Exhibit 1.1

NORTH AMERICAN PALLADIUM LTD.

ANNUAL INFORMATION FORM

For the year ended December 31, 2009

Dated as of March 31, 2010

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TABLE OF CONTENTS



FORWARD-LOOKING STATEMENTS

1IMPERIAL-METRIC CONVERSION TABLE

4REPORTING CURRENCY, FINANCIAL AND RESERVE INFORMATION

4CORPORATE STRUCTURE

5DESCRIPTION OF THE BUSINESS AND GENERAL DEVELOPMENTS

6Three Year History and Significant Acquisitions

6Business Overview

8Overview of the Principal Markets

9Lac des Iles Property

11Sleeping Giant Mine

12Discovery Project

13Flordin Property

13Shebandowan West Project

13Corporate Development and Grassroots Exploration

14Mineral Reserve and Mineral Resource Estimates

14MINERAL PROPERTIES

16Lac des Iles Mine

16Overview

16Project Description and Location

17Accessibility, Climate, Local Resources, Infrastructure and Physiography

18History

19Geological Setting

22Exploration

22Mineralization

23Drilling

23Sampling, Analysis and Security

24Mineral Resource Estimates

24Mining Operations

24Sleeping Giant Mine

28Overview

28Project Description and Location

28Accessibility, Climate, Local Resources, Infrastructure and Physiography

29History

29Geological Setting

30Exploration

31Mineralization

31Drilling

32Sampling Method and Approach

32Mineral Reserve and Mineral Resource Estimates

33Other Relevant Data and Information

35The Discovery Project

35Overview

35Project Description and Location

35Accessibility, Climate, Local Resources, Infrastructure and Physiography

35History

36Geological Setting

36Exploration

36Mineralization

37Drilling

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Sampling Method and Approach

38Mineral Resource Estimates

38Flordin Property

38Overview

38Project Description and Location

39Accessibility, Climate, Local Resources, Infrastructure and Physiography

39History

39Geological Setting

40Exploration

41Mineralization

41Drilling

42Sampling and Analysis

42Security of Samples

43Mineral Resource and Mineral Reserve Estimates

44Shebandowan West Project

44Overview

44Project Description and Location

44Accessibility, Climate, Local Resources, Infrastructure and Physiography

44History

45Geological Setting

46Exploration

46Mineralization

47Drilling

49Sampling, Analysis and Security

50Mineral Resource Estimates

51FINANCING

51Senior Credit Facilities

51KFOC Credit Facility

51Convertible Note Financing

51Palladium and Platinum Purchase Agreement

522007 Private Placement

522007 Public Offering

522009 Bought Deal / Private Placement

53DIVIDENDS

53CAPITAL STRUCTURE

53Common Shares

54Special Shares

54MARKET FOR SECURITIES

55Trading Price and Volume

55DIRECTORS AND EXECUTIVE OFFICERS

56Cease Trade Orders, Bankruptcies, Penalties or Sanctions

59Conflicts of Interest

60LEGAL PROCEEDINGS

60INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

61TRANSFER AGENT AND REGISTRAR

61MATERIAL CONTRACTS

61


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INTERESTS OF EXPERTS

61RISK FACTORS

62AUDIT COMMITTEE INFORMATION

72Audit Committee Mandate

72Composition of the Audit Committee

72Relevant Education and Experience

72Audit Committee Pre-Approval Policies and Procedures

72External Auditor Service Fees

73ADDITIONAL INFORMATION

74AUDIT COMMITTEE MANDATE

75GLOSSARY OF TERMS

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FORWARD-LOOKING STATEMENTS

This Annual Information Form ("AIF") contains forward-looking statements, which include
future-oriented financial information, within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and the securities legislation of certain
of the provinces of Canada, including theSecurities Act(Ontario). Forward-looking statements, including future-oriented financial information, are
necessarily based on estimates and assumptions made by North American Palladium Ltd. or one of its subsidiaries (the "Company") in light
of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These estimates
and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which, with respect to future events, are subject to change.
These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by the
Company, or on its behalf.

In
making the forward-looking statements, including future-oriented financial information, in this AIF, the Company has made several assumptions that it believes are appropriate, including, but not
limited to, the assumptions that:



The
Company cannot assure you that any of these assumptions will prove to be correct.

Forward
looking statements included or incorporated by reference in this document include statements with respect to anticipated future results, the Company's acquisition strategy, the Company's
objectives or plans to grow production and reserves, expectations regarding the ability to raise capital and add to reserves, information concerning mineral reserve and mineral resource estimates,
events and conditions and other statements that are not statements of historical fact.

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The
words "expect," "anticipate," "estimate," "may," "will," "should," "intend," "believe," "target," "budget," "plan," "projection" and similar expressions are intended to identify forward-looking
statements.

In
light of the risks and uncertainties inherent in all forward-looking statements, including future-oriented financial information, the inclusion of forward-looking statements in this AIF should not
be considered as a representation by the Company or any other person that the Company's objectives or plans will be achieved. Numerous factors could cause the Company's actual results to differ
materially from those expressed or implied in the forward-looking statements, including the following, which are discussed in greater detail under the heading
"Risk Factors":



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These
factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. No assurance can be given that the expectations reflected in the
forward-looking statements, including future-oriented financial information, contained in this AIF will prove to be correct. In addition, although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, including future-oriented financial information, there may be other
factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company undertakes no obligation to disclose publicly any future revisions to forward-looking
statements, including future-oriented financial information, to reflect events or circumstances after the date of this AIF or to reflect the occurrence of unanticipated events, except as expressly
required by law. Additionally, the forward-looking statements, including future-oriented financial information, contained herein are presented solely for the purpose of conveying management's
reasonable belief of the direction of the Company and may not be appropriate for other purposes.

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IMPERIAL-METRIC CONVERSION TABLE

Imperial

Metric1 troy ounce

31.103 grams1 ton, short

0.907 tonnes1 troy ounce per ton

34.286 grams per tonne1 foot

0.305 metres1 mile

1.609 kilometres1 acre

0.405 hectares


REPORTING CURRENCY, FINANCIAL AND RESERVE INFORMATION

The information in this AIF is presented as at December 31, 2009 unless otherwise indicated.

All
dollar amounts referred to herein are in Canadian dollars unless stated otherwise. Unless otherwise indicated, all financial information included herein has been prepared in accordance with
Canadian generally accepted accounting principles, which may differ from United States generally accepted accounting principles.

Unless
otherwise indicated, all reserve and resource estimates included in this annual information form have been prepared in accordance with Canadian National
Instrument 43-101 Standards of Disclosure for Mineral Projects("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum classification system.
NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange
Commission (the "SEC"), and reserve and resource information included herein may not be comparable to similar information disclosed by
U.S. companies. In particular, and without limiting the generality of the foregoing, this document uses the terms "measured resources," "indicated resources" and "inferred resources".
U.S. investors are advised that while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under U.S. standards, mineralization may not be
classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve
determination is made. U.S. investors are cautioned not to assume that any part of a "measured resource" or "indicated resource" will ever be converted into a "reserve". U.S. investors
should also understand that "inferred resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of
"inferred resources" exist, are economically or legally mineable or will ever be upgraded to a higher category. Under Canadian rules, estimated "inferred resources" may not form the basis of
feasibility or pre-feasibility studies except in rare cases. Disclosure of "contained ounces" in a mineral resource is permitted disclosure under Canadian regulations. However, the SEC
normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade, without reference to unit measures. The requirements of
NI 43-101 for identification of "reserves" are also not the same as those of the SEC, and reserves reported by North American Palladium in compliance with
NI 43-101 may not qualify as "reserves" under SEC standards. Accordingly, information concerning mineral deposits set forth in this annual information form may not be
comparable with information made public by companies that report in accordance with U.S. standards.

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CORPORATE STRUCTURE

North American Palladium Ltd. is the successor to Madeleine Mines Ltd., a company incorporated under theMining
Companies Act(Quebec) by letters patent in 1968. In January 1992, Madeleine Mines Ltd. was amalgamated with 2945-2521 Quebec Inc. and
the amalgamated company was wound up into the federally incorporated parent company, 2750538 Canada Inc. This entity changed its name to Madeleine Mines Ltd. and, in
June 1993, the name was changed to North American Palladium Ltd. The Company continues to exist under theCanada Business Corporations
Act("CBCA").

The
Company has three wholly-owned subsidiaries: Lac des Iles Mines Ltd. ("LDI"), Cadiscor Resources Inc.
("Cadiscor") and North American Palladium Arctic Services Oy ("Arctic Services").

In
1991, LDI was incorporated under the CBCA as a subsidiary of Madeleine Mines Ltd. to hold a 50% interest in the Lac des Iles property. In 1994, LDI acquired the remaining 50% interest in the
Lac des Iles property from the Sheridan Platinum Group Ltd. to become the sole owner of the property.

In
2005, Arctic Services entered into a services agreement with Gold Fields Arctic Platinum Oy ("Gold Fields"), the owner of the Arctic Platinum Project
("APP"), an advanced stage nickel-copper-PGM exploration project in Finland. In 2008, the Company determined that it would not deliver a
positive feasibility study for the APP, which was a requirement for the Company to earn a 50% interest on the project. All interests in the APP reverted back to Gold Fields in 2008.

On
December 10, 2007, the Company earned a 50% interest in the Shebandowan West Project (comprised of the former producing Shebandowan mine and the surrounding Haines and Conacher properties)
pursuant to an option and joint venture agreement with Vale Inco Limited ("Vale Inco"). The properties are located approximately 90 kilometres
west of Thunder Bay, Ontario and approximately 100 kilometres southwest of the Company's Lac des Iles mine. Vale Inco has an option to increase its interest from 50% to 60%.

On
May 26, 2009, the Company acquired all of the issued and outstanding shares of Cadiscor pursuant to a plan of arrangement under Section 192 of the CBCA. As a result, Cadiscor became a
wholly owned subsidiary of the Company. Cadiscor owns various gold properties located in Quebec, including the Sleeping Giant gold mine in the Abitibi region of Quebec.

As
a result of its acquisition of Cadiscor, the Company also holds a 100% interest in both the Discovery Project located approximately 35 kilometres northwest of the town of
Lebel-sur-Quévillon, Quebec and the Flordin Property located approximately 40 kilometres north of the town of
Lebel-sur-Quévillon, Quebec.

The
Company's head and registered office is located at Suite 2116, 130 Adelaide Street West, Toronto, Ontario M5H 3P5, Canada, telephone: (416) 360-7590,
facsimile: (416) 360-7709.

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North American Palladium Ltd.  Corporate Chart

GRAPHIC

DESCRIPTION OF THE BUSINESS
AND GENERAL DEVELOPMENTS
Three Year History and Significant Acquisitions

On February 5, 2007, the Company announced that it had entered into a palladium and platinum purchase agreement with Auramet
Trading, LLC ("Auramet"), a New York precious metals trader and merchant bank, providing for the sale of an average of
10,000 ounces of palladium and 500 ounces of platinum per month over a two-year term. At its election, the Company could receive advance payments not exceeding, at any time,
an aggregate maximum amount of U.S.$25 million. The Company granted Auramet a security interest in the concentrates produced at the Lac des Iles mine together with the proceeds arising from the
sale of the concentrate, and by way of additional security, assigned its smelting and refining agreement with Xstrata Nickel ("Xstrata"). The palladium
and platinum purchase agreement expired on December 31, 2008.

On
February 27, 2007, the Company completed a private placement of 550,000 flow-through common shares at $11.00 per share for gross proceeds of $6.05 million. The
proceeds from the financing were spent to expedite work on the Shebandowan West Project.

In
April 2007, the Company announced the results of a mineral resource estimate prepared by Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson
RPA") on the Offset High Grade Zone at the Lac des Iles mine (the "Offset Zone"). The Offset Zone is the fault displaced
continuation of the Roby Zone, the main PGM deposit at the Lac des Iles mine.

On
December 13, 2007, the Company announced that it had closed a public offering of 18,666,667 units at a price of U.S.$4.00 per unit for total gross proceeds of approximately
U.S.$75 million. Each unit consisted of one Common Share and one half of a Common Share purchase warrant of the Company. Each whole warrant entitled the holder to purchase one Common Share at a
price of U.S.$5.05 per share at any time on or prior to December 13, 2009. On January 9, 2008, the Company issued an additional 2,800,000 units under a 30-day
over-allotment option. KFOC exercised its right to subscribe for 25% of this over-allotment offering. After taking the over-allotment exercise into account, the
total gross proceeds to the Company from the unit offering were approximately U.S.$86 million.

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On
May 7, 2008, the Company released the results of a Preliminary Economic Assessment prepared by Micon International Limited ("Micon") on the
Offset Zone at the Lac des Iles mine, suggesting that the Company's underground mining operations could be extended to 2018 by mining the deposit at a rate of 6,000 tonnes per day, yielding up
to 250,000 ounces palladium, 16,000 ounces platinum, 17,000 ounces gold, two million pounds nickel and 4 million pounds copper annually once full production was achieved.
This economic assessment was preliminary in nature and included indicated and inferred mineral resources. Approximately 80% of the resources included in the 2007 preliminary economic assessment were
in the inferred category. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable the resource to be categorized as
mineral reserves. The study's level of accuracy was deemed to be plus or minus 25%. In June 2008, a dispute with the Company's insurer relating to the failure of the Company's primary crusher
in 2002 at the Lac des Iles mine was settled. Under the settlement, the Company received a cash payment of $14.5 million, which was in addition to a $7.1 million insurance recovery
received in 2004.

On
October 1, 2008, William J. Biggar joined the Company as President and Chief Executive Officer, replacing James Excell, with the dual mandate of growing the Company's core assets and
leveraging the Company's strong balance sheet to pursue potential acquisitions and joint venture opportunities.

On
October 21, 2008, the decision was made to temporarily place the Lac des Iles mine on care and maintenance effective October 29, 2008 due to declining metal prices. In particular,
declining sales and production in the automotive industry, the major consumer of palladium and platinum, suggested that PGM producers would be facing significant challenges in the near term. The
closure resulted in the layoff of over 350 employees.

In
January 2009, an updated mineral resource estimate was prepared by Scott Wilson RPA, which upgraded the indicated resource in the Offset Zone by 280%, from 3.2 million tonnes at
4.85 g/t palladium to 12.3 million tonnes at 5.02 g/t palladium (8.28 g/t PdEq). A technical report from the entire Lac des Iles mine, including the Offset Zone, was filed
with securities regulators on March 13, 2009.

On
May 26, 2009, the Company and Cadiscor completed a court approved statutory plan of arrangement, whereby the Company purchased all of the outstanding common shares of Cadiscor. Cadiscor
shareholders received 0.33 Common Shares for each Cadiscor common share. Concurrent with the signing of the merger agreement between the Company and Cadiscor, the Company advanced a total of
$7.5 million to Cadiscor to bring the Sleeping Giant mine back into production.

On
June 25, 2009, the Company announced the discovery of a new underground PGM zone at its Lac des Iles mine. The new zone, named the Cowboy Zone, was discovered during infill drilling of the
Offset Zone to support an advanced preliminary economic assessment that is currently in progress.

On
July 20, 2009, Jeffrey A. Swinoga joined the Company as Vice President, Finance and Chief Financial Officer.

On
August 27, 2009, the Company announced the signing of a letter agreement with Midland Exploration Inc. to earn an interest in the Laflamme gold property. The Company has the option to
acquire a 50% interest in the property over four years for cash payments totalling $100,000 plus exploration expenditures totalling $1 million over four years. The Company will be the operator
and, following the acquisition of the initial 50% interest, the Company will have an option to acquire an additional 15% interest upon delivery of a bankable feasibility study.

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On
September 30, 2009, the Company announced the completion of a bought deal prospectus offering of 16 million units for total gross proceeds of $50.4 million. Each unit consisted
of one Common Share and one half of one Common Share purchase warrant of the Company. Each whole warrant entitles the holder to purchase one Common Share at a price of $4.25 per share at any time
prior to September 30, 2011. On October 8, 2009, the Company issued an additional 2.4 million units under a 30-day over-allotment option for total gross
proceeds of $7.6 million and announced the closing of a bought deal private placement of 4 million flow-through shares at a price of $3.75 per share for total gross proceeds
of $15 million.

On
October 6, 2009, the Company poured its first gold bars at the Sleeping Giant mine. On October 7, 2009, the Company announced that it exercised its right to buy back a 1% net smelter
return royalty on the Sleeping Giant mine held by IAMGOLD Corporation ("IAMGOLD") for $1 million.

On
November 5, 2009, the Company announced the signing of an agreement with Diagnos Inc. to acquire the Harricana North Property located in the Abitibi region of Quebec north-northwest
of its Sleeping Giant mine. The Harricana North Property consists of 133 non-contiguous claims and covers a surface area of approximately 7,490 hectares. Diagnos Inc.
was granted a 2% net smelter return royalty over the property.

On
December 8, 2009, the Company announced that it intends to re-open the Lac des Iles mine as an underground only operation and expects to produce its first concentrate in the
second quarter of 2010. The Company expects to produce approximately 140,000 ounces of palladium per year over a two-year period, mined via ramp access. The Company also announced
its intention to commence initial development of the Offset Zone. In February 2010, the Company began development of a 1,500 metre ramp over a depth of 200 metres that will take
approximately 12 months to complete.

As
of January 1, 2010, the Company achieved commercial production at the Sleeping Giant gold mine.

On
January 25, 2010, the Company announced that it doubled its exploration budget at the Lac des Iles mine to $15 million in 2010 because of positive results from its 2009 exploration
program. The objectives of the 2010 exploration program are to identify additional resources, upgrade resource classifications and facilitate future mine development planning. The Company expects to
file an updated NI 43-101 report on the Lac des Iles mine in the second quarter of 2010. The report will include an updated mineral resource and mineral reserve estimate that
will include the 2009 drill results.

On
January 29, 2010, the Company announced a $6.2 million, 53,000 metre gold exploration program for 2010. Of the $6.2 million, the Company intends to spend approximately
$2.1 million on 30,000 metres of underground drilling at the Sleeping Giant mine and $1.2 million on drilling at the Dormex property adjacent to the Sleeping Giant mine.

Business Overview

The following contains forward-looking statements and future-oriented financial information about the Company's business. Reference should be made to
"Forward-Looking Statements" on page 1 and for a description of material factors that could cause the Company's actual results to differ materially from the forward-looking statements in
the following, please see "Risk Factors" beginning on page 62. Additionally, the following description of the Company's business includes many geological terms that may not be familiar to the reader.
For a description of the meaning of some of these terms, please see the "Glossary of Terms" beginning on page 79.

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The
Company's principal properties are the Lac des Iles property (including the Lac des Iles mine and the Offset Zone) and the Sleeping Giant mine. Other principal projects are the Discovery Project,
the Flordin Property, and the Shebandowan West Project.

On
December 8, 2009, the Company announced that it intends to restart operations at the Lac des Iles mine, which was temporarily placed on care and maintenance in October 2008 due to
declining metal prices. Prior to this, the Company was Canada's only primary producer of PGMs, producing an estimated 4% of the annual global palladium production. While the majority of the Company's
revenue was derived from the sale of palladium, the Company also generated a considerable portion of its revenue from the sale of platinum, nickel, gold, and copper, all of which are
by-products of the Company's palladium mining operations. The Company expects to resume operations in the Roby underground mine only in the second quarter of 2010. The Company has
commenced initial development of the Offset Zone.

On
May 26, 2009, the Company acquired all of the issued and outstanding shares of Cadiscor pursuant to a plan of arrangement under the CBCA. Cadiscor is now a wholly-owned subsidiary of the
Company and owns the Sleeping Giant gold mine, which declared commercial production on January 1, 2010.

As
a result of the Lac des Iles mine being on care and maintenance for 2009, the Company's revenues totalled only $3.8 million.

For
the 2008 fiscal year, the Company's revenue totalled $56.3 million for palladium, $20.1 million for platinum, $20.1 million for nickel, $14.4 million for gold,
$12.2 million for copper and $2.4 million for other metals, representing 45%, 16%, 16%, 11%, 10% and 2% respectively of its total consolidated revenue. However, as the mine was placed on
temporary care and maintenance at the end of October, 2008, these figures represent approximately ten months of operations.

Prior
to placing the Lac des Iles mine on care and maintenance, the Company had 415 employees. As of March 31, 2010, the Company had 324 employees. Of this number,
116 employees worked at the Lac des Iles mine, 182 at the Sleeping Giant mine, 4 at the Company's finance and administration office in Thunder Bay, 13 out of an exploration
office in Thunder Bay and 9 at the Company's corporate head office in Toronto. With the resumption of operations at the Roby underground mine, the Company intends to hire an additional
64 employees. The Company is dependent on a skilled labour force with experience and a knowledge base in the mining sector. Whether as employees of the Company or independent contractors, this
labour force is generally available to the Company from residents in the Thunder Bay and Val d'Or/Amos areas and Abitibi region, although exploration and corporate office personnel have been recruited
both locally and across Canada.

Overview of the Principal Markets

Principal Market for PGMs

PGMs are rare precious metals with unique physical properties that are used in diverse industrial applications and in jewellery. The unique
physical characteristics of PGMs include: (1) strong catalytic properties; (2) excellent conductivity and ductility; (3) a high level of resistance to corrosion;
(4) strength and durability; and (5) a high melting point. Palladium, like gold, silver and platinum, is a precious metal, as well as one of the six PGMs, which also include rhodium,
ruthenium, iridium and osmium. Palladium is used in the manufacture of catalytic converters in the automotive industry, the manufacture of jewellery and electronics, and in dental and chemical
applications. As a precious metal, there is also investment demand for palladium in the form of doré bars, generally held as physical inventory by exchange traded funds
("ETFs") and institutional investors.

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Palladium
is typically produced as a by-product metal from either platinum mines in the Republic of South Africa (41% of world mine production) or Norilsk Nickel's mines in Russia (45% of
world mine production). North America contributes approximately 11% to the world's supply of palladium, which was estimated to be approximately 6 million ounces in 2009. The Company is one of
only two primary producers of palladium in North America.

More
than half (52%) of the global demand for palladium in 2009 stemmed from the automotive industry for use in auto catalysts, while 14% stemmed from electronics, and 15% stemmed from other uses
including ETFs. Chinese jewellery demand accounted for 8%, while the dental industry accounted for 11%.

The
primary use for palladium in the automotive industry is in the manufacture of catalytic converters, which reduce harmful vehicle exhaust emissions by converting them into less harmful carbon
dioxide, nitrogen and water vapour. Palladium, platinum and rhodium are the primary components in catalytic converters. The demand for palladium in the automotive industry has more than doubled in the
last ten years due to an increase in global automotive production and the tightening of emissions standards worldwide, resulting in steady growth in the use of catalytic converters. Given that the
market price for palladium has historically been substantially lower than that of platinum, catalytic converter manufacturers have substituted palladium in place of platinum, where possible, for use
in gasoline powered engines. Auto makers are also now using palladium in low sulphur diesel powered engines, although the technology has not advanced sufficiently to replace platinum completely.
Palladium can comprise up to approximately 50% of the PGM content of a diesel catalytic converter.

In
the electronics industry, palladium's demand has been rising in recent years. This increase is largely attributable to an increase in demand for palladium bearing semiconductors that are used in
many electronic devices, including cellular telephones, personal and notebook computers, fax machines and home electronics. In the dental industry, palladium is widely used in alloys for dental
restoration. Palladium is also used in the manufacture of jewellery and may be used either on its own or as an alloy in white gold. Additionally, palladium is used in crude oil refining catalysts,
chemical process catalysts and various chemical applications, including the manufacture of paints, adhesives, fibres and coatings. Palladium is also used in the manufacture of polyester.

An
important macroeconomic trend has been the increase in demand for palladium, along with the other precious metals (i.e. platinum, gold and silver), for investment purposes. Strong investor
sentiment for these precious metals has provided support for a favourable palladium pricing environment. Increased participation by a greater variety of market participants and the resulting
improvement in liquidity, and the introduction of new investment vehicles are all improving investment demand for palladium. Palladium ETFs were introduced in 2007 by some of the same firms that have
introduced platinum ETFs, and there are now palladium ETFs that trade on the London, Zurich, Tokyo and New York stock exchanges.

The
Company may sell palladium into the spot market, directly to a smelter processing the Company's concentrate or directly to end users of palladium metal. In each instance the price for palladium is
expected to be determined with reference to prevailing spot market prices.

Principal Market for Gold

Gold from the Sleeping Giant mine is sold into the spot market at prevailing spot market prices.

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Lac des Iles Property

Lac des Iles mine

The Company's Lac des Iles property is located approximately 85 kilometres northwest of the city of Thunder Bay, Ontario, Canada. The property
consists of the Roby open pit mine, the Roby underground mine (collectively, the "Roby Zone"), the Offset Zone, a processing plant with a nominal
capacity of approximately 15,000 tonnes per day, and the original mill with nominal capacity of approximately 2,400 tonnes per day. The primary deposits on the LDI Property are the Roby
Zone and the Offset Zone, both disseminated magmatic nickel-copper-PGM deposits.

In
2009, the Company discovered what it believes to be two new underground mineralized areas, called the "Cowboy Zone" and the
"Outlaw Zone".

Roby Zone

The Company began mining the Roby Zone in 1993 using open pit mining methods. In April 2006, an underground mine went into commercial
production to access a higher grade portion of the Roby Zone. In 2007, the Company produced 286,334 ounces of palladium from the Lac des Iles mine and in 2008, the Company produced
212,046 ounces of palladium up to October 29, 2008, when the mine was placed on temporary care and maintenance due to a precipitous drop in the price of palladium.

On
December 8, 2009, the Company announced its intention to restart operations in the Roby underground mine, and that it expects to produce approximately 140,000 ounces of palladium per
year of production over a two-year period, mined via ramp access at a rate of 76,500 tonnes per month. The Company expects to produce its first concentrate in the second quarter of
2010. The Company anticipates mill restart capital expenditures to be approximately $4 million and capitalized pre-production operating costs to be approximately $10 million.
These estimated capital costs were previously disclosed in the Company's material change report dated December 10, 2009. John Caldbick, P. Eng., the General Manager of the Lac des Iles mine, is
a qualified person under NI 43-101 and is responsible for the estimated restart costs. Mr. Caldbick verified the restart cost estimates by conducting a financial analysis
with senior mine site personnel, taking into account the Company's past practices over the mine's 15-year operating history and current plans for operations at the Lac des Iles mine.

Offset Zone

The Offset Zone is located on the Lac des Iles property and was discovered by the Company's exploration team in 2001. The Offset Zone is the fault
displaced continuation of the Roby Zone mineralization and is located below and approximately 250 metres to the south west of the Roby Zone.

A
December 31, 2008 technical report on the Lac des Iles property estimated the indicated resource at 12.3 million tonnes at 5.02 g/t Pd (8.28 g/t PdEq). An updated mineral
resource estimate is in progress and is expected to be filed in the second quarter of 2010. The Offset Zone has significantly more mineral resources than the current underground mine at the Roby Zone
and remains open along strike to the north, south and at depth. An underground drilling program and a detailed scoping study are underway.

Drill
programs are planned for 2010 to increase confidence in existing mineral resources and to delineate more resources. On January 25, 2010, the Company announced that it has doubled its
exploration budget to $15 million for the Lac des Iles property, of which $12 million will be spent on drilling 53,000 metres in the Offset Zone. Potential exists to add new
resources along strike to the north and south and down-dip. Thus far the Offset Zone has been traced at a depth of 1,300 metres below surface, and along a strike length of
approximately 600 metres.

In
February 2010, the Company commenced initial development of a 1,500 metre ramp over a depth of 200 metres in the Offset Zone. The ramp will facilitate additional underground
exploration drilling as well as provide access for a platform for the installation of a raise-bore shaft to the surface. It is anticipated that the ramp will be completed by
early 2011.

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Cowboy Zone

On June 25, 2009, the Company announced the discovery of the Cowboy Zone, a new underground PGM zone at the Lac des Iles mine. The Cowboy Zone
has the potential to extend the mine life and significantly impact the economics of the Lac des Iles mine. The Cowboy Zone is located 30 to 50 metres down section to the west of the Offset Zone
and extends for up to 250 metres along strike and 350 metres down dip. It remains open in all directions similar to the Offset Zone and appears to consist of several mineralized
subzones.

On
September 17, 2009, the Company announced that Phase 2 drilling results from 11 of 35 planned holes extended the limits of the Cowboy Zone 180 metres farther to the
north and 50 metres farther down dip. On November 11, 2009, the Company further announced that preliminary assay results from four more holes showed the highest palladium grades reported
to date for the Cowboy Zone and extended the limit of the Cowboy Zone 30 metres farther to the north.

On
January 25, 2010, the Company reported positive exploration results from its 2009 exploration program at the Lac des Iles property, including the best new intersection at the Cowboy Zone
with 18 metres grading 8.91 g/t palladium.

Outlaw Zone

In September 2009, the Company announced the discovery of a potential new mineralized zone, called the Outlaw Zone to the west of the Cowboy
Zone. The Outlaw Zone is hosted by gabbro. The composited assay interval for the intersection is 22m @ 3.26 g/t palladium (which includes 5m @ 5.94 g/t palladium). Future drill programs
will be designed to explore the lateral and vertical limits of the Outlaw Zone, and to establish its orientation, geometry and internal continuity.

Other Recent Discoveries

In addition to the Offset Zone and the Cowboy Zone, a surface exploration program in 2009 identified a mineralized area near surface and adjacent to
the Roby open pit called the "West Pit". Similarly, grassroots exploration work at the Lac des Iles property in 2008 indicated the presence of a zone, called the "North VT Rim", of anomalous palladium
assays which follows the contact with the Roby Zone to the east.

Sleeping Giant Mine

The Company's Sleeping Giant mine is situated in the Abitibi region of Quebec, approximately 80 kilometres north of the town of Amos. The mine
is a narrow vein underground mine that commenced production in 1988 and is accessible by a four-compartment production shaft with a total depth of 1,053 metres. The mine site also
has a mill with a rated capacity of 900 tonnes per day. There are approximately 190 employees employed by the Sleeping Giant mine and mill. The previous owner placed the mine on care and
maintenance in September 2008.

As
of January 1, 2010, commercial production was achieved at the Sleeping Giant mine. The Company expects annualized production to reach approximately 50,000 ounces of gold per year once
steady-state production is achieved.

12

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Discovery Project

The Company's Discovery Project is located approximately 35 kilometres northwest of the town of
Lebel-sur-Quévillon, Quebec and approximately 70 kilometres from the Sleeping Giant mine. This greenfield gold property is comprised of
124 contiguous mining claims covering 3,351 hectares. Cadiscor engaged InnovExplo Inc. ("InnovExplo") to prepare a
NI 43-101 resource estimate and scoping study on the project, which was issued on August 1, 2008 (the "Discovery
Report"). The Discovery Report estimated that there were 3,109 tonnes of measured resources grading 8.95 g/t, 1,278,973 tonnes of indicated resources
grading 5.74 g/t and 1,545,500 tonnes of inferred resources grading 5.93 g/t. The scoping study concluded that the Discovery Project could produce 44,000 ounces of gold per
year for 4 years at a $650 gold price.

Flordin Property

In 2008, Cadiscor carried out preliminary exploration drilling on the Flordin property at a cost of $0.3 million. Drilling on Flordin
intersected several mineralized zones, expanding their lateral and depth dimensions and confirming the exploration potential of the property.

During
the last quarter of 2009, the Company hired InnovExplo of Val d'Or to prepare a NI 43-101 resource estimate on the Flordin gold deposit. The report estimated that
there were 29,700 tonnes of measured resources grading 4.6 g/t, 649,200 tonnes of indicated resources grading 4.24 g/t and 1,451,400 tonnes of inferred resources
grading 3.63 g/t.

Shebandowan West Project

On December 10, 2007, the Company earned a 50% interest in the former producing Shebandowan mine and the surrounding Haines and Conacher
properties pursuant to an option and joint venture agreement with Vale Inco. The properties contain a series of nickel copper-PGM mineralized zones and the land package totals
approximately 7,974 hectares. These properties are located 90 kilometres west of Thunder Bay, Ontario, and approximately 100 kilometres southwest from the Company's Lac des Iles
mine. Vale Inco retains an option to increase its interest from 50% to 60%, exercisable in the event that a feasibility study on the properties results in a mineral reserve and mineral resource
estimate equal to 200 million pounds of nickel and other metals.

The
Shebandowan West Project encompasses three shallow mineralized zones known as the West, Road and "D" zones, all of which are located at shallow depths immediately to the west of the former
Shebandowan mine in an area known as the Shebandowan West district. The Shebandowan West Project's nickel copper-PGM mineralization is believed by management to represent the western
extension of the Shebandowan mine orebody. The former Shebandowan mine, which was in operation from 1972 to 1998, produced 8.7 million tonnes of ore at grades of 2.07% nickel, 1.00% copper and
approximately 3.0 grams per tonne PGM and gold. A technical report in compliance with NI 43-101 disclosing the results of a mineral resource estimate by an independent
qualified person was filed on October 26, 2007.

Management
was considering a mine development scenario that would entail excavation of the Shebandowan West Project by means of ramp-accessed underground mining methods at a rate of 500 to
1,000 tonnes per day, crushing the material on site and transporting it by truck to the Lac des Iles property for processing at the original mill on the Lac des Iles property. The original mill
at Lac des Iles has been idle since 2001. Preliminary metallurgical testing supports the possibility of producing a bulk sulphide concentrate from the Shebandowan West Project at the original mill. As
currently envisaged, the Shebandowan West Project would not trigger Vale Inco's back-in right.

13

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In
light of the sharp decline in metal prices in the fall of 2008, the Company ceased all activities at the Shebandowan West Project. In light of a more favourable outlook for nickel prices the
Company and Vale Inco plan to conduct a $250,000 exploration program in 2010.

Corporate Development and Grassroots Exploration

In addition to its operating mines and advanced exploration projects described above, grassroots exploration is an important ongoing part of the
Company's growth strategy. Traditionally, the Company has examined PGM and nickel opportunities, particularly the exploration potential around the Company's Lac des Iles mine, and on the Shebandowan
West Project property. Management continues to believe that the Company is well positioned to partner with other PGM exploration companies in Canada, given the existing infrastructure at the Lac des
Iles mine and the Company's years of experience in mining PGM-nickel deposits.

Since
acquiring the Sleeping Giant mine in 2009, the Company is also considering corporate transactions with gold companies that support the Company's goal of becoming a mid-tier precious
metals producer.

From
time to time, the Company enters into confidentiality agreements with junior mining companies or individual prospectors to assess the prospective nature of their land holdings. As part of its
development strategy, the Company intends to acquire additional mining properties, where such transactions are economically and strategically justified.

Mineral Reserve and Mineral Resource Estimates

The table below sets forth estimated mineral resources as at December 31, 2008 for the Lac des Iles mine (including the Offset Zone), as at
December 31, 2009 for the Sleeping Giant mine, as at August 1, 2008 for the Discovery Project, as at February 23, 2010 for the Flordin Property, and as at August 9, 2007
for the Shebandowan West Project, in each case as calculated pursuant to National Instrument 43-101  Standards of Disclosure for Mineral
Projects.

In
2009, the Company reclassified all remaining open pit, underground, and stockpiles at the Lac des Iles mine from mineral reserves to mineral resources because the mine was on care and maintenance.
With the restart of the Lac des Iles mine in the second quarter of 2010, it is anticipated that some mineral resources will be converted to mineral reserves in a new
NI 43-101 report expected in the second quarter of 2010. The report will also include the results from 2009 exploration activity.

14

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North American Palladium Mineral Reserves and Mineral Resources:

Property

Category

Tonnes
(000)

Pd
(g/t)

Pt
(g/t)

Au
(g/t)

Cu
(%)

Ni
(%)

Pd
(000 oz)

Pt
(000 oz)

Au
(000 oz)Lac des Iles

ResourcesMeasuredRoby Zone Open Pit


3,722


1.99


0.23


0.17


0.08


0.07


238


28


20Roby Zone Stockpiles


763


2.09


0.19


0.18


0.06


0.08


51


5


4Indicated ResourcesRoby Zone Open Pit


2,565


2.20


0.24


0.18


0.08


0.07


181


20


15Roby RGO Stockpile


13,365


0.97


0.12


0.08


0.03


0.06


417


52


34Roby Zone Underground


3,292


7.61


0.44


0.33


0.06


0.08


805


47


35Offset Underground


12,331


5.02


0.38


0.37


0.11


0.13


1,990


151


147Measured and Indicated


36,038


3.18


0.26


0.22


0.07


0.09


3,682


303


235InferredOffset Underground


4,637


4.9


0.4


0.3


0.12


0.13


730


60


45Sleeping Giant

ReservesProven


91








8.91














26Probable


96








9.79














30ResourcesIndicated


213








8.32














57Inferred


243








12.9














101Discovery

ResourcesMeasured


3








8.95














0.9Indicated


1,279








5.74














236Inferred


1,546








5.93














294Flordin

ResourcesMeasured


30








4.6














4Indicated


649








4.24














88Inferred


1,451








3.63














169Shebandowan

ResourcesMeasured


368


1.19


0.37


0.22


0.66


0.89


14


4


Indicated


924


1.05


0.33


0.23


0.60


0.92


31


10


Measured and Indicated


1,292


1.09


0.34


0.23


0.62


0.91


45


14


Inferred


171


0.97


0.27


0.18


0.61


1.11


5


2





Notes: (1)The
classification system used herein conforms with National Instrument 43-101  Standards of
Disclosure for Mineral Projects (NI 43-101) and the Canadian Institute of Mining, Metallurgy and Petroleum classification system. U.S. investors should refer to page 4
of this Annual Information Form for an overview on how Canadian standards differ significantly from U.S. requirements.(2)Mineral
Resources for the Lac des Iles mine were estimated by Scott Wilson Roscoe Postle Associates, Inc. Using the following cut-off
grades: (i) 1.8 g/t PdEq for the Roby open pit, within an optimized pit shell run below the current pit survey (October 2008); (ii) 1.9 g/t PdEq for the mine stockpiles; and
(iii) 5.8 g/t PdEq for the underground Roby Zone and the Offset Zone. These cut-off grades were determined under the assumption that a production rate of 14,000 tpd would be
resumed in the event of re-starting operations. Metal price assumptions of US$350/oz palladium, US$1,400/oz platinum, US$850/oz gold,US$6.50/lb nickel, and US$2.00/lb copper were used in
the estimation of cut-off grade. A US$/C$ exchange rate of 1.11 was also applied.


15

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(3)Mineral
Reserves and Mineral Resources for the Sleeping Giant mine were estimated as of December 31, 2009 by Vincent Jourdain, P.Eng., Ph.D, a
qualified person under NI 43-101. A long term gold price of Cdn.$850 per ounce was assumed. Mineral Reserves are exclusive of Mineral Resources.(4)For
the Sleeping Giant mine, grade capping was carried out on a vein-by-vein basis using the historical values of 60 g/t in
zones 2, 7 and 9; 90 g/t in Zone 8; and 100 g/t in Zone 50. Reserves were evaluated from drill hole results using the polygonal method on inclined longitudinal sections. A specific
gravity of 2.85 t/m3 was used. Shrinkage Stopes the intersections are internally diluted (at zero grade) to minimum true thickness of 1.8 metres; for Long Hole or
Room and Pillar stopes the intersections are internally diluted (at zero grade) to minimum true thickness of 1.8 metres. An external dilution of 15% (at zero grade) and a mining
recovery of 95% are applied to the Shrinkage stopes; an external dilution of 25% (at zero grade) and a mining recovery of 95% are applied to the Long Hole stopes; and an external dilution of
15% (at zero grade) and a mining recovery of 85% are applied to the Room and Pillar stopes.(5)Mineral
Resources for the Discovery Project were estimated as of August 1, 2008 by InnovExplo. A long term gold price of Cdn.$650 per ounce was
assumed. Mineral Resources for the Discovery Project were estimated using various cut-off grades, depending on the mining method applied.(6)Mineral
Resources for the Flordin Property were estimated as of February 23, 2010 by InnovExplo. Mineral Resources were compiled using a cut off
grade between 1.0 g/t Au and 7.0 g/t Au.(7)Mineral
resources for the Shebandowan West Project were estimated by F.H. Brown, CPG, Pr. Sci. Nat., a Qualified Person under
NI 43 101 using a cut-off grade of US$60.00 NSR and 18-month trailing average metal prices of US$300/oz Pd, US$750/oz Pt, US$400/oz Au, US$7/lb Ni
and US$1.50/lb Cu. The estimate assumes a net inventory to North American Palladium of 50% for the Shebandowan West Project. The Company's interest is currently 50%, which could be reduced to 40% upon
the exercise by Vale Inco of a claw-back right.(8)Pd,
Pt and Au ounces are stated as contained ounces. Disclosure of contained ounces is permitted under Canadian regulations; however, the SEC generally
permits resources to be reported only as in place tonnage and grade. Metallurgical recoveries for gold at the Sleeping Giant mine are anticipated to be approximately 96.5%. At the Lac des Iles
mine, historical recoveries have been approximately 75% for palladium, 65% for platinum and 75% for gold. However, as the Lac des Iles mine will resume as an underground only operation, the Company
anticipates an improvement in metallurgical recoveries in 2010.


MINERAL PROPERTIES

The Company's principal properties are the Lac des Iles property (including the Lac des Iles mine and the Offset Zone) and the Sleeping Giant mine.
Other principal projects are the Discovery Project, the Flordin Property, and the Shebandowan West Project. The following describes key aspects of the Company's material properties. Please refer to
the various reports prepared in accordance with NI 43-101 discussed below for a further description of these properties, including their location, accessibility, climate,
local resources, infrastructure, physiography, geological setting, mineralization, past drilling programs and history.

Lac des Iles Mine

Overview

At the request of the Company, Scott Wilson RPA prepared mineral resource estimates for the Lac des Iles mine, as described in two reports, the first
dated January 15, 2009 and entitled "Report on the Resource Estimate for the Offset Zone at Lac des Iles Mine" (the "Offset Zone Report"),
and the second dated March 13, 2009 and entitled "Technical Report on the Lac des Iles Mine, Thunder Bay, Ontario, Canada" (the "LDI
Report"). Mineral resource estimates contained in the LDI Report were based on the assumption that production at the Lac des Iles mine would resume at the previous operating
rate of 14,000 tpd milled. The LDI Report states that this rate is dependent on resuming open pit mining, and notes that scenarios that consider lower production rates, without open pit mining,
are likely to involve higher unit costs ($/t), leading to higher cut-off grades. Higher cut-off grades would reduce resource quantities, most notably in the 13 million
tonnes of regular grade ore stockpile, which is very close to the cut-off grade applicable for 14,000 tpd mining and processing operations. As such, mineral resource estimates
derived from the LDI Report may no longer be accurate. The authors of the reports are "qualified persons" under NI 43-101 and are independent of the Company.

16

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The
following description of the Lac des Iles mine has largely been summarized from the Offset Zone Report and the LDI Report, which are available for review in Canada on SEDAR at www.sedar.com and in
the U.S. on EDGAR, which can be accessed at www.sec.gov. The section entitled "Recent Discoveries" has been prepared by the Company and reviewed by its qualified persons.

The
Lac des Iles mine was temporarily placed on care and maintenance in October 2008. On December 8, 2009, the Company announced that it intends to restart operations as an
underground-only operation in the second quarter of 2010. Approximately 150 employees are expected to be hired as a result of the restart. An updated mineral reserve and mineral
resource estimate for the Lac des Iles mine is expected to be filed in the second quarter of 2010.

Project Description and Location

The Lac des Iles property comprises approximately 86.4 square kilometres of mineral claims and leases. The Lac des Iles property is located at
Latitude 49°10' North, Longitude 89°37' West, 85 kilometres northwest of the community of Thunder Bay in northwestern Ontario. The mine, mill and tailings impoundment
area lie in the Boreal Forest ecoregion, characterized by typical northern Ontario forest with numerous lakes and beaver swamps.

The
mine site straddles the Spruce River and the Dog River/Matawin Forests. The land surrounding the mine is Crown Land with limited access, and was historically used primarily for recreation, forest
resource extraction, and trapping. The Lac des Iles mine is the only developed mine in the area. The mine area is part of a registered trap line. LDI co-operates with the Sustainable
Forest Licence holders, utilizing the area to ensure that marketable timber on the mine site is harvested.

LDI
holds six mining leases comprising 3,416.3 hectares. Contiguous with these leases are 54 mineral claims consisting of 331 claim units covering 5,119.1 hectares, for a
total property area of 8,535.3 hectares. LDI owns the surface rights to some but not all the claims and leases.

Royalties

Production from the Lac des Iles mine and any future production from the Offset Zone is subject to a royalty agreement with the Sheridan Platinum
Group Inc. and John Patrick Sheridan (together, the "Sheridan Group"). Under the agreement, the Company is required to pay the Sheridan Group a
net smelter return royalty equal to 5% of net cash proceeds received from concentrates and other products produced from mining operations on the Lac des Iles property. Net cash proceeds are calculated
as proceeds from the sale of concentrates after deducting; (i) the costs of sampling, assaying, transporting and insuring the concentrate; (ii) smelter processing and refining charges
and penalties (excluding the Company's own processing costs); and (iii) all applicable taxes and royalties that must be paid in respect of the mining operations. If the Company elects to be
paid for some or all of its payable metals in kind, the royalty obligation is then also payable in kind in respect of these metals.

Environmental Liabilities

Mining and processing operations involve many risks and hazards, including environmental contamination, which could result in environmental damage
and/or liability. See "Risk Factors The risks and hazards associated with mining and processing pose operational and environmental risks
that may not be covered by insurance and may increase the Company's costs."

17

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In
addition, the Company's business is subject to extensive environmental legislation. This legislation requires the Company to obtain various operating approvals and licenses and also imposes
standards and controls. If the Company breaches this legislation, fails to obtain or maintain such operating approvals or licenses or breaches such standards or controls the Company may be subject to
fines or other liabilities. See "Risk Factors The Company is subject to extensive environmental legislation and the costs of complying
with these applicable laws and regulations may be significant."

The
Company believes that its operations and facilities comply in all material respects with current legislation, and that it holds all necessary approvals and licenses for its operations at the Lac
des Iles mine and for all of its planned expansion projects. However, compliance with existing and future legislation and for new mines and mills may require additional control measures and
expenditures, which cannot be estimated at this time.

The
Company is responsible for all costs of closure and reclamation at the Lac des Iles mine and the Shebandowan West Project. The Company, in conjunction with the Ontario Ministry of Northern
Development and Mines (the "Ministry"), has established a trust fund (the "Fund") pursuant
to the Company's mine closure plan for eventual clean-up and restoration of these sites. The mine closure plan calls for a total amount of $8,400 million to be accumulated in the
Fund. Commencing in February 2001, the Fund, controlled by the Ministry, started to accumulate through monthly deposits of $100,000. At December 31, 2009, the Company had
$8.4 million on deposit with the Ministry including accrued interest of $876,000. All current amounts required have been contributed as at December 31, 2009.

In
addition, to the extent that the Company's exploration activities at other projects disturb the land or some other environmental attribute, the Company may incur clean-up and other
reclamation costs at such projects.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Accessibility

Access to the site is via a paved provincial highway from Thunder Bay and then via a 15 kilometre all-weather private road to the
mine site. The site itself is served by well-maintained gravel surface roads.

Climate

The Lac des Iles area experiences hot summers, and cold, snowy winters. Maximum and minimum temperatures range from an extreme low of
-30°C in the winter months to an extreme high of 38°C in the summer months. Winter lows of -30°C are not uncommon in January and February.
Mean annual precipitation at the Lac des Iles property is approximately 714 millimetres. The area is snow-covered for approximately five and a half months per year, with monthly
snowfalls ranging from 270 millimetres to 450 millimetres in winter. Prevailing winds at the Lac des Iles mine are from the northwest. The relative humidity ranges from 50% to 77%.
Weather conditions are rarely severe enough to halt mining operations and generally the only issue is related to safe traction on the access roads and ramps within the open pit mine. Mill operations
are enclosed and are therefore not exposed to the weather other than feed stocks. The Company does not budget for weather related shutdowns in the mines.

Local Resources

Thunder Bay is the major service center for northwestern Ontario and provides most of the services required by the mining operation. This includes an
airport with regular daily service to and from major Canadian cities, rail connections, and ocean access via the Great Lakes and St. Lawrence Seaway.

18

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Most
mine and mill consumables including fuel, cement and propane are readily available in Thunder Bay. Due to the project's proximity to Thunder Bay, the Lac des Iles mine has had recent success in
hiring experienced staff and personnel with considerable mining and processing expertise. Most staff operate on a 4 day on / 3 day off or 7 day on / 7 day off shift.
Contract miners operate on a 28 day in / 14 day out schedule.

Infrastructure

The main facilities of the mine are the old camp area, the new camp area, the main office and tire shop, the old mill area, the new mill area, which
includes the open pit shops, warehouse and operational offices, the old concentrator building, the open pit and stockpile area, the underground portal and related ventilation accesses, and the
tailings management facility (the "TMF").

A
324-person capacity camp and recreational complex was built in conjunction with the construction of the new mill. This facility was expanded in 2006 to accommodate the underground
workforce and now has a 460-person capacity camp.

All
purchasing is handled by the on-site staff, with regular freight movement between the Lac des Iles mine site and Thunder Bay. On-site warehouse space accommodates spares
for open pit and underground mining as well as milling operations. The trucking contractor maintains a transhipping warehouse in Thunder Bay for Lac des Iles material. Road access to the site is
adequate for moving in most materials, including oversize mining equipment.

Waste
dumps and ore stockpiles of various grades have been established on the surface near the concentrator facilities. One significant aspect is that the waste rock from pit walls is relatively
benign and classified as non-acid generating. Similar waste rock from the underground workings is placed as fill in the mined underground stopes.

Tailings
from the mill are deposited and water reclaimed for use in the concentrator. The TMF was expanded in 2008 to meet future milling capacity.

Water
and sewer services are supplied independently for each facility and are considered by the Company to be adequate for current needs. Expansion of potable water and sewer services were completed
for the underground workforce additions. Electrical power is supplied by Hydro One via a 118 kV line to a main substation on site. Site distribution is maintained by Lac des Iles and consists
of 4,160 V overhead lines around the site. There is a services agreement with the provincial utility currently in place.

Physiography

The Lac des Iles mine is located in northwestern Ontario which lies within the Superior Province of the Canadian Precambrian Shield, a boreal forest
region typified by black spruce, birch, poplar and jack pine, and low areas of numerous lakes and treed swamps. Drainage is poorly integrated and generally south to Lake Superior. Local land use is
primarily forestry related. The topography of the site is favourable for the placement of facilities, being generally of low relief. Elevations on the property range from 418 metres above sea
level to 550 metres above sea level, exclusive of the open pit.

History

Significant palladium mineralization was first discovered in the Roby Zone in 1963 by prospectors. Various exploration programs were undertaken over
the next 25 years by a number of companies.

19

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In
1990, Madeleine Mines Ltd. developed the property. After intermittent production and continuing capital expenditures, commercial open pit production of the Roby Zone was achieved in
December 1993. The Company was formed as an outcome of corporate reorganization. In 2000, the Company commenced an expansion program at the Lac des Iles mine and a new mill was commissioned in
the second quarter of 2001, which achieved its nominal rated 15,000 tonnes per day throughput in August 2002.

From
1999 to 2001, the Company carried out an extensive exploration drilling campaign that identified mineralization at depth, below the ultimate pit bottom. The drilling identified two zones with
potential for underground mining: the Main High Grade Zone and the Offset Zone.

A
major Phase 4 push back of the south and east pit wall was undertaken in 2004-2005, with waste removal of upper benches completed in 2005. In 2006, the open pit mine was
redesigned to address south wall slope stability issues. This pit redesign was finalized in September 2006.

Roby Zone

The Company began mining the Roby Zone in 1993 using open pit mining methods. In April 2006, the Roby underground mine went into commercial
production to access a higher grade portion of the Roby Zone. The Company produced 286,334 and 212,046 ounces of palladium from the Lac des Iles mine in 2007 and 2008, respectively.

Offset Zone

In 2001, the Company's exploration team discovered the Offset Zone, which according to the LDI Report has an indicated resource of
12.3 million tonnes at 5.02 g/t Pd (8.28 g/t PdEq). This mineral resource estimate may no longer be accurate. A new mineral resource estimate is currently anticipated to be
completed by the second quarter of 2010, incorporating the results of an extensive infill drilling program completed in 2009. Located on the Lac des Iles property, the Offset Zone is the fault
displaced continuation of the Roby Zone mineralization and is located below and approximately 250 metres to the south west of the Roby Zone.

The
Offset Zone has significantly more mineral resources than the current underground mine at the Roby Zone and remains open along strike to the north and south, and at depth. An underground drilling
program and a preliminary economic analysis are underway with the objectives of increasing the tonnage and grade of the upper portion of the Offset Zone, upgrading indicated resources to probable
reserves, assessing the optimal mining and milling configuration, and assessing the economics of developing the upper portion of the Offset Zone.

Drill
programs are planned for 2010 to increase confidence in existing mineral resources and to delineate more resources. Potential exists to add new resources along strike to the north and south and
down-dip. Thus far the Offset Zone has been traced to a depth of 1,300 metres below surface, and along a strike length of approximately 600 metres.

20

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Recent Discoveries

As a result of the Company's extensive ongoing exploration program at the Lac des Iles mine, the Company has discovered four additional mineralized
areas: the Cowboy Zone, the Outlaw Zone, the West Pit and the North VT Rim. The disclosure regarding these mineralized areas is conceptual in nature and there has been insufficient exploration to
define a mineral resource in any of these areas. It is uncertain if further exploration will result in any of these areas being delineated as a mineral resource. The technical content of this
disclosure is derived from previously filed press releases dated June 25, 2009, September 17, 2009 and November 11, 2009, which are based on drilling programs conducted by the
Company's exploration team under the supervision of Dr. Bill Stone, P. Geo, who was the Company's Vice President, Exploration at that time. Dr. Stone is a qualified person under
NI 43-101 and was responsible for the contents of the press releases.

Cowboy Zone

The Cowboy Zone is located 30 to 60 metres to the west of the Offset Zone and was discovered in 2009 during infill drilling of the Offset
Zone. This new discovery has the potential to extend Lac des Iles' mine life and could potentially impact the economics of the Lac des Iles mine. The first phase of the drilling campaign indicated
that the zone extends for up to 250 metres along strike and 300 metres down dip from the Offset Zone. The assay results from the Phase 2 drilling extended the limit of the Cowboy
Zone 50 metres farther to the north for a total strike length of 300 metres.

Outlaw Zone

A 750-metre long underground exploration hole, designed to test the contact of the Lac des Iles intrusion and the unmineralized country
rock, intersected a significant interval of platinum group elements ("PGE") mineralization to the west of the Offset Zone and the Cowboy Zone. Referred
to as the Outlaw Zone, this new potential zone of mineralization is hosted by gabbro like the Cowboy Zone. Future drill programs are planned to explore the lateral and vertical limits of the Outlaw
Zone, and establish its orientation, geometry and internal continuity.

West Pit

A surface drill program in the West Pit area of the Lac des Iles mine followed up on historic drill results and resulted in the discovery of a new
mineralized area adjacent to the Roby open pit mine. Fifteen holes were drilled from within 150 metres of the west wall of the open pit with assays that were of higher grade than the historic
average grade of 1.99 grams per tonne of palladium at the open pit mine. The assay results and the close proximity of the PGE mineralized intersections provide encouragement for further
exploration, with a view to determining whether there is sufficient mineralized material to consider possible open pit mining scenarios.

North VT Rim

In 2008, the Company conducted grassroots exploration work on the Lac des Iles property, including trenching at an area known as the North VT Rim.
Additional work completed in 2009 included drilling 17 holes and digging and sampling 7 trenches on a 175-metre strike length along the north margin of the Mine Block
Intrusion. An eighth trench was excavated and sampled 40 metres farther to the east. The drilling and trenching results together indicate the presence of a zone of anomalous palladium assays
which follows the contact with the Roby Zone to the east. Follow-up drilling, trenching and prospecting work is planned for the North VT Rim area in 2010. The objective of future work will
be to determine whether the potential exists to extend the Roby Zone mineralization across the northern part of the Mine Block Intrusion by a distance of approximately 1.6 kilometres.

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Geological Setting

Regional Geology

The Lac des Iles area is underlain by mafic to ultramafic rocks of the Archean Lac des Iles Intrusive Complex. These rocks have intruded granites and
greenstones of the Wabigoon Subprovince of the Superior Province. The Lac des Iles Intrusive Complex lies immediately north of the Wabigoon Quetico subprovince boundary, which extends some
300 kilometres from Rainy Lake to Lake Nipigon. The Lac des Iles Intrusive Complex is the largest of a series of mafic and ultramafic intrusions that occur along the boundary and which
collectively define a 30 kilometre diameter circular pattern in the Lac des Iles mine area.

Local and Property Geology

The mine lies in the southern portion of the Lac des Iles Intrusive Complex, in a roughly elliptical intrusive package measuring 3 kilometres
long by 1.5 kilometres wide. These rocks, locally termed the Mine Block Intrusion ("MBI"), comprise a very wide range of textures and mafic and
ultramafic compositions. The MBI is host to a number of PGM deposits, and the most important of these is the Roby Zone. The Roby Zone consists of three subzones: the North Roby Zone, High Grade Zone,
and Breccia Zone. The main area of economic interest for underground mining is the High Grade Zone of the Roby Zone, extending beneath the open pit mine and the Offset Zone, a fault displaced depth
extension of the High Grade Zone.

High
Grade Zone ore is hosted mainly within a portion of a 15 metre to 25 metre thick unit of occasionally sheared PXN/melanogabbro. A host to high-grade PGM mineralization,
it is located in the east central portion of the Roby Zone, bounded by the barren EGAB hanging wall and HGABX hosted Breccia Ore to the west. The High Grade Zone is primarily confined to a
400 metre long segment of the PXN, although it does extend northward into the GN. The High Grade Zone, striking north-northwest to north-northeast, dips near-vertically near surface
and flattens to nearly 45o at depth. The zone appears to be terminated down dip by a relatively shallow dipping fault, the Offset Fault.

Below
this structure, the Offset Zone, a higher grade zone similar to the High Grade Zone, has been intersected in drill holes, where it is displaced down and approximately 300 metres to the
west. Within the wireframed Offset Zone, the palladium mineralization is hosted in approximately 37% heterolithic gabbro breccia, 32% pyroxenite, 16% gabbro and gabbro breccias. Approximately 3% of
the zone is occupied by late dikes (dilution). Higher grade portions of the Roby Footwall Zone, in the footwall of the Offset Zone, are hosted 60% by heterolithic gabbro breccia and 31% by
vari-textured gabbro, gabbro and gabbro norites with dilution by approximately 1% late dikes.

Exploration

Since the early 1960s the Lac des Iles property has been mapped by several companies. The first detailed mapping of the Roby Zone was conducted by
the Company between 1992 and 1994. During this period, the eastern part of the zone was stripped of overburden, then mapped and sampled. This program continued in 1995 over the South Roby area. In
1998, the area between the south pit and the main pit was stripped, mapped and channel sampled. In 1999, this program was expanded to the area east of the Roby pit and resulted in the discovery of the
mineralized Twilight Zone and several other zones of mineralization. The Baker, Moore and Creek zones have been explored sporadically over the last ten years.

The
Offset Zone was discovered in 2001 and 39 holes (35,363 metres) were drilled in, and immediately above, the zone during 2000 and 2001 to explore the zone. In 2001, geological
interpretations of available data were initiated and a large east west striking oblique-slip fault with an offset throw of 300 metres (to the southwest) was interpreted to
displace the down plunge extent of the high grade ore. Two holes for 2,783 metres were drilled in the zone in 2003 and 2004. Fifteen additional holes (18,230 metres) were drilled
in 2005.

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In
2006, the Company spent approximately $1.5 million for diamond drilling to better define and upgrade a portion of the Offset Zone to an inferred resource. As of 2005, drill hole intercepts
within the Offset Zones were generally spaced at 120 metres to 140 metres. The 2006-2007 infill drilling program was designed to tighten the spacing to approximately
50 metres by 50 metres in and around some of the wider intercepts. Eight wedge offset holes (5,663 metres) were drilled from two surface holes to fill in on certain sections and
close the hole spacing, allowing for classification of some of the inferred resources as indicated resources.

Development
of the 5095RL underground exploration drift that began in 2006 was completed in April 2007 at a total cost of $2 million. The underground exploration drift off from 5095RL
was drilled off in the 2009 drilling program to explore the Offset Zone. The two targets were primarily the Shallow Offset High Grade Zone and the Roby Footwall Zone.

Mineralization

PGM, gold and base metal mineralization in the Lac des Iles intrusion occur in both primary and secondary environments within sulphide and silicate
minerals. Mineralization appears to be predominantly strata-bound along the contact between the East Gabbro and the mineralized Heterolithic Gabbro Breccia. Within the Heterolithic Gabbro Breccia,
there is a high grade core typically constrained to an easily recognized ultramafic unit known as the Pyroxenite ("PXN").

Visible
PGM mineralization is rare to nil, and difficult to predict. Palladium and platinum mineralization within the High Grade Zone consists primarily of fine-grained PGM sulphide,
braggite and telluride minerals, merenskyite and kotulskite. Higher PGM grades (mean -7.89 g/t palladium, maximum -55.95 g/t palladium) occur in those portions of
the PXN that are altered to an assemblage of amphibole (anthophyllite actinolite hornblende)-talc-chlorite.

The
PGM tenor is not proportional to the sulphide content, and samples free of visible sulphide often contain more than 10 g/t palladium. The high-grade mineralisation is located
primarily within the western, highly altered portion of the pyroxenite unit. The higher grade "High Grade Ore" is not restricted to the PXN as it commonly straddles the PXN/gabbro breccia contact to
depths exceeding 250 metres.

Platinum
group and chalcophile elements occur in variable amounts in almost every ore type within the Roby Zone. The majority of PGMs either occur within sulphides or are associated with
sulphides at sulphide silicate boundaries, occurring as discrete mineral inclusions within secondary silicates of altered rocks.

Drilling

The Lac des Iles property has been subjected to numerous drill campaigns since the early 1960s. From May 1997 to May 2001, Matawin
Mineral Exploration Inc., under contract to LDI, managed the exploration and drilling programs on the property. In May of 2001, the Company established its own metals exploration division. A
variety of contractors have carried out drilling on the property since then.

Core
recovery is excellent throughout the deposit and is reported to average close to 100 percent. Since 2006, the Company's exploration division has noted core recovery on the
drill logs.

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Sampling, Analysis and Security

In 2004, a series of nine diamond drilling, core logging and sampling related procedure manuals were compiled by the Company's exploration department
for use at the Lac des Iles mine. The Core Cutting and Splitting Manuals were last updated in 2007 and the exploration protocols are currently being revised.

Upon
delivery to the core shack, the core boxes are sorted and tagged. The core is digitally photographed and images are archived in JPG format. Geotechnical data including rock quality designation
measurements are collected in Excel format by geological technicians. Water immersion specific gravity and magnetic susceptibility measurements are collected every 30 metres down hole, with
six-metre intervals taken within the mineralized zone.

Samples
are generally marked at one-metre intervals but may be dependent upon lithological, mineralogical, structural alteration and mineralization factors observed by the geologist during
core logging. Sampling of the Offset Zone starts within the East Gabbro hanging wall, at least five metres prior to the Offset Zone contact, and continues through the footwall breccia to the end of
hole. Any other zones of interest (e.g. pyroxenite-rich breccias) in the hanging wall are also sampled. Sample intervals within the main mineralized zones are generally split
(except for infill drilling, which is whole core sampled) using a fresh water diamond saw or a hydraulic splitter. Technicians are responsible for core halving, bagging, tagging and inserting the
pre-numbered quality assurance and quality control samples into the shipping bags. Core logging and sampling information is entered into a Century Systems database using DHLogger.

For
base metal assay, pulps are digested using a multi-acid digest (nitric acid, hydrofluoric acid, hydrochloric acid). The samples are bulked up with 2.0 millilitres of
hydrochloric acid and brought to a final volume of 10.0 millilitres with distilled de-ionized water. The samples are vortexed and allowed to settle and then analyzed for copper,
nickel, and cobalt using atomic absorption spectroscopy.

The
results for the atomic absorption are checked by the technician and forwarded to data entry by electronic transfer, and a certificate is produced. The laboratory manager checks the data and
validates it if it is error-free. The results are then forwarded to LDI by email and in hardcopy by mail. The Exploration Office in Thunder Bay maintains hardcopy laboratory certificates
and digital copies on file, the latter stored by drill hole number. The digital analytical results are compiled, formatted, and imported into the master drill hole database.

Core
samples are secured in the logging/sampling geology facility at the mine site. The mine itself has a gate house and barriers to restrict public access. Core samples are trucked by exploration
staff to the Accurassay laboratory in Thunder Bay.

Mineral Resource Estimates

The mineral resource estimate and underlying assumptions for the LDI Report are set out above. See "Description of the Business and General
Developments  Mineral Reserve and Mineral Resource Estimates".

Mining Operations

The Company began mining the Roby Zone in 1993 using open pit mining methods. Ore and waste from the open pit was mined using conventional hydraulic
27 cubic metre and 23 cubic metre shovels, 190 tonne trucks, 187 millimetre blast hole drills and a fleet of conventional ancillary equipment. Mine waste was stockpiled
outside of design pit limits.

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Development
of the underground mine began in the second quarter of 2004 in order to access the higher grade portion of the Roby Zone. The underground deposit lies below the ultimate pit bottom of the
open pit and extends to a depth of approximately 660 metres below the surface where it is truncated by an offset fault. Commercial production from the underground mine began on April 1,
2006. For the 2008 fiscal year, the Roby underground mine had a run-of-mine average head grade of 5.71 grams per tonne of palladium compared to 5.79 grams per
tonne in 2007.

The
chosen mining method for the Roby underground mine is sublevel retreat longitudinal long hole stoping with unconsolidated rock fill. The mining block interval is 95 metres floor to floor
with two sublevels in between and twenty metre sill pillars between blocks. Stopes average 60 metres in length with 7 to 10 metre wide vertical rib pillars between stopes. Total intake
ventilation for the mine is designed to be 205 cubic metres per minute. There is one intake ventilation raise/secondary egress situated outside the ultimate open pit limits and air exhausts up
the main ramp.

When
the mine was placed on temporary care and maintenance in October 2008, the open pit had a remaining mine life of less than one year. During more favourable PGM market conditions,
management assessed the economic viability of a southern extension of the open pit, which might have prolonged the mine life of the open pit by an additional two to three years. However, as a result
of a more detailed assessment of development scenarios, management now believes that the capital and operating costs associated with a pushback of the open pit, make it unlikely that the open pit will
be extended or re-opened absent sustained higher palladium prices.

On
December 8, 2009, the Company announced its intention to restart operations in the Roby underground mine only and expects to produce its first concentrate in the second quarter of 2010. The
Company expects to produce approximately 140,000 ounces of palladium per year of production over a two-year period, mined via ramp access at a rate of 76,500 tonnes
per month.

Milling Operations

In 2001, a mill facility was commissioned with a nominal design capacity of 15,000 tonnes per day. Ore from the open pit and underground mine
was crushed in a gyratory crusher and conveyed to a coarse ore stockpile. With the commissioning of the secondary crusher in 2004, the coarse ore stream could be split so that a portion was crushed in
the secondary crusher producing a fine material feed which was then combined with the coarse feed. This mixture of coarse and fine material feeds the SAG mill to increase mill throughput. In 2005,
modifications were made to the secondary crusher, including the installation of a slide gate and better control feed distribution. The ore was ground to a nominal P80 (the size of an opening
through which 80% of the product would pass) of 74 microns in a conventional semi-autogenous mill/ball mill/pebble crusher (SABC) circuit. The ground ore then feeds a flotation
circuit comprised of rougher/scavengers and three stages of cleaning. The processing operation utilized a conventional flotation technology to produce a palladium-rich concentrate that
also contained platinum, nickel, gold and copper. The flotation circuit in the old concentrator was connected to the new concentrator to provide additional cleaner flotation capacity. The final
concentrate is thickened and dewatered using two pressure filters.

In
2008, up until the temporary shutdown of the mine, the concentrator processed 3,722,732 tonnes of ore or 11,419 tonnes per calendar day at an average palladium head grade of
2.33 grams per tonne and an average palladium recovery of 75.3%. In 2007, the concentrator processed 5,006,383 tonnes of ore or 13,716 tonnes per calendar day at an average
palladium head grade of 2.39 grams per tonne and an average palladium recovery of 74.8%.

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The
Company intends to resume operations in the Roby underground mine only and expects that the milling operations will be similar to those used in the past, with reduced requirements on the crushing,
grinding, and flotation plants. However, given that mining operations will only resume in the Roby underground mine, the mill is expected to operate at a lower throughput than that which was processed
prior to the mine being placed on temporary care and maintenance in October 2008. The Company expects that the ore from the Roby underground mine will be crushed using a mobile jaw crusher and
fed into the current mill for processing.

Due
to the LDI mine closure, the LDI mill did not process any ore during the year ended December 31, 2009. Production costs per tonne of ore milled were $30.85 in 2008. No palladium was
produced in the year ended December 31, 2009. Cash costs, which include direct and indirect operating costs, smelting, refining, transportation and sales costs and royalties, net of credits for
by-products, were approximately U.S.$283 per ounce of palladium in 2008.

The
following table sets forth the tonnes milled and the metal production of the concentrate for each of the five years ended December 31, 2009:

Year Ended December 31,2005

2006(1)

2007

2008(2)

2009(2)PALLADIUMOre milled (tonnes)


4,780,599


4,570,926


5,006,383


3,722,732


0Head grade (g/t)


1.66


2.18


2.39


2.33


n/aRecovery (%)


69.6


74.0


74.8


75.3


n/aMill Availability


86.5


86.5


91.1


88.4


n/aProduction (oz)


177,167


237,338


286,334


212,046


0BY-PRODUCT METALSPlatinum (oz)


18,833


22,308


24,442


16,311


0Nickel (lbs)


2,353,227


2,721,042


3,066,973


2,503,902


0Copper (lbs)


5,514,670


5,155,588


5,536,044


4,623,278


0Gold (oz)


14,308


17,237


20,092


15,921


0


Notes: (1)The
underground mine at Lac des Iles went into commercial production on April 1, 2006.(2)The
Lac des Iles mine was placed on care and maintenance on October 29, 2008.


Facilities and Infrastructure

The Company's Lac des Iles mining operation also includes an assay laboratory, a warehouse, an electrical shop, a three-bay truck shop to
service the larger haul trucks, an operations camp, a water treatment plant, a propane storage facility, a fuel storage area, other minor outbuildings, low grade stockpile areas, rock storage areas,
tailings storage areas and an electrical substation. Power is delivered to the site by a 65 kilometre power line, that ties directly into the Northwestern Ontario power grid.

The
present TMF at the Lac des Iles mine has been operating since 1990. The TMF is an industrial waste impoundment structure, where erosion is minimized, runoff is managed, water is returned to the
mill facility as needed and excess water is stored until it can be treated and released. The design of the operation is expected to facilitate closure and reclamation of the facility at the end of
mine life. An expansion of the TMF was nearing completion when the mine was placed on care and maintenance and, once completed, the expanded TMF is expected to have sufficient capacity to hold all of
the tailings generated until the end of mine life of the Roby underground mine and the commencement of development of the Offset Zone. Additional rock lifts are contemplated to increase the storage
capacity of the TMF.

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Smelting and Refining

Prior to placing the mine on temporary care and maintenance, the Company delivered all of its concentrate to Xstrata (formerly Falconbridge Limited)
for treatment under a contract that was renegotiated during the second quarter of 2007. The concentrate was delivered by truck to Xstrata's Sudbury, Ontario smelter operations where the nickel and
copper are extracted. The PGM and gold bearing material is then further processed at Xstrata's refining operations in Kristiansand, Norway. Under the agreement, the Company has a precious metal
take-back option of refined palladium and platinum, which the Company has historically exercised. The balance of the recovered metals was settled in cash.

Sales
of metals in concentrate were recognized in revenue (net of royalties, treatment, refining and other charges) in Canadian dollars when concentrate is delivered to the Xstrata smelter in
Sudbury for treatment. Final pricing is determined by quoted market prices at the time that the refined metal is sold, which can be up to six months later. Accordingly, revenue in a quarter is based
on current U.S. dollar denominated commodity prices for sales occurring in the quarter and ongoing pricing adjustments from prior sales that were recognized in the Company's revenue but
remained subject to final pricing. These final pricing adjustments result in additional revenues in a rising commodity price environment and reductions to revenue in a declining commodity price
environment. Similarly, not including other variables, a weakening in the Canadian dollar relative to the U.S. dollar will result in additional revenues and a strengthening in the Canadian
dollar relative to the U.S. dollar will result in reduced revenues. Since April 1, 2007, the amount of the final pricing adjustment recognized on any commodity price changes is reduced
by any price participation deductions as provided for in the Company's smelting and refining agreements. The Company does not currently hedge against currency and commodity price fluctuations while
concentrate is awaiting settlement. See "Risk Factors Fluctuations in foreign currency exchange rates in relation to the
U.S. dollar may adversely affect the Company's results of operations."

The
Company is currently negotiating new smelting and refining terms with several third parties and expects to have a new agreement in place prior to the restart of the Lac des Iles mine.

Metal Sales

In 2008, the Company sold palladium both into the spot market (through metal traders) and to Auramet, under a palladium and platinum advance purchase
facility that has since expired. Upon a restart of operations, the Company intends to sell its production from the Lac des Iles mine at spot market prices and/or to the smelter/refiner that receives
concentrate from the Lac des Iles mine.

Labour Matters

Employees at the Lac des Iles mine are either salaried or paid hourly. The hourly employees at the Lac des Iles mine are members of United
Steelworkers of America, Local 9422. In 2006, the Company and the union signed a new three-year collective agreement that expired on February 23, 2009. A new collective agreement
was signed in January 2010, which expires on May 31, 2012.

Employees
live at the mine site during their work week and most have homes in Thunder Bay, Ontario, a city of approximately 105,000 people with an international airport, rail service and port
facilities on Lake Superior. Prior to being placed in temporary care and maintenance, the Lac des Iles mine employed approximately 385 employees. Upon restart, the Company expects that the mine
will employ approximately 180 employees.

The
underground development work at the Lac des Iles mine was conducted using contractors, given the general shortage of, and significant competition for, skilled underground miners. Underground
production mining at the Lac des Iles mine was conducted by Company employees, and is supplemented from time-to-time by contractors for specialized projects or during periods
where manpower was insufficient to meet production levels.

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Sleeping Giant Mine

Overview

In December 2007, Cadiscor commenced a 19,000 metre underground exploration program at the Sleeping Giant mine at a cost of
$2.4 million to test the continuity of a gold zone below the deepest developed mine level (975 metres). Cadiscor engaged Genivar L.P.
("Genivar") to validate the geological interpretation and the known mineralized zones at the mine. In its report dated October 8, 2008, entitled
"Technical Report, the Sleeping Giant Mine, Northwestern Quebec, prepared for Cadiscor Resources Inc." (the "Sleeping Giant Report" a copy
of which is available on SEDAR at www.sedar.com under Cadiscor's profile), Genivar concluded that the Sleeping Giant mine had proven and probable mineral reserves accessible from the current
underground mine working totalling 235,300 tonnes at an average grade of 9.3 g/t gold and measured and indicated resources of 254,500 tonnes at an average grade of
9.7 g/t gold.

Project Description and Location

The Sleeping Giant property is located 80 km north of the town of Amos, Quebec. Provincial highway 109, which connects Amos and Matagami, is
located less than 1 kilometre east of the mine site. Overburden thickness varies between 15 and 60 metres with an average of 30 metres. The Sleeping Giant mine property is
composed of four mining leases and 69 mining claims surrounding the mining infrastructures.

Royalties

Gold production from the Sleeping Giant mine was subject to a 1% net smelter return royalty in favour of IAMGOLD. On October 7, 2009 the
Company exercised its right to buy back the royalty upon making a payment of $1 million to IAMGOLD. The property is also subject to a 1.5% net smelter return royalty in favour of IAMGOLD for
any base metals produced from the Sleeping Giant mine provided that a technical report prepared in accordance with NI 43-101 demonstrates the existence of more than
5 million tonnes of measured and indicated resources on the property. Royalty obligations also exist on certain claims located on the Sleeping Giant property but none of these are situated on
claims that form part of Sleeping Giant's mining operations.

Environmental Liabilities

Mining and processing operations involve many risks and hazards, including environmental contamination, which could result in environmental damage
and/or liability. See "Risk Factors The risks and hazards associated with mining and processing pose operational and environmental risks
that may not be covered by insurance and may increase the Company's costs."

In
addition, the Company's business is subject to extensive environmental legislation. This legislation requires the Company to obtain various operating approvals and licenses and also imposes
standards and controls. If the Company breaches this legislation, fails to obtain or maintain such operating approvals or licenses or breaches such standards or controls the Company may be subject to
fines or other liabilities. See "Risk Factors The Company is subject to extensive environmental legislation and the costs of complying
with these applicable laws and regulations may be significant."

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The
Company believes that its operations and facilities comply in all material respects with current legislation, and that it holds all necessary approvals and licenses for its operations at the
Sleeping Giant mine and for all of its planned expansion projects. However, compliance with existing and future legislation and for new mines and mills may require additional control measures and
expenditures, which cannot be estimated at this time.

Tailings
in existence at the Sleeping Giant mine at the time that IAMGOLD ceased operations remain IAMGOLD's responsibility. The Company, in conjunction with the Ministère des
Ressources naturelles et de la Faune, has established a trust fund pursuant to the Company's mine closure plan for eventual clean-up and restoration of the Sleeping Giant gold mine. As of
December 31, 2009, all current amounts required have been contributed to this trust fund.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Sleeping Giant mine is accessed via provincial highway 109, which connects Amos to Matagami. The nearest significant urban centre is Amos,
approximately 80 kilometres south of the property.

The
landscape is relatively flat and lightly timbered. It is limited to the west and south by the Harricana and Coigny Rivers. The major forest vegetation consists of Black Spruce.

The
climate is typical of northwestern Quebec. Weather data for Amos, the nearest reporting centre, show that January is the coldest month with an average maximum of -12°C and
an average minimum of -23°C, while July is the warmest month with an average maximum of 22°C and an average minimum of 10°C. Rainfall is highest in July
with 115 mm and snowfall is highest in December with 57 cm.

History

In 1957, following the discovery of the Lac Matagami zinc-copper deposit located approximately 65 kilometres north of the Sleeping
Giant mine, work started in the Sleeping Giant area. Several aerial and ground geophysical surveys, as well as some drilling, searching for base metals were carried out. These were followed with an
exploration program that was carried out from 1976 to 1982 by Matagami Lake Exploration.

In
1983, Peron Gold Mines (now named Aurizon Mines Ltd.) acquired a 50% interest in the property by carrying out ground geochemistry and geophysical surveys (magnetic and
very-low-frequency studies), drilling, as well as the beginning of underground exploration. Between 1984 and 1987, two shafts were sunk and sufficient reserves were delimited
to begin development work. The first phase of commercial production occurred between 1988 and 1991, during which 494,000 tonnes at 6.4 g/t gold were extracted from levels 55
to 415. By the end of 1990, Aurizon Mines Ltd., then sole owner of the Sleeping Giant mine, stopped work due to the depletion of reserves.

In
1991, an agreement between Aurizon Mines Ltd. and Cambior Inc. allowed Cambior Inc. to acquire a 50% interest in the property by investing in drilling and in underground work.
With this Cambior Inc. became the project manager. In April 2008, Cambior Inc. purchased the remaining 50% interest in the Sleeping Giant mine to become the sole owner.

After
acquiring it from Cambior Inc. in November of 2006, IAMGOLD held 100% of mineral rights, claims and interest of the Sleeping Giant mine. In October 2007, Cadiscor signed an
agreement with IAMGOLD in order to acquire mineral rights at the end of IAMGOLD's planned production with delivery of the property to Cadiscor at the end of October 2008. On May 26,
2009, the Company acquired all of the issued and outstanding shares of Cadiscor pursuant to a plan of arrangement under the CBCA. Cadiscor is now a wholly-owned subsidiary of the Company.

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Geological Setting

Regional Geology

The Sleeping Giant mine is located in the first volcanic cycle of the North Volcanic Zone of the Abitibi sub-province. The location of
the Sleeping Giant mine matches a disturbance of the regional tectonic grain which forms a triple junction emphasized by the three tonalitic polyphase and synvolcanic plutons arrangement. This
area is affected by major deformation zones E-W and NW-SE. The Joutel mining camp is located at 50 kilometres northwest, and the Matagami mining camp is located at
65 kilometres North from the Sleeping Giant mine.

Local Geology

The mine geology is composed of a volcanic and sedimentary sequence intruded by a felsic complex and post-mineralization dykes. The
volcano-sedimentary rocks from a homoclinal sequence striking east-west with a steep southern dip.

As
for the deposit geometry, the economic gold zones are restricted to the volcano-sedimentary sequence located north and south of the central dacitic intrusion.

The
Sleeping Giant mine gold ore is contained in sulphide bearing quartz veins. At the mine scale, the mineralized zones are spatially distributed inside 1 square kilometre surface to the
north; the veins strike east-west with a steep southern dip of between 65 and 75 degrees. They are characterized by a vertical continuity of over 700 metres and a lateral
continuity between 100 and 200 metres. To the south, a complex system made of four family of veins show a gradual change of the strike and connections with other veins at different attitudes.
These veins are less continuous and extensive than those at the north. Their sizes vary between 50 to 100 metres laterally and less than 200 metres vertically.

Property Geology

All data related to drilling that was compiled since 2002 has expanded several aspects of the knowledge related to the Sleeping Giant mine geological
context.

The
new characterizations of volcanic rocks of this sector identify two local-scale volcanic cycles (the North Cycle and the Mine Cycle) in relation with an important intrusive complex.

The
Mine Cycle stratigraphic sequence is cut by an important group of intrusive rocks of felsic to intermediate composition of calc-alkaline affinity, which constitute the Sleeping Giant
Complex. Four major phases are recognized in the magmatic evolution of this complex.

Recent
data shows that the mine area is the site of a tight fold dipping east with its axial surface sub-vertical and oriented ENE-WSW. Beds that are oriented
ESE-WSW with a steep slope going south in the north area of the mine, pass N-S with a moderate slope going east in the south sector and come back at ESE to WSW in the south
sector. Overall, the fold's dip is moderate going east, but information suggests that it has a steeper slope in the deepest levels.

Some
faults oriented NW-SE show another important structural aspect of the mine sector. Two categories of fault NW-SE are distinguished in the mine environment: ductile dextral
structures (sector SW) and brittle sinistral faults (sector NE). Both fault categories are late according to the upthrust and they displace the gold zones.

30

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Exploration

In 2007 and 2008, Cadiscor completed 90 underground drill holes for a total of 18,669 metres. These drill holes were completed with the
objective of verifying the economic potential of veins below the current mine workings and of increasing knowledge of selected areas that had not been mined in the past even though
gold-bearing veins had been defined there. In 2009, a total of 47 holes for 7,857 metres were drilled underground to define Zone 30W above and below level 975, which
is presently the deepest working level of the Sleeping Giant mine. An additional 14 drill holes defining Zone 3 above level 725 were implanted at level 655 for a total of
2,710 metres drilled. On the surface, five holes were drilled for a total of 2,400 metres.

The
main focus of the 2009 exploration program at the Sleeping Giant mine was to extend the 30 West zone and the 3 zone. At the 30 West zone, drilling 47 underground holes
for 7,800 metres indicated that this zone extends above and below level 975, the lowest level of the mine. The most significant intersections include hole
91-148-09, which graded 124 g/t gold (uncut) over 1.0 metre and hole 85-141-09, which graded 14.38 g/t gold over 1.6 metres.

At
the 3 zone, 14 underground drill holes totalling 2,710 metres followed the extension of the zone. The most significant intersections include hole
65-967b-09, which graded 21.9 g/t gold over 1.2 metres and hole 66-972-09, which graded 9.34 g/t gold over 1.8 metres.

A
new zone, called the 785N zone, was intersected 180 metres below level 975, the lowest level of mine. A 2.2 metre section graded 16 g/t gold.

The
Company also drilled five holes totalling 2,600 metres from the surface. Three holes tested the surface western extension of zones 20, 30 and 40, and two holes tested the surface southern
extension of the J-D zone. Lateral continuations of zones 20, 30 and 40 have been recognised. The best intersection to date in this ongoing program is a 2 metre section
grading 4.1 g/t gold.

Mineralization

The Sleeping Giant deposit is a member of the type of gold deposits formed by groups of veins with gold associated with sulphide minerals and whose
geometry was controlled by the stress field in the rocks at the time of vein formation.

The
Sleeping Giant deposit is a quartz-sulphide vein type gold deposit. The best mineralized veins typically contain four sulphide minerals: pyrite, pyrrhotite, chalcopyrite and sphalerite, which
form 5% to 60% of the veins. The typical vein thickness is between 20 and 80 centimetres with average grade between 35 and 85 g/t gold (uncut channel sample analyses). In
addition to gold, the veins also contain silver and a small amount of copper and zinc. The gold to silver ratio is about 1 to 2.

In
new extensions of the multi-vein gold system, no change was observed in the nature of veins (i.e. no improvement related to tonnes and grades). Therefore, it is considered that
future exploration in the extensions of the mineralized system is likely to show veins of the same type, tonnes and grades as those found up until now.

The
economic veins are grouped in the Mine Cycle rocks and in North Cycle rocks surrounding the main intrusive mass of the Sleeping Giant complex. Controls of gold-bearing structures
correspond to permeability zones in the supporting structure, such as faults, lithological contacts, joints and specific lithologies. Gold veins are usually oblique compared to bedding. Most of the
veins are found in faults. Geological markers show that movements caused by these faults are limited, in the order of metres.

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With
regard to spatial distribution of this vein-type system, several veins occur at the level of the fold hinge line. Since veins were in place before the folding, it is considered that
this abundance shows the fact that this hinge line is a site of favourable preservation, in contrast to the limb where veins might have been boudinaged. The hinge line then appears as a significant
target where well-preserved ore veins can be found.

Drilling

Drilling for purposes of the Sleeping Giant Report includes drill holes completed by the mine operations in stopes or areas which were subsequently
not mined, as well as new drilling by Cadiscor in their exploration program. In all cases, drilling was from underground stations by standard methods with most drill core of BQ size. Core boxes were
closed at the drill station and transported to the core logging facility on surface for core description and sampling.

Sampling Method and Approach

Drill core samples taken from the exploration holes are split and one-half of the core is retained. Samples are split from drill core
using a hydraulic splitter, standard in the industry.

All
samples were analyzed at the laboratory located at the mine site. The analytical method was fire assay with an atomic absorption finish. This method has a lower detection limit of 0.03 g/t
gold. Samples returning a high gold concentration are re-analysed following dilution. To simplify calculations, results are typically reported to one decimal place.

Sample
reception and preparation follow industry standards. The objective of the drying, crushing, quartering and pulverisation steps is to produce a rock sample of approximately 500 grams with
70% passing 200 mesh. A powdered sample of 15 grams is used for the gold analysis. This amount of sample is less than typical in exploration programs, but adequate when a larger number
of samples will be used to define a stope for eventual mining.

The
quality assurance/quality control program consisted of: (1) the use of a check laboratory in order to verify the precision of the results (splits of the pulps); (2) insertion of
blanks in order to control contamination errors; (3) continuous insertion of drill core pulps and tailings in order to evaluate the reproducibility; and (4) insertion of certified
reference material samples.

The
Sleeping Giant laboratory has a control system and quality control program that has continuously demonstrated acceptable results.

A
mine visit was carried out by Tyson Birkett, Eng. Ph.D. on August 12, 2008, as a due diligence study of the drill core handling, logging and sampling, and the mine laboratory procedures. Core
handling, logging and sampling are generally to industry standards.

Six
base samples were selected from available materials, and one-quarter cores, coarse rejects and pulps were obtained from all or some of these materials. A total of 15 samples
were submitted to ALS-Chimitec of Val-d'Or, Quebec, for analyses for gold.

Overall,
results of check analyses agree well with original values from the Sleeping Giant laboratory. There is an excellent correlation between the original and check results, with the pulp analyses,
as expected, showing the best agreement. Results of one-quarter cores and coarse rejects show the effects of a larger nugget effect and associated difficulties of subsampling than the
pulps. Average values for the check analyses versus the original values show an excellent correlation with no significant bias evident.

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After
a review of methods and internal checks and a series of check analyses in an external laboratory, it is the opinion of Tyson C. Birkett, Eng. PhD, that core handling, sampling, sample security
and analysis at the Sleeping Giant mine meet current industry standards and are adequate to support estimates of mineral resources and mineral reserves.

Data Verification

The technical information that forms the basis of the Sleeping Giant Report was acquired by personnel of the Sleeping Giant mine either in their
capacity as employees at the mine or in a subsequent capacity as employees of Cadiscor. There was thus continuity in personnel and in accumulated knowledge of the mine which has benefited the current
study. Since most of the new resources are extensions of existing veins and existing stopes, the geometries of the mineralized zones are well constrained and detailed verification of such data has
been minimal.

Verification
of new drilling has been limited to examination of some drill logs and analytical results. The new drilling leading to estimates of mineral resources at depth below the current mine
workings has followed known veins to greater depth with demonstration of geometric continuity. Since this information is rooted in the existing mine data, it has been verified through examination of
plans and sections for geological coherence.

Adjacent Properties

The Sleeping Giant Report was limited to the Sleeping Giant mine and no relationship with adjacent properties was considered.

Mineral Reserve and Mineral Resource Estimates

The mineral resource estimate and underlying assumptions for the Sleeping Giant mine are set out above. See "Description of the Business and General
Developments  Mineral Reserve and Mineral Resource Estimates".

Mining Operations

The Sleeping Giant mine was in production from 1988 to 1991 and 1993 to September 2008, when it was placed on care and maintenance by its
previous owner, IAMGOLD. At the end of 2008, cumulative production was approximately 960,000 ounces of gold at an average grade of about 11.44 g/t gold.

The
Company poured its first gold bars at the Sleeping Giant mine on October 6, 2009 and declared commercial production on January 1, 2010.

The
mine is accessed by a four-compartment production shaft with a total depth of 1,053 metres. Levels are spaced at 45 metres from surface to a depth of 235 metres,
and from there to a depth of 975 metres are spaced at 60 metres. The exploration shaft and various raises allow all portions of the mine to be ventilated with fresh air. An ore pass and
a waste pass allow material to be handled and raised to the surface. The deepest working level of the mine is presently 975 metres but the Company recently began to deepen the shaft with a view
to extending it by up to another 180 metres. The mine uses 3 and 5 tonne electric locomotives and rail cars.

Three
mining methods have been used to extract ore, with the method being determined according to the dip of a particular zone. For dips over 65 degrees, long-hole and shrinkage
stope extraction is used. For slopes between 65 and 45 degrees, shrinkage stope mining is generally employed (with some stopes mined by long-hole methods). For slopes below
45 degrees, the room and pillar extraction method is used.

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According
to the Sleeping Giant Report, the mine currently has sufficient mineral reserves to support operations for 16 months at a rate of approximately 50,000 ounces of gold per year.
If all of the current mineral resources are converted to reserves, there would be sufficient mine life to support mining operations for an additional 17 months. In 2010, exploration activity at
the mine is expected to focus on seeking to extend the mine life by converting mineral resources to mineral reserves and identifying new mineral resources.

The
existing tailings pond has capacity to support operations for 16 months at a rate of approximately 50,000 ounces of gold per year, after which additional rock lifts may be added to
the existing footprint of the pond to enable it to hold tailings for an additional five years. The tailings pond is constructed of compacted clay that is covered with non acid generating waste rock
from the underground mine. Internal rock lifts are added as the interior of the area is filled with tailings. Deposited tailings are composed of siliceous minerals with approximately 0.20% copper and
0.20% zinc, which are lightly acid generating.

Refining and Metal Sales

The Sleeping Giant mill produces gold-silver doré bars, which are transported by a licensed armoured car services company
to Johnson Matthey Ltd.'s refinery in Brampton, Ontario for further purification. It is anticipated that all of the gold produced from the Sleeping Giant mine will be sold to banks, bullion
dealers and/or refiners based on prevailing spot market prices at the time of such sales.

Labour

Employees at the Sleeping Giant mine are either salaried or paid hourly. The hourly employees are members of United Steelworkers, Local 4796. IAMGOLD
negotiated the current union agreement which expires July 31, 2010. Preliminary discussions are now underway to renew the union agreement.

Most
of the employees have homes in or near the town of Amos, Quebec and travel to and from the mine site daily on a bus provided by the Company. Currently, the Sleeping Giant mine employs
approximately 190 employees. In addition, contractors are employed as needed to assist with underground development, diamond drilling and other duties.

Milling Operations

The mill has a rated capacity of 900 tonnes per day and recovery in November and December of 2009 has been approximately 96%.

Mineral Processing and Metallurgical Testing

In 1993, the Sleeping Giant's milling facility was restarted using the Merill-Crowe process. The recovery rate slightly increased in the following
years, while costs decreased. In 1998, the material used for the Merill-Crowe process was so deteriorated that the milling process was questioned. Once a study was completed, it was decided to modify
the milling facility in order to use the carbon-in-leach process. This process allowed,
in the first months of its use, a recovery increase with the reduction of the liquid tailings and in a short period of time reduction of global milling and processing costs. This system reduces fresh
water demand and the quantity of water that needs to be treated.

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The
Sleeping Giant mill has a nameplate capacity of 900 tonnes per day and was operating at approximately 800 tonnes per day in August 2008, approximately 325 tonnes per
day in November 2009 and approximately 360 tonnes per day in December 2009. Thus the mill capacity is adequate for the planned production over the 19-month operating
period envisaged in the Sleeping Giant Report.

Other Relevant Data and Information

Exploration drilling at depth has intersected the mineralized zones as deep as 445 metres below the current workings of 975 metres with
significant gold grades comparable to those in the current existing levels, which has indicated exploration potential.

At
current gold prices, new interpretation of the existing geological interpretation of the mine and drilling to extend known zones to depth is justified. Zones recently drilled such as 30W remain
open both down and up dip.

The Discovery Project

Overview

Following a successful 2007-2008 drilling program, Cadiscor hired InnovExplo to update the previous
NI 43-101 report on the Discovery gold deposit. The new NI 43-101 resource estimate dated August 1, 2008
(the "Discovery Report") increased the measured and indicated resource by 15%, for a total of 1,282,082 tonnes grading 5.75 grams
per tonne gold (237,075 ounces of gold). In addition, the inferred resource increased by 56% to 1,545,500 tonnes grading 5.93 grams per tonne gold (294,473 ounces of gold).
The Discovery Report confirmed the project to be economically feasible and generate positive cash flow under certain assumptions.

Project Description and Location

The Discovery Project is located approximately 35 kilometres northwest of the town of
Lebel-sur-Quévillon, Quebec and approximately 70 kilometres from the Sleeping Giant mine. This greenfield gold exploration property is comprised of
124 contiguous claims covering 3,351 hectares in the Bruneau and Desjardins townships.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The property is accessible via a well-maintained logging road from provincial Highway 113. A working railway transects the property from
north to south. Power grids are located within 20 km of the property limits. The Discovery deposit is approximately 35 km by road to the nearest town,
Lebel-sur-Quévillon, which provides all necessary services.

The
area surrounding the properties is characterized by generally flat, low-lying forested ground with small bogs and swampy areas. The area was logged many years ago and has been
re-vegetated to a large extent.

The
region experiences cold winters and generally warm summers. Temperatures in January are often below -20 degrees Celsius, while temperatures in the mid-20s are common
between June and September. Snow accumulation and lake freeze-up begin in November and generally persist until April or early May.

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History

Prospecting for gold started as early as 1930 in the area. In 1935, the Flordin mine was discovered a few kilometres east of the Discovery Project.
Between 1937 and 1960 the first exploration work was conducted on the Borduras-Martel and Desjardins properties (now comprising the Discovery Project).

A
resurgence of exploration took place from 1975 to 1990. In 1986, Homestake Mineral Development Company ("HMDC") negotiated options to buy the
Borduras-Martel and Desjardins properties. From 1987-1990 a total of sixty-three (63) diamond drill holes (9,972 metres) were completed.

From
1994-2002 GéoNova optioned the properties from HMDC and prospectors performed geophysical and geological surveys, stripping work and land surveying.

From
2002-2003 Strateco optioned the properties from GéoNova and drilled thirty-five holes and eighteen wedges for a total of 22,275 metres. In August of
2002, SRK Consulting completed an independent technical report for the Discovery Project.

In
2006, Cadiscor purchased (i) Strateco gold's assets in exchange for shares of Cadiscor, and (ii) GéoNova's interest in the Discovery Project, to own a 100% interest in
the Discovery Project.

Geological Setting

Regional Geology

The Discovery Project is located in the north-central part of the Archean Abitibi Greenstone Belt, a subprovince of the Superior Province. The
Discovery gold deposit lies within the monocyclic volcanic segment of the Northern Volcanic Zone, or more precisely, the Vezza-Bruneau volcano-sedimentary belt at the southeastern extremity of the
Harricana-Turgeon trough.

The
Casa Berardi and Douay-Cameron deformation corridors are the most prominent regional structures. These corridors, which host numerous gold deposits, collectively form an extensive E-W
discontinuity through the Northern Volcanic Zone.

Local and Property Geology

The host rock for the gold mineralization is a multi-phase gabbro still at the top of the Southern Volcanites assemblage, 50 to 100 metres
from the contact with the Taibi Group sediments. The gabbro has a relatively constant thickness of approximately 60 metres in the western part of the Discovery Zone, gradually enlarging
southeastward to more than 400 metres, probably due to a NE-SW intersecting fault system and/or folding.

Exploration

From fall 2006 to spring 2007, Cadiscor completed 60 diamond drill holes and 10 wedges NQ size for a total of 26,315 meters in
order to define the Indicated Resources, upgrade resources from inferred to indicated, and (iii) add new inferred resources with exploration drilling at depth and in the eastern extension.

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In
the fall of 2006, a soil geochemistry test program was carried out in the southern part of the Discovery property where no outcrops are present. A soil sampling survey for geochemistry assays was
realized in October 2006 with 115 samples collected. However, 1/3 of the samples could not be analyzed due to insufficient material. The sampling methods were
re-evaluated. No interpretation or conclusions were made as the number of samples was not sufficient.

A
part of the Company's gold exploration program for 2010, the Company plans to spend $500,000 on 4,000 metres of surface drilling to extend the 1200 E gold zones. Permitting work will
continue to advance the project towards an underground exploration stage, as recommended in a 2008 preliminary economic assessment.

Mineralization

The mineralization of the Discovery Project is hosted within a 10-50 metre thick heterogeneous shear zone affecting a gabbro sill.
The gold-bearing shear zone is sub-parallel to the gabbro sill and can be traced over 5 kilometres. The known gold deposits are found in a 2.6 kilometre section
of the shear, which is located in a highly magnetite-rich sub-unit of the gabbro sill.

Three
zoned alteration facies are recognized around the core of gold mineralization in the shear zone. Only the highly ankeritic altered schistose rocks with a quartz-albite-biotite-pyrrhotite-pyrite
and magnetite assemblage are economically gold-bearing.

The
mineralized zones at the Discovery Project were reviewed and re-interpreted by InnovExplo during the course of preparing the Discovery Report. The zones were interpreted along strike
over a distance of 1,200 metres from surface to a vertical depth of 850 metres. A geological interpretation led to four well-defined gold-bearing zones and two
minor zones, all of which are encompassed by the Discovery shear corridor: "E", "EE", "A", "B", "C" and "D". The zones display local branching or splaying.

A
second sector was interpreted along strike over a distance of 1,050 metres from surface to a vertical depth of 700 metres. Two well-defined gold-bearing zones
and three minor zones were interpreted from north to south in the gabbro sill unit. In cross-sections and in level plans, gold-bearing zones have thicknesses from 0.5 to 15 metres,
and form planar bodies with gently curvilinear contours, sometimes irregular and discontinuous due to boudinage deformation and/or complex initial permeability network configuration within
anastomosing shear zones.

The
"B" zone comprises three main lenses: West, East and Center. These three lenses show two distinct ore shoots. The higher grade shoots on the "B" zone typically form vertical elongated lenses. The
"B" zone accounts for 60% of the tonnage and gold content of the Discovery gold deposit.

Drilling

Following the publication of a 43-101 report in June 2007, InnovExplo operated a drilling program for Cadiscor on the
Discovery Project with the objective of confirming the Discovery deposit extensions in the East, 600E and 1200E lenses. A total of 19 diamond drill holes were completed for a total of
11,821 metres. 3 holes totalling 708 metres were aborted due to excessive deviation.

The
drilling program started in June 2007 and ended in February 2008. Most holes intersected typical Discovery-type mineralization with economic grades, and drilling
confirmed that the East, 600E and 1200E zones are still continuous and open to the east and at depth. These drill results confirm the exploration potential of the property.

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Sampling Method and Approach

Early samples were collected by mechanically splitting the core in half. From 1996 onward, assay samples from presumed mineralized sections were
collected by sawing the core in half. The remaining half was returned to the core boxes as witness. The core is in good condition and there is no evidence of misplaced pieces. Sample tags are
generally still readable, although tags placed at the beginning or end of the remaining core samples are loose.

Samples
collected by GéoNova were assayed at two laboratories in the Abitibi region: Technilab Inc. or Abilab Laboratories Inc., with check assays performed by the other
lab. Some verification was also conducted at ALS Chemex-Chimitec for the 1996 program. SRK examined the drill logs in detail. GéoNova performed extensive checks of the assays and found
them to be very consistent. In the more recent drilling programs performed by Strateco, blanks and standards were inserted in the sample stream and results were carefully monitored.

Drill
core was cut with a diamond saw during Strateco's 2004 drilling program. Samples were usually 0.75 to 1.25 metres long, with half the core kept as a witness sample and the other half sent
for analysis at the ALS Chemex-Chimitec laboratory in Val-d'Or. The preparation and gold analysis protocols of the 2002 and 2003 drilling programs were modified in 2004 to improve the
reproducibility of gold analyses. Analysis verifications were systematically made on rejects by fire assay with atomic absorption finish on samples grading over 2 g/t gold and with gravimetric
finish for those grading over 5 g/t gold.

Approximately
10% of the first pulps were sent to the Bourlamaque Laboratory in Val-d'Or for additional analytical verifications. Some samples from the volcanite and volcaniclastic
sequences at the north end of the gabbro sill were also analyzed for silver, copper and zinc using aqua regia extraction and inductively coupled plasma atomic emission spectrometry. Specific gravity
determinations were obtained for gold zones of economic interest. Standard samples were added to the samples sent to the ALS Chemex-Chimitec laboratory as an integral part of a quality control
program. No analytical problem was identified.

For
Cadiscor's 2006-2008 drilling program drill core samples were split into two equal parts using a diamond saw. Samples were generally 0.50 to 1.5 metres long. Half the core was
sent to the ALS Chemex-Chimitec laboratory in Val-d'Or, and the other half kept in an outdoor core rack for future consultation, with a duplicate of the sample numbers stapled in the
core boxes.

Mineral Resource Estimates

The mineral resource estimate and underlying assumptions for the Discovery Report are set out above. See "Description of the Business and General
Developments  Mineral Reserve and Mineral Resource Estimates".

Flordin Property

Overview

During the last quarter of 2009, the Company hired the consulting firm InnovExplo of Val D'Or to prepare a 43-101 resource
estimate on the Flordin gold deposit. The report estimated that there were 29,700 tonnes of measured resources grading 4.6 g/t, 649,200 tonnes of indicated resources grading
4.24 g/t and 1,451,400 tonnes of inferred resources grading 3.63 g/t.

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Project Description and Location

The Flordin Project is approximately 40 km north of the town of Lebel-sur-Quévillon, Quebec. The
project is located in the Desjardins Township.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Flordin Project is located in the Desjardins Township, approximately 40 kilometres north of
Lebel-sur-Quévillon in the Jamésie region of northwestern Quebec, Canada. The property is readily accessible from provincial road 113 onto
a seasonal gravel road built to access the property's interior.

The
Flordin Project is characterized by a relatively cold and humid continental climate. Minimum winter temperatures are close to -20 °C, with an extreme record low of
-43 °C. Maximum summer temperatures are close to 23 °C, with an extreme record high of 36 °C. The average annual snow accumulation is 300 cm, and
the average annual rainfall is 625 mm.

The
town of Lebel-sur-Quévillon, with a population of 3,000, is the closest community. The project is located about 200 kilometres from
Val-d'Or. Val-d'Or has quality manpower and is a place where companies can hire reliable, qualified and experienced staff. Electricity to the property could be provided by
Hydro-Québec, and ample water is available from rivers and lakes for processing purposes.

The
Flordin property is located in the Abitibi Subprovince of the Canadian Shield. The topography of the area is characterized by low ridges and hills flanked by generally flat areas of glacial
outwash and swamps with numerous lakes and bogs. Overburden depth varies from 0 to 10 metres, and consists of stratified clays as well as glacial and fluvio-glacial Pleistocene deposits.

History

The Flordin claim group has been the subject of a number of exploration ventures since 1935. From 1935 to 1936, the first reconnaissance work was
carried out on the Flordin property by Coniagas Mines Ltd. and Hollinger Mines Ltd., leading to the discovery of mineralization. Extensive surface work took place, including
100 diamond drill holes (4,745 metres) drilled on a 3 kilometre trend of gold-bearing veins. The work delineated the #1, #2 and Carthwright zones, of which the first
two are now known as the "E" and "B" zones respectively. A total of 4,877 metres of trenching was also carried out on the Flordin property.

In
1939, International Mining Corporation optioned the project from the new owner, Flordin Mines Ltd., and followed up on the positive earlier results by sinking a shaft in the Carthwright
Zone. A total of 283 metres in 150 test holes and 540 metres in 24 diamond drill holes were completed in underground workings from 1939 to 1941, when the project
was suspended.

The
Flordin property lay dormant until 1978, when it was optioned by Dalhousie Oil Corporation. 5 surface diamond drill holes were drilled on the Carthwright Zone, for a total of
461 metres.

In
1980, Sullivan Mining Group optioned the Flordin property. In 1981, an agreement was reached with SOQUEM allowing them to acquire 50% of Sullivan's interest in the Flordin property.

From
July 1981 to October 1982, 71.8 kilometres of line were cut on the Flordin property. 55 diamond holes were drilled totalling 9,029 metres. Some trenching work
was done near the future ramp, and geological mapping was performed across the property.

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In
September 1986, an agreement was signed between Sullivan Mining Group Ltd. and Bachelor Lake Gold Mines Inc. ("Bachelor Lake")
for the exploration and development of the "B" Zone. The exploration program included the construction of an access road, ramp excavation, drifting, crosscutting, and surface diamond drilling.
68 diamond drill holes totalling 9,705 metres were drilled on the Flordin prospect. Bachelor Lake obtained a 49% interest in the prospect after investing $1,549,000 in
exploration work.

From
October 1986 to February 1987, the first phase of underground exploration was carried out. A total of 5,511 tonnes of ore and 7,905 tonnes of waste were excavated. The
broken muck was transported to a mill near Desmaraisville owned by Bachelor Lake. In mid-June 1987, a total of 5,174 dry metric tons were processed at the mill. A total of
372.048 ounces was sold to the Royal Canadian Mint and 10.513 ounces were kept in the mill inventories. A second phase of underground exploration comprising 2,277 metres of
diamond drilling was carried out from June 1987 to August 1987.

On
October 15, 1987, Cambior Inc. acquired Sullivan Mining Group Ltd. and its 51% interest in the Flordin Project. An important diamond drilling program was carried out from
September 1987 to January 1988, totalling 9,868 metres in 47 holes. During this time, outcrop stripping, geological mapping and channel sampling were carried out on the
property surface.

Between
September 1988 and January 1989, Western Premium Resources Corp. carried out an underground exploration program. Enlargement of the existing ramp was carried out. By the end of
program, some 11,000 tonnes had been broken of which 4,879 tonnes was ore.

In
1998, Cambior Inc. acquired a 100% interest in the Flordin property. In 1999, Cambior proceeded with the rehabilitation of the Flordin site. The ramp and old openings could not be accessed.
The drill core was placed in the ramp, and the collar of the ramp was banked using waste.

In
July 2007, Cadiscor acquired a 100% interest in the Flordin property after signing a purchase agreement with IAMGOLD Corporation. In 2007-2008, Cadiscor undertook geological
compilation work and carried out a diamond drilling program on the property. Previously delineated mineralized zones were encountered, as well as the Boundary Zone, a new zone in the southern part of
the property.

Geological Setting

Regional Geology

The Abitibi Subprovince is dominated by the Abitibi Greenstone Belt, one of the world's largest contiguous areas of low grade Archean volcanic and
sedimentary rocks. The Abitibi Greenstone Belt is also one of the world's richest mining areas, and has produced major amounts of gold, copper, zinc, silver and iron from the Timmins, Kirkland Lake,
Rouyn-Noranda Val-d'Or, Matagami and Chibougamau camps. The Abitibi Greenstone Belt has been intensely studied and explored, mainly due to its economic importance, excellent state of
preservation of its rocks, and accessibility. The Abitibi Subprovince is bounded on the west by the Kapuskasing structural zone. In the southeast, it is in tectonic contact with Neoarchean rocks of
the Pontiac Subprovince and with gneiss units of the Grenville Province.

The
Abitibi Subprovince was divided into the Southern Volcanic Zone ("SVZ") and the Northern Volcanic Zone
("NVZ"). The limit between the NVZ and SVZ corresponds to the Destor-Porcupine-Manneville Fault Zone.

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Local and Property Geology

The Flordin gold deposit lies within the Cameron Deformation Zone, a major NW-SE structural discontinuity. This shear zone is at least
80 kilometres long and reaches up to 5 kilometres wide. The sequence begins with massive to pillowed volcanic flows surmounted by sedimentary rocks of the Taibi Group. The sedimentary
rocks are covered by another volcanic unit composed of mafic and felsic lavas. The sequence was intruded by the felsic Lac Cameron and Franquet plutons.

Sedimentary
rocks are present in the extreme northern part of the property where the magnetic signature is typically low. Intrusive rocks are present as narrow alkalic dykes. They may be genetically
related to a granite/syenite body northwest of Cameron Lake. These rocks are generally pinkish, medium grained and homogeneous; some varieties are buff-coloured and contain up to 10%
quartz phenocrysts. Very few mafic to intermediate varieties have been observed.

Exploration

Cadiscor performed a surface diamond drilling exploration program in 2007-2008. This program is described in the Drilling section.
Earlier exploration activities are described in the History section.

Mineralization

Gold mineralization occurs in 10 major zones in the Flordin deposit. From north to south, they are: "F" Zone, "F2" Zone, "E" Zone, "E2" Zone,
"D" Zone, "C" Zone, "B" Zone, "A" Zone, South-1 Zone, South-2 Zone. The South-1 and "B" zones were the best known by these earlier geologists because
they were accessed by drifts, raises and stopes. Some features of other zones are known only through diamond drilling.

The
"B" Zone consists of a mylonitized quartz vein that contains fragments of metasomatized and mylonitized relict host rocks with variable amounts of sulphides. The lenses of the "B" Zone quartz vein
are arranged so that where one vein pinches out, another vein reopens 2 to 10 metres further. Most of the gold mineralization is restricted to veins, and more specifically impregnated on their
walls where abundant sulphides are present. The remainder of the gold is present in sheared and altered wall rock. Several generations of quartz are present, described in the literature as large
strained crystals, as a mosaic of recrystallized grains, or simply as recrystallized grains.

The
gold-bearing veins are composed mainly of quartz, generally milky white but sometimes smoky grey. Calcite is the second mineral of importance, accounting for approximately 8% of the
rock by volume. Calcite generally occurs as elongated accumulations about 0.5 cm to 4.0 cm wide near the vein margins, and also occurs in dessiminated form. Near the contacts with the
host rock, tourmaline occurs as isolated crystals or in bands, accompanied by pyrite, chalcopyrite, some carbonate minerals, sericite and albite. The auriferous veins also contain approximately 3%
chlorite as millimetric bands.

Pyrite
is the main sulphide mineral, constituting anywhere from 1% to 20% of the veins. Pyrite forms small aggregates along the vein margins and in the chloritic bands within the veins. Altered wall
rocks may average more than 5% pyrite. Pillow basalts, the dominant host rock to the veins, contain an average of 3% pyrite in disseminated form and along fractures.

Visible
gold is rare, and where present occurs in association with a metallic mineral thought to be a telluride. Numerous isolated gold grains were observed microscopically in the matrix and enclosed
in pyrite, or along pyrite margins. Hematite is widespread (up to 6-7%).

The
South-1 Zone is an area of intense mylonitization and hydrothermal alteration similar to the "B" Zone. The South-1 Zone is marked by a shattered appearance,
characterized by pervasive alteration and injections of minute quartz stringers. Carbonate-rich quartz veinlets are intercalated with bands of volcanic material. Late
quartz-carbonate-albite veinlets were also observed. Ductile deformation of this zone likely took place without rupture of the deformed rock. Instead, permeability was probably the result of fabrics
propagating through the rock. Fluid flow was focused along the fabrics and therefore generated widespread disseminated alteration and mineralization.

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Both
deformed and unstrained pyrite account for 3-4% of the rock by volume. Pyrite hosts inclusions of chalcopyrite, pyrrhotite and numerous grains of a silver-coloured mineral. Hematite
(6-7%) and isolated chalcopyrite crystals are also present. Several gold grains occur at the interface between pyrite grains and/or chalcopyrite grains.

The
mineralization and alteration features of other mineralized zones in the Flordin deposit are similar to those of the South-1 Zone. These other zones were delineated by diamond
drilling only, and their geological features are thus less well known than those of the "B" and South-1 zones. Rocks in the mineralized zones are beige to brown in colour. In many
places, the rocks appear bleached.

Drilling

Following the compilation of all available geological data for the Flordin property, Cadiscor carried out a two-phase diamond drilling
program. The first phase was performed from December 17, 2007 to January 29, 2008. The 2007-2008 drill contract was awarded to Foramex of Rouyn-Noranda, Quebec. A total of
5 diamond drill holes totalling 1,541 metres were drilled. All holes were drilled from north to south. The location of each hole was established using the old local grid established by
previous companies. All recovered core was NQ diameter. The casing for each hole was behind, and the tops were not cemented. The casings were surveyed in the field by a surveyor from the firm of
Jean-Luc Corriveau Arpenteur-Géomètre in Val-d'Or, Quebec.

The
2007-2008 drilling program investigated the 10 known mineralized zones. The diamond drill holes intersected the envelope of these mineralized zones. Many occurrences of gold
mineralization were observed during drilling.

Benoit
Drilling of Val-d'Or, Quebec, was awarded the 2008 drill contract. Drilling ran from May 14 to May 23, 2008. A total of 2 NQ diamond drill holes were completed
for a total of 351 metres. The holes were drilled from south to north, and the casings left behind. The overall objective of the 2008 program was to follow up on the Boundary Zone that had been
intersected by two earlier underground diamond drill holes. All core from 2007 and 2008 is stored in tagged core boxes at the Cadiscor core shack in
Lebel-sur-Quévillon, Quebec.

Sampling and Analysis

The core from diamond drill holes FD-07-01 to FD08-04 was examined and described by two geologists from
InnovExplo, whereas the core from diamond drill holes FD08-05 and FD08-06 was examined and described by a consulting geologist. After logging, the core was sampled by
Valmont Beaulieu, a technician from InnovExplo, at Lebel-sur-Quévillon, Quebec according to an established protocol. The selection of drill core for sampling and
assaying was based on the presence of alteration, sulphide mineralization, and/or quartz veins. Both walls of the selected zones of interest were also sampled.

First,
the core of the selected section was cut in half with a rock saw, with one half put aside for eventual shipment to the laboratory. The second half of the core was then put back in its place in
the core box, and a tag bearing the same number was placed at the beginning of sawed core halves forming the selected sampled length. The rock saw was cleaned thoroughly, as was the working table,
before proceeding to the next sample. Each bag, after being closed and tied, was then placed with other samples into a larger bag for shipment. Each of these larger bags typically contained
25 samples. All samples were shipped to the ALS Chemex laboratory in Val-d'Or. Sample lengths ranged from 0.50 to 1.50 m.

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A
quality assurance / quality control program was present for the Cadiscor 2007-2008 diamond drilling program. The adopted protocol is based on a fusible batch size of 81 samples.
3 sub-batches of 25 samples are combined to create a single large batch of 75 samples to be shipped to the laboratory. All samples shipped from the field are
identified by individual sample number, including batch and sub-batch identification. Each sub-batch is comprised of: (i) 22 regular samples; (ii) 1 field
duplicate sample selected at random; (iii) 1 field blank; and (iv) 1 certified reference material ("CRM"). In addition, the laboratory
inserts 1 coarse crush duplicate sample split, selected at random, into each 25-sample sub-batch, for a total of 78 samples per large batch. To this batch of
78 samples, the laboratory adds 1 laboratory internal analytical blank standard, inserted at random and 2 laboratory internal CRMs, inserted at random for a total of
81 fused samples.

A
series of duplicate samples taken at each stage of the sampling and sample preparation process enables the precision to be monitored incrementally. The number of duplicate types depends on the
number of process steps, but typically includes 3 types, namely the field duplicate sample, a coarse crush duplicate sample, and a pulp duplicate sample. In cases with
more complex sample preparation flow sheets, the protocol may require additional duplicates, such as in the case of a multi-stage crushing process.

Security of Samples

In December 2007, InnovExplo was contracted by Cadiscor to supervise the drilling program on the Flordin property. InnovExplo also supervised
core logging during the 2007-2008 drilling program. Only the core from Cadiscor's drilling program is available for verification.

Geological
logging was completed using codes reflecting lithology combined with qualifiers for mineralogy, alteration, structural elements and mineralization. A brief description was also included.
The logging codes are amenable to management in a computer database, and in this case, Cadiscor supplied the Flordin data as a GeoticLog database. Paper logs for all surface and underground diamond
drill holes from 1935 to 2008 were available for consultation by InnovExplo personnel. Geotechnical logging was not performed; consequently, none of the diamond drill hole logs record fracture
frequency or Rock Quality Designation.

InnovExplo
verified the data that was available for the purpose of producing a 43-101 resource estimate. InnovExplo chose 3 cross-sections (6280E, 6295E, and 6310E) to work
with, and the geological information for the 28 drill holes on these cross-sections was verified using the original paper logs. The assays presented on the sections could only be checked
against assays recorded on the paper logs because assay certificates are no longer available for holes drilled before 2007. No discrepancies between the paper logs and cross-sections were uncovered,
so the authors considered it reasonable to assume the positive verification results for these 28 holes are representative of the 260 diamond drill holes used for the
43-101 resource estimate, despite representing only 10.8% of the total. InnovExplo also verified all diamond drill hole locations on the Flordin property. It was discovered that the
positions for some of the diamond drill holes drilled from 1933 to 1935 (the H-series) were inaccurate.

The
GeoticLog database provided by Cadiscor contained data for all diamond drill holes carried out on the Flordin property. InnovExplo transferred the GeoticLog data into a Gemcom database and
validated and corrected the data. All surface and underground diamond drill holes were retained. The resulting database consists of 335 diamond drill holes totalling 38,517 metres.

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Mineral Resource and Mineral Reserve Estimates

The mineral resource estimate and underlying assumptions for the Flordin Property are set out above. See "Description of the Business and General
Developments  Mineral Reserve and Mineral Resource Estimates".

Shebandowan West Project

Overview

At the request of the Company, Des Cullen, P.Geo., Consulting Geologist, F.H. Brown CPG, Pr. Sci. Nat., Consulting Geologist, and Laila Sedore
(Potvin), P.Eng., Mill Superintendent at LDI, prepared a report dated August 9, 2007 entitled "Technical Report on the Shebandowan West Property, Thunder Bay Mining Division, Northwestern
Ontario" (the "Shebandowan Report"). Each of Mr. Cullen and Mr. Brown is a "qualified person" within the meaning of
NI 43-101 and is independent of the Company. Mrs. Sedore is also a "qualified person" within the meaning of NI 43-101 and was an employee of the Company at
the time the report was issued.

In
light of the sharp decline in metal prices in the fall of 2008, the Company ceased all activities with the Shebandowan joint venture, including the Shebandowan West Project. In light of a more
favourable outlook for nickel prices the Company and Vale Inco plan to conduct a $250,000 exploration program in 2010.

The
following description of the Shebandowan West Project has largely been summarized from the Shebandowan Report, a copy of which is available on SEDAR at www.sedar.com under the Company's profile.

Project Description and Location

The Shebandowan West Project is located in Hagey and Haines Townships in the Thunder Bay Mining District, approximately 90 kilometres west of
Thunder Bay, Ontario. The UTM co-ordinates for the approximate centre of the property are 700500 E, 5386800 N.

The
Shebandowan joint venture consists of six unpatented claims (eight units) covering an area of approximately 132 hectares, and 205 patented and leased mining claims totalling
approximately 7,842 hectares, all of which are held 100% by Vale Inco. The Shebandowan West Project is part of this larger land package that includes the leases hosting the current Shebandowan
mine workings.

A
power-line approximately six kilometres to the north of the property previously serviced the Shebandowan mine. Also on the property are backfilled and flooded mine workings immediately
east of the project area. A tailings pond, pump shack and gate house remain on the property as well.

No
permits were required to undertake the drilling, metallurgy and resource estimate by the Company on the Shebandowan West Project. Permits will be required if a decision is made to develop
a mine.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Shebandowan joint venture property is located approximately 90 kilometres west of Thunder Bay, Ontario, and is centred
15 kilometres west southwest of the town of Shebandowan, which is situated on Trans Canada Hwy #11.

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Year
round access to the property is available via the Inco Mine Road that starts at Shebandowan and crosses the property. Temperatures range from highs of 35°C in summer to lows of
-30°C in winter, with snow cover between November and May. The best season for exploration is between June and October, although exploration activities of lake covered or
swampy areas such as geophysical surveys and diamond drilling might best be conducted after winter freeze-up.

Thunder
Bay is a city of approximately 105,000 people with an international airport, rail service and port facilities on Lake Superior. Shebandowan is a town with a very small
year-round population and limited services including seasonal accommodation, electrical and telephone utilities, railroad, highway and public lake access to Lower Shebandowan Lake.

Based
on the history of the property and the mine, the project area has sufficient surface rights and sufficient availability of power, water, mining personnel and mining infrastructure to carry out
future mining operations.

History

The following chronology is from MNDM Mineral Deposit Files: INCO-Shebandowan. The reader is cautioned not to rely on historic
information as its accuracy cannot be guaranteed.

1913-14

Nickel is discovered by W. W. Benner at Discovery Point. Test pits blasted by Cross Brothers.1923

Samples are sent to the Ontario Department of Mines provincial assayer.1927-30

Trenching, stripping and diamond drilling is conducted by Cross Brothers. Geological mapping and diamond drilling is performed.1936-52

Claims are purchased by Inco; trenching, test-pitting, geophysical surveys and diamond drilling is conducted.1952-65

Intermittent diamond drilling is undertaken by Inco.1966-67

No. 1 development shaft is commenced in spring 1966 and completed in the following year. Underground diamond drilling is conducted. Geophysical surveys performed.1966-67

Inco undertakes various exploration programs while development and production of the orebody continues, including: geological, geophysical and geochemical surveys; stripping; and diamond drilling in the search for
both precious and base metals.1972-98

Aubut, Lavigne, Scott and Kita state in "Metallurgy, Stratigraphy and Structure of the Shebandowan Greenstone Belt" (1990) that the Shebandowan mine "has been in semi-continuous production since 1972 at an average
production rate of about 2,000 tons per day". The orebody is up to 150 feet wide, has a strike length of 6,200 feet and plunges to the east.1972-98

Concentrate produced from the Shebandowan mine is alternatively shipped to Sudbury, Ontario, or Thompson, Manitoba, for smelting and refining.


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1972-98

Production from the Shebandowan mine totalled 8.7 million tons at 2.07% nickel, 1.00% copper and approximately 3.0 g/t PGM and gold (B. Schnieders, personal communication).1993-2001

The provincial and federal governments undertake many mapping projects in the area, the most recent of which include: geological mapping by Osmani (1993) OGS Map 2625 and 2626; airborne geophysical survey (1991) OGS
Map 81560; Lake sediment and water geochemical survey (2001) OGS open file report 6057; and Till sampling survey (2001) OGS open file report 6046.1998-2006

The Shebandowan mine ceased production in 1998 and by 2006 the mine site had largely been rehabilitated with continuing maintenance and monitoring of the tailings site.


Geological Setting

Regional Geology

The Shebandowan joint venture property is underlain by the Shebandowan Greenstone Belt which is part of the Wawa Subprovince of the Superior
Structural Province of the Canadian Shield. In this area, the Wawa Subprovince is fault-bounded to the north by the sedimentary plutonic suites of the Quetico Subprovince and to the south by the
Paleoproterozoic rocks of the Animikie Group and the Keweenawan Supergroup.

Property Geology

The Shebandowan West Project lays immediately west of the past producing Shebandowan mine. The project area is located along the western strike
extension of the former orebody and exhibits many similar geological features and controls to those found at the mine-site.

The
Shebandowan West Project area is underlain by east-west-striking and steeply north-dipping Keewatin metavolcanics and ultramafics with local interflow metasediments lying
north of Timiskiming metavolcanics and metasediments. A regional fault called the Crayfish Creek Fault is a dextral fault generally found along the southern contact of the southern ultramafic,
separating the Keewatin and Timiskiming rocks. The southern Timiskiming rocks consist of intensely foliated and sheared agglomerates and felsic to intermediate metavolcanics now sericite schists.

A
younger granite called the Shebandowan Lake Stock intruded the Keewatin metavolcanics and lies on the north side of the project area. The Keewatin metavolcanics consist predominantly of crudely
banded mafic volcanics that often exhibit intense foliation and shearing associated with strong chlorite and epidote alteration. Within the Keewatin Metavolcanic suite are ultramafic units thought to
be magmatic flows or sills that host nickel and copper-bearing sulphides and chromite mineralization. The ultramafic units strike approximately 107 degrees and dip sub-vertically.
There are two ultramafic bodies termed the "Northern" and "Southern" Peridotites, which lie within and along the southern contact of the banded Keewatin metavolcanics along the Crayfish
Creek Fault.

Exploration

Exploration Geophysics

In February of 2004, Geotech Ltd., on behalf of the Company, flew a helicopter-borne, time domain, electromagnetic
("EM"), geophysical survey over an area that included the Shebandowan West Project. The airborne survey included collection of EM and magnetic data. The
survey was flown at 100 metre line spacings in a north-south direction at 80 kilometres per hour. The data recording rates were 0.1 second for both EMs and magnetics with
an EM sensor flight height of 30 metres. The mine stratigraphy was used as a base of reference to work from producing magnetic and EM anomalies. The ultramafics within the Shebandowan West
Project are highlighted as moderate magnetic anomalies with weak-to-moderate local EM conductors.

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In
February 2004, on behalf of the Company, Crone Geophysics & Exploration Ltd. conducted a Surface Pulse EM survey over the D-Zone, and the western portion of the
Shebandowan West Project. A grid was cut by Nord-Ouest Exploration totalling approximately 5,350 metres having 200 metre line spacing and 1,100 and 1,150 metre length
lines along with a baseline. Results of the survey produced a moderate EM anomaly in an area of known mineralization and historic drilling.

From
September 20 to 28, 2004, Geosig Inc., on behalf of the Company, conducted a detailed ground magnetometric gradiometric survey over the Road and D-Zones. The survey was
carried out on a flagged grid of 30.7 line kilometres. The grid consisted of 300 metre lines spaced at 12.5 metres apart. The readings were taken along the grid lines
every 5 metres. Due to the location of Shebandowan Lake, the survey could only be conducted on the central to western side of the property. The intent of the survey was to better define the
near surface geology as well as identify important structures that may influence the location or emplacement of the nickel copper mineralization.

A
small gravity survey was conducted along Shaft 1 road across the stratigraphy of Road zone by A. Spector of Allan Spector & Associates Ltd. The survey took place in
July 2004 using a thermostatically controlled Sodin gravimeter and a differential barometric altimetry system at 100 metre stations along the road. A gravity anomaly was generated over
the ultramafics that host the Road Zone mineralization.

Exploration Trenching

On behalf of the Company, J & J Hackl Ltd. was contracted to do trenching in the D-Zone area, which was carried out in
October 2006. Six trenches were dug with a Tanga F221 Excavator and a one-yard bucket in an attempt to extend mineralization along strike of the historic D-Zone
showing. Two out of the six trenches directly west of the historic showing uncovered mineralization, while the other four uncovered barren ultramafic rocks. Three of the six trenches were filled in
due to extensive overburden depths. Various beep-mat traverses were carried out north-south across stratigraphy to try and discover surface conductors.

Exploration Drilling

Throughout 2005 and 2006, three diamond drill programs (D-Zone, Phase I and Phase II) were carried out. See "Drilling"
below. All diamond drill holes were collared west of and on Discovery Point of Lower Shebandowan Lake targeting the D, Road and West Zones. A total of 87 diamond drill holes were completed
totalling 13,102.3 metres.

Mineralization

Nickel copper mineralization on the Shebandowan West Project is believed to represent the western extension of the Shebandowan mine orebody. At the
Shebandowan mine, nickel copper bearing sulphide mineralization strikes 107 degrees, dipping sub-vertically and was mined over a 2.0 kilometre strike length and to a vertical
depth of 902 metres. Mineralization at the Shebandowan mine was mainly hosted within the Northern Peridotite, along the contact with the hanging wall Keewatin metavolcanics. Nickel copper
sulphide mineralization occurred generally as irregular lenses of semi-massive breccia style sulphides and as stringer sulphides, with more localized pods of massive sulphide material. In
general, the massive sulphides tended to have a higher nickel tenure while the copper rich sulphides were more associated with PGM mineralization within the stringer style mineralization and, where
present, net-textured sulphides. The sulphide mineralization appears to gradually shallow and thins out to the west while the eastern boundary is reported to be steeply plunging with a
higher sulphide content.

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Nickel
copper mineralization has been traced by diamond drilling across most of the Shebandowan West Project, however the mineralization appears discontinuous, forming three separate zones called West
Zone, Road Zone and D-Zone (from east to west respectively).

Mineralized Zones

The West Zone is the largest of the three nickel copper zones on the Shebandowan West Project and lies immediately west of and includes parts of the
area around Shaft 1. It has a known strike length of 285 metres and varies between two and 20 metres in width averaging six metres and has been traced from surface to a depth of
175 metres. This mineralization strikes 107 degrees and dips sub-vertically. Nickel copper mineralization in the West Zone is comprised of disseminated to massive sulphides
located along the northern or hanging wall contact of the Northern Peridotite. Common sulphide minerals within the mineralized horizon are pentlandite, pyrite, chalcopyrite, pyrrhotite, violerite,
bornite and millerite.

There
has apparently been a significant amount of remobilization associated with post mineral deformation and faulting, as a result of which the sulphide mineralization appears to pitch and swell both
along strike and in a down dip direction. This is the case for the West Zone as well as for the Road and D Zones. This pinching and swelling was also a common feature noted in the Shebandowan mine.
Inco has stated that the sulphide mineralization has been seen pinching from approximately 30 feet to two feet over the length of one round underground.

The
Road Zone is located between West Zone and the D-Zone. Mineralization in the Road Zone differs somewhat from the West and D-Zone as it appears to have bifurcated and is
hosted within two separate but subparallel ultramafic units (North and Main Units). The North and Main Units are interpreted to represent the lateral equivalent of the Northern Peridotite. Both nickel
copper zones are composed of disseminated to massive pyrrhotite, chalcopyrite, pentlandite and pyrite that vary in concentrations and widths located at the northern or hanging wall contacts of the
North and Main Units. The Road Zone mineralization is typically highly variable in widths from 0.5 to 15 metres but averages four metres in width for the North Unit and five metres in width for
the Main Unit. Mineralization has been encountered in drilling down to a depth of 181 metres where it appears to be closed off and can be traced along strike for 483 metres.

The
D-Zone is an historic surface showing discovered in the late 1920s. Previous historic drilling suggests that the D-Zone represents the western-most extent of
near surface nickel-copper bearing sulphide mineralization. Mineralization in this area is very shallow and discontinuous. The presence of late felsic diking and faulting has caused significant
disruption and offsetting of the mineralization. Sulfides in this zone vary from disseminated pyrite to massive pyrrhotite with associated pentlandite, chalcopyrite and pyrite. Breccia style
mineralization is most common.

Mineralization Types

Nickel-copper sulphide mineralization observed in drill core on the Shebandowan West Project generally occurs as semi-massive or breccia
style sulphides and as stringer sulphides, with more localized pods of massive sulphide material and rarely observed net textured sulphides. The most common sulphide minerals are pentlandite, pyrite,
chalcopyrite, pyrrhotite, violerite, bornite and millerite.

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Massive
sulphides are generally less abundant than semi-massive and stringer sulphides and comprise approximately 13% of the overall mineralization. The massive sulphides consist of
pyrrhotite with common pentlandite eyes and minor chalcopyrite and pyrite. The pyrrhotite is very fine-grained and exhibits flow textures as a result of remobilization. Round
two-to-three millimetre pentlandite eyes are common as very lustrous, distinct grains within duller and finer pyrrhotite. Minor chalcopyrite can be present and is usually found
along the peridotite/ sulphide contacts.

The
semi-massive or breccia style mineralization is the second most common form of sulphide mineralization found on the Shebandowan West Project, consisting of approximately 26% of the
overall mineralization observed. Breccia style mineralization is commonly a mixture of pyrrhotite, chalcopyrite and pyrite at a ratio of approximately 4:3:1 respectively containing numerous
clasts of the host ultramafic rocks. The sulphides are draped around sub-rounded ultramafic clasts that range in diameter from one millimetre to over 10 centimetres. Very often, the
clasts are coated or rimmed by fine-grained chalcopyrite and minor pyrite.

Stringer
type mineralization is the most common form of mineralization encountered throughout the Shebandowan West Project comprising approximately 34% of the sulphide material. The stringers commonly
contain chalcopyrite with lesser pyrrhotite and pyrite and are generally one-to-three centimetres in width but vary from one-to-two millimetres to five
centimetres in size. Stringer mineralization is often found along the outer contacts of the breccia style and massive sulphide mineralization as splays and fine dikelets.

Drilling

The Company has attempted to review the practices and details of the historic drilling carried out by Inco on the Shebandowan property since the
signing of the March 2006 joint venture agreement. No information on drilling practices was made available, but header, survey and lithological data was provided by Inco. Since 1936, Inco had
diamond drilled a total of 195 surface holes on the Shebandowan West Project totalling 41,801 feet (12,741 metres). Underground drilling was conducted from various levels and
consisted of 1,038 holes totalling 59,202 feet (18,045 metres).

In
November 2005, four drill holes were drilled around the historic D-Zone. The drilling was undertaken to confirm the validity of previous drilling done by Inco and to test the EM
anomaly generated in the 2004 ground pulse EM survey performed by Crone Geophysics. Two of the four drill holes intersected semi-massive to massive sulphide. This mineralization was
intercepted in the vicinity of historic mineralization, and there was a close correlation with the EM anomaly produced from 2004. A total of 584 metres were drilled in the 2005
D-Zone phase of drilling.

The
Phase I program took place from May 31 to August 3, 2006 to test previous drilling and larger gaps in historic drilling. This Phase I drilling campaign consisted of
21 drill holes totalling 4,010 metres, which targeted three zones of the Shebandowan West Project (West Zone, Road Zone and D-Zone). Sixteen holes were drilled in the West
Zone totalling 3,290 metres, three holes were drilled in the Road Zone totalling 483 metres and two holes were drilled in the D-Zone totalling 237 metres. The drilling
confirmed the presence of mineralization in all three zones within the Shebandowan West Project.

Sixty-two
holes were drilled during the Phase II program that took place from September 27 to December 14, 2006 with the use of two drills. The Phase II program
totalled 8,508 metres of which 25 holes were drilled in the West Zone for 4,816 metres, ten holes were drilled in the Road Zone for 1,674 metres, and 23 holes were
drilled in the D-zone for 1,952 metres and four rock characterization holes were drilled totalling 60 metres.

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Throughout 2005 and 2006, a total of 13,102 metres were drilled on the Shebandowan West Project. The results of the drilling confirm the continuity of sulphide mineralization and correlation
with the EMCOR geological model. All drilling on the Shebandowan West Project was carried out by Bradley Brothers Limited on behalf of the Company.

Drill hole Summary

Drilling Campaign


Year Drilled


Number of Holes


Total Metreage


Number of SamplesD-zone


2005


4


584


142Phase I


2006


21


4,017


1,103Phase II


2006


62


8,501.3


2,056


Sampling, Analysis and Security

Sampling

Drill core samples for assaying were selected based on significant mineralization or alteration through the sulphide mineralization. The logging
geologist generally sampled in one-metre intervals, with exceptions at lithological contacts and always sampled a minimum of one-to-two metres of barren material
adjacent to the mineralization to ensure that the mineralization unit was completely defined.

No
drilling or recovery factors were noticed that could materially impact the accuracy and reliability of the results.

All
samples collected by the Company and delivered to Accurassay were analyzed for precious metals by fire assay with an AA finish, while base metals were analyzed using aqua-regia.

Quality Assurance and Quality Control Procedures

As a means of quality assurance and control for each diamond drilling program, blank and standard samples were randomly inserted into the continuous
sampling series. The insertion of blank and standard materials was done to ensure the accuracy of the assay results against any laboratory bias. For each drill hole, random positions were chosen for
the blanks within each set of 20 samples (e.g. one blank sample within samples 001 to 020, one blank sample within samples 021 to 040, etc). Similarly, random standard sample positions
were chosen within each set of 30 samples (e.g. one standard sample within samples 001 to 030, one standard sample within samples 031 to 060, etc).

Sample Security

The Company took reasonable steps to ensure the security of samples from the drill site through to the database, including
the following:



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The
measures discussed above do not guarantee that the samples are completely immune from tampering, but the secure storage of the remaining half core, the coarse rejects, and the pulps means that any
suspicion of fraudulent behaviour can always be resolved by reference to the original sample, which has been retained.

Mineral Resource Estimates

The mineral resource estimate and underlying assumptions for the Shebandowan West Project are set out above, based on a U.S.$60.00 net smelter return
mineralization shell. See "Description of the Business and General Developments  Mineral Reserve and Mineral Resource Estimates".

FINANCING

Senior Credit Facilities

On June 28, 2004, the Company entered into a U.S.$20 million and a $10 million senior credit facility with a leading equipment
finance company. The senior credit facilities were repaid in 2009.

KFOC Credit Facility

On October 12, 2006, the Company obtained a U.S.$5 million short-term working capital loan from KFOC, maturing
December 31, 2006. The interest rate under the loan was the 30-day LIBOR rate plus 2.5%. The Company paid a commitment fee of U.S.$38,000 and amounts not drawn under the loan were
subject to a standby fee of 0.125% per annum. In connection with the loan, the Company granted to KFOC a first priority security interest in the inventory and receivables of the Company. On
December 13, 2006 the maturity date was extended to March 31, 2007, with no other changes in terms. The Company paid a commitment fee of U.S.$25,000 for the extension. The loan was
repaid on March 7, 2007. See "Palladium and Platinum Purchase Agreement" below.

As
of March 16, 2010 KFOC reported that it held approximately 29.6% of the Company's issued and outstanding Common Shares.

Convertible Note Financing

On March 29, 2006, the Company issued U.S.$48.5 million principal amount of convertible notes
(the "Convertible Notes Due 2008") together with warrants to purchase, for four years from the date of their issuance, 50% of the number of
Common Shares underlying the Notes (the "Notes Warrants"), including the placement of U.S.$31 million of the Convertible Notes Due 2008
and related Notes Warrants with KFOC, the Company's major shareholder. On March 28, 2006, the Company settled the pricing for U.S.$35 million principal amount of Series I Notes
Due 2008 (the "Series I Notes") and the Notes Warrants (the "Series I
Warrants"). On June 13, 2006, the Company announced that it had exercised its right to require KFOC to purchase a U.S.$13.5 million convertible note
(the "Series II Note") and related common share purchase warrants (the "Series II
Warrants"). Proceeds from the Series II Note were used to repay a loan under an existing KFOC credit facility.

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The
Series I and Series II Warrants contain "full ratchet" anti-dilution provisions. Under these provisions, if at any time prior to August 1, 2008 the Company issued
securities (including Common Shares or warrants convertible into Common Shares) at an effective price per share less than a stated amount, the conversion/exercise price of the outstanding
Series I and Series II Warrants was to be reduced downward to equal the effective price, subject to a floor price of U.S.$10.73 for the Series I Warrants and U.S.$7.85 for the
Series II Warrants. On account of the unit offering that closed on December 13, 2007, the conversion price of the Series I Warrants and the Series II Warrants decreased to
their respective floor prices.

The
Company has since retired the Convertible Notes Due 2008, having made its final repayment on December 1, 2008 and the Series I Warrants expired (unexercised) on March 29,
2010. The Series II Warrants remain outstanding and, if unexercised, will expire on June 23, 2010.

Palladium and Platinum Purchase Agreement

On February 5, 2007, the Company announced that LDI had entered into a platinum and palladium purchase agreement dated as of
January 19, 2007 (the "Auramet Agreement") with Auramet, a precious metals merchant, providing for the purchase and sale of an average of
10,000 ounces of palladium and 500 ounces of platinum per month. LDI could elect to receive advance payments not exceeding, at any time, an aggregate maximum of U.S.$25 million.

The
Company granted Auramet a security interest in the concentrates produced at the Lac des Iles mine together with the proceeds arising from the sale of the concentrate, and by way of additional
security, assigned its smelting and refining agreement with Xstrata.

The
first advance payment was made on March 7, 2007 and was used to repay a bridge loan from the Company's major shareholder and subsequent advance payments were used to finance working capital
requirements.

The
agreement with Auramet expired in 2008 and the Company has no advances outstanding under this facility.

2007 Private Placement

On February 27, 2007, the Company completed a private placement of 550,000 flow-through Common Shares at a price of $11.00
per share for gross proceeds of $6.05 million. The shares were sold to accredited investors in Canada on a private placement basis pursuant to applicable Canadian securities laws.

2007 Public Offering

On December 13, 2007, the Company announced that it had closed its public offering of 18,666,667 units at a price of U.S.$4.00 per unit
for total gross proceeds of approximately U.S.$75 million. Each unit consisted of one Common Share and one half of a Common Share purchase warrant of the Company. Each whole warrant entitled
the holder to purchase one Common Share at a price of U.S.$5.05 per share at any time on or prior to December 13, 2009.

52

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Under
the terms of the securities purchase agreement relating to the Company's Convertible Notes Due 2008 (see "Financing  Convertible Note Financing"),
KFOC and IP Synergy Finance Inc. each had a right to subscribe at the public offering price for up to 12.5% of the total securities being offered by the Company in this offering. If either KFOC
or IP Synergy Finance Inc. subscribed for less than its 12.5% share, the unused right was to be offered to the non-declining party, KFOC or IP Synergy, as the case may be. IP
Synergy Finance Inc. elected not to participate in this offering pursuant to its pre-existing participation right, and, in accordance with the terms of the Securities Purchase
Agreement, KFOC elected to subscribe for 25% of this offering.

On
January 9, 2008, the Company issued an additional 2,800,000 units under a 30-day over-allotment option granted to the underwriters. After taking the
over-allotment exercise into account, the total gross proceeds to the Company from the unit offering were approximately U.S.$86 million. KFOC also elected to exercise its right to
subscribe for 25% of the over-allotment offering, which is included in the additional 2,800,000 units.

2009 Bought Deal / Private Placement

On September 30, 2009, the Company announced that it had closed its bought deal of 16,000,000 units at a price of $3.15 per unit for
total gross proceeds of $50.4 million. Each unit consisted of one Common Share and one half of a Common Share purchase warrant of the Company (the "2009
Warrants"). Each whole 2009 Warrant entitles the holder to purchase one Common Share at a price of $4.25 per share at any time on or prior to September 30, 2011 subject
to early termination in some circumstances.

On
October 8, 2009, the Company issued an additional 2,400,000 units under a 30-day over-allotment option granted to the underwriters. After taking the
over-allotment exercise into account, the total gross proceeds to the Company from the unit offering were approximately $58 million.

On
October 8, 2009, the Company also announced that it had closed its bought deal private placement of 4,000,000 flow-through Common Shares at a price of $3.75 per share for
total gross proceeds of $15,000,000. The shares were sold by the underwriters to accredited investors in Canada on a private placement basis pursuant to applicable Canadian securities laws.

DIVIDENDS

The Company has not paid any dividends to date on the Common Shares. The Company intends to retain its earnings, if any, to finance the growth and
development of its business. Accordingly, the Company does not expect to pay any dividends on its Common Shares in the near future. The actual timing, payment and amount of any dividends will be
determined by the Company's board of directors from time to time based upon, among other things, cash flow, results of operations and financial condition, the need for funds to finance ongoing
operations and such other business considerations as the Company's board of directors may consider relevant.

CAPITAL STRUCTURE

The authorized share capital of the Company consists of an unlimited number of Common Shares and an unlimited number of special shares, issuable in
series. As of March 31, 2010, there were 127,407,801 Common Shares of the Company issued and outstanding and no special shares issued and outstanding. The Common Shares issued and
outstanding as of February 25, 2010 exclude: (i) 3,057,800 Common Shares reserved for issuance pursuant to outstanding stock options, which are exercisable at a weighted average exercise
price of Cdn.$3.50 per Common Share; (ii) 951,649 Common Shares reserved for issuance upon the exercise of the Company's outstanding Series II Warrants
(the "Warrants") (the exercise price of such Warrants is U.S.$7.85); (iii) 330,000 Common Shares reserved for issuance upon the
exercise of warrants issued by Cadiscor (with a weighted average exercise price of Cdn.$2.12), which were assumed by the Company on its acquisition of Cadiscor on May 26, 2009; and
(iv) 9,200,000 Common Shares reserved for issuance upon the exercise of warrants issued in connection with a bought deal conducted by the Company in September 2009 (the exercise
price of such warrants is Cdn.$4.25).

53

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Common Shares

Each Common Share entitles the holder thereof to one vote at all meetings of shareholders other than meetings at which only the holders of another
class or series of shares are entitled to vote. Each Common Share entitles the holder thereof, subject to the prior rights of the holders of special shares, to receive any dividends declared by the
board of directors and the remaining property of the Company upon dissolution.

There
are no pre-emptive or conversion rights that attach to the Common Shares. All Common Shares now outstanding and to be outstanding are, or will be when issued, fully paid and
non-assessable, which means the holders of such Common Shares will have paid the purchase price in full and the Company cannot ask them to pay additional funds.

The
Company's by-laws provide for certain rights of its shareholders in accordance with the provisions of the CBCA. Such by-laws may be amended either by a majority vote of the
shareholders or by a majority vote of the board of directors. Any amendment of the by-laws by action of the board of directors must be submitted to the next meeting of the shareholders
whereupon the by-law amendment must be confirmed as amended by a majority vote of the shareholders voting on such matter. If the by-law amendment is rejected by the
shareholders, the by-law ceases to be effective and no subsequent resolution of the board of directors to amend a by-law having substantially the same purpose or effect shall
be effective until it is confirmed or confirmed as amended by the shareholders.

Shareholders
do not have cumulative voting rights for the election of directors. Therefore, the holders of more than 50% of the Common Shares voting for the election of directors could, if they choose
to do so, elect all of the directors and, in such event, the holders of the remaining Common Shares would not be able to elect any directors. KFOC, which owns approximately 29.6% of the outstanding
Common Shares may nonetheless be considered to have the ability to exercise de facto control of the Company. For additional information regarding the risks associated with KFOC's shareholdings, see
"Risk Factors" in this AIF.

The
rights of holders of Common Shares may be adversely affected by the rights of holders of any Special shares that may be issued in the future.

Special Shares

Special shares may be issued in series. The Company's directors may, by resolution, fix the number of shares in, the designation of, and determine
the rights, privileges, restrictions and conditions attaching to, each series of special shares.

The
special shares of each series rank on parity with the special shares of any other series in respect of dividends or the return of capital. The holders of special shares are entitled to receive, in
priority to the holders of Common Shares and the shares of any other class ranking junior to the special shares, as and when declared by the directors, dividends in the amounts specified or
determinable in accordance with the provisions of the series of which such special shares form a part. In the event of the liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, before any amount is paid to the holders of Common Shares or shares of any other class ranking junior to the special shares, the holders of special shares shall be
entitled to receive, to the extent provided for with respect to such series, an amount equal to the price at which such shares were issued, such premium, if any, as has been provided for with respect
to such series, and all unpaid cumulative dividends or declared and unpaid non-cumulative dividends. The special shares of any series may also be given such other preferences over the
Common Shares and any other class of shares ranking junior to the special shares as may be determined in the case of such series. The rights of holders of the special shares of any series may be
adversely affected by the rights of holders of any special shares of any other series that may be issued in the future. The holders of special shares are not entitled to vote separately as a class and
the holders of any series of special shares are not entitled to vote separately as a series except as required by the CBCA. Voting of special shares may also be regulated by applicable securities laws
or stock exchange rules.

54

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The
foregoing description may not be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of the Company's constating documents, as amended.

MARKET FOR SECURITIES
Trading Price and Volume

The Common Shares are listed for trading on the NYSE Amex Equities ("NYSE Amex") under the trading
symbol "PAL" and the Toronto Stock Exchange ("TSX") under the trading symbol "PDL". The following table sets out the
market price range and trading volumes of the Common Shares on the NYSE Amex and the TSX for the periods indicated.

NYSE Amex

TSXHigh

Low

Volume

High

Low

Volume(U.S.$)

(U.S.$)



(Cdn.$)

(Cdn.$)2009January


2.13


1.50


11,624,435


2.45


1.89


1,361,317February


1.90


1.31


8,105,415


2.37


1.66


802,390March


1.64


1.06


11,397,336


2.02


1.38


1,052,643April


1.90


1.44


9,824,717


2.32


1.80


1,067,438May


2.77


1.86


21,167,098


3.21


2.25


3,649,415June


2.77


2.15


15,887,391


3.03


2.50


3,130,173July


3.09


2.05


15,358,020


3.39


2.46


1,957,827August


3.51


2.72


19,510,064


3.38


3.04


3,293,026September


3.24


2.60


25,517,585


3.45


2.87


8,935,154October


3.09


2.36


26,988,083


3.25


2.54


8,258,616November


3.21


2.40


24,401,356


3.35


2.59


6,078,112December


3.23


2.80


27,002,495


3.67


2.98


4,607,7492010January


4.78


3.41


70,419,064


4.92


3.65


11,684,686February


4.14


3.62


39,981,265


4.35


3.88


5,394,859


55

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The
2009 Warrants are listed for trading on the TSX under the trading symbol "PDL.WT.A". The following table sets out the market price range and trading volumes of the 2009 Warrants on the TSX for the
periods indicated.

TSXHigh

Low

Volume(Cdn.$)

(Cdn.$)2009January

n/a

n/a

n/aFebruary

n/a

n/a

n/aMarch

n/a

n/a

n/aApril

n/a

n/a

n/aMay

n/a

n/a

n/aJune

n/a

n/a

n/aJuly

n/a

n/a

n/aAugust

n/a

n/a

n/aSeptember

n/a

n/a

n/aOctober

0.6

0.4

1,565,852November

0.65

0.41

1,119,641December

0.85

0.55

534,2742010January

1.62

0.9

1,587,158February

1.42

1.01

344,845


DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information about the directors and executive officers of the Company as of December 31, 2009:

Name and
Municipality of Residence

Position(s) Held

Principal OccupationSteven R. Berlin(1)(2)
Tulsa, Oklahoma, USA

Director

Part-time consultantWilliam J. Biggar
Toronto, Ontario, Canada

Director, President & CEO

President & CEO, North American Palladium Ltd.Michel F. Bouchard
Quebec City, Quebec, Canada

Vice President, Exploration and Development

Vice President, Exploration and Development, North American Palladium Ltd.C. David A. Comba(1)(3)
Burlington, Ontario, Canada

Director

Retired executiveAndré J. Douchane(2)(3)(5)
Toronto, Ontario, Canada

Chairman and Director

President & CEO, Starfield Resources Inc.Trent C.A. Mell
Toronto, Ontario, Canada

Vice President, Corporate Development, General Counsel and Corporate Secretary

Vice President, Corporate Development, General Counsel and Corporate Secretary, North American Palladium Ltd.David J. Passfield
Ajax, Ontario, Canada

Vice President, Operations

Vice President, Operations, North American Palladium Ltd.Robert J. Quinn(1)(3)
Houston, Texas, USA

Director

Partner, Quinn & Brooks LLPJeffrey A. Swinoga
Oakville, Ontario, Canada

Vice President, Finance and Chief Financial Officer

Vice President, Finance and Chief Financial Officer, North American Palladium Ltd.


56

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Name and
Municipality of Residence

Position(s) Held

Principal OccupationGregory J. Van Staveren(1)(2)
Toronto, Ontario, Canada

Director

President, Strategic Financial ServicesWilliam J. Weymark(2)(3)
West Vancouver, B.C., Canada

Director

President, Weymark Engineering Ltd.


(1)Member
of the Audit Committee.(2)Member
of the Governance, Nominating and Compensation Committee.(3)Member
of the Technical, Environment, Health and Safety Committee.


Steven R. Berlin:Mr. Berlin was first appointed to the board of directors of the Company in February 2001. Mr. Berlin is also a director of
Orchids Paper Products, an AMEX listed company. At the end of 2005, Mr. Berlin retired from his position as Vice President of KFOC where he worked part-time for two years following
four years of full-time work as Vice President and Chief Financial Officer. Prior to joining KFOC, Mr. Berlin taught at the University of Tulsa for three years where he also served
a year as acting Associate Dean of the College of Business as well as acting Director of the School of Accounting. Prior to that, Mr. Berlin spent 25 years with Citgo Petroleum
Corporation, retiring as Senior Vice President Finance and Administration and Chief Financial Officer. Mr. Berlin has a bachelor's degree from Duquesne University, an MBA from the University of
Wisconsin Madison and has completed the Executive Management program at Stanford University. Mr. Berlin's current term as director will end on May 20, 2010, or when he resigns or ceases
to be a director by operation of law.

William J. Biggar:Mr. Biggar brings significant expertise in the mining sector to the Company developed from his extensive experience in corporate finance,
corporate development and mergers & acquisitions. He has served as Senior Vice President at Barrick Gold Corporation and The Horsham Corporation as well as obtaining 10 years of
experience in investment banking. Mr. Biggar held the position of Executive Vice President of Magna International as well as President and Chief Executive Officer of MI Developments. A
Chartered Accountant, he holds a Master of Business Administration and Bachelor of Commerce (with distinction) degrees from the University of Toronto. Mr. Biggar's current term as director will
end on May 20, 2010, or when he resigns or ceases to be a director by operation of law.

Michel F. Bouchard:Mr. Bouchard was appointed as Vice President, Gold Division in May 2009, following the acquisition of Cadiscor. He was
subsequently appointed as Vice President, Exploration and Development in November 2009. Mr. Bouchard has been involved in exploration, development and operations in the mining industry
for the past 25 years. He is credited for his contributions in the discovery of the Bouchard Herbert Mine in northwest Quebec. Previously Mr. Bouchard held various senior positions with
Audrey Resources, Lyon Lake Mines and SOQUEM. Mr. Bouchard was formerly President and Chief Executive Officer of Cadiscor.

C. David A. Comba:Mr. Comba was first appointed to the board of directors of the Company in March 2006. Mr. Comba has over four decades of
experience as an exploration advocate and senior mining executive. As Chief Exploration Geologist of Falconbridge Limited in Sudbury, Ontario, he led the discovery team for Falconbridge Limited's
Thayer Lindsley Mine. Prior to its takeover by Kinross Gold Corporation, Mr. Comba was Vice President, Exploration of Falconbridge Gold Corporation. Following the takeover, he became President
and Chief Executive Officer of a Kinross-controlled junior exploration company listed on the TSX. From 1998 to 2005, Mr. Comba was Director of Issues Management with the Prospectors and
Developers Association of Canada, where he led the successful lobby effort for the re-introduction of enhanced or "super" flow-through shares. Mr. Comba has bachelors
and masters degrees in geology from Queen's University in Kingston, Ontario. Mr. Comba's current term as director will end on May 20, 2010, or when he resigns or ceases to be a director
by operation of law.

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André J. Douchane:Mr. Douchane was first appointed to the board of directors of the Company in April 2003. Mr. Douchane is a
mining engineer with over 35 years of mining experience managing precious metals operations. In addition to serving as the Company's President and Chief Executive Officer from April 2003
to January 2006, he has held senior management positions with several international publicly traded precious metal mining companies. In January 2007, Mr. Douchane was appointed
President and Chief Executive Officer of Starfield Resources Inc., an exploration and development company in Nunavut, Canada. Mr. Douchane also serves on the board of Osisko
Exploration Ltd. Mr. Douchane's current term as director will end on May 20, 2010, or when he resigns or ceases to be a director by operation of law.

Trent C.A. Mell:Mr. Mell joined the Company in April 2007 as Vice President, General Counsel and Corporate Secretary and in March 2008, also
assumed responsibility as Vice President, Corporate Development. He previously worked in the corporate head offices of Barrick Gold Corporation where he acted as corporate counsel, and Sherritt
International Corporation where he was Associate General Counsel and Assistant Secretary. Prior to joining the mining industry, Mr. Mell worked in the Toronto offices of Stikeman
Elliott LLP, where he practiced with the firm's securities law group. He holds a Bachelor of Arts in Economics and Political Science, a Bachelor of Civil Law and a Bachelor of Common Law, each
from McGill University, and a Masters of Law degree in Securities Law from Osgoode Hall Law School. He has published two papers on mineral reserve and mineral resource disclosure rules in Canada and
other mining jurisdictions.

David J. Passfield:Mr. Passfield was appointed Vice President, Operations of the Company in October 2006. Mr. Passfield is a professional
engineer with almost 30 years experience in open-pit and underground mining operations. Mr. Passfield has held management positions with numerous mining operations located
across Canada and overseas, including the Diavik Diamond Mine in the Northwest Territories. Additionally, he worked as a consultant for several Canadian mining and construction companies where he
advised on production and maintenance planning, equipment selection and throughput optimization. Prior to October 2006, Mr. Passfield was Vice President and General Manager of Grande
Cache Coal Corporation, an operating metallurgical coal mining company located in Alberta, Canada. Prior to May 2005, he was Manager, Mining for Diavik Diamond Mines Inc., a subsidiary
of Rio Tinto plc, which operates the Diavik Diamond Mine in the Northwest Territories.

Robert J. Quinn:Mr. Quinn was first appointed to the board of directors of the Company in June 2006. A founding partner of the Houston mining
transactional law firm Quinn & Brooks LLP, he has almost 30 years legal and management experience, including as Vice President and General Counsel for Battle Mountain Gold
Company. He also has extensive experience in mergers & acquisitions transactions, corporate governance, public disclosure, governmental affairs, environmental law and land management.
Mr. Quinn has a Bachelor of Science degree in Economics from the University of Denver, a juris doctorate degree from the University of Denver College of Law and has completed two years of
graduate work in Mineral Economics at the Colorado School of Mines. Mr. Quinn currently serves as a director on the board of three other public companies. Mr. Quinn's current term as
director will end on May 28, 2010, or when he resigns or ceases to be a director by operation of law.

Jeffrey A. Swinoga.Mr. Swinoga has over eighteen years of experience in the resource, mining and finance industries. He brings a wealth of experience in
leading debt and equity transactions, including project financings for mine development. He has served as Senior Vice President, Finance & CFO of MagIndustries Corp., Vice President,
Finance & CFO of HudBay Minerals Inc., and was Director, Treasury Finance of Barrick Gold Corporation for seven years. Mr. Swinoga is a Chartered Accountant and also holds a
Master of Business Administration degree from the University of Toronto and a Honours Economics degree from the University of Western Ontario. Mr. Swinoga has overall responsibility for the
company's financial activities.

58

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Gregory J. Van Staveren:Mr. Van Staveren was first appointed to the board of directors of the Company in February 2003. Mr. Van Staveren is
currently the President of Strategic Financial Services, a private consulting company providing business advisory services. Mr. Van Staveren is a Chartered Accountant and a Certified Public
Accountant and holds a Bachelor of Math (Honours) degree from the University of Waterloo. From February 1998 until September 2001, Mr. Van Staveren was the Chief Financial Officer
of MartinRea International Inc. (MRE:TSX), and prior to that he was partner in the mining group of KPMG, where he provided accounting, and advisory services to his clients. He had been with
KPMG since 1980. Mr. Van Staveren currently acts as an independent director on the board of two other public companies and acts as the Chief Financial Officer on a part-time basis
for Starfield Resources Inc. (SRU:TSX) and AIM Health Group Inc. (AHG:TSX). Mr. Van Staveren's current term as director will end on May 20, 2010, or when he resigns or
ceases to be a director by operation of law.

William J. Weymark:Appointed to the Board of Directors of the Company in January 2007, Mr. Weymark is President of Weymark Engineering Ltd.,
a Company providing consulting services to businesses in the private equity, construction and resource sector. He is also a director of Tirex Resources Ltd. (TXX:TSX-V), the
VGH & UBC Hospital Foundation Board, and several private companies. Mr. Weymark is active with the BC Lions as a Founder of their business association and a Member of the Industry
Advisory Committee for the Norman B. Keevil Institute of Mining Engineering at the University of British Columbia. Until June 2007, Mr. Weymark was President and CEO of Vancouver
Wharves/BCR Marine, a transportation firm located on the west coast of British Columbia. Prior to joining Vancouver Wharves in 1991, Mr. Weymark spent 14 years in the mining industry
throughout western Canada working on the start-up and operation of several mines.

The
number of Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, by all directors and senior officers of the Company is approximately 338,044,
which is less than 1% of the Common Shares issued and outstanding. KFOC owns approximately 29.6% of the Company's outstanding Common Shares.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Mr. Berlin was a director of Ozark Airlines, Inc., doing business as Great Plains Airlines, Inc., which filed a voluntary
Bankruptcy Petition under Chapter 11 of the United States Bankruptcy Code in an Oklahoma court on January 23, 2003. Mr. Berlin resigned from the board of directors of Ozark
Airlines on December 14, 2004. Ozark Airlines filed a motion to convert the bankruptcy to Chapter 7, which was granted by the Court on March 11, 2005.

In
July 2002, the Ontario Securities Commission issued a cease trading order against Black Pearl Minerals Consolidated Inc. for failure to file required financial statements and reports.
On October 3, 2002, the Ontario Securities Commission revoked this cease trading order. Another cease trading order was issued by the Ontario Securities Commission against Black Pearl Minerals
Consolidated Inc. on February 3, 2004 for failure to file financial statements. This cease trading order was revoked on February 18, 2004. C. David A. Comba, a director of the
Company, was a director of Black Pearl Minerals Consolidated Inc. from December 1998 to April 2004.

59

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Conflicts of Interest

There may be potential conflicts to which the directors of the Company are subject in connection with the business and operations of the Company. The
individuals concerned are governed in any conflicts or potential conflicts by applicable law. As of the date hereof, the following directors and officers of the Company hold positions with other
companies that explore for or produce PGMs or gold or have other business interests which may potentially conflict with the interests of the Company.

In
January 2007, Mr. Douchane was appointed President and Chief Executive Officer of Starfield Resources Inc., a TSX Venture Exchange listed company. Starfield
Resources Inc. is involved in the exploration and development of its 100% owned Ferguson Lake nickel copper cobalt palladium platinum property located in Nunavut, Canada. Additionally, on
September 14, 2007, Mr. Van Staveren was appointed part-time Chief Financial Officer of Starfield Resources Inc.

Mr. Comba
is a director of First Nickel Inc., a TSX-listed company, which owns the Lockerby Mine in Sudbury, Ontario, Canada. First Nickel Inc. is a nickel, copper and
cobalt producer with platinum group credits that is actively exploring for nickel deposits in Sudbury and south-eastern, Ontario.

LEGAL PROCEEDINGS

The following is a summary of material legal proceedings of which the Company is or has been a party.

In
2000, LDI and B.R. Davidson Mining & Development Ltd. ("Davidson") entered into a contract whereby Davidson agreed to construct an
expanded tailings management facility at the Lac des Iles mine site. LDI declared Davidson to be in default of the contract on February 2, 2001 and made a demand under a labour and material
payment bond issued by AXA Pacific Insurance Company ("AXA"). Davidson was the principal named in the bond and the indemnitors were B.R. Davidson
Mining & Development Ltd., Atikokan Ready Mix Ltd., Blaine R. Davidson, Bruce R. Davidson and Marlene Davidson. AXA commenced an action against the indemnitors. All of the
indemnitors other than Marlene Davidson commenced a third party action against LDI, Sitka Corp., LDI's engineers, and Aon Reed Stenhouse, the bond broker. In this third party action, Davidson claims
under the contract in the amount of $7.9 million, general damages for breach of contract in the amount of $3 million, aggravated, punitive or exemplary damages in the amount of $500,000,
loss of equity and equipment in the amount of $3 million by reason of LDI's failure to pay, contribution and indemnity for any amounts which the indemnitors are required to pay as a result of
AXA's claim against Davidson, costs, and interest. For its part, LDI has two default judgments against Davidson and noted Davidson in default in eight other actions in connection with subtrade claims
made against Davidson which were assigned to LDI. LDI's subtrade actions, costs orders and interest against Davidson total approximately $2 million.

An
action brought by Cambridge Resources Corp. ("Cambridge") against the Company, along with J. Patrick Sheridan, Minerales De Copan and two other
individuals, was dismissed by the Superior Court of Justice (Ontario) in December 2009. In its amended statement of claim dated September 27, 1991, Cambridge claimed damages in the
amount of $20 million, punitive and exemplary damages in the amount of $5 million, a declaration that the defendants hold any interest in an unidentified mining concession located in
Honduras (defined therein as the "Mining Property") on constructive trust for Cambridge, a mandatory order requiring the defendants to deliver up all
proceeds, equity interest, security or debenture interest in whatever form relating to the Mining Property, prejudgment and post-judgment interest and costs.

60

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From
time to time, the Company is involved in other litigation, investigations or proceedings related to claims arising out of its operations in the ordinary course of business. In the opinion of the
Company's management, these claims and lawsuits individually and in the aggregate, even if adversely settled, would not be expected to have a material effect on the results of operations or financial
condition of the Company and would not exceed ten percent of the current assets of the Company.

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

No director, executive officer, shareholder owning, directly or indirectly, or exercising control or direction over, 10% or more of the voting
securities of the Company or any associate or affiliate of any of the foregoing has or had a material interest, direct or indirect in any transaction since January 1, 2007 that has materially
affected or will materially affect the Company, except as follows:

KFOC
exercised a pre-emptive right pursuant to a 2006 convertible note financing to subscribe for 25% of the units at the public offering price of the offering of December 13, 2007
and the subsequent over-allotment option of January 9, 2007. See "Financing  2007 Public Offering" above.

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc. is the registrar and transfer agent of the Common Shares in Canada, and Computershare Trust Company, N.A.
is the co-transfer agent for the Common Shares in the United States. Computershare Trust Company of Canada is the trustee and transfer agent for the 2009 Warrants.

MATERIAL CONTRACTS

The option and joint venture agreement with Vale Inco governing the Shebandowan West Project described in the section titled "Business
Overview  Shebandowan West Project" is the only contract that is material to the Company and is still in effect.

INTERESTS OF EXPERTS

Information relating to the Company's mineral properties in this AIF has been derived from reports prepared by Scott Wilson Roscoe Postle
Associates Inc., Deborah A. McCombe, Ian T. Blakley, Richard E. Routledge, Jason J. Cox, Fred H. Brown, Laila Sedore (Potvin), Des Cullen, Genivar L.P., Tyson C. Birkett,
Josée Couture, Christian Bézy, Vincent Jourdain, Bill Stone, John Caldbick, InnovExplo, Bruno Turcotte and Carl Pelletier and has been included in reliance on such
persons' expertise. Each of these individuals is a qualified person as such term is defined in NI 43-101 and, with the exception of Laila Sedore (Potvin) who was an employee of the
Company at the time of her report and Tyson C. Birkett, Vincent Jourdain and John Caldbick who are now employees of the Company, is independent from the Company.

None
of Scott Wilson Roscoe Postle Associates Inc., Deborah A. McCombe, Ian T. Blakley, Richard E. Routledge, Jason J. Cox, Fred H. Brown, Laila Sedore (Potvin), Des Cullen,
Genivar L.P., Tyson C. Birkett, Josée Couture, Christian Bézy, Vincent Jourdain, Bill Stone, InnovExplo, Bruno Turcotte and Carl Pelletier, each being companies or
persons who have prepared or supervised the preparation of reports relating to the Company's mineral properties, or any director, officer, employee or partner thereof, as applicable, received or has
received a direct or indirect interest in the property of the Company or of any associate or affiliate of the Company. To the knowledge of the Company, as at the date hereof, the aforementioned
persons and persons at the companies specified above who participated in the preparation of such reports, as a group, beneficially own, directly or indirectly, less than one percent of the outstanding
securities of the Company.

61

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With
the exception of Tyson C. Birkett, Vincent Jourdain and John Caldbick who are now employees of the Company, neither the aforementioned persons, nor any director, officer, employee or partner, as
applicable, of the aforementioned companies or partnerships, is currently expected to be elected, appointed or employed as a director, officer or employee of the Company or of any associate or
affiliate of the Company.

The
auditors of the Company are KPMG LLP, Chartered Accountants, of Toronto, Ontario. KPMG LLP reports that it is independent of the Company in accordance with the Rules of Professional
Conduct of the Institute of Chartered Accountants of Ontario and in accordance with the applicable rules and regulations of the SEC. KPMG LLP is registered with the Public Company Accounting
Oversight Board.

RISK FACTORS

The Company's securities are subject to the following risks. If any of the risks occur, the Company's business, operating results and financial
condition could be materially adversely affected, the trading price of the Common Shares could decline and all or part of any investment may be lost. Additional risks and uncertainties not currently
known to the Company, or that are currently deemed immaterial, may also materially and adversely affect the Company's business operations.

A prolonged suspension of production at the Lac des Iles mine will adversely impact the financial position of the Company.

On October 29, 2008, the Company placed the Lac des Iles mine, its only producing mine on temporary care and maintenance and laid off
approximately 350 employees as a result of declining metal prices. Consequently, the Company's results of operations for the year ended December 31, 2009 are not comparable to the same
period in 2008 when the Lac des Iles mine was in full production. A sustained period of depressed metal prices, resulting in a lengthy period of suspension in production at the Lac des Iles mine, will
result in a significant loss of revenue for this period and could have a material adverse impact on the financial position and results of operations of the Company. A prolonged shutdown could also
make it more difficult for the Company to recruit qualified employees. Although the Company announced on December 8, 2009 that it intends to resume mining at the Lac des Iles mine as an
underground only operation, there can be no guarantee that the restart will proceed as expected.

The Company may not meet its production level and operating cost estimates and, if it does not, its results of operations may be adversely affected.

Planned production levels and operating costs at the Lac des Iles mine and the Sleeping Giant mine are estimates, with the estimates in respect of
the Lac des Iles mine being based on the Company's experience in operating such mine. The Company has little experience operating the Sleeping Giant mine and many estimates related thereto are based
in whole or in part on projections. These estimates are subject to numerous uncertainties, many of which are beyond the Company's control. The Company cannot give assurances that its actual production
levels will not be substantially lower than its estimates or that its operating costs will not be materially higher than anticipated. For example, production levels for 2008 were considerably lower
than initial estimates as a result of the decision to place the Lac des Iles mine on temporary care and maintenance.

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The Company's financial results are directly affected by commodity prices.

The Company's earnings are directly related to commodity prices as its revenues are derived from sales of palladium and, to a lesser extent, by
platinum, gold, nickel and copper produced from its Lac des Iles mine, which is currently idle. It is not the Company's current practice to sell forward its production. Commodity prices can fluctuate
widely and are affected by numerous factors beyond the Company's control, including production at other mines, supply from recycling, producer hedging activities, the state of the automotive industry,
other production and investor demands and overall political and economic conditions. The price of palladium is affected by global supply and demand for the commodity, the availability and cost of
substitutes and supply from Russia and South Africa, the two major PGM producing countries. Further, the prices of palladium and platinum have on occasion been subject to very rapid
short-term changes because of the smaller size of the market relative to other metals. The aggregate effect of these factors is impossible to predict with any accuracy.

Over
the last few years, the market price of palladium has been extremely volatile. In March 2008, the PM London Fix Price of palladium traded at a high of US$582 per ounce, and by
December 2008 it had declined to a low of US$164 per ounce. On March 30, 2010, the PM London Fix Price of palladium was US$472 per ounce. A prolonged or significant global economic
contraction could put downward pressure on market prices of PGMs, particularly if demand for PGMs decline in connection with reduced automobile demand.

Changes
in currency exchange rates, and particularly a significant weakening of the South African rand relative to the U.S. dollar, could reduce relative costs of production and improve the
competitive cost position of South African PGM producers. This in turn could result in additional PGM production from South Africa. An increased supply of palladium from South Africa could have a
negative impact on the price of palladium.

If
the price for palladium drops, this will affect the Company's financial performance and results of operations adversely. The Company's primary source of revenue has historically been the sale of
palladium, which accounted for approximately 45% of the Company's revenue in 2008 and 47% of the Company's revenues in 2007. Historically, changes in the market price of palladium have significantly
impacted the Company's profitability and the trading price of the Common Shares. In October 2008, when the market prices of palladium and by-product metals fell below the Company's
total cash costs of production, the Company suspended operations at its Lac des Iles mine.

Deterioration of economic conditions will adversely impact the Company's revenues.

The deterioration in the U.S. and global capital markets, the financial services industry and economic conditions generally, could continue to
negatively impact the Company's business in several ways. For instance, market volatility, tight credit markets and the decline in the U.S. housing market has adversely affected consumer
confidence and reduced business activity, both of which have negatively impacted the Company's revenues and the market price of the Common Shares since PGMs are used in the production of
consumer items such as automobiles, electronics and jewellery. In addition, some purchasers of PGMs, such as automobile manufacturers, could experience serious cash flow problems due to deteriorating
global capital markets. Approximately half of global demand of palladium and platinum is for the manufacture of automotive catalytic converters. Auto companies and other PGM purchasers may be forced
to reduce their product lines or production, shut down their operations or file for bankruptcy protection, which would have a material adverse effect on the Company's business. Any continuation or
worsening of the economic downturn will continue to adversely affect the Company.

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Fluctuations in foreign currency exchange rates in relation to the U.S. dollar may have an adverse effect on the Company's results of operations.

Changes in the Canadian dollar/U.S. dollar exchange rate significantly affect the Company's operating results and cash flow. Exchange rate
movements can have a significant impact as all of the Company's revenues are earned in U.S. dollars but most of its operating and capital costs are incurred in Canadian dollars. As a result, a
strengthening Canadian dollar relative to the U.S. dollar will result in reduced profit or increased losses for the Company. The Canadian dollar/U.S. dollar exchange rate has varied
significantly over the last several years. The Company does not currently hedge its foreign exchange exposure against the effects of currency fluctuations. There can be no assurance that foreign
exchange fluctuations will not materially adversely affect the Company's financial performance and results of operations.

Calculation of mineral resources, mineral reserves and metal recovery are only estimates, and there can be no assurance about the quantity and grade of minerals until the
metals are actually mined.

The calculation of mineral resources, mineral reserves and grades are merely estimates and depend on geological interpretation and statistical
inferences or assumptions drawn from drilling and sampling analysis, which might prove to be unpredictable. Mineral resources that are not mineral reserves do not have demonstrated economic viability
and mineral reserve estimates are based on certain assumptions, including metal prices. Until mineral resources or mineral reserves are actually mined and processed, the quantity of reserves or
resources and their respective grades must be considered as estimates only. Any material change in the quantity of mineral resources, mineral reserves, grade or stripping ratio may affect the economic
viability of the Company's properties.

Decreases in the market price of palladium, gold or other metals may render the mining of some or all of the reserves uneconomic.

The mineral resource and reserve figures presented in this AIF are estimates, which are, in part, based on forward-looking information, and no
assurance can be given that the indicated level of palladium, platinum, gold, nickel and copper will be produced. Factors such as metal price fluctuations, increased production costs, reduced recovery
rates and other factors, may render the present proven and probable reserves unprofitable to develop at a particular site or sites for periods of time.

The
mineral reserve estimates in the LDI Report, which includes or updates technical information from the Offset Zone Report, assume long-term prices of U.S.$350 per ounce for palladium,
U.S.$1,400 per ounce for platinum, U.S.$850 per ounce for gold, U.S.$6.50/lb nickel and U.S.$2.00/lb copper. The mineral reserve estimates in the Offset Zone Report assume long-term prices
of U.S.$325 per ounce for palladium, U.S.$1,000 per ounce for platinum, U.S.$550 per ounce for gold, U.S.$11/lb nickel and U.S.$2.50/lb copper. The mineral reserve estimates in the Shebandowan Report
assume 18-month trailing average metal prices of U.S.$300 per ounce for palladium, U.S.$750 per ounce for platinum, U.S.$400 per ounce for gold, U.S.$7/lb nickel and U.S.$1.50/lb copper.
The mineral resource and reserve estimates in the Sleeping Giant Report assume long-term prices of Cdn.$850 per ounce for gold. The mineral resource and reserve estimates in the Discovery
Report assume a price of Cdn.$850 per ounce for gold for the first five years and $750 per ounce for gold for the last year. Mineral reserve and resource estimates would be lower than estimated to the
extent the actual metal prices are lower than assumed.

If mineral resource and reserve estimates are not accurate, production may be less than estimated which would adversely affect the Company's financial condition and results
of operations.

The Company cannot be certain that its mineral resource and reserve estimates are accurate and cannot guarantee that it will recover the indicated
quantities of metals. Future production could differ dramatically from such estimates for the following reasons:

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The
occurrence of any of these events may cause the Company to adjust its mineral resource and reserve estimates or change its mining plans, which could negatively affect the Company's financial
condition and results of operations. Moreover, short-term factors, such as the need for additional development of the orebody or the processing of new or different grades if and when
operations resume, may adversely affect the Company.

A prolonged suspension of production at the Lac des Iles mine will adversely impact the financial position of the Company.

On October 29, 2008, the Company placed the Lac des Iles mine, its only producing mine on temporary care and maintenance and laid off
approximately 350 employees as a result of declining metal prices. Consequently, the Company's results of operations for the year ended December 31, 2009 are not comparable to the same
period in 2008 when the Lac des Iles mine was in full production. A sustained period of depressed metal prices, resulting in a lengthy period of suspension in production at the Lac des Iles mine, will
result in a significant loss of revenue for this period and could have a material adverse impact on the financial position and results of operations of the Company. A prolonged shutdown could also
make it more difficult for the Company to recruit qualified employees. Although the Company announced on December 8, 2009 that it intends to resume mining at the Lac des Iles mine as an
underground only operation, there can be no guarantee that the restart will proceed as expected.

Favourable market conditions from 2004 to 2007 encouraged increased mining exploration, development and construction activity in the mining industry, resulting in increased
demand for, and cost of, exploration, development and construction services and equipment.

The overall strength of the metal market from 2004 to 2007 resulted in an increase in exploration, development and construction activities around the
world, resulting in increased demand for, and cost of, exploration, development and construction services and equipment. In the Abitibi gold district, this demand remained strong from 2008 to 2009.
The costs of such services and equipment could increase in the future, which could result in delays if services or equipment cannot be obtained in a timely manner.

Future exploration at the Lac des Iles mine, the Sleeping Giant mine or at the Company's other exploration properties may not result in increased mineral resources or
mineral reserves, which could prevent the Company from sustaining its targeted production levels over the long term.

As mines have a depleting asset base, the Company actively seeks to replace and expand its mineral resources and mineral reserves through exploration
and development, strategic acquisitions and joint ventures. The Company has conducted exploration programs on the Lac des Iles property, the Sleeping Giant mine, the Discovery Project, the Shebandowan
West Project and elsewhere with the objective of increasing total mineral resources and mineral reserves. Exploration for minerals involves many risks and uncertainties and is frequently unsuccessful.
Among the many uncertainties inherent in any exploration and development program are the location of mineralized zones, the development of appropriate metallurgical processes, the receipt of necessary
governmental permits to mine a deposit and the construction of mining and processing facilities. Assuming discovery of an economic mineralized zone, several years may elapse from the completion of the
exploration phase until commercial production commences and during such time the economic feasibility of production may change. There can be no assurance that the Company's current exploration and
development programs will result in economically viable mining operations or yield new mineral resources and mineral reserves to replace current mineral resources and mineral reserves. This could
prevent the Company from sustaining its targeted production levels over the long term, which could affect its ability to continue as a going concern.

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Risks of acquisitions and the failure to integrate acquired mining properties.

As part of its development strategy, the Company intends to acquire additional mining properties, including gold properties, where such transactions
are economically and strategically justified. However, there can be no assurance that the Company will be able to identify attractive acquisition candidates in the future or that it will succeed at
effectively managing the integration of acquired mining properties, including the Sleeping Giant mine and the Discovery Project. If the expected synergies from such transactions do not materialize, or
if the Company fails to integrate such new mining properties successfully into its existing business, or if acquired businesses or properties have unexpected liabilities, the Company's results of
operations could be adversely affected.

The Company has a history of losses.

The Company has a history of losses, and there can be no assurance that it will be profitable in the future. The Company expects to resume production
at the Lac des Iles mine in the second quarter of 2010 and declared commercial production at the Sleeping Giant mine on January 1, 2010, but even if the Company is successful in these
operations, there can be no assurance that the Company will ever achieve profitability.

The risks and hazards associated with mining and processing pose operational and environmental risks that may not be covered by insurance and may increase the Company's
costs.

Mining and processing operations involve many risks and hazards, including, among others: metallurgical and other processing problems; unusual and
unexpected rock formations; ground or slope failures or underground cave-ins; environmental contamination; industrial accidents; fires; flooding and periodic interruptions due to inclement
or hazardous weather conditions or other acts of nature; organized labour disputes or work slow-downs; mechanical equipment failure and facility performance problems; and the availability
of critical materials, equipment and skilled labour. These risks could result in: damage to, or destruction of, the Company's properties or production facilities, personal injury or death;
environmental damage; delays in mining or processing; increased production costs; asset write downs; monetary losses, and legal liability.

The
Company cannot be certain that its insurance will cover all of the risks associated with mining and processing or that it will be able to maintain insurance to cover these risks at economically
feasible premiums. The Company could also become subject to liability for hazards against which it cannot insure or against which the Company may elect not to insure because of high premium costs or
commercial impracticality. Such events could result in a prolonged interruption in operations that would have a negative effect on the Company's ability to generate revenues, profits and cash flow.
Losses from such events may increase costs and decrease profitability.

Title to the Company's mineral properties cannot be guaranteed and may be subject to prior recorded and unrecorded agreements, transfers or claims and other defects and
potential aboriginal rights claims.

The Company cannot guarantee that title to its properties will not be challenged. Title insurance is generally not available for mineral properties
and the Company's ability to ensure that it has obtained secure claim to individual mineral properties or mining concessions may be severely constrained. The Company's mineral properties may be
subject to prior recorded and unrecorded agreements, transfers or claims, and title may be affected by, among other things, undetected defects. Additionally, there can be no guarantee that potential
aboriginal rights claims to the Company's mineral properties will not create delays in project approval, unexpected interruptions in project progress or result in additional costs to advance the
project. A successful challenge to the area and location of these claims could result in the Company being unable to operate on its properties as permitted or being unable to enforce its rights with
respect to its properties.

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The Company is dependent on a third party for smelting and significantly refining its palladium. If the third party is unable to accommodate the Company's smelting and
refining requirements, the Company's ability to generate revenues could be harmed.

The Company had a smelter agreement with Xstrata, which provided for the smelting and refining of the principal metals contained in the concentrates
produced at the Lac des Iles mine. The agreement with Xstrata was terminated in 2009. The failure to enter into a new agreement on acceptable terms with Xstrata or another third party could have a
material adverse effect on the Company's financial performance and results of operations until such time as smelting and refining arrangements can be made or alternative purchasers of the Company's
concentrates can be found. If the Company is required to make alternative refining arrangements or to find alternative purchasers, there can be no assurance that such arrangements would be on terms as
favourable to the Company as its previous agreement with Xstrata.

Increased competition could adversely affect the Company's ability to acquire suitable producing properties or prospects for mineral exploration in the future.

The mining industry is intensely competitive. The Company may be at a competitive disadvantage in acquiring additional mining properties because it
must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than the Company. As a result, for reasons beyond
its control, the Company may not be able to acquire mining properties in the future on acceptable terms.

The exploration and development of the Company's properties could require substantial additional financing.

The exploration and development of the Offset Zone at the Lac des Iles mine and at other properties could require substantial additional financing.
Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration activities, development or production on any or all of the Company's properties or even a loss
of property interest. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to
the Company.

The Company's inability to renew its collective agreements on acceptable terms could have a material adverse effect on the Company.

The Company's collective agreement with the United Steelworkers of America, which represents the hourly employees at the Lac des Iles and the
Sleeping Giant mine, will expire on May 31, 2012 and July 31, 2010, respectively. The inability to renew these agreements on acceptable terms could have a material adverse effect on the
Company and could potentially delay or prevent operations at the Lac des Iles or Sleeping Giant mines. In addition,
work stoppages or strikes at either mine could have a material adverse effect on the results of operations and financial performance of the Company.

The Company is subject to extensive environmental legislation and the costs of complying with these applicable laws and regulations may be significant.

The Company's operations are subject to extensive environmental legislation. This legislation requires the Company to obtain various operating
approvals and licenses and also imposes standards and controls on activities relating to the exploration, development and production activities.

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The
cost to the Company of obtaining operating approvals and licenses and abiding by environmental legislation, standards and controls may be significant. Further, if the Company fails to obtain or
maintain such operating approvals or licenses or breaches such legislation, standards or controls, it may not be able to continue its operations in its usual manner or at all, and the Company may be
subject to fines or other liabilities which may have a material adverse impact on its operations or financial results.

The
Company will be responsible for all costs of closure and reclamation at the Lac des Iles mine and the Sleeping Giant mine. In addition, to the extent that the Company's exploration activities at
other projects, including the Shebandowan West Project and the Discovery Project, disturb the land or some other environmental attribute, the Company may incur clean-up and other
reclamation costs at such projects. Under applicable legislation, the Company has established a trust fund to prepare for closure and reclamation at the Lac des Iles mine. The current amended mine
closure plan requires the payment by the Company of $8.4 million for cleanup and restoration of the Lac des Iles mine site. The trust fund is maintained by the Ontario Ministry of Northern
Development and Mines and will become available to the Company when the mine closure is completed. At December 31, 2009, approximately $8.4 million (including accrued interest) had been
deposited by the Company into the trust fund. The estimated closure and reclamation costs at the Sleeping Giant mine are $4.4 million. Of this amount, approximately $1.8 million is
currently held in a trust fund established to prepare for the closure and reclamation of the Sleeping Giant mine. There can be no assurance that the closure and reclamation costs for the Lac des Iles
mine or the Sleeping giant mine will not substantially exceed the Company's estimates, or that any trust funds available will cover these costs.

Changes
in environmental legislation or in its enforcement, new information on existing environmental conditions or other events, including changes in environmental controls or standards or in their
enforcement, may increase future environmental expenditures or otherwise have a negative effect on the Company's financial condition and results of operations. In addition to existing requirements, it
is expected that other environmental legislation may be implemented in the future with the objective of further protecting human health and the environment. New environmental legislation or changes in
existing environmental legislation could have a negative effect on production levels, product demand, product quality and methods of production and distribution. The complexity and breadth of these
issues make it difficult for the Company to predict their impact. The Company anticipates capital expenditures and operating expenses would likely increase as a result of compliance with new or more
stringent environmental legislation.

Failure
to comply with environmental legislation may result in the issuance of governmental orders, the imposition of penalties, liability for related damages and the loss of operating licenses or
approvals. The Company cannot give assurances that it will at all future times be in compliance with all federal and provincial environmental legislation or that steps to bring the Company into
compliance would not have a negative effect on its financial condition and results of operations.

Compliance with current and future government regulations may cause the Company to incur significant costs.

The Company's activities are subject to extensive Canadian federal and provincial legislation governing matters such as mine safety, occupational
health, labour standards, prospecting, exploration, production, exports, toxic substances, explosives, management of natural resources, price controls, land use, water use and taxes. Compliance with
this and other legislation could require the Company to make significant capital outlays. The enactment of new legislation or more stringent enforcement of current legislation may increase costs,
which could have a negative effect on the Company's financial position. The Company cannot make assurances that it will be able to adapt to these regulatory developments on a timely or cost effective
basis. Violations of these laws, regulations and other regulatory requirements could lead to substantial fines, penalties or other sanctions including possible shut-downs of the Lac des
Iles mine and future operations, as applicable.

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The Company is required to obtain and renew governmental permits in order to conduct mining operations, which is often a costly and time-consuming process.

Throughout the normal course of business, the Company is required to obtain and renew governmental permits for exploration, operations and expansion
of existing operations or for the development of new projects. Obtaining or renewing governmental permits is a complex and time-consuming process. The duration and success of permitting
efforts are contingent upon many variables not within the Company's control, including the interpretation of requirements implemented by the applicable permitting authority. The Company may not be
able to obtain or renew permits that are necessary to its operations, or the cost to obtain or renew permits may exceed the Company's expectations. Any unexpected delays or costs associated with the
permitting process could delay the development or impede the operation of a mine, which could materially adversely affect the Company's revenues and future growth.

The Company faces competition from other larger suppliers of PGMs and gold and from potential new sources of PGMs and gold.

The Company competes globally with other PGM and gold producers and suppliers, some of which are significantly larger and have access to greater
mineral reserves and financial resources. In addition, recycling and new mines could increase the global supply of palladium and gold. The Company may not be successful in competing with these
existing and emerging PGM and gold producers and suppliers.

The development of new technology or new alloys could reduce the demand for palladium and platinum.

Demand for palladium and platinum may be reduced if manufacturers in the automotive, electronics and dental industries find substitutes for palladium
or platinum. The development of a substitute alloy or synthetic material which has catalytic characteristics similar to PGMs could result in a decrease in demand for palladium and platinum.
Furthermore, if the automotive industry were to develop automobiles that do not require catalytic converters, such as pure electric vehicles, it could significantly reduce the demand for palladium and
platinum. High prices for palladium or platinum would create an incentive for the development of substitutes. Any such developments could have a material adverse effect on the Company's financial
condition and results of operations.

If the Company loses key personnel or is unable to attract and retain personnel, the Company's mining operations and prospects could be significantly harmed.

The Company is dependent upon the services of a small number of members of senior management. The Company's current operations and its future
prospects depend on the experience and knowledge of these individuals. The Company does not maintain any "key person" insurance. The loss of one or more of these individuals could have a material
adverse effect on the Company's mining operations and results of operations.

The Company's credit facilities could provide for events of default, some of which are beyond the Company's control.

The Company may enter into credit facilities to borrow money to finance its operations. Credit facilities may contain certain events of default, some
of which may be beyond the Company's control, the occurrence of which could require the Company to pay back immediately all amounts borrowed under such credit facilities.

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The Company's principal shareholder has the ability to direct the Company's affairs and business and, because the principal shareholder owns approximately 29.6% of the
Common Shares, third parties may be deterred from acquiring the Company.

To the Company's knowledge, KFOC owns Common Shares representing approximately 29.6% of the total number of Common Shares outstanding as at March 16,
2010. KFOC, therefore, could have the ability to direct the affairs and business of the Company and it cannot be assumed that the interests of KFOC will coincide with those of the Company. This
concentration of ownership results in KFOC possibly having the ability to elect the Company's board of directors and may have the effect of delaying or preventing a change in control of the Company,
which may deprive the Company's shareholders of a control premium that might otherwise have been realized in connection with an acquisition of the Company. Alternatively, if KFOC sells its
shareholdings to a third party, the new purchasing shareholder would obtain a considerable controlling interest in the Company. There can be no assurance that the interests of such a
shareholder would be consistent with the plans of the Company as described in this AIF or that such a sale would not decrease the value of the Common Shares.

The Company's hedging activities or its decision not to hedge could expose it to losses.

From time to time, the Company may in the future engage in hedging activities to manage its exposure related to currencies, interest rates and
commodity prices. While hedging related to realized metal prices may protect the Company against low metal prices, it may also limit the price the Company can receive on hedged products. As a result,
the Company may be prevented from realizing possible revenues in the event that the market price of a metal exceeds the price stated in a forward sale or call option contract. In addition, the Company
may experience losses if a counterparty fails to purchase under a contract when the contract price exceeds the spot price of a commodity.

Lack of infrastructure could delay or prevent the Company from developing its projects.

Completion of the development of the Company's advanced exploration projects is subject to various requirements, including the availability and
timing of acceptable arrangements for electricity or other sources of power, water and transportation facilities. The lack of availability on acceptable terms or the delay in the availability of any
one or more of these items could prevent or delay development of the Company's advanced exploration projects. If adequate infrastructure is not available in a timely manner, there can be no assurance
that: the development of the Company's projects will be completed on a timely basis, if at all; the resulting operations will achieve the anticipated production volume; or the ongoing operating costs
associated with the development of the Company's advanced projects will not be higher than anticipated.

Current and future litigation and regulatory proceedings may impact the revenue and profits of the Company.

The Company may be subject to civil claims (including class action claims) based on allegations of negligence, breach of statutory duty, public
nuisance or private nuisance or otherwise in connection with its operations or investigations relating thereto. While the Company is presently unable to quantify its potential liability under any of
the above heads of damage, such liability may be material to the Company and may materially adversely affect its ability to continue operations.

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In
addition, the Company may be subject to actions or related investigations by governmental or regulatory authorities in connection with its activities at the Lac des Iles mine, the Sleeping Giant
mine or its other properties. Such actions may include prosecution for breach of relevant legislation or failure to comply with the terms of the Company's licenses and permits and may result in
liability for pollution, other fines or penalties, revocations of consents, permits, approvals or licenses or similar actions, which could be material and may impact the results of operations of the
Company. The Company's current insurance coverage may not be adequate to cover any or all the potential losses, liabilities and damages that could result from the civil and/or regulatory actions
referred to above.

The Company may fail to achieve and maintain adequate internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act and equivalent
Canadian legislation.

The Company documented and tested during its most recent fiscal year its internal control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes Oxley Act ("SOX") and equivalent Canadian legislation. Both SOX and Canadian legislation require management to assess
annually the effectiveness of the Company's internal control over financial reporting ("ICFR"). Cadiscor, acquired in May 2009, was not subject
to equivalent SOX or Canadian certification requirements prior to its acquisition and the Company, in accordance with applicable U.S. and Canadian securities laws, has elected to temporarily exclude
Cadiscor from the scope of certification of ICFR. The Company will be required to include Cadiscor in its certification of the design of controls as at June 30, 2010 and will be required to
certify the effectiveness of those controls as at December 31, 2010. The Company may fail to achieve and maintain the adequacy of its ICFR as such standards are modified, supplemented, or
amended from time to time, and the Company may not be able to ensure that it can conclude, on an ongoing basis, that it has effective ICFR in accordance with Section 404 of SOX and equivalent
Canadian legislation. The Company's failure to satisfy the requirements of Section 404 of SOX and equivalent Canadian legislation on an ongoing, timely basis could result in the loss of
investor confidence in the reliability of its financial statements, which in turn could harm the Company's business and negatively impact the trading price of the Common Shares or the market value of
its other securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company's operating results or cause
it to fail to meet its reporting obligations. Future acquisitions of companies, if any, may provide the Company with challenges in implementing the required processes, procedures and controls in its
acquired operations. No evaluation can provide complete assurance that the Company's ICFR will detect or uncover all failures of persons within the Company to disclose material information otherwise
required to be reported. The effectiveness of the Company's processes, procedures and controls could also be limited by simple errors or faulty judgments. In addition, if the Company expands, the
challenges involved in implementing appropriate ICFR will increase and will require that the Company continue to improve its ICFR.

Because the Company is a Canadian corporation and the majority of its directors and officers are resident in Canada, it may be difficult for investors in the
United States to enforce civil liabilities against the Company based solely upon the federal securities laws of the United States.

The Company is a Canadian corporation, with its principal place of business in Canada. A majority of the Company's directors and officers and some or
all of the experts named in this AIF are residents of Canada and a significant portion of the Company's assets and the assets of a majority of the Company's directors and officers and the experts
named in this AIF are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon the
Company or its directors or officers or such experts who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States
predicated upon civil liabilities under the United States Securities Act of 1933, as amended. Investors should not assume that Canadian courts (1) would enforce judgments of
U.S. courts obtained in actions against the Company or such directors, officers or experts predicated upon the civil liability provisions of the U.S. federal securities laws or the
securities or "blue sky" laws of any state within the United States or (2) would enforce, in original actions, liabilities against the Company or such directors, officers or experts
predicated upon the U.S. federal securities laws or any such state securities or "blue sky" laws. In addition, the protections afforded by Canadian securities laws may not be available to
investors in the United States.

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The board of directors may issue, without shareholder approval, an unlimited number of special shares that have rights and preferences potentially superior to those of the
Common Shares. Such an issuance may delay or prevent a change of control.

While there are no special shares currently outstanding, the Company's articles allow the issuance of an unlimited number of special shares in one or
more series. Subject to the TSX, NYSE Amex and any applicable regulatory approvals, the board of directors may set the rights and preferences of any series of special shares in its sole discretion
without shareholder approval. The rights and preferences of those special shares may be superior to those of the Common Shares. Accordingly, the issuance of special shares may adversely affect the
rights of holders of Common Shares and could have the effect of delaying or preventing a change of control, which may deprive the Company's shareholders of a control premium that might otherwise have
been realized in connection with an acquisition of the Company.

AUDIT COMMITTEE INFORMATION

Audit Committee Mandate

The Audit Committee is responsible for assessing the performance of the Corporation's auditors and for reviewing the Corporation's financial
reporting and internal controls. The Committee has adopted a charter, ratified by the Board, which describes roles and responsibilities to the members of the Committee.

The
Audit Committee mandate is set out in full beginning on page 75.

Composition of the Audit Committee

The Audit Committee is comprised of Messrs. Berlin (chairman), Van Staveren, Comba and Quinn.

Relevant Education and Experience

Messrs. Berlin, Van Staveren, Comba and Quinn are independent as such term is defined in MI 52-110 and are financially literate.
Each of the members has the requisite qualification to serve on the Audit Committee. Mr. Berlin received a bachelor's degree from Duquesne University, an MBA from the University of Wisconsin
Madison and has completed the Executive Management program at Stanford University. Mr. Van Staveren has received a CA and a CPA designation and was a former partner at KPMG LLP. Each of
Messrs. Comba and Quinn has had extensive management and board experience in the mining industry.

Audit Committee Pre-Approval Policies and Procedures

All audit and non-audit services performed by the Company's external auditors are pre-approved by the Audit Committee.

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External Auditor Service Fees

Audit Fees

The aggregate fees billed by KPMG LLP, the Company's external auditors for the fiscal years ended December 31, 2009 and 2008, for
professional services that are normally provided by the external auditors in connection with statutory and regulatory filings or engagements for that year were $520,400 and $544,175, respectively.

Audit-Related Fees

The aggregate fees billed by KPMG LLP for the fiscal years ended December 31, 2009 and 2008 for assurance and related services rendered
by it that are reasonably related to the performance of the audit or review of the Company's financial statements engagements for that year were $155,000 and $75,900, respectively. In 2009,
such fees were paid for services rendered in connection with the 2009 Information Circular ($44,000), a prospectus filing ($101,000), and the IFRS Quick Scan ($10,000).

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Tax Fees

The aggregate fees billed by KPMG LLP for the fiscal years ended December 31, 2009 and 2008 for professional services rendered by it
for tax compliance, tax advice, tax planning and other services were $84,380 and $88,250, respectively. Tax services provided included preparation of corporate tax returns and review of tax
provisions. In 2009, such fees were paid for preparation of federal/provincial tax returns ($15,860), an Ontario mining tax assessment for December 31, 2008 ($17, 920), flow-through
share remuneration ($27,000), and correspondence and discussions related to investments in Finland and other investments ($23,600).

All Other Fees

Other products and services provided included accounting support. The aggregate fees billed by KPMG LLP for the fiscal years ended
December 31, 2009 and 2008 for products and services provided by KPMG LLP, other than the services reported in the preceding three paragraphs, were $nil and $nil, respectively.

ADDITIONAL INFORMATION

We are required to file with the securities commission or authority in each of the applicable provinces of Canada annual and quarterly reports,
material change reports and other information. In addition, we are subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance with the Exchange Act, we also file reports with, and furnish other information to, the SEC. Under a
multijurisdictional disclosure system adopted by the United States, these reports and other information (including financial information) may be prepared in accordance with the disclosure
requirements of Canada, which differ in certain respects from those in the United States. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the
furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we are not required to publish financial statements as promptly as U.S. companies.

You
may read any document we file with or furnish to the securities commissions and authorities of the provinces of Canada through SEDAR and any document we file with or furnish to the SEC at the
SEC's public reference room at Station Place, 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the same documents from the public reference room of the SEC at
450 Fifth Street, N.W., Washington D.C. 20549 by paying a fee. Please call the SEC at l-800-SEC-0330 for further information on the
public reference rooms. Certain of our filings are also electronically on EDGAR, and which may be accessed at www.sec.gov, as well as from commercial document retrieval services.

Additional
information, including directors' and officers' remuneration and indebtedness, principal holders of the Company's securities and securities authorized for issuance under equity compensation
plans, is contained in the Company's management proxy circular. As well, additional financial information is provided in the Company's annual financial statements for the year ended
December 31, 2009 and management's discussion and analysis of operations and financial results.

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AUDIT COMMITTEE MANDATE

1.     Composition

The Audit Committee shall consist of a minimum of three directors of the Company.



2.     Qualifications and Experience

At the time of appointment or within a reasonable period of time following appointment, each member of the Committee must be financially literate, having the ability to read
and understand a set of financial statements that present the breadth and level of complexity or accounting issues that are generally comparable to the breadth and complexity of the issues that can be
reasonably be expected to be raised by the Company's financial statements.

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3.     Mandate and Responsibilities

The Audit Committee shall:

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4.     Authority

The Audit Committee shall have the authority:

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5.     Proceedings

The following shall apply to the proceedings of the Audit Committee.

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GLOSSARY OF TERMS

The following is a glossary of certain terms used in this document.

"Accurassay" means Accurassay Laboratories, a division of Assay Laboratory Services Inc.

"AIF" means this Annual Information Form.

"APP" means Arctic Platinum Project, which is an advanced stage PGM-nickel-copper exploration project located approximately
60 kilometres south of the city of Rovaniemi, Finland.

"ball mill" means a rotary grinding mill which uses metal balls to reduce ore to a fine particle size.

"breccia" means a textural description of a rock which is composed of angular rock fragments.

"Cadiscor" means Cadiscor Resources Inc.

"catalyst" is a substance which, when present in small amounts, modifies the rate or efficiency of a chemical reaction of other substances without being
consumed in the process.

"catalytic converter" means a pollution control device, fitted to the exhaust systems of vehicles powered by internal combustion engines. This device
contains platinum, palladium and sometimes rhodium, which assist in the conversion (oxidation) of carbon monoxide and hydrocarbons into carbon dioxide and water.

"CBCA" means the Canada Business Corporations Act.

"Common Shares" means the common shares of the Company.

"Company" means North American Palladium Ltd.

"concentrate" means a product containing the valuable metal and from which most of the waste material in the ore has been removed.

"concentrator" or "processing plant" means a plant or facility which processes ore brought from the mine
and removes most of the valuable mineral or metal from the ore and discards most of the barren portion of the ore as tailings.

"Cowboy Zone" means the underground PGM Zone at the Lac des Iles mine located 30 to 60 metres to the west of the Offset Zone and extends for up
to 300 metres along strike and 300 metres down dip.

"cut-off grade" is determined by the following formula parameters: estimates over the relevant period of mining costs, ore treatment costs,
general and administrative costs, refining costs, royalty expenses, process and refining recovery rates and PGM prices.

"diamond drilling" means rotary drilling using diamond impregnated bits to produce a solid continuous core sample of the underlying rock.

"Discovery Report" means the NI 43-101 Technical Report on the Discovery Project dated August 1, 2008 prepared by
InnovExplo Inc.

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"EM" means electromagnetic.

"ETFs" means exchange traded funds.

"feasibility study" means a program to establish whether a mineral deposit can be successfully mined considering technical and economic parameters.

"flotation circuit" means a series of flotation tanks or cells which recover metal by means of flotation. Flotation is a milling process by which some
mineral particles are induced to float and others to sink. The valuable minerals are thereby concentrated and separated from the worthless waste.

"gabbro" means a dark, course-grained intrusive rock usually composed of angular rock fragments.

"Genviar" means Genviar L.P.

"grade" means a particular quantity of ore or mineral relative to other constituents, in a specified quantity of rock.

"head grade" means the quantity of valuable mineral or metal contained in each tonne of ore delivered to the concentrator.

"indicated resource" means that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be
estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill
holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

"inferred resource" means that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence
and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes.

"intrusion/intrusive" means a mass of igneous rock that was injected and solidified within the earth's crust.

"iridium" means hard, brittle, silver-white platinum group metal used for pen tips, jewellery, resistance wiring, electronic contacts
and electrodes.

"KFOC" means Kaiser-Francis Oil Company, the Company's major shareholder.

"LDI" means Lac des Iles Mines Ltd.

"LDI Report" means the N1 43-101 Technical Report on the Lac des Iles Mine dated March 13, 2009 prepared by Scott
Wilson RPA.

"mafic rocks" means rocks composed of 40 to 90% mafic minerals. (PGM deposits are usually hosted in mafic and untramafic intrusive rocks).

"MBI" means the Mine Block Intrusive.

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"measured mineral resource" means that part of a mineral resource for which quantity, grade or quality, densities, shape, physical characteristics are
so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of
the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

"measured resource" means that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so
well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

"Micon" means Micon International Limited.

"mineral reserve" means the economically mineable part of a measured or indicated resource demonstrated by at least a preliminary feasibility study.
This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be
justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.

"mineral resource" means a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth's crust in such
form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral
resource are known, estimated or interpreted from specific geological evidence and knowledge.

"mineralization" means the concentration of metals and their chemical compounds within a body of rock.

"net smelter return royalty" means a royalty based on the gross proceeds received from the sale of minerals less the cost of smelting, refining, freight
and other related costs.

"NI 43-101" means National Instrument 43-101  Standards of Disclosure for Mineral Projects.

"Offset Zone" means Offset High Grade Zone, a mineralized zone located below and approximately 250 metres to the west of the Lac des Iles
underground mine orebody.

"Offset Zone Report" means the N1 43-101 Technical Report on the Lac des Iles property (including the Lac des Iles mine and the
Offset High Grade Zone) dated January 15, 2009 prepared by Scott Wilson RPA.

"ore" means a mixture of valuable and worthless minerals from which at least one of the minerals can be mined and processed at an economic profit.

"osmium" means a rare, hard white metal.

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"ounce" or "oz." is a unit of weight measure. In the precious metals industry a troy ounce is equal to
one-twelfth part of a pound or 31.103 grams.

"Outlaw Zone" means the 750 metre long underground exploration hole, which is a potential zone of mineralization at the Lac des Iles mine.

"overburden" means unconsolidated material that overlies a mineral deposit and must be removed prior to mining.

"palladium" means a white, ductile, malleable precious metal that does not tarnish at normal temperatures. Wide applications range from electronics,
dentistry, jewellery and automotive catalytic converters.

"PGE" means platinum group elements.

"PGMs" means "Platinum Group Metals". Platinum Group Metals include platinum, palladium, rhodium,
ruthenium, osmium and iridium. All PGMs have catalytic qualities and resist corrosion and are chemically inert over a wide range of temperatures.

"probable mineral reserve" means the economically mineable part of an indicated, and in some circumstances a measured mineral resource demonstrated by
at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of
reporting, that economic extraction can be justified.

"professional association", for the purposes of the definition of a qualified person below, means a self-regulatory organization of
engineers, geoscientists or both engineers and geoscientists that



"pyroxenite" means an ultramafic rock which predominantly contains the mafic mineral pyroxene (Mg-rich silicate).

"qualified person" means an individual who



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"rhodium" means a silver-white metal of the platinum family resistant to tarnishing and used as an electrode posit, or alloyed with platinum to
manufacture thermocouples.

"Roby Zone" means the Roby open pit mine and the Roby underground mine on the Lac des Iles property.

"SAG mill" means a semi-autogenous grinding mill. A SAG mill is one in which steel balls are added to the mill charge to supplement the
grinding capabilities of the larger pieces of ore.

"Scott Wilson RPA" means Scott Wilson Roscoe Postle Associates Inc.

"SEC" means the United States Securities and Exchange Commission.

"Shebandowan Report" means the N1 43-101Technical Report on the Shebandowan West Property dated August 9, 2007 prepared by Des
Cullen, F.H. Brown and Laila Sedore (Potvin).

"Sheridan Group" means Sheridan Platinum Group Inc. and John Patrick Sheridan.

"Sleeping Giant Report" means the N1 43-101 Technical Report on the Sleeping Giant Mine dated October 8, 2008 prepared
by Genviar.

"strip ratio" means the ratio of units of waste material required to be removed to facilitate the mining of one unit of economic material.

"tailings impoundment" means a containment area constructed to hold tailings.

"tailings" means that portion of the ore which remains after the valuable minerals have been extracted. "tailings impoundment" means a containment area
constructed to hold tailings.

"TMF" means tailing management facility.

"ton" means a short ton, equivalent to 2,000 pounds.

"tonne" means a metric measure consisting of 2,204.6 pounds or 1,000 kilograms.

"ultramafic" means rocks composed of greater than 90% mafic minerals. (PGM deposits are usually hosted in mafic and ultramafic intrusive rocks.)

"UTM" means the Universal Transverse Mercator coordinate system, a grad coordinate system.

"Vale Inco" means Vale Inco Limited.

"waste" means barren rock in a mine, or mineralized material that is too low in grade to be mined and milled at a profit.

"Xstrata" means Xstrata Nickel.

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