining tax liability, long-term              |   | $      | (1,207  | )      |   | $      | (127 | ) |
| Future mining tax assets (liabilities)              |   | $      | (1,207  | )      |   | $      | (127 | ) |

----

| 21. | STATEMENT OF CASH FLOWS |
|-----|-------------------------|

----

| (a) | The net changes in non-cash working capital balances related to operations are as follows: |
|-----|-------------------------------------------------------------------------------------------------|

|                                     |   | 2010   |    |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Cash provided by (used in):              |   |   |    |   |   |   |   |   |   |
| Accounts receivable                      |   | $      | (80,683 | )      |   | $      | 43,051 |   |   | $ | 36,037 |   |
| Inventories and stockpiles               |   |   | (1,953  | )      |   |   | (8,296 | )      |   |   | 4,220 |   |
| Other assets                             |   |   | (5,279  | )      |   |   | 1,257  |   |   |   | (630 | ) |
| Accounts payable and accrued liabilities |   |   | 29,604  |   |   |   | (6,002 | )      |   |   | (6,761 | ) |
| Taxes payable                            |   |   | (1,167  | )      |   |   | 2,468  |   |   |   | (576 | ) |
|                                     |   | $      | (59,478 | )      |   | $      | 32,478 |   |   | $ | 32,290 |   |

| (b) | Cash outflows during the year for interest and income taxes were as follows: |
|-----|------------------------------------------------------------------------------|

|                                              |   | 2010 |    |   | 2009   |   |    | 2008   |   |
|---------------------------------------------------|--------|------|---------|--------|--------|--------|---------|--------|--------|
| Interest paid on senior credit facilities         |   | $    | – |   |   | $      | 73      |   |   | $ | 446 |   |
| Interest paid on obligations under capital leases |   | $    | 142     |   |   | $      | 84      |   |   | $ | 173 |   |
| Income and mining taxes paid                      |   | $    | – |   |   | $      | – |   |   | $ | 143 |   |

| (c) | The Series I and II convertible notes bore interest at a rate of 6.5% per annum payable bi-monthly.  During 2008, the purchasers elected to receive common shares in settlement of their interest expense in the amount of $732.  The convertible notes were fully repaid December 1, 2008. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | During 2008, the purchasers elected to receive common shares in settlement of the principal repayments on the Series I and II convertible notes in the amount of $30,332.  The convertible notes were fully repaid December 1, 2008. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | During 2010, the Company had additions to mining interests of $52,342 (2009 – $12,205; 2008 – $41,646) of which $2,978 (2009 – $nil; 2008 – $955) related to capital leases and $nil (2009 – $nil; 2008 – $3,529) related to adoption of CICA Section 3031.  For the year ended December 31, 2010, $6,500 relating to the acquisition of the Vezza property was acquired by the issuance of common shares. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 22. | SEGMENT INFORMATON |
|-----|--------------------|

----

----

|                      |   | As at December 31, 2010 |    |   | As at December 31, 2009 |   |
|---------------------------|--------|------------------------------|---------|--------|------------------------------|--------|
|                      |   | Palladiumoperations          |    |   | Goldoperations               |   |   | Corporateand other |   |   | Total |   |   | Palladiumoperations |   |   | Goldoperations |   |   | Corporateand other |   |   | Total |   |
| Cash and cash equivalents |   | $                            | 3,232   |   |                         | $      | (2,013 | ) |   | $ | 73,940 |   |   | $ | 75,159 |   |   | $ | 689 |   |   | $ | 576 |   |   | $ | 96,990 |   |   | $ | 98,255 |   |
| Accounts receivable       |   |                         | 80,683  |   |                         |   | – |   |   |   | – |   |   |   | 80,683 |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Inventories               |   |                         | 19,673  |   |                         |   | 7,814 |   |   |   | – |   |   |   | 27,487 |   |   |   | 19,649 |   |   |   | 5,657 |   |   |   | – |   |   |   | 25,306 |   |
| Other current assets      |   |                         | 4,308   |   |                         |   | 3,048 |   |   |   | 20,929 |   |   |   | 28,285 |   |   |   | 708 |   |   |   | 1,510 |   |   |   | 481 |   |   |   | 2,699 |   |
| Mining interests          |   |                         | 64,278  |   |                         |   | 61,473 |   |   |   | 445 |   |   |   | 126,196 |   |   |   | 31,815 |   |   |   | 50,300 |   |   |   | 333 |   |   |   | 82,448 |   |
| Other non-current assets  |   |                         | 8,438   |   |                         |   | 1,769 |   |   |   | 330 |   |   |   | 10,537 |   |   |   | 8,406 |   |   |   | 1,769 |   |   |   | 328 |   |   |   | 10,503 |   |
| Total assets*             |   | $                            | 180,612 |   |                         | $      | 72,091 |   |   | $ | 95,644 |   |   | $ | 348,347 |   |   | $ | 61,267 |   |   | $ | 59,812 |   |   | $ | 98,132 |   |   | $ | 219,211 |   |

|                                                        |   | Year endedDecember 31, 2010 |    |   | Year endedDecember 31, 2009 |   |    | Year endedDecember 31, 2008 |   |
|------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|--------------------------------------------|--------|---------|--------------------------------------------|--------|
|                                                        |   | Palladiumoperations                        |    |   | Goldoperations                             |   |    | Corporateand other                    |   |   | Total |   |   | Palladiumoperations |   |   | Goldoperations |   |   | Corporateand other |   |   | Total |   |   | Palladiumoperations |   |   | Goldoperations |   |   | Corporateand other |   |   | Total |   |
| Revenue – after pricing adjustments                   |   | $                                          | 84,813  |   |                                       | $      | 22,285  |                                       |   | $ | – |   |   | $ | 107,098 |   |   | $ | 4,019 |   |   | $ | – |   |   | $ | – |   |   | $ | 4,019 |   |   | $ | 132,096 |   |   | $ | – |   |   | $ | – |   |   | $ | 132,096 |   |
| Depreciation and amortization                                    |   |                                       | 3,250   |   |                                       |   | 9,797   |                                       |   |   | 128 |   |   |   | 13,175 |   |   |   | 217 |   |   |   | 25 |   |   |   | 27 |   |   |   | 269 |   |   |   | 36,016 |   |   |   | – |   |   |   | 10 |   |   |   | 36,026 |   |
| Asset impairment charge                                          |   |                                       | – |   |                                       |   | – |                                       |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 90,000 |   |   |   | – |   |   |   | – |   |   |   | 90,000 |   |
| Insurance recovery                                               |   |                                       | – |   |                                       |   | – |                                       |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | (13,800 | ) |   |   | – |   |   |   | – |   |   |   | (13,800 | ) |
| Operating expenses                                               |   |                                       | 55,307  |   |                                       |   | 28,690  |                                       |   |   | – |   |   |   | 83,997 |   |   |   | 9,873 |   |   |   | 109 |   |   |   | – |   |   |   | 9,982 |   |   |   | 147,629 |   |   |   | – |   |   |   | – |   |   |   | 147,629 |   |
| Income (loss) from mining operations                             |   |                                       | 26,256  |   |                                       |   | (16,202 | )                                          |   |   | (128 | ) |   |   | 9,926 |   |   |   | (6,071 | ) |   |   | (134 | ) |   |   | (27 | ) |   |   | (6,232 | ) |   |   | (127,749 | ) |   |   | – |   |   |   | (10 | ) |   |   | (127,759 | ) |
| Other expenses                                                   |   |                                       |    |   |                                       |   |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administration                                       |   |                                       | 163     |   |                                       |   | 116     |                                       |   |   | 10,397 |   |   |   | 10,676 |   |   |   | 298 |   |   |   | 606 |   |   |   | 8,117 |   |   |   | 9,021 |   |   |   | (939 | ) |   |   | – |   |   |   | 8,605 |   |   |   | 7,666 |   |
| Exploration                                                      |   |                                       | 13,998  |   |                                       |   | 15,004  |                                       |   |   | 1,124 |   |   |   | 30,126 |   |   |   | 11,419 |   |   |   | 1,671 |   |   |   | 144 |   |   |   | 13,234 |   |   |   | 5,283 |   |   |   | – |   |   |   | 17,787 |   |   |   | 23,070 |   |
| Other                                                            |   |                                       | 62      |   |                                       |   | (2      | )                                          |   |   | (378 | ) |   |   | (318 | ) |   |   | 379 |   |   |   | (7 | ) |   |   | (2,082 | ) |   |   | (1,710 | ) |   |   | 2,118 |   |   |   | – |   |   |   | 2,296 |   |   |   | 4,414 |   |
| Income (loss) before taxes                                       |   |                                       | 12,033  |   |                                       |   | (31,320 | )                                          |   |   | (11,271 | ) |   |   | (30,558 | ) |   |   | (18,167 | ) |   |   | (2,404 | ) |   |   | (6,206 | ) |   |   | (26,777 | ) |   |   | (134,211 | ) |   |   | – |   |   |   | (28,698 | ) |   |   | (162,909 | ) |
| Income and mining tax (expense) recovery                         |   |                                       | 670     |   |                                       |   | (100    | )                                          |   |   | 6,729 |   |   |   | 7,299 |   |   |   | (2,280 | ) |   |   | (955 | ) |   |   | (2 | ) |   |   | (3,237 | ) |   |   | 778 |   |   |   | – |   |   |   | 1,452 |   |   |   | 2,230 |   |
| Net income (loss) and comprehensive income (loss) for the period |   | $                                          | 12,703  |   |                                       | $      | (31,420 | )                                          |   | $ | (4,542 | ) |   | $ | (23,259 | ) |   | $ | (20,447 | ) |   | $ | (3,359 | ) |   | $ | (6,208 | ) |   | $ | (30,014 | ) |   | $ | (133,433 | ) |   | $ | – |   |   | $ | (27,246 | ) |   | $ | (160,679 | ) |

|                     |   | Year endedDecember 31, 2010 |   |   | Year endedDecember 31, 2009 |   |   | Year endedDecember 31, 2008 |   |
|-------------------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                          |   | Palladiumoperations              |   |   | Goldoperations                   |   |   | Corporateand other               |   |   | Total |   |   | Palladiumoperations |   |   | Goldoperations |   |   | Corporateand other |   |   | Total |   |   | Palladiumoperations |   |   | Goldoperations |   |   | Corporateand other |   |   | Total |   |
| Additions to mining interests |   | $                                | 35,492 |   |                             | $      | 13,632 |                             |   | $ | 240 |   |   | $ | 49,364 |   |   | $ | 886 |   |   | $ | 10,990 |   |   | $ | 329 |   |   | $ | 12,205 |   |   | $ | 40,661 |   |   | $ | – |   |   | $ | 30 |   |   | $ | 40,691 |   |

| 23. | COMPARATIVE FIGURES |
|-----|---------------------|

----

----

| 24. | SUBSEQUENT EVENTS |
|-----|-------------------|

----

----