SEABRIDGE GOLD INC.



CONSOLIDATED



FINANCIAL STATEMENTS



FOR THE YEAR ENDED

DECEMBER 31, 2016













Management’s Responsibility for Financial
Statements



The accompanying consolidated financial
statements have been prepared by management in accordance with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.  Financial statements include certain amounts based on estimates and judgments.
When an alternative method exists under IFRS, management has chosen a policy it deems most appropriate in the circumstances in
order to ensure that the consolidated financial statements are presented fairly, in all material respects, in accordance with IFRS.



The Company maintains adequate systems
of internal controls.  Such systems are designed to provide reasonable assurance that transactions are properly authorized
and recorded, the Company’s assets are appropriately accounted for and adequately safeguarded and that the financial information
is relevant and reliable.



The Board of Directors of the Company is
responsible for ensuring that management fulfills its responsibilities for financial reporting, and is ultimately responsible for
reviewing and approving the consolidated financial statements and the accompanying management’s discussion and analysis. 
The Board of Directors carries out this responsibility principally through its Audit Committee.



The Audit Committee is appointed by the
Board of Directors and all of its members are non-management directors.  The Audit Committee meets periodically with management
and the external auditors to discuss internal controls, auditing matters and financial reporting issues, and to satisfy itself
that each party is properly discharging its responsibilities.  The Audit Committee also reviews the consolidated financial
statements, management’s discussion and analysis, the external auditors’ report, examines the fees and expenses for
audit services, and considers the engagement or reappointment of the external auditors. The Audit Committee reports its findings
to the Board of Directors for its consideration when approving the consolidated financial statements for issuance to the shareholders. 
KPMG LLP, the external auditors, have full and free access to the Audit Committee.



|Rudi
P. Fronk

Chairman & CEO

March
29, 2017 | Christopher J. Reynolds

Vice President, Finance and Chief
Financial Officer

March
29, 2017
|--------------------------------------------- | --------------------------------------------------------------------------------------------

























INDEPENDENT
AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders and Directors of Seabridge
Gold Inc.



We have audited the accompanying consolidated
financial statements of Seabridge Gold Inc., which comprise the consolidated statements of financial position as at December 31,
2016 and December 31, 2015, the consolidated statements of operations and comprehensive loss, changes in shareholders’
equity and cash flows for the years then ended, and notes, comprising 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 consolidated 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 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 consolidated
financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances. 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 consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits 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 consolidated financial position of Seabridge Gold Inc. as at December
31, 2016 and December 31, 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended
in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.













Other Matter



We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), Seabridge Gold Inc.’s internal control over
financial reporting as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 29, 2017
expressed an unmodified (unqualified) opinion on the effectiveness of Seabridge Gold Inc.’s internal control over financial
reporting.





Chartered Professional Accountants, Licenced Public Accountants

March 29, 2017

Toronto, Canada



















REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING



To the Shareholders and Board of Directors of Seabridge Gold
Inc.



We have audited Seabridge Gold Inc.’s
internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Seabridge Gold
Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting included under the heading Internal Controls over Financial Reporting
in Management’s Discussion and Analysis for the year ended December 31, 2016. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.



A company’s internal control over
financial reporting is a process 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. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



In our opinion, Seabridge Gold Inc. maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).



We also have audited, in accordance with
Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States),
the consolidated statements of financial position of Seabridge Gold Inc. as of December 31, 2016 and December 31, 2015, and
the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows
for the years ended December 31, 2016 and December 31, 2015, and our report dated March 29, 2017 expressed an unmodified (unqualified)
opinion on those consolidated financial statements.



Chartered Professional Accountants, Licensed Public Accountants

March 29, 2017

Toronto, Canada



















|SEABRIDGE
GOLD INC.                           | 
|--------------------------------------------- | 
|Consolidated Statements of Financial Position
|(Expressed in thousands of Canadian dollars) 



|                                           | Note     | December 31, 2016 | December 31, 2015
|------------------------------------------ | -------- | ----------------- | -----------------
|Assets                                     |          |                   |                  
|Current assets                             |          |                   |                  
|Cash and cash equivalents                  | 4        | 1,646             | 990              
|Short-term deposits                        | 4        | 6,120             | 14,540           
|Amounts receivable and prepaid expenses    | 5        | 637               | 565              
|Investments                                | 6        | 4,661             | 4,039            
|                                           |          | 13,064            | 20,134           
|Non-current assets                         |          |                   |                  
|Mineral interests                          | 7, 8, 10 | 322,930           | 278,798          
|Reclamation deposits                       | 9        | 1,991             | 1,595            
|Total non-current assets                   |          | 324,921           | 280,393          
|Total assets                               |          | 337,985           | 300,527          
|                                           |          |                   |                  
|Liabilities and shareholders’ equity       |          |                   |                  
|Current liabilities                        |          |                   |                  
|Accounts payable and accrued liabilities   | 8        | 5,721             | 1,392            
|Flow-through share premium                 | 10       | -                 | 981              
|                                           |          | 5,721             | 2,373            
|Non-current liabilities                    |          |                   |                  
|Deferred income tax liabilities            | 14       | 17,396            | 14,841           
|Provision for reclamation liabilities      | 9        | 3,510             | 1,329            
|Total non-current liabilities              |          | 20,906            | 16,170           
|Total liabilities                          |          | 26,627            | 18,543           
|                                           |          |                   |                  
|Shareholders’ equity                       | 10       | 311,358           | 281,984          
|Total liabilities and shareholders’ equity |          | 337,985           | 300,527          





Commitments (Note 15)

Subsequent events (Notes 7, 8, 10)

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



These financial statements were approved by the Board of Directors
and were signed on its behalf:



|Rudi P. Fronk

Director | Richard C. Kraus

Director
|----------------------- | --------------------------

















|SEABRIDGE
GOLD INC.                                                                          
|---------------------------------------------------------------------------------------------
|Consolidated Statements of Operations and Comprehensive Loss                                 
|(Expressed in thousands of Canadian dollars except common share and per common share amounts)





|                                                                                | Note | December 31, 2016 | December 31, 2015
|------------------------------------------------------------------------------- | ---- | ----------------- | -----------------
|Corporate and administrative expenses                                           | 12   | (9,679)           | (9,410)          
|Other income - flow-through shares                                              | 10   | 4,321             | 2,907            
|Gain on investments                                                             | 6    | 866               | 266              
|Gain on disposition of mineral interests                                        | 7    | -                 | 1,000            
|Impairment of mineral interests                                                 | 7    | -                 | (350)            
|Impairment of investments                                                       | 6    | -                 | (891)            
|Interest income                                                                 |      | 149               | 101              
|Finance expense and other income                                                |      | 28                | 11               
|Loss before income taxes                                                        |      | (4,315)           | (6,366)          
|Income tax expense                                                              | 14   | (2,974)           | (2,700)          
|Loss for the year                                                               |      | (7,289)           | (9,066)          
|                                                                                |      |                   |                  
|Other comprehensive income (loss), net of income taxes:                         |      |                  
|Reclassification of previously deferred gains on available for sale investments |      | (278)             | -                
|Unrealized gain on available for sale investments                               | 6    | 734               | 97               
|Total other comprehensive income                                                |      | 456               | 97               
|Comprehensive loss for the year                                                 |      | (6,833)           | (8,969)          
|                                                                                |      |                   |                  
|Basic and diluted net loss per Common Share                                     |      | (0.14)            | (0.18)           
|Basic and diluted weighted average number of common shares outstanding          |      | 53,328,938        | 49,825,270       







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













|SEABRIDGE
GOLD INC.                                                 
|--------------------------------------------------------------------
|Consolidated Statements of Changes in Shareholders’ Equity          
|(Expressed in thousands of Canadian dollars except number of shares)







|                                                           | Number of Shares | Share Capital | Stock-based Compensation | Contributed Surplus | Deficit  | Accumulated Other Comprehensive Income | Total Equity
|---------------------------------------------------------- | ---------------- | ------------- | ------------------------ | ------------------- | -------- | -------------------------------------- | ------------
|As at January 1, 2016                                      | 52,139,626       | 325,624       | 22,591                   | 22,707              | (89,075) | 137                                    | 281,984     
|Share issuance                                             | 1,000,000        | 17,400        | -                        | -                   | -        | -                                      | 17,400      
|Share issuance acquisition of SnipGold Corp.               | 695,277          | 12,452        | -                        | -                   | -        | -                                      | 12,452      
|Share issuance costs                                       | -                | (1,597)       | -                        | -                   | -        | -                                      | (1,597)     
|Stock-based compensation                                   | -                | -             | 3,670                    | -                   | -        | -                                      | 3,670       
|Stock options and warrants - acquisition of SnipGold Corp. | -                | -             | 619                      | -                   | -        | -                                      | 619         
|Exercised options                                          | 303,644          | 4,517         | (1,273)                  |                     | -        | -                                      | 3,244       
|Expired options                                            | -                | -             | (9,021)                  | 9,021               | -        | -                                      | -           
|Shares - RSUs                                              | 183,250          | 1,835         | (1,835)                  | -                   | -        | -                                      | -           
|Deferred tax                                               | -                | 419           | -                        | -                   | -        | -                                      | 419         
|Other comprehensive income                                 | -                | -             | -                        | -                   | -        | 456                                    | 456         
|Net loss for the year                                      | -                | -             | -                        | -                   | (7,289)  | -                                      | (7,289)     
|As at December 31, 2016                                    | 54,321,797       | 360,650       | 14,751                   | 31,728              | (96,364) | 593                                    | 311,358     
|                                                           |                  |               |                          |                     |          |                                        |             
|As at January 1, 2015                                      | 48,438,876       | 295,545       | 29,197                   | 15,061              | (80,009) | 40                                     | 259,834     
|Share issuance                                             | 3,437,500        | 28,284        | -                        | -                   | -        | -                                      | 28,284      
|Share issuance costs                                       | -                | (1,101)       | -                        | -                   | -        | -                                      | (1,101)     
|Stock-based compensation                                   | -                | -             | 3,647                    | -                   | -        | -                                      | 3,647       
|Shares - RSUs                                              | 263,250          | 2,607         | (2,607)                  | -                   | -        | -                                      | -           
|Expired options                                            | -                |               | (7,646)                  | 7,646               | -        | -                                      | -           
|Deferred tax                                               | -                | 289           | -                        | -                   | -        | -                                      | 289         
|Other comprehensive income                                 | -                | -             | -                        | -                   | -        | 97                                     | 97          
|Net loss for the year                                      | -                | -             | -                        | -                   | (9,066)  | -                                      | (9,066)     
|As at December 31, 2015                                    | 52,139,626       | 325,624       | 22,591                   | 22,707              | (89,075) | 137                                    | 281,984     













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













|SEABRIDGE
GOLD INC.                         
|--------------------------------------------
|Consolidated Statements of Cash Flows       
|(Expressed in thousands of Canadian dollars)





|                                                          | 2016     | 2015    
|--------------------------------------------------------- | -------- | --------
|Operating Activities                                      |          |         
|Net loss                                                  | (7,289)  | (9,066) 
|Items not affecting cash:                                 |          |         
|Stock-based compensation                                  | 3,670    | 3,647   
|Other income - flow-though shares                         | (4,321)  | (2,907) 
|Income tax expense                                        | 2,974    | 2,700   
|Gain on investments                                       | (866)    | (300)   
|Impairment of mineral interests                           | -        | 350     
|Gain on disposition of mineral interests                  | -        | (1,000) 
|Impairment of investments                                 | -        | 891     
|Finance expense and other income                          | (33)     | 20      
|Taxes paid                                                | -        | (58)    
|Changes in non-cash working capital items:                |          |         
|Amounts receivable and prepaid expenses                   | (3)      | 408     
|Accounts payable and accrued liabilities                  | 690      | (2,111) 
|Net cash used in operating activities                     | (5,178)  | (7,426) 
|                                                          |          |         
|Investing Activities                                      |          |         
|Mineral interests                                         | (24,070) | (18,602)
|Acquisition of SnipGold Corp., net of cash acquired       | (1,602)  | -       
|Mineral exploration tax credits                           | -        | 4,119   
|Purchase of short-term deposits                           | (18,000) | (30,000)
|Redemption of short-term deposits                         | 26,420   | 21,497  
|Disposition of mineral interests                          | -        | 1,000   
|Cash proceeds from sale of investments                    | 700      | 294     
|Net cash used in investing activities                     | (16,552) | (21,692)
|                                                          |          |         
|Financing Activities                                      |          |         
|Issue of share capital (net of transaction costs)         | 22,386   | 29,852  
|Net increase in cash and cash equivalents during the year | 656      | 734     
|                                                          |          |         
|Cash and cash equivalents, beginning of the year          | 990      | 256     
|Cash and cash equivalents, end of the year                | 1,646    | 990     





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













SEABRIDGE GOLD INC.



Notes to the Consolidated Financial
Statements



For the years ended December 31, 2016 and
2015



1.    
Reporting entity



Seabridge Gold Inc. is comprised of Seabridge
Gold Inc. (“Seabridge” or the “Company”) and its subsidiaries (Seabridge Gold (NWT) Inc., Seabridge Gold
Corp. and SnipGold Corp.) and is a company engaged in the acquisition and exploration of gold properties located in North America.
The Company was incorporated under the laws of British Columbia, Canada on September 4, 1979 and continued under the laws of Canada
on October 31, 2002. Its common shares are listed on the Toronto Stock Exchange trading under the symbol “SEA” and
on the New York Stock Exchange under the symbol “SA”. The Company is domiciled in Canada, the address of its registered
office is 10th Floor, 595 Howe Street, Vancouver, British Columbia, Canada V6C 2T5 and the address of its corporate office is 106
Front Street East, 4th Floor, Toronto, Ontario, Canada M5A 1E1.



2.    
Statement of compliance and basis of presentation



These consolidated financial statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). These financial statements were authorized for issuance by the Board of Directors
of the Company on March 29, 2017.



3.    
Significant accounting policies



The significant accounting policies used
in the preparation of these consolidated financial statements are described below.



(a)  
Basis of measurement



The consolidated financial statements have
been prepared on the historical cost basis, except for available for sale financial instruments, which are measured at fair value.



(b)  
Basis of consolidation – subsidiaries



Subsidiaries are entities over which the
Company has control. Control over an entity exists when the Company is exposed or has rights to returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. They are deconsolidated from the date on which control ceases.



Business acquisitions are accounted for
using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with
the excess of the purchase consideration over such fair value being recorded as goodwill and allocated to cash generating units.
Non-controlling interest in an acquisition may be measured at either fair value or at the non-controlling interest’s proportionate
share of the fair value of the acquiree’s net identifiable assets.



If the fair value of the net assets acquired
exceeds the purchase consideration, the difference is recognized immediately as a gain in the consolidated statement of operations
and comprehensive loss.















Where a business combination is achieved
in stages, previously held equity interests in the acquiree are re-measured at acquisition-date fair value and any resulting gain
or loss is recognized in the consolidated statement of operations and comprehensive loss. Acquisition related costs are expensed
during the period in which they are incurred, except for the cost of debt or equity instruments issued in relation to the acquisition
which is included in the carrying amount of the related instrument. Certain fair values may be estimated at the acquisition date
pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination,
they may be adjusted retrospectively in subsequent periods. However, the measurement period will not exceed one year from the acquisition
date.



(c)  
Associates



An associate is an entity over which the
Company has significant influence but not control and one that is neither a subsidiary nor an interest in a joint arrangement.
Significant influence is presumed to exist where the Company has between 20% and 50% of the voting rights, but can also arise where
the Company has less than 20% if influence is exerted over policy decisions that affect the entity. The Company’s share of
the net assets and net income or loss of associates is accounted for in the consolidated financial statements using the equity
method of accounting.



(d)  
Translation of foreign currencies



These consolidated financial statements
are presented in Canadian dollars, which is the Company’s, and each of its subsidiary’s, functional currency.



Foreign currency transactions are translated
into Canadian dollars using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statement
of operations and comprehensive loss.



Monetary assets and liabilities of the
Company denominated in a foreign currency are translated into Canadian dollars at the rate of exchange at the statement of financial
position date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at
average exchange rates prevailing during the period. Exchange gains and losses are included in the determination of profit or loss
for the year.



(e)   Critical
accounting judgments and estimation uncertainty



In applying the Company’s accounting
policies in conformity with IFRS, management is required to make judgments, estimates and assumptions about the carrying amounts
of certain assets and liabilities. These estimates and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates.



(i)           
Critical accounting judgments



The following are the critical judgments,
that the Company has made in the process of applying the Company’s accounting policies and that have the most significant
effect on the amounts recognized in the consolidated financial statements (refer to appropriate accounting policies for details).



(a)  
Mineral reserves and resources



To calculate reserves and resources, the
Company uses assumptions and evaluates technical, economic and geological conditions for each ore body. Measured grade of the ore
and geotechnical considerations can have a significant effect on the carrying value of mineral properties and therefore the recoverability
of costs. Future market prices for gold and copper and other commodities are also factored into valuation models. Changes to these
factors can affect the recoverability of mineral properties and impairment thereto.













(b)  
Impairment of assets



When there has been a decline in the fair
value of an investment in marketable securities or other similar investments that the Company has judged to be significant or prolonged,
the investment is written down to fair value and the loss is recognized in the statement of operations and comprehensive loss.
For mineral properties, should the Company decide to proceed with development in respect of a particular area of interest, the
relevant exploration and evaluation asset is tested for impairment at that time.



(ii)          
Key sources of estimation uncertainty



(a)  
Mineral properties



The recoverability of the carrying value
of mineral properties and associated deferred exploration expenses is based on market conditions for minerals, underlying mineral
resources associated with the properties and future costs that may be required for ultimate realization through mining operations
or by sale. The Company is in an industry that is dependent on a number of factors including environmental, legal and political
risks, the existence of economically recoverable reserves, the ability of the Company and its subsidiaries to obtain necessary
financing to complete the development, and future profitable production or the proceeds of disposition thereof.



(b)  
Asset retirement obligations



The provision for asset retirement obligations
is the best estimate of the present value of the future costs of reclaiming the environment that has been subject to disturbance
through exploration activities or historical mining activities. The Company uses assumptions and evaluates technical conditions
for each project that have inherent uncertainties, including changes to laws and practices and to changes in the status of the
site from time-to-time. The timing and cost of the rehabilitation is also subject to uncertainty. These changes, if any, are recorded
on the statement of financial position as incurred.



(c)  
Share based payments



The factors affecting stock-based compensation
include estimates of when stock options and restricted share units might be exercised and share price volatility. The timing for
exercise of options is out of the Company’s control and will depend upon a variety of factors, including the market value
of the Company’s shares and financial objectives of the share-based instrument holders. The Company uses historical data
to determine volatility in accordance with appropriate fair value methodology. However, the future volatility is uncertain and
the model has its limitations.



(d)  
Deferred Income taxes



The Company has operations in Canada and
the United States and files corporate tax returns in each. Deferred tax liabilities are estimated for tax that may become payable
in the future. Future payments could be materially different from our estimated deferred tax liabilities. We have deferred tax
assets related to non-capital losses and other deductible temporary differences. Deferred tax assets are only recognized to the
degree that it shelters tax liabilities or when it is probable that there will be sufficient taxable income in the future to recover
them.



(f)Cash and cash equivalents and short-term deposits



Cash and cash equivalents and short-term
deposits consist of balances with banks and investments in money market instruments. These instruments are carried at fair value
through profit or loss. Cash and cash equivalents consist of investments with maturities of up to 90 days at the date of purchase.
Short-term deposits consist of investments with maturities from 91 days to one year at the date of purchase.













(g)Investments



Investments in marketable
securities accounted for as available-for-sale securities are recorded at fair value. The fair values of the investments are determined
based on the closing prices reported on recognized securities exchanges and over-the-counter markets. Such individual market values
do not necessarily represent the realizable value of the total holding of any security, which may be more or less than that indicated
by market quotations. Increases or decreases in the market value of investments are recorded in other comprehensive income net
of related income taxes. When there has been a loss in the value of an investment in marketable securities that is determined to
be significant or prolonged, the investment is written down and the loss is recorded in the statement of operations and comprehensive
loss.



(h)  
Mineral interests



Mineral resource properties are carried
at cost. The Company considers exploration and development costs and expenditures to have the characteristics of property and equipment
and, as such, the Company capitalizes all exploration costs, which include license acquisition costs, advance royalties, holding
costs, field exploration and field supervisory costs and all costs associated with exploration and evaluation activities relating
to specific properties as incurred, until those properties are determined to be economically viable for mineral production. General
and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly
to activities in a particular area of interest. The fair value of any recoveries from the disposition or optioning of a mineral
property is credited to the carrying value of mineral properties.



Once a project has been established as
commercially viable and technically feasible, related development expenditures are capitalized. This includes costs incurred in
preparing the site for mining operations. Capitalization ceases when the mine is capable of commercial operations.



The actual recovery value of capitalized
expenditures for mineral properties and deferred exploration costs will be contingent upon the discovery of economically viable
reserves and the Company’s financial ability at that time to fully exploit these properties or determine a suitable plan
of disposition.



When a decision is made to proceed with
development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment,
reclassified to development properties, and then amortized over the life of the reserves associated with the area of interest once
mining operations have commenced.



(i)   
Property and equipment



Property and equipment are stated at cost,
less accumulated depreciation and accumulated impairment losses. The cost of property and equipment comprises its purchase price,
any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating
in the manner intended by management and the estimated closure and restoration costs associated with the asset. Depreciation is
provided using the straight-line method at an annual rate of 20% from the date of acquisition. Residual values and useful lives
are reviewed, and adjusted if appropriate, at each statement of financial position date. Changes to the estimated residual values
or useful lives are accounted for prospectively.



(j)   
Impairment of non-financial assets



The carrying value of the Company's mineral
interests is assessed for impairment when indicators of such impairment exist. If any indication of impairment exists, an estimate
of the asset's recoverable amount is calculated to determine the extent of the impairment loss, if any. The recoverable amount
is determined as the higher of the fair value less costs to sell for the asset and the asset's value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not
been adjusted.













Impairment is determined on an asset by
asset basis, whenever possible. If it is not possible to determine impairment on an individual asset basis, then impairment is
considered on the basis of a cash generating unit (“CGU”). CGUs represent the lowest level for which there are separately
identifiable cash inflows that are largely independent of the cash flows from other assets or other group of assets.



If the carrying amount of the asset exceeds
its recoverable amount, the asset is impaired and an impairment loss is charged immediately to comprehensive loss within the statement
of operations and comprehensive loss so as to reduce the carrying amount to its recoverable amount.



An assessment is made at each reporting
date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.
If such indication exists, the Company makes an estimate of the recoverable amount.



A previously recognized impairment loss
is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment
loss was recognized. If this is the case, the carrying amount of the asset is increased to its recoverable amount. The increased
amount cannot exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in
prior years. Such reversal is recognized in the statement of operations and comprehensive loss.



(k)  
Reclamation liabilities



Provisions for environmental restoration
are recognized when: (i) the Company has a present legal or constructive obligation as a result of past exploration, development
or production events; (ii) it is probable that an outflow of resources will be required to settle the obligation; (iii) and the
amount can be reliably estimated. Provisions do not include any additional obligations which are expected to arise from future
disturbance.



Provisions are measured at the present
value of the expenditures expected to be required to settle the obligation incorporating risks specific to the obligation using
a pre-tax rate that reflects current market assessments of the time value of money. When estimates of obligations are revised,
the present value of the changes in obligations is recorded in the period by a change in the obligation amount and a corresponding
adjustment to the mineral interest asset.



The amortization or ‘unwinding’
of the discount applied in establishing the net present value of provisions due to the passage of time is charged to the statement
of operations and comprehensive loss in each accounting period.



The ultimate cost of environmental remediation
is uncertain and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the
emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change,
for example in response to changes in ore reserves or production rates. As a result there could be significant adjustments to the
provisions for restoration and environmental cleanup, which would affect future financial results.



Funds on deposit with third parties provided
as security for future reclamation costs are included in reclamation deposits on the statement of financial position.



(l)   
Income taxes



Income tax expense comprises current and
deferred tax. Current 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.













Current tax is the expected tax payable
on the taxable income 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 using the asset
and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.



Deferred tax is measured at the rates that
are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantially
enacted by the reporting date. 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 which is not deductible for tax purposes.



A deferred tax asset is recognized only
to the extent that it is probable that future taxable profits will be available against which the asset 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.



The Company has certain non-monetary
assets and liabilities for which the tax reporting currency is different from its functional currency. Any translation gains or
losses on the remeasurement of these items at current exchange rates versus historic exchange rates that give rise to a temporary
difference is recorded as a deferred tax asset or liability.



(m) 
Stock-based compensation (options and restricted share units)



The Company applies the fair value method
for stock-based compensation and other stock-based payments. The fair value of options is valued using the Black Scholes option-pricing
model and other models for the two-tiered options and restricted share units as may be appropriate. The grant date fair value of
stock-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity,
over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted
to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that
the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market
performance conditions at the vesting date (Note 10). The Company reviews estimated forfeitures of options on an ongoing basis.



(n)  
Flow-through shares



The Company finances a portion of its exploration
activities through the issuance of flow-through common shares. The tax deductibility of qualifying expenditures is transferred
to the investor purchasing the shares. Consideration for the transferred deductibility of the qualifying expenditures is often
paid through a premium price over the market price of the Company’s shares. The Company reports this premium as a liability
on the statement of financial position and the balance is reported as share capital. At each reporting period, and as qualifying
expenditures have been incurred, the liability is reduced on a proportionate basis and income is recognized in the statement of
operations and comprehensive loss.



(o)  
Net profit (loss) per common share



Basic profit (loss) per common share is
computed based on the weighted average number of common shares outstanding during the year. The Company uses the treasury stock
method for calculating diluted earnings per share which assumes that stock options and RSUs with an exercise price lower than the
average quoted market price were exercised at the later of the beginning of the year, or time of issue. Stock options with an exercise
price greater than the average quoted market price of the common shares and RSUs are not included in the calculation of diluted
profit per share as the effect is anti-dilutive.













(p)  
Financial assets and liabilities



Financial assets within the scope of IAS
39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments
or available-for-sale financial assets, as appropriate. When financial assets are recognized initially, they are measured at fair
value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.
The Company determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates
this designation at each financial year end.



The Company’s financial instruments
are comprised of the following:





|Financial assets:                      | Classification:                  
|-------------------------------------- | ---------------------------------
|Cash and cash equivalents              | Fair value through profit or loss
|Short-term deposits                    | Fair value through profit or loss
|Amounts receivable                     | Loans and receivables            
|Investments                            | Available for sale               
|                                       |                                  
|Financial liabilities:                 | Classification:                  
|Accounts payable and other liabilities | Other financial liabilities      





(i)   
Financial assets at fair value through profit or loss:



Financial assets at fair value through
profit or loss include financial assets held for trading and financial assets designated upon initial recognition as fair value
through profit or loss.



(ii)  
Loans and receivables:



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets
and have not been designated as either fair value through profit or loss or available for sale. After initial measurement, loans
and receivables are subsequently measured at amortized cost using the effective interest method less any allowance for impairment.
Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral
part of the effective interest rate and transaction costs. Gains and losses are recognized in the consolidated statement of operations
and comprehensive loss when the loans and receivables are derecognized or impaired, as well as through the amortization process.



(iii) 
Available for sale investments



Financial assets classified as available-for-sale
are measured at fair value, with changes in fair values recognized in other comprehensive income, except when there is objective
evidence that the asset is impaired, at which point the cumulative loss that had been previously recognized in other comprehensive
income is recognized within the consolidated statement of operations and comprehensive loss.



(iv) 
Fair value:



Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.













(v)  
Impairment of financial assets:



Financial assets are assessed for indicators
of impairment at each financial reporting date. Financial assets are impaired where there is objective evidence that, as a result
of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
instrument have been impacted. Evidence of impairment could include:



|· |  | significant financial difficulty
of the issuer or counterparty; or
|- |  | ------------------------------------------------------------------



|· |  | default or delinquency in
interest or principal payments; or
|- |  | ------------------------------------------------------------



|· |  | it becoming probable that
the borrower will enter bankruptcy or financial re-organization.
|- |  | ------------------------------------------------------------------------------------------



The carrying amount of the financial asset
is reduced by the impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying
amount is reduced through the use of an allowance account. When an amount receivable is considered uncollectible, it is written
off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognized in profit or loss. If, in a subsequent period, the amount
of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment
at the date the impairment reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
In the case of an impairment loss reversal being recorded for available-for-sale marketable securities, the reversal is recorded
in other comprehensive income.



(q)  
New accounting standards not yet adopted



New standards and amendments to standards
that have been issued and that are relevant to the Company and are not yet effective and have therefore not been applied in preparing
these consolidated financial statements are:



IFRS 9, Financial instruments (“IFRS
9”) introduces new requirements for classification and measurement of financial assets, additional changes to financial liabilities
and a new general hedge accounting standard. The mandatory effective date is for annual periods beginning on or after January 1,
2018. The Company plans to apply IFRS 9 on the effective date. The Company does not expect any reclassification and measurement
of financial instruments will have a material impact on the financial statements upon adoption and the Company expects the revised
approach to hedge accounting to have no effect on the financial statements.



IFRS 15, Revenue from contracts with customers
(“IFRS 15”) will replace IAS 18 Revenue, IAS 11 Construction contracts, and some revenue-related interpretations. The
new standard is effective for annual periods beginning on or after January 1, 2018. The standard contains a single model that applies
to contracts with customers and two approaches to recognizing revenue at either a point in time or over time. The model features
a five-step analysis of transactions to determine when and how much revenue should be recognized. New estimates and judgmental
thresholds were introduced, which may affect the amount and/or timing of revenue recognized. Given the Company is in the exploration
stage, and has no foreseeable source of revenue, the Company does not expect the standard will have a material impact on the financial
statements upon adoption.



IFRS 16, Leases (“IFRS 16”)
will replace IAS 17 Leases. The new standard requires lessees to recognize assets and liabilities for most leases. Application
of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted,
provided the new revenue standard, IFRS 15 has been applied or is applied at the same date as IFRS 16. The Company plans to apply
IFRS 16 on the effective date. The Company does not expect the standard will have a material impact on the financial statements.
The Company will evaluate the impact of the changes to its financial statements based on the characteristics of any leases in place
before and at the time of adoption.













IFRS 2, Share-based payments amendments
(“Amendments to IFRS 2”). The Amendments to IFRS 2 clarify the classification and measurement of share-based payments
for cash-settled share-based payment transactions or for share-based payment transactions with net settlement features for withholding
tax obligations or for any modifications to the terms and conditions of a share-based payment transaction that changes its classification
from cash-settled to equity-settled. The effective date of the amendments is January 1, 2018 and the Company intends to adopt the
amendments on the effective date. The Company does not expect the amendments to have a material impact on the financial statements
based on current stock-based payment practices but will continue to evaluate the amendments based on any changes to settlement
practices.



4.     
Cash and cash equivalents and short-term deposits





|($000’s)                  | December 31, 2016 | December 31, 2015
|------------------------- | ----------------- | -----------------
|Cash and cash equivalents | 1,646             | 990              
|Short-term deposits       | 6,120             | 14,540           
|                          | 7,766             | 15,530           





All of the cash and cash equivalents are
held in a Canadian Schedule I bank. Short-term deposits consist of Canadian Schedule I bank guaranteed deposits and are cashable
in whole or in part with interest at any time to maturity.



5.
     Amounts receivable and prepaid expenses





|($000’s)         | December 31, 2016 | December 31, 2015
|---------------- | ----------------- | -----------------
|HST              | 250               | 249              
|Prepaid expenses | 387               | 316              
|                 | 637               | 565              





6.
    Investments





|($000’s)                       | January 1, 2016 | Dispositions | Gain on disposition | Gain of associates | Impairment | Other comprehensive income | December 31, 2016
|------------------------------ | --------------- | ------------ | ------------------- | ------------------ | ---------- | -------------------------- | -----------------
|Available-for-sale investments | 2,731           | (700)        | 278                 | -                  | -          | 456                        | 2,765            
|Investment in associate        | 1,308           | -            | -                   | 588                | -          | -                          | 1,896            
|                               | 4,039           | (700)        | 278                 | 588                | -          | 456                        | 4,661            







|($000’s)                       | January 1, 2015 | Dispositions | Gain on disposition | Gain of associates | Impairment | Other comprehensive income | December 31, 2015
|------------------------------ | --------------- | ------------ | ------------------- | ------------------ | ---------- | -------------------------- | -----------------
|Available-for-sale investments | 3,246           | (294)        | 28                  | -                  | (346)      | 97                         | 2,731            
|Investment in associate        | 1,651           | -            | -                   | 202                | (545)      | -                          | 1,308            
|                               | 4,897           | (294)        | 28                  | 202                | (891)      | 97                         | 4,039            





The Company holds common shares of several
mining companies that were received as consideration for optioned mineral properties and other short-term investments, including
one gold exchange traded receipt. These available-for- sale financial assets are recorded at fair value of $2.8 million (2015 -
$2.7 million) on the consolidated statements of financial position. During 2016 the Company disposed of a portion of its holdings
in one of these investments with a carrying value of $0.5 million and recorded a gain of $0.3 million on its available-for sale
investments.



During the year ended December 31, 2016,
the Company recorded its proportionate share of the net income of an investment in an associate accounted for on the equity basis
of $0.7 million (2015 – $0.2 million) within gains on investments on the consolidated statement of operations and comprehensive
income. In 2016, the associate was acquired by a third party through a plan of arrangement and from July 7, 2016, the acquirer
has been classified as an associate and the Company has continued to account for the investment on the equity basis. The transaction
resulted in a net gain of $0.8 million principally related to the Company’s additional interest in the net assets of the
associate. At December 31, 2016 the carrying value of the company’s investment in the associate was $1.9 million (2015 -
$1.3 million) on the statement of financial position.













7.Mineral Interests



Mineral interest expenditures on projects
are considered as exploration and evaluation and their related costs consist of the following:





|($000’s)        | Balance,        | Expenditures / Acquisitions | Impairment | Balance,         
|--------------- | --------------- | --------------------------- | ---------- | -----------------
|                | January 1, 2016 | 2016                        | 2016       | December 31, 2016
|KSM             | 209,929         | 23,733                      | -          | 233,662          
|Courageous Lake | 68,098          | 604                         | -          | 68,702           
|Iskut           | -               | 19,795                      | -          | 19,795           
|Grassy Mountain | 771             | -                           | -          | 771              
|                | 278,798         | 44,132                      | -          | 322,930          









|($000’s)        | Balance,        | Expenditures | Impairment | Balance,         
|--------------- | --------------- | ------------ | ---------- | -----------------
|                | January 1, 2015 | 2015         | 2015       | December 31, 2015
|KSM             | 191,929         | 18,000       | -          | 209,929          
|Courageous Lake | 67,471          | 627          | -          | 68,098           
|Nevada Projects | 350             | -            | (350)      | -                
|Grassy Mountain | 771             | -            | -          | 771              
|                | 260,521         | 18,627       | (350)      | 278,798          





Continued exploration
of the Company’s mineral properties is subject to certain lease payments, project holding costs, rental fees and filing fees.



a)KSM (Kerr-Sulphurets-Mitchell)



In 2001, the Company purchased a 100% interest
in contiguous claim blocks in the Skeena Mining Division, British Columbia. The vendor maintains a 1% net smelter royalty interest
on the project, subject to maximum aggregate royalty payments of $4.5 million. The Company is obligated to purchase the net smelter
royalty interest for the price of $4.5 million in the event that a positive feasibility study demonstrates a 10% or higher internal
rate of return after tax and financing costs.



In 2002, the Company optioned the KSM property
to Noranda Inc. (which subsequently became Falconbridge Limited and then Xstrata plc.- now Glencore plc) which could earn up to
a 65% interest by incurring exploration expenditures and funding the cost of a feasibility study. In April 2006, the Company reacquired
the exploration rights to the KSM property from Falconbridge. On closing of the formal agreement in August 2006, the Company issued
Falconbridge 200,000 common shares of the Company with a deemed value of $3,140,000 excluding share issue costs. The Company also
issued 2 million warrants to purchase common shares of the Company with an exercise price of $13.50 each. The 2,000,000 warrants
were exercised in 2007 and proceeds of $27,000,000 were received by the Company.



In July 2009, the Company agreed to acquire
various mineral claims immediately adjacent to the KSM property for further exploration and possible mine infrastructure use. The
terms of the agreement required the Company to pay $1 million in cash, issue 75,000 shares and pay advance royalties of $100,000
per year for 10 years commencing on closing of the agreement. The property is subject to a 4.5% net smelter royalty from which
the advance royalties are deductible. The purchase agreement closed in September 2009, with the payment of $1 million in cash,
the issuance of 75,000 shares valued at $2,442,750 and the payment of the first year’s $100,000 advance royalty.













In February 2011, the Company acquired
a 100% interest in adjacent mineral claims mainly for mine infrastructure purposes for a cash payment of $675,000, subject to a
2% net smelter returns royalty on these adjacent claims.



In 2011 and 2012, the Company completed
agreements granting a third party an option to acquire a 2% net smelter royalty on all gold and silver production sales from KSM
for a payment equal to the lesser of $160 million or US$200 million. The option is exercisable for a period of 60 days following
the announcement of receipt of all material approvals and permits, full project financing and certain other conditions for the
KSM project.



In 2013, the Company
applied for $4.4 million of refundable provincial tax credits related to exploration expenditures incurred in 2010 at KSM. The
recovery was credited to mineral properties in 2013 and the Company collected the funds during 2014. Similarly, in 2014, the Company
applied for $4.1 million of refundable provincial tax credits related to exploration expenditures incurred in 2011 at KSM and the
recovery was credited to mineral properties in 2014 and in 2015 the Company collected the funds.



In 2014, approval of
an environmental assessment application, submitted to provincial and federal regulators in 2013 was obtained.



In 2015, $18 million of expenditures were
incurred on the KSM project as the Company finalized the analysis of the resource update on Deep Kerr and Iron Cap Lower Zone from
the 2014 exploration drilling and executed the 2015 exploration and drilling program.



In 2016, the Company charged $23.7 million
to mineral interests while completing its 2016 exploration program and completing and filing a National Instrument 43-101
Technical Report that included an updated Preliminary Feasibility Study and a new Preliminary Economic Assessment. Included
in the total is $3.6 million in respect of refundable provincial tax credits as described in note 8.



b)       
Courageous Lake



In 2002, the Company purchased a 100% interest
in the Courageous Lake gold project from Newmont Canada Limited and Total Resources (Canada) Limited (“the Vendors”)
for US$2.5 million. The Courageous Lake gold project consists of mining leases located in Northwest Territories of Canada.



In 2004, an additional
property was optioned in the area. Under the terms of the agreement, the Company paid $50,000 on closing and was required to make
option payments of $50,000 on each of the first two anniversary dates and subsequently $100,000 per year up to a total of $1,250,000.
The Company has made $1,150,000 in payments and will make the final annual payments in 2017. The property may be purchased outright
at any time with the accelerated payment of the remaining balance.



In each of 2015 and 2016, the Company incurred
$0.6 million of exploration and other costs completing a limited exploration program while the Company continued its primary focus
on exploration programs at KSM in 2015 and KSM and Iskut in 2016.



c)        
Iskut



On June 21, 2016, the
Company purchased 100% of the common shares of SnipGold Corp. (“SnipGold”) which owns the Iskut Project, located in
northwestern British Columbia. On the acquisition date, the Company issued 695,277 common shares, 54,968 stock options and 1,587
warrants with a combined fair value of $13.1 million. The Company also incurred $1.7 million of acquisition costs. Based on the
relative fair values of the net assets acquired, $16.4 million was attributed to the Iskut Project. Since the acquisition date,
the Company commenced and substantially completed an exploration program at Iskut spending, approximately $3.4 million on the project.
A full description of the allocation of purchase price of SnipGold is contained in note 10.













d)       
Grassy Mountain



In 2000, the Company
acquired an option on a 100% interest in mineral claims located in Malheur County, Oregon, USA. During 2002, the Company paid US$50,000
in option payments. On December 23, 2002, the agreement was amended and the Company made a further option payment of US$300,000
and in March 2003 acquired the property for a payment of US$600,000.



In April 2011, the Company announced that
an agreement had been reached to option the Grassy Mountain project to Calico Resources Corp. (“Calico”) which was
subsequently amended in 2013. In the original agreement, in order to exercise the option, Calico was to issue to the Company (i)
two million of its common shares following TSX Venture Exchange approval; (ii) four million of its common shares at the first anniversary,
and (iii) eight million of its shares when the project has received the principal mining and environmental permits necessary for
the construction and operation of a mine. The Company received the first two million common shares of Calico in 2011 and a value
of $740,000 was recorded as a reduction to the carrying value of the mineral properties. In February 2013, the agreement was amended
to allow for an accelerated exercise of the option and Calico issued 6,433,000 common shares and 4,567,000 special warrants to
acquire a 100% interest in the Grassy Mountain project. Each special warrant was exercisable to acquire one common share of Calico
for no additional consideration. The fair value of the shares and special warrants reduced the carrying value of the mineral properties
at the time of receipt of the securities. During 2013 and 2014, the Company elected to convert all of the special warrants into
common shares. Following the de-recognition of the Grassy Mountain net assets, in 2013, a value of $771,000 has been retained within
mineral properties.



In July 2016 Calico was acquired by Paramount
Gold Nevada Corp. (“Paramount”) through a plan of arrangement. In addition to the shares and special warrants received
as consideration for the Grassy Mountain project, after the delivery of a National Instrument 43-101 compliant feasibility study
on the project, Paramount must either grant the Company a 10% net profits interest or pay the Company $10 million in cash, at the
sole election of the Company.



e)Nevada Projects



In June 2011, the Company
entered into an agreement letter of intent with Golden Predator Corp. pursuant to which the Company and Golden Predator Corp.,
would contribute a portfolio of mineral properties into a new private company called Wolfpack Gold Corp. (“Wolfpack”).
The transaction was closed on June 26, 2012 and certain properties were transferred to Wolfpack, from the Company, while others
were optioned. In total, 5,506,500 shares of Wolfpack were received as consideration for the optioned and transferred properties.



In 2014 and 2015, the Company was notified
that the options to purchase three Nevada based projects would be discontinued. The Company decided not to continue to carry the
maintenance costs of these claims and determined that the recoverability of the carrying costs was impaired and fully charged the
statement of operations for the capitalized costs at the time of notification. By December 31, 2015, the Company had impaired all
the carrying costs of the Nevada projects.



The Company announced subsequent to December
31, 2016 that it has entered into a letter of intent setting forth the terms under which it has agreed to purchase a private company
owned by Paulson Gold Holdings, LP ("Paulson") that holds a 100% interest in the Snowstorm Project. The Snowstorm Project
consists of 31 square miles of land comprised of 700 mining claims and 5,800 acres of fee lands strategically located at the projected
intersection of three of the most important gold trends in Northern Nevada: the Carlin Trend, the Getchell Trend and the Northern
Nevada Rift Zone. The transaction currently contemplates that the Company will pay (i) 700,000 common shares; (ii) 500,000 common
share purchase warrants exercisable for four years at $15.65 per share; (iii) a conditional cash payment of US$2.5 million if exploration
activities at the Snowstorm Project result in defining a minimum of five million ounces of gold resources compliant with National
Instrument 43-101; and (iv) a further cash payment of US$5.0 million on the delineation of an additional five million ounces of
gold resources. The letter of intent is non-binding and closing of the transaction is subject to completion of further review of
the private company and receipt of stock exchange approvals.













Also subsequent to December 31, 2016, the Company disposed of
its leasehold interest in the Castle Black Rock project and received 1,500,000 common shares of Columbus Gold Corp. at a fair value
of $1.4 million.



f)         
Other mineral properties



(i) Red Mountain



In 2001, the Company
purchased a 100% interest in an array of assets associated with mineral claims in the Skeena Mining Division, British Columbia,
together with related project data and drill core, an owned office building and a leased warehouse, various mining equipment on
the project site, and a mineral exploration permit which is associated with a cash reclamation deposit of $1 million.



The Company assumed all
liabilities associated with the assets acquired, including all environmental liabilities, all ongoing licensing obligations and
ongoing leasehold obligations including net smelter royalty obligations on certain mineral claims ranging from 2.0% to 6.5% as
well as an annual minimum royalty payment of $50,000.



In 2014, the Company
entered into an agreement with IDM Mining (“IDM”) to option the Red Mountain Project. In order to exercise its option,
IDM paid the Company $1 million in 2014 and another $1 million in 2015. IDM also issued to the Company 4,955,500 common shares,
the fair value of which was $1.5 million, and was recorded in investments on the statement of financial position. IDM is also obligated
to spend $7.5 million on the Red Mountain Project over a three year period. At the time of the receipt of the cash and shares mentioned
above, there was no carrying value recorded for Red Mountain, as all historical acquisition and exploration costs had been fully
recovered through option payments and other recoveries and as such, the $1 million received in 2015 and the combined value of the
cash and shares of $2.5 million received in 2014 has been recorded on the statement of operations and comprehensive loss as a gain
on the disposition of mineral properties in the respective years.



Upon commencing commercial production IDM
must pay the Company an additional $1.5 million and either an additional $4 million or sell to the Company up to 50,000 ounces
of gold at a pre-determined price.



In 2016 the Company was informed that IDM
intends to exercise its option to acquire the Red Mountain Project. Upon completion of the exercise, the Company will derecognize
approximately $1.1 million of accrued reclamation liabilities and the Company will either release a reclamation deposit of $1 million
into cash or receive $1 million from IDM upon the transfer of the security in their name. Closing of the option exercise is expected
in the first half of 2017.



(ii) Quartz Mountain



In 2001, the Company purchased a 100% interest
in mineral claims in Lake County, Oregon. The vendor retained a 1% net smelter royalty interest on unpatented claims acquired and
a 0.5% net smelter royalty interest was granted to an unrelated party as a finder’s fee.



In 2011, subject to an agreement between
the Company and Orsa Ventures Corp. (“Orsa”) the Company granted Orsa the exclusive option to earn a 100% interest
in the Quartz Mountain gold property and all of Seabridge's undivided 50% beneficial joint venture interest in an adjacent peripheral
property. The agreement stipulated that Orsa would pay the Company $0.5 million on or before the fifth day following regulatory
approval of the option agreement and make staged payments of $5 million in cash or common shares of Orsa, at the discretion of
the Company. In 2013, Alamos Gold Inc. (“Alamos”) acquired Orsa and its option to acquire Quartz Mountain and the Company
received the next staged payment of $2 million from Alamos. There is no carrying value recorded for Quartz Mountain as all historical
acquisition and exploration costs have been fully recovered through option payments and other recoveries.













Upon the completion of a feasibility study,
Alamos must pay the Company $3 million and either an additional $15 million or provide a 2% net smelter return royalty on production
at Quartz Mountain, at the option of the Company.



8.Accounts payable and accrued liabilities





|($000’s)                                        | December 31, 2016 | December 31, 2015
|----------------------------------------------- | ----------------- | -----------------
|Trade payables                                  | 1,637             | 1,104            
|Trade and other payables due to related parties | 148               | 88               
|Non-trade payables and accrued expenses         | 3,936             | 200              
|                                                | 5,721             | 1,392            



In 2014 and 2015, the Company received
$8.5 million related to the application for refund under the British Columbia Mineral Exploration Tax Credit program, for spending
in 2010 and 2011. During 2016, upon the completion of an audit of the application by tax authorities, the Company was assessed
$3.6 million, including accrued interest, for expenditures related to the application that the tax authority has categorized as
not applicable to the recovery program. The Company has recorded a $3.6 million provision within accounts payable and accrued liabilities
on the consolidated statement of financial position as at December 31, 2016, with a corresponding increase to mineral interests.
Subsequent to the year end, the Company filed an objection to the reassessment and paid one-half of the accrued balance.



9.Provision for reclamation liabilities





|($000’s)                          | December 31, 2016 | December 31, 2015
|--------------------------------- | ----------------- | -----------------
|Beginning of the year             | 1,329             | 1,349            
|Acquisition of SnipGold (note 10) | 2,224             | -                
|Accretion                         | 19                | 18               
|Current year adjustment           | (62)              | (38)             
|End of the period                 | 3,510             | 1,329            





The Company’s policy on reclamation
liabilities is described in Note 3. Although the ultimate costs to be incurred are uncertain, the Company’s estimates are
based on independent studies or agreements with the respective government body for each project using current restoration standards
and techniques. The estimate of the asset retirement obligations, as at December 31, 2016, was calculated using the total estimated
cash flows, of $3.5 million (December 31, 2015 - $1.5 million) required to settle estimated obligations and expected timing of
cash flow payments required to settle the obligations between 2017 and 2025. The discount rate used to calculate the present value
of the reclamation obligations was 1.7% at December 31, 2016 (1.4% - December 31, 2015). The Company has placed a total of $2.0
million (December 31, 2015 - $1.6 million) on deposit with financial institutions that are pledged as security against the reclamation
liability.













10.Shareholders’ equity





|($000’s)                               | December 31, 2016 | December 31, 2015
|-------------------------------------- | ----------------- | -----------------
|Share capital                          | 360,650           | 325,624          
|Stock based compensation               | 14,751            | 22,591           
|Contributed surplus                    | 31,728            | 22,707           
|Deficit                                | (96,364)          | (89,075)         
|Accumulated other comprehensive income | 593               | 137              
|                                       | 311,358           | 281,984          





The Company is authorized to issue an unlimited
number of preferred shares and common shares with no par value. No preferred shares have been issued or were outstanding at December
31, 2016 and December 31, 2015.



The Company manages its capital structure
and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and
development of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management,
but rather relies on the expertise of the Company's management to sustain future development of the business.



The properties in which the Company currently
has an interest are in the exploration stage; as such the Company is dependent on external financing to fund its activities. In
order to carry out the planned exploration and pay for administrative costs, the Company will spend its existing working capital
and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional
properties that would be accretive and meaningful to the Company. The Company is not subject to externally imposed capital requirements.



Management reviews its capital management
approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were
no changes in the Company's approach to capital management during the year ended December 31, 2016. The Company considers its capital
to be share capital, stock based compensation, contributed surplus and deficit.



On April 29, 2016, the Company issued 500,000
common shares at a price of C$17.40 per common share for aggregate gross proceeds of $8.7 million. Share issuance costs of $0.8
million were incurred in relation to the offering and have been included in equity.



On May 19, 2016, the Company issued 500,000
flow-through common shares at a price of $24.08 per flow-through share closed for aggregate gross proceeds of $12.0 million. The
purchase price represented a 38% premium over the market price of the Company’s shares on that date. Share issuance costs
of $0.7 million were incurred in relation to the offering and have been included in equity. The Company committed to renounce its
ability to deduct qualifying exploration expenditures for the equivalent value of the gross proceeds of the financings and transfer
the deductibility to the purchasers of the flow-through shares. The effective date of the renouncement will be December 31, 2016.
At the time of issuance of the shares, the $3.3 million premium was recognized as a liability on the statement of financial position
with the balance recorded as share capital. At each reporting period, as qualifying expenditures were incurred, the liability was
reduced on a proportionate basis and income was recognized on the statement of operations and comprehensive income. In the period
May 20, 2016 to December 31, 2016, the entire premium was recognized through other income on the statement of operations and comprehensive
income as qualifying expenditures were incurred.



On June 21, 2016 the Company acquired all
of the issued and outstanding common shares of SnipGold by way of a statutory plan of arrangement under the Business Corporations
Act (British Columbia). Pursuant to the arrangement agreement, holders of SnipGold common shares received 1/63rd of a
common share of the Company in exchange for 1 SnipGold common share held. 695,277 common shares of the Company were issued to existing
SnipGold shareholders. The Company also issued 54,968 stock options and 1,587 warrants to existing SnipGold holders of similar
securities. The fair value of the shares, stock options and warrants was $13.1 million. The Company also incurred $1.7 million
of acquisition costs. The total purchase price of $14.8 million has been allocated to the assets acquired and the liabilities assumed
based on the fair value of the total consideration at the closing date of the acquisition. All financial assets acquired and financial
liabilities assumed were recorded at fair value.















|Assets acquired and liabilities assumed (000's)
|-----------------------------------------------
|Current assets                                 
|Mineral interests                              
|Current liabilities                            
|Provision for reclamation liabilities          
|                                               





|Consideration paid (000's) |      
|-------------------------- | -----
|Share issuance             |      
|Options and warrants       | 619  
|Acquisition costs          | 1,704
|                           |      





On October 30, 2015, the Company issued
1,800,000 common shares of the Company, through a non-brokered private placement, at a price of $8.10 per share raising gross proceeds
of $14.6 million.



On April 7, 2015 the Company issued 1,610,000
flow-through common shares, at $10.17 per share, raising gross proceeds of $16.4 million. The purchase price represented a 22%
premium over the market price of the Company’s shares on that date. Share issuance costs of $1.0 million were incurred in
relation to the offering and have been included in equity. The Company committed to renounce its ability to deduct qualifying exploration
expenditures for the equivalent value of the gross proceeds of the financings and transfer the deductibility to the purchasers
of the flow-through shares. The effective date of the renouncement was December 31, 2015. The $2.9 million premium was initially
recognized as a liability on the statement of financial position and the balance was recorded as share capital. At each reporting
period, and as qualifying expenditures were incurred, the liability was reduced on a proportionate basis and income was recognized
on the statement of operations and comprehensive income. In the period April 8, 2015 to December 31, 2015, $2.0 million of the
premium was recognized through other income on the statement of operations and comprehensive income for the proportionate amount
of qualifying expenditures made relative to the $16.4 million commitment.



The Company provides compensation to directors
and employees in the form of stock options and a Restricted Share Units (“RSU”), plan implemented in 2013.



Pursuant to the Share Option Plan, the
Board of Directors has the authority to grant options, and to establish the exercise price and life of the option at the time each
option is granted, at a price not less than the closing price of the common shares on the Toronto Stock Exchange on the date of
the grant of such option and for a period not exceeding five years. All exercised options are settled in equity.



Pursuant to the Company’s RSU Plan,
the Board of Directors has the authority to grant RSUs, and to establish terms of the RSUs including the vesting criteria and the
life of the RSU. The life of the RSU is not to exceed two years.













Stock option and RSU
transactions were as follows:





|                                            | Options   |                                     | RSUs                                |  | Total    
|------------------------------------------- | --------- | ----------------------------------- | ----------------------------------- |  | ---------
|                                            |           | Weighted Average Exercise Price ($) | Amortized Value of options ($000’s) |  |          
|Outstanding January 1, 2016                 | 3,585,000 | 14.15                               | 21,602                              |  | 183,250  
|Granted                                     | 1,145,801 | 12.04                               | 1,873                               |  | 125,500  
|Exercised option or vested RSU              | (303,644) | 10.68                               | (1,273)                             |  | (183,250)
|Expired                                     | (725,562) | 24.41                               | (9,021)                             |  | -        
|Amortized value of stock based compensation |           |                                     |                                     |  |          
|granted in prior years                      | -         | -                                   | 1,472                               |  | -        
|Outstanding December 31, 2016               | 3,701,595 | 11.76                               | 14,653                              |  | 125,500  
|                                            |           |                                     |                                     |  |          
|Exercisable at December 31, 2016            | 2,115,762 |                                     |                                     |  |          









|                                            | Options   |                                     | RSUs                                |  | Total    
|------------------------------------------- | --------- | ----------------------------------- | ----------------------------------- |  | ---------
|                                            |           | Weighted Average Exercise Price ($) | Amortized Value of options ($000’s) |  |          
|Outstanding January 1, 2015                 | 3,240,000 | 17.62                               | 27,427                              |  | 355,000  
|Granted                                     | 840,000   | 9.93                                | 1,698                               |  | 94,000   
|Exercised option or vested RSU              | -         | 9.90                                | -                                   |  | (263,250)
|Cancelled                                   | -         | 9.63                                | -                                   |  | (2,500)  
|Expired                                     | (495,000) | 29.75                               | (7,646)                             |  | -        
|Amortized value of stock based compensation |           |                                     |                                     |  |          
|granted in prior years                      | -         | -                                   | 123                                 |  | -        
|Outstanding December 31, 2015               | 3,585,000 | 14.15                               | 21,602                              |  | 183,250  
|                                            |           |                                     |                                     |  |          
|Exercisable at December 31, 2015            | 2,888,333 |                                     |                                     |  |          









The outstanding share
options at December 31, 2016 expire at various dates between March 2017 and February 2021. A summary of options outstanding, their
remaining life and exercise prices as at December 31, 2016 is as follows:





|               | Options Outstanding |                              | Options Exercisable
|-------------- | ------------------- | ---------------------------- | -------------------
|Exercise price | Number              | Remaining                    | Number             
|               | outstanding         | contractual life             | Exercisable        
|$21.54         | 10,000              | 2 months                     | 10,000             
|$14.70         | 100,000             | 6 months                     | 100,000            
|$17.32         | 180,000             | 8 months                     | 180,000            
|$17.52         | 155,000             | 11 months                    | 155,000            
|$12.60         | 655,000             | 1 years 2 months             | 655,000            
|$12.91         | 100,000             | 1 years 5 months             | 100,000            
|$8.00          | 50,000              | 2 years                      | 50,000             
|$10.36         | 450,000             | 2 years 3 months             | 450,000            
|$9.72          | 50,000              | 2 years 6 months             | 50,000             
|$9.00          | 450,000             | 3 years 4 months             | -                  
|$11.13         | 365,000             | 4 years                      | 286,667            
|$13.52         | 100,000             | 4 years 3 months             | 33,333             
|$17.16         | 50,000              | 4 year 5 months              | -                  
|$17.14         | 50,000              | 4 year 8 months              | -                  
|$10.45         | 890,833             | 5 years                      | -                  
|$6.30 -$129.15 | 45,762              | 3 months to 4 years 6 months | 45,762             
|               |                     |                              |                    
|               | 3,701,595           |                              | 2,115,762          





In March 2016, 100,000 five-year options,
with an exercise price of $13.52 and in August 2016, 50,000 options, with an exercise price of $17.14, to purchase common shares
of the Company were granted to a members of management. The options had a fair value, at the grant date, of $0.7 million and $0.4
million respectively and vest over a two year period.













In May 2016, 50,000 five-year options,
with an exercise price of $17.16, to purchase common shares of the Company were granted to a new director of the Company. The options
had a fair value of $0.5 million and vest upon the Company entering into a major transaction on one of the Company’s two
core assets or other transformative transaction.



In December 2016, 890,833 five-year options
with an exercise price of $10.45, to purchase common shares of the Company, with a fair value, at the date of the grant, of $4.9
million, were granted to members of the Board of Directors and management. The 575,000 options to granted board members are subject
to shareholder approval and vesting of these options is subject to the Company entering into a major transaction on one of the
Company’s two core assets or other transformative transaction. The remaining 315,833 options were granted members of management
and vest over a three year period. The fair value of these options is being amortized over the service life of the options.



Also in 2016, in conjunction with the acquisition
of SnipGold, 54,968 stock options and 1,587 warrants with a combined fair value, at the date of the grant, of $0.6 million and
has been included in the costs of the net assets acquired.



In December 2015, 365,000 five-year options,
with an exercise price of $11.13, to purchase common shares of the Company were granted to members of management. These options
had a fair value, at the date of the grant, of $2 million. Of the total granted, 235,000 options vest over a two year period. Of
the remaining 130,000 options, one half of them vested on December 31, 2015 and the second half will vest upon the Company entering
into a major transaction on one of the Company’s two core assets.



In April 2015, 475,000 five-year options
to purchase common shares of the Company, with a fair value of $1.4 million, were granted to members of the Board of Directors.
These options have an exercise price of $9.00 and were subject to shareholder approval which was obtained in June 2015. Vesting
of these options is subject to the Company entering into a major transaction on one of the Company’s two core assets. The
fair value of these options is being amortized over the service life of the options.



The fair value of the options granted is
estimated on the dates of grant using a Black Scholes option-pricing model with the following assumptions:





|                         | 2016             | 2015   
|------------------------ | ---------------- | -------
|Dividend yield           | Nil              | Nil    
|Expected volatility      | 44-73%           | 51-57% 
|Risk free rate of return | 0.5-0.1.2%       | 0.7%-1%
|Expected life of options | 2 months-5 years | 5 years





In 2016, the Board granted 125,500 RSUs
to members of management. The fair value of the grants, of $1.3 million, was estimated as at the grant date and is being amortized
over the expected service period of the grants. The expected service periods vary from three to eleven months from the date of
the grant depending on certain corporate objectives being met. In 2016, 183,250 RSUs vested and were exchanged for common shares
of the Company. Subsequent to December 31, 2016, 61,250 RSUs, of the 125,500 RSUs outstanding at the time, vested and were exchanged
for common shares of the Company. Also subsequent to December 31, 2016, 75,984 options were exercised.



In 2015, the Board granted 94,000 RSUs
to members of management. The fair value of the grants, of $1.0 million, was estimated as at the grant date and is being amortized
over the expected service period of the grants. The expected service periods vary from one to nine months from the date of the
grant depending on certain corporate objectives being met. In 2015, 263,250 RSUs vested and were exchanged for common shares of
the Company.













For the years ended December 31, 2016 and
2015, basic and diluted net loss per common share are computed by dividing the net loss for the year by the weighted average number
of common shares outstanding for the year. The potential effect of stock options, RSUs and warrants has been excluded from the
calculation of diluted loss per common share as the effect would be anti-dilutive. At December 31, 2016 there was a total of 3,828,682
stock options, RSUs and warrants outstanding (2015 – 3,768,250).



11.  Fair value of financial
assets and liabilities



Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.



Level 1: Inputs are quoted prices (unadjusted)
in active markets for identical assets or liabilities.



Level 2: Inputs are quoted prices in markets
that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are
observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward
pricing curves used to value currency and commodity contracts, volatility measurements used to value option contracts and observable
credit default swap spreads to adjust for credit risk where appropriate), or inputs that are derived principally from or corroborated
by observable market data or other means.



Level 3: Inputs are unobservable (supported
by little or no market activity).



The fair value hierarchy gives the highest
priority to Level 1 inputs and the lowest priority to Level 3 inputs.



The Company’s financial assets and
liabilities as at December 31, 2016 and December 31, 2015 are cash and cash equivalents, short-term deposits, amounts receivable,
available-for-sale investments, and accounts payable and accrued liabilities. Other than investments, the carrying values approximate
their fair values due to the immediate or short-term maturity of these financial instruments and are classified as a Level 1 measurement.
The Company’s available-for-sale investments are measured at fair value based on quoted market prices and are classified
as a level 1 measurement.



The Company's financial risk exposures
and the impact on the Company's financial instruments are summarized below:



Credit Risk



The Company's credit risk is primarily
attributable to short-term deposits, and receivables included in amounts receivable and prepaid expenses. The Company has no significant
concentration of credit risk arising from operations. Short-term deposits consist of Canadian Schedule I bank guaranteed notes,
with terms up to one year but are cashable in whole or in part with interest at any time to maturity, for which management believes
the risk of loss to be remote. Management believes that the risk of loss with respect to financial instruments included in amounts
receivable and prepaid expenses to be remote.



Liquidity Risk





The Company’s approach to managing liquidity risk is to
ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2016, the Company had  cash and
cash equivalents of $1.6 million and short-term deposits of $6.1 million (2015 - $1 million and $14.5 million, respectively) for
settlement of current financial liabilities of $5.7 million (2015 - $1.4 million). In addition, as at December 31, 2016, the Company
had commitments of $0.8 million required to be paid in 2017, including $0.6 million to maintain its mineral property claims in
good standing. The Company will seek additional sources of cash, required in 2017 to cover its proposed exploration and development
programs at its key projects, in the form of equity financings and from the sale of non-core assets. The short-term deposits consist
of Canadian Schedule I bank guaranteed deposits and are cashable in whole or in part with interest at any time to maturity. The
Company’s financial liabilities primarily have contractual maturities of 30 days and are subject to normal trade terms. The
Company’s ability to fund its operations and capital expenditures and other obligations as they become due is dependent upon
market conditions.















Market Risk



(a) Interest Rate Risk



The Company has no interest-bearing debt.
The Company's current policy is to invest excess cash in Canadian bank guaranteed notes (short-term deposits). The short-term deposits
can be cashed in at any time and can be reinvested if interest rates rise.



(b) Foreign Currency Risk



The Company's functional currency is the
Canadian dollar and major purchases are transacted in Canadian and US dollars. The Company funds certain operations, exploration
and administrative expenses in the United States on a cash call basis using US dollar currency converted from its Canadian dollar
bank accounts held in Canada. Management believes the foreign exchange risk derived from currency conversions is not significant
to its operations and therefore does not hedge its foreign exchange risk. As at December 31, 2016 the Company had no foreign currency
denominated financial instruments.



(c) Investment Risk



The Company has investments in other publicly
listed exploration companies which are included in investments. These shares were received as option payments on certain exploration
properties the Company owns. In addition, the Company holds $2.3 million in a gold exchange traded receipt that is recorded on
the statement of financial position in investments. The risk on these investments is significant due to the nature of the investment
but the amounts are not significant to the Company.



12. 
Corporate and administrative expenses





|($000’s)                   | 2016  | 2015 
|-------------------------- | ----- | -----
|Employee compensation      | 3,344 | 3,459
|Stock-based compensation   | 3,670 | 3,647
|Professional fees          | 929   | 897  
|General and administrative | 1,736 | 1,407
|                           | 9,679 | 9,410





13. 
Related party disclosures



Compensation
to key management personnel of the Company:





|($000’s)                   | 2016  | 2015
|-------------------------- | ----- | ----
|Compensation of directors: |       |     
|Directors fees             | 369   | 363 
|Services                   | 71    | 113 
|Stock-based compensation   | 693   | 283 
|                           | 1,133 | 759 







|Compensation of key management personnel:       |       |      
|----------------------------------------------- | ----- | -----
|Salaries and consulting fees                    | 3,398 | 3,409
|Stock-based compensation                        | 2,838 | 2,503
|                                                | 6,236 | 5,912
|Total remuneration of  key management personnel | 7,369 | 6,671















14. 
Income taxes





|('000s')             | 2016  | 2015 
|-------------------- | ----- | -----
|Current tax expense  | -     | 11   
|Deferred tax expense | 2,974 | 2,689
|                     | 2,974 | 2,700







|('000s')             | 2016 | 2015
|-------------------- | ---- | ----
|Share issuance costs | 420  | 289 





In 2016, the Company recognized income
tax expense of $3.0 million (2015 - $2.7 million) primarily related to a deferred tax expense arising due to the renouncement of
expenditures related to 2015 and 2016 flow-through shares which are capitalized for accounting purposes, offset by a deferred tax
recovery arising from the losses in the current year and 2015.





|Rate Reconciliation                                                                                                                                                                                           |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|The provision for income tax differs from the amount that would have resulted by
    applying the combined Federal and Ontario and Northwest Territories statutory income tax rates of 26.33% (2015 - 26.29%)
|                                                                                                                                                                                                             



|('000s')                                  | 2016    | 2015   
|----------------------------------------- | ------- | -------
|Loss before income taxes                  | (4,315) | (6,366)
|                                          | 26.33%  | 26.29% 
|Tax recovery calculated                   |         |        
|using statutory rates                     | (1,136) | (1,674)
|Non-deductible items                      | (170)   | 198    
|Difference in foreign tax rates           | 47      | (37)   
|Change in deferred tax rates              | 21      | (65)   
|Movement in tax benefits not recognized   | (1,141) | (191)  
|Branch tax                                | -       | 11     
|Renouncement of flow-through expenditures | 5,027   | 4,027  
|Prior period adjustment                   | 311     | 427    
|Other                                     | 15      | 3      
|Income tax expense                        | 2,974   | 2,700  







|Deferred Income Tax                                                   |  | 
|--------------------------------------------------------------------- |  | 
|The following table summarizes the components of deferred income tax:



|('000s')                              | December 31, 2016 | December 31, 2015
|------------------------------------- | ----------------- | -----------------
|Deferred tax assets                   |                   |                  
|Property and equipment                | 64                | 63               
|Provision for reclamation liabilities | 339               | 349              
|Financing costs                       | 667               | 583              
|Non-capital loss carryforwards        | 15,051            | 13,200           
|                                      |                   |                  
|Deferred tax liabilities              |                   |                  
|Mineral interests                     | (33,517)          | (29,036)         
|                                      | (17,396)          | (14,841)         

















|Unrecognized Deferred Tax Assets                                                 |  | 
|-------------------------------------------------------------------------------- |  | 
|Deferred income tax assets have not been recognized in respect of the following:



|('000s')                    | December 31, 2016 | December 31, 2015
|--------------------------- | ----------------- | -----------------
|Investments in subsidiaries | 5,029             | 4,422            
|Marketable securities       | 624               | 1,360            
|Loss carry-forwards         | 2,787             | 735              
|Investment tax credits      | 1,481             | 1,481            
|Foreign tax credits         | 16                | 16               
|Mineral properties          | (245)             | 454              



|                                                                                                                                                                                                                                                                                                                                                                                           |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|The tax losses not recognized expire as per the amount and years noted below. The deductible temporary
    differences do not expire under the current tax legislation. Deferred tax assets have not been recognized in respect of these
    items because it is not probable that future taxable profit would be available against which the Company can utilize the benefits there from.



|Income Tax Attributes                                                                                   |  | 
|------------------------------------------------------------------------------------------------------- |  | 
|As at December 31, 2016, the Company had the following Canadian income tax attributes to carry forward:



|                                       | Amount ('000s') | Expiry date
|-------------------------------------- | --------------- | -----------
|Canadian non-capital losses            | 65,788          | 2036       
|Canadian capital losses                | 1,672           | Indefinite 
|Canadian tax basis of mineral interest | 172,909         | Indefinite 
|                                       |                 |            
|US non-capital losses                  | 190             | 2036       
|US capital losses                      | 738             | 2021       
|US tax basis of mineral interest       | 1,674           | Indefinite 





15. 
Commitments



|($0000’s)                         | Payments due by period
|--------------------------------- | ----------------------
|                                  | Total                 
|Mineral interests                 | 4,183                 
|Business premises operating lease | 859                   
|                                  | 5,042