---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F/A

[  ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or
(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31,
2012

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______to
______

OR

[  ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell
company report: ____________

Commission File Number 000-28980

Royal Standard Minerals Inc.(Exact name of Company as specified in its charter)

Not applicable(Translation of Registrants name
into English)

Canada(Jurisdiction of incorporation or
organization)

50 Richmond Street East, Suite 101, Toronto, Ontario M5C 1N7(Address of principal executive offices)

George Duguay50 Richmond Street East, Suite 101,
Toronto, Ontario M5C 1N7(416) 848-0105 george@dsacorp.ca(Name, Telephone, E-mail and/or Facsimile Number and Address of
Company Contact Person)

Securities registered or to be registered pursuant to Section
12(b) of the Act.

|None                  | Not applicable                                   
|--------------------- | -------------------------------------------------
|(Title of each class) | (Name of each exchange on which
      registered)

Securities registered or to be registered pursuant to Section
12(g) of the Act.

Common Shares, without par value(Title of Class)

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Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.

None(Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report.

As of January 31, 2012: 83,853,825 Common Shares, without par
value

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ 
]          No [X]

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of Securities Exchange Act of 1934.

Yes [ 
]          No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]          No
[  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

Yes [ 
]          No [  ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act.

|Large accelerated filer [  ] | Accelerated filer [  ] | Non-accelerated filer [X]
|---------------------------- | ---------------------- | -------------------------

Indicated by check mark which basis of accounting the company
has used to prepare the financial statements included in this filing:

|U.S. GAAP [  ] | International Financial Reporting
      Standards as issued by the | Other [  ]
|-------------- | ------------------------------------------------------------------ | ----------
|               | International Accounting Standards
    Board [X]                   |           

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow.

[  ] Item 17          
[  ] Item 18

If this is an annual report, indicate by check mark whether the
company is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ 
]          No [X]

EXPLANATORY NOTE

This Form 20-F/A of Royal Standard Minerals Inc.  (the “Company”) amends the Company’s Form 20-F Annual Report for the fiscal year ended January 31, 2012 as originally fled on June 13, 2012. This Form 20-F/A is being filed to include the Annual Financial Statements section and Management's Discussion and Analysis section, which was inadvertently excluded from the original filing.

For the convenience of the reader, this Form 20-F/A sets forth the entire Form 20-F Annual Report as originally filed with the SEC with amendments to only include the missing sections and updated page numbers. As a result, this Form 20-F/A does not reflect any events that may have occurred after the Form 20-F Annual Report was filed on June 13, 2012 and our Annual Report on Form 20-F for the fiscal year ended January 31, 2012, as amended by this Amendment, continues to speak as of the initial filing date of the Form 20-F.

The filing of this Form 20-F/A shall not be deemed an admission that the Form 20-F, when filed, included any known untrue statement of material fact or knowingly omitted to state a material fact necessary to make a statement not misleading.

ii

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TABLE OFCONTENTS

|PART I | 3                                                                  
|------ | -------------------------------------------------------------------
|       | Item 1. Identity of Directors, Senior
      Management and Advisers
|       | Item 2. Offer
      Statistics and Expected Timetable              
|       | Item 3. Key Information                                            
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 4. Information
      on the Company                           
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 4A. Unresolved Staff Comments                                 
|       | Item 5. Operating and
      Financial Review and Prospects         
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 6. Directors,
      Senior Management and Employees           
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 7. Major
      Shareholders and Related Party Transactions    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 8. Financial
      Information                                
|       |                                                                    
|       |                                                                    
|       | Item 9. The Offer and Listing                                      
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       | Item 10. Additional
      Information                              
|       |                                                                    
|       |                                                                    
|       |                                                                    
|       |                                                                    

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|         |                                                                                             | E. Taxation                                                                       | 49
|-------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | --
|         |                                                                                             | F. Dividends and paying agents.                                                   | 55
|         |                                                                                             | G. Statement by experts.                                                          | 55
|         |                                                                                             | H. Documents on display.                                                          | 55
|         |                                                                                             | I. Subsidiary Information.                                                        | 56
|         | Item 11. Quantitative and Qualitative Disclosures about
      Market Risk                   | 56                                                                               
|         | Item 12. Description of Securities Other than Equity
      Securities                       | 58                                                                               
|PART II  | 58                                                                                         
|         | Item 13. Defaults, Dividend Arrearages and Delinquencies                                    | 58                                                                               
|         | Item 14. Material Modifications to the Rights of Security
      Holders and Use of Proceeds | 58                                                                               
|         | Item 15. Controls and Procedures                                                            | 62                                                                               
|         |                                                                                             | A. Disclosure Controls and Procedures.                                            | 62
|         |                                                                                             | B. Management's Annual Report on Internal Control over
      Financial Reporting. | 62
|         |                                                                                             | C. Attestation Report of the Registered Public Accounting
      Firm.             | 62
|         |                                                                                             | D. Changes in Internal Control over Financial Reporting.                          | 63
|         | Item 16. [Reserved]                                                                         | 63                                                                               
|         | Item 16A. Audit Committee Financial Expert                                                  | 63                                                                               
|         | Item 16B. Code of Ethics                                                                    | 63                                                                               
|         | Item 16C. Principal Accountant Fees and Services                                            | 63                                                                               
|         | Item 16D. Exemptions from the Listing Standards for Audit
      Committees                  | 64                                                                               
|         | Item 16E. Purchases of Equity Securities by the Issuer
      and Affiliated Purchasers      | 64                                                                               
|         | Item 16F. Change in Registrant's Certifying Accountant                                      | 64                                                                               
|         | Item 16G. Corporate Governance                                                              | 65                                                                               
|         | Item 16H. Mine Safety Disclosure                                                            | 65                                                                               
|PART III | 65                                                                                         
|         | Item 17. Financial Statements.                                                              | 65                                                                               
|         | Item 18. Financial Statements                                                               | 67                                                                               
|         | Item 19. Exhibits                                                                           | 68                                                                               
|         |                                                                                             | SIGNATURES                                                                        | 70

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EXPLANATORY NOTE

Royal Standard Minerals Inc. (together with its subsidiaries,
the Company, Royal Standard or RSM) is a Canadian issuer eligible to file
its annual report pursuant to Section 13(a) of the U.S. Securities Exchange Act
of 1934, as amended (the Exchange Act), on Form 20-F. The Corporation is a
foreign private issuer as defined in Rule 3b-4 under the Exchange Act and Rule
405 under the U.S. Securities Act of 1933, as amended (the Securities Act).
Equity securities of the Company are accordingly under the Exchange Act exempt
from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to
Rule 3a12-3.

The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS), as issued
by the International Accounting Standards Board (IASB). The Companys
consolidated financial statements, which are filed with this annual report on
Form 20-F, may be subject to Canadian auditing and auditor independence
standards. They may not be comparable to financial statements of United States
companies.

Unless otherwise indicated, all dollar amounts in this report
are presented in U.S. dollars. The exchange rate of Canadian dollars into United
States dollars, on January 31, 2012, based upon the Bank of Canada noon exchange
rate, was U.S.$1.00 = Cdn$1.0052.

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F and the exhibits attached
hereto contain forward-looking statements within the meaning of applicable
laws concerning the Companys plans at its properties, plans related to its
business and other matters. These statements relate to analyses and other
information that are based on forecasts of future results, estimates of amounts
not yet determinable and assumptions of management.

Statements concerning mineral reserves and resource estimates
may also be deemed to constitute forward-looking statements to the extent that
they involve estimates of the mineralization that will be encountered if any of
the Goldwedge, Piñon, Fondaway, or Kentucky projects are developed, and in the
case of mineral reserves or resources, such statements reflect the conclusion
based on certain assumptions that the mineral deposit can be economically
exploited. Any statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words or phrases
such as expects, anticipates, plans, estimates or intends, or the
negative or other variations of these words or other comparable words or phrases
or stating that certain actions, events or results may, could, would,
might or will be taken, occur or be achieved) are not statements of
historical fact and may be forward-looking statements. Forward-looking
statements also include the potential for future growth, indications of
potential for economic extraction, the extraction of material that the Company
is able to process, the potential to increase throughput and resource estimates,
exploration and development plans, and the execution of certain agreements
including the terms of those agreements. Forward-looking statements are subject
to a variety of risks and uncertainties which could cause actual events or
results to differ from those reflected in the forward-looking statements,
including, without limitation:

- precious metal and coal price fluctuations;
- volatility in the financial markets;
- operating hazards and risks;
- risks and uncertainties relating to the exploration and development of
  mineral properties;
- uncertainty attributable to the calculation of reserves, resources and
  metal recoveries;
- uncertainty of title to mining properties;
- risks associated with dilution;

1

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- risks related to environmental regulation and liability;
- risks related to the possibility that the Company is a passive foreign
investment company; and
- uncertainty associated with U.S. investors
enforcing in the United States civil liabilities of the Company and its
directors and officers who are resident in Canada.

Some of the important risks and uncertainties that could affect
the Companys forward-looking statements are described further in Item 3.D.
Risk Factors. Should one or more of these risks and uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements. Forward-looking
statements are made based on managements beliefs, estimates and opinions on the
date the statements are made and the Company undertakes no obligation to update
forward-looking statements if these beliefs, estimates and opinions or other
circumstances should change, except as required by law. Investors are cautioned
against placing undue reliance on forward-looking statements.

RESOURCE AND RESERVE ESTIMATES

The terms mineral reserve, proven mineral reserve and
probable mineral reserve used in the Companys disclosure are Canadian mining
terms that are defined in accordance with National Instrument 43-101  Standards
of Disclosure for Mineral Projects (NI 43-101) under the guidelines set out in
the Canadian Institute of Mining, Metallurgy and Petroleum (the CIM) Best
Practice Guidelines for the Estimation of Mineral Resource and Mineral Reserves
(the CIM Standards), adopted by the CIM Council on November 23, 2003. These
definitions differ from the definitions in the United States Securities and
Exchange Commission (the SEC) Industry Guide 7 under the Securities Act. Under
Industry Guide 7 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. Under Industry Guide 7 standards, a final or bankable
feasibility study is required to report reserves, the three-year historical
average price is used in any reserve or cash flow analysis to designate reserves
and the primary environmental analysis or report must be filed with the
appropriate governmental authority.

The terms mineral resource, measured mineral resource,
indicated mineral resource and inferred mineral resource used in the
Companys disclosure are Canadian mining terms that are defined in accordance
with NI 43-101 under the guidelines set out in the CIM Standards; however, these
terms are not defined terms under Industry Guide 7 and are normally not
permitted to be used in reports and registration statements filed with the SEC.
Investors are cautioned not to assume that any part or all of mineral deposits
in these categories will ever be converted into reserves. Inferred mineral
resources have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It cannot be assumed
that all or any part of an inferred mineral resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of inferred mineral resources
may not form the basis of feasibility or pre-feasibility studies, except in rare
cases. Investors are cautioned not to assume that all or any part of an inferred
mineral resource exists or is economically or legally mineable. Disclosure of
contained ounces in a resource is permitted disclosure under Canadian
regulations; however, the SEC normally only permits issuers to report
mineralization that does not constitute reserves by SEC Industry Guide 7
standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this annual report on
Form 20-F and the documents incorporated by reference herein containing
descriptions of the Companys mineral deposits may not be comparable to similar
information made public by U.S. companies subject to the reporting and
disclosure requirements under the United States federal securities laws and the
rules and regulations thereunder.

2

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PART I

Item 1. Identity of Directors, Senior Management and
Advisers

Not applicable.

Item 2. Offer Statistics and Expected
Timetable

Not applicable.

Item 3. Key Information

A.Selected financial data.

The tables below present selected statement of operations and
balance sheet data for Royal Standard Minerals Inc. as at and for the fiscal
years ended January 31, 2012 and 2011. The selected financial data presented
herein for the fiscal years ended January 31, 2011 and 2012 is prepared in
accordance with International Financial Reporting Standards. The financial data
includes the accounts of the Company and its wholly-owned subsidiaries, Kentucky
Standard Energy Company, Inc., and Manhattan Mining Co., both United States
Companies. See Item 4. Information on the Company.

Royal Standard Minerals Inc.(An Exploration Stage
Enterprise)Consolidated Financial Statement DataFor the
Years Ended January 31(Expressed in US Currency)

2012
    
    
    2011Revenue
    $
    0
    
    $
    0Finance Income
    $
    4,291
    
    $
    3,221Expenses
    
    ($6,455,989
    )
    
    ($1,636,066
    )Net loss for the
      year
    
    ($6,451,698
    )
    
    ($1,632,845
    )Deficit, beginning
      of year
    
    ($38,101,796
    )
    
    ($36,468,951
    )Loss per common
      share:Basic
      and dilutedloss
      per share
    
    ($0.08
    )
    
    ($0.02
    )Weighted Average SharesOutstanding
    
    83,853,825
    
    
    83,853,825


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|Balance Sheet       |   | January 31, 2012 |   |   | January 31, 2011 | 
|------------------- | - | ---------------- | - | - | ---------------- | 
|Current Assets      | $ | 935,828          |   | $ | 215,315          | 
|Equipment, net      | $ | 2,084,336        |   | $ | 453,733          | 
|Total Assets        | $ | 3,653,198        |   | $ | 1,206,908        | 
|Current Liabilities | $ | 6,120,109        |   | $ | 935,688          | 
|Net Assets          |   | ($5,810,547      | ) | $ | 39,210           | 

B.Capitalization and
indebtedness.

Not applicable.

C.Reasons for the offer and use of
proceeds.

Not applicable.

D.Risk factors.

The operations of the Company involve a number of substantial
risks and the securities of the Company are highly speculative in nature. See
the risk factors found under Risk Factors included in Item 17 of this Form
20-F.

Item 4. Information on the Company

A.History and development of the
Company.

Royal Standard Minerals Inc. was incorporated pursuant to the
laws of Canada by articles of incorporation dated December 10, 1986 under its
former name, Ressources Minieres Platinor Inc. ("Resources"). On April 30, 1996,
Royal Standard shareholders approved the acquisition of all the issued and
outstanding shares of Southeastern Resources, Inc. ("Southeastern") in a reverse
take-over transaction. Pursuant to this transaction, articles of amendment were
filed effective May 14, 1996, pursuant to which the name of the Company was
changed to its current form of name and its shares issued and outstanding at
that time were consolidated on a 7.5:1 basis. On June 28, 1996, the Common
Shares commenced trading on the Montreal Exchange. On January 4, 2002 the
Company was continued from the laws of Canada (Canada Business Corporations
Act, CBCA) to the laws of the Province of New Brunswick (Business
Corporations Act (New Brunswick)). On February 17, 2004 under the laws of
the Province of New Brunswick the articles were amended to provide for an
unlimited number of common shares and an unlimited number of special shares. On
July 23, 2007, the Company was continued from the laws of the Province of New
Brunswick to the laws of Canada, under the CBCA, and the articles of continuance
provided for an unlimited number of common shares and an unlimited number of
preferred shares. The Companys Common Shares are quoted on the United States
Over-the-Counter Bulletin Board (OTC Bulletin Board), under the symbol
RYSMF.

The registered office of the Company is located at 50 Richmond
Street East, Suite 101, Toronto, Ontario M5C 1N7. The Companys two wholly-owned
subsidiaries, Manhattan Mining Co. and Kentucky Standard Energy Company, Inc.,
have offices at One Main Street, Manhattan, Nevada, 89022 and 11945 North Big
Creek Road, Hadfield, Kentucky, 41514, respectively.

For a description of certain of the Companys principal capital
expenditures and divestitures, see Item 4.D. Property, plants and equipment.

4

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B.Business overview.

Royal Standard is a mineral exploration company primarily engaged in locating, acquiring, exploring and developing gold and precious metal deposits in the State of Nevada. The Company owns a 100% interest in five projects in three separate
gold-silver districts in Nevada. These projects include the Goldwedge Project in Nye County, the Piñon and Railroad Projects in Elko County and the Fondaway Canyon and Dixie-Comstock Projects in Churchill County.

At the present time, the Company's activities include exploratory searches for gold ore in Nevada and coal in Kentucky. The Company continues evaluating the potential for economic extraction of known deposits of ore grade material on the Company's
mineral exploration properties. The Company has not generated any revenues from operations at this time. See “Item 3.D. Risk Factors. On April 16, 2012, the Company announced the commissioning of its mill at its flagship Goldwedge Project. The
gravity process plant has been commissioned and is permitted to process four hundred metric tons of gold ore per day.

C.Organizational structure.

The Company has two wholly-owned subsidiaries, Manhattan Mining Co., a company incorporated under the laws of the State of Nevada, and Kentucky Standard Energy Company, Inc., a company incorporated under the laws of the State of Kentucky.

D.Property, plants and equipment.

The registered office of Royal Standard Minerals Inc. is located at 50 Richmond Street East, Suite 101, Toronto, Ontario M5C 1N7. The Company’s wholly-owned subsidiary Manhattan Mining Co. also has an office at One Main Street, Manhattan,
Nevada, 89022 and the Company’s wholly-owned subsidiary Kentucky Standard Energy Company, Inc. also has an office at 11945 North Big Creek Road, Hadfield, Kentucky, 41514.

5

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Goldwedge Project

General Information

The Goldwedge Project is located in the Manhattan Mining District, section 18, T8N, R43E, Mount Diablo Meridian, approximately one mile west of the town of Manhattan in Nye County, Nevada and about eight (8) miles south of the Round Mountain mine.
Located within the southern Toquima Range of central Nevada, the elevation ranges from 6,800 feet to 7,800 feet. The topography is gently rising to rolling and ruggedly steep along the north-south trending mountain range. The deposit occurs under a
gravel covered dry drainage valley north of paved highway 377. The town of Tonopah is 50 miles south of the deposit and is considered the most favorable location for accommodations. Tonopah is also the county seat for Nye County.

6

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The Goldwedge Project deposit occurs at the intersection of north and northwest trending faults. In the deposit area, the north trending Reliance fault is mineralized within the Ordovician Zanzibar limestone and siltstone. The target mineralization
occurs within multiple high angle structures over a width of between 100-200 feet primarily within the Zanzibar limestone. Results of approximately 75 drill holes, primarily within the central zone over a strike length of 1,000+ feet and 100'-500'
of vertical extent, indicate continuous gold oxide mineralization of potential mineable thickness and quality.

RSM has evaluated all of the pertinent drill data as part of a detailed inventory of the deposit geometry, size and overall grade.

The Goldwedge Project is one of several gold deposits in the area and is considered one of the best known projects in the district for development. Management believes the property also has excellent exploration potential for future growth.

A mining and milling permit by the Nevada Division of Environmental Protection (“NDEP”) has been issued. The Company has completed refurbishment of the on-site processing plant which was used for the test mining and processing
that took place between 2007 and 2008. Commissioning of the plant was announced in April 2012.

Historical Activity Summary

In 2004 the Company secured all the necessary mine, mill (plant) and water use permits and rights from the State of Nevada. Also, in 2004 the Company constructed an underground portal and developed a 700 foot (underground) decline and cross cut to
test one of the gold mineralized structures within a 100+ wide structural zone (Phase 1 of underground development program). Additionally, RSM completed the surface facilities necessary to process the material to be mined onsite to include silt
ponds, ore pad and the onsite gold processing plant. The Company acquired a full production scale gold recovery (gravity) plant that was intended to be utilized to process the mined material as part of the test mining program.

On June 29, 2005 the Company entered into a 5-year Purchase Option Agreement with a private individual for all of his patented and unpatented mining claims in the Manhattan Mining District located in Nye County, Nevada. The land package totals
approximately 1600 acres (4 patented, 70 unpatented claims). This property position adjoins the Company's Goldwedge property. The land package includes a number of exploration targets which are of interest to the Company.

The second phase of the underground development program, which commenced in 2007, included further development of the existing decline and additional crosscuts to identify, locate and assess mineralized zones at greater depth. Groundwater inflow
hampered decline development as it progressed; a dewatering well and pumping facility was put in place in 2008 to lower the water table. As of 2008 approximately 5,000 feet of underground development had been completed, including 10 crosscuts
intersecting the mineralized zones.

During Phases 1 and 2 of the underground development program, the surface processing facilities were installed and tested (2005) and modified (during 2006-2007) to improve recoveries. The process plant includes primary crushing and grinding
facilities that feed a gravity recovery system.

Project activities in 2009 concentrated on acquiring the necessary permits with the various state and federal agencies to handle water disposal through the permit of a Rapid Infiltration Basin on the
Company's properties. Project work included plant modifications as part of an effort to increase the daily throughput of gold bearing material as part of the milling process.

7

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2011 Activity

In 2011 the Company completed construction of the Rapid Infiltration Basins (RIB), dewatered the previously completed underground development and resumed phase 2 of the underground development program. This phase of the development included the
exploration of mineralized zones concurrently with advancing decline development. An 11 foot diameter ventilation shaft was excavated with raise bore equipment to enable future mine development and production as well as provide a secondary
escapeway. Level development was concentrated on developing along the strike of mineralized zones to assess continuity and grade as well as prepare areas for future test stoping.

The Company contracted Northern Nevada Mining & Milling Services LLC for further construction and modification to the existing processing plant on site. The plant has been modified over the last year to replace the two smaller ball mills in the
grinding circuit with a larger single 8’ x 9’ ball mill.

Recent and Current Activities

In early 2012 the ventilation raise was shotcreted, a ladderway to surface installed and bulkhead and fans installed. This alternate entry and exit to surface now in place is fully functional as a secondary escapeway and is necessary prior to
further underground development.

Underground electrical infrastructure and ventilation system upgrades were performed in February and early March 2012 to meet regulatory requirements and to enable uninterrupted development. In April, an international engineering consulting firm was
engaged to perform a geotechnical assessment on site and provide recommendations for ground support for both ongoing development work and future production.

Staffing levels in the underground mining, technical and administrative departments were increased, with implementation of additional shifts planned in the near future. Diamond drilling crews for both surface and underground work have been hired.

Ramp development is ongoing and approaching the next planned elevation for level access. Ore development faces continue to be identified and developed. A surface stockpile in excess of two thousand tons has been established. Mineralized material is
trucked to surface, sampled and analyzed for gold values at the Company’s onsite assay laboratory which was recently refurbished and has now been approved by the NDEP. Additionally, for compliance with future NI 43-101 requirements the Company
sends samples to independent accredited laboratories offsite for independent analyses.

Commissioning of the process plant was announced in April 2012. Modifications to improve throughput and recoveries are being implemented.

Surface and underground diamond drilling is underway.

Land Positions

The project area includes staked U.S. Department of the Interior Bureau of Land Management (“BLM”) lands; options of BLM claims owned by others and patented mining claims owned by the Company. All payments, maintenance fees,
option payments and taxes to state and federal authorities are current under state and federal guidelines.

The land position controlled by RSM on the Goldwedge Project area is shown below:

8

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Claim Name
    Claim Type
    BLM Serial # or Patent #Goldwedge
    Unpatented
    NMC 96294 -96297Goldwedge 1-3
    Unpatented
    NMC 96294-96297Orpahnt
    Patents
    4095Copper Farm-Eldorado #2
    Patents
    2876GW 1-34
    Unpatented
    NMC 826458-826460,
      824432, 824436,826461-826476, 829859-829863, 834113-824114


Location of Claims
    # of Claims/Acres/Owner
    Importance to DevelopmentGoldwedge Deposit
    4 Claims/50 Acres/Hill
    90% of known deposit, 3% NSR, - 5-year lease term,
      renewableNorth Plunge of Goldwedge Deposit and 1.5 miles of
      Mineralized Caldera Margin Trend (RSM owns 100% of Unpatented Claims)
    34 Claims/450 Acres/RSM
    Largest deep and unexplored mineralized caldera marginSouth End of Goldwedge Deposit and East Caldera Margin
      Trend (RSM owns 100% of Patent Claim
    1 Claim/20.03 Acres/RSM (Orphant Patent)
    Approximately 5% of known deposit, Private Land for
      Decline and Plant Site, and 1,500 feet of mineralized caldera trend,
      facility site plan, 1% NSR


9

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10

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Wm. Michael Donovan Jr., Professional Land Surveyor #2617, surveyed the land holdings in the immediate vicinity of the deposit to determine the exact land boundaries in relation to the gold deposit. This surveying was completed in 2001 following the
staking of the unpatented claims by the Company in the same year.

11

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The Company has recorded an asset retirement obligation on its
Goldwedge Project in the amount of $168,276, representing the estimated costs,
on a discounted basis, of the Company's obligation to restore the property site
to its original condition.

Project Expenditures

During the year ending January 31, 2012, expenses on the
Goldwedge Project were $2,748,949 with cumulative expenditures to January 31,
2012 of $19,632,659. A table of detailed expenditures follows:

|                                            |   |             |  |   |             |   |   |             |   |   | Cumulative from      |  
|------------------------------------------- | - | ----------- |  | - | ----------- | - | - | ----------- | - | - | -------------------- | -
|                                            |   | January 31, |  |   | January 31, |   |   | January 31, |   |   | date of inception of |  
|For the years ending                        |   | 2012        |  |   | 2011        |   |   | 2010        |   |   | exploration phase    |  
|Goldwedge Project                           |   |             |  |   |             |   |   |             |   |   |                      |  
|Opening balance                             | $ | 16,874,710  |  | $ | 16,087,544  |   | $ | 15,177,300  |   |   | 0                    |  
|Property acquisition costs                  | $ | 10,000      |  | $ | 40,492      |   | $ | 430,028     |   | $ | 1,202,167            |  
|Travel                                      | $ | 71,292      |  | $ | 65,983      |   | $ | 6,914       |   | $ | 469,552              |  
|Mine development costs                      | $ | 397,626     |  | $ | 42,312      |   | $ | 10,671      |   | $ | 1,486,726            |  
|Drilling                                    | $ | 40, 206     |  |   | 0           |   |   | ($202       | ) | $ | 988,999              |  
|General exploration                         |   | 0           |  |   | 0           |   |   | 0           |   | $ | 133,353              |  
|Professional fees                           | $ | 113,442     |  | $ | 65,550      |   | $ | 7,528       |   | $ | 259,156              |  
|Consulting                                  | $ | 1,238, 299  |  | $ | 240,392     |   | $ | 282,548     |   | $ | 6,460,402            |  
|Office and general                          | $ | 393,149     |  | $ | 84,314      |   | $ | 118,112     |   | $ | 2,151,769            |  
|Analysis and assays                         | $ | 7,392       |  | $ | 2,225       |   | $ | 7,983       |   | $ | 165,227              |  
|Supplies, equipment and transportation      | $ | 353,312     |  |   | ($9,010     | ) | $ | 54,153      |   | $ | 4,031,053            |  
|Depreciation                                | $ | 124,231     |  | $ | 254,908     |   | $ | 322,524     |   | $ | 2,605,270            |  
|Less: Proceeds from sale of exploration ore |   | 0           |  |   | 0           |   |   | ($330,015   | ) |   | ($330,015            | )
|Activity during the period                  | $ | 2,748,949   |  | $ | 787,166     |   | $ | 910,244     |   | $ | 19,623,659           |  
|Closing balance                             | $ | 19,623,659  |  | $ | 16,874,710  |   | $ | 16,087,544  |   | $ | 19,623,659           |  

Future Programs

Underground development as well as surface and underground
drilling will be directed towards further delineation and expansion of the
resources on this property as well as optimization of the gravity recovery
plant. Preliminary scoping for addition of a CIP circuit to further increase
recoveries is in progress. All of this work will be supervised by the CEO and
carried out by experienced miners and plant employees currently working for the
Company. Consultants will be utilized in special instances to assist management
with specific technical issues.

The Goldwedge Project requires further capital investment to
move the project towards production. Various funding opportunities will be
pursued.

This project is an advanced exploration project without known
reserves and the proposed program is exploratory in nature. See Item 3.D. Risk
Factors.

The Goldwedge Project forms part of the Manhattan/Round
Mountain Caldera program, the Company's most advanced district play. The project
area is located southeast of the town of Round Mountain, Nevada
east of State route 376. The town of Manhattan is located approximately 15 miles south of Round Mountain. The Manhattan Project is located approximately 7 miles east of route 376 on route 377 and 1.5 miles west of the town of Manhattan.

12

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The land position in the Manhattan Mining District is comprised of 70 unpatented and 6 patented lode-mining claims. An underground development program to include drill testing the extensions of the Goldwedge deposit in addition to the evaluation of
several additional lode and placer properties that the Company controls in the district could significantly increase the historic gold resource estimates.

Piñon Project-Carlin Trend South

General Information

The Piñon Project located at the southeast end of the famous "Carlin Gold Trend" about 10 miles south of Newmont's Rain mine, 25 miles southwest of Elko, Nevada. The main access from Elko is west on Interstate 80 to Carlin (25 miles) then
south on State Highway 51 for 22 miles to the Trout Creek access road. The project area is 7 miles east along a well-maintained BLM gravel-dirt road. There is no infrastructure in the vicinity of the property; the nearest power line is 7 miles to
the west along State Highway 51.



13

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The Carlin Trend is one of the most prolific gold trends in the
world and has produced more than 50 million ounces of gold. The property is
located within a region of known mineralization, which supports the potential
for expanding the known gold deposits and making new discoveries. Much of the
district wide exploration was undertaken prior to the start of the 1990's. Since
the mid-1990's the cumulative knowledge of "Carlin-type" gold deposits has
expanded tremendously. This expanded knowledge can be used to re-interpret all
historic exploration data, which may identify new exploration targets at the
property. Also, during the past 10+ years numerous high-grade gold deposits have
been discovered along the Carlin Trend that can be mined using underground
techniques. Many of these deeper deposits are associated with surface oxidized
gold deposits. Essentially no significant deeper exploration has been conducted
under the Piñon deposit, or at other places on the property. The exploration
opportunity offers the possibility for discovery of additional gold deposits at
Piñon.

The Webb Formation is mineralized above the Devils Gate
limestone. However, higher-grade mineralization has been encountered at very
shallow depths, mineralized oxide zones occur along a 1,300 feet strike length
and occur less than 90 feet below the surface.

The Pinon deposit occurs in the basal Missippian Age Webb
Formation. The basal Webb Formation is composed of calcareous siltstone and
limestone that has been folded along a southeast plunging anticline. Gold
mineralization continues into the underlying Devonian Age Devils Gate Limestone
where karst collapse breccia has developed in the underlying limestone along the
unconformity contact with the underlying Devils Gate Limestone. The gold
resource is strata-bound over the fold crest and is exposed at the surface. The
mineralized rock has been silicified, decalcified and argillized.

A second gold resource occurs north and adjacent to the larger
Pinon Main Zone resource and trends north along a fault zone. A deeper zone of
brecciation and mineralization occurs on the south end of the Pinon Main Zone
resource and is currently considered to be a hydrothermal karst breccia. A
coring program is required to better understand the geometry of this breccia.
The current defined resource at Pinon occurs on the Companys land holdings.

The Piñon property currently consists of a contiguous land
block of 39 unpatented mining lode claims - claim fractions that are located in
surveyed Township 30 North, Range 53 East, Section 22, (Mount Diablo Meridian),
Elko County, Nevada. The current Piñon land position covers an area of
approximately 2,720 acres (approx. 1101 hectares). All payments, maintenance
fees to federal and state authorities are current. Landowner option payments are
also current and in good standing for this land position. Included in the land
block are the following claims:

|                 | County
      Recordation        
|---------------- | --------------------------------
|Claim Name       | BLM Serial #                    
|TC-1 thru TC-10  | NMC 125638 thru NMC
      133862
|TC-11            | NMC 133862                      
|TC-12 thru TC-28 | NMC 148871 thru NMC
      148887
|TC-29 thru TC-39 | NMC 403761 thru NMC 403771      

The TC claim group is under (100%) control by the company. The
TC claims are located on federal public domain lands that are managed (both
surface and mineral estates) by the Bureau of Land Management ("BLM"). Initially
staked in 1979, this ground was previously open to mineral location with no
significant restrictions. Location certificates for all claims staked in the
group were filed and recorded with the BLM and the Elko County Recorder's Office
in Elko according to federal and state laws/regulations.

14

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The TC claim group is surrounded by private fee lands containing a complicated mixture of severed surface and mineral estates that were previously controlled in part by the Piñon Joint Venture through various lease-option agreements. These
lands have since been dropped by the joint venture. An ownership summary for several of the more important sections is shown below.

T30N, R53E

Section 21: All (640 acres)

Surface estateJ. Tomera Ranch (100%)

Mineral estateJ. Tomera family (50%)Rudnick Trust (16.6%)L&R Rudnick family (16.6%)

Section 27: NE1/4 NW1/4 , NE1/4, NE1/4 SE1/4 (640 acres)

Surface estatePereira Trust (100%)

Mineral estatePereira Trust (50%)O. Rudnick family (16.67%)Rudnick Trust (8.33%)

Section 27: NW1/4 NW1/4 , S1/2 NW1/4, SW1/4, NW1/4 SE1/4, S1/2 SE1/4 (640 acres)

Surface estateJ. Tomera Ranch (100%)

Mineral estateJ. Tomera family (50%)O. Rudnick family (16.67%)Rudnick Trust (8.33%)R. Rudnick family (8.3%)

The Piñon Project is made up of a number of lease agreements to lease certain properties in Elko County, Nevada. The Company is obligated to incur certain payments and exploration expenditures to keep the leases in good standing. The lessors
retain a 5% net smelter return royalty.

The Railroad Project was made up of two lease agreements to lease certain properties in Elko County, Nevada. The Company was obligated to incur payments of $8,000 to keep one lease in good standing and pay $1,765,000 to exercise the option
to purchase the leased property under the other agreement by August 31, 2009 to keep the leases in good standing. The lessors would retain a 5% net smelter return royalty. On August 31, 2009 the option was exercised to acquire 100% of this project
and the property was sold for $2,965,000 to an unrelated private company for net proceeds of $1.2 million, a 1% NSR royalty and 500,000 common shares of the private company. The sale of this property resulted in a gain on the sale of
$583,199.

15

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Approximately 600 shallow drill holes have been completed on
six near surface gold-silver deposits. The Company has recorded an asset
retirement obligation in the amount of $28,724 on the Piñon Project,
representing the estimated costs, on a discounted basis, of the Company's
obligation to restore the property site to its original condition as required by
the State of Nevada regulatory authorities.

Project Expenditures

During the year ended January 31, 2012, expenditures on the
Piñon Project were $71,188 with cumulative expenditures to January 31, 2012 of
$2,159,700. During 2010, the expenditures relating to the Railroad Project in
the amount of $617,300 were applied against the proceeds received. These costs
were incurred in connection with various activities performed by the Company on
a discretionary basis. A table of detailed expenditures follows:

|                                       |   |             |  |   |             |   |   |                           |   |   | Cumulative from      |  
|-------------------------------------- | - | ----------- |  | - | ----------- | - | - | ------------------------- | - | - | -------------------- | -
|                                       |   | January 31, |  |   | January 31, |   |   | **January**
      **31,** |   |   | date of inception of |  
|For the years ending                   |   | 2012        |  |   | 2011        |   |   | 2010                      |   |   | exploration phase    |  
|Piñon Project                          |   |             |  |   |             |   |   |                           |   |   |                      |  
|Opening balance                        | $ | 2,088,512   |  | $ | 2,001,517   |   | $ | 1,931,122                 |   | $ | 0                    |  
|Property Acquisition
      costs       | $ | 69,571      |  | $ | 102,706     |   | $ | 54,013                    |   | $ | 782,494              |  
|Travel                                 |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 78,326               |  
|Drilling                               |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 130,600              |  
|General exploration                    |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 7,765                |  
|Professional fees                      |   | 0           |  |   | 0           |   | $ | 19,668                    |   | $ | 85,941               |  
|Office and general                     |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 98,120               |  
|Geologist                              |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 32,653               |  
|Consulting, wages and salaries         | $ | 1,617       |  |   | ($15,711    | ) | $ | 258                       |   | $ | 645,241              |  
|Reclamation costs                      |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 167,785              |  
|Analysis and assays                    |   | 0           |  |   | 0           |   |   | 0                         |   | $ | 74,042               |  
|Supplies, equipment and transportation |   | 0           |  |   | 0           |   |   | ($3,544                   | ) | $ | 56,733               |  
|Activity during the period             | $ | 71,188      |  | $ | 86,995      |   | $ | 70,395                    |   | $ | 2,159,700            |  
|Closing balance                        | $ | 2,159,700   |  | $ | 2,088,512   |   | $ | 2,001,517                 |   | $ | 2,159,700            |  
|                                       |   |             |  |   |             |   |   |                           |   |   |                      |  
|Railroad Project                       |   |             |  |   |             |   |   |                           |   |   |                      |  
|Opening balance                        |   | 0           |  |   | 0           |   | $ | 460,013                   |   |   | 0                    |  
|Property acquisition
      costs       |   | 0           |  |   | 0           |   | $ | 5,980                     |   | $ | 465,993              |  
|Professional fees                      |   | 0           |  |   | 0           |   | $ | 123,580                   |   | $ | 123,580              |  
|Consulting, wages and
      salaries   |   | 0           |  |   |             |   | $ | 27,727                    |   | $ | 27,727               |  
|Sale of Property                       |   | 0           |  |   | 0           |   |   | ($617,300                 | ) |   | ($617,300            | )
|Activity during the period             |   | 0           |  |   | 0           |   |   | ($460,013                 | ) |   | 0                    |  
|Closing balance                        | $ | 0           |  | $ | 0           |   | $ | 0                         |   | $ | 0                    |  

16

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Future Programs

Any future work will involve twinning of historic drilling to bring historic data to 43-101 standard. Subsequent modelling will allow a decision to be made on further exploration or development.

The property is without known reserves and the proposed program is exploratory in nature. See “Item 3.D. Risk Factors.”

Fondaway Canyon Project

The 100% controlled Fondaway Canyon gold project is located in Churchill County, Nevada in the Stillwater range. The Fondaway property is accessible from Fallon east along U.S. Highway 50, then north on Hwy 116 to the settlement of Stillwater, then
north on an improved gravel road for 30 miles along the front range of the Stillwater Mountains to Fondaway Canyon. The elevation of the property ranges from 5000 to 6000 feet. Access east into Fondaway Canyon is steep but adequate with existing
mine roads. The Fondaway deposit is located on the west flank of the Stillwater Range in Sections 1 and 2, T22N, R33E, and Sections 5 and 6, T22N, R34E.



The Fondaway Canyon property consists of 148 contiguous unpatented lode-mining claims (approximately 3000 acres) on BLM land held under a lease agreement assigned from Nevada Contact Inc. (NCI) to the Company. Eighteen claims were staked by NCI,
quitclaimed to the owner, and included in the assignment to the Company. The lease terms include a 3% net smelter return royalty to the owner Richard Fisk and advanced royalty payments of $25,000 per year.
The annual payments graduated to $35,000 in 2006 and years following. Details of
the option agreement are as follows:

17

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|Required Cash Payments to Optionors                                                                                                                             |  | Royalty | Exercise of Option
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------------------
|Commencing in fiscal 2003. $25,000 in year one, $30,000
      in years two and three and $35,000 each of the next seven years apply to
      the purchase price |  | 3% NSR  | July 2013 $600,000

All of the maintenance filing fees are current and in good
standing.

Nearly-vertical, east-west trending mineralized shear zones
host the Half Moon, Paperweight, Hamburger Hill and South Pit gold resources
that are hosted within a Mesozoic sedimentary package. The Mesozoic sedimentary
package has been intruded by a Mesozoic-Tertiary aged intrusive. The vertical
extent tested by historic drilling of the higher grade gold mineralized shear
zones is greater than 1,000 feet. Horizontal continuation of gold mineralization
at the Paperweight and Hamburger Hill mineralized shear zone is 3,700 feet with
widths commonly 5'-20+ feet. Records indicate that 568 holes have been drilled
for a total estimated footage of 200,000 feet of RC drilling and 22,000 feet of
core drilling: 455 reverse circulation, 49 core and 64 air track holes over a
strike length of approximately 12,000 feet. Tenneco Minerals Inc., the most
active company, drilled approximately 350 holes (130,000 feet) and drove a 500'
adit for sulfide metallurgical sampling during the period 1987-1996. Tenneco
also operated a small oxide gold open pit mine for a short time during this
period. Nevada Contact Inc. (NCI) acquired the property in 2001 and drilled 11
reverse circulation holes. The Company acquired the property from NCI in early
2003 as part of a property swap with NCI retaining a 1% NSR overriding royalty
in the Fondaway Canyon property and $25,000 advance minimum royalty payments to
the claim holder until 2006 at which time the payments increase to $35,000 per
year that includes a 3% NSR royalty until buyout. There is a buyout option of
$600,000 for the owners' interest.

Estimates of prior expenditures on this property are
approximately $5-6 million. The largest portion of these expenditures was
contributed by Tenneco Minerals and Tundra Mines LTD. This work included
extensive drilling, development of a small open pit production project and an
advanced exploration adit on the property.

Project Expenditures

During the year ended January 31, 2012, expenditures on the
Fondaway Project were $37,297, with cumulative expenditures to January 31, 2012
of $435,110. These costs were incurred in connection with various activities
performed by the Company on a discretionary basis. The Company will continue to
pay all lease payments to keep this project in good standing. A table of
detailed expenditures follows:

|                                 |   |             |  |   |             |  |   |             |  |   | Cumulative from
      date | 
|-------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | -------------------------- | 
|                                 |   | January 31, |  |   | January 31, |  |   | January 31, |  |   | of inception of            | 
|For the years ending             |   | 2012        |  |   | 2011        |  |   | 2010        |  |   | exploration phase          | 
|Fondaway Project                 |   |             |  |   |             |  |   |             |  |   |                            | 
|Opening balance                  | $ | 397,813     |  | $ | 339,776     |  | $ | 302,279     |  | $ | 0                          | 
|Property Acquisition
      costs | $ | 35,000      |  | $ | 58,037      |  | $ | 37,497      |  | $ | 413,537                    | 
|Travel                           |   | 0           |  |   | 0           |  |   | 0           |  | $ | 15,646                     | 
|Drilling                         |   | 0           |  |   | 0           |  |   | 0           |  | $ | 351                        | 
|Office and General               | $ | 2,297       |  |   | 0           |  |   | 0           |  | $ | 2,297                      | 
|Analysis and assays              |   | 0           |  |   | 0           |  |   | 0           |  | $ | 3,279                      | 
|Activity during the period       | $ | 37,297      |  | $ | 58,037      |  | $ | 37,497      |  | $ | 435,110                    | 
|Closing balance                  | $ | 435,110     |  | $ | 397,813     |  | $ | 339,776     |  | $ | 435,110                    | 

18

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The Company does not anticipate performing exploration
activities until additional funding is obtained. The Company will maintain its
2013 lease payment obligations and claim renewal fees.

The property is without known reserves and any proposed program
would be exploratory in nature. See Item 3.D. Risk Factors.

Kentucky Project

In an effort to achieve diversity within its natural resource
portfolio on November 19, 2008, the Company and Sharpe Resources Corporation
(Sharpe) entered into an option agreement whereby the Company agreed to
an option to acquire a 50% interest in coal properties in Kentucky by advancing
to the project $2 million prior to December 9, 2009. Once the option is
exercised by the Company a 50/50 Joint Venture agreement will be entered into
between the Company and Sharpe at which time all expenditures incurred and
revenues earned from the coal projects will be shared 50% by the Company and 50%
by Sharpe.

Under the terms of the option agreement a 100% interest in a
surface mine coal project in Wolfe County, Kentucky was acquired. The
transaction costs included $250,000 to acquire the project and $178,700 for a
reclamation bond to cover the state of Kentucky reclamation requirements for
this property. The property consists of approximately 1,000 acres of coal
mineral rights under lease and includes an approved Kentucky Mining Permit, I.D.
No. 919-0066.

On September 11, 2009 this option agreement was amended to
allow the Company to acquire its 50% interest in the properties by advancing to
the project $2 million by December 9, 2011. As consideration for this amendment
the Company cancelled the promissory note receivable from Sharpe held by the
Company and received a new note from Sharpe in the amount of $120,409 on
September 9, 2009 repayable in three equal installments on September 9, 2011,
2012, and 2013. During 2011, the Company wrote off the promissory note
receivable.

On December 7, 2011, the Company exercised its option. Pursuant
to the terms of the agreement, the Company requested Sharpe to provide
additional cash to the Kentucky Project, to match that of the Company, which had
exceeded $2,000,000. As of the date hereof, Sharpe has not responded. The
Company is currently reviewing its options for the Kentucky Project.

The Kentucky Project is approximately 5 miles southeast of the
Town of Campton adjacent to paved highway 15 and is situated in Wolfe County at
an elevation of 900 feet. The topography is gently rising to rolling and
moderately steep terrain that reflects a dendritic drainage pattern of valleys
and ridges that occur at the head of these drainages. The ridge elevations
within the project area are on the order of 900-1,250 above sea level with the
valley floors in the 900-1000 feet above sea level. The area is covered with a
hard wood forest that is well supplied with regular rainfall and ample
vegetation. Electrical power was installed from a nearby power line crossing the
property from the Licking River Electric Cooperative. The nearest large city is
Lexington, Kentucky located approximately 70 miles northwest of the project
area.

19

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Within Wolfe County, the Company holds mining interests on
seven properties, containing six coal seams capable of production, namely, in
order from the bottom sequence to the top: 1) Vires, 2) Grassy, 3) Cannel City,
4) Whitesburg, 5) Fire Clay and 6) Fire Clay Rider, hereinafter known as the
Seams. The Seams range in thickness from 12 inches up to nearly 30 inches within
the leasehold boundary. These are all surface-minable seams. The Campton mine is
made up of seven (7) separately owned land parcels having coal mining rights by
any mining methods, aggregating 974 acres. Of the 974 acres, 272.19 acres are
permitted for surface mining.

|Original Owner or Lessor            | Area (Acres) | Mining Types | Kentucky Seams | Royalty Rate 
|----------------------------------- | ------------ | ------------ | -------------- | -------------
|David Rudd                          | 280 +/-      | C/Area       | All Seams      | 6% F.O.B. Pit
|Kevin and Tara Patton               | 85 +/-       | C/Area       | All Seams      | 6% F.O.B. Pit
|Earl Patton                         | 150 +/-      | C/Area       | All Seams      | 6% F.O.B. Pit
|William and Maggie Hutton           | 90 +/-       | C/Area       | All Seams      | 6% F.O.B. Pit
|Elizabeth and Taylor
      Caldwell | 109 +/-      | C/Area       | All Seams      | 6% F.O.B. Pit
|Pauline Caldwell                    | 110 +/-      | C/Area       | All Seams      | 6% F.O.B. Pit
|Wick & Phyllis
      Clemons        | 150 +/-      | C/Area       | All Seams      | 6% F.O.B. Pit

C/Area = Contour and Auger/Area or
Mountain-top Removal;F.O.B. = Freight on Board sales prices, with deductions
for freight and sales commissions

The Company has recorded an asset retirement obligation in the
amount of $95,315 on its Kentucky Project, representing the estimated costs of
the Company's obligation to restore the property site to its original condition
as required by the State of Kentucky regulatory authorities.

Project Expenditures

During the year ended January 31, 2012, expenditures on the
Kentucky Project were $96,922 with cumulative expenditures to January 31, 2012
of $1,580,478, which together with expenditures which indirectly were made for
the benefit of the Kentucky Project totals in excess of $2 million. These costs
were incurred in connection with various activities performed by the Company on
a discretionary basis. A detailed table of expenditures follows:

20

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|                                           |   |             |  |   |             |   |   |             |  |   | Cumulative from      | 
|------------------------------------------ | - | ----------- |  | - | ----------- | - | - | ----------- |  | - | -------------------- | 
|                                           |   | January 31, |  |   | January 31, |   |   | January 31, |  |   | date of inception of | 
|For the years ending                       |   | 2012        |  |   | 2011        |   |   | 2010        |  |   | exploration phase    | 
|Kentucky Project                           |   |             |  |   |             |   |   |             |  |   |                      | 
|Opening balance                            | $ | 1,483,556   |  | $ | 1,370,849   |   | $ | 1,136,682   |  |   | 0                    | 
|Property Acquisition
      costs           |   | 0           |  |   | ($300       | ) | $ | 300         |  | $ | 418,000              | 
|Travel                                     | $ | 12,764      |  | $ | 62          |   | $ | 12,162      |  | $ | 38,815               | 
|Reclamation Costs                          |   | 0           |  | $ | 444         |   | $ | 2,925       |  | $ | 22,646               | 
|Professional fees                          | $ | 2,400       |  | $ | 17,786      |   | $ | 29,673      |  | $ | 98,539               | 
|Consulting, wages and
      salaries       | $ | 46,300      |  | $ | 49,150      |   | $ | 43,694      |  | $ | 302,972              | 
|Office and general                         | $ | 12,794      |  | $ | 15,223      |   | $ | 35,825      |  | $ | 124,497              | 
|Supplies, equipment
      & transportation | $ | 10,552      |  | $ | 13,646      |   | $ | 93,508      |  | $ | 424,511              | 
|Rent                                       |   | 0           |  |   | 0           |   | $ | 750         |  | $ | 94,010               | 
|Amortization                               |   | 0           |  |   | 0           |   |   | 0           |  |   | 0                    | 
|Depreciation                               | $ | 12,112      |  | $ | 16,696      |   | $ | 15,330      |  | $ | 56,488               | 
|Activity during the period                 | $ | 96,922      |  | $ | 112,707     |   | $ | 234,167     |  | $ | 1,580,478            | 
|Closing balance                            | $ | 1,580,478   |  | $ | 1,483,556   |   | $ | 1,370,849   |  | $ | 1,580,478            | 

Future Programs

The Company is currently reviewing its options regarding this
joint venture.

Item 4A.Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and
Prospects

A.Operating results.

Royal Standard is an exploration and pre-development stage
enterprise and is in the process of exploring its resource properties and has
not determined whether the properties contain economically recoverable reserves.
The recovery of the amounts shown for the resource properties and the related
deferred expenditures is dependent upon the existence of economically
recoverable reserves, confirmation of the Company's interest in the underlying
mineral claims, the ability of the Company to obtain necessary financing to
complete the exploration and, upon future profitable production.

As Royal Standard is an exploration and pre-development stage
enterprise, it currently has no producing properties and no operating income or
cash flow, other than interest earned on funds invested in short-term deposits.
(See Item 3.D. - Risk Factors.)

Year Ended January 31, 2012 Compared to the Year Ended
January 31, 2011

The Company's net loss totaled $6,451,698 for the year ended
January 31, 2012, with basic and diluted losses per share of $0.08. This
compares with net loss of $1,632,845 with basic and diluted losses per share of
$0.02 for the year ended January 31, 2011. The increase of $4,818,853 in net
loss was principally due to increased exploration activities at the Goldwedge
property, professional legal fees for various
activities and claims during the year and the fair value of the stock options granted during the year ended January 31, 2012.

21

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Year Ended January 31, 2011 Compared to the Year Ended January 31, 2010

The Company's net loss totaled $1,632,845 for the year ended January 31, 2011, with basic and diluted losses per share of $0.02. This compares with a net loss of $821,104 with basic and diluted losses per share of $0.01 for the year
ended January 31, 2010. In 2010, the Company’s exploration and evaluation expenditures were capitalized under Canadian Generally Accepted Accounting Principles. The increase of $811,741 in net loss was principally due to exploration
activities expensed during the year, the write down of advances made to a related party offset by decreases in consulting, wages, salaries and a gain on disposal of marketable securities in the year ended January 31, 2011.

B.Liquidity and capital resources.

The activities of the Company, principally the acquisition of properties prospective for gold and coal are financed through the completion of equity or debt financing, the exercise of stock options or the sale of exploration properties or marketable
securities owned by the Company. For the year ended January 31, 2012, the cash resources of the Company increased by $527,515. The increase in cash resources is a result of the Gold Stream Facility provided by Waterton Global Value L.P.
(“Waterton”). There is no assurance that future sales and equity or debt capital will be available to the Company in the amounts or at the times desired, or on terms that are acceptable to the Company, if at all. (“Item 3.D.
- Risk Factors”.)

Year Ended January 31, 2012 Compared to the Year Ended January 31, 2011

As at January 31, 2012, the Company had $629,553 in cash (January 31, 2011: $102,038). The Company had a working capital deficiency of $5,184,281 as of January 31, 2012, compared to a working capital deficiency of $720,373 as of
January 31, 2011. Working capital has decreased for the current period presented as a result of increased exploration expenditures, construction of the mill operations and the increase in professional legal fees. On May 8, 2012 the Company had
secured an additional $2,000,000 loan extension from Waterton. This now brings the total funds provided by Waterton to $10,000,000.

As at January 31, 2012, the Company had current liabilities of $6,120,109 compared to $935,688 as at January 31, 2011. Current liabilities have increased due primarily to costs relating to the refurbishment of the mill, increased
professional legal fees and the current portion of the Gold Stream Facility. The Company's cash and marketable securities as at January 31, 2012, were not sufficient to pay these liabilities.

On June 29, 2011, the Company's wholly owned subsidiary, Manhattan Mining Co. ("Manhattan") entered into a secured bridge loan agreement (the “Bridge Loan”) with Waterton Global Value, L.P. (“Waterton”) pursuant to which
Waterton agreed to provide an $8,000,000 bridge loan (the “Credit Facility”) available to Manhattan. Of the total $8,000,000 Bridge Loan, $4,000,000 was available on closing and the remaining $4,000,000 after the
satisfaction of certain covenants. Under the Bridge Loan agreement, the amounts drawn down under the Credit Facility would incur interest at 6% per annum, and the scheduled repayment date of the Credit Facility was 16 months after the initial
closing date. In connection with the Credit Facility, Manhattan agreed to pay Waterton a structuring fee, and also provided Waterton with certain royalty interests relating to its Goldwedge Property. Manhattan and Waterton have also entered into a
gold purchase agreement pursuant to which Waterton had agreed to purchase Manhattan’s production. The Credit Facility was secured by, amongst other items, the Company’s real property assets in Nevada.

22

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On August 26, 2011, Manhattan amended its existing Bridge Loan with Waterton such that the Bridge Loan was transitioned into a more permanent senior secured gold stream debt facility (the “Gold Stream Facility”) amongst the parties.
Under the Gold Stream Facility, Waterton will make $8,000,000 (the “Principal Amount”) available to Manhattan. The Principal Amount is repayable by Manhattan to Waterton in monthly payments commencing in August 2012 and ending in
July 2013. Under the Gold Stream Facility, each monthly repayment of the Principal Amount will be made by the delivery by Manhattan to Waterton of gold bullion ounces where the number of ounces to be delivered shall be based on the spot price of
gold on the business day immediately preceding the repayment date less an applicable discount or by the payment of the cash equivalent of such number of ounces. In addition, there is a profit participation formula which is triggered when the spot
price of gold is in excess of $1,600 an ounce on the business day immediately preceding the repayment ("Profit Participation"). The Principal Amount will accrue interest at 9.0% per annum. The Gold Stream Facility is secured by, amongst other
items, Manhattan's real property assets in Nevada.

The Company considers Profit Participation as an embedded derivative. As at January 31, 2012, the gross proceeds received under the Gold Stream Facility was $5,970,350, which was allocated to the embedded derivative based on the initial fair
values of the embedded derivative determined when proceeds were received ($170,721), and then the residual value was allocated to the liability portion. The Company estimates the future cash flow needs in terms of Profit Participation using the
gold future contract prices of repayment periods and discounted to the present value using 9% as annual discount rate. As of January 31, 2012, the Company estimates the gold future price during the repayment period from August 2012 to July 2013 to
be $1,750 per ounce.

As consideration for entering into the Gold Stream Facility, a structuring fee equal to 2% of the aggregate amount of the Gold Stream Facility and an establishment fee of $80,000 was payable by Manhattan to Waterton in cash and Manhattan also
granted Waterton certain royalty interests over its exploration stage projects. In addition, Manhattan and Waterton have agreed that Waterton shall have the right to purchase all of the gold produced by Manhattan from its Nevada projects at a price
per ounce that will be equal to an agreed discount to the existing spot price of gold at the time of any such purchase. Bayfront Capital Partners Ltd. acted as placement agent in connection with the Gold Stream Facility in consideration for a
placement fee equal to 4% of any Principal Amounts actually drawn by Manhattan under the Gold Stream Facility.

The Gold Stream Facility contains covenants for Manhattan such as, among other things, providing Waterton with updates on its operations, carrying on its business in accordance with prudent mining industry practices, and providing Waterton with
certain rights of inspection. Until all amounts outstanding under the Gold Stream Facility have been repaid in full or otherwise satisfied in accordance with the terms of such facility, certain standard restrictive covenants shall apply to Manhattan
limiting its ability to (without limitation): incur additional indebtedness, create liens on its assets or dispose of its assets. These negative covenants are subject to certain carve-outs that facilitate Manhattan's ability to operate its business
efficiently. The Gold Stream Facility also includes certain event of default provisions pursuant to which, immediately and automatically upon the occurrence of an event of default, all amounts outstanding under the Gold Stream Facility would be
automatically accelerated and immediately due and payable to Waterton.

At any time, without penalty, the Gold Stream Facility provides Manhattan the option to prepay in whole or in part, on five business days prior notice. Prepayments may be made in physical gold ounces or cash. The amount of any prepayment shall be
calculated using the spot price of gold on the business day immediately preceding the prepayment.

23

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As of January 31, 2012, the Company had met its capital commitment obligations to keep all of its property agreements in good standing.

Year Ended January 31, 2011 Compared to the Year Ended January 31, 2010

As at January 31, 2011, the Company had $102,038 in cash and cash equivalents (January 31, 2010: $745,779). The Company had a working capital deficiency of $720,373 as of January 31, 2011, compared to working capital of $529,435 as
of January 31, 2010. Working capital has decreased for the current period presented as a result of funds spent on gold and coal projects and maintaining the Company's reporting issuer status and operating activities offset by the sale of the
marketable securities for the amount of $275,695.

Current liabilities as at January 31, 2011 were of $935,688 compared to $301,381 as at January 31, 2010 due to the Company's inability to meet its current obligations. The current liabilities are primarily due to accruals for exploration
expenditures, wages and general expenditures. The Company's cash and cash equivalents and short-term investments as at January 31, 2011, were not sufficient to pay these liabilities. As at January 31, 2011, the Company was attempting to secure a
debt and/or equity financing in order to rectify the working capital deficiency that existed. On June 29, 2011, the Company announced that it has entered into a secured bridge loan agreement with Waterton Global Value, L.P. ("Waterton") pursuant to
which Waterton has agreed to make an $8,000,000 bridge loan (the "Credit Facility") available to the Company.

C.Research and development, patents and licenses, etc.

See “Item 4.D – Property, plants and equipment.” and “Item 5.A. – Operating results”.

D.Trend information.

The economic crisis that started in the financial sector has continued to worsen and the Company is in the midst of a global recession. The mineral exploration business is undergoing massive scaling down. Capital investment in mineral exploration
has dramatically declined with major new projects being cancelled and delayed, and producing properties are subject to shut downs and reduced production. Credit markets have become increasingly inaccessible and many exploration companies that, just
one year ago, had large cash resources to invest in exploration activities are now struggling to finance day-to-day operations.

There are uncertainties regarding the price of commodities and the availability of equity and debt financing for the purpose of mineral exploration and development. The financial markets have made it difficult to raise new capital.

Current financial markets are likely to be volatile in Canada and the United States for the remainder of 2012 and potentially into 2013, reflecting ongoing concerns about the stability of the global economy and weakening global growth prospects. As
well, concern about global growth has led to sustained drops in the commodity markets. Unprecedented uncertainty in the credit markets has also led to increased difficulties in borrowing or raising funds. As a result, the Company may have
difficulties raising equity or debt financing for the purposes of project development. (See “Item 3.D. – Risk Factors” and “Item 5.A. – Operating results”.)

E.Off-balance sheet arrangements.

None.

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F.Tabular disclosures of contractual
obligations.

The Company's liabilities and obligations for the following
five years as of January 31, 2012, are summarized below:

|                                 |   |           |  |   | Less Than |  |   |           |  |  |           |  |  | More than 5 | 
|-------------------------------- | - | --------- |  | - | --------- |  | - | --------- |  |  | --------- |  |  | ----------- | 
|Contractual Obligations          |   | Total     |  |   | 1 Year    |  |   | 1-3 Years |  |  | 3-5 Years |  |  | Years       | 
|                                 |   |           |  |   |           |  |   |           |  |  |           |  |  |             | 
|Long-Term Debt
      Obligations | $ | 7,960,465 |  | $ | 3,980,232 |  | $ | 3,980,233 |  |  | Nil       |  |  | Nil         | 

Goldwedge Project

In order to maintain property on the Goldwedge project, the
Company has to pay claim renewal fees to the BLM of approximately $11,743.

Piñon Project

In order to maintain its lease agreements on the Piñon Project,
the Company must make annual payments, exploration expenses and BLM claim
maintenance fees.

Fondaway Project

In order to maintain the lease agreements on the Fondaway
Project, the Company must make option payments of $35,000 and must pay claim
renewal fees to BLM of approximately $22,278.

Management believes that the Company's cash and cash
equivalents and short term investments are not sufficient to meet its
expenditures for the next five years as the Company had a working capital
deficiency balance of $5,184,281 as of January 31, 2012. As a result, the
Company will be required to raise some capital during this period by way of an
equity or debt financing, the exercise of options or the sale of an asset to
meet its obligations. There is no guarantee that the five year time horizon that
management has presented will be realized. See Item 3.D.  Risk Factors.

G.Safe harbor.

Not applicable.

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Item 6.Directors, Senior Management and
Employees

A.Directors and senior
management.

Name and Residence
    Position with the
      Company
    Date First Elected a
      Director/ Held OfficeJames B. Clancy(1)(2)(3)Toronto, Ontario, Canada
    Director
    March 2009John Fitzgerald(1)(2)(3)Oakville, Ontario, Canada
    Director
    January 2012Riyaz Lalani(2)(3)Toronto, Ontario, Canada
    Director
    January 2012Ken M. Strobbe(3)Arizona,
      U.S.A.
    Director
    January 2012Paul G. Smith(1)(2)(3)Toronto, Ontario, Canada
    Chairman and Director
    March 2009Philip Gross London, U.K.
    Interim President and Chief
      Executive Officer
    October 2011Ike Makrimichalos Newmarket, Ontario,
      Canada
    Chief Financial Officer
    August 2011George A. Duguay Toronto, Ontario, Canada
    Secretary
    March 2009


Notes:

| | (1) | Member of the Audit Committee.                                            
| | --- | --------------------------------------------------------------------------
| | (2) | Member of the Corporate Governance and Compensation
      Committee.      
| | (3) | Member of the Health, Safety, Environmental and Technical
      Committee.

The following is a brief biography of each of the Companys
directors and executive officers:

James B. Clancy

Mr. Clancy has been Senior Advisor of SableRidge Capital
Partners Inc. since March 2011 and President of Clancy Consultants Inc. since
October 2009. Prior thereto, Mr. Clancy was Director-Finance for Techint E.
& C. Canada, a federally incorporated private company,from March
2006 to October 2009. Mr. Clancy has been involved as General Manager and/or
Chief Financial Officer in the pipeline construction industry in Canada and
overseas for over thirty years. He has an Honours Commerce degree from the
University of Toronto and is a member of the Canadian Institute of Chartered
Accountants. Mr. Clancy presently sits on the board, and is Chairman, of the
Audit Committee of Galantas Gold Corporation (a federal company listed on the
TSX-V).

John Fitzgerald

Mr. Fitzgerald has over 20-years experience in the mining
industry. Mr. Fitzgerald is Director of Mining at AuRico Gold Inc. (formerly,
Northgate Minerals Corporation), an Ontario company. Prior thereto, Mr.
Fitzgerald was: Associate Director at Scotia Capital Inc. company from 2010 to
2011; an independent
consultant in Toronto and Brisbane, Australia from 2008 to 2010; Principal Adviser – Underground Mining with Rio Tinto Ltd., an Australian company in Brisbane from 2007 to 2008; and Manager, Engineering, at Barrick Gold Corporation, an Ontario
company from 2004 to 2007; as well as engineer with various other mining companies from 1990. Mr. Fitzgerald holds a B. Eng. degree from Nottingham University and an MBA from Durham University, England.

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Riyaz Lalani

Mr. Lalani is the Chief Operating Officer of Kingsdale Shareholder Services Inc., Canada’s largest and most active proxy solicitation and shareholder services advisory firm. He has been involved in, and led the client services teams tasked
with, completing dozens of high profile client engagements, including hostile bids, complex M&A transactions and proxy contests. Mr. Lalani is frequently called upon to brief public issuers and their directors on shareholder engagement and
corporate governance practices. Prior to joining Kingsdale, Mr. Lalani was employed by Acqua Capital Management LP (international asset management company) in New York and Toronto from 2003 to February 2010. Mr. Lalani worked in a variety of
analytical, business development and operational roles at the firm, eventually heading up the overall research and operational efforts. Teamed with the Chief Investment Officer, he helped originate, negotiate and structure billions of dollars of
direct and secondary market equity investments into small, mid and large cap public companies in North America, Asia, Europe and the Middle East. Mr. Lalani’s prior experience includes roles with two Canadian bank-owned investment dealers. He
is also a director of Difference Capital Funding Inc. (formerly TriNorth Capital Inc.) (a federal company listed on the TSX-V) and was previously a director of URSA Major Minerals Incorporated (an Ontario company listed on the TSX).

Ken M. Strobbe

Mr. Strobbe has been a consultant since August 2011. He was employed at Barrick Gold Corporation, an Ontario company, as a Manager, Underground Projects, Capital Projects Group (January 2009 to August 2011) and Senior Engineer Operations, Corporate
Group (May 2006 to January 2008) . From 2004 until 2006, Mr. Strobbe was a Production Planning Team Member, Integrated Business Systems at Placer Dome Inc. (now Barrick Gold Corporation). From 2001 until 2004, he was an Underground Supervisor and
Production Planner at Placer Dome Canada’s Musselwhite Mine in Northern Ontario. Prior thereto, he held the position of Mine Engineer at the Lupin Mine (Echo Bay Mines Ltd., a mining company) and was a Senior Mine Engineer, Planning Engineer
and Ventilation Engineer at the Giant Mine (Royal Oak Mines Ltd., a mining company). Mr. Strobbe has extensive experience in the areas of mine design, underground development and production planning and execution, and evaluating underground mining
projects, including participation in scoping, pre-feasibility and feasibility studies. Mr. Strobbe holds a Bachelor of Applied Science (BASc.) in Mining Engineering from the University of British Columbia.

Paul G. Smith

Mr. Smith has been President, Chief Executive Officer since January 2009, Executive Vice President and Chief Financial Officer from December 2004 to December 2008 and a director of Equity Financial Holdings Inc. (listed on the TSX as
(“Equity”), a financial services firm, whose principal subsidiary is Equity Financial Trust Company. Prior to Equity, Mr. Smith held management positions at BCE Inc., a federal company; served as Executive Assistant to the Prime Minister
of Canada; and was an aide to the Minister of External Affairs and to the Minister of International Cooperation. He holds an MBA from INSEAD, an MPA from Carleton University, and undergraduate degrees (Accounting, Political Science) from the
University of Ottawa. He is a graduate of the Directors Education Program of the Institute of Corporate Directors and holds the institute’s ICD.D designation. Mr. Smith is Chairman of the Board of VIA Rail Canada Inc., a position he has held
since December, 2010, after serving as a director since 2006.

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He is also a member of the board of directors of StorageVault Canada Inc., (a Canadian public company listed on the TSX-V).

Philip Gross

Mr. Gross possesses many years of experience in the commodities industry and has worked extensively in both the physical and financial aspects of the industry. Mr. Gross has previously worked for one of the largest global commodities supply chain
management firms, where he was the Head of Non-Ferrous Metals. Mr. Gross managed the firm’s non-ferrous metals team from incubation to successful maturity and, ultimately, oversaw the firm’s relevant commercial operations in India, South
Korea, Taiwan, Singapore, Venezuela, Brazil and Australia. Over the course of his career, Mr. Gross has assisted firms of various sizes in developing and sustaining their commodities portfolio management businesses.

Ike Makrimichalos

Mr. Makrimichalos is a Chartered Accountant with a BA from the University of Toronto, with over 27 years of experience in servicing public and private companies for Deloitte & Touche LLP in Toronto. In addition, Mr. Makrimichalos also provides
services as a CFO and consultant for several private companies and was recently a Controller for Mukuba Resources Limited, a junior mining exploration company.

George A. Duguay

Since January 1989, Mr. Duguay has been the President of G. Duguay Services Inc., which was a partner of Duguay and Ringler Corporate Services, a provider of corporate and financial administrative services to public companies, until February 2006.
G. Duguay Services Inc. continues to act as a consultant in this area. Mr. Duguay is Corporate Secretary of three public companies in the resource sector, and a Director and Chairman of the Audit Committee of Intrinsyc Software International, Inc.,
a company listed on the Toronto Stock Exchange that provides proprietary software, hardware, and services for the growing market of mobile handheld products. Mr. Duguay also serves or has served as a board member for several other public and private
companies. Mr. Duguay was a co-founder of Equity Financial Trust Co., a provider of transfer agent and corporate trust services to companies. Mr. Duguay is a Certified General Accountant (C.G.A.) and a Fellow of the Institute of Chartered
Secretaries.

B.Compensation.

Compensation Discussion and Analysis

Background

The Company is an exploration stage company and as at January 31, 2012, was engaged in the acquisition, exploration and development of coal and precious metal properties in the United States. The Company has no commercial operations and does not
earn any operating revenues from its mineral properties.

Overview

The Board of Directors (the “Board”) is responsible for setting the overall compensation strategy of the Company and for evaluating and approving the compensation of directors and executive officers. The Company has delegated these
responsibilities to the Corporate Governance and Compensation Committee (the “CGC Committee”). The CGC Committee annually reviews, and recommends to the Board, the base
salary, incentive compensation and long-term compensation for the Company’s executive officers to determine if the compensation package for executive officers continues to be appropriate or if any modifications are required. Factors considered
by the CGC Committee in establishing suitable compensation packages for its executive officers include, the early stage of development of the Company, the small number of executive officers, financial resources available to the Company, competitive
factors and the time committed by the executive officer to the affairs of the Company. The CGC Committee has determined that the current compensation is appropriate for the risk and responsibilities assumed by the officers.

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Corporate Governance and Compensation Committee

The CGC Committee currently consists of Messrs. Lalani, Smith, Fitzgerald and Clancy, all of whom are independent directors and have direct and indirect expertise, experience and education relevant to their role as members of the Committee.

Objectives of Compensation Program

It is the objective of the Company’s compensation program to attract and retain highly qualified executives and to link incentive compensation to performance and shareholder value. It is the goal of the CGC Committee to endeavor to ensure that
the compensation of executive officers is sufficiently competitive to achieve the objectives of the executive compensation program. The CGC Committee gives consideration to the Company’s contractual obligations, performance, quantitative
financial objectives, including relative shareholder return, as well as to the qualitative aspects of the individual’s performance and achievements.

Role of Executive Officers in Compensation Decisions

The CGC Committee will receive and review any recommendations of the President and Chief Executive Officer relating to the general compensation structure and policies and programs for the Company and the salary and benefit levels for executive
officers.

Elements of the Compensation Program

The Company’s compensation program comprises (i) base salary and (ii) long-term incentives, including the 2011 Amended and Restated Stock Option Plan (the “Stock Option Plan”). Each component of the executive compensation program
is addressed below.

The CGC Committee recognizes that certain elements of compensation could promote unintended inappropriate risk-taking behaviors, but the Company seeks to ensure that the Company’s executive compensation package is comprised of a mix of cash
and equity compensation, balancing short term incentives (e.g., cash bonuses) and long-term incentives (e.g., options). Base salaries and personal benefits are sufficiently competitive and not subject to performance risk. To receive the benefit of
long-term incentives (options), the executive officers must be employed by the Company (subject to limited exceptions), thereby better aligning executive performance with the interests of the Company and its shareholders. The CGC Committee believes
that executive compensation risk management is reinforced by ongoing Board oversight of, among other things, the Company’s financial results, regulatory disclosure, strategic plans, fraud and error reporting, the Audit Committee’s
regular meetings with the external auditors (the “auditors”) (including without the presence of management the Company’s internal control, management information systems and financial control systems. As a result, the CGC Committee
does not believe that its compensation practices and policies are reasonably likely to have a material adverse effect on the Company.

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Base Salaries and Benefits

Salaries for executive officers are reviewed annually based on corporate and personal performance and on individual levels of responsibility. Salaries of the executive officers are not determined based on a specific formula, nor is a formal
benchmarking process used. The Board, on the recommendation of the CGC Committee considers, and, if deemed appropriate, approves salaries recommended by the President and Chief Executive Officer for the other executive officers of the Company. As
stated above, base salaries are established to be competitive in order to attract and retain highly qualified executives.

The Company does not provide any pension or retirement benefits to its executive officers.

Long-Term Incentives and Stock Option Pan

The CGC Committee administers the Stock Option Plan that is designed to provide a long-term incentive that is linked to shareholder value. The Board, on the recommendation of the CGC Committee, determines the number of options to be granted to each
executive officer based on the level of responsibility and experience required for the position. The CGC Committee regularly reviews and where appropriate adjusts the number of options granted to individuals and determines the vesting provisions of
such options. The Board, on the recommendation of the CGC Committee, sets the number of options, as appropriate, designed to attract and retain qualified and talented personnel. The Board also takes account of the Company’s contractual
obligations and the award history for all participants in the Stock Option Plan.

Option-based Awards

A description of the process that the Company uses to grant option-based awards to executive officers, including the role of the Board and executive officers, is included under the heading “Compensation Discussion and Analysis – Elements
of Compensation Program – Long-Term Incentives and Stock Option Plan” above.

The Company did not grant any option-based awards to executive officers or directors during the year ended January 31, 2012.

Hedging

The Company has not initiated any policies related to the purchase of financial instruments (including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds) by directors or Named Executive Officers (as defined
below), that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by any director or Named Executive Officer.

Compensation of Executive Officers

Summary Compensation Table for Executive Officers

The following table sets forth all compensation paid, payable, awarded, granted, given or otherwise provided, directly or indirectly, for each of the Company’s three most recently completed financial years to the Chief Executive Officer
(“CEO”) and the Chief Financial Officer (“CFO”) and each of the Company’s three most highly compensated executive officers, other than the CEO and CFO, who were serving as executive officers at the end of
the most recently completed financial year and whose total salary and bonus exceeds $150,000 (collectively the “Named Executive Officers”). Total compensation encompasses, as applicable, regular salary, dollar amount of option
awards, non-equity incentive plan compensation which would include discretionary and
non-discretionary bonuses, pension value with compensatory amounts for both
defined and non-defined contribution retirement plans, and all other
compensation which could include perquisites, tax gross-ups, premiums for
certain insurance policies, payments resulting from termination, resignation,
retirement or a change in control and all other amounts not reported in another
column.

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|Name and
      Principal Position                                  | Fiscal
      Year Ended January 31  | Salary
      ($) | Share-
      based awards ($) | Option-based awards ($) | Non-equity
      incentive plan compensation **($)** | Pension
      Value ($) | All other
      compensation ($) | Total
      compensation ($)
|------------------------------------------------------------------ | ----------------------------------- | ---------------- | ----------------------------- | ----------------------- | ---------------------------------------------------- | ----------------------- | -------------------------------- | ----------------------------
|Annual
      incentive plans ($)                                   | Long-term
      incentive plans ($)
|Philip Gross, Interim President & Chief
      Executive Officer(1) | 2012                                | 27,620           | Nil                           | 142,000                 | Nil                                                  | Nil                     | N/A                              | Nil                         
|Ike Makrimichalos Chief
      Financial Officer(2)                 | 2012                                | 56,616           | Nil                           | 28,400                  | Nil                                                  | Nil                     | N/A                              | Nil                         
|Roland M. Larsen, President
      & Chief Executive Officer(3)     | 2012                                | 227,876          | Nil                           | Nil                     | Nil                                                  | Nil                     | N/A                              | 7,8534                      
|2011                                                               | 249,995                             | Nil              | Nil                           | Nil                     | Nil                                                  | N/A                     | 10,520(4)                        | 260,515                     
|2010                                                               | 249,986                             | Nil              | 2,260,424(5)                  | Nil                     | Nil                                                  | N/A                     | 10,520(4)                        | 2,520,930                   
|J. Allan Ringler, Chief
      Financial Officer(6)                 | 2012                                | 14,129           | Nil                           | Nil                     | Nil                                                  | Nil                     | N/A                              | Nil                         
|2011                                                               | 40,921                              | Nil              | Nil                           | Nil                     | Nil                                                  | N/A                     | Nil                              | 40,921                      
|2010                                                               | 34,146                              | Nil              | 190,400(5)                    | Nil                     | Nil                                                  | N/A                     | Nil                              | 224,546                     

Notes:

|(1) | Mr. Gross became Interim President and Chief Executive
      Officer on December 6, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. Makrimichalos became Chief Financial Officer in
      August 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(3) | Mr. Larsen ceased to be President and Chief Executive
      Officer on December 6, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(4) | This amount represents $2,468 (2011 - $3,346; 2010 -
      $3,346) for medical insurance paid by the Company and $5,385 (2011 -
      $7,174; 2010 - $7,174) for premiums pertaining to a $1,000,000 Term Life
      Insurance policy on the life of Mr. Larsen.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5) | Mr. Larsen was granted options to acquire 4,155,191
      Common Shares on June 26, 2009, exercisable at a price of $0.10 per Common
      Share and expiring on June 26, 2014. Mr. Ringler was granted options to
      acquire 350,000 Commons Shares on June 26, 2009, exercisable at a price of
      $0.10 per Common Share. Mr. Ringlers options expired on September 17,
      2011. The value of the option- based award is calculated using the grant
      date fair value ($0.544) multiplied by the number of options granted. The
      grant date fair value of $0.544 for each option has been calculated using
      the Black-Scholes Option Pricing Model using the following assumptions:
      risk-free interest rate of 2.53%; expected volatility of 187.73%; expected
      dividend yield of Nil; and expected option life of five years. Mr.
      Larsens options expired on April 11, 2012
|(6) | Mr. Ringler was Chief Financial Officer from March 5,
      2009 to June 17, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(7) | Mr. Gross was granted options to acquire 500,000 Common
      Shares on January 20, 2012, exercisable at a price of $0.30 per Common
      Share and expiring on January 20, 2017. Mr. Makrimichalos was granted
      options to acquire 100,000 Commons Shares on January 20, 2012, exercisable
      at a price of $0.30 per Common Share and expiring on January 20, 2017. The
      value of the option-based award is calculated using the grant date fair
      value ($0.284) multiplied by the number of options granted. The grant date
      fair value of $0.284 for each option has been calculated using the
      Black-Scholes Option Pricing Model using the following assumptions:
      risk-free interest rate of 1.29%; expected volatility of 206.2%; expected
      dividend yield of Nil; and expected option life of five
  years.                                                             

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Incentive Plan Awards for Named Executive Officers

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth information concerning all
option-based and share-based awards for each Named Executive Officer outstanding
at the end of the financial year ended January 31, 2012, including awards
granted before the financial year ended January 31, 2012.

|Name                                               | Option-based
      Awards(1) | Share-based Awards   
|-------------------------------------------------- | ---------------------------- | ---------------------
|Number ofsecuritiesunderlyingunexercisedoptions(#) | Option exerciseprice(U.S. $) | Option expirationdate
|Philip Gross                                       | 500,000                      | 0.30                 
|Ike Makrimichalos                                  | 100,000                      | 0.30                 
|Roland Larsen                                      | 4,155,191(2)                 | 0.10                 

Notes:

| | (1) | Based on the closing price of the common shares on the
      OTC Bulletin Board of U.S. $0.26 on January 31, 2012 less the exercise
      price in respect of such options.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Mr. Larsens options expired on April 11,
  2012.                                                                                                                          

See Compensation Discussion and Analysis  Elements of the
Compensation Program and Compensation Discussion and Analysis Option-based
Awards.

Incentive Plan Awards  Value Vested or Earned During the
Year

There was no value of option-based awards granted to Named
Executive Officers which vested during the year ended January 31, 2012. The
Company has not granted any share based awards nor does it have a non-equity
compensation plan.

Pension Plan Benefits

The Company does not have any pension plans that provide for
payments of benefits at, following or in connection with retirement, or provide
for retirement or deferred compensation plans for its Named Executive Officers
or directors.

Compensation of Directors

Summary Compensation Table for Directors

The following table sets forth all amounts of compensation
provided to the non-executive directors of the Company for the financial year
ended January 31, 2012.

|Name                  | Fees earned
      ($) | Share-based
      awards ($) | Option-based
      awards ($) | Non-equity
      incentive plan compensation($) | Pension value
      ($) | All other
      compensation ($) | Total ($)  
|--------------------- | --------------------- | ---------------------------- | ----------------------------- | ----------------------------------------------- | ----------------------- | -------------------------------- | -----------
|(a)                   | (b)                   | (c)                          | (d)                           | (e)                                             | (f)                     | (g)                              | (h)        
|James B. Clancy(3)    | Cdn$62,575            | Nil                          | Cdn$240,145                   | Nil                                             | Nil                     | Nil                              | Cdn$302,720
|John Fitzgerald(1)(3) | Cdn$575               | Nil                          | Cdn$211,892                   | Nil                                             | Nil                     | Nil                              | Cdn$212,467
|Riyaz Lalani(1)(3)    | Cdn$575               | Nil                          | Cdn$211,892                   | Nil                                             | Nil                     | Nil                              | Cdn$212,467

32

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|Name                   | Fees earned
      ($) | Share-based
      awards ($) | Option-based
      awards ($) | Non-equity
      incentive plan compensation($) | Pension value
      ($) | All other
      compensation ($) | Total ($)  
|---------------------- | --------------------- | ---------------------------- | ----------------------------- | ----------------------------------------------- | ----------------------- | -------------------------------- | -----------
|(a)                    | (b)                   | (c)                          | (d)                           | (e)                                             | (f)                     | (g)                              | (h)        
|Ken M. Strobbe(1)(3)   | Cdn$575               | Nil                          | Cdn$211,892                   | Nil                                             | Nil                     | Nil                              | Cdn$212,467
|Paul G. Smith(3)       | Cdn$57,575            | Nil                          | Cdn$240,145                   | Nil                                             | Nil                     | Nil                              | Cdn$297,720
|Kimberly L. Koerner(1) | $8,381                | Nil                          | NIL                           | Nil                                             | Nil                     | Nil                              | $8,831     

| | (1) | Messrs. Fitzgerald, Lalani and Strobbe became directors
      on January 11, 2012.                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Ms. Koerner ceased to be a director on January 11,
      2012.                                                                      
| | (3) | Fees received in Canadian dollars. Amounts shown based on
      the January 31, 2012 Bank of Canada noon rate of CDN$1 = USD$0.9948.

Board Fees

During the financial year ended January 31, 2012, each of the
non-executive directors was entitled to annual compensation in the amount of
Cdn$7,000 and the payments in connection with attending meetings of the Board
and meetings of the Boards committees. The Chairman of the Audit Committee was
entitled to additional annual compensation of Cdn$5,000. Effective January 11,
2012, each of the non-executive directors were entitled to annual compensation
on the amount of Cdn$10,000 in connection with attending meetings of the Board
and meeting of the Boards committees.

The directors are also entitled to receive stock options under
the Stock Option Plan.

Incentive Plan Awards for Directors

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth information concerning all
option-based and share-based awards for each non-executive director outstanding
at January 31, 2012, including awards granted before the financial year ended
January 31, 2012.

|Name                                                                   | Option grant
      date             | Option-based
      Awards    | Share-based
      Awards                                        
|---------------------------------------------------------------------- | ----------------------------------- | ---------------------------- | ----------------------------------------------------------------
|Number of
      securities underlying unexercised
      options (#)(1) | Option
      exercise price (U.S.$) | Option
      expiration date | Value of
      unexercised in-the-money options
      (U.S.$)(1)
|(a)                                                                    |                                     | (b)                          | (c)                                                             
|James Clancy                                                           | June 26, 2009                       | 200,000                      | 0.10                                                            
|                                                                       | January 20, 2012                    | 850,000                      | 0.30                                                            
|John Fitzgerald                                                        | January 20, 2012                    | 750,000                      | 0.30                                                            
|Riyaz Lalani                                                           | January 20, 2012                    | 750,000                      | 0.30                                                            
|Ken M. Strobbe                                                         | January 20, 2012                    | 750,000                      | 0.30                                                            
|Paul G. Smith                                                          | June 26, 2009                       | 200,000                      | 0.10                                                            
|                                                                       | January 20, 2012                    | 850,000                      | 0.30                                                            
|Kimberly L. Koerner(2)                                                 | June 26, 2009                       | 2,405,000                    | 0.10                                                            

33

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Notes

| | (1) | Based on the closing price of the Common Shares on the
      OTC Bulletin Board of $0.26 on January 31, 2012 less the exercise price in
      respect of such options.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Ms. Koerners options expired on April 11,
  2012.                                                                                                                    

See Compensation Discussion and Analysis  Elements of the
Compensation Program and Compensation Discussion and Analysis  Option-based
Awards, above.

Incentive Plan Awards  Value Vested or Earned During the
Year

There was no value of option-based awards granted to
directors which vested during the year ended January 31, 2012. The Company has
not granted any share based awards nor does it have a non-equity compensation
plan.

C.Board practices.

Information regarding the length of service of the members of
the Board is shown in Item 6.A. Directors and senior management. Each director
elected will hold office until the next annual meeting or until his successor is
appointed, unless his office is earlier vacated in accordance with the CBCA and
the bylaws of the Company.

There are no contracts providing for benefits upon termination
to any director.

Responsibilities of the Board

The Board is responsible for the stewardship of the business
and affairs of the Company and has adopted a set of principles and practices
setting out its stewardship responsibilities. Under its mandate, the Board seeks
to discharge such responsibility by reviewing, discussing and approving the
Company's strategic planning and organizational structure, and supervising
management to ensure that the foregoing enhance and preserve the underlying
value of the Company for the benefit of all shareholders. As part of the
strategic planning process, the Board contributes to the development of a
strategic direction for the Company by reviewing, on an annual basis, the
Company's principal opportunities, the processes that are in place to identify
such opportunities and the full range of business risks facing the Company,
including strategic, financial, operational, leadership, partnership and
reputation risks. On an ongoing basis, the Board also reviews with management
how the strategic environment is changing, what key business risks and
opportunities are appearing and how they are managed, including the
implementation of appropriate systems to manage these risks and opportunities.
The performance of management, including the Company's Chief Executive Officer,
is also supervised to ensure that the affairs of the Company are conducted in an
ethical manner. The Board, directly and through its committees, ensures that the
Company puts in place, and reviews at least on an annual basis, comprehensive
communication policies to address how the Company (i) interacts with analysts,
investors, other key stakeholders and the public, and (ii) complies with its
continuous and timely disclosure obligations and avoids selective disclosure.
Finally, the Board monitors the integrity of corporate internal control
procedures and management information systems to manage such risks and ensure
that the value of the underlying asset base is not eroded.

The Board from time to time delegates to senior executives the
authority to enter into certain types of transactions, including financial
transactions, subject to specified limits. According to the Company's policy,
investments and other similar expenditures above the specified limits, including
major capital projects as well as material transactions outside the ordinary
course of business, whether on or off balance sheet, are reviewed by, and
subject to, the prior approval of the Board.

Following are the principles of the Company's corporate
governance arrangements:

34

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- Subject to the relatively small size of the Company and to business needs, the size of the Board must be kept to a sufficiently low number to facilitate open and effective dialogue and full participation and contribution of each director.
- The Board must function as a cohesive team, with shared responsibilities and accountabilities that are clearly defined, understood and respected.
- The Board must have the ability to exercise all its supervisory responsibilities independent of any influence by management.
- The Board must have access to all the information needed to carry out its full responsibilities. Information must be available in a timely manner and in a format conducive to effective decision making.
- The Board must develop, implement, and measure effective corporate governance practices, processes and procedures.

Committees of the Board

There are currently three committees of the Board being the Audit Committee, the CGC Committee and the Health, Safety, Environmental and Technical Committee (the “Technical Committee”). In addition to regularly scheduled meetings of the
Board, its members are in continuous contact with one another and with the members of senior management.

Audit Committee

The Audit Committee shall be composed of three or more directors as determined by the Board, the composition of which shall satisfy applicable independence requirements of applicable securities regulatory authorities. Members shall be appointed
annually from among the members of the Board. The Chair of the Audit Committee shall be appointed by the Board. All members of the Audit Committee shall be financially literate. An Audit Committee member who is not financially literate may be
appointed to the Audit Committee provided that the member becomes financially literate within a reasonable period of time. The following persons have been appointed to the Audit Committee: James B. Clancy (Chair), John Fitzgerald and Paul G. Smith.

The Audit Committee's primary duties and responsibilities are to:

(a) Identify and monitor the management of the principal risks that could impact the financial reporting of the Company;

(b) Oversee and monitor the integrity of the Company's financial reporting process and system of internal controls regarding financial reporting and accounting compliance;

(c) Oversee and monitor the independence and performance of the Company's external auditors; and

(d) Provide an avenue of communication among the external auditors, management and the Board.

The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the external auditors as well as anyone in the organization. The Audit Committee has the ability to
retain, at the Company's expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties.

35

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The Audit Committee shall, in addition to any other duties and
responsibilities specifically assigned or delegated to it from time to time by
the Board:

(a) Be directly responsible for overseeing the work of the
external auditors engaged for the purpose of preparing or issuing an auditors
report or performing other audit, review or attest services for the Company,
including the resolution of disagreements between management and the auditors
regarding financial reporting;

(b) Meet with the auditors and the senior management of the
Company to review, and recommend to the Board for approval, the year-end audited
financial statements, related Managements Discussion and Analysis (MD&A)
and earnings releases and financial reporting contained in public disclosure
documents, including annual reports and annual information forms of the Company
prior to any public disclosure thereof;

(e) Review with senior management and, if necessary, the
auditors, and recommend to the Board for approval, the interim financial
statements, related MD&A and earnings releases of the Company prior to any
public disclosure thereof;

(f) Review, and recommend to the Board for approval, all
financial statements or results of the Company which have not previously been
approved by the Board and which are to be included in a prospectus, press
release, material change report, offering document or other public disclosure
document of the Company;

(g) Consider and be satisfied that adequate policies and
procedures are in place for the review of the Companys disclosure of financial
information extracted or derived from the Companys financial statements, and
periodically assess the adequacy of such procedures;

(h) Review the audit plans and the independence of the
auditors;

(i) Review and approve the Companys hiring policies regarding
partners, employees and former partners and employees of the present and former
auditors of the Company;

(j) Meet with the auditors independently of management,
including to consider any matter which the Audit Committee or auditors believe
should be brought to the attention of the Board or the shareholders of the
Company;

(k) In consultation with senior management, review annually and
recommend for approval by the Board:

(i) the appointment of auditors at the
annual general meeting of shareholders of the Company;

(ii) the remuneration of the auditors;
and

(iii) the pre-approval of all non-audit
services to be provided to the Company by the auditors. In fulfilling such
requirement, if the Audit Committee deems it appropriate, the Audit Committee
may form and delegate to subcommittees consisting of one or more members, the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that decisions of such subcommittee to grant pre-approvals shall be
presented to the full Audit Committee at its next scheduled meeting. The
pre-approval of services pursuant to delegated authority may be given at any
time up to one year before commencement of the specified service;

(l) Review with the auditors:

36

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(iv) the scope of the audit;

(v) the significant changes in the
Company's accounting principles, practices or policies; and

(vi) new developments in accounting
principles, reporting matters or industry practices which may materially affect
the financial statements of the Company;

(m) Review with the auditors and senior management the results
of the annual audit, and make appropriate recommendations to the Board, having
regard to, among other things:

(vii) the financial statements;

(viii) management's discussion and
analysis and related financial disclosure contained in continuous disclosure
documents;

(ix) significant changes, if any, to
the initial audit plan;

(x) accounting and reporting decisions
relating to significant current year events and transactions;

(xi) the audit findings report and
management letter, if any, outlining the auditors' findings and recommendations,
together with management's response, with respect to internal controls and
accounting procedures;

(xii) any difficulties encountered in
the course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with
management; and

(xiii) any other matters relating to
the conduct of the audit, including the review and opportunity to provide
comments in respect of any press releases announcing year-end financial results
prior to issue and such other matters which should be communicated to the Audit
Committee under generally accepted auditing standards;

(n) Review with the auditors the adequacy of management's
internal control procedures and management information systems and inquiring of
management and the auditors about significant risks, including fraud risk, and
exposures to the Company that may have a material adverse impact on the
Company's financial statements, and inquiring of the auditors as to the efforts
of management to mitigate such risks and exposures;

(o) Review disclosures made to the Audit Committee by the Chief
Executive Officer and Chief Financial Officer of the Company during their
certification process related to the Companys annual and quarterly regulatory
filings, including with respect to any significant deficiencies in the design or
operation of the Companys internal control over financial reporting or material
weaknesses therein, and any fraud involving management or other employees who
have a significant role in the Companys internal control over financial
reporting;

(p) Monitor policies and procedures for reviewing directors'
and officers' expenses and perquisites, and inquire about the results of such
reviews;

(q) Review and approve written risk management policies and
guidelines including the effectiveness of the overall process for identifying
the principal risks affecting financial reporting;

37

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(r) Review, and advise the Board of, issues relating to legal,
ethical and regulatory responsibilities to monitor management's efforts to seek
to ensure compliance, including any legal matters that could have a significant
impact on the Companys financial statements, the Companys compliance with
applicable laws and regulations and inquiries received from regulators of
governmental agencies. Discuss with management and the auditors any
correspondence with respect to such inquiries and published reports that raise
material issues regarding the Companys financial statements and accounting
policies; and

(s) Establish procedures for:

(xiv) the receipt, retention and
treatment of complaints received by the issuer regarding accounting, internal
accounting controls, or auditing matters; and

(xv) the confidential, anonymous
submission by employees of the issuer of concerns regarding questionable
accounting or auditing matters.

Corporate Governance and Compensation Committee

The CGC Committee shall be composed of a minimum of three
directors, each of whom shall be independent for the purposes of National
Instrument 58-101 Disclosure of Corporate Governance Practices. Members
shall be appointed annually from among the members of the Board. The Chair of
the CGC Committee shall be appointed by the Board. All members of the CGC
Committee shall, subject to applicable exemptions therefrom, satisfy the
experience requirements, if any, imposed by applicable securities regulatory
authorities. The following persons have been appointed to the CGC Committee:
Riyaz Lalani (Chair), James B. Clancy, John Fitzgerald and Paul G. Smith.

The overall purpose of the CGC Committee is to assist the Board
in maintaining high standards of corporate governance by developing,
recommending and monitoring effective guidelines and procedures applicable to
the Company and to fulfil its oversight responsibilities in relation to
compensation by developing, monitoring and assessing the Companys approach to
the compensation of its directors and senior management. The mandate of the CGC
Committee includes reviewing and making recommendations to the Board, on an
annual basis, the compensation paid to the Companys executive officers and the
Board and overseeing the administration of the Companys compensation programs.
The CGC Committee also recommends to the Board candidates for chief executive
officer, the size and composition of the Board, qualification criteria for the
selection of new directors, director nominees and nominees for the Chairman of
the Board (and if applicable, the lead director).

Health, Safety, Environmental and Technical Committee

The Technical Committee shall be composed of a minimum of three
directors, each of whom shall satisfy independence requirements of National
Instrument 58-101 Disclosure of Corporate Governance Practices. Members shall be
appointed annually from among the members of the Board. The Chair of the
Technical Committee shall be appointed by the Board. All members of the CGC
Technical Committee shall satisfy the experience requirements, if any, imposed
by applicable securities regulatory authorities. The following persons have been
appointed to the Technical Committee: John Fitzgerald (Chair), James B. Clancy,
Riyaz Lalani, Ken Strobbe and Paul G. Smith.

The overall purpose of the Technical Committee is to assist the
Board in its oversight responsibilities relating the Companys establishment of
health, safety and environmental policies for its mining operations and to
review their appropriateness on an ongoing basis to reflect the Companys
commitment to the health and safety of workers at its sites; and the Companys
commitment to environmental stewardship, public responsibility, social progress
and economic growth. The Technical Committee also is charged with the responsibility for reviewing the technical
aspects of the Companys exploration, development, permitting, construction and
mining programs and, in the Technical Committees discretion, make
recommendations to the Board for consideration.

38

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Conflicts of Interest

Some of the directors and officers of Royal Standard also serve
as directors and officers of other companies involved in the resource
exploration sector. Consequently, there exists a possibility for any such
officer or director to be placed in a position of conflict. Each such director
or officer is subject to fiduciary duties and obligations to act honestly and in
good faith with a view to the best interests of the Company. Similar duties and
obligations will apply to such other companies. Thus, any future transaction
between the Company and such other companies will be for bona fide
business purposes and approved by a majority of disinterested directors of the
Company.

D.Employees.

In addition to the listed officers, at January 31, 2012, the
Company had 18 full-time and no part-time employees.

E.Share ownership.

|                  |                                               | Number of
      Common      | Percentage of
      Common 
|----------------- | --------------------------------------------- | --------------------------- | ---------------------------
|                  |                                               | Shares
      Beneficially   | Shares
      Beneficially  
|                  |                                               | Owned as of April
      30, | Owned as of April
      30,
|Name              | Office Held                                   | 2012                        | 2012                       
|James B. Clancy   | Director                                      | Nil                         | 0%                         
|John Fitzgerald   | Director                                      | Nil                         | 0%                         
|Riyaz Lalani      | Director                                      | Nil                         | 0%                         
|Ken M. Strobbe    | Director                                      | Nil                         | 0%                         
|Paul G. Smith     | Chairman and Director                         | 300,000                     | 0.36%                      
|Philip Gross      | Interim President and Chief Executive Officer | Nil                         | 0%                         
|Ike Makrimichalos | Chief Financial Officer                       | Nil                         | 0%                         

See B. Compensation - Compensation of Executive Officers 
Incentive Plan Awards for Named Executive Officers and B. Compensation -
Compensation of Directors  Incentive Plan Awards for Directors for details of
options granted to the above officers and directors.

Item 7. Major Shareholders and Related Party
Transactions

A.Major shareholders.

To the knowledge of the directors and officers of the Company
based on reports filed on Schedule 13G/A pursuant to Rule 13d-1(c) of the
Securities Exchange Act of 1934 (Amendment No. 5) and on www.sedar.com pursuant
to National Instrument 62-103 of the Canadian Securities Administrators, Sprott
Asset Management LP exercises direction or control over 11.8% of the outstanding
voting securities of the Company of which the Sprott Canadian Equity Fund
beneficially owns 6.9% .

39

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B.Related party transactions.

Other than as described below, no director, senior officer,
principal holder of securities, or any associate, affiliate, or family member
thereof, of the Company has any material interest, direct or indirect, in any
transaction since the commencement of the Company's last fiscal year or in any
proposed transaction which, in either case, has or will materially affect the
Company.

The Company paid salaries and benefits to directors and
officers in the amount of $471,380 for the year ended January 31, 2012 and
$316,911 for the year ended January 31, 2011. The Company also made $501,799 in
stock-based payments. The board of directors does not have employment or service
contracts with the Company. Directors are entitled to director fees and stock
options for their services.

Paul G. Smith, a director and Chairman of the Board, is the
President and Chief Executive Officer of Equity Financial Holdings Inc., a
company providing financial services to the Company.

C.Interests of experts and
counsel.

Not applicable.

Item 8. Financial Information

A.Consolidated Statements and Other
Financial Information.

Financial Statements

See Item 17. Financial Statements.

Legal Proceedings

See note 18. Contingencies in the notes to the
above-referenced financial statements.

Dividends

The Company does not anticipate paying dividends in the
foreseeable future

B.Significant Changes.

IFRS The Canadian Accounting Standards Board ("AcSB")
has confirmed that IFRS will replace current Canadian GAAP for publicly
accountable enterprises, effective for fiscal years beginning on or after
January 1, 2011. Accordingly, the Company began reporting interim and annual
consolidated financial statements (with comparatives) in accordance with IFRS
beginning with the quarter ended April 30, 2011. The Company's 2012 interim and
annual consolidated financial statements included comparative 2011 financial
statements, adjusted to comply with IFRS. See the Company's Management
Discussion and Analysis for the Year Ended January 31, 2012 included in Item 17
of this annual report on Form 20-F.

IFRS 9 Financial Instruments ("IFRS
9")

IFRS 9 was issued by the IASB in October 2010 and will replace
IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9
uses a single approach to determine whether a financial asset is measured at
amortized cost or fair value, replacing the multiple rules in IAS 39. The
approach in IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow characteristics of
the financial assets. Most of the requirements in IAS 39 for classification and
measurement of financial liabilities were carried forward unchanged to IFRS 9.
The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2015. The Company has not yet assessed
the impact of the standard or determined whether it will adopt the standard
early.

40

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IFRS 10 Consolidated Financial Statements ("IFRS
10")

IFRS 10 provides a single model to be applied in the control
analysis for all investees, including entities that currently are SPEs ("Special
purpose entities") in the scope of SIC-12. In addition, the consolidation
procedures are carried forward substantially unmodified from IAS 27 (2008). IFRS
10 is effective for annual periods beginning on or after January 1, 2013, with
early adoption permitted. The Company has not yet assessed the impact of the
standard or determined whether it will adopt the standard early.

IFRS 11 Joint Arrangements ("IFRS 11")

IFRS 11 replaces the guidance in IAS 31 Interests in Joint
Ventures and SIC 13 - Joint Controlled Entities Non-Monetary Contributions by
Venturers. IFRS 11 is effective for annual periods beginning on or after January
1, 2013, with early adoption permitted. The Company has not yet assessed the
impact of the standard or determined whether it will adopt the standard early.

IFRS 12 Disclosure of Interests in Other Entities
(IFRS 12)

IFRS 12 was issued by the IASB in May 2011. IFRS 12 is a new
standard which provides disclosure requirements for entities reporting interests
in other entities, including joint arrangements, special purpose vehicles, and
off balance sheet vehicles. IFRS 12 is effective for annual periods beginning on
or after January 1, 2013. The Company has not yet assessed the impact of the
standard or determined whether it will adopt the standard early.

IFRS 13 Fair Value Measurement ("IFRS
13")

IFRS 13, Fair Value Measurement was issued by the IASB on May
12, 2011. The new standard converges IFRS and US GAAP on how to measure fair
value and the related fair value disclosures. The new standard creates a single
source of guidance for fair value measurements, where fair value is required or
permitted under IFRS, by not changing how fair value is used but how it is
measured. The focus will be on an exit price. IFRS 13 is effective for annual
periods beginning on or after January 1, 2013, with early adoption permitted.
The Company has not yet assessed the impact of the standard or determined
whether it will adopt the standard early.

IAS 1 Presentation of Financial
Statements

IAS 1 was amended by the IASB in June 2011 in order to align
the presentation of items in other comprehensive income with US GAAP standards.
Items in other comprehensive income will be required to be presented in two
categories: items that will be reclassified into profit or loss and those that
will not be reclassified. The flexibility to present a statement of
comprehensive income as one statement or two separate statements of profit and
loss and other comprehensive income remains unchanged. The amendments to IAS 1
are effective for annual periods beginning on or after July 1, 2012.

41

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IAS 28 Investments in Associates and Joint
Ventures

As a consequence of the issue of IFRS 10, IFRS 11 and IFRS 12,
IAS 28 has been amended and will further provide the accounting guidance for
investments in associates and will set out the requirements for the application
of the equity method when accounting for investments in associates and joint
ventures. This standard will be applied by the Company when there is joint
control, or significant influence over an investee. Significant influence is the
power to participate in the financial and operating policy decisions of the
investee but does not include control or joint control of those policy
decisions. When determined that the Company has an interest in a joint venture,
the Company will recognize an investment and will account for it using the
equity method in accordance with IAS 28. IAS 28 is required to be applied for
annual periods beginning on or after January 1, 2013, with earlier adoption
permitted. The Company has not yet assessed the impact of the standard or
determined whether it will adopt the standard early.

Future Accounting Changes

The IASB is expected to publish new IFRSs on the following
topics in early 2012. The Company will assess the impact of these new standards
on the Companys operations as they are published.

- Hedge accounting
- Leases
- Revenue recognition and
- Financial instruments

Item 9. The Offer and Listing

A.Offer and listing details.

The issued and outstanding share capital of Royal Standard
consists solely of its Common Shares. The Common Shares of Royal Standard are
without nominal or par value. Subject to the prior rights of holders of
Preferred Shares (as hereinafter defined), if any, each Common Share ranks
equally with all other Common Shares with respect to dissolution, liquidation or
winding-up of Royal Standard and payment of dividends. The holders of Common
Shares are entitled to one vote for each share held of record on all matters to
be voted on by such holders and are entitled to receive pro rata such dividends
as may be declared by the Board of Royal Standard out of funds legally available
therefor and to receive pro rata the remaining property of Royal Standard on
dissolution. The holders of Common Shares have no preemptive or conversion
rights. The rights attaching to the Common Shares can only be modified by the
affirmative vote of at least two-thirds of the votes cast at a meeting of
shareholders called for that purpose.

The common shares of the Company are quoted on the OTC Bulletin
Board under the symbol RYSMF. The Companys common shares were previously
listed and traded on the TSX Venture Exchange (the TSXV) and were voluntarily
delisted from the TSXV effective May 11, 2009.

The following tables set forth the reported high and low sales
prices on the TSXV and the OTC Bulletin Board, respectively, for the periods
specified below.

TSXV (Cdn$)

| | Period                             | High(Cdn$) | Low(Cdn$)
| | ---------------------------------- | ---------- | ---------
| | Fiscal year ended January 31, 2008 | 0.90       | 0.34     

| | Fiscal year ended January 31, 2009 | 0.45 | 0.04
| | ---------------------------------- | ---- | ----

42

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OTC Bulletin Board (US$)

Period
    High
    LowFiscal year ended January 31, 2008
    0.80
    0.35Fiscal year ended January 31, 2009
    0.46
    0.04Fiscal year ended January 31, 2010
    0.15
    0.03Fiscal year ended January 31, 2011
    0.12
    0.06Fiscal year ended January 31, 2012
    0.29
    0.06


| | Period                         | High | Low 
| | ------------------------------ | ---- | ----
| |                                |      |     
| | Quarter ended April 30, 2010   | 0.12 | 0.06
| | Quarter ended July 31, 2010    | 0.11 | 0.07
| | Quarter ended October 31, 2010 | 0.09 | 0.06
| | Quarter ended January 31, 2011 | 0.09 | 0.06
| | Quarter ended April 30, 2011   | 0.12 | 0.07
| | Quarter ended July 31, 2011    | 0.14 | 0.06
| | Quarter ended October 31, 2011 | 0.18 | 0.10
| | Quarter ended January 31, 2012 | 0.29 | 0.14

| | Period        | High | Low 
| | ------------- | ---- | ----
| |               |      |     
| | November 2011 | 0.17 | 0.14
| | December 2011 | 0.23 | 0.18
| | January 2012  | 0.29 | 0.21
| | February 2012 | 0.28 | 0.24
| | March 2012    | 0.26 | 0.22
| | April 2012    | 0.25 | 0.15

B.Plan of distribution.

Not applicable.

C.Markets.

The Common Shares currently trade on the OTC Bulletin Board
under the symbol "RYSMF".

D.Selling shareholders.

Not applicable.

E.Dilution.

Not applicable

43

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F.Expenses of the issue.

Not applicable.

Item 10. Additional Information

A.Share capital.

Not applicable.

B.Memorandum and articles of
incorporation.

The articles of incorporation, amendments thereto and articles
of continuance, as well as the location of the registered office of the Company,
are described under Item 4.A.History and Development of the Company, above.
The Company is continued under the CBCA under Corporation No. 681198-1. The
articles of continuance of the Company do not place any restrictions on the
Companys objects and purposes.

On December 12, 2011 the Board approved the repeal of former
general By-Law No. 1 and adopted ByLaw No. 2, being a new by-law relating
generally to the conduct of the business and affairs of the Company. On January
11, 2012, the shareholders of the Company ratified the repeal of By-Law No. 1
and confirmed By-Law No. 2 as the new general by-law.

Meetings of Shareholders

Subject to the CBCA, meetings of shareholders are held at such
time and at such place, within or outside Canada, as the Board, the chair of the
Board, the chief executive officer or the president may from time to time
determine. Annual shareholders meetings must be held yearly, not later than
fifteen months after the preceding general meeting but no later than six months
after the end of its preceding financial year, to consider the financial
statements and auditors report thereon, elect directors, appoint auditors and
consider such other business that may properly brought before the meeting.

Pursuant to the CBCA the holders of not less than five percent
of the issued and outstanding shares that carry the rights to vote (i.e. Common
Shares) may requisition the Board to call a meeting of shareholders for the
purposes stated in the requisition by sending the requisition to each director
and to the Companys registered office. Upon the requisition of shareholders,
the Board must proceed to convene the meeting or meetings to be held in the
manner set forth in the Companys by-laws and the CBCA, as applicable. The
requisition shall state the business to be transacted at the meeting.

Subject to the CBCA and applicable securities law, notice of
the time and place of each meeting of shareholders, along with a management
information circular and form of proxy, shall be sent not less than 21 days nor
more than 60 days before the meeting to each shareholder entitled to vote at the
meeting, to each director and to the auditors. These materials are filed with
the Canadian securities regulatory authorities and the SEC. If a meeting of
shareholders is adjourned for less than 30 days it is not necessary to give
notice of the adjourned meeting other than by announcement at the earliest
meeting that is adjourned.

A quorum is present at a meeting of shareholders if two persons
are present in person, each being a shareholder entitled to vote thereat or a
duly appointed proxyholder for an absent shareholder so entitled, and together
holding or representing by proxy not less than five percent of the outstanding
shares of the Company entitled to vote at the meeting. The only persons entitled
to be present at a meeting of shareholders are those entitled to vote thereat
and others who, although not entitled to vote, are entitled or required under any provisions of the CBCA, other applicable law
or the articles to be present at the meeting. Any other person maybe admitted
only on the invitation of the chair of the meeting or with the consent of the
meeting.

44

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The CBCA also prescribes the method under which proposals may
be made by shareholders entitled to vote. The shareholder must submit to the
Company, within a prescribed period, a notice of any matter that the person
proposes to raise at the meeting. The Company is required to set out the
proposal in the management proxy circular and the proposing shareholder may
request to include a supporting statement. If the Company does not include the
proposal in the management proxy circular, it must send a notice of refusal to
the proposing shareholder including the reasons why the proposal will not be
included. Either the shareholder and/or the Company may apply to the courts
claiming grievance.

Directors

The Board shall manage, or supervise the management of, the
business and affairs of the Company. Each of the directors and officers shall
act honestly and in good faith with a view to the best interests of the Company
and exercise care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. Directors stand for election at the annual
general meeting of shareholders, and there are no staggered terms. At least 25
percent of the Board must be resident Canadians. However, if there are less than
four directors, at least one director must be a resident Canadian.. A director
is not required to hold any shares of the Company to qualify as a director.
Neither the articles nor the by-laws provide for retirement or non-retirement of
directors under an age limit.

Subject to the Companys by-laws and articles, the Board may
fix the remuneration of the members of the Board. To the extent permitted by
law, no director or officer for the time being of the Company shall be liable
for: (i) the acts, receipts, neglects or defaults of any other director or
officer or employee; (ii) joining in any receipt or other act for conformity;
(iii) any loss, damage or expense happening to the Company through the
insufficiency or deficiency of title to any property acquired by the Company or
for or on behalf of the Company; (iv) the insufficiency or deficiency of any
security in or upon which any of the moneys of or belonging to the Company shall
be placed out or invested; (v) any loss or damage arising from the bankruptcy,
insolvency or tortious act of any person with whom or which any moneys,
securities or other assets belonging to the Company shall be lodged or
deposited; (vi) any loss, conversion, misapplication or misappropriation of or
any damage resulting from any dealings with any moneys, securities or other
assets belonging to the Company or for any other loss, damage or misfortune
whatever which may happen in the execution of the duties of his respective
office or trust or in relation thereto; unless the same shall happen by or
through his failure to act honestly and in good faith with a view to the best
interests of the Company and in connection therewith to exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. If any director or officer of the Company shall be
employed by or shall perform services for the Company otherwise than as a
director or officer or shall be a member of a firm or a shareholder, director or
officer of a body corporate which is employed by or performs services for the
Company, the fact of his being a director or officer of the Company shall not
disentitle such director or officer or such firm or body corporate, as the case
may be, from receiving proper remuneration for such services.

The Company shall indemnify its directors and officers, a
former director or officer of the Company or another individual who acts or
acted at the Companys request as a director or officer, or an individual acting
in a similar capacity, of another entity against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by such individual in respect of any civil, criminal or
administrative, investigative or other proceeding in which the individual is
involved because of that association with the Company or other entity. The
Company may not indemnify an individual in connection with the foregoing unless
the individual: (a) acted honestly and in good faith with a view to the Companys best interests or that of another
entity for which the individual acted as a director or officer or in a similar
capacity at the Companys request, as the case may be; and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had reasonable grounds for believing that his conduct was lawful. The
Company has entered into such indemnity agreements with its directors and
officers.

45

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A director or officer who is a party to a material transaction
or material contract or proposed material transaction or material contract with
the Company, is a director or an officer of, or acts in a capacity similar to a
director or officer of, or has a material interest in any person who is, a party
to a material transaction or material contract or proposed material transaction
or material contract with the Company shall disclose the nature and extent of
his interest at the time and in the manner provided in the CBCA. Except as
provided in the CBCA (including in the case of director remuneration), no such
director of the Company shall vote on any resolution to approve any transaction.
If a material transaction or material contract is made between the Company and
one or more of its directors or officers, or between the Company and another
person of which a director or officer of the Company is a director or officer or
in which he/she has a material interest, the transaction is neither void nor
voidable by reason only of that relationship, or by reason only that a director
with an interest in the transaction or contract is present at or is counted to
determine the presence of a quorum at a meeting of the Board or committee of
Board that authorized the transaction, if the director or officer disclosed his
interest in accordance with the provisions of the CBCA, the transaction or
contract was approved by Board or shareholders, as the case may be, and it was
reasonable and fair to the Company at the time it was approved.

The CBCA provides that, unless the articles or by-laws
otherwise provide, the directors may:

| | (a) | borrow money upon the credit of the Company;                                                                                                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                            
| | (b) | issue, reissue, sell or pledge or hypothecate debt
      obligations of the Company;                                                                                                                       
| |     |                                                                                                                                                                                                            
| | (c) | give a guarantee on behalf of the Company to secure
      performance of an obligation of any person; and                                                                                                  
| |     |                                                                                                                                                                                                            
| | (d) | mortgage, hypothecate, charge, pledge or otherwise create
      a security interest in all or any property of the Company, owned or
      subsequently acquired, to secure any obligation of the
  Company.

The directors may, by resolution, make, amend or repeal any
by-laws that regulate the business or affairs of the Company. The CBCA requires
the directors to submit any such by-law, amendment or repeal to the Companys
shareholders at the next meeting of shareholders, and the shareholders may, by
ordinary resolution, confirm, reject or amend the by-law, amendment or
repeal.

Limitations on Ownership of Securities

Except as described under Item 10.D. Exchange Controls,
below, there are no limitations on the right to own securities imposed by
foreign law to the Companys knowledge or by the articles of the Company.

Share Capital

The authorized capital of the Company consists of an unlimited
number of Common Shares without par value, and an unlimited number of preferred
shares issuable in series (Preferred Shares). Please see Item 9.A. Offer and
listing details, for the rights, privileges, restrictions and conditions
attaching to the Common Shares. The rights attaching to the Common Shares and
the Preferred Shares can only be modified by the affirmative vote of at least two-thirds of the
votes cast at a meeting of shareholders called for that purpose.

46

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The following summarizes the key rights, privileges,
restrictions and conditions attached to Preferred Shares.

Series

The Preferred Shares are issuable in series with such
preferred, deferred or other special rights, privileges, restrictions,
conditions and designations attached thereto as shall be fixed from time to time
by any resolutions which may be passed by the directors, including:

| | (a) | the rate, amount or method of calculation of any
      dividends, provided always that dividends on each series of Preferred
      Shares shall be non-cumulative;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                   
| | (b) | any right of redemption and/or purchase and the
      redemption or purchase prices and terms and conditions of any such
      right;                             
| |     |                                                                                                                                                                   
| | (c) | any right of retraction vested in the holders of
      Preferred Shares of such series and the prices and terms and conditions of
      any such rights;          
| |     |                                                                                                                                                                   
| | (d) | any rights upon dissolution, liquidation or winding-up of
      the Company;                                                                                      
| |     |                                                                                                                                                                   
| | (e) | any voting rights; and                                                                                                                                            
| |     |                                                                                                                                                                   
| | (f) | any other provisions attaching to any such series of
      Preferred Shares.                                                                                      

Priority

The Preferred Shares of each series shall, with respect to the
payment of dividends and the distribution of assets or return of capital in the
event of liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, rank on a parity with the Preferred Shares of every
other series and be entitled to a preference and priority over the Common Shares
and over any other shares of the Company ranking junior to the Preferred Shares.

Notices and Voting

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares, the holders of
Preferred Shares shall not, as such, be entitled to receive notice of or to
attend meetings of the shareholders of the Company nor shall they have any
voting rights for the election of directors or for any other purpose except as
provided in the CBCA.

Purchase for Cancellation

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares, the Company may
at any time or from time to time purchase for cancellation the whole or any part
of the Preferred Shares outstanding at such time. In the case of the purchase
for cancellation by private contract, the Company shall not, except as required
by law, be required to purchase Preferred Shares from all holders or series of
Preferred Shares or to offer to purchase the shares of any other class or any
series of shares before proceeding to purchase from any one holder of Preferred
Shares nor shall it be required to make purchases from holders of Preferred
Shares on a pro rata basis.

47

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Redemption

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares, the Company
may, at its option, redeem all or from time to time any part of the outstanding
Preferred Shares on payment to the holders thereof, for each share to be
redeemed, the redemption price per share, together with all dividends declared
thereon and unpaid

Retraction

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares and partial
redemption obligations set forth below, a holder of Preferred Shares shall be
entitled to require the Company to redeem at any time and from time to time
after the date of issue of any Preferred Shares, upon giving notice, all or any
number of the Preferred Shares registered in the name of such holder on the
books of the Company at the redemption price per share, together with all
dividends declared thereon and unpaid.

Partial Redemption

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares, if the
redemption by the Company on any option redemption date of all of the Preferred
Shares to be redeemed on such date would be contrary to any provisions of the
CBCA or any other applicable law, the Company shall be obligated to redeem only
the maximum number of Preferred Shares which the Company determines it is then
permitted to redeem, such redemptions to be made pro rata (disregarding
fractions of shares) according to the number of Preferred Shares required by
each such holder to be redeemed by the Company. The Company shall, before
redeeming any other Preferred Shares, redeem on the first day of each month
thereafter the maximum number of such Preferred Shares so required by holders to
be redeemed as would not then by contrary to any provisions of the CBCA or any
other applicable law, until all of such shares have been redeemed.

Liquidation, Dissolution and Winding Up

Subject to the rights, privileges, restrictions and conditions
that may be attached to a particular series of Preferred Shares, in the event of
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of Preferred Shares shall be entitled to receive,
before any distribution of any part of the assets of the Company among the
holders of any other shares, for each Preferred Share, an amount equal to the
redemption price of such share and any dividends declared thereon and unpaid.

48

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C.Material contracts.

|1. | Senior Secured Gold Stream Credit Agreement between
      Manhattan Mining Co., certain guarantors and Waterton Global Value, L.P.,
      by the general partner of its general partner, Cortleigh Limited, dated
      August 26, 2011. See note 12 to the Consolidated Financial Statements,
      included in Item 17 of this annual report or Form 20-F.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                             
|2. | In order to maintain its property on the Goldwedge
      project, the Company has to pay annual claim renewal fees to the BLM of
      approximately $15,000.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                             
|3. | In order to maintain its lease agreements on the Piñon
      Project, the Company had to make annual payments of $79,100 for the year
      ended January 31, 2012 and a commitment of $175,000 (incurred) in
      exploration expenses, which include claim renewal fees of $15,000 to the
      BLM.                                                     
|   |                                                                                                                                                                                                                                                                                                                                                             
|4. | In order to maintain the lease agreements on the Fondaway
      Project, the Company has to make option payments of $35,000 and has to pay
      claim renewal fees to the BLM of approximately
$15,000.                                                                                                                                                    

D.Exchange controls.

There is no law, governmental decree or regulation in Canada
that restricts the export or import of capital, including foreign exchange
controls, or that affects the remittance of dividends, interest or other
payments to non-resident holders of Common Shares, other than withholding tax
requirements and potential capital gain on the disposition of the Common Shares
under certain circumstances. See Item 10.E. Taxation.

E.Taxation

Canadian Federal Income Tax Considerations

The following is a summary of certain Canadian federal income
tax provisions under the Income Tax Act (Canada) and the regulations promulgated
thereunder (the Tax Act) applicable to United States corporations, citizens
and resident alien individuals purchasing Common Shares. The discussion is only
a general summary and does not purport to deal with all aspects of Canadian
federal taxation that may be relevant to shareholders, including those subject
to special treatment under the Tax Act. Shareholders are advised to consult
their own tax advisors regarding the Canadian federal income tax consequences of
holding and disposing of the Company's Common Shares, as well as any
consequences arising under U.S. federal, state or local tax laws or tax laws of
other jurisdictions outside the United States. The summary is based on the
assumption that, for Canadian tax purposes, the purchasers or shareholders (i)
deal at arm'slength with the Company, (ii) are not resident or deemed to be
resident in Canada, (iii) hold the Common Shares as capital property and (iv) do
not use or hold Common Shares in, or in the course of, carrying on business in
Canada (a "Non-Resident Holder").

This summary does not apply to a shareholder that is a
financial institution (as defined in the Tax Act for the purpose of the
mark-to-market rules), to a shareholder an interest in which is a tax shelter
investment (as defined in the Tax Act) or to a shareholder that has elected to
report its Canadian tax results (as defined in the Tax Act) in a currency
other than Canadian currency.

Dividends paid or credited or deemed to be paid or credited to
a Non-Resident Holder on the Common Shares will generally be subject to Canadian
withholding tax at a rate of 25%, subject to reduction under the provisions of
an applicable income tax treaty or convention between Canada and the country in
which the Non-Resident Holder is resident. For this purpose, dividends will
include amounts paid by the Company in excess of the paid-up capital of the Common Shares
on a redemption or a purchase for cancellation of such shares by the Company
(other than purchases on the open market).

49

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Where a Non-Resident Holder is a resident of the United States
for purposes of the Canada-United States Tax Convention (1980) and is fully
entitled to the benefits under such treaty, the applicable rate of Canadian
withholding tax is generally reduced to 15% of the gross amount of the dividends
(or 5% in the case of a resident of the United States that is a company
beneficially owning at least 10% of the Companys voting shares).

A Non-Resident Holder will generally not be subject to tax in
Canada on capital gains realized from disposition of Common Shares, unless such
shares are "taxable Canadian property" within the meaning of the Tax Act and the
Non-Resident Holder is not entitled to relief under an applicable tax
treaty.

The Common Shares will generally not constitute taxable
Canadian property of the Non-Resident Holder unless at any time during the
60-month period that ends at that time more than 50% of the fair market value of
the Common Shares of the Company was derived directly or indirectly from one, or
any combination of, real or immovable property situated in Canada, Canadian
resource properties (as defined in the Tax Act), timber resource properties (as
defined in the Tax Act), and options in respect of, or interests in, or for
civil law rights in, any such properties (whether or not such property exists).
Certain provisions of the Tax Act may deem property to be taxable Canadian
property of a Non-Resident Holder in specific circumstances. Non-Resident
Holders should consult their own tax advisors for advice having regard to their
particular circumstances.

United States Federal Income Tax Considerations

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230,
PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S.
FEDERAL TAX ISSUES IN THIS ANNUAL REPORT IS NOT INTENDED OR WRITTEN TO BE RELIED
UPON, AND CANNOT BE RELIED UPON, BY INVESTORS FOR THE PURPOSE OF AVOIDING
PENALTIES THAT MAY BE IMPOSED UNDER THE CODE; (B) SUCH DISCUSSION IS BEING USED
IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED HEREIN; AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON
THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following summary describes certain material U.S. federal
income tax considerations generally applicable to U.S. Holders (as defined
below) with respect to the ownership and disposition of the Companys common
shares offered hereunder. This summary is based on the Internal Revenue Code of
1986, as amended (the Code), Treasury Regulations (whether final, temporary or
proposed), administrative rulings of the Internal Revenue Service (IRS),
judicial decisions and the Convention Between Canada and the United States of
America with Respect to Taxes on Income and on Capital, signed September 26,
1980, as amended (the U.S.-Canada tax treaty), as in effect and available as
of the date of this annual report, all of which are subject to change, possibly
with retroactive effect. It addresses only U.S. Holders that hold the Companys
common shares as capital assets within the meaning of Section 1221 of the Code
(generally, assets held for investment purposes). The following summary does not
purport to be a complete analysis of all of the potential U.S. federal income
tax considerations that may be relevant to particular U.S. Holders in light of
their particular circumstances, nor does it deal with persons that are subject
to special tax rules, such as brokers, dealers in securities or currencies,
financial institutions, mutual funds, insurance companies, tax-exempt entities,
qualified retirement plans, regulated investment companies, common trust funds,
U.S. Holders subject to the alternative minimum tax, U.S. Holders holding the Companys common shares as part of a
straddle, hedge or conversion transaction or as part of a synthetic security or
other integrated transaction, traders in securities that elect to use a mark-to
market method of accounting for their securities holdings, U.S. Holders that
have a functional currency other than the U.S. dollar, U.S. expatriates, and
persons that acquired the Companys common shares in connection with the
performance of services. In addition, this summary does not address persons that
hold an interest in a partnership or other pass-through entity that holds the
Companys common shares, or tax considerations arising under the laws of any
state, local or non-U.S. jurisdiction or other U.S. federal tax considerations
(e.g., estate or gift tax) other than those pertaining to the income tax.

50

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As used herein, the term U.S. Holder means a beneficial owner
of the Companys common shares that is (i) a citizen or individual resident of
the U.S. for U.S. federal income tax purposes, (ii) a corporation (or an entity
classified as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the U.S. or any political subdivision thereof,
(iii) an estate, the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a trust if (A) a U.S. court is able to
exercise primary supervision over its administration and one or more U.S.
persons, within the meaning of Section 7701(a)(30) of the Code, have authority
to control all of its substantial decisions or (B) it has properly elected under
applicable Treasury Regulations to be treated as a U.S. person.

The tax treatment of a partner in a partnership (or other
entity classified as a partnership for U.S. federal income tax purposes) may
depend on both the partners and the partnerships status and the activities of
such partnership. Partnerships that are beneficial owners of the Companys
common shares, and partners in such partnerships, should consult their own tax
advisors regarding the U.S. federal, state, local and non-U.S. tax
considerations applicable to them with respect to the ownership and disposition
of the Companys common shares.

THIS SUMMARY IS OF A GENERAL NATURE ONLY. IT IS NOT INTENDED
TO CONSTITUTE, AND SHOULD NOT BE CONSTRUED TO CONSTITUTE, LEGAL OR TAX ADVICE TO
ANY PARTICULAR U.S. HOLDER. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR
CIRCUMSTANCES.

Ownership and Disposition of the Companys Common Shares

Distributions. Subject to the discussion below under
United States Federal Income Tax Considerations  Passive Foreign Investment
Company Rules and United States Federal Income Tax Considerations  Controlled
Foreign Corporations, distributions made with respect to the Companys common
shares (including any Canadian taxes withheld from such distributions) generally
will be included in the gross income of a U.S. Holder as dividend income to the
extent of the Companys current and accumulated earnings and profits, as
determined under U.S. federal income tax principles. Distributions in excess of
the Companys current and accumulated earnings and profits, if made with respect
to the Companys common shares, will be treated as a return of capital to the
extent of the U.S. Holders adjusted tax basis in such common shares, and
thereafter as capital gain.

For taxable years beginning before January 1, 2013, a dividend
paid by the Company generally will be taxed at the preferential tax rates
applicable to long-term capital gains if (a) the Company is a qualified foreign
corporation (as defined below), (b) the U.S. Holder receiving such dividends is
an individual, estate, or trust, and (c) such dividend is paid on the Companys
shares that have been held by such U.S. Holder for at least 61 days during the
121-day period beginning 60 days before the ex-dividend date.

The Company generally will be a qualified foreign
corporation under Section 1(h)(11) of the Code (a QFC) if the Company is
eligible for the benefits of the U.S.-Canada tax treaty or, if not, the Companys shares are readily tradable on an established
securities market in the U.S. However, even if the Company satisfies one or more
of such requirements, the Company will not be treated as a QFC if the Company is
a PFIC for the taxable year during which it pays a dividend or for the preceding
taxable year.

51

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As discussed below, the Company has not made a determination
of whether it is or has been a PFIC. It is possible that the Company currently
is, may have been or will be a PFIC.

If any dividends are paid in Canadian dollars, the amount
includible in gross income will be the U.S. dollar value of such dividend,
calculated by reference to the exchange rate in effect on the date of actual or
constructive receipt of the payment, regardless of whether the payment is
actually converted into U.S. dollars. If any Canadian dollars actually or
constructively received by a U.S. Holder are later converted into U.S. dollars,
such U.S. Holder may recognize gain or loss on the conversion, which will be
treated as ordinary gain or loss. Such gain or loss generally will be treated as
gain or loss from sources within the U.S. for U.S. foreign tax credit purposes.

A U.S. Holder may be entitled to deduct or claim a credit for
Canadian withholding taxes, subject to applicable limitations in the Code.
Complex limitations apply to the foreign tax credit, including the general
limitation that the credit cannot exceed the proportionate share of a U.S.
Holders U.S. federal income tax liability that such U.S. Holders foreign
source taxable income bears to such U.S. Holders worldwide taxable income. In
applying this limitation, a U.S. Holders various items of income and deduction
must be classified, under complex rules, as either foreign source or U.S.
source. However, the amount of a distribution with respect to the common shares
that is treated as dividend may be lower for U.S. federal income tax purposes
than it is for Canadian federal income tax purposes, resulting in a reduced
foreign tax credit allowance to a U.S. Holder. In addition, this limitation is
calculated separately with respect to specific categories of income. Dividends
paid to a U.S. Holder generally will constitute foreign source income and
generally will be categorized as passive category income. U.S. Holders should
consult their own tax advisors regarding the availability of the foreign tax
credit in their particular circumstances.

Dispositions.Subject to the discussion below under
United States Federal Income Tax Considerations  Passive Foreign Investment
Company Rules and United States Federal Income Tax Considerations  Controlled
Foreign Corporations, upon the sale, exchange or other taxable disposition of
the Companys common shares, a U.S. Holder generally will recognize capital gain
or loss equal to the difference between (i) the amount of cash and the fair
market value of any other property received upon the sale, exchange or other
taxable disposition and (ii) the U.S. Holders adjusted tax basis in such common
shares. Capital gain or loss recognized upon a sale, exchange or other taxable
disposition of the Companys common shares will generally be long-term capital
gain or loss if the U.S. Holders holding period with respect to such common
shares disposed of is more than one year at the time of the sale, exchange or
other taxable disposition. The deductibility of capital loss is subject to
limitations.

Passive Foreign Investment Company Rules

The foregoing discussion assumes that the Company is not a
PFIC. Certain adverse U.S. federal income tax rules generally apply to a U.S.
person that owns or disposes of stock in a non-U.S. corporation that is treated
as a PFIC. In general, a non-U.S. corporation will be treated as a PFIC for any
taxable year during which, after applying relevant look-through rules with
respect to the income and assets of subsidiaries, either (i) 75% or more of the
non-U.S. corporations gross income is passive income, or (ii) 50% or more of
the average value of the non-U.S. corporations assets produce or are held for
the production of passive income. Special rules apply where a non-U.S.
corporation owns, directly or indirectly, at least 25% (by value) of the shares
of another corporation (a lower-tier corporation).

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For purposes of determining whether the Company is a PFIC, it
will be treated as if it held its proportionate share of the assets of any
lower-tier corporation and received directly its proportionate share of the
income of any lower-tier corporation.

For purposes of the PFIC rules, and subject to certain
exceptions, passive income generally includes dividends, interest, certain rents
and royalties, and the excess of gains over losses from certain commodities
transactions, including transactions involving oil and gas. However, gains and
losses from commodities transactions generally are excluded from the definition
of passive income if (i) such gains or losses are derived by a non-U.S.
corporation in the active conduct of a commodity business, and (ii)
substantially all of such corporations business is as an active producer,
processor, merchant or handler of commodities of like kind (the active
commodities business exclusion).

The Company has not made a determination as to its PFIC status
for the current or any past taxable years. PFIC classification is factual in
nature, generally cannot be determined until the close of the taxable year in
question, and is determined annually. Thus, there can be no assurance that the
Company is not a PFIC for the current taxable year, has not been for any past
taxable years or will not be a PFIC for any future taxable years.

The following U.S. federal income tax consequences generally
will apply to a U.S. Holder of the Companys common shares if the Company is
treated as a PFIC:

Distributions.Distributions made by the Company with
respect to its common shares, to the extent such distributions are treated as
excess distributions pursuant to Section 1291 of the Code, must be allocated
rateably to each day of the U.S. Holders holding period for such common shares.
The amounts allocated to the taxable year during which the distribution is made,
and to any taxable years in such U.S. Holders holding period which are prior to
the first taxable year in which the Company is treated as a PFIC, are included
in such U.S. Holders gross income as ordinary income for the taxable year of
the distribution. The amount allocated to each other taxable year is taxed as
ordinary income in the taxable year of the distribution at the highest tax rate
in effect for the U.S. Holder in that other taxable year and is subject to an
interest charge at the rate applicable to underpayments of tax. Any distribution
made by the Company that does not constitute an excess distribution would be
treated in the manner described under United States Federal Income Tax
Considerations  Ownership and Disposition of the Companys Common Shares 
Distributions, above.

Dispositions. The entire amount of any gain realized upon the
U.S. Holders disposition of the Companys common shares generally will be
treated as an excess distribution made in the taxable year during which such
disposition occurs, with the consequences described above.

Elections. In general, the adverse U.S. federal income tax
consequences of holding stock of a PFIC described above may be mitigated if a
U.S. shareholder of the PFIC is able to, and timely makes, a valid qualified
electing fund (QEF) election with respect to the PFIC or a valid
mark-to-market election with respect to the stock of the PFIC. U.S. Holders
should be aware that there can be no assurance that the Company will supply U.S.
Holders with the information and statements that such U.S. Holders require to
make a QEF election under Section 1295 of the Code.

Under recently enacted U.S. tax legislation and subject to
future guidance, if the Company is a PFIC, U.S. Holders will be required to file
an annual information return with the IRS (on IRS Form 8621, which will be
required to be filed with income tax or information returns) relating to their
ownership of the common shares (the general filing requirement). In addition
under the current version of the Instructions to IRS Form 8621, if the Company
is a PFIC, U.S. Holders generally will be required to file IRS Form 8621 if they
receive excess distributions from or dispose of the common shares or in order to
make certain tax elections with respect to the common shares (the reportable
transaction filing requirement). Pursuant to recent IRS guidance, the IRS has temporarily suspended the
general filing requirement under the recent legislation until the IRS releases a
revised IRS Form 8621 which reflects the recently enacted U.S. tax legislation.
However, the reportable transaction filing requirement is not affected by the
temporary suspension set forth in the recent IRS guidance and continues to apply
to PFIC shareholders under the current version of the Instructions to IRS Form
8621.

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U.S. Holders should consult their own tax advisors as to the
tax consequences of owning and disposing of stock in a PFIC, including the
availability of any elections that may mitigate the adverse U.S. federal income
tax consequences of holding stock of a PFIC.

Certain Controlled Foreign Corporation Rules

If more than 50% of the total voting power or the total value
of the Companys outstanding shares is owned, directly or indirectly, by
citizens or residents of the U.S., U.S. partnerships or corporations, or U.S.
estates or trusts (as defined by Section 7701(a)(30) of the Code), each of which
own, directly or indirectly, 10% or more of the total voting power of the
Companys outstanding shares (each a 10% Shareholder), the Company could be
treated as a Controlled Foreign Corporation (CFC) under Section 957 of the
Code.

The Companys classification as a CFC would bring into effect
many complex results, including that under Section 1248 of the Code, gain from
the disposition of the Companys common stock by a U.S. Holder that is or was a
10% Shareholder at any time during the five-year period ending with the
disposition will be treated as a dividend to the extent of the Companys
earnings and profits attributable to the common shares sold or exchanged.

If the Company is classified as both a PFIC and a CFC, the
Company generally will not be treated as a PFIC with respect to 10%
Shareholders.

The Company has made no determination as to whether it
currently meets or has met the definition of a CFC, and there can be no
assurance that it will not be considered a CFC for the current or any future
taxable year.

The CFC rules are very complicated, and U.S. Holders should
consult their own financial advisor, legal counsel or accountant regarding the
CFC rules and how these rules may impact their U.S. federal income tax
situation.

Surtax on Unearned Income

For tax years beginning after December 31, 2012, certain U.S.
persons, including individuals, estates and trusts, will be subject to an
additional 3.8% Medicare tax on net investment income. Investment income
generally includes passive income such as interest, dividends, annuities,
royalties, rents, and capital gains. Net investment income would be reduced by
properly allocable deductions to such income.

Information Reporting and Backup Withholding Tax

Dividend payments made with respect to shares of the Companys
stock and proceeds from the sale, exchange or other disposition of common shares
may be subject to information reporting requirements, and to possible U.S.
backup withholding (currently at a rate of 28%). In general, backup withholding
will apply with respect to reportable payments made to a U.S. Holder unless (i)
the U.S. Holder is a corporation or other exempt recipient and, if required,
demonstrates such exemption, or (ii) the U.S. Holder furnishes the payor with a
taxpayer identification number on IRS Form W-9 in the manner required, certifies under penalty of perjury that such U.S.
Holder is not currently subject to backup withholding and otherwise complies
with the backup withholding requirements.

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Backup withholding is not an additional tax. Rather, the amount
of any backup withholding imposed on a payment to a holder will be allowed as a
refund or a credit against such holders U.S. federal income tax liability,
provided that the required information is furnished to the IRS.

Additional Reporting Requirements

Recently-enacted U.S. tax legislation generally requires a U.S.
individual to report to the IRS certain interests owned by such individual in
stock issued by a non-U.S. person (such as the Companys common shares), if the
aggregate value of all such interests exceeds $50,000. This reporting
requirement is subject to certain exceptions (including an exception for stock
held in custodial accounts maintained by a U.S. financial institution), and
applies for tax years beginning after March 18, 2010. Pursuant to recent IRS
guidance, this reporting requirement has been suspended until the IRS releases
IRS Form 8938. Additional guidance is expected regarding the specific
information that will be required to be reported on IRS Form 8938. Prior to
filing their annual income tax returns, U.S. Holders should consult their tax
advisers regarding whether additional guidance has been issued with respect to
this reporting requirement, and if so, how to comply with such guidance.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE
ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO
THE OWNERSHIP AND DISPOSITION OF THE COMPANYS COMMON SHARES. U.S. HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO
THEM IN THEIR PARTICULAR CIRCUMSTANCES.

F.Dividends and paying agents.

Not applicable.

G.Statement by experts.

Not applicable.

H.Documents on display.

Documents concerning the Company that are referred to in this
annual report on Form 20-F may be inspected at 50 Richmond Street East, Suite
101, Toronto, Ontario M5C 1N7 during regular business hours of the Company.

You may also review a copy of the Companys filings with the
SEC, including exhibits and schedules filed with this annual report on Form
20-F, at the SEC's public reference room 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You may also obtain copies of such materials upon
payment of a duplicating fee, by writing to the SEC. You may call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. The SEC
maintains a website (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.

You may read and copy any reports, statements or other
information that the Company files with the SEC at the addresses indicated above
and you may also access some of them electronically at the website set forth above. These SEC filings are also available to the public
from commercial document retrieval services.

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The Company also files reports, statements and other
information with the Canadian Securities Administrators (the CSA), and these
can be accessed electronically at the CSA's System for Electronic Document
Analysis and Retrieval website (http://www.sedar.com).

I.Subsidiary Information.

Not applicable.

Item 11. Quantitative and Qualitative Disclosures
about Market Risk

The Company's activities expose it to a variety of financial
risks including credit risk, liquidity risk and market risk. Risk management is
carried out by the Company's management team with guidance from the Audit
Committee under policies approved by the Board. The Board also provides regular
guidance for overall risk management.

Market risk is the risk of loss that may arise from changes in
market factors such as interest rate, foreign exchange rates and commodity and
equity prices.

Credit risk. Credit risk is the risk of
loss associated with a counterparty's inability to fulfill its payment
obligations. The Company's credit risk is primarily attributable to cash,
reclamation bonds and due from related parties. The Company has no significant
concentration of credit risk arising from operations. Cash and reclamation bonds
are held with reputable financial institutions, from which management believes
the risk of loss to be minimal.

Liquidity risk.Liquidity risk refers to
the risk that the Company will not be able to meet its financial obligations
when they become due, or can only do so at excessive cost. The Company's
approach to managing liquidity risk is to ensure that it will have sufficient
liquidity to meet liabilities when due. As at January 31, 2012, the Company had
a cash balance of $629,553 January 31, 2011 ($102,038) to settle current
liabilities of $6,120,109 (January 31, 2011 - $935,688). All of the Company's
financial liabilities have contractual maturities of less than 60 days and are
subject to normal trade terms. The Company continues to seek sources of
additional capital to improve its liquidity position.

Market risk. Market risk is the risk of
loss that may arise from changes in market factors such as interest rate,
foreign exchange rates and commodity and equity prices.

(a) Interest rate risk

Interest rate risk is the risk that the
fair value of a financial instrument will fluctuate due to changes in market
interest rates. The Company has cash balances and no interest bearing debt. The
Company's current policy is to invest excess cash in guaranteed investment
certificates, bankers acceptance and money market deposits, with reputable
financial institutions. The Company regularly monitors its cash management
policy.

(b) Foreign currency risk

Foreign exchange risk arises from
future commercial transactions and recognized assets and liabilities denominated
in a currency that is not the entity's functional currency. The risk is measured
using cash flow forecasting. The Company's functional and reporting currency is
the United States dollar ("U.S. dollar") and major purchases are transacted in U.S. dollars. An operating account is maintained in Canadian
dollars primarily for settlement of general and corporate expenditures.

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(c) Commodity price risk

The Company is exposed to price risk
with respect to commodity and equity prices. Equity price risk is defined as the
potential adverse impact on the Company's earnings due to movements in
individual equity prices or general movements in the level of the stock market.
Commodity price risk is defined as the potential adverse impact on earnings and
economic value due to commodity price movements and volatility. The Company
closely monitors commodity prices, as it relates to coal and precious metals in
the United States, individual equity movements and the stock market in general
to determine the appropriate course of action to be taken by the Company.

Sensitivity analysis

As of January 31, 2012, the carrying and fair value amounts of
the Company's financial instruments are approximately equivalent.

Based on management's knowledge and experience of the financial
markets, the Company believes the following movements are "reasonably possible"
over a twelve month period. The sensitivity analysis shown in the notes below
may differ materially from actual results.

- The Company's marketable securities are subject to fair value
  fluctuations. As at January 31, 2012, if the fair value of the marketable
  securities had decreased/increased by 10% with all other variables held
  constant, comprehensive loss for the twelve months ended January 31, 2012
  would have been approximately $15,000 higher/lower. Similarly, as at January
  31, 2012, reported shareholders' equity would have been approximately $15,000
  lower/higher as a result of a 10% decrease/increase in the fair value of
  marketable securities.
- Cash, sundry receivables, due from and to related parties and accounts
  payable and accrued liabilities denominated in Canadian dollars are subject to
  foreign currency risk. As at January 31, 2012, had the US dollar
  weakened/strengthened by 5% against the Canadian dollar with all other
  variables held constant, the net loss and comprehensive loss would be affected
  by approximately $36,000.
- Commodity price risk could adversely affect the Company. In particular,
  the Company's future profitability and viability of development depends upon
  the world market price of coal and precious metals. Coal and precious metals
  have fluctuated widely in recent years. There is no assurance that, even as
  commercial quantities of coal and precious metals may be produced in the
  future, a profitable market will exist for them. A decline in the market price
  of coal and precious metals may also require the Company to reduce its mineral
  properties, which could have a material and adverse effect on the Company's
  value. As at January 31, 2012, the Company was not a coal or precious metal
  producer. As a result, commodity price risk may affect the completion of
  future equity transactions such as equity offerings, debt offerings and the
  exercise of stock options. This may also affect the Company's liquidity and
  its ability to meet its ongoing obligations.
- The fair value of the embedded derivative on long-term debt is determined
  by the gold price at the repayment dates. When the gold price is over $1,600
  per ounce, the embedded derivative would have a value. As at January 31, 2012,
  had the future gold price increased/decreased $50 per ounce, it would affect
  net loss and comprehensive loss by approximately $57,000.

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Item 12. Description of Securities Other than Equity
Securities

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and
Delinquencies

Not applicable.

Item 14. Material Modifications to the Rights of
Security Holders and Use of Proceeds

On January 11, 2012, the shareholders of the Company approved
the adoption of a shareholder rights plan agreement dated December 23, 2010 (the
Rights Plan). The following description of the Rights Plan is qualified in its
entirety by reference to the Rights Plan, which is filed as Exhibit 2.1 to this
annual report on Form 20-F.

Purpose of the Rights Plan

The primary purpose of the Rights Plan is to seek to ensure
that, in the context of a bid for control of the Company through an acquisition
of shares, all shareholders have an equal opportunity to participate in the bid
and are given adequate time to access the bid. The Rights Plan in no way
prohibits a change of control of the Company in a transaction that is
procedurally fair to shareholders. The Rights Plan does not attempt to
discourage bids. It allows a potential bidder to make a "permitted bid" directly
to the shareholders of the Company without the prior approval of the Board. Such
permitted bid must be made to all shareholders and must remain open for a
minimum period of 60 days after the date of the bid and for a further period of
10 business days after the bidder publicly announces that the shares deposited
constitute more than 50% of the outstanding Common Shares held by independent
shareholders.

Summary of the Rights Plan

The following summary of the Rights Plan does not purport to be
complete and is qualified in its entirety by reference to the Rights Plan.

Issuance of Rights

Pursuant to the Rights Plan, one Right has been issued and has
attached to each Common Share of the Company outstanding as of 4:00 p.m.
(Toronto time) on December 23, 2010, the date of implementation of the Company's
Rights Plan, and one Right will continue to be issued in respect of each Common
Share issued thereafter prior to the earlier of the Separation Time (as defined
below) and the expiration time.

Each Right entitles the holder thereof to purchase from the
Company one Common Share at the exercise price equal to five times the market
price per Common Shares determined as at the Separation Time, subject to
adjustment and certain anti-dilution provisions (the Exercise Price). The
Rights are not exercisable until the Separation Time. If a Flip-in Event
(defined below) occurs, each Right will entitle the registered holder to
receive, upon payment of the Exercise Price, that number of Common Shares of the
Company, having an aggregate market price on the date of the occurrence of such
Flip-in Event equal to twice the Exercise Price for an amount in cash equal to
the Exercise Price.

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Trading of Rights

Until the occurrence of certain specific events, the Rights
will trade with the Common Shares of the Company and not be represented by any
certificates for such Common Shares. The Rights will separate and trade
separately from the Common Shares to which they are attached and will become
exercisable from and after the Separation Time.

Separation Time

The Separation Time will occur on the close of business on
the tenth trading day after the earliest of: (a) the date of public announcement
by the Company or an Acquiring Person (defined below) of facts indicating that a
person has become an Acquiring Person, (b) the date that any person commences or
announces an intention to commence a take-over bid, and (c) the date on which a
Permitted Bid (as defined below) or a Competing Permitted Bid ceases to qualify
as such, or such later date as the Board may determine.

Acquiring Person

In general, an Acquiring Person is a person who is the
beneficial owner of 20% or more of the outstanding voting shares of the Company.
Excluded from the definition of Acquiring Person are the Company and its
subsidiaries, and any person who becomes the beneficial owner of 20% or more of
the outstanding voting shares of the Company as a result of one or more or any
combination of a Voting Share Reduction, Permitted Bid Acquisitions, Exempt
Acquisition, a Pro Rata Acquisition, or a Convertible Security Acquisition. The
definitions of Voting Share Reduction, Permitted Bid Acquisitions, Exempt
Acquisition, a Pro Rata Acquisition, or a Convertible Security Acquisition
are set out in the Rights Plan. However, in general:

(a)      a Voting Share Reduction
means an acquisition or redemption by the Company or a subsidiary of voting
shares which by reducing the number of voting shares outstanding increases the
percentage of outstanding voting shares beneficially owned by any person to 20%
or more of the voting shares outstanding;

(b)      a Permitted Bid Acquisition
meansa voting share acquisition made pursuant to a Permitted Bid or a
Competing Permitted Bid;

(c)      an Exempt Acquisition means
an acquisition of voting shares: (i) in respect of which the directors have
waived the application of the Flip-in Event provisions of the Rights Plan; (ii)
pursuant to a distribution by the Company of voting shares or convertible
securities (x) pursuant to a prospectus or similar document (provided that the
purchaser does not thereby beneficially own a greater percentage of voting
shares or convertible securities so offered than the percentage of voting shares
or convertible securities beneficially owned by the purchaser immediately prior
to such acquisition) or (y) by private placement provided that in such case, all
necessary stock exchange approvals have been obtained and complied with and the
purchaser does not become the beneficial owner of more than 25% of the voting
shares issued and outstanding immediately prior to the private placement (and in
making this determination, the securities to be issued to such purchaser on the
private placement will be deemed to be held by such purchaser but shall not be
included in the aggregate number of outstanding voting shares immediately prior
to the private placement); and (iii) pursuant to an amalgamation, merger or
other statutory procedure requiring shareholder approval;

(d)      a Pro Rata Acquisition
means: (i) an acquisition as a result of a stock dividend or a stock split or
other event pursuant to which a person receives or acquires voting shares on the
same proportionate basis as all other holders of the same class of voting shares;
(ii) the acquisition pursuant to a dividend reinvestment plan of the Company or
other plan made available by the Company to the holders of voting shares
generally; or (iii) the receipt and/or exercise of rights (other than the
Rights) issued by the Company to all holders of a class of voting shares to
subscribe for or purchase voting shares, provided that such rights are acquired
directly from the Company and not from any other person; and

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(e)      a Convertible Security
Acquisition means the acquisition of voting shares on the exercise, conversion
or exchange of convertible securities acquired by a person pursuant to a
Permitted Bid Acquisition, Exempt Acquisition or Pro Rata Acquisition.

Also excluded from the definition of Acquiring Person are
underwriters or members of a banking or selling group acting in such capacity in
connection with a distribution of securities, and a Person (a Grandfathered
Person) who is the beneficial owner of 20% or more of the outstanding voting
shares of the Company as at the record time; provided, however, that this
exception ceases to be applicable to a Grandfathered Person in the event that
such Grandfathered Person shall, after the record time, become the Beneficial
Owner of any additional voting shares outstanding at the record time, other than
pursuant to one or any combination of a Voting Share Reduction, a Permitted Bid
Acquisition, an Exempt Acquisition or a Pro Rata Acquisition.

In addition, for purposes of determining whether a Flip-in
Event has occurred, generally, a person (including a trust company) who is
engaged in the business of managing investment funds for others and, as part of
such person's duties for fully managed accounts, holds or exercises voting or
dispositive power over voting shares in the ordinary course of business, would
not, by reason thereof, be considered to be the beneficial owner of such voting
shares. Exemptions are also provided for Crown agents and statutory or other
registered pension plans or funds. In each case, the exemption ceases to apply
in the event that the exempt person is making a take-over bid (other than
pursuant to a distribution by the Company, pursuant to a Permitted Bid or
Competing Permitted Bid or by means of ordinary course market transactions).

Flip-in Event

If a transaction occurs prior to the expiration time pursuant
to which any person becomes an Acquiring Person (a Flip-in Event), then each
Right will constitute within ten trading days of such occurrence that each Right
(except for Rights beneficially owned by the Acquiring Person, its affiliates or
associates and/or persons acting jointly or in concert with the foregoing) shall
thereafter constitute the right to purchase from the Company upon payment of the
exercise price that number of Common Shares of the Company having an aggregate
market price on the date of the occurrence of such Flip-in Event equal to twice
the exercise price for an amount in cash equal to the exercise price (subject to
anti-dilution adjustments).

Permitted Bid

A Permitted Bid is a take-over bid where the bid is made by
way of a take-over bid circular and is a bid that complies with, among other
things, the following: (a) the take-over bid must be made to all holders of
voting shares other than the bidder; and (b) (i) the take-over bid must not
permit the bidder to take up any Common Shares that have been tendered pursuant
to the take-over bid prior to the expiry of a period not less than 60 days after
the date of the take-over bid, and (ii) then only if at such time more than 50%
of the voting shares held by the independent shareholders (which generally
includes shareholders other than the bidder, its affiliates or associates and/or
persons acting jointly or in concert with the foregoing), have been deposited or
tendered pursuant to the take-over bid and not withdrawn.

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Competing Permitted Bid

A Competing Permitted Bid is a take-over bid that satisfies
all the criteria of a permitted bid except that since it is made after a
permitted bid or another competing permitted bid (the prior bid) the time
period for any take up and payment of voting shares tendered under a competing
bid is not 60 days, but is instead no earlier than the later of 35 days after
the date of the Competing Permitted Bid and the 60th day after the
date of the Prior Bid outstanding, and then only if at the close of business on
the date voting shares are first taken up or paid for, more than 50% of the
outstanding voting shares held by independent shareholders have been deposited
or tendered pursuant to such Competing Prior Bid and not withdrawn. The
requirements of a Permitted Bid and a Competing Permitted Bid enable
shareholders to decide whether the take-over bid or any Competing Permitted Bid
is adequate on its own merits, without being influenced by the likelihood that a
take-over bid will succeed.

Lock-Up Agreement

The Rights Plan contains an exemption for Lock-Up Agreements,
where the agreement, among other things: (a) permits the locked-up person to
withdraw voting shares from the lock-up bid to tender to another bid that
provides greater value, or if another bid is an offer for a greater number of
voting shares (where the maximum hurdle rate is 5%), and (b) provides for no
break-up fees or similar fees payable to the locked-up person that are greater
than: (i) the cash equivalent of 3.5% of the price or value payable to the
locked-up person under the lock-up bid; and (ii) one-half of the difference in
value payable to the locked-up person between the lock-up bid and the other bid.

Redemption

Until the occurrence of a Flip-In Event as to which the Board
has not issued a waiver, the Board, with the prior consent of the shareholders,
may elect to redeem all but not less than all of the then outstanding Rights at
a redemption price of Cdn$0.00001 per Right (subject to anti-dilution
adjustments).

Waiver

Until the occurrence of a Flip-in Event, the Board may waive
the application of the Rights Plan to a take-over bid that is not a Permitted
Bid and that is made to all holders of voting shares, but if it does so then it
will be deemed to have waived the application of the Rights Plan to all similar
bids made prior to the expiry of any bid for which such a waiver was granted.

In addition, subject to the prior consent of holders of voting
shares, until the occurrence of a Flip-in Event, the Board may waive the
application of the Rights Plan if such Flip-in Event would occur by reason of an
acquisition of voting shares other than pursuant to a take-over bid.

Term of the Rights Plan

The Rights Plan will expire on the close of business on
December 23, 2020 unless extended by the Board.

Amending Power

The Company, without the prior consent of holders of voting
shares at any time prior to the Separation Time, may supplement or amend any
provisions of the Rights Plan, except that Section 5 thereof, dealing with the
rights agent, requires the written consent of the rights agent to such
supplement or amendment. Any amendment will be subject to receipt of any
requisite approval or consent from any applicable regulatory authority, including necessary approvals of the
stock exchange on which the Common Shares may be listed.

61

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Rightsholder not a Shareholder

Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company.

Item 15. Controls and Procedures

A.Disclosure Controls and
Procedures.

As of January 31, 2012 and based on their evaluations the
Company's principal executive officer and principal financial officer have
concluded that the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective to ensure that the
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in SEC rules and forms.

B.Management's Annual Report on Internal
Control over Financial Reporting.

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined under Exchange
Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.

All internal control systems, no matter how well designed, have
inherent limitations and may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can only provide reasonable
assurance with respect to financial reporting reliability and financial
statement preparation and presentation. In addition, projections of any
evaluation of effectiveness to future periods are subject to risk that controls
become inadequate because of changes in conditions and that the degree of
compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal
control over financial reporting as of January 31, 2012. In making the
assessment, management used the criteria issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on its assessment, management concluded that, as of January 31,
2012, the Company's internal control over financial reporting was effective to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

C.Attestation Report of the Registered
Public Accounting Firm.

This annual report on Form 20-F does not include an attestation
report of the Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's registered public accounting firm pursuant to the
rules of the SEC that permit the Company to provide only management's report in
this annual report.

62

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D.Changes in Internal Control over
Financial Reporting.

There were no changes in the Companys internal controls over
financial reporting that occurred during the fiscal year ended January 31, 2012
that has materially affected, or is reasonably likely to materially affect the
Companys internal control over financial reporting.

Item 16. [Reserved]

Item 16A.Audit Committee Financial Expert

The Board has determined that Mr. James Clancy, a director and
Audit Committee member of the Company is an audit committee financial expert
as defined in Form 20-F. Mr. Clancy is independent, as such term is defined
under the Nasdaq Stock Market Rules..

Item 16B.Code of Ethics

The Company is committed to maintaining high standards of
integrity and accountability in conducting its business. It is the Company's
goal to seek to ensure that its best interests are paramount in all of its
dealings with consultants, competitors, existing and potential business partners
and other representatives wherever possible, and are conducted in a manner that
avoids actual or potential material conflicts of interest. The Board takes steps
to ensure directors exercise independent judgment in considering transactions
and agreements in respect of which a director or officer of the Company has a
material interest, which include ensuring that directors and officers are
familiar with the rules concerning reporting conflicts of interest and obtaining
direction from the Companys President and Chief Executive Officer and/or the
Companys legal counsel, as appropriate, regarding any potential conflicts of
interest. The Company has not yet adopted a formal written code of ethics
because the Company believes that the fiduciary duties required to be met by the
Companys officers and directors, as set forth above, are sufficient to ensure
that the Company operates in an ethical manner at this stage of the Companys
Development.

Item 16C.Principal Accountant Fees and
Services

MSCM LLP has served as the Companys auditing firm since March
26, 2009. Aggregate fees billed to the Company for professional services
rendered by MSCM LLP and its affiliates during the fiscal years ended January
31, 2012 and January 31, 2011 are detailed below:

|                   |   | Year Ended January
      31, | 
|------------------ | - | ---------------------------- | 
|                   |   | (Cdn$)                       | 
|                   |   | 2012                         | 
|Audit Fees         | $ | 60,000                       | 
|Audit-Related Fees | $ | 14,680                       | 
|Tax Fees           | $ | 0                            | 
|All Other Fees     | $ | 1,200                        | 

The nature of each category of fees is as follows:

Audit Fees:

Audit fees were paid for professional services rendered by the
auditors for the audit of the Companys annual financial statements, reviews of
the Companys condensed consolidated interim financial statements and
attestation services provided in connection with statutory and regulatory
filings or engagements.

63

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Audit-Related Fees:

Audit-related fees are defined as the aggregate fees billed for
assurance and related services that are reasonably related to the performance of
the audit or review of the Companys financial statements and are not reported
under the Audit Fees item above. This category comprises fees billed for
advisory services associated with the Companys financial reporting.

Tax Fees:

Tax fees are defined as the aggregate fees billed for
professional services rendered by the Companys external auditor for tax
compliance, tax advice and tax planning.

All Other Fees:

All other fees include expenses reimbursed for services
rendered to the Company and its subsidiaries, other than the services described
above.

Pre-approval Policies and Procedures

All services to be performed by the Companys auditor must be
approved in advance by the Audit Committee. The Audit Committee, in consultation
with senior management, reviews annually and recommends for approval by the
Board.

- the appointment of independent auditors at the annual general meeting of
  shareholders of the Company;
- the remuneration of the auditors; and
- pre-approval of all audit and non-audit services to be provided to the
  Company by the external auditor, other than any de minimisnon-audit
  services allowed by applicable law or regulation.

Since the commencement of the Company's most recently completed
financial year, every recommendation of the Audit Committee to nominate or
compensate an external auditor was adopted by the Board.

Of the total aggregate fees paid by the Company to its
accountants during the fiscal year ended January 31, 2012, $74,680, or 98% of
the aggregate fees, were approved by the Audit Committee pursuant to the de
minimis exception provided by Section (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.

Item 16D.Exemptions from the Listing
Standards for Audit Committees

Not applicable.

Item 16E.Purchases of Equity Securities by
the Issuer and Affiliated Purchasers

Not applicable.

Item 16F.Change in Registrant's Certifying
Accountant

Not applicable.

64

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Item 16G.Corporate Governance

Not applicable.

Item 16H.Mine Safety Disclosure

Not applicable.

PART III

Item 17. Financial Statements.

Following is a list of financial statements filed as part of
this annual report on Form 20-F.

- Auditor's Report for Royal Standard Minerals Inc. for the years ended
  January 31, 2012 and 2011.
- Consolidated Statements of Financial Position of Royal Standard Minerals
  Inc. as at January 31, 2012, January 31, 2011 and February 1, 2010.
- Consolidated Statements of Operations of Royal Standard Minerals Inc. for
  the years ended January 31, 2012 and 2011.
- Consolidated Statements of Cash Flows of Royal Standard Minerals Inc. for
  the years ended January 31, 2012 and 2011.
- Consolidated Statement of Changes in Shareholders Equity of Royal
  Standard Minerals Inc. for the years ended January 31, 2012 and 2011.
- Notes to the Consolidated Financial Statements of Royal Standard Minerals
  Inc.
- Management's Discussion and Analysis for the year ending January 31, 2012.

The consolidated financial statements of Royal Standard
Minerals Inc. were prepared in accordance with International Financial Reporting
Standards and are expressed in United States dollars. For a discussion of the
reconciliation of such financial statements to United States generally accepted
accounting principles, see note No. 18 of the notes to the consolidated
financial statements of Royal Standard Minerals Inc. (Please note, this
reconciliation would appear on the statements previously filed under Canadian
GAAP only).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Shareholders of Royal Standard Minerals Inc.

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial
statements of Royal Standard Minerals Inc. (the Company), which comprise the
consolidated statements of financial position as at January 31, 2012, January
31, 2011 and February 1, 2010, and the consolidated statements of operations,
changes in shareholders equity and cash flows for the years ended January 31,
2012 and 2011 and a summary of significant accounting policies and other
explanatory information.

Management's Responsibility for the Consolidated Financial
Statements

65

---

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.

The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation and fair presentation of
the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Royal Standard
Minerals Inc. as at January 31, 2012, January 31, 2011 and February 1, 2010, and
its financial performance and its cash flows for the years ended January 31,
2012 and 2011 in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1 to
the consolidated financial statements which indicates that the Company has no
sources of recurring revenue and has incurred losses amounting to $44,553,494
since its inception. These conditions, along with other matters as set forth in
Note 1, indicate the existence of material uncertainties that may cast
significant doubt about the Companys ability to continue as a going concern.

Signed: MSCM LLP Chartered Accountants Licensed
Public Accountants

Toronto, Ontario May 29, 2012

66

---



---

Royal Standard Minerals Inc.

(Expressed in United States Dollars)

Consolidated Financial Statements

January 31, 2012 and 2011

---



67

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MANAGEMENT'S RESPONSIBILITY FORCONSOLIDATED
FINANCIAL REPORTING

The accompanying audited annual financial statements of Royal
Standard Minerals Inc. (the "Company") are the responsibility of the Board of Directors.

The audited annual financial statements have been prepared by
management, on behalf of the Board of Directors, in accordance with the
accounting policies disclosed in the notes to the audited annual financial
statements. Where necessary, management has made informed judgments and
estimates in accounting for transactions which were not complete at the
reporting date. In the opinion of management, the financial statements have been
prepared within acceptable limits of materiality and are in compliance with all
applicable International Financial Reporting Standards.

Management has established processes, which are in place to
provide it sufficient knowledge to support management representations that it
has exercised reasonable diligence that (i) the audited annual financial
statements do not contain any untrue statement of material fact or omit to state
a material fact required to be stated or that is necessary to make a statement
not misleading in light of the circumstances under which it is made, as of the
date of, and for the periods presented by, the audited annual financial
statements; and (ii) the audited annual financial statements fairly present in
all material respects the financial condition, financial performance and cash
flows of the Company, as of the date of and for the periods presented by the
audited annual financial statements.

The Board of Directors is responsible for reviewing and
approving the audited annual financial statements together with other financial
information of the Company and for ensuring that management fulfills its
financial reporting responsibilities. An Audit Committee assists the Board of
Directors in fulfilling this responsibility. The Audit Committee meets with
management to review the financial reporting process and the audited annual
financial statements together with other financial information of the Company.
The Audit Committee reports its findings to the Board of Directors for its
consideration in approving the audited annual financial statements together with
other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the
Companys affairs in compliance with established financial standards, and
applicable laws and regulations, and for maintaining proper standards of conduct
for its activities.

|(signed) "Philip Gross"                       | (signed) "Ike Makrimichalos"
|--------------------------------------------- | ----------------------------
|                                              |                             
|Philip Gross                                  | Ike Makrimichalos           
|Interim President and Chief Executive Officer | Chief Financial Officer     

Toronto, CanadaMay 29, 2012

68

---



Independent Auditors' Report

To the Shareholders ofRoyal Standard Minerals Inc.

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial
statements of Royal Standard Minerals Inc. (the Company), which comprise the
consolidated statements of financial position as at January 31, 2012, January
31, 2011 and February 1, 2010, and the consolidated statements of operations,
changes in shareholders equity and cash flows for the years ended January 31,
2012 and 2011 and a summary of significant accounting policies and other
explanatory information.

Management's Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.

The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation and fair presentation of
the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Royal Standard
Minerals Inc. as at January 31, 2012, January 31, 2011 and February 1, 2010, and
its financial performance and its cash flows for the years ended January 31,
2012 and 2011 in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1 to
the consolidated financial statements which indicates that the Company has no
sources of recurring revenue and has incurred losses amounting to $44,553,494
since its inception. These conditions, along with other matters as set forth in
Note 1, indicate the existence of material uncertainties that may cast
significant doubt about the Companys ability to continue as a going
concern.

|                 | Signed: MSCM LLP         
|---------------- | ---------------------------
|                 |                            
|                 | Chartered Accountants      
|                 | Licensed Public Accountants
|Toronto, Ontario |                            
|May 29, 2012     |                            

701 Evans Avenue, 8th Floor, Toronto ON M9C 1A3, Canada T
(416) 626-6000 F (416) 626-8650 MSCM.CA

69

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|Royal Standard Minerals Inc.                 
|---------------------------------------------
|Consolidated Statements of Financial Position
|(expressed in
      United States Dollars)   

|                                                   |   | As at       |   |   | As at       |   |   | As at       |  
|-------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                   |   | January 31, |   |   | January 31, |   |   | February 1, |  
|                                                   |   | 2012        |   |   | 2011        |   |   | 2010        |  
|                                                   |   |             |   |   | (Note 21)   |   |   | (Note 21)   |  
|                                                   |   |             |   |   |             |   |   |             |  
|Assets                                             |   |             |   |   |             |   |   |             |  
|Current                                            |   |             |   |   |             |   |   |             |  
|Cash                                               | $ | 629,553     |   | $ | 102,038     |   | $ | 745,779     |  
|Marketable
      securities (Note 5)               |   | 150,000     |   |   | 52,000      |   |   | 60,500      |  
|Sundry receivables and prepaids
      (Note 6)     |   | 156,275     |   |   | 61,277      |   |   | 24,537      |  
|                                                   |   | 935,828     |   |   | 215,315     |   |   | 830,816     |  
|                                                   |   |             |   |   |             |   |   |             |  
|Due from related parties (Note 17)                 |   | -           |   |   | -           |   |   | 121,740     |  
|Reclamation bonds (Note 7)                         |   | 633,034     |   |   | 537,860     |   |   | 534,984     |  
|Equipment, net (Note 9)                            |   | 2,084,336   |   |   | 453,733     |   |   | 725,906     |  
|                                                   | $ | 3,653,198   |   | $ | 1,206,908   |   | $ | 2,213,446   |  
|                                                   |   |             |   |   |             |   |   |             |  
|Liabilities                                        |   |             |   |   |             |   |   |             |  
|Current                                            |   |             |   |   |             |   |   |             |  
|Accounts payable and accrued liabilities (Note 10) | $ | 3,033,763   |   | $ | 578,627     |   | $ | 301,381     |  
|Due to related
      parties (Note 17)             |   | 35,023      |   |   | 357,061     |   |   | -           |  
|Long-term debt - current portion (Note 12)         |   | 2,965,962   |   |   | -           |   |   | -           |  
|Embedded
      derivative on long-term debt        |   |             |   |   |             |   |   |             |  
|- current portion (Note 12)                        |   | 85,361      |   |   | -           |   |   | -           |  
|                                                   |   |             |   |   |             |   |   |             |  
|                                                   |   | 6,120,109   |   |   | 935,688     |   |   | 301,381     |  
|                                                   |   |             |   |   |             |   |   |             |  
|Asset retirement obligations
      (Note 11)       |   | 292,315     |   |   | 232,010     |   |   | 232,010     |  
|Long-term debt (Note 12)                           |   | 2,965,961   |   |   | -           |   |   | -           |  
|Embedded derivative on long-term debt (Note 12)    |   | 85,360      |   |   | -           |   |   | -           |  
|                                                   |   | 9,463,745   |   |   | 1,167,698   |   |   | 533,391     |  
|                                                   |   |             |   |   |             |   |   |             |  
|Shareholders' (Deficiency) Equity                  |   |             |   |   |             |   |   |             |  
|Share capital (Note 13(b))                         |   | 28,098,264  |   |   | 28,098,264  |   |   | 28,098,264  |  
|Reserves                                           |   | 10,580,808  |   |   | 10,076,866  |   |   | 10,076,866  |  
|Accumulated deficit                                |   | (44,553,494 | ) |   | (38,101,796 | ) |   | (36,468,951 | )
|Accumulated other comprehensive (loss) income      |   | 63,875      |   |   | (34,124     | ) |   | (26,124     | )
|                                                   |   | (5,810,547  | ) |   | 39,210      |   |   | 1,680,055   |  
|                                                   | $ | 3,653,198   |   | $ | 1,206,908   |   | $ | 2,213,446   |  

Going Concern(Note 1)Contingencies(Note
18)Subsequent events(Note 22)

Approved by the Board:

|Paul
      G. Smith |  | James B. Clancy | 
|------------------- |  | --------------- | 
|Director            |  | Director        | 









The accompanying notes are an integral part of these
consolidated financial statements.

70

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|Royal Standard Minerals Inc.              
|------------------------------------------
|Consolidated Statements of Operations     
|(expressed in
      United States Dollars)

|For the years ended January 31                                                           |   | 2012       |   |   | 2011       |  
|---------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                                         |   |            |   |   | (Note 21)  |  
|                                                                                         |   |            |   |   |            |  
|Expenses                                                                                 |   |            |   |   |            |  
|Exploration and evaluation expenditures (Note
      8)                                   | $ | 2,954,356  |   | $ | 1,044,905  |  
|General and administrative (Note 19)                                                     |   | 2,809,119  |   |   | 741,275    |  
|                                                                                         |   | 5,763,475  |   |   | 1,786,180  |  
|                                                                                         |   |            |   |   |            |  
|Other items                                                                              |   |            |   |   |            |  
|Finance income                                                                           |   | 4,291      |   |   | 3,221      |  
|Finance costs (Note 12)                                                                  |   | (712,822   | ) |   | -          |  
|Write down of advances to
      related Company                                          |   | -          |   |   | (132,060   | )
|Gain on disposal of marketable securities                                                |   | -          |   |   | 275,194    |  
|Foreign currency translation adjustment                                                  |   | 20,308     |   |   | 6,980      |  
|                                                                                         |   |            |   |   |            |  
|Net loss for the year                                                                    | $ | (6,451,698 | ) | $ | (1,632,845 | )
|                                                                                         |   |            |   |   |            |  
|Basic and diluted loss per share (Note 15)                                               | $ | (0.08      | ) | $ | (0.02      | )
|                                                                                         |   |            |   |   |            |  
|Consolidated Statements of Comprehensive Loss
      (expressed in United States Dollars) |   |            |   |   |            |  
|                                                                                         |   |            |   |   |            |  
|For the years ended
      January 31                                                     |   | 2012       |   |   | 2011       |  
|                                                                                         |   |            |   |   | (Note 21)  |  
|                                                                                         |   |            |   |   |            |  
|Net loss for the year                                                                    | $ | (6,451,698 | ) | $ | (1,632,845 | )
|                                                                                         |   |            |   |   |            |  
|Other comprehensive income (loss)                                                        |   |            |   |   |            |  
|Net unrealized income (loss) on available-for-sale
      marketable securities           |   | 97,999     |   |   | (8,000     | )
|                                                                                         |   |            |   |   |            |  
|Comprehensive loss for the year                                                          | $ | (6,353,699 | ) | $ | (1,640,845 | )









The accompanying notes are an integral part of these
consolidated financial statements.

71

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|Royal Standard Minerals Inc.                                    
|----------------------------------------------------------------
|Consolidated Statements of Changes in Shareholders'
      Equity
|(Expressed in
      United States Dollars)                      

|                                                                                    |   |            |  |   |            |  |   |             |   |   | Accumulated   |   |   |            |  
|----------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ----------- | - | - | ------------- | - | - | ---------- | -
|                                                                                    |   |            |  |   |            |  |   |             |   |   | Other         |   |   |            |  
|                                                                                    |   | Share      |  |   |            |  |   | Accumulated |   |   | Comprehensive |   |   |            |  
|January 31, 2011                                                                    |   | Capital    |  |   | Reserves   |  |   | Deficit     |   |   | Income (Loss) |   |   | Total      |  
|                                                                                    |   |            |  |   |            |  |   |             |   |   |               |   |   |            |  
|Balance, February 1, 2010                                                           | $ | 28,098,264 |  | $ | 10,076,866 |  | $ | (36,468,951 | ) | $ | (26,124       | ) | $ | 1,680,055  |  
|Net loss for the year                                                               |   | -          |  |   | -          |  |   | (1,632,845  | ) |   | -             |   |   | (1,632,845 | )
|Net decrease in unrealized losses on available-for-sale
      marketable securities |   | -          |  |   | -          |  |   | -           |   |   | (8,000        | ) |   | (8,000     | )
|Balance, January 31, 2011                                                           | $ | 28,098,264 |  | $ | 10,076,866 |  | $ | (38,101,796 | ) | $ | (34,124       | ) | $ | 39,210     |  

|                                                                                  |   |            |  |   |            |  |   |             |   |   | Accumulated   |   |   |            |  
|--------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ----------- | - | - | ------------- | - | - | ---------- | -
|                                                                                  |   |            |  |   |            |  |   |             |   |   | Other         |   |   |            |  
|                                                                                  |   | Share      |  |   |            |  |   | Accumulated |   |   | Comprehensive |   |   |            |  
|January 31, 2012                                                                  |   | Capital    |  |   | Reserves   |  |   | Deficit     |   |   | Income (Loss) |   |   | Total      |  
|                                                                                  |   |            |  |   |            |  |   |             |   |   |               |   |   |            |  
|Balance, February 1, 2011                                                         | $ | 28,098,264 |  | $ | 10,076,866 |  | $ | (38,101,796 | ) | $ | (34,124       | ) | $ | 39,210     |  
|Stock-based payments                                                              |   | -          |  |   | 503,942    |  |   | -           |   |   | -             |   |   | 503,942    |  
|Net loss for the year                                                             |   | -          |  |   | -          |  |   | (6,451,698  | ) |   | -             |   |   | (6,451,698 | )
|Net
      increase in unrealized gain on available-for-sale marketable securities |   | -          |  |   | -          |  |   | -           |   |   | 97,999        |   |   | 97,999     |  
|Balance, January 31, 2012                                                         | $ | 28,098,264 |  | $ | 10,580,808 |  | $ | (44,553,494 | ) | $ | 63,875        |   | $ | (5,810,547 | )









The accompanying notes are an integral part of these
consolidated financial statements.

72

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Consolidated Statements of Cash Flows     
|(expressed in
      United States Dollars)

|For the years ended January 31                        |   | 2012       |   |   | 2011       |  
|----------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                      |   |            |   |   | (Note 21)  |  
|                                                      |   |            |   |   |            |  
|Operating activities                                  |   |            |   |   |            |  
|Net loss for the year                                 | $ | (6,451,698 | ) | $ | (1,632,845 | )
|Operating items not involving
      cash:             |   |            |   |   |            |  
|Depreciation                                          |   | 137,274    |   |   | 272,172    |  
|Increase in asset retirement obligation               |   | 60,305     |   |   | -          |  
|Accretion expense                                     |   | 611,108    |   |   | -          |  
|Stock-based payments                                  |   | 503,942    |   |   | -          |  
|Gain on disposal
      of marketable securities       |   | -          |   |   | (275,194   | )
|Write down of advances to related Company             |   | -          |   |   | 132,060    |  
|Changes in non-cash working capital:                  |   |            |   |   |            |  
|Sundry receivables and prepaids                       |   | (94,998    | ) |   | (36,740    | )
|Accounts payable
      and accrued liabilities        |   | 1,481,098  |   |   | 277,246    |  
|Due to related parties                                |   | (322,038   | ) |   | 346,741    |  
|                                                      |   |            |   |   |            |  
|Cash used in operating activities                     |   | (4,075,007 | ) |   | (916,560   | )
|                                                      |   |            |   |   |            |  
|Financing activities                                  |   |            |   |   |            |  
|Increase in long-term debt                            |   | 5,970,350  |   |   | -          |  
|Finance costs paid on long-term debt                  |   | (400,000   | ) |   | -          |  
|                                                      |   |            |   |   |            |  
|Cash provided by financing activities                 |   | 5,570,350  |   |   | -          |  
|                                                      |   |            |   |   |            |  
|Investing activities                                  |   |            |   |   |            |  
|Increase in reclamation bonds                         |   | (95,174    | ) |   | (2,876     | )
|Purchase of equipment                                 |   | (872,654   | ) |   | -          |  
|Proceeds on disposal of marketable securities         |   | -          |   |   | 275,695    |  
|                                                      |   |            |   |   |            |  
|Cash
      (used in) provided by investing activities |   | (967,828   | ) |   | 272,819    |  
|                                                      |   |            |   |   |            |  
|Change in cash                                        |   | 527,515    |   |   | (643,741   | )
|                                                      |   |            |   |   |            |  
|Cash, beginning of year                               |   | 102,038    |   |   | 745,779    |  
|                                                      |   |            |   |   |            |  
|Cash, end of year                                     | $ | 629,553    |   | $ | 102,038    |  









The accompanying notes are an integral part of these
consolidated financial statements.

73

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|1. | The Company and Operations and Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Royal Standard Minerals Inc. (the "Company") is a publicly held company, engaged in the acquisition, exploration and development of gold and precious metal properties in the United States of America. The Company is continued under
the Canada Business Corporations Act and its common shares are traded in the United States of America on the Over-the-Counter ("OTC") Bulletin Board. Inception has been deemed to be June 26, 1996, the date on which the Company acquired all of the
outstanding common shares of Southeastern Resources Inc. ("SRI"), which acquisition was accounted for as a reverse takeover of the Company by SRI. The Company's head office is located at 50 Richmond Street East, Suite 101, Toronto, Ontario,
M5C1N7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The consolidated financial statements were approved by the Board of Directors on May 29, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal course of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future,
which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity's
ability to continue as a going concern. The Company has incurred a loss in the current and prior periods, with a current net loss of $6,451,698 during the year ended January 31, 2012 (2011 - $1,632,845) and has an accumulated deficit of
$44,553,494 (January 31, 2011 - $38,101,796, February 1, 2010 - $36,468,951).                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The underlying value of the resource properties is dependent upon the existence and economic recovery of economic reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability to raise
long-term financing to complete the development of the properties and upon future profitable production or, alternatively, upon the Company’s ability to dispose of its interest on an advantageous basis, all of which are uncertain. There is no
assurance that any such initiatives will be sufficient and, as a result, there is significant doubt regarding the going concern assumption and, accordingly, the ultimate appropriateness of the use of accounting principles applicable to a going
concern. The Company’s ability to continue to meet its obligations and carry out its planned exploration activities is uncertain and dependent upon the continued financial support of its shareholders, its current creditors and securing
additional financing. During the year ended January 31, 2012, the Company secured financing of $8,000,000 (see note 12). These financial statements do not reflect the adjustments to the carrying values or classifications of assets and
liabilities or to the reported expenses that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations for the foreseeable future. These adjustments could be
material.









74

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | [a] Statement of compliance and
      conversion to International Financial Accounting Standards
  (IFRS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements of the Company
      have been prepared in accordance with IFRS as issued by the International
      Accounting Standards Board (IASB).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements have been
      prepared in accordance with IFRS with a changeover date of February 1,
      2011 and a transition date of February 1, 2010. Previously, the Company
      prepared its financial statements in accordance with Canadian Generally
      Accepted Accounting Principles (GAAP). The disclosures required by the
      provision of IFRS 1, First-time adoption of International Financial
      Reporting Standards, explaining how the transition to IFRS has affected
      the reported loss and comprehensive loss, cash flows, changes of equity
      and financial position of the Company, are presented in note 21.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The policies applied in these consolidated financial
      statements are presented below and are based on IFRS issued and
      outstanding as of May 29, 2012, the date the Board of Directors approved
      the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | [b] Accounting polices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, Kentucky
      Standard Energy Inc. and Manhattan Mining Co., both United States
      companies. All intercompany transactions and balances have been eliminated
      upon consolidation.                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Equipment is recorded at cost less accumulated
      depreciation. Depreciation is provided using the declining balance method
      using the following rates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Exploration equipment    | - 25% to 30%                
| | ------------------------ | ----------------------------
| | Office equipment         | - 20%                       
| | Construction in progress | - nil, as not yet in service

At the end of each reporting period,
the Company reviews the carrying amounts of its equipment to determine whether
there is any indication that the equipment has suffered an impairment loss.
Where such an indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss. The
recoverable amount is the higher of the the equipment's fair value less cost to
sell or its value in use.









75

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|2. | Significant Accounting Policies
  (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | [b] Accounting polices (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Exploration and evaluation
      expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company expenses exploration and evaluation
      expenditures as incurred. Exploration and evaluation expenditures include
      acquisition costs of mineral properties, property option payments and
      evaluation activity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Once a project has been established as commercially
      viable and technically feasible, related development expenditure is
      capitalized. This includes costs incurred in preparing the site for mining
      operations. Capitalization ceases when the mine is capable of commercial
      production, with the exception of development costs that give rise to a
      future benefit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Restoration, rehabilitation and environmental
      obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | A legal or constructive obligation to incur restoration,
      rehabilitation and environmental costs may arise when environmental
      disturbance is caused by the exploration, development or ongoing
      production of a mineral property interest. Such costs arising from the
      decommissioning of plant and other site preparation work, discounted to
      their net present value, are provided for and recorded in the exploration
      and evaluation expenditures, as soon as the obligation to incur such costs
      arises. Discount rates using a pretax rate that reflects the time value of
      money are used to calculate the net present value. These costs are charged
      against profit or loss over the economic life of the related asset,
      through amortization using either a unit-of- production or the
      straight-line method as appropriate. The related liability is adjusted for
      each period for the unwinding of the discount rate and for changes to the
      current market-based discount rate, amount or timing of the underlying
      cash flows needed to settle the obligation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Share based payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The fair value of the stock options granted to directors,
      officers and employees is determined using the Black-Scholes option
      pricing model and management's assumptions as disclosed in Note 14 and
      recorded as stock-based compensation expense over the vesting period of
      the stock options, with the offsetting credit recorded as an increase in
      reserves. The fair value of stock options issued to other than employees
      are measured at the fair value of the goods or services received unless
      this cannot be reliably estimated, and are recognized over the period of
      service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | If the stock options are exercised, the proceeds are
      credited to share capital and the fair value at the date of grant is
      reclassified from reserves to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Tax expense comprises current and deferred tax. Current
      tax and deferred tax are recognized in profit or loss except to the extent
      that it relates to a business combination, or items recognized directly in
      equity or in other comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              









76

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|2. | Significant Accounting Policies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | [b] Accounting polices (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Income taxes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for
the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in
subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend
to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Loss per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Basic loss per share is computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year, including contingently issuable shares which are included when the conditions
necessary for issuance have been met. Diluted loss per share is calculated in a similar manner, except that the weighted average number of common shares outstanding is increased to include potentially issuable common shares from the assumed exercise
of common share purchase options and warrants, if dilutive. The number of additional shares included in the calculation is based on the treasury stock method for options and warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The United States dollar is the functional and presentation currency of the Company. Functional currency is also determined for each of the company’s subsidiaries, and items included in the financial statements of the
subsidiary are measured using that functional currency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            









77

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|2. | Significant Accounting Policies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | [b] Accounting polices (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Foreign currency translation (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Transactions in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities not denominated in the
functional currency are translated at the year end rates of exchange. Foreign exchange gains and losses are recognized in the statement of earnings (loss). Intercompany amounts with foreign operations for which settlement is neither planned nor
likely to occur in the foreseeable future are part of the Company’s net investment in the foreign operation. Foreign exchange gains and losses related to these intercompany amounts are included in accumulated other comprehensive income.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Assets and liabilities of entities with functional currencies other than United States dollars are translated at the year end rates of exchange, and the results of their operations are translated at average rates of exchange for
the year. The resulting translation adjustments are included in accumulated other comprehensive income in shareholders' equity.                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company recognizes financial assets and financial liabilities when the Company becomes a party to a contract. Financial assets and financial liabilities, with the exception of financial assets classified as at fair value
through profit or loss, are measured at fair value plus transaction costs on initial recognition. Financial assets at fair value through profit or loss are measured at fair value on initial recognition and transaction costs are expensed when
incurred. Securities are accounted for at the trade date.                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Measurement in subsequent periods depends on the classification of the financial instrument.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | i) Financial assets at fair value through profit or loss (FVTPL)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair value option), or if they are derivative assets that are not part of an effective and designated
hedging relationship. Financial assets classified as FVTPL are measured at fair value, with changes recognized in the consolidated statements of income (loss).                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company’s financial assets classified as FVTPL include cash and cash equivalents. The Company does not currently hold any derivative instruments or apply hedge accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | ii) Available-for-sale financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Financial assets are classified as available-for-sale when so designated by management. Financial assets classified as available-for-sale are measured at fair value, with changes recognized in the other comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company’s financial assets classified as available-for-sale include marketable securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         









78

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|2. | Significant Accounting Policies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | [b] Accounting polices (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Financial instruments (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | iii) Loans and receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Loans and receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted in an active market. Subsequent to initial recognition, loans and receivables are carried at amortized cost
using the effective interest method.                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Sundry receivables and due from related parties are classified as loans and receivables.                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | iv) Financial liabilities at fair value through profit or loss ("FVTPL")                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of being sold or repurchased in the near term. They are carried in the consolidated statements of financial position at fair
value with changes in fair value recognized in the consolidated statements of operations.                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Embedded derivative on long-term debt is classified as FVTPL.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | v) Other financial liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities that are not subject to hedge accounting, are measured at amortized cost using
the effective interest method.                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Accounts payable and accrued liabilities, due to related parties, long-term debt, and asset retirement obligations are classified as other financial liabilities. The Company does not currently apply hedge accounting.                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The effective interest method is a method of calculating the amortised cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument to the net carrying
amount on initial recognition.









79

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|2. | Significant Accounting Policies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | [b] Accounting polices (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial instruments (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | vi) Financial instruments recorded at fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair
value hierarchy has the following levels: Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data
(unobservable inputs). As of January 31, 2012, January 31, 2011 and February 1, 2010, the only financial assets or liability measured at fair value is the Company's cash and cash equivalents, investment in Sharpe Resources Corporation ("Sharpe"),
and embedded derivative on long-term debt. As at January 31, 2012, Sharpe's fair market value was determined to be $150,000 (January 31, 2011 - $52,000 and February 1, 2010 - $60,500), and the embedded derivative on long-term debt's fair
market value was determined to be $170,721.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Cash and cash equivalents, Sharpe, and embedded derivative on long-term debt are considered Level 1 for purposes of the fair value hierarchy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Significant accounting judgments and estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are
pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the
revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Critical accounting estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Significant assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate
to, but are not limited to, the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

- management's assumption of material restoration, rehabilitation and environmental obligations, based on the facts and circumstances that existed during the period; and
- management's assumption used to determine the fair value of the embedded derivative on long-term debt.









80

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|2. | Significant Accounting Policies
  (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | [b] Accounting polices
    (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Significant accounting judgments and estimates
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Critical accounting judgments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The categorization of financial assets and liabilities is
      an accounting policy that requires management to make judgments or
      assessments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Long-term debt instruments are initially recognized at
      fair value, net of debt issuance costs incurred. Long- term debt
      instruments are subsequently valued at amortized cost. Debt issue costs
      are deducted from the balance of the underlying debt and amortized using
      the effective interest rate method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Embedded derivative on Long-term
    debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company may enter into certain financial derivative
      contracts in order to manage the exposure to market risks from
      fluctuations in commodity prices. The Companys policy is not to utilize
      derivative financial instruments for speculative purposes. All financial
      derivative contracts are classified as fair value through profit or
      loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Embedded derivatives are separated from the host contract
      and accounted for separately if the economic characteristics and risks of
      the host contract and the embedded derivative are not closely related, a
      separate instrument with the same terms as the embedded derivative would
      meet the definition of a derivative, and the combined instrument is not
      measured at fair value through the profit or loss. Changes in the fair
      value of separable embedded derivatives are recognized immediately profit
      or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | [c] New standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | IFRS 9 Financial instruments (IFRS
      9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | IFRS 9 was issued by the IASB in October 2010 and will
      replace IAS 39 Financial Instruments: Recognition and Measurement [IAS
      39]. IFRS 9 uses a single approach to determine whether a financial asset
      is measured at amortized cost or fair value, replacing the multiple rules
      in IAS 39. The approach in IFRS 9 is based on how an entity manages its
      financial instruments in the context of its business model and the
      contractual cash flow characteristics of the financial assets. Most of the
      requirements in IAS 39 for classification and measurement of financial
      liabilities were carried forward unchanged to IFRS 9. The new standard
      also requires a single impairment method to be used, replacing the
      multiple impairment methods in IAS 39. IFRS 9 is effective for annual
      periods beginning on or after January 1, 2015. The Company has not yet
      assessed the impact of the standard or determined whether it will adopt
      the standard early.









81

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|2. | Significant Accounting Policies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | [c] New standards (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 10 Consolidated Financial Statements (“IFRS 10”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that currently are SPEs ("Special purpose entities") in the scope of SIC-12. In addition, the consolidation procedures are
carried forward substantially unmodified from IAS 27 (2008). IFRS 10 is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. The Company has not yet assessed the impact of the standard or determined
whether it will adopt the standard early.                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 11 Joint Arrangements (“IFRS 11”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 11 replaces the guidance in IAS 31 Interests in Joint Ventures and SIC 13 - Joint Controlled Entities - Non-Monetary Contributions by Venturers. IFRS 11 is effective for annual periods beginning on or after January 1, 2013,
with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 12 was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off
balance sheet vehicles. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 13, Fair Value Measurement ("IFRS 13")                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IFRS 13, Fair Value Measurement was issued by the IASB on May 12, 2011. The new standard converges IFRS and US GAAP on how to measure fair value and the related fair value disclosures. The new standard creates a single source of
guidance for fair value measurements, where fair value is required or permitted under IFRS, by not changing how fair value is used but how it is measured. The focus will be on an exit price. IFRS 13 is effective for annual periods beginning on or
after January 1, 2013, with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IAS 1 Presentation of Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | IAS 1 was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with US GAAP standards. Items in other comprehensive income will be required to be presented in two categories:
items that will be reclassified into profit or loss and those that will not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income
remains unchanged. The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012.                                                       









82

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      

|2. | Significant Accounting Policies
  (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | [c] New standards (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | IAS 28 Investments in Associates and Joint
      Ventures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As a consequence of the issue of IFRS 10, IFRS 11 and
      IFRS 12, IAS 28 has been amended and will further provide the accounting
      guidance for investments in associates and will set out the requirements
      for the application of the equity method when accounting for investments
      in associates and joint ventures. This standard will be applied by the
      Company when there is joint control, or significant influence over an
      investee. Significant influence is the power to participate in the
      financial and operating policy decisions of the investee but does not
      include control or joint control of those policy decisions. When
      determined that the Company has an interest in a joint venture, the
      Company will recognize an investment and will account for it using the
      equity method in accordance with IAS 28. IAS 28 is required to be applied
      for annual periods beginning on or after January 1, 2013, with earlier
      adoption permitted. The Company has not yet assessed the impact of the
      standard or determined whether it will adopt the standard early.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | Capital Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company manages its capital with the following
      objectives:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

- to ensure sufficient financial flexibility to achieve the ongoing business
  objectives including funding of future growth opportunities, and pursuit of
  accretive acquisitions; and
- to maximize shareholder return through enhancing the share value.

The Company monitors its capital
structure and makes adjustments according to market conditions in an effort to
meet its objectives given the current outlook of the business and industry in
general. The Company may manage its capital structure by issuing new shares,
repurchasing outstanding shares, adjusting capital spending, or disposing of
assets. The capital structure is reviewed by Management and the Board of
Directors on an ongoing basis.

The Company considers its capital
(deficiency) to be equity, comprising share capital, reserves, accumulated
deficit and accumulated other comprehensive loss, which at January 31, 2012,
totalled $(5,810,547) (January 31, 2011 - $39,210, February 1, 2010 -
$1,680,055). Note that included in the balance presented is a deficit of
$44,553,494 as at January 31, 2012 (January 31, 2011 - $38,101,796, February 1,
2010 -$36,468,951).

The Company manages capital through its
financial and operational forecasting processes. The Company reviews its working
capital and forecasts its future cash flows based on operating expenditures, and
other investing and financing activities. The forecast is regularly updated
based on activities related to its mineral properties. Selected information is
provided to the Board of Directors of the Company. The Companys capital
management objectives, policies and processes have remained unchanged during the
year ended January 31, 2012. The Company is not subject to external capital
requirements.









83

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|4. | Property and Financial Risk Factors                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a) Property risk                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company's significant mineral property is the
      Goldwedge Project.                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Unless the Company acquires or develops additional
      significant resource properties, the Company will be solely dependent upon
      the Goldwedge Project. If no additional mineral properties are acquired by
      the Company, any adverse development affecting the Goldwedge Project would
      have a material adverse effect on the Company's financial condition and
      results of operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (b) Financial risk factors                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys activities expose it to a variety of
      financial risks: credit risk, liquidity risk and market risk (including
      interest rate, foreign exchange rate, and commodity price risk).                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Risk management is carried out by the Company's
      management team with guidance from the Audit Committee under policies
      approved by the Board of Directors. The Board of Directors also provides
      regular guidance for overall risk management.                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                 









84

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|4. | Property and Financial Risk Factors
    (Continued)                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                        
|   | (b) Financial risk factors
      (continued)                                                                                                                                           
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   |                                                                                                                                                                                        
|   | (c) Sensitivity analysis                                                                                                                                                               
|   |                                                                                                                                                                                        
|   | As of January 31, 2012, the carrying and fair value
      amounts of the Company's financial instruments are approximately
      equivalent.                                           
|   |                                                                                                                                                                                        
|   | Based on management's knowledge and experience of the
      financial markets, the Company believes the following movements are
      "reasonably possible" over a twelve month period:

- The Company's marketable securities are subject to fair value
  fluctuations. As at January 31, 2012, if the fair value of the marketable
  securities had decreased/increased by 10% with all other variables held
  constant, comprehensive loss for the year ended January 31, 2012 would have
  been approximately $15,000 higher/lower. Similarly, as at January 31, 2012,
  reported shareholders' equity would have been approximately $15,000
  lower/higher as a result of a 10% decrease/increase in the fair value of
  marketable securities.
- Cash, sundry receivables, due from and to related parties, and accounts
  payable and accrued liabilities denominated in Canadian dollars are subject to
  foreign currency risk. As at January 31, 2012, had the US dollar
  weakened/strengthened by 5% against the Canadian dollar with all other
  variables held constant, it would affect net loss and comprehensive loss by
  approximately $36,000.









85

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|4. | Property and Financial Risk Factors (Continued)
|-- | -----------------------------------------------
|   |                                                
|   | **(c) Sensitivity analysis
(continued)**       

- Commodity price risk could adversely affect the Company. In particular,
  the Companys future profitability and viability of development depends upon
  the world market price of gold and precious metals. Gold and precious metals
  have fluctuated widely in recent years. There is no assurance that, even if
  commercial quantities of gold and precious metals may be produced in the
  future, a profitable market will exist for them. A decline in the market price
  of gold and precious metals may also require the Company to reduce its mineral
  properties, which could have a material and adverse effect on the Companys
  value. As of January 31, 2012, the Company is not a gold or precious metals
  producer. As a result, commodity price risk may affect the completion of
  future equity transactions such as equity offerings and the exercise of stock
  options and warrants. This may also affect the Company's liquidity and its
  ability to meet its ongoing obligations.
- The fair value of embedded derivatives on long-term debt is determined by
  the gold price at the repayment dates. When the gold price is over $1,600 per
  ounce, the embedded derivative would have a value. As at January 31, 2012, had
  the future gold price increased/decreased $50 dollars per ounce, it would
  affect net loss and comprehensive loss by approximately $57,000.

|5. | Marketable Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Marketable securities consist of 2,000,000 common shares
      of Sharpe Resources Corporation ("Sharpe"), a publicly held Canadian
      company engaged in the exploration and development of coal properties in
      the United States. Sharpe was considered to be related to the Company
      because of common management prior to the termination of the former CEO's
      employment in December 2011. The market value of the shares at January 31,
      2012 was $150,000 (January 31, 2011 - $52,000, February 1, 2010 -
      $60,500).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | Sundry Receivables and
Prepaids                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                       |   | As at       |  |   | As at       |  |   | As at       | 
| | --------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
| |                       |   | January 31, |  |   | January 31, |  |   | February 1, | 
| |                       |   | 2012        |  |   | 2011        |  |   | 2010        | 
| |                       |   |             |  |   |             |  |   |             | 
| | Sales tax receivables | $ | 71,415      |  | $ | 18,290      |  | $ | 1,573       | 
| | Other receivables     |   | 60,094      |  |   | 31,592      |  |   | 12,080      | 
| | Prepaid expenses      |   | 24,766      |  |   | 11,395      |  |   | 10,884      | 
| |                       |   |             |  |   |             |  |   |             | 
| |                       | $ | 156,275     |  | $ | 61,277      |  | $ | 24,537      | 

|7. | Reclamation Bonds                                                                                                                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has posted reclamation bonds for its mining
      projects, as required by the States of Nevada and Kentucky, to secure
      clean-up costs if the projects are abandoned or closed. $397,676 of the
      reclamation bonds pertains to the Goldwedge Project, $56,658 to the Piñon
      Project and $178,700 to the Kentucky Project.









86

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|8. | Exploration and Evaluation Expenditures on Mineral
      Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (a) Goldwedge Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Goldwedge Project, a property owned by the Company,
      represents the Company's most advanced project and is located in the
      Manhattan District in Nye County, Nevada, approximately eight miles south
      of the Round Mountain mine and has been issued a mine and mill permit by
      the Nevada Division of Environmental Protection. The Company is completing
      refurbishment of the on-site processing plant which was used for the test
      mining and processing that took place between 2007 and 2008. The process
      includes primary and secondary crushing and grinding facilities that feed
      a gravity recovery system. In addition, dry stack tailings containment as
      well as silt and fresh water ponds are in place. Testing of the various
      mineral processing functions extracted stockpiles of low grade gold feed
      material, as well as concurrently newly mined material. The feed material
      was processed into gold dore on site. The Company has recently completed
      construction of the Rapid Infiltration Basins (RIB), dewatered the
      previously completed underground development and also commenced phase 2 of
      the underground development program. This phase of the development
      includes the exploration of defined mineralized zones concurrently with
      the second phase of decline development. The previous work had
      concentrated on the development of a spiral decline as a means to explore
      the deposit at depth. As part of the program, a series of crosscuts were
      constructed at specific intervals to effectively assess the potential
      mineralized zones. Phase 2 of the development is concentrated on
      developing along the strike of known mineralized zones to assess
      continuity and grade as well as prepare areas for future test stoping. All
      material is sampled daily and analyzed for gold onsite at the Company's
      assay laboratory. In addition, the Company sends samples for analysis to
      an independent laboratory located offsite.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Also held under the same option agreement as the
      Goldwedge Property was the Dixie-Comstock Mining Company option, in Nye
      County located within the Manhattan District and other unpatented mining
      claims located in Churchill County, Nevada. In 2010, the Company exercised
      its option to purchase these unpatented and patented mining claim
      groups.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Under the guidance of IAS 37, the Company has recorded an
      asset retirement obligation ("ARO") of $168,276 on this project,
      representing the estimated costs, on a discounted basis, of the Company's
      obligation to restore the site to its original condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Based on the existing level of terrestrial disturbance
      and water treatment and monitoring requirements, the discounted ARO's for
      all projects, where applicable, has been estimated by management. The
      assumptions for the future payments are based on future expenses being
      incurred between 2017 and 2019 and a discount rate of 10%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (b) Piñon Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Piñon Project is a property made up of a number of
      property leases located in Elko Country, Nevada. Under the guidance of IAS
      37, the Company has recorded an ARO of $28,724 on this project,
      representing the estimated costs, on a discounted basis, of the Company's
      obligation to restore the site to its original condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (c) Fondaway Canyon Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Fondaway Canyon Project is located in Churchill
      County, Nevada. During the years ended January 31, 2011 and 2012, the
      Company did not perform any exploration on this
project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             









87

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|8. | Exploration and Evaluation Expenditures on Mineral
      Properties (Continued)                                                                                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (d) Kentucky Project                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On December 7, 2011, the Company exercised its option to
      acquire a 50% interest in certain coal projects in Eastern Kentucky. The
      option was originally acquired by the Company pursuant to an option and
      joint venture agreement entered into with Sharpe on November 21, 2008 and
      amended on September 11, 2009, to jointly pursue the exploration and
      development of approximately 1,000 acres in Wolfe County,
  Kentucky.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In the prior year, the Company wrote off a promissory
      note receivable from the optionor in the amount of $133,134. Further, the
      Company paid for a reclamation bond of $178,700, included in the
      consolidated statements of financial position under reclamation
    bonds.                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Under the guidance of IAS 37, the Company has recorded an
      ARO on its Kentucky Project in the amount of $95,315, representing the
      estimated costs, on a discounted basis, of the Company's obligation to
      restore the property to its original condition.                                                                                                                                                                                   









88

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|8. | Exploration and Evaluation Expenditures on Mineral
      Properties (Continued)                                     
|-- | --------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                     
|   | During the year ended January 31, 2012, the Company's
      exploration and evaluation expenditures were as
follows:

| |                                              |   | Years Ended | 
| | -------------------------------------------- | - | ----------- | 
| |                                              |   | January 31, | 
| |                                              |   | 2012        | 
| |                                              |   |             | 
| | Gold Wedge Project                           |   |             | 
| | Property acquisition costs                   | $ | 10,000      | 
| | Travel                                       |   | 71,292      | 
| | Mine development costs                       |   | 397,626     | 
| | Drilling                                     |   | 40,206      | 
| | Professional fees                            |   | 113,442     | 
| | Consulting, wages and
      salaries         |   | 1,238,299   | 
| | Office and general                           |   | 393,149     | 
| | Analysis and assays                          |   | 7,392       | 
| | Supplies, equipment and transportation       |   | 353,312     | 
| | Depreciation                                 |   | 124,231     | 
| |                                              | $ | 2,748,949   | 
| |                                              |   |             | 
| | Piñon Project                                |   |             | 
| | Property acquisition costs                   | $ | 69,571      | 
| | Consulting, wages and salaries               |   | 1,617       | 
| |                                              | $ | 71,188      | 
| |                                              |   |             | 
| | Fondaway Project                             |   |             | 
| | Property acquisition costs                   | $ | 35,000      | 
| | Office and general                           |   | 2,297       | 
| |                                              | $ | 37,297      | 
| |                                              |   |             | 
| | Kentucky Project                             |   |             | 
| | Property acquisition costs                   | $ | -           | 
| | Travel                                       |   | 12,764      | 
| | Reclamation                                  |   | -           | 
| | Professional fees                            |   | 2,400       | 
| | Consulting, wages and
      salaries         |   | 46,300      | 
| | Office and general                           |   | 12,794      | 
| | Supplies, equipment and
      transportation |   | 10,552      | 
| | Depreciation                                 |   | 12,112      | 
| |                                              | $ | 96,922      | 
| |                                              |   |             | 
| | Total exploration activities                 | $ | 2,954,356   | 









89

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|9. | Equipment
|-- | ---------

| |                           |   | Construction |  |   | Exploration     |  |   | Office    |  |   |           | 
| | ------------------------- | - | ------------ |  | - | --------------- |  | - | --------- |  | - | --------- | 
| | COST                      |   | in progress  |  |   | equipment       |  |   | equipment |  |   | Total     | 
| | Balance, February 1, 2010 | $ | -            |  | $ | 2,977,464       |  | $ | 21,253    |  | $ | 2,998,717 | 
| | Additions                 |   | -            |  |   | -               |  |   | 553       |  |   | 553       | 
| | Balance, January 31, 2011 | $ | -            |  | $ | 2,977,464       |  | $ | 21,806    |  | $ | 2,999,270 | 
| | Additions                 |   | 1,619,341    |  |   | 148,536         |  |   | -         |  |   | 1,767,877 | 
| | Balance, January 31, 2012 | $ | 1,619,341    |  | $ | 3,126,000       |  | $ | 21,806    |  | $ | 4,767,147 | 
| |                           |   |              |  |   |                 |  |   |           |  |   |           | 
| |                           |   | Construction |  |   | Exploration     |  |   | Office    |  |   |           | 
| | ACCUMULATED DEPRECIATION  |   | in progress  |  |   | equipment       |  |   | equipment |  |   | Total     | 
| | Balance, February 1, 2010 | $ | -            |  | $ | 2,253,811       |  | $ | 19,000    |  | $ | 2,272,811 | 
| | Depreciation for the year |   | -            |  |   | 271,604         |  |   | 1,122     |  |   | 272,726   | 
| | Balance, January 31, 2011 | $ | -            |  | $ | 2,525,415       |  | $ | 20,122    |  | $ | 2,545,537 | 
| | Depreciation for the year |   | -            |  |   | 136,343         |  |   | 931       |  |   | 137,274   | 
| | Balance, January 31, 2012 | $ | -            |  | $ | 2,661,758       |  | $ | 21,053    |  | $ | 2,682,811 | 
| |                           |   |              |  |   |                 |  |   |           |  |   |           | 
| |                           |   | Construction |  |   | **Exploration** |  |   | Office    |  |   |           | 
| | CARRYING AMOUNT           |   | in progress  |  |   | **equipment**   |  |   | equipment |  |   | Total     | 
| | Balance, February 1, 2010 | $ | -            |  | $ | 723,653         |  | $ | 2,253     |  | $ | 725,906   | 
| | Balance, January 31, 2011 | $ | -            |  | $ | 452,049         |  | $ | 1,684     |  | $ | 453,733   | 
| | Balance, January 31, 2012 | $ | 1,619,341    |  | $ | 464,242         |  | $ | 753       |  | $ | 2,084,336 | 

Construction in progress relates to the
refurbishment of the mill at the Company's Goldwedge Project.

Depreciation of exploration equipment
is expensed to exploration and evaluation expenditures and depreciation of
office equipment is expensed to general and administrative on the consolidated
statements of operations.

|10. | Accounts Payable and Accrued
  Liabilities
|--- | ------------------------------------------

| |                     |   | As at       |  |   | As at       |  |   | As at       | 
| | ------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
| |                     |   | January 31, |  |   | January 31, |  |   | February 1, | 
| |                     |   | 2012        |  |   | 2011        |  |   | 2010        | 
| |                     |   |             |  |   |             |  |   |             | 
| | Trade payables      | $ | 579,664     |  | $ | 231,432     |  | $ | 68,002      | 
| | Accrued liabilities |   | 2,454,099   |  |   | 347,195     |  |   | 233,379     | 
| |                     | $ | 3,033,763   |  | $ | 578,627     |  | $ | 301,381     | 

Included in accrued liabilities are
accrued finance costs of $78,814 and accrued costs in connection with the

construction in progress, and purchase
of exploration equipment, totaling $895,223.









90

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|11. | Asset Retirement Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company is required to recognize a liability for a
      legal and constructive obligation to perform asset retirement activities,
      including decommissioning, reclamation and environmental monitoring
      activities once any of its projects are permanently closed. Although these
      activities are conditional upon future events, the Company is required to
      make a reasonable estimate of the fair value of the liability. Based on
      the existing level of terrestrial disturbance and water treatment and
      monitoring requirements, the discounted asset retirement obligations
      ("ARO's") were estimated to be $292,315 as at January 31, 2012, assuming
      future payments of $484,706 being made over a ten year period from the
      date of initial assessment of the ARO's and a discount rate of
  10%.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Determination of the undiscounted ARO and the timing of
      these obligations were based on internal estimates using information
      currently available, existing regulations, and estimates of closure costs.
      There was no significant change in the present value of the obligation for
      the year ended January 31, 2011. Accordingly, no accretion cost has been
      expensed in the year ended January 31, 2011. During the year ended January
      31, 2012, the Company determined an additional $52,165 increase in ARO
      related to the Company's Goldwedge Project. The following is the
      reconciliation of the asset retirement
obligations:                                                                                                                                                                            

| |                                          |   | Year ended  |  |   | Year ended  |  |   | Year ended  | 
| | ---------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
| |                                          |   | January 31, |  |   | January 31, |  |   | February 1, | 
| |                                          |   | 2012        |  |   | 2011        |  |   | 2010        | 
| |                                          |   |             |  |   |             |  |   |             | 
| | Balance, beginning of year               | $ | 232,010     |  | $ | 232,010     |  | $ | 232,010     | 
| | Increase in asset retirement obligations |   | 52,165      |  |   | -           |  |   | -           | 
| | Accretion cost                           |   | 8,140       |  |   | -           |  |   | -           | 
| |                                          |   |             |  |   |             |  |   |             | 
| | Balance, end of year                     | $ | 292,315     |  | $ | 232,010     |  | $ | 232,010     | 

|12. | Long-Term Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | On June 29, 2011, the Company's wholly owned subsidiary,
      Manhattan Mining Co. ("Manhattan") entered into a secured bridge loan
      agreement (the Bridge Loan) with Waterton Global Value, L.P.
      (Waterton) pursuant to which Waterton agreed to provide an $8,000,000
      bridge loan (the Credit Facility) available to Manhattan. Of the total
      $8,000,000 Bridge Loan, $4,000,000 was available on closing and the
      remaining $4,000,000 after the satisfaction of certain covenants. Under
      the Bridge Loan agreement, the amounts drawn down under the Credit
      Facility would incur interest at 6% per annum, and the scheduled repayment
      date of the Credit Facility was 16 months after the initial closing date.
      In connection with the Credit Facility, Manhattan agreed to pay Waterton a
      structuring fee, and also provided Waterton with certain royalty interests
      relating to its Goldwedge Property. Manhattan and Waterton have also
      entered into a gold purchase agreement pursuant to which Waterton had
      agreed to purchase Manhattans production. The Credit Facility was secured
      by, amongst other items, the Companys real property assets in
    Nevada.









91

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31, 2012                          

|12. | Long-Term Debt (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On August 26, 2011, Manhattan amended its existing Bridge Loan with Waterton such that the Bridge Loan was transitioned into a more permanent senior secured gold stream debt facility (the “Gold Stream Facility”)
amongst the parties. Under the Gold Stream Facility, Waterton will make $8,000,000 (the “Principal Amount”) available to Manhattan. The Principal Amount is repayable by Manhattan to Waterton in monthly payments commencing in August
2012 and ending in July 2013. Under the Gold Stream Facility, each monthly repayment of the Principal Amount will be made by the delivery by Manhattan to Waterton of gold bullion ounces where the number of ounces to be delivered shall be based on
the spot price of gold on the business day immediately preceding the repayment date less an applicable discount or by the payment of the cash equivalent of such number of ounces. In addition, there is a profit participation formula which is
triggered when the spot price of gold is in excess of $1,600 an ounce on the business day immediately preceding the repayment ("Profit Participation"). The Principal Amount will accrue interest at 9.0% per annum. The Gold Stream Facility is
secured by, amongst other items, Manhattan's real property assets in Nevada.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company considers Profit Participation as an embedded derivative. As at January 31, 2012, the gross proceeds received under the Gold Stream Facility was $5,970,350, which was allocated to the embedded derivative based on
the initial fair values of the embedded derivative determined when proceeds were received ($170,721), and then the residual value was allocated to the liability portion. The Company estimates the future cash flow needs in terms of Profit
Participation using the gold future contract prices of repayment periods and discounted to the present value using 9% as annual discount rate. As of January 31, 2012, the Company estimates the gold future price during the repayment period from
August 2012 to July 2013 to be $1,750 per ounce.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | As consideration for entering into the Gold Stream Facility, a structuring fee equal to 2% of the aggregate amount of the Gold Stream Facility and an establishment fee of $80,000 was payable by Manhattan to Waterton in cash
and Manhattan also granted Waterton certain royalty interests over its exploration stage projects. In addition, Manhattan and Waterton have agreed that Waterton shall have the right to purchase all of the gold produced by Manhattan from its Nevada
projects at a price per ounce that will be equal to an agreed discount to the existing spot price of gold at the time of any such purchase. Bayfront Capital Partners Ltd. acted as placement agent in connection with the Gold Stream Facility in
consideration for a placement fee equal to 4% of any Principal Amounts actually drawn by Manhattan under the Gold Stream Facility.                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Gold Stream Facility contains covenants for Manhattan such as, among other things, providing Waterton with updates on its operations, carrying on its business in accordance with prudent mining industry practices, and providing
Waterton with certain rights of inspection. Until all amounts outstanding under the Gold Stream Facility have been repaid in full or otherwise satisfied in accordance with the terms of such facility, certain standard restrictive covenants shall
apply to Manhattan limiting its ability to (without limitation): incur additional indebtedness, create liens on its assets or dispose of its assets. These negative covenants are subject to certain carve-outs that facilitate Manhattan's ability to
operate its business efficiently. The Gold Stream Facility also includes certain event of default provisions pursuant to which, immediately and automatically upon the occurrence of an event of default, all amounts outstanding under the Gold Stream
Facility would be automatically accelerated and immediately due and payable to Waterton.                                                                                                                                                                                              









92

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|12. | Long-Term Debt (Continued)                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                  
|    | At any time, without penalty, the Gold Stream Facility
      provides Manhattan the option to prepay in whole or in part, on 5 business
      days prior notice. Prepayments may be made in physical gold ounces or
      cash. The amount of any prepayment shall be calculated using the spot
      price of gold on the business day immediately preceding the
    prepayment.
|    |                                                                                                                                                                                                                                                                                                                                                                                  
|    | The following table shows the reconciliation between the
      gross proceeds received and the carrying value of the Gold Stream
      Facility.                                                                                                                                                                                                                                 

| | Gross proceeds                                                | $ | 5,970,350 |  
| | ------------------------------------------------------------- | - | --------- | -
| | Less: Initial fair value of the embedded
      derivative (i) |   | (170,721  | )
| | Less: Debt issuance cost (ii)                                 |   | (478,814  | )
| | Add:
      Accretion costs                                    |   | 611,108   |  
| |                                                               |   |           |  
| | Long-term debt (iii)                                          | $ | 5,931,923 |  

(i) There was no significant change in
the fair value of the embedded derivative during the year ended January 31,
2012. Accordingly, no such change was recorded in the consolidated statements of
operations. The fair value of the embedded derivative is presented as
follows:

| | Current portion     | $ | 85,361  | 
| | ------------------- | - | ------- | 
| | Non-current portion |   | 85,360  | 
| |                     | $ | 170,721 | 

(ii) Debt issuance costs consist of the
following:

| | Structuring and establishment
      fee | $ | 240,000 | 
| | --------------------------------------- | - | ------- | 
| | Placement fee                           |   | 238,814 | 
| |                                         | $ | 478,814 | 

(iii) The long-term debt balance is
presented as follows:

| | Current portion     | $ | 2,965,962 | 
| | ------------------- | - | --------- | 
| | Non-current portion |   | 2,965,961 | 
| |                     | $ | 5,931,923 | 

(iv) Minimum long-term debt repayments
under the Gold Stream Facility are as follows:

| | 12 months ended January 31,
      2013 | $ | 3,980,232 | 
| | -------------------------------------- | - | --------- | 
| | 12
      months ended January 31, 2014 |   | 3,980,233 | 
| |                                        | $ | 7,960,465 | 

As of January 31, 2012, the Company had
an interest payable balance of $155,930 related to the Gold Stream Facility. The balance was
recorded in the accounts payable and accrued liabilities.









93

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|13. | Share Capital                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------
|    |                                                                                                                
|    | (a) Authorized                                                                                                 
|    |                                                                                                                
|    | The authorized capital of the Company consists of an
      unlimited number of common shares without par value.
|    |                                                                                                                
|    | (b) Issued                                                                                                     

| | Common shares issued                                                   |  | Shares     |  |   | Amount     | 
| | ---------------------------------------------------------------------- |  | ---------- |  | - | ---------- | 
| | Balance, February 1, 2010, January 31, 2011 and January
      31, 2012 |  | 83,853,825 |  | $ | 28,098,264 | 

|14. | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Under the Company's stock option plan (the "Option
      Plan"), the directors of the Company can grant options to acquire common
      shares of the Company to directors, employees and others who provide
      ongoing services to the Company. Exercise prices cannot be less than the
      closing price of the Company's shares on the trading day preceding the
      grant date and the maximum term of any option cannot exceed ten
    years.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The number of common shares under option at any time
      under the Option Plan or otherwise cannot exceed 5% of the then
      outstanding common shares of the Company for any optionee. In addition,
      options granted to insiders of the Company cannot exceed more than 10% of
      the then outstanding common shares of the Company. The options vest when
      granted.                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Option pricing models require the input of highly
      subjective assumptions including the expected price volatility. Changes in
      the subjective input assumptions can materially affect the fair value
      estimate, and therefore the existing models do not necessarily provide a
      reliable measure of the fair value of the Company's share purchase
      options.                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The following table reflects the continuity of stock
      options:                                                                                                                                                                                                                                                                                                                                                                                      

| |                                                      |  | Number of     |   |   | Weighted Average | 
| | ---------------------------------------------------- |  | ------------- | - | - | ---------------- | 
| |                                                      |  | Stock Options |   |   | Exercise Price   | 
| |                                                      |  |               |   |   |                  | 
| | Balance, February 1, 2010
      and January 31, 2011 |  | 7,904,691     |   | $ | 0.10             | 
| | Cancelled during the year                            |  | (544,500      | ) | $ | 0.10             | 
| | Granted (i)                                          |  | 4,700,000     |   | $ | 0.30             | 
| |                                                      |  |               |   |   |                  | 
| | Balance, January 31, 2012                            |  | 12,060,191    |   | $ | 0.17             | 









94

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|14. | Stock Options (continued)                                                                               
|--- | --------------------------------------------------------------------------------------------------------
|    |                                                                                                         
|    | The following table reflects the stock options
      outstanding and exercisable as at January 31,
2012:

| |                  |  | Exercise Price |  |  | Options     |  |  | Options     |  |   | Fair      |  |  | Weighted average | 
| | ---------------- |  | -------------- |  |  | ----------- |  |  | ----------- |  | - | --------- |  |  | ---------------- | 
| | Expiry Date      |  | ($)            |  |  | Outstanding |  |  | Exercisable |  |   | Value     |  |  | remaining years  | 
| |                  |  |                |  |  |             |  |  |             |  |   |           |  |  |                  | 
| | June 26, 2014    |  | 0.10           |  |  | 7,360,191   |  |  | 7,360,191   |  | $ | 4,002,581 |  |  | 2.40             | 
| | January 20, 2017 |  | 0.30           |  |  | 4,700,000   |  |  | 1,700,000   |  |   | 1,334,800 |  |  | 4.98             | 
| |                  |  |                |  |  |             |  |  |             |  |   |           |  |  |                  | 
| |                  |  |                |  |  | 12,060,191  |  |  | 9,060,191   |  | $ | 5,337,381 |  |  | 3.36             | 

|    | (i) On January 20, 2012, 4,700,000 options to purchase
      common shares of the Company at a price of $0.30 have been granted to
      consultants, officers and directors of the Company expiring on January 20,
      2017. A value of $1,334,800 was assigned using the Black-Scholes option
      pricing model with the following assumptions: dividend yield of 0%,
      expected volatility of 206.2% based on historical trends, share price on
      the date of grant of $0.29, risk-free interest rate of 1.29%, and an
      expected life of 5 years. 3,750,000 of these options vest as to one third
      immediately, one third after one year and one third after two years from
      the date of grant; 500,000 of these options vest one half immediately and
      one half after one year from the date of grant; 150,000 of these options
      vest after one year from the date of grant; 100,000 of these options vest
      after six months from the date of grant; and 200,000 of these options vest
      immediately. For the year ended January 31, 2012, the impact on salaries
      and benefits was $503,942.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|15. | Basic and Diluted Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The following table sets forth the computation of basic
      and diluted loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                                                                                 |   | Year Ended  |  
| | ----------------------------------------------------------------------------------------------- | - | ----------- | -
| |                                                                                                 |   | January 31, |  
| |                                                                                                 |   | 2012        |  
| |                                                                                                 |   |             |  
| | Numerator:                                                                                      |   |             |  
| | Loss
      for the year                                                                         | $ | (6,451,698  | )
| |                                                                                                 |   |             |  
| | Denominator:                                                                                    |   |             |  
| | Weighted average number of common shares outstanding for
      basic and diluted loss per share |   | 83,853,825  |  
| |                                                                                                 |   |             |  
| | Basic and diluted loss per share                                                                | $ | (0.08       | )

The stock options and common share
purchase options were not included in the computation of diluted loss

per share on January 31, 2012 and 2011
as their inclusion would be anti-dilutive.









95

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|16. | Income Taxes                                                                                                                                                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                        
|    | The following table reconciles the expected income tax
      expense (recovery) at the Canadian statutory income tax rate at 28.08%
      (2011 - 30.17%) to the amounts recognized in the consolidated statements
      of operations:

| |                                                         |   | 2012       |   |   | 2011       |  
| | ------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                         |   |            |   |   |            |  
| | Net loss before income taxes                            | $ | (6,451,698 | ) | $ | (1,632,845 | )
| | Expected tax recovery at statutory rate                 |   | (1,811,637 | ) |   | (492,629   | )
| | Permanent differences                                   |   | 141,507    |   |   | -          |  
| | Effects of expiration of non-capital losses             |   | -          |   |   | 214,082    |  
| | Difference between Canadian
      and foreign tax rates |   | (270,193   | ) |   | (27,000    | )
| | Tax
      benefits not recognized                       |   | 1,940,323  |   |   | 305,547    |  
| | Tax provision                                           | $ | -          |   | $ | -          |  

The Canadian statutory tax rate changed
from 30.17% for the year ended January 31, 2011 to 28.08% for the 2011 taxation
year as a result of the enacted reduction of Canadian corporate tax rates.

Deferred Tax Assets and
Liabilities

(a) Unrecognized deferred tax
assets

Deferred tax assets are recognized for
the carry-forward or unused tax losses and unused tax credits to the extent that
it is probably that taxable profits will be available against which the unused
tax losses/credits can be utilized. The following represents the deductible
temporary differences by jurisdiction which have not been recognized in the
financial statements.

| |                                                                                            |   | 2012       |  |   | 2012       |  |   | 2011       |  |   | 2011       | 
| | ------------------------------------------------------------------------------------------ | - | ---------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | 
| |                                                                                            |   | Canada     |  |   | US         |  |   | Canada     |  |   | US         | 
| |                                                                                            |   |            |  |   |            |  |   |            |  |   |            | 
| | Unclaimed non-capital losses                                                               | $ | 7,487,313  |  | $ | 24,183,584 |  | $ | 5,643,790  |  | $ | 17,731,886 | 
| | Excess of undepreciated capital cost
      allowance over carrying value of capital assets |   | 3,093,265  |  |   | -          |  |   | 2,994,884  |  |   | -          | 
| | Excess of unclaimed resources pools over carrying value of
      exploration properties    |   | 1,459,616  |  |   | -          |  |   | 1,564,552  |  |   | -          | 
| |                                                                                            | $ | 12,040,194 |  | $ | 24,183,584 |  | $ | 10,203,226 |  | $ | 17,731,886 | 









96

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|16. | Income Taxes (Continued)                                              
|--- | ----------------------------------------------------------------------
|    |                                                                       
|    | The unclaimed non-capital losses carried forward by
      expiry date:

| |         |  |      |  |   | Canada    |  |   | US         | 
| | ------- |  | ---- |  | - | --------- |  | - | ---------- | 
| | Expires |  | 2015 |  | $ | 630,952   |  | $ | -          | 
| |         |  | 2026 |  |   | 854,554   |  |   | -          | 
| |         |  | 2027 |  |   | 834,665   |  |   | 5,431,480  | 
| |         |  | 2028 |  |   | 1,029,144 |  |   | 1,175,212  | 
| |         |  | 2029 |  |   | 643,397   |  |   | 872,981    | 
| |         |  | 2030 |  |   | 1,140,900 |  |   | 821,104    | 
| |         |  | 2031 |  |   | 489,264   |  |   | 9,431,109  | 
| |         |  | 2032 |  |   | 1,864,437 |  |   | 6,451,698  | 
| |         |  |      |  | $ | 7,487,313 |  | $ | 24,183,584 | 

|17. | Related Party Transactions and Balances                                                    
|--- | -------------------------------------------------------------------------------------------
|    |                                                                                            
|    | Remuneration of Directors and key management personnel of
      the Company was as follows:

| |                                                                |   | Years Ended | 
| | -------------------------------------------------------------- | - | ----------- | 
| |                                                                |   | January 31, | 
| |                                                                |   | 2012        | 
| |                                                                |   |             | 
| | Salaries and benefits paid to
      directors and officers (1) | $ | 471,380     | 
| | Stock-based payments                                           | $ | 501,799     | 

|    | (1)Salaries and benefits include director
      fees. The board of directors does not have employment or service contracts
      with the Company. Directors are entitled to director fees and stock
      options for their services.                                                                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Paul G. Smith, a director and Chairman of the Board, is
      the President and Chief Executive Officer of Equity Financial Holdings
      Inc., a company providing financial services to the Company.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Due to related parties balance at January 31, 2012
      consists of $22,607 (January 31, 2011 - $357,061, February 1, 2010 - $nil)
      owing to the former CEO and $12,416 owed to Sharpe (January 31, 2011 -
      $nil, February 1, 2010 - $121,740). In addition, included in accounts
      payable and accrued liabilities is $18,677 (2011 - $nil), owing to the
      former CEO.                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|18. | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (a) The Company received documents filed in the
      District Court, Nye County, Nevada, whereby a optionor of a property
      acquired by the Company has requested payment for machinery and equipment
      stored in the vicinity of the acquired property. In the opinion of
      management, the legal proceedings are without merit and the Company
      intends to vigorously defend itself against this
claim.









97

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|18. | Contingencies (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | (b) The Company received an action against it
      whereby the Company was requested by a prior lease holder to take any and
      all steps necessary to ensure that the prior lease holders bear no
      responsibilities or liability for the Companys failure to comply with the
      rules and regulations of the Kentucky Energy and Environment Cabinet,
      Division of Mine Enforcement and Reclamation (the DMER). Management has
      responded to the DMER and are rectifying the notice received from the DMER
      and as a result no penalty will be assessed and the Company will be in
      compliance with the rules and regulations of the DMER.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | (c) On September 27, 2011 Hale Capital
      Management, LP and Hale Capital Partners, LP (together, Hale Capital)
      commenced an action in the New York Supreme Court alleging breach of
      contract in relation to a term sheet entered into between the Company and
      Hale Capital on December 11, 2010 (the Term Sheet), which set out
      preliminary terms for Hale to provide financing of up to $15 million for
      the Companys Goldwedge Project (the Hale Transaction). Hale Capital is
      seeking the right to participate in financing the Company on no less
      favourable terms and conditions as was agreed upon between the Company and
      Waterton on June 29, 2011 or, in the alternative, damages for breach of
      the exclusivity provision contained in the Term Sheet. Hale is also
      seeking expense reimbursement for legal, travel and due diligence fees
      incurred by Hale Capital, which allegedly totaled $376,170 as of November
      21, 2011. On November 23, 2011, Hale Capital amended their complaint to
      include the Companys subsidiary Manhattan Mining Co. Management has
      estimated the expenses at $330,000 and has accrued this amount in the
      accounts.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|19. | General and
Administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                                |   | Years Ended | 
| | ---------------------------------------------- | - | ----------- | 
| |                                                |   | January 31, | 
| |                                                |   | 2012        | 
| |                                                |   |             | 
| | Corporate development                          | $ | 263,251     | 
| | Insurance                                      |   | 22,841      | 
| | Office and general                             |   | 1,719       | 
| | Professional fees                              |   | 1,489,989   | 
| | Consulting, wages and
      salaries (Note 17) |   | 526,446     | 
| | Share based payments                           |   | 503,942     | 
| | Depreciation                                   |   | 931         | 
| |                                                |   |             | 
| |                                                | $ | 2,809,119   | 

|20. | Segmented Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has one reportable business segment
      consisting of the exploration and development of mining properties.
      Substantially all of the Companys assets are located in the United States
      except for cash totaling $426,596 at January 31, 2012 (January 31, 2011 -
      $100,065, February 1, 2010 - $678,589) held in Canadian banks. The
      Companys operations in Canada consist of general and administrative
      expenses, totaling $2,459,866 for the year ended January 31, 2012 (2011 -
      $309,735), including expenses necessary to maintain the Companys public
      company status.









98

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (i) Overview                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | As stated in Significant Accounting Policies (note 2),
      these consolidated financial statements are prepared in accordance with
      IFRS as issued by the IASB.                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The policies set out in the Significant Accounting
      Policies section have been applied in preparing the financial statements
      for the years ended January 31, 2012 and 2011 and in the preparation of an
      opening IFRS balance sheet at February 1, 2010 (the Companys Transition
      Date).                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (ii) First-time adoption of
  IFRS                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The adoption of IFRS requires the application of IFRS 1,
      which provides guidance for an entitys initial adoption of IFRS. IFRS 1
      generally requires retrospective application of IFRS as effective at the
      end of its first annual IFRS reporting period. However, IFRS 1 also
      provides certain optional exemptions and mandatory exceptions to this
      retrospective treatment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company has elected to apply the following optional
      exemptions in its preparation of an opening IFRS statement of financial
      position as at February 1, 2010.                                                                                                                                                                                                                               



- To apply IFRS 2 Share-based Payments only to equity
instruments that were issued after November 7, 2002 and had not vested by the
Transition Date.
- To apply IFRS 3 Business Combinations prospectively from the
Transition Date, therefore not restating business combinations that took place
prior to the Transition Date.
- To apply IAS 23 Borrowing Costs prospectively from the
Transition Date. IAS 23 requires the capitalization of borrowing costs directly
attributable to the acquisition, production or construction of certain assets.

IFRS 1 does not permit changes to
estimates that have been made previously. Accordingly, estimates used in the
preparation of the Companys opening IFRS statement of financial position as at
the Transition Date are consistent with those that were made under Canadian
GAAP.

(iii) Changes to accounting
policies

The Company has changed certain
accounting policies to be consistent with IFRS effective on January 31, 2012
(note 2), the Company's first annual IFRS reporting date. The changes to its
accounting policies have resulted in certain changes to the recognition and
measurement of assets, liabilities, equity, revenue and expenses within its
financial statements.

The following summarizes the
significant changes to the Companys accounting policies on adoption of IFRS.

(a) Impairment of non-financial assets
IFRS requires a write down of assets if the higher of the fair value less costs
to sell and the value in use of a group of assets is less than its carrying
value. Value in use is determined using discounted estimated future cash flows.
Previously, Canadian GAAP required a write down to estimated fair value only if
the undiscounted estimated future cash flows of a group of assets are less than
its carrying value.









99

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (iii) Changes to accounting policies
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (a) Impairment of non-financial assets
    (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company's accounting policies related to impairment
      of non-financial assets have been changed to reflect these differences.
      There was no impact on the consolidated financial statements.                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (b) Decommissioning Liabilities (Asset Retirement
      Obligations)                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | IFRS requires the recognition of a decommissioning
      liability for legal or constructive obligations. A constructive obligation
      exists when an entity has created reasonable expectations that it will
      take certain actions.                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company's accounting policies related to
      decommissioning liabilities have been changed to reflect these
      differences. There is no impact on the consolidated financial
      statements.                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (c) Exploration and evaluation expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | On transition to IFRS, the Company adopted a policy to
      expense exploration and evaluation expenditures as incurred. Previously,
      the Company's Canadian GAAP policy was to capitalize exploration and
      evaluation expenditures as incurred. As a result of this adoption, all
      previously capitalized mineral property costs were written off against
      accumulated deficit, and to the extent relating to cost incurred in the
      current period, against the statement of operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In fiscal 2011, the Company wrote down mineral properties
      amounting to $8,437,355 in relation to the Goldwedge Project, primarily
      due to the lack of financing to fund exploration activities at the time.
      The impairment loss recognized under Canadian GAAP would not have been
      recognized under IFRS because the expenditures to which it related would
      not have been recognized as assets.                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Impact on Consolidated Statements of Financial
      Position                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                   |   | As at       |   |   | As at       |  
| | --------------------------------- | - | ----------- | - | - | ----------- | -
| |                                   |   | January 31  |   |   | February 1, |  
| |                                   |   | 2011        |   |   | 2010        |  
| | Adjustment to mineral properties  | $ | (12,009,423 | ) | $ | (19,799,686 | )
| | Adjustment to accumulated deficit | $ | (12,009,423 | ) | $ | (19,799,686 | )

Impact on Consolidated Statements of
Operations

| |                                                       |   | Year        | 
| | ----------------------------------------------------- | - | ----------- | 
| |                                                       |   | ended       | 
| |                                                       |   | January 31, | 
| |                                                       |   | 2011        | 
| | Adjustment to exploration and evaluation expenditures | $ | 7,790,263   | 
| | Adjustment to loss                                    | $ | 7,790,263   | 









100

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                               
|--- | -------------------------------------------------------------
|    |                                                              
|    | *(iii) Changes to accounting policies
      (continued)*     
|    |                                                              
|    | (c) Exploration and evaluation expenditures
      (continued)
|    |                                                              
|    | Impact on Consolidated Statements of Cash
      Flows        

| |                                                          |   | Year        | 
| | -------------------------------------------------------- | - | ----------- | 
| |                                                          |   | ended       | 
| |                                                          |   | January 31, | 
| |                                                          |   | 2011        | 
| | Adjustment to loss                                       | $ | 7,790,263   | 
| | Depreciation                                             | $ | 271,050     | 
| | Mineral resource properties and exploration expenditures | $ | 8,061,313   | 

(d) Presentation

Certain amounts on the consolidated
statements of financial position, statements of operations and comprehensive
loss and statements of cash flows have been reclassified to conform to the
presentation adopted under IFRS.









101

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                 
|    | (iv) Reconciliation between IFRS and Canadian
      GAAP                                                        
|    |                                                                                                                 
|    | The February 1, 2010 Canadian GAAP statement of financial
      position has been reconciled to IFRS as
follows:

| |                                             |   | February 1, 2010 |  
| | ------------------------------------------- | - | ---------------- | -
| |                                             |   | Canadian         |  
| |                                             |   | GAAP             |  
| | Assets                                      |   |                  |  
| |                                             |   |                  |  
| | Current                                     |   |                  |  
| | Cash                                        | $ | 745,779          |  
| | Marketable securities                       |   | 60,500           |  
| | Sundry receivables and prepaids             |   | 24,537           |  
| |                                             |   | 830,816          |  
| |                                             |   |                  |  
| | Due from related parties                    |   | 121,740          |  
| | Reclamation bonds                           |   | 534,984          |  
| | Mineral properties (Note
      21(iii)(c))  |   | 19,799,686       |  
| | Equipment, net                              |   | 725,906          |  
| |                                             | $ | 22,013,132       |  
| |                                             |   |                  |  
| | Liabilities                                 |   |                  |  
| | Current                                     |   |                  |  
| | Accounts payable and accrued liabilities    | $ | 301,381          |  
| |                                             |   | 301,381          |  
| |                                             |   |                  |  
| | Asset retirement obligations                |   | 232,010          |  
| |                                             |   | 533,391          |  
| |                                             |   |                  |  
| | Shareholders' equity                        |   |                  |  
| | Share capital                               |   | 28,098,264       |  
| | Contributed surplus (Note
      21(iii)(d)) |   | 10,076,866       |  
| | Reserves (Note 21(iii)(d))                  |   | -                |  
| | Deficit (Note 21(iii)(c))                   |   | (16,669,265      | )
| | Accumulated other                           |   |                  |  
| | comprehensive loss                          |   | (26,124          | )
| |                                             |   |                  |  
| |                                             |   | 21,479,741       |  
| |                                             |   |                  |  
| |                                             | $ | 22,013,132       |  









102

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                 
|    | (iv) Reconciliation between IFRS and Canadian GAAP
      (continued)                                            
|    |                                                                                                                 
|    | The January 31, 2011 Canadian GAAP statement of financial
      position has been reconciled to IFRS as
follows:

| |                                                |   | January 31, 2011 |  
| | ---------------------------------------------- | - | ---------------- | -
| |                                                |   | Canadian         |  
| |                                                |   | GAAP             |  
| |                                                |   |                  |  
| | Assets                                         |   |                  |  
| | Current                                        |   |                  |  
| | Cash                                           | $ | 102,038          |  
| | Marketable securities                          |   | 52,000           |  
| | Sundry receivables and prepaids                |   | 61,277           |  
| |                                                |   | 215,315          |  
| | Due from related parties                       |   | -                |  
| | Reclamation bonds                              |   | 537,860          |  
| | Mineral properties (Note
      21(iii)(c))     |   | 12,009,423       |  
| | Equipment, net                                 |   | 453,733          |  
| |                                                | $ | 13,216,331       |  
| |                                                |   |                  |  
| |                                                |   |                  |  
| | Liabilities                                    |   |                  |  
| |                                                |   |                  |  
| | Current                                        |   |                  |  
| | Accounts payable and accrued
      liabilities | $ | 578,627          |  
| | Due
      to related parties                   |   | 357,061          |  
| |                                                |   | 935,688          |  
| | Asset retirement obligations                   |   | 232,010          |  
| |                                                |   | 1,167,698        |  
| |                                                |   |                  |  
| | Shareholders' equity                           |   |                  |  
| | Share capital                                  |   | 28,098,264       |  
| | Contributed surplus (Note
      21(iii)(d))    |   | 10,076,866       |  
| | Reserves (Note 21(iii)(d))                     |   | -                |  
| | Deficit (Note 21(iii)(c))                      |   | (26,092,373      | )
| | Accumulated other comprehensive loss           |   | (34,124          | )
| |                                                |   |                  |  
| |                                                |   | 12,048,633       |  
| |                                                |   |                  |  
| |                                                | $ | 13,216,331       |  









103

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                                                                                                          
|--- | ----------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                         
|    | (iv) Reconciliation between IFRS and Canadian GAAP
      (continued)                                                                    
|    |                                                                                                                                         
|    | The year ended January 31, 2011 Canadian GAAP statement
      of loss and comprehensive loss has been reconciled to IFRS as
    follows:

| |                                                                       |       | Canadian       |       |   | IFRS        |   |   | IFRS              |   |       |                |      
| | --------------------------------------------------------------------- | ----- | -------------- | ----- | - | ----------- | - | - | ----------------- | - | ----- | -------------- | -----
| |                                                                       |       | GAAP           |       |   | adjustments |   |   | reclassifications |   |       | IFRS           |      
| |                                                                       |       |                |       |   |             |   |   |                   |   |       |                |      
| | EXPENSES:                                                             |       |                |       |   |             |   |   |                   |   |       |                |      
| | Exploration and evaluation expenditures(Note
      21(iii)(c))        | $     | -              |       | $ | (7,790,263  | ) | $ | 8,835,168         |   | **$** | **1,044,905**  |      
| | General and administrative
      expenses (Note 21(iii)(d))           |       | 674,394        |       |   | -           |   |   | 66,881            |   |       | 741,275        |      
| | Consulting, wages and salaries (Note
      21(iii)(d))                |       | 65,759         |       |   | -           |   |   | (65,759           | ) |       | -              |      
| | Depreciation (Note 21(iii)(d))                                        |       | 1,122          |       |   | -           |   |   | (1,122            | ) |       | -              |      
| |                                                                       |       | (741,275       | )     |   | 7,790,263   |   |   | 8,835,168         |   |       | (1,786,180     | )    
| |                                                                       |       |                |       |   |             |   |   |                   |   |       |                |      
| | Other                                                                 |       |                |       |   |             |   |   |                   |   |       |                |      
| | Finance income                                                        |       | 3,221          |       |   | -           |   |   | -                 |   |       | 3,221          |      
| | Write down of advances to related company                             |       | (132,060       | )     |   | -           |   |   | -                 |   |       | (132,060       | )    
| | Write-off of exploration
      properties                             |       | (8,835,168     | )     |   | -           |   |   | 8,835,168         |   |       | -              |      
| | Gain on disposal of marketable securities                             |       | 275,194        |       |   | -           |   |   | -                 |   |       | 275,194        |      
| | Foreign currency translation adjustment (Note 21(iii)(d))             |       | 6,980          |       |   | -           |   |   | -                 |   |       | 6,980          |      
| |                                                                       |       |                |       |   |             |   |   |                   |   |       |                |      
| | Net loss for the year                                                 | $     | (9,423,108     | )     | $ | 7,790,263   |   | $ | 8,835,168         |   | **$** | **(1,632,845** | **)**
| |                                                                       |       |                |       |   |             |   |   |                   |   |       |                |      
| | Net unrealized loss on available-for-sale marketable
      securities |       | (8,000         | )     |   | -           |   |   | -                 |   |       | (8,000         | )    
| |                                                                       |       |                |       |   |             |   |   |                   |   |       |                |      
| | Comprehensive loss for the year                                       | **$** | **(9,431,108** | **)** | $ | 7,790,263   |   | $ | -                 |   | **$** | **(1,640,845** | **)**









104

---

|Royal Standard Minerals Inc.              
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in United States Dollars)      
|January 31,
      2012                    

|21. | Conversion to IFRS (Continued)                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                    
|    | (iv) Reconciliation between IFRS and Canadian GAAP
      (continued)                                               
|    |                                                                                                                    
|    | The year ended January 31, 2011 Canadian GAAP statement
      of cash flows has been reconciled to IFRS as
follows:

| |                                                         |   | Canadian   |   |   | IFRS        |   |   | IFRS              |  |       |             |  
| | ------------------------------------------------------- | - | ---------- | - | - | ----------- | - | - | ----------------- |  | ----- | ----------- | -
| |                                                         |   | GAAP       |   |   | adjustments |   |   | reclassifications |  |       | IFRS        |  
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Operating activities                                    |   |            |   |   |             |   |   |                   |  |       |             |  
| | Net loss for the period                                 | $ | (9,423,108 | ) | $ | 7,790,263   |   | $ | -                 |  | $     | (1,632,845  | )
| | Operating items not involving
      cash:               |   |            |   |   |             |   |   |                   |  |       |             |  
| | Depreciation                                            |   | 1,122      |   |   | 271,050     |   |   | -                 |  |       | 272,172     |  
| | Write-off of exploration properties                     |   | 8,835,168  |   |   | (8,835,168  | ) |   | -                 |  |       | -           |  
| | Gain on disposal
      of marketable securities         |   | (275,194   | ) |   | -           |   |   | -                 |  |       | (275,194    | )
| | Write down of advances to related company               |   | 132,060    |   |   | -           |   |   | -                 |  |       | 132,060     |  
| | Changes in non-cash working capital:                    |   |            |   |   |             |   |   |                   |  |       |             |  
| | Sundry receivables and prepaids                         |   | (36,740    | ) |   | -           |   |   | -                 |  |       | (36,740     | )
| | Accounts payable and
      accrued liabilities          |   | 277,246    |   |   | -           |   |   | -                 |  |       | 277,246     |  
| | Due from (due to) related
      parties                 |   | 346,741    |   |   | -           |   |   | -                 |  |       | 346,741     |  
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Cash used in operating activities                       |   | (142,705   | ) |   | (773,855    | ) |   | -                 |  |       | (916,560    | )
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Investing activities                                    |   |            |   |   |             |   |   |                   |  |       |             |  
| | Purchase of reclamation bonds                           |   | (2,876     | ) |   | -           |   |   | -                 |  |       | (2,876      | )
| | Additions to mineral
      properties (Note 21(iii)(c)) |   | (773,855   | ) |   | 773,855     |   |   | -                 |  |       | -           |  
| | Proceeds on disposal of marketable securities           |   | 275,695    |   |   | -           |   |   | -                 |  |       | 275,695     |  
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Cash
      used in investing activities                 |   | (501,036   | ) |   | 773,855     |   |   | -                 |  |       | 272,819     |  
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Change in cash and cash equivalents                     |   | (643,741   | ) |   | -           |   |   | -                 |  |       | (643,741    | )
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Cash
      and cash equivalents, beginning of year      |   | 745,779    |   |   | -           |   |   | -                 |  |       | 745,779     |  
| |                                                         |   |            |   |   |             |   |   |                   |  |       |             |  
| | Cash and cash equivalents, end of year                  | $ | 102,038    |   | $ | -           |   | $ | -                 |  | **$** | **102,038** |  

|22. | Subsequent Events
|--- | -----------------
|    |                  
|    | (a)              
|    |                  
|    | (b)              
|    |                  
|    | (c)              









105

---



ROYAL STANDARD MINERALS INC.

MANAGEMENTS DISCUSSIONAND ANALYSIS

YEAR ENDED JANUARY 31, 2012

106

---

|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

This Management Discussion and Analysis (MD&A) is dated
May 29, 2012 and unlessotherwise noted, should be read in conjunction with the
Companys consolidated financial statements for the year ended January 31, 2012
and the comparable year ended January 31, 2011 and the related notes thereto.
This MD&A was written to comply with the requirements of National Instrument
51-102-Continuous Disclosure Obligations. Unless otherwise noted, all amounts
reported herein are in United States dollars. In the opinion of management, all
adjustments (which consist only of normal recurring adjustments) considered
necessary for a fair presentation have been included. The results presented for
the year ended January 31, 2012 are not necessarily indicative of the results
that may be expected for any future period.

The consolidated financial statements for the years ended
January 31, 2012 and 2011 include the Companys wholly owned subsidiaries, Kentucky Standard Energy
Company, Inc. and Manhattan Mining Co., both United States Companies.

As of February 1, 2011, the Company adopted International
Financial Reporting Standards (IFRS), with an opening transition date of
February 1, 2010. The consolidated financial statements for the year ended
January 31, 2012 are the first annual statements that have been prepared in
accordance with IFRS. Readers of this MD&A should refer to Changes in
Accounting Policies below, for a discussion of IFRS and its effect on the
Companys financial presentation.

In this MD&A and the financial statements, the term CGAAP
refers to Canadian Generally Accepted Accounting Principles before the adoption
of IFRS. For more information regarding the implementation of IFRS, please refer
to note 21 of the consolidated financial statements for the years ended January
31, 2012 and 2011 and this MD&A on Conversion to IFRS.

For the purposes of preparing this MD&A, management, in
conjunction with the Board of Directors, considers the materiality of
information. Information is considered material if (1) such information is a
change or a fact that has or would reasonably be expected to have, a significant
effect on the market price or value of the Companys common shares; or (2) there
is a substantial likelihood that a reasonable investor would consider it
important in making an investment decision; or (3) if it would significantly
alter the total mix of information available to investors. Management, in
conjunction with the Board of Directors, evaluates materiality with reference to
all relevant circumstances, including potential market sensitivity.

Additional information relating to the Company can be found on
SEDAR at www.sedar.com.

The Companys common shares are listed in the United States of
America on the Over the Counter Bulletin Board OTC:BB, under the symbol
RYSMF.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements, including in
respect of the timing of project development. These forward-looking statements
entail various risks and uncertainties that could
cause actual results to differ materially from those reflected in these forward-looking statements. Such statements are based on current expectations, are subject to a number of uncertainties and risks, and actual results may differ materially from
those contained in such statements. These uncertainties and risks include, but are not limited to, the strength of the Canadian and US economies; the price of gold; operational, funding and liquidity risks; the degree to which mineral resource
estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations. Risks and uncertainties about the
Company’s business are more fully discussed under “Risk Factors” contained elsewhere in this MD&A. The Company assumes no obligation to update any forward-looking statement or to update the reasons why actual results could
differ from such statements unless required by law.

107

---

|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

HIGHLIGHTS

On May 8, 2012, the Company announced that it had secured an additional $2,000,000 loan extension from Waterton Global Value, L.P. (“Waterton”). This now brings the total funds provided by Waterton to $10,000,000. As
consideration for this loan extension, the Company will provide Waterton with additional net smelter return royalties (“NSR”), on several of its properties, including Piñon and Fondaway Canyon.

On April 16, 2012, the Company announced the commissioning of its mill at its flagship Goldwedge Project in Manhattan, Nevada. The gravity process has been commissioned and is permitted to process four hundred metric tons of gold bearing ore per
day. The commissioning of the mill was the most important milestone met to date, under the Company’s new management team. This positive development provides further evidence of management’s commitment and dedication to maximize the
Company’s growth and build value for its shareholders.

On January 11, 2012, at its annual and special meeting of its shareholders, the Company announced the following persons elected as directors of the Company: Paul G. Smith (Chairman), James B. Clancy, John Fitzgerald, Riyaz Lalani and Ken Strobbe.

On December 6, 2011, Roland M. Larsen was terminated as President and Chief Executive Officer of the Company. Philip Gross, a director of the Company at the time, was appointed Interim President and Chief Executive Officer of the Company.

On August 26, 2011, the Company’s wholly-owned subsidiary, Manhattan Mining Co. (“Manhattan”), amended its existing senior secured bridge loan (the “Bridge Loan”) with
Waterton such that the Bridge Loan was transitioned into a more permanent senior secured gold stream debt facility (the “Gold Stream Facility”) guaranteed by the Company. Under the Gold Stream Facility, Waterton will make up to
$8,000,000 (the “Principal Amount”) available to
Manhattan. The Principal Amount will be repayable in monthly installments commencing August 2012 through to July 2013. Under the Gold Stream Facility, each monthly repayment will be made by the delivery of gold bullion ounces to Waterton,
whereby the number of ounces to be delivered shall be based on the then current
spot price of gold less an applicable discount or by the payment of the cash
equivalent of such number of ounces. Any principal amounts drawn under the
facility will accrue interest at 9% per annum. In addition, Manhattan will owe
Waterton a profit participation fee, dependent on the spot price of gold. As
at January 31, 2012, $5,970,350 was outstanding under the Gold Stream Facility.
There are additional financing costs associated with the Gold Stream Facility,
including a profit participation component which has been accounted for as an
embedded derivative, a structuring and placement fee paid to Waterton, a
placement fee based on 4% of the amount drawn under the Gold Stream Facility
paid to the agent and a premium of 33% paid during the monthly repayment period,
beginning August 2012. Total finance costs of $712,822 have been expensed in the
consolidated financial statements for the year ended January 31, 2012.

108

---

|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

OVERVIEW

The Company is a mineral exploration and mine development company engaged in locating, acquiring, exploring and developing gold and precious metal deposits in Nevada. The Company's flagship Goldwedge Project is located southeast of the Round
Mountain gold mine in central Nevada. The Goldwedge Project continues to be the primary focus of the Company. This project is considered to be an advanced exploration development project that is fully permitted by the Nevada Division of
Environmental Protection (“NDEP”) for a mine and mill. The Company’s portfolio of gold exploration projects also includes Fondaway Canyon, Piñon and Dixie-Comstock. The Company intends to evaluate, explore and develop its
Nevada gold projects and, if appropriate, acquire additional prospective gold properties, to create a development pipeline that can fuel further growth.

GOING CONCERN

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its
assets and discharge its liabilities in the normal course of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least,
but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity's ability to continue as
a going concern. The Company has incurred a loss in the current and prior years, with a current net loss of $6,451,698 (2011– net loss of $1,632,845) and has an accumulated deficit of $44,553,494 (January 31, 2011 –
$38,101,796, February 1, 2010-$36,468,951).

The underlying value of the resource properties is dependent upon the existence
and economic recovery of economic reserves, confirmation of the Companys
interest in the underlying mineral claims, the ability to continue to raise
long-term financing to complete the development of the properties and upon
future profitable production or, alternatively, upon the Companys ability to
dispose of its interest on an advantageous basis, all of which are uncertain.
There is no assurance that any such initiatives will be sufficient and, as a
result, there is significant doubt regarding the
going concern assumption and, accordingly, the ultimate appropriateness of the use of accounting principles applicable to a going concern. The Company’s ability to continue to meet its obligations and carry out its planned exploration
activities is uncertain and dependent upon the continued financial support of its shareholders, its current creditors and securing additional financing. During the year ended January 31, 2012, the Company secured financing of $8,000,000. These
financial statements do not reflect the adjustments to the carrying values or classifications of assets and liabilities or to the reported expenses that would be necessary if the Company were unable to realize its assets and settle its liabilities
as a going concern in the normal course of operations for the foreseeable future. These adjustments could be material.

109

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

MINERAL PROPERTIES

Goldwedge Project

The Goldwedge Project, represents the Company’s most advanced project and is located in theManhattan district of Nye County, approximately eight miles south of the Round Mountain mine and has been issued a mine and mill permit by the NDEP. The Company has been completing the refurbishment of the on-site processing plant which was used for
the test mining and processing that took place between 2007 and 2008. As noted above, the mill was commissioned this past April. The process includes primary and secondary crushing and grinding facilities that feed a gravity recovery system.  In
addition, dry stack tailings containment as well as silt and fresh water ponds are in place. Testing of the various mineral processing functions commenced during April 2007, and continued throughout 2008, using previously extracted stockpiles of low
grade gold feed material, as well as concurrently newly mined material. The plant feed material was processed into gold doré on site. The Company had recently completed construction of the Rapid Infiltration Basins (RIB), dewatered the
previously completed underground development and also commenced phase 2 of the underground development program. This phase of the development includes the exploration of defined mineralized zones concurrently with the second phase of decline
development.  The previous work has concentrated on the development of a spiral decline as a means to explore the deposit at depth.  As part of the program, a series of crosscuts were constructed at specific intervals to effectively assess the
potential mineralized zones.  Phase 2 of the development is concentrated on developing along the strike of known mineralized zones to assess continuity and grade as well as prepare areas for future test stoping. Currently, all material is sampled
daily and analyzed for gold onsite at the Company’s assay laboratory. The assay laboratory was also recently refurbished and has now been approved by the NDEP.

On June 29, 2005, the Company entered into a five year Purchase Option Agreement with a private individual for all of his patented and unpatented mining claims in the Manhattan Mining District located in Nye County, Nevada.  The land package totals
approximately 1,600 acres (four patented and 70 unpatented claims). The property’s position adjoins the Company's Goldwedge
Mine. The land package includes a number of exploration targets which are of
interest to the Company. In addition, the Company's option included the
Dixie-Comstock claim group located in Churchill County, Nevada. Dixie-Comstock
is a 1,500 acre property containing
a gold system that has been explored by a number of major mining companies over the past 20 years. Annual option payments of $48,000 were to be applied to a total purchase price of $600,000. This option was exercised prior to August 31, 2009
and as a result, this property is now 100% owned by the Company.

110

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

The Company has recorded an asset retirement obligation (“ARO”) on its Goldwedge Project in the amount of $168,276, representing the net present value of management’s estimated costs to restore the property site to its original
condition. In determining these estimated costs, management also reviews calculations prepared by and provided by the state of Nevada, using the Nevada Standardized Reclamation Cost Estimator (“SRCE”). The SRCE is used by the state in
calculating the reclamation bond being requested from the Company.

Based on the existing level of terrestrial disturbance and water treatment and monitoring requirements, the discounted ARO for all projects, where applicable, has been estimated by management assuming that the future payments will be made over a ten
year period from the date of initial assessment of the ARO’s using a discount rate of 10%.

Project Expenditures

During the year ended January 31, 2012, the Company's exploration and evaluation expenditures on the Goldwedge Project were $2,748,949 (2011 - $787,166).

Future Programs

Management anticipates advancing the production potential on the Goldwedge Project by incurring further exploration and evaluation expenditures and continuing to upgrade the processing plant. The Company will maintain its ongoing claim renewal fees
and will maintain and complete various operational permits with regulatory bodies.

Other Properties

The Piñon property is made up of certain lease agreements to lease certain properties in Elko County, Nevada.  During the year ended January 31 2012 the Company's exploration and evaluation expenditures on the Piñon property were
$71,188 (2011 - $86,995).

The Fondaway Canyon property is located in Churchill County, Nevada. During the year ended January 31, 2012, the Company's exploration and evaluation expenditures on the Fondaway Canyon Project were $37,297 (2011 - $58,037).

The Kentucky Project is located in Wolfe County, Kentucky. During the year ended January 31,
2012, the Company’s exploration and evaluation expenditures on the Kentucky Project were $96,922 (2011-$112,707). See “Related Party Transactions”. The Kentucky Project represents the Company’s sole venture in coal
exploration. The Company is currently reviewing all options with this project.

111

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Under the guidance of IAS 37, the Company has recorded an ARO on the Piñon Project in the amount of $28,724 and on the Kentucky Project $95,315 as at January 31, 2012, representing the net present value of the estimated costs to
restore each property to its original condition.

ENVIRONMENTAL LIABILITIES

The Company’s projects in Nevada are subject to regulation and permitting by the NDEP. The Company is not aware of any other environmental liabilities or obligations associated with its mining interests in Nevada. The Company is conducting its
operations in a manner that is consistent with governing environmental legislation.

OVERALL PERFORMANCE

During the year ended January 31, 2012, the continuing global economic uncertainty weighed heavily on the equity markets and the junior mining industry. Notwithstanding these challenges, the Company was able to secure financing with Waterton,
finalizing an $8,000,000 Gold Stream Facility during the third quarter. The Gold Stream Facility has allowed the Company to focus on its Goldwedge Project and its primary objective of completing the processing plant (mill). During the fourth
quarter, management hired two main contractors to carry out the completion of the mill, which was recently commissioned. The Company continues to prepare the mill for production and during the fourth quarter, primarily, incurred $1,619,341 in
construction costs associated with the mill, including significant electrical upgrades and new installations. During the construction, the Company encountered many challenges with the existing equipment, due to mechanical failure requiring repeated
repairs and replacement. These costs will be depreciated, once the mill is in production.

The Company’s net loss for the year ended January 31, 2012 was $6,451,698 ($0.08 per share) compared to $1,632,845 ($0.02 per share) for the year ended January 31, 2011, an increase of $4,818,853. The increase in the loss
is mainly attributable to the increased exploration and evaluation expenditures of $1,909,451, the result of the increased mine staff and the hiring of consultants to carry out the exploration and development of the mine, made possible by the
Gold Stream Facility. In addition, general and administrative expenses increased by $ 2,067,844, mainly attributable to increased professional fees of $1,296,211, representing primarily, legal expenses incurred in addressing the
company’s outstanding claims, providing for estimated expenses in connection with an outstanding claim, preparing for the recent annual general meeting on January 11, 2012 and a more focused effort on corporate governance with an increase in
corporate development of $205,849, the majority of which was in connection with activities around the recent annual general meeting. In addition, the Company granted stock options on January 20, 2012 to directors, officers, an employee and a
consultant. The impact of these options resulted in an increase to the loss during the year of $503,942. There were no stock options granted in 2011. Also contributing to the increased loss was the financing costs associated with the Gold Stream
Facility, a total of $ 712,822 for the year.

112

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

The Companys future financial condition and operations is
dependent on many factors including, the underlying value of the resource
properties which is dependent on the underlying mineral claims, the ability to
raise additional long-term financing or other forms of financing to enable it to
complete the development of the properties and upon future profitable production
or, alternatively, upon the Companys ability to dispose of its interest on an
advantageous basis, all of which are uncertain.

SELECTED ANNUAL FINANCIAL INFORMATION

For the financial information for 2010, the results and
balances have been prepared in accordance with CGAAP.

|                                                                                    |  | 2012       |  |  | 2011       |  |  | 2010       | 
|----------------------------------------------------------------------------------- |  | ---------- |  |  | ---------- |  |  | ---------- | 
|                                                                                    |  | (IFRS)     |  |  | (IFRS)     |  |  | (CGAAP)    | 
|                                                                                    |  | **$**      |  |  | $          |  |  | $          | 
|                                                                                    |  |            |  |  |            |  |  |            | 
|Total revenues                                                                      |  | nil        |  |  | nil        |  |  | nil        | 
|Net loss for the year                                                               |  | 6,451,698  |  |  | 1,632,845  |  |  | 961,104    | 
|Basic and diluted loss per share                                                    |  | 0.08       |  |  | 0.02       |  |  | 0.01       | 
|Total issued share capital                                                          |  | 83,853,825 |  |  | 83,853,825 |  |  | 83,853,825 | 
|Total equipment                                                                     |  | 2,084,336  |  |  | 453,733    |  |  | 725,906    | 
|Total assets (including equipment)                                                  |  | 3,653,198  |  |  | 1,206,908  |  |  | 2,213,446  | 
|Total liabilities (excluding long- term
      debt and related embedded derivative) |  | 3,361,101  |  |  | 1,167,698  |  |  | 533,391    | 
|Total long-term debt and related embedded derivative                                |  | 6,102,644  |  |  | nil        |  |  | nil        | 

SUMMARY OF QUARTERLY RESULTS

The following is a summary of selected financial information of
the Company for the quarterly periods indicated. For the four quarters ending
after February 1, 2010, the quarterly results have been restated to reflect
accounting policies consistent with IFRS.

113

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Ended Jan-31
      2012
    Ended Oct-31 2011
    Ended July-31 2011
    Ended Apr-30 2011
    Ended Jan-31 2011
    Ended Oct-31 2010
    Ended July-31 2010
    Ended Apr-30 2010Finance Income
    (2,285)
    (801)
    (708)
    (497)
    (1,149)
    (130)
    (919)
    (1,023)Exploration
    996,551
    999,865
    783,052
    174,888
    304,872
    250,733
    242,022
    247,278General & administrative
    2,338,423
    202,442
    197,530
    70,724
    346,144
    84,864
    111,313
    198,954Write-off of advances
    -
    -
    -
    -
    132,060
    -
    -
    -Gain on disposal of
      marketable securities
    -
    -
    -
    -
    (275,194)
    -
    -
    -Other expenses (income)
    (608,991)
    1,280,855
    12,481
    8,169
    (12,980)
    7,503
    1,751
    (3,254)Net loss
    2,723,698
    2,482,361
    992,355
    253,284
    493,753
    342,970
    354,167
    441,955Basic & diluted loss per share
    0.03
    0.03
    0.01
    0.00
    0.01
    0.00
    0.00
    0.01Weighted average number of
      shares
    83,853,825
    83,853,825
    83,853,825
    83,853,825
    83,853,825
    83,853,825
    83,853,825
    83,853,825


FINANCIAL PERFORMANCE

Revenue

The Companys Goldwedge Project is the property of main focus.
It is still in the exploration and development stage. Until sufficient work has
been completed to confirm the technical feasibility and commercial viability of
this project, no material revenue will be earned. No revenues have been earned
during the years ended January 31, 2012 and 2011.

Expenses

As previously noted, the Companys loss for the year ended
January 31, 2012 was $6,451,698 ($0.08 per share) compared to $1,632,845 ($0.02
per share) for the year ended January 31, 2011, an increase of $4,818,853. The
financing provided by the Gold Stream Facility allowed the Company to increase
employee levels in all areas, underground mining, underground drilling,
engineering staff, a mill superintendent, a new safety officer, assay laboratory
expertise and an experienced underground superintendent, working as an
independent contractor. As of the date hereof, the Company has continued to hire
new miners, surface drillers, assay laboratory samplers, an engineer/surveyor
and a geological consultant. Also, during the fourth quarter and as of the date
hereof, management continued to assess the performance of its workforce, making
changes where necessary. Management is continually challenged with recruiting
quality employees who are willing to accept the challenges of working in this
remote location. These efforts have resulted in the increase in consulting,
wages and salaries during the year, an increase of $1,012,385 on the Goldwedge
Project. During the fourth quarter, the Company carried out
extensive mine development efforts with expenditures increasing $355,314. The major contributing factors to this increase were in connection with the completion of the secondary escape/ventilation raise.

114

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During the third quarter, the Company completed the construction of the Rapid Infiltration Basins (RIB), dewatered the previously completed underground development and also commenced phase 2 of the underground development program. With the increased
activity towards the last two quarters of the year, the Company also incurred a higher level of costs for supplies, transportation and small tools and equipment, an increase of $359,228.

During the fourth quarter, the Company encountered issues not previously anticipated, including electrical improvements and upgrades required for its underground operations which led to a shutdown of the underground mine in the early part of the
first quarter of fiscal 2013.

As previously noted, general and administrative expenses increased by $2,067,844, mainly attributable to increased professional fees of $1,296,211, increased corporate development of $205,849 and the increase from the granting of stock
options of $503,942. The professional fees related to continuing costs in connection with outstanding claims, a provision for estimated expenses of $ 330,000 in connection with the Company’s action with Hale Capital Management,LP and Hale Capital Partners, LP and professional fees related to continuous disclosure requirements.

During the fourth quarter, management revised its estimates for its financing costs in connection with the Gold Stream Facility. As a result, finance costs for the year ended January 31, 2012 totaled $712,822. Included in these finance costs, is
an estimate of the impact of the embedded derivative, which is a component of the Gold Stream Facility and is triggered when the spot price of gold is in excess of $1,600 an ounce on the business day immediately preceding the repayment, which
begins August 2012. The embedded derivative will be re-evaluated at the end of each quarter and adjusted to its estimated fair value.

LIQUIDITY AND CAPITAL RESOURCES

The Company currently has no operating cash flow and has to date, financed its mineral exploration activities and its ongoing expenditures, primarily through equity transactions such as equity offerings, the exercise of warrants and its recent
financing arrangement with Waterton. The Company’s financial success will be dependent on the economic viability of its mineral exploration properties to the extent that it can establish economic reserves and its ability to secure ongoing
financing and the support of its shareholders and creditor.

As at January 31, 2012, the Company had cash of $629,553. Cash used in operating activities was $4,075,007 for the year ended January 31, 2012. During the year, the Company experienced a net increase in non-cash working capital items of
$1,064,062, which was primarily due to increases in accounts payable and accrued liabilities of $1,481,098, offset by a repayment of
amounts due to related parties of $322,038 and an increase in sundry receivables and prepaids of $94,998.

115

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

As at January 31, 2012 and the date hereof, the Company had met its capital commitment obligations to keep its property agreements in good standing.

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due.  As at January 31, 2012, the Company had cash of $629,553 compared to $102,038 as at January 31, 2011, to
settle current liabilities of $6,120,109 compared to $935,688 as at January 31, 2011. Included in current liabilities are amounts owing on the long-term debt, including the embedded derivative totaling $3,051,323. All of the Company's
financial liabilities, excluding those related to the long term debt (including the embedded derivative) have contractual maturities of less than 60 days and are subject to normal trade terms.  The Company regularly evaluates its cash position to
ensure maintenance of liquidity.

As of the date hereof, the Company had drawn $10,000,000 against the Gold Stream Facility.
See “Recent Developments”.

There is no assurance that future sales or equity or debt capital will be available to the Company in the amounts or at the times desired, or on terms that are acceptable to the Company, if at all. See “Risk Factors” below.

CONTRACTUAL OBLIGATIONS

(a) Under the terms of the option agreement with Sharpe Resources Corporation (“Sharpe”), the Company was required to incur expenditures of $2,000,000 in total by December 9, 2011 to exercise its option.  As noted previously, the
Company exercised the option on December 7, 2011. Pursuant to the terms of the option agreement, the Company requested Sharpe to provide additional cash to the Kentucky Project, to match that of the Company, which had exceeded $2,000,000. As of
the date hereof, Sharpe had not responded.

(b) Includes optional payments and expenditures required in order to maintain its various mining interests in good standing. In order to maintain its property on the Goldwedge Project, the Company has to pay claim renewal fees to the BLM of
approximately $15,000.

(c) The Company had an employment contract dated January 1, 2011 with the former
Chief Executive Officer. The contract was for a term of five years, allowing for
a base salary of $250,000 per year and also providing for an additional annual
bonus payment at the discretion of the Board of Directors. The contract also
contained termination provisions entitling the former Chief Executive Officer to
receive the greater of three years basic compensation and the amount outstanding
for the remainder of the term of the employment agreement only if he is
terminated other than for cause or if he terminated his employment for good
reason which includes material failure by the Company to substantially comply
with the terms of the employment agreement. Management has determined that the former Chief
Executive Officer is not entitled to any additional compensation since he was
terminated with cause.

116

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Management has undertaken a review of all contractual
obligations and other payables in relation to the Companys properties and
operations. The Company has no operating revenues and therefore it must utilize
its current cash reserves, funds obtained from the exercise of stock options and
other financing transactions to maintain its capacity to meet ongoing
discretionary exploration and operating activities. Although the Company has
obtained financing, the Company does not have sufficient funds on hand to meet
its current operating and capital requirements; therefore, the Company will
continue to seek additional equity or debt financing to generate funds.

As at January 31, 2012 and as of the date hereof, the Company
had 83,853,825 common shares issued and outstanding, and stock options
outstanding as at January 31, 2012, to acquire 12,060,191 common shares of the
Company. As at January 31, 2012, 9,060,191 options were exercisable. During the
year ended January 31, 2012 and as of the date hereof, the Company granted
4,700,000 stock options to directors, officers, an employee and a consultant.
1,700,000 of these stock options were exercisable as at January 31, 2012. During
the year and as of the date hereof, no common shares had been issued and no
stock options were exercised. In December of 2011, the Company amended and
restated its stock option plan. Subsequent to the year-end, 6,560,191 stock
options granted to past directors, having an expiry date of June 26, 2014, had
expired. As of the date hereof, the Company had 5,350,000 stock options
outstanding that would raise $ 1,475,000, if exercised in full.

The Companys liquidity risk with financial instruments is
minimal as any excess cash is invested in highly liquid bank-backed guaranteed
investment certificates.

The market value of the Companys investment in Sharpe, a
Canadian held public company as at January 31, 2012, was $150,000. The Company
can sell the securities to raise funds to settle its obligations as they arise.
The investment is considered an available for sale investment and the Company
has recorded other comprehensive income on this investment of $ 97,999, for the
year ended January 31, 2012.

RELATED PARTY TRANSACTIONS

Remuneration of Directors and key management personnel of the
Company was as follows:

| |                                                                |   | Years Ended |  |   | January 31, | 
| | -------------------------------------------------------------- | - | ----------- |  | - | ----------- | 
| |                                                                |   | 2012        |  |   | 2011        | 
| | Salaries and benefits paid to
      directors and officers (1) | $ | 471,380     |  | $ | 316,911     | 
| | Stock-based payments                                           | $ | 501,799     |  | $ | -           | 

(1)Salaries and benefits
include director fees. The board of directors does not have employment or
service contracts with the Company. Directors are entitled to directorfees and stock options for their services. Paul G. Smith, a
director and Chairman of the Board, is the President and Chief Executive Officer
of Equity Financial Holdings Inc., a company providing financial services to the
Company.

117

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Due to related parties balance as at January 31, 2012 consists
of $22,607 (January 31, 2011 - $357,061, February 1, 2010 - $nil) owing to the
former CEO and $12,416 owed to Sharpe (January 31, 2011 - $nil, February 1, 2010
- $121,740). In addition, included in accounts payable and accrued liabilities
is $18,677 (2011 - $nil), owing to the former CEO.

SHARE CAPITAL

The Company is authorized to issue an unlimited number of
common shares and special shares. As at January 31, 2012 and the date hereof,
the Company has 83,853,825 common shares outstanding.

As at January 31, 2012, the Company had 12,060,191 stock
options outstanding, as follows:

|Number of Options | Exercise Price | Expiry Date     
|----------------- | -------------- | ----------------
|7,360,191         | $0.10          | June 26, 2014   
|4,700,000         | $0.30          | January 20, 2017

As of the date hereof, the Company had 5,350,000 stock options
outstanding, after the expiration of 6,560,191 stock options to former
directors, which was announced on April 16, 2012 and 150,000 to a former
employee. And, of the remaining 5,350,000 stock options outstanding, 2,350,000
are exercisable.

CONTINGENCIES

| | (a) | The Company received documents filed in the District
      Court, Nye County, Nevada, whereby an optionor of a property acquired by
      the Company has requested payment for machinery and equipment stored in
      the vicinity of the acquired property. The Company intends to vigorously
      defend itself against this claim.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) | The Company received an action against it whereby the
      Company was requested, by a prior lease holder, to take any and all steps
      necessary to ensure that the prior lease holders bear no responsibilities
      or liability for the Companys failure to comply with the rules and
      regulations of the Kentucky Energy and Environment Cabinet, Division of
      Mine Enforcement and Reclamation (the DMER). Management had
      responded to the DMER and is rectifying the notice received from the DMER.
      The Company believes that no penalty will be assessed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) | On September 27, 2011, Hale Capital Management, LP and
      Hale Capital Partners, LP(together, Hale Capital) commenced an action in the New
      York Supreme Court alleging breach of contract in relation to a term sheet
      entered into between the Company
and Hale Capital on December 11, 2010 (the “Term Sheet”), which set out preliminary terms for Hale to provide financing of up to $15 million for the Company’s Goldwedge project (the “Hale Transaction”). Hale Capital
is seeking the “right to participate” in financing the Company on no less favorable terms and conditions as was agreed upon between the Company and Waterton on June 29, 2011 or, in the alternative, damages for breach of the exclusivity
provision contained in the Term Sheet. Hale is also seeking expense reimbursement for legal, travel and due diligence fees incurred by Hale Capital, which allegedly totaled approximately $376,179, as of November 21, 2011. On November 23, 2011,
Hale Capital amended their complaint to include the Company’s subsidiary Manhattan Mining Co. Management has estimated these expenses at $330,000 and has accrued this amount in the accounts.

118

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OFF BALANCE SHEET ARRANGEMENTS

As of the date hereof, management believes the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company,
including, and without limitation, such considerations as liquidity and capital resources.

PROPOSED TRANSACTIONS

There are no proposed transactions of a material nature being considered by the Company. However, the Company continues to evaluate either debt or equity financings and evaluate properties that may be sold in the future.

CONVERSION TO IFRS

Overview

As stated in Significant Accounting Policies (note 2), of the Consolidated Financial Statements for the years ended January 31, 2012 and 2011, they have been prepared in accordance with IFRS as issued by the IASB.

The policies set out in the Significant Accounting Policies section have been applied in preparing the financial statements for the years ended January 31, 2012 and 2011 and in the preparation of an opening IFRS balance sheet at February 1, 2010
(the Company’s Transition Date).

First Time adoption of IFRS

The adoption of IFRS requires the application of IFRS 1, which provides guidance for an entity’s initial adoption of IFRS. IFRS 1 generally requires retrospective application of IFRS as effective at the end of its first annual IFRS reporting
period. However, IFRS 1 also provides certain optional exemptions and mandatory exceptions to this retrospective treatment.

119

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

The Company has elected to apply the following optional
exemptions in its preparation of an opening IFRS statement of financial position
as at February 1, 2010.

- To apply IFRS 2 Share-based Payments only to equity instruments that were
  issued after November 7, 2002 and had not vested by the Transition Date.
- To apply IFRS 3 Business Combinations prospectively from the Transition
  Date, therefore not restating business combinations that took place prior to
  the Transition Date.
- To apply IAS 23 Borrowing Costs prospectively from the Transition Date.
  IAS 23 requires the capitalization of borrowing costs directly attributable to
  the acquisition, production or construction of certain assets.

IFRS 1 does not permit changes to estimates that have been made
previously. Accordingly, estimates used in the preparation of the Companys
opening IFRS statement of financial position as at the Transition Date are
consistent with those that were made under Canadian GAAP.

Changes to Accounting Policies

The Company has changed certain accounting policies to be
consistent with IFRS effective on January 31, 2012 (note 2), the Company's first
annual IFRS reporting date. The changes to its accounting policies have resulted
in certain changes to the recognition and measurement of assets, liabilities,
equity, revenue and expenses within its financial statements.

The following summarizes the significant changes to the
Companys accounting policies on adoption of IFRS.

(a) Impairment of non-financial assets

IFRS requires a write down of assets if
the higher of the fair value less costs to sell and the value in use of a group
of assets is less than its carrying value. Value in use is determined using
discounted estimated future cash flows. Previously, Canadian GAAP required a
write down to estimated fair value only if the undiscounted estimated future
cash flows of a group of assets are less than its carrying value.

The Company's accounting policies
related to impairment of non-financial assets have been changed to reflect these
differences. There was no impact on the consolidated financial statements.

(b) Decommissioning Liabilities (Asset
Retirement Obligations)

IFRS requires the recognition of a
decommissioning liability for legal or constructive obligations. A constructive
obligation exists when an entity has created reasonable expectations that it
will take certain actions.

120

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The Company's accounting policies
related to decommissioning liabilities have been changed to reflect these
differences. There is no impact on the consolidated financial statements.

(c) Exploration and evaluation
expenditures

On transition to IFRS, the Company
adopted a policy to expense exploration and evaluation expenditures as incurred.
Previously, the Company's Canadian GAAP policy was to capitalize exploration and
evaluation expenditures as incurred. As a result of this adoption, all
previously capitalized mineral property costs were written off against
accumulated deficit, and to the extent relating to cost incurred in the current
period, against the statement of operations.

In fiscal 2011, the Company wrote down mineral properties
amounting to $8,437,355 in relation to the Goldwedge Project, primarily due to
the lack of financing to fund exploration activities at the time. The impairment
loss recognized under Canadian GAAP would not have been recognized under IFRS
because the expenditures to which it related would not have been recognized as
assets.

Impact on Consolidated Statements of Financial Position

|                                       |   | As at       |   |   | As at       |  
|-------------------------------------- | - | ----------- | - | - | ----------- | -
|                                       |   | January 31, |   |   | February 1, |  
|                                       |   | 2011        |   |   | 2010        |  
|                                       |   |             |   |   |             |  
|Adjustment to mineral
      properties | $ | (12,009,423 | ) | $ | (19,799,686 | )
|Adjustment to accumulated deficit      | $ | (12,009,423 | ) | $ | (19,799,686 | )

Impact on Consolidated Statements of Operations

|                                                            |   | Year ended       | 
|----------------------------------------------------------- | - | ---------------- | 
|                                                            |   | January 31, 2011 | 
|                                                            |   |                  | 
|Adjustment to exploration and evaluation
      expenditures | $ | 7,790,263        | 
|Adjustment to loss                                          | $ | 7,790,263        | 

Impact on Consolidated Statements of Cash Flows

|                                                               |   | Year ended       | 
|-------------------------------------------------------------- | - | ---------------- | 
|                                                               |   | January 31, 2011 | 
|                                                               |   |                  | 
|Adjustment to loss                                             | $ | 7,790,263        | 
|Depreciation                                                   | $ | 271,050          | 
|Mineral resource properties and exploration
      expenditures | $ | 8,061,313        | 

121

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(d) Presentation

Certain amounts on the consolidated
statements of financial position, statements of operations and comprehensive
loss and statements of cash flows have been reclassified to conform to the
presentation adopted under IFRS.

NEW SIGNIFICANT ACCOUNTING POLICIES

In addition to the changes to significant accounting policies
on the conversion to IFRS, the Company followed the following two new accounting
policies as noted in Note 2 of the consolidated financial statements for the
years ended January 31, 2012 and 2011:

Long-term debt

Long-term debt instruments are
initially recognized at fair value, net of debt issuance costs incurred.
Long-term debt instruments are subsequently valued at amortized cost. Debt issue
costs are deducted from the balance of the underlying debt and amortized using
the effective interest rate method.

Embedded derivative on Long-term
debt

The Company may enter into certain
financial derivative contracts in order to manage the exposure to market risks
from fluctuations in commodity prices. The Companys policy is not to utilize
derivative financial instruments for speculative purposes. All financial
derivative contracts are classified as fair value through profit or loss.

Embedded derivatives are separated from the host contract and
accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, a separate
instrument with the same terms as the embedded derivative would meet the
definition of a derivative, and the combined instrument is not measured at fair
value through the profit or loss. Changes in the fair value of separable
embedded derivatives are recognized immediately profit or loss

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Companys consolidated financial
statements requires management to make certain estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of expenses during the
reporting period. Actual outcomes could differ from those estimates. The
consolidated financial statements for the year ended January 31, 2012 and 2011
include estimates that, by their nature, are uncertain. The impacts of such
estimates are pervasive throughout the consolidated financial statements for the
years ended January 31, 2012 and 2011 and may require accounting adjustments
based on future occurrences. Revisions to accounting estimates are recognized in
the period in which the estimate is revised and future periods if the revision
affects both current and future periods. These estimates are based on historical experience,
current and future economic conditions and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

122

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Significant assumptions about the future that management has
made that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions
made, relate to, but are not limited to, the following and are explained in
detail in Note 2 of the consolidated financial statements for the years ended
January 31, 2012 and 2011:

Managements assumption of material
      restoration, rehabilitation and environmental obligations, based on the
      facts and circumstances that existed during the period; andManagements assumption used to determine the
      fair value of the embedded derivative on long-term debt


NEW ACCOUNTING PRONOUNCEMENTS

IFRS 9 Financial Instruments (IFRS 9)

IFRS 9 was issued by the International Accounting Standards
Board (IASB) in October 2010 and will replace IAS 39 Financial Instruments
Recognition and Measurement (IAS 39). IFRS 9 uses a single approach to
determine whether a financial asset is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how
an entity manages its financial instruments in the context of its business model
and the contractual cash flow characteristics of the financial assets. Most of
the requirements in IAS 39 for classification and measurement of financial
liabilities were carried forward unchanged to IFRS 9. The new standard also
requires a single impairment method to be used, replacing the multiple
impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning
on or after January 1, 2013. The IASB has proposed amending the effective date
to January 1, 2015. The Company has not yet assessed the impact of the standard
or determined whether it will adopt the standard early.

IFRS 10 Consolidated Financial Statements(IFRS 10)

IFRS 10 provides a single model to be applied in the control
analysis for all investees, including entities that currently are SPEs ("Special
purpose entities") in the scope of SIC-12. In addition, the consolidation
procedures are carried forward substantially unmodified from IAS 27 (2008). IFRS
10 is effective for annual periods beginning on or after January 1, 2013, with
early adoption permitted. The Company has not yet assessed the impact of the
standard or determined whether it will adopt the standard early.

IFRS 11 Joint Arrangements (IFRS 11)

IFRS 11 replaces the guidance in IAS 31 Interests in Joint
Ventures and SIC 13 - Joint Controlled Entities - Non-Monetary Contributions by
Venturers. IFRS 11 is effective for annual periods
beginning on or after January 1, 2013, with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

123

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IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”)

IFRS 12 was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles.
IFRS 12 is effective for annual periods beginning on or after January 1, 2013. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13 Fair Value Measurement (“IFRS 13”)

IFRS 13, Fair Value Measurement was issued by the IASB on May 12, 2011. The new standard converges IFRS and US GAAP on how to measure fair value and the related fair value disclosures. The new standard creates a single source of guidance for fair
value measurements, where fair value is required or permitted under IFRS, by not changing how fair value is used but how it is measured. The focus will be on an exit price. IFRS 13 is effective for annual periods beginning on or after January 1,
2013, with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 1 Presentation of Financial Statements

IAS 1 was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with US GAAP standards. Items in other comprehensive income will be required to be presented in two categories: items that will be
reclassified into profit or loss and those that will not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income remains unchanged.
The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012.

IAS 28 Investments in Associates and Joint Ventures

As a consequence of the issue of IFRS 10, IFRS 11 and IFRS 12, IAS 28 has been amended and will further provide the accounting guidance for investments in associates and will set out the requirements for the application of the equity method when
accounting for investments in associates and joint ventures. This standard will be applied by the Company when there is joint control, or significant influence over an investee. Significant influence is the power to participate in the financial and
operating policy decisions of the investee but does not include control or joint control of those policy decisions. When determined that the Company has an interest in a joint venture, the Company will recognize an investment and will account for it
using the equity method in accordance with IAS 28. IAS 28 is required to be applied for annual periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined
whether it will adopt the standard early.

124

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Future Accounting Changes

The IASB is expected to publish new IFRSs on the following topics in early 2012. The Company will assess the impact of these new standards on the Company’s operations as they are published.

- Hedge accounting
- Leases
- Revenue recognition and
- Financial instruments

MANAGEMENT OF CAPITAL

The Company manages its capital with the following objectives:

- to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and
- to maximize shareholder return through enhancing the share value.

The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by
issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets.  The capital structure is reviewed by Management and the Board of Directors on an ongoing basis.

The Company considers its capital to be equity, comprising share capital, reserves, accumulated deficit and accumulated other comprehensive loss which at January 31, 2012 totaled $(5,810,547) (January 31, 2011 - $39,210 and February 1, 2010
- $1,680,055).  Included in the consolidated statements of financial position is an accumulated deficit of $44,553,494 as at January 31, 2012 (January 31, 2011 – $38,101,796 and February 1, 2010-$36,468,951).

The Company manages capital through its financial and operational forecasting processes.  The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. The
forecast is regularly updated based on activities related to its mineral properties. Selected information is provided to the Board of Directors of the Company. The Company’s capital management objectives, policies and processes have remained
unchanged during the years ended January 31, 2012 and 2011.

The Company has cash balances and interest-bearing debt. The Company's current
policy is to invest excess cash in guaranteed investment certificates, bankers
acceptance and money market deposits, with reputable financial institutions. The
Company regularly monitors its cash management policy. The Companys interest
bearing debt is its Gold Stream Facility which bears interest at the rate of 9%
per annum. The Company is also obligated to pay a profit participation amount,
on each repayment date, when the spot price of gold is in excess of $1,600 an
ounce on the
business day immediately preceding the repayment. In addition, the Company is obligated to pay an amount in excess of the scheduled repayment amount, equal to approximately 33%.

125

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

The Company’s functional and reporting currency is the US dollar and major purchases are transacted in US dollars.  An operating account is maintained in Canadian dollars primarily for settlement of general corporate expenditures.

Sensitivity analysis

Based on management's knowledge and experience of the financial markets, the Company believes the following movements are "reasonably possible" over a twelve month period.  The sensitivity analysis shown in the notes below may differ materially from
actual results.

- The Company’s marketable securities are subject to fair value fluctuations. As at January 31, 2012, if the fair value of the marketable securities had decreased/increased by 10% with all other variables held constant, comprehensive loss for
the year ended January 31, 2012 would have been approximately $15,000 higher/lower. Similarly, as at January 31, 2012, reported shareholders’ equity would have been approximately $15,000 lower/higher as a result of a 10%
decrease/increase in the fair value of marketable securities.
- Cash, sundry receivables, due to related parties and accounts payable and accrued liabilities denominated in Canadian dollars are subject to foreign currency risk. As at January 31, 2012, had the US dollar weakened/strengthened by 5% against the
Canadian dollar with all other variables held constant, the net loss and comprehensive loss would be affected by approximately $36,000.
- Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability of development depends upon the world market price of coal and precious metals. Coal and precious metals have fluctuated
widely in recent years. There is no assurance that, even as commercial quantities of coal and precious metals may be produced in the future, a profitable market will exist for them. A decline in the market price of coal and precious metals may also
require the Company to reduce its mineral properties, which could have a material and adverse effect on the Company’s value. As at January 31, 2012 and the date hereof, the Company is not a coal or precious metal producer. As a result,
commodity price risk may affect the completion of future equity transactions such as equity offerings, debt offerings and the exercise of stock options. This may also affect the Company’s liquidity and its ability to meet its ongoing
obligations. See “Risk Factors”.

RISK FACTORS

An investment in the securities of the Company is highly speculative and involves numerous and significant risks.  Such investment should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. Prospective investors should carefully consider the risk factors below.

126

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Exploration Stage Company and Exploration Risks

The Company is a junior resource company focused primarily on the acquisition and exploration of mineral properties located in the United States and, as such, is engaged in a highly speculative business. The properties of the Company have no
established reserves. There is no assurance that any of the projects can be mined profitably. Accordingly, it is not assured that the Company will realize any profits in the short to medium term, if at all, from its mineral properties.  Any
profitability in the future from the business of exploration will be dependent upon developing and commercially mining an economic deposit of minerals, which in itself is subject to numerous risk factors. The exploration and development of mineral
deposits involve a high degree of financial risk over a significant period of time that even a combination of management’s careful evaluation, experience and knowledge may not eliminate. There are a number of uncertainties inherent in any
exploration and development program, including the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits, and the construction of mining and processing facilities.

While discovery of ore-bearing structures may result in substantial rewards, few properties that are explored are ultimately developed into producing mines.  Major expenses may be required to establish reserves by drilling and to construct mining
and processing facilities at a particular site. It is impossible to ensure that the current exploration, development and production programs of the Company will result in profitable commercial mining operations.  The profitability of the
Company’s operations will be, in part, directly related to the cost and success of its exploration and development programs, which may be affected by a number of factors.  Substantial expenditures are required to establish reserves that are
sufficient to commercially mine some of the Company’s properties and construct, complete and install mining and processing facilities on those properties that are actually mined and developed.

No History of Profitability from Mineral Exploration

The Company is a development stage company with no history of profitability from mineral exploration. There can be no assurance that the operations of the Company will be profitable in the future.  The Company has limited financial resources and
will require additional financing to further explore, develop, acquire, retain and engage in commercial production on its property interests and, if financing is unavailable for any reason, the Company may become unable to acquire and retain its
mineral concessions and carry out its business plan.

Market Fluctuations and Commercial Quantities

The market for minerals is influenced by many factors beyond the control of the
Company such as changing production costs, the supply and demand for minerals,
the rate of inflation, the inventory of mineral producing companies, the
international economic and political environment, changes in
international investment patterns, global or regional consumption patterns, costs of substitutes, currency availability and exchange rates, interest rates, speculative activities in connection with minerals, and increased production due to improved
mining and production methods. The metals industry in general is intensely competitive and there is no assurance that, even if commercial quantities and qualities of metals are discovered, a market will exist for the profitable sale of such metals.
Commercial viability of precious and base metals and other mineral deposits may be affected by other factors that are beyond the Company’s control including particular attributes of the deposit such as its size, quantity and quality, the cost
of mining and processing, proximity to infrastructure and the availability of transportation and sources of energy, financing, government legislation and regulations including those relating to prices, taxes, royalties, land tenure, land use, import
and export restrictions, exchange controls, restrictions on production, as well as environmental protection. It is impossible to assess with certainty the impact of various factors that may affect commercial viability so that any adverse combination
of such factors may result in the Company not receiving an adequate return on invested capital.

127

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Mining Risks and Insurance

The Company is subject to risks normally encountered in the mining industry, such as unusual or unexpected geological formations, cave-ins or flooding.  The Company may become subject to liability for pollution, damage to life or property and other
hazards if mineral exploration against which it or the operator of its exploration programs cannot insure or against which it or such operator may elect not to insure because of high premium costs or other reasons. In addition, insurance coverage
may not continue to be available or may not be adequate to cover any resulting liability. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon the Company’s financial
condition and results of operations.

Environmental Risk

The mining and mineral processing industries are subject to extensive governmental regulations for the protection of the environment, including regulations relating to air and water quality, mine reclamation, solid and hazardous waste handling and
disposal and the promotion of occupational health and safety, which may adversely affect the Company or require it to expend significant funds.

Title Risk

The validity of unpatented mining claims on public lands, which constitute most of the Company’s property holdings, is often uncertain and may be contested and subject to title defects.

Property Interests

The Company's gold and coal interests being the Goldwedge Project (including the Dixie-Comstock Mining Company claims), Piñon Project, Fondaway
Canyon Project, and Kentucky Project (collectively Property Interests) are the
only projects that are currently material to the
Company.  Unless the Company acquires or develops additional material Property Interests, the Company will be solely dependent upon its current Property Interests.  There is significant competition for the acquisition of properties producing or
capable of producing gold and precious minerals. The Company may be at a competitive disadvantage in acquiring additional mining properties since it must compete with other parties, many of whom have greater financial and technical resources than
the Company. As a result, the Company may be unable to acquire attractive mining properties on terms it considers acceptable. If no additional Property Interests are acquired by the Company, any adverse development affecting the Company's existing
Property
Interests would have a material adverse effect on the Company’s financial condition and results of its operations.

128

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Credit Risk

Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to cash and reclamation bonds. The Company has no significant concentration of
credit risk arising from operations. While cash and reclamation bonds are held with reputable financial institutions from which management believes the risk of loss to be minimal, there can be no assurances that such institutions will not encounter
economic difficulties, which may, in turn, have a material adverse effect on the Company.

Liquidity Risk

There is a risk that the Company will not be able to meet its financial obligations when they become due, or can only do so at excessive cost. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to
meet liabilities when due. However, since the Company does not have any revenue, there is a risk that the Company will not have sufficient cash resources to meet liabilities as they come due.

Commodity Prices

The value and price of the Company’s securities, its financial results, and its exploration, development and mining activities may be significantly adversely affected by declines in the price of gold, other precious metals and coal. Gold
prices fluctuate widely and are affected by numerous factors beyond the Company’s control, such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the U.S. dollar and foreign currencies, global and regional
supply and demand, and the political and economic conditions of gold producing countries throughout the world.

Government Regulation

The Companys mineral exploration and development activities, if any, are
subject to various laws governing prospecting, mining, development, production,
taxes, labor standards and occupational health, mine safety, toxic substances,
land use, water use, land claims of local people and other matters. The Company
can provide no assurance that new rules and regulations will not be enacted
or that existing rules and regulations will not be applied in a manner which could limit or curtail the
Company’s exploration, production or development activities.  There is no guarantee that the
Company’s exploration licenses will be extended or that new exploration licenses will be approved. In addition, such exploration licenses could be changed and there can be no assurances that any application to renew any existing licenses will
be approved. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed,
and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Government approvals and permits are currently, and may in the future be, required in connection with the Company’s
operations, if any. There can be no assurance that the Company will be able to obtain these permits in a timely manner.

129

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

Capital Investment

The ability of the Company to continue exploration and development of its property interests will be dependent upon its ability to raise significant additional financing hereafter.  There is no assurance that adequate financing will be available to
the Company or that the terms of such financing will be favorable.  Should the Company not be able to obtain such financing, its properties may be lost entirely.

Conflicts of Interest

Certain of the directors and officers of the Company may also serve as directors and officers of other companies involved in base and precious metal exploration and development and consequently, the possibility of conflict exists. Any decisions made
by such directors involving the Company will be made in accordance with the duties and obligations of directors to deal fairly and in good faith with the Company and such other companies. In addition, such directors declare, and refrain from voting
on, any matters in which such directors may have a conflict of interest.

Dependence on Key Employees

The Company’s business is dependent on retaining the services of a small number of key employees.  The success of the Company is, and will continue to be, to a significant extent, dependent on the expertise and experience of these employees.
The loss of one or more of these employees could have a materially adverse effect on the Company.

RISK MANAGEMENT

Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors provides regular guidance for overall risk management.

130

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

DISCLOSURE OF INTERNAL CONTROLS

Management has established processes, which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the consolidated financial statements do not contain any
untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by
the consolidated financial statements, and (ii) the consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods
presented by the consolidated financial statements.

In contrast to the certificate required under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), the Company utilizes the Venture Issuer Basic Certificate, which does not include
representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing the
Certificate are not making any representations relating to the establishment and maintenance of:

(i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation; and

(ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.

Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality,
reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

131

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|Royal Standard Minerals Inc.        
|------------------------------------
|Managements Discussion and Analysis
|Year Ended January 31, 2012         
|Discussion Dated May 29, 2012       
|                                    
|                                    

ADDITIONAL DISCLOSURE FOR VENTURE CORPORATIONS

The following table sets forth a breakdown of the components of
general and administrative expenditures for the Company, for the year ended
January 31, 2012 and 2011.

Years Ended
      January 31,2012 $
    2011 $DetailCorporate development
    263,251
    57,402Insurance
    22,841
    24,168Office and general
    1,719
    31,786Professional fees
    1,489,989
    193,778Consulting, wages and salaries
    526,446
    433,019Share based payments
    503,942
    -Depreciation
    931
    1,122Total
    2,809,119
    741,275


132

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Item 18. Financial Statements

Not applicable.

133

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Item 19. Exhibits.

|ExhibitNo. | Description of Exhibit                                                                                                                                                                                                                                                                                                                                          
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                                                                                                                                                                                                                                                                 
|1.1        | Certificate of Incorporation of the Company, as amended.*                                                                                                                                                                                                                                                                                                       
|           |                                                                                                                                                                                                                                                                                                                                                                 
|1.2.1      | By-law No. 1 of the Company (incorporated by reference to
      Schedule E to the Companys Form 6-K filed with the SEC on June 21,
      2007).                                                                                                                                                                                                              
|           |                                                                                                                                                                                                                                                                                                                                                                 
|1.2.2      | By-law No. 2 of the Company (incorporated by reference to
      Exhibit 99.1 to Form 6-K filed with the SEC on January 12, 2012).                                                                                                                                                                                                                               
|           |                                                                                                                                                                                                                                                                                                                                                                 
|2.1        | Shareholder Rights Plan dated December 23, 2010.*                                                                                                                                                                                                                                                                                                               
|           |                                                                                                                                                                                                                                                                                                                                                                 
|4.1        | 2011 Amended and Restated Stock Option Plan (incorporated
      by reference to Schedule B to Exhibit 99.1 to the Companys Form 6-K/A
      filed with the SEC on December 22, 2011).                                                                                                                                                                          
|           |                                                                                                                                                                                                                                                                                                                                                                 
|4.2.1#     | Senior Secured Gold Stream Credit Agreement by and
      between Manhattan Mining Co., certain guarantors and Waterton Global
      Value, L.P., by the general partner of its general partner, Cortleigh
      Limited, dated August 26, 2011 (incorporated by reference to Exhibit 99.2
      to the Companys Form 6-K/A filed with the SEC on June 7, 2012).
|           |                                                                                                                                                                                                                                                                                                                                                                 
|4.2.2      | First Amendment to Credit Agreement by and between
      Manhattan Mining Co. and Waterton Global Value, L.P., by the general
      partner of its general partner, Cortleigh Limited, dated May 2, 2012
      (incorporated by reference to Exhibit 99.3 to the Companys Form 6-K filed
      with the SEC on May 14, 2012).                                  
|           |                                                                                                                                                                                                                                                                                                                                                                 
|4.3.1#     | Royalty Agreement by and between Manhattan Mining Co. and
      Waterton Global Value, L.P., dated August 26, 2011 (incorporated by
      reference to Exhibit 99.4 to the Companys Form 6- K/A filed with the SEC
      on June 7, 2012).                                                                                                                     
|           |                                                                                                                                                                                                                                                                                                                                                                 
|4.3.2      | Amendment to Royalty Agreement by and between Manhattan
      Mining Co. and Waterton Global Value, L.P., dated May 2, 2012
      (incorporated by reference to Exhibit 99.5 to the Companys Form 6-K/A
      filed with the SEC on June 7, 2012).                                                                                                             
|           |                                                                                                                                                                                                                                                                                                                                                                 
|8.1        | List of Subsidiaries of the Company.*                                                                                                                                                                                                                                                                                                                           
|           |                                                                                                                                                                                                                                                                                                                                                                 
|12.1       | Certification of Chief Executive Officer pursuant to Rule
      13a-14(a) or Rule 15d-14(a).*                                                                                                                                                                                                                                                                   
|           |                                                                                                                                                                                                                                                                                                                                                                 
|12.2       | Certification of Chief Financial Officer pursuant to Rule
      13a-14(a) or Rule 15d-14(a).*                                                                                                                                                                                                                                                                   
|           |                                                                                                                                                                                                                                                                                                                                                                 
|13.1       | Certification of the Chief Executive Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the United
      States Sarbanes Oxley Act of 2002.*                                                                                                                                                                               
|           |                                                                                                                                                                                                                                                                                                                                                                 
|13.2       | Certification of the Chief Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the United
      States Sarbanes Oxley Act of 2002.*                                                                                                                                                                               
|           |                                                                                                                                                                                                                                                                                                                                                                 
|15.1       | Consent of MSCM LLP.*                                                                                                                                                                                                                                                                                                                                           

134

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|15.2 | Consent of Donald G. Strachan, M.Sc. CPG, Timothy D.
      Master, M.Sc. CPC, James W. Ashton, Consulting Engineer P.E., and Roger C.
      Steininger*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|* | Filed herewith.                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                              
|# | Confidential treatment has been requested for the
      redacted portions of this agreement. A complete copy of the agreement,
      including the redacted portions, has been filed separately with the SEC.

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SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

ROYAL STANDARD MINERALS INC.(Registrant)

/s/ Philip
GrossName: Phillip Gross Title: Interim President and Chief
Executive Officer

Dated effective: May 31, 2012

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