Exhibit
99.3

















SEABRIDGE
GOLD INC.
























AUDITED
CONSOLIDATED FINANCIAL STATEMENTS









FOR
THE YEAR ENDED DECEMBER 31, 2009









SEABRIDGE
GOLD INC.






Management’s
Report




The
management of Seabridge Gold Inc. is responsible for the preparation of the
consolidated financial statements as well as the financial and other information
contained in the Annual Report, Annual Information Form and Annual Report on
Form 40-F. Management maintains an internal control system in order to provide
reasonable assurance as to the reliability of financial information and the
safeguarding of assets.





The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in Canada and necessarily include amounts
determined in accordance with estimates and judgments made by management. KPMG
LLP, the external auditors, express their opinion on the consolidated financial
statements in the annual report.





The Board
of Directors, through the Audit Committee, is responsible for ensuring that
management fulfills its responsibilities for financial reporting and internal
control.





The
consolidated financial statements of the Company have been approved by the Board
of Directors.




/S/ RUDI P.
      FRONK
            /S/ RODERICK
      CHISHOLMRudi
      P. Fronk

                President
      & CEO
                March
      18, 2010
            Roderick
      Chisholm

                Chief
      Financial OfficerMarch 18,
2010









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




AUDITORS'
REPORT
  To the
Shareholders of Seabridge Gold Inc.
 
 We have
audited the consolidated balance sheets of Seabridge Gold Inc. as at December
31, 2009 and 2008 and the consolidated statements of operations and deficit,
comprehensive loss, accumulated other comprehensive income and cash flows for
each of the years in the three-year period ended December 31, 2009. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.
 
 In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2009 and 2008
and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2009 in accordance with Canadian
generally accepted accounting principles.
 
 /S/ KPMG
LLP
 Chartered
Accountants, Licensed Public Accountants
 
 Toronto,
Canada
 MARCH
18, 2010
   KPMG LLP
is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.  KPMG Canada
provides services to KPMG LLP.
 
  KPMG LLP
                  Chartered AccountantsBay
      Adelaide Centre
                  333
      Bay Street Suite 4600
                  Toronto
      ON M5H 2S5
                Telephone
                    Fax
                (416)
      777-8500
                  (416)
      777-8818
                  www.kpmg.ca
   REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors of Seabridge Gold Inc.
 
 We have
audited Seabridge Gold Inc. (the “Company”)’s internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).The Company'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 in Management’s Annual Report on Internal Control
over Financial Reporting within its Form 40-F. 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, the Companymaintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2009, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
  We also
have conducted our audits on the consolidated financial statements in accordance
with Canadian generally accepted auditing standards and the standards of the
Public Company Accounting Oversight Board (United States). Our report dated
March 18, 2010, expressed an unqualified opinion on thoseconsolidatedfinancial
statements.
 
 /S/ KPMG
LLP
 Chartered
Accountants, Licensed Public Accountants
 
 Toronto,
Canada
 March 18,
20
10
   KPMG LLP
is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.  KPMG Canada
provides services to KPMG LLP.
  
  KPMG LLP
                  Chartered AccountantsBay
      Adelaide Centre
                  333
      Bay Street Suite 4600
                  Toronto
      ON M5H 2S5
                Telephone
                    Fax
                (416)
      777-8500
                  (416)
      777-8818
                  www.kpmg.ca
   REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors of Seabridge Gold Inc.
 
 We have
audited the accompanying consolidated balance sheets of Seabridge Gold Inc. (the
“Company”) as of December 31, 2009 and December 31, 2008 and the related
consolidated statements of operations and deficit, comprehensive loss,
accumulated other comprehensive income and cash flows for each of the years in
the three-year period ended December 31, 2009. These consolidated financial
statements are the responsibility of the Company's management. 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 andthe
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 the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 2009 and December 31, 2008 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2008 in
conformity with Canadian generally accepted accounting principles.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated March 18, 2010,
expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
 
 /S/ KPMG
LLP
 Chartered
Accountants, Licensed Public Accountants
 
 Toronto,
Canada
 March 18,
2010
  
  Consolidated
      Balance Sheets
                December
      31, 2009 and 2008
                (in
      Canadian dollars)2009
              
              
              2008ASSETSCurrent
      AssetsCash
      and cash equivalents (Note 3)
              
              $
              285,280
              
              
              $
              8,098,982Short-term
      deposits (Note 3)
              
              
              9,002,158
              
              
              
              30,895,622Amounts
      receivable and prepaid expenses
              
              
              465,579
              
              
              
              237,894Marketable
      securities
              
              
              797,368
              
              
              
              90,75810,550,385
              
              
              
              39,323,256Mineral Interests (Note
      4)
              
              
              91,214,373
              
              
              
              69,028,974Reclamation Deposits
      (Note 5)
              
              
              1,551,915
              
              
              
              1,324,400Property
      and Equipment
              
              
              84,597
              
              
              
              124,930$
              103,401,270
              
              
              $
              109,801,560LIABILITIESCurrent
      liabilitiesAccounts
      payable and accruals
              
              $
              1,375,746
              
              
              $
              3,368,963Income
      taxes payable (Note 9 and 4(i))
              
              
              34,000
              
              
              
              5,326,0341,409,746
              
              
              
              8,694,997Long-term income taxes
      payable  (Note 9)
              
              
              137,000
              
              
              
              -Provision for Reclamation
      Liabilities  (Note 5)
              
              
              2,256,293
              
              
              
              1,998,9883,803,039
              
              
              
              10,693,985SHAREHOLDERS’ EQUITY(Note 6)Share
      Capital
              
              
              114,027,129
              
              
              
              110,220,772Stock
      Options
              
              
              7,012,025
              
              
              
              6,033,805Contributed
      Surplus
              
              
              126,015
              
              
              
              19,500Deficit
              
              
              (21,739,778
              )
              
              
              (17,061,209
              )Accumulated Other Comprehensive
      Income (Loss)
              
              
              172,840
              
              
              
              (105,293
              )99,598,231
              
              
              
              99,107,575$
              103,401,270
              
              
              $
              109,801,560
  COMMITMENTS (Note
10)
 SUBSEQUENT EVENTS (Notes 4(d)
and 11)
 See
accompanying notes to consolidated financial statements
  On Behalf
of the Board of Directors
  /S/ RUDI P.
      FRONK
                Rudi
      P. Fronk
                Director
              /S/ JAMES S.
      ANTHONY
                James
      S. Anthony
                Director
  1
  Consolidated
      Statements of Operations and Deficit
                  For
      the Years Ended December 31, 2009, 2008 and 2007
                  (in
      Canadian dollars)2009
                
                
                2008
                
                
                2007ExpendituresCorporate
      and general expenses
                
                $
                (5,049,583
                )
                
                $
                (5,594,818
                )
                
                $
                (6,688,504
                )Gain
      on sale of Noche Buena project
                
                
                -
                
                
                
                19,891,071
                
                
                
                -Interest
      income
                
                
                477,813
                
                
                
                621,099
                
                
                
                822,563Gain
      on sale of marketable securities
                
                
                163,625
                
                
                
                -
                
                
                
                -Write-down
      of marketable securities
                
                
                (81,830
                )
                
                
                -
                
                
                
                -Foreign
      exchange gains (losses)
                
                
                (17,594
                )
                
                
                378,325
                
                
                
                (295,843
                )Income
      (Loss) Before Income Taxes
                
                
                (4,507,569
                )
                
                
                15,295,677
                
                
                
                (6,161,784
                )Income
      tax (expense)recovery (Notes 6(a)(ii) and 9)
                
                
                (171,000
                )
                
                
                (5,005,989
                )
                
                
                620,000Net
      (Loss) Profit for Year
                
                
                (4,678,569
                )
                
                
                10,289,688
                
                
                
                (5,541,784
                )Deficit,
      Beginning of Year
                
                
                (17,061,209
                )
                
                
                (27,350,89
                )
                
                
                (21,809,113
                )Deficit,
      End of Year
                
                $
                (21,739,778
                )
                
                $
                (17,061,209
                )
                
                $
                (27,350,897
                )Profit
      (Loss) per Share – basic
                
                $
                (0.12
                )
                
                $
                0.28
                
                
                $
                (0.15
                )Profit
      (Loss) per Share – diluted (Note 2(k))
                
                $
                (0.12
                )
                
                $
                0.27
                
                
                $
                (0.15
                )Weighted
      Average Number of Shares Outstanding - Basic
                
                
                37,485,977
                
                
                
                37,327,201
                
                
                
                35,991,034Weighted
      Average Number of Shares Outstanding - Diluted
                
                
                37,485,977
                
                
                
                37,867,620
                
                
                
                35,991,034
  Consolidated
      Statements of Comprehensive Loss
                  For
      the Years Ended December 31, 2009, 2008 and 2007
                  (in
      Canadian dollars)2009
                
                
                2008
                
                
                2007Net
      (Loss) Profit for Year
                
                $
                (4,678,569
                )
                
                $
                10,289,688
                
                
                $
                (5,541,784
                )Other
      Comprehensive  Income (Loss)Reclassification
      of losses in net profit for year
                
                
                106,130
                
                
                
                -
                
                
                
                -Unrecognized
      gains (losses) on financial assets
                
                
                172,003
                
                
                
                (164,112
                )
                
                
                58,819Comprehensive (Loss)
      Profit
                
                $
                (4,400,436
                )
                
                $
                10,125,576
                
                
                $
                (5,482,965
                )
  Consolidated
      Statements of Accumulated Other Comprehensive Income
                  For
      the Years Ended December 31, 2009, 2008 and 2007
                  (in
      Canadian dollars)2009
                
                
                2008
                
                
                2007Balance,
      Beginning of Year
                
                $
                (105,293
                )
                
                $
                58,819
                
                
                $
                -Other Comprehensive Income
      (Loss)
                
                
                278,133
                
                
                
                (164,112
                )
                
                
                58,819Balance,
      End of Year
                
                $
                172,840
                
                
                $
                (105,293
                )
                
                $
                58,819
 
 See accompanying notes to consolidated
financial statements
  2
  Consolidated
      Statements of Cash Flows
                For
      the Years Ended December, 2009, 2008 and 2007
                (in
      Canadian dollars)2009
              
              
              2008
              
              
              2007Cash
      Used for OperationsNet
      (loss) profit for year
              
              $
              (4,678,569
              )
              
              $
              10,289,688
              
              
              $
              (5,541,784
              )Items
      not involving cashGain
      on sale of Noche Buena project
              
              
              -
              
              
              
              (19,891,071
              )
              
              
              -Gain
      on sale of marketable securities
              
              
              (163,625
              )
              
              
              -
              
              
              
              -Write-down
      of marketable securities
              
              
              81,830
              
              
              
              -
              
              
              
              -Stock
      option compensation
              
              
              1,481,466
              
              
              
              1,852,004
              
              
              
              2,830,270Unrealized
      foreign exchange gains
              
              
              -
              
              
              
              (266,524
              )
              
              
              -Accretion
      (Note 5)
              
              
              172,105
              
              
              
              158,713
              
              
              
              145,665Amortization
              
              
              39,349
              
              
              
              40,754
              
              
              
              24,761Income
      taxes (recoveries)
              
              
              171,000
              
              
              
              (586,562
              )
              
              
              (620,000
              )Changes
      in non-cash working capital itemsAmounts
      receivable and prepaid expenses
              
              
              (127,685
              )
              
              
              182,175
              
              
              
              (327,520
              )Accounts
      payable and accruals
              
              
              (182,549
              )
              
              
              76,063
              
              
              
              138,540Income
      taxes payable
              
              
              (5,326,034
              )
              
              
              5,592,558
              
              
              
              -(8,532,712
              )
              
              
              (2,552,202
              )
              
              
              (3,350,068
              )Investing
      ActivitiesMineral
      interests
              
              
              (21,666,928
              )
              
              
              (14,706,219
              )
              
              
              (8,350,885
              )Proceeds
      on sale of Noche Buena project
              
              
              -
              
              
              
              30,842,488
              
              
              
              -Short-term
      deposits
              
              
              21,893,464
              
              
              
              (19,338,129
              )
              
              
              (11,
      557,493
              )Marketable
      securities
              
              
              (224,932
              )
              
              
              -
              
              
              
              -Reclamation
      deposits
              
              
              (249,470
              )
              
              
              (19,229
              )
              
              
              (200,000
              )Property
      and equipment
              
              
              -
              
              
              
              9,000
              
              
              
              (174,339
              )(247,866
              )
              
              
              (3,212,089
              )
              
              
              (20,
      282,717
              )Financing
      ActivitiesIssue
      of share capital and warrants
              
              
              966,876
              
              
              
              383,126
              
              
              
              31,327,426Net
      Cash (Used for) Provided
              
              
              (7,813,702
              )
              
              
              (5,381,165
              )
              
              
              7,694,641Cash
      and Cash Equivalents, Beginning of Year
              
              
              8,098,982
              
              
              
              13,480,147
              
              
              
              5,785,506Cash
      and Cash Equivalents, End of Year
              
              $
              285,280
              
              
              $
              8,098,982
              
              
              $
              13,480,147Supplementary
      Non-cash Investing ActivitiesShares
      issued for mineral property acquisition
              
              $
              2,442,749
              
              
              $
              -
              
              
              $
              -Changes
      in Liabilities in Mineral Interests
              
              $
              1,910,668
              
              
              $
              94,251
              
              
              $
              1,054,875Unpaid
      Commissions on Sale of Noche Buena
              
              $
              -
              
              
              $
              2,505,647
              
              
              $
              -
  See
accompanying notes to consolidated financial statements
  3
  Notes
to Consolidated Financial Statements
 At
December 31, 2009 and 2008 and
 For
the Years Ended December 31, 2009, 2008 and 2007
 (in
Canadian dollars, except where noted)
 
 1.
              NATURE
      OF OPERATIONS
 The
      Company is engaged in the acquisition, exploration and development of
      mineral properties. To date, the Company has not earned significant
      revenues and is considered to be in the exploration stage. The ability of
      the Company to carry out its business plan rests with its ability to
      continue to secure equity financings and/or the sale or joint venture of
      its properties.
 
 2.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 The
      consolidated financial statements of the Company have been prepared in
      accordance with generally accepted accounting principles (“GAAP”) in
      Canada.
 
 The
      consolidated financial statements have, in management’s opinion, been
      properly prepared within the framework of the significant accounting
      policies summarized below:
 
 a)
              Principles
      of Consolidation
 These
consolidated financial statements include the accounts of Seabridge Gold Inc.
and its wholly-owned subsidiaries, Seabridge Gold Corp., a company incorporated
under the laws of the State of Nevada, USA, 5073 N.W.T. Limited, a company
incorporated under the laws of the Northwest Territories of Canada; Pacific
Intermountain Gold Inc. (“PIGCO”), a company incorporated under the laws of the
State of Nevada, USA and Minera Seabridge Gold SA de CV, a company incorporated
in Mexico in 2006 to hold the Noche Buena project. The Mexican company and
project were sold in December 2008.  All significant inter-company
transactions and balances have been eliminated.
 
 b)
              Mineral
      Interests
 Direct
property acquisition costs, advance royalties, holding costs, field exploration
and field supervisory costs relating to specific properties are deferred until
the properties are brought into production, at which time, they will be
amortized on a unit of production basis, or until the properties are abandoned,
sold or considered to be impaired in value, at which time an appropriate charge
will be made. The recovery of costs of mining claims and deferred exploration is
dependent upon the existence of economically recoverable reserves, the ability
of the Company to obtain the necessary financing to complete exploration and
development and future profitable production or proceeds from disposition of
such properties.
 
 The
Emerging Issues Committee of the CICA issued EIC-174 – “Mining Exploration
Costs” which interprets how Accounting Guideline No. 11 entitled Enterprises in
the Development Stage - (AcG-11) affects mining companies with respect to the
deferral of exploration costs.  EIC-174 refers to CICA Handbook
Section 3061 "Property, Plant and Equipment", paragraph 21, which states that
for a mining property, the cost of the asset includes exploration costs if the
enterprise considers that such costs have the characteristics of property, plant
and equipment. EIC-126 then states that a mining enterprise that has not
established mineral reserves objectively, and therefore does not have a basis
for preparing a projection of the estimated cash flow from the property, is not
precluded from considering the exploration costs to have the characteristics of
property, plant and equipment. EIC-174 also provides additional guidance for
mining exploration enterprises on when an impairment test is
required.
  The
Company reviews its mineral interests for impairment whenever events or changes
in circumstances indicate that the carrying amount of the mineral interest may
not be recoverable.  The net recoverable amount is based on estimates of
undiscounted future net cash flows expected to be recovered from specific assets
through use or future disposition.
  The
Company considers that exploration costs have the characteristics of property,
plant and equipment, and, accordingly, defers such costs.
 
 c)
              Asset
      Retirement Obligations
 The
Company recognizes the fair value of liabilities for asset retirement
obligations in the period in which they occur and/or in which a reasonable
estimate of such costs can be made using the total undiscounted cash flows
required to settle estimated obligations, estimated expected timing of cash flow
payments required to settle the obligations and estimated credit-adjusted
risk-free discount rates and inflation rates (see Note 5).
 
 d)
              Stock-based
      Compensation
 The
Company applies the fair value method for stock-based compensation and other
stock-based payments.  Options are valued using the Black Scholes
option-pricing model and other models for the two-tiered options as may be
appropriate. The resulting value is charged against income over the anticipated
vesting period of the option (see Note 6(b)). The Company reviews estimated
forfeitures of options on an ongoing basis.
 
 e)
              Property
      and Equipment
 Property
and Equipment are carried at cost less accumulated amortization. Amortization is
provided using the straight-line method at an annual rate of 20% from the date
of acquisition.
 
 f)
              Cash
      and Short-term Deposits
 Cash and
short-term investments consist of balances with banks and investments in money
market instruments. These investments are carried at fair value. 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 greater
than 90 days at the date of purchase.
  4
  g)
              Marketable
      Securities
 Short-term
investments in marketable securities accounted for as available for sale
securities are recorded at market value, which is also considered fair value.
The market values of 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. When there has been a loss in the value of an investment
in marketable securities that is determined to be other than a temporary
decline, the investment is written down to recognize the loss.
 
 h)
              Flow-through
      Shares
 The
Company financed a portion of its exploration and development activities through
the issue of flow-through shares.  Under the terms of these share
issues, the tax attributes of the related expenditures are renounced to
subscribers.  When the renunciation is made, the tax value of the
renunciation is recorded as a liability and charged against share capital. Where
the Company has a valuation allowance, which reduces future income tax assets,
the valuation allowance is reduced and an income tax recovery is recorded in the
statement of operations.
 
 i)
              Translation
      of Foreign Currencies
 The
functional currency of the Company and its subsidiaries is considered to be the
Canadian dollar. Foreign currency transactions entered into by the Company and
financial statements of integrated foreign operations are translated using the
temporal method.  Under this method, monetary assets and liabilities
are translated at year-end rates of exchange, non-monetary assets and
liabilities are translated at historic rates of exchange and statement of
operations items are translated at average exchange rates prevailing during the
year.  Exchange gains and losses on foreign currency transactions and
foreign currency denominated balances are included in the statement of
operations.
 
 j)
              Income
      Taxes
 The
Company accounts for income taxes using the asset and liability method. Under
this method of tax allocation, future income tax assets and liabilities are
determined based on differences between the financial statement carrying values
and their respective income tax bases (temporary differences). Future income tax
assets and liabilities are measured using the tax rates expected to be in effect
when the temporary differences are expected to reverse. The effect on future
income tax assets and liabilities of a change in tax rates enacted is included
in operations in the period in which the change is enacted or substantively
enacted. The amount of future income tax assets recognized is limited to the
amount that is more likely than not to be realized.
  k)
              Loss
      Per Share
 Basic
(profit) loss per share of common stock 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 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 are not included in the
calculation of diluted profit per share as the effect is anti-dilutive. There
were 305,000 options which were not included in the diluted profit per share as
they would be anti-dilutive.  As the Company incurred net losses for
the years ended December 31, 2009 and 2007, all outstanding options and warrants
have been excluded from the calculation of diluted loss per share for those
years.  The diluted weighted average number of common shares for the
year ended December 31, 2008 was as follows:
 
 Basic
      weighted average number of common shares outstanding for
    2008
                
                
                37,327,201Incremental
      number of common shares on assumed exercise of stock
    options
                
                
                540,419Weighted
      average number of common shares used for diluted profit per
      share
                
                
                37,867,620
 l)
              Use
      of Estimates
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reported year. The most
significant estimates relate to the carrying values of exploration properties,
accrued liabilities and contingencies, valuation of stock options and
calculations of future income tax assets.  Actual results could be
materially different from those estimates.
 m)
                Changes
      in Accounting Policies
 The
Company has adopted the following new accounting policies for the 2009 year as
issued by the Canadian Institute of Chartered Accountants (“CICA”):
 
 Goodwill
and Intangible Assets
 In
February 2008, the CICA issued Handbook Section 3064 Goodwill and Intangible
Assetswhich is
required to be adopted for fiscal years beginning on or after October 1,
2008.  This section establishes standards for the recognition,
measurement, presentation and disclosure of goodwill and intangible assets
subsequent to their initial recognition by profit-oriented enterprises. The
adoption of this new standard did not have a material effect on the financial
statements.
 
 Credit
Risk and the Fair Value of Financial Assets and Financial
Liabilities
 On
January 20, 2009, the Canadian Accounting Standards Board ("AcSB") issued
EIC-173, Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities which was adopted retrospectively, without restatement. This EIC
provides guidance on how to take into account credit risk of an entity and
counterparty when determining the fair value of financial assets and financial
liabilities, including derivative instruments. The adoption of EIC-173 did not
have a material effect on the financial statements.
  5
  Mining
Exploration Costs
 On March
27, 2009, the AcSB issued EIC-174, Mining Exploration Costs which provides
guidance to mining enterprises related to the measurement of exploration costs
and the conditions that a mining enterprise should consider when determining the
need to perform an impairment review of such costs.  The accounting
treatments provided in EIC-174 have been applied in the preparation of the
financial statements and did not have an impact on the valuation of the
Company’s mineral properties.
 
 Financial
Instruments - Disclosures
 In June
2009, the CICA amended Section 3862, "Financial Instruments - Disclosures", to
include enhanced disclosures on liquidity risk of financial instruments and new
disclosures on fair value measurements of financial instruments.  Refer to
Note 8 for the additional disclosures.
 
 n)
                Changes
      in Accounting Policies Not Yet
Adopted
 Business
Combinations, Consolidated Financial Statements, Non-controlling
Interests
 The CICA
issued Handbook Sections 1582 Business Combinations, 1601 Consolidated Financial
Statements and 1602 Non-controlling Interests all of which are effective for
years beginning on or after January 1, 2011.  These Handbook Sections
replace 1581 Business Combinations and 1600 Consolidated Financial Statements
and establish a new Section for accounting for non-controlling interest in
subsidiaries.  The Company is currently evaluating the impact of these
new standards.
  3.
                CASH
      AND CASH EQUIVALENTS AND SHORT-TERM
DEPOSITS
  2009
              
              
              2008Cash
              
              $
              285,280
              
              
              $
              8,098,982Canadian
      bank guaranteed notes
              
              
              9,002,158
              
              
              
              30,895,6229,287,438
              
              
              
              38,994,604Short-term
      deposits
              
              
              (9,002,158
              )
              
              
              (30,895,622
              )Cash
      and cash equivalents
              
              $
              285,280
              
              
              $
              8,098,982
 
 Short-term
deposits consist of Canadian Schedule I bank guaranteed notes with a term of one
year to December 2010.  The short-term deposits amounting to
$9,002,158 held at December 31, 2009 were issued for a one year period in
December 2009 but are cashable in whole or in part with interest at any time to
maturity.  All of the cash is held in a Canadian Schedule I
bank.
  6
  4.
              MINERAL
      INTERESTS
 Expenditures
made on account of mineral interests by the Company were as
follows:
  2009Property
      and Expense
              
              Balance,
      December 31, 2008
              
              
              Expenditures
              
              
              Recoveries
              
              
              Balance,December 31,
      2009Courageous
      LakeAcquisition
      costs
              
              $
              8,502,305
              
              
              $
              100,000
              
              
              $
              -
              
              
              $
              8,602,305Deferred
      exploration
              
              
              13,405,841
              
              
              
              396,114
              
              
              
              -
              
              
              
              13,801,95521,908,146
              
              
              
              496,114
              
              
              
              -
              
              
              
              22,404,260Castle
      Black RockAcquisition
      costs
              
              
              140,426
              
              
              
              -
              
              
              
              (140,426
              )
              
              
              -Deferred
      exploration
              
              
              375,669
              
              
              
              45,988
              
              
              
              (180,016
              )
              
              
              241,641516,095
              
              
              
              45,988
              
              
              
              (320,442
              )
              
              
              241,641Grassy
      MountainAcquisition
      costs
              
              
              2,261,299
              
              
              
              -
              
              
              
              -
              
              
              
              2,261,299Deferred
      exploration
              
              
              1,207,500
              
              
              
              137,418
              
              
              
              -
              
              
              
              1,344,9183,468,799
              
              
              
              137,418
              
              
              
              -
              
              
              
              3,606,217Hog
      RanchAcquisition
      costs
              
              
              443,838
              
              
              
              -
              
              
              
              (443,838
              )
              
              
              -Deferred
      exploration
              
              
              833,480
              
              
              
              2,479
              
              
              
              (156,162
              )
              
              
              679,7971,277,318
              
              
              
              2,479
              
              
              
              (600,000
              )
              
              
              679,797KSMAcquisition
      costs
              
              
              15,306,546
              
              
              
              3,442,750
              
              
              
              -
              
              
              
              18,749,296Deferred
      exploration
              
              
              20,833,703
              
              
              
              18,268,596
              
              
              
              -
              
              
              
              39,102,29936,140,249
              
              
              
              21,711,346
              
              
              
              -
              
              
              
              57,851,595Quartz
      MountainAcquisition
      costs
              
              
              357,139
              
              
              
              -
              
              
              
              (21,750
              )
              
              
              335,389Deferred
      exploration
              
              
              94,258
              
              
              
              14,152
              
              
              
              -
              
              
              
              108,410451,397
              
              
              
              14,152
              
              
              
              (21,750
              )
              
              
              443,799Red
      MountainAcquisition
      costs
              
              
              82,090
              
              
              
              -
              
              
              
              (50,000
              )
              
              
              32,090Deferred
      exploration
              
              
              1,324,690
              
              
              
              185,984
              
              
              
              -
              
              
              
              1,510,6741,406,780
              
              
              
              185,984
              
              
              
              (50,000
              )
              
              
              1,542,764Pacific
      Intermountain Gold Corp.Acquisition
      costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Deferred
      exploration
              
              
              3,448,080
              
              
              
              511,743
              
              
              
              -
              
              
              
              3,959,8233,448,080
              
              
              
              511,743
              
              
              
              -
              
              
              
              3,959,823Other
      Nevada ProjectsAcquisition
      costs
              
              
              20,000
              
              
              
              -
              
              
              
              -
              
              
              
              20,000Deferred
      exploration
              
              
              392,110
              
              
              
              72,367
              
              
              
              -
              
              
              
              464,477412,110
              
              
              
              72,367
              
              
              
              -
              
              
              
              484,477TotalAcquisition
      costs
              
              
              27,113,643
              
              
              
              3,542,750
              
              
              
              (650,014
              )
              
              
              30,000,379Deferred
      exploration
              
              
              41,915,331
              
              
              
              19,634,841
              
              
              
              (336,178
              )
              
              
              61,213,994Total
      Mineral Interests
              
              $
              69,028,974
              
              
              $
              23,177,591
              
              
              $
              (992,192
              )
              
              $
              91,214,373
  7
  2008Property
      and Expense
              
              Balance,
      December 31, 2007
              
              
              Expenditures
              
              
              Recoveries
              
              
              Balance,December 31,
      2008Courageous
      LakeAcquisition
      costs
              
              $
              8,402,305
              
              
              $
              100,000
              
              
              $
              -
              
              
              $
              8,502,305Deferred
      exploration
              
              
              12,688,309
              
              
              
              717,532
              
              
              
              -
              
              
              
              13,405,84121,090,614
              
              
              
              817,532
              
              
              
              -
              
              
              
              21,908,146Castle
      Black RockAcquisition
      costs
              
              
              140,426
              
              
              
              -
              
              
              
              -
              
              
              
              140,426Deferred
      exploration
              
              
              332,135
              
              
              
              43,534
              
              
              
              -
              
              
              
              375,669472,561
              
              
              
              43,534
              
              
              
              -
              
              
              
              516,095Grassy
      MountainAcquisition
      costs
              
              
              2,261,299
              
              
              
              -
              
              
              
              -
              
              
              
              2,261,299Deferred
      exploration
              
              
              1,100,279
              
              
              
              107,221
              
              
              
              -
              
              
              
              1,207,5003,361,578
              
              
              
              107,221
              
              
              
              -
              
              
              
              3,468,799Hog
      RanchAcquisition
      costs
              
              
              443,838
              
              
              
              -
              
              
              
              -
              
              
              
              443,838Deferred
      exploration
              
              
              762,498
              
              
              
              70,982
              
              
              
              -
              
              
              
              833,4801,206,336
              
              
              
              70,982
              
              
              
              -
              
              
              
              1,277,318KSMAcquisition
      costs
              
              
              15,306,546
              
              
              
              -
              
              
              
              -
              
              
              
              15,306,546Deferred
      exploration
              
              
              10,008,860
              
              
              
              10,824,843
              
              
              
              -
              
              
              
              20,833,70325,315,406
              
              
              
              10,824,843
              
              
              
              -
              
              
              
              36,140,249Quartz
      MountainAcquisition
      costs
              
              
              357,139
              
              
              
              -
              
              
              
              -
              
              
              
              357,139Deferred
      exploration
              
              
              94,258
              
              
              
              -
              
              
              
              -
              
              
              
              94,258451,397
              
              
              
              -
              
              
              
              -
              
              
              
              451,397Red
      MountainAcquisition
      costs
              
              
              82,090
              
              
              
              -
              
              
              
              -
              
              
              
              82,090Deferred
      exploration
              
              
              1,028,530
              
              
              
              296,160
              
              
              
              -
              
              
              
              1,324,6901,110,620
              
              
              
              296,160
              
              
              
              -
              
              
              
              1,406,780Pacific
      Intermountain Gold Corp.Acquisition
      costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Deferred
      exploration
              
              
              3,000,032
              
              
              
              462,223
              
              
              
              (14,175
              )
              
              
              3,448,0803,000,032
              
              
              
              462,223
              
              
              
              (14,175
              )
              
              
              3,448,080Other
      Nevada ProjectsAcquisition
      costs
              
              
              20,000
              
              
              
              -
              
              
              
              -
              
              
              
              20,000Deferred
      exploration
              
              
              322,925
              
              
              
              69,185
              
              
              
              -
              
              
              
              392,110342,925
              
              
              
              69,185
              
              
              
              -
              
              
              
              412,110Noche
      Buena, MexicoAcquisition
      costs
              
              
              4,888,270
              
              
              
              1,820,609
              
              
              
              (6,708,879
              )
              
              
              -Deferred
      exploration
              
              
              1,428,111
              
              
              
              276,482
              
              
              
              (1,704,593
              )
              
              
              -6,316,381
              
              
              
              2,097,091
              
              
              
              (8,413,472
              )
              
              
              -TotalAcquisition
      costs
              
              
              31,901,913
              
              
              
              1,920,609
              
              
              
              (6,708,879
              )
              
              
              27,113,643Deferred
      exploration
              
              
              30,765,937
              
              
              
              12,868,162
              
              
              
              (1,718,768
              )
              
              
              41,915,331Total
      Mineral Interests
              
              $
              62,667,850
              
              
              $
              14,788,771
              
              
              $
              (8,427,647
              )
              
              $
              69,028,974
  8
  2007Property
      and Expense
              
              Balance,
      December 31, 2006
              
              
              Expenditures
              
              
              Recoveries
              
              
              Balance,December 31,
      2007Courageous
      LakeAcquisition
      costs
              
              $
              8,302,305
              
              
              $
              100,000
              
              
              $
              -
              
              
              $
              8,402,305Deferred
      exploration
              
              
              12,072,797
              
              
              
              615,512
              
              
              
              -
              
              
              
              12,688,30920,375,102
              
              
              
              715,512
              
              
              
              -
              
              
              
              21,090,614Castle
      Black RockAcquisition
      costs
              
              
              140,426
              
              
              
              -
              
              
              
              -
              
              
              
              140,426Deferred
      exploration
              
              
              289,198
              
              
              
              42,937
              
              
              
              -
              
              
              
              332,135429,624
              
              
              
              42,937
              
              
              
              -
              
              
              
              472,561Grassy
      MountainAcquisition
      costs
              
              
              2,261,299
              
              
              
              -
              
              
              
              -
              
              
              
              2,261,299Deferred
      exploration
              
              
              986,741
              
              
              
              113,538
              
              
              
              -
              
              
              
              1,100,2793,248,040
              
              
              
              113,538
              
              
              
              -
              
              
              
              3,361,578Hog
      RanchAcquisition
      costs
              
              
              443,838
              
              
              
              -
              
              
              
              -
              
              
              
              443,838Deferred
      exploration
              
              
              700,888
              
              
              
              61,610
              
              
              
              -
              
              
              
              762,4981,144,726
              
              
              
              61,610
              
              
              
              -
              
              
              
              1,206,336KSM
      (Kerr-Sulphurets-Mitchell)Acquisition
      costs
              
              
              15,061,208
              
              
              
              245,338
              
              
              
              -
              
              
              
              15,306,546Deferred
      exploration
              
              
              3,717,826
              
              
              
              6,291,034
              
              
              
              -
              
              
              
              10,008,86018,779,034
              
              
              
              6,536,372
              
              
              
              -
              
              
              
              25,315,406Quartz
      MountainAcquisition
      costs
              
              
              357,139
              
              
              
              -
              
              
              
              -
              
              
              
              357,139Deferred
      exploration
              
              
              85,348
              
              
              
              8,910
              
              
              
              -
              
              
              
              94,258442,487
              
              
              
              8,910
              
              
              
              -
              
              
              
              451,397Red
      MountainAcquisition
      costs
              
              
              82,090
              
              
              
              -
              
              
              
              -
              
              
              
              82,090Deferred
      exploration
              
              
              859,180
              
              
              
              169,350
              
              
              
              -
              
              
              
              1,028,530941,270
              
              
              
              169,350
              
              
              
              -
              
              
              
              1,110,620Pacific
      Intermountain Gold Corp.Acquisition
      costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Deferred
      exploration
              
              
              2,488,602
              
              
              
              556,261
              
              
              
              (44,831
              )
              
              
              3,000,0322,488,602
              
              
              
              556,261
              
              
              
              (44,831
              )
              
              
              3,000,032Other
      Nevada ProjectsAcquisition
      costs
              
              
              20,000
              
              
              
              -
              
              
              
              -
              
              
              
              20,000Deferred
      exploration
              
              
              254,602
              
              
              
              68,323
              
              
              
              -
              
              
              
              322,925274,602
              
              
              
              68,323
              
              
              
              -
              
              
              
              342,925Noche
      Buena, MexicoAcquisition
      costs
              
              
              4,888,270
              
              
              
              -
              
              
              
              -
              
              
              
              4,888,270Deferred
      exploration
              
              
              250,423
              
              
              
              1,177,688
              
              
              
              -
              
              
              
              1,428,1115,138,693
              
              
              
              1,177,688
              
              
              
              -
              
              
              
              6,316,381TotalAcquisition
      costs
              
              
              31,556,575
              
              
              
              345,338
              
              
              
              -
              
              
              
              31,901,913Deferred
      exploration
              
              
              21,705,605
              
              
              
              9,105,163
              
              
              
              (44,831
              )
              
              
              30,765,937Total
      Mineral Interests
              
              $
              53,262,180
              
              
              $
              9,450,501
              
              
              $
              (44,831
              )
              
              $
              62,667,850
 
  Continued
exploration of the Company’s mineral properties is subject to certain lease
payments, project holding costs, rental fees and filing fees.
  a)
              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.
  The
Vendors were granted a 2% net smelter royalty interest in the
project.  In addition, the Company agreed to pay the Vendors US$1.5
million when the spot price of gold closed at or above US$360 per ounce for 10
consecutive days (paid in March 2003), and pay the Vendors US$1.5 million when
the spot price of gold closed at or above US$400 per ounce or a production
decision was made at Courageous Lake, whichever occurred earlier (paid in
February 2004).
 
 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.  In addition, the property may be
purchased at any time for $1,250,000 with all option payments being credited
against the purchase price.
  9
  b)
                Castle Black
      Rock
 The
      Company entered into a mining lease agreement dated August 15, 2000, and
      amended on August 1, 2001, with respect to mineral claims
      located in Esmeralda County, Nevada, USA. In 2002, the Company paid
      US$17,500 and in 2003, US$25,000 in advance royalties and is required to
      pay further advance royalties of US$25,000 each August 15 thereafter and
      to pay a production royalty, varying with the price of gold, of 3% to 5%,
      and a 3.5% royalty on gross proceeds from other metals produced. The
      Company has the right to purchase 50% of the production royalty for US$1.8
      million.
 
 In March
2009, the Company signed a letter of intent to sell the Castle Black-Rock and
its early-stage Nevada properties including the Pacific Intermountain properties
to Cortez Resources Corp.  In April 2009, Cortez paid the Company
$20,000 which permitted them a 60-day period to complete a formal agreement
which required a further payment of US$2.9 million in cash and the issuance of
10 million shares of Cortez on closing.  In July 2009, the terms of
the agreement were amended and the proposed closing of the transaction was
changed to September 30, 2009 and subsequently to November 27, 2009. The revised
agreement terms required the following on closing: payment of US$2.9 million in
cash, issuance of 5 million shares of Cortez, and issuance of a $1.25 million 3
year, non-interest bearing convertible debenture. In addition, as consideration
for the amendments, Cortez paid an additional US$80,000 and agreed to fund
property maintenance costs through November 27, 2009 of approximately US$500,000
if the agreement closes.  The agreement failed to close in November
2009.
 
 In
December 2009, the Company signed a letter of intent to sell the same properties
as stated above to Constitution Mining Corp. (“Constitution”).  The
agreement is now scheduled to close at the end of March 2010.  The
terms of the agreement called for Constitution to pay cash of US$3 million,
issue three million shares and issue a US$1 million two-year convertible
debenture.
 
 The cash
payments consisted of US$200,000 paid on signing the letter of intent,
US$800,000 on closing the agreement, US$1,000,000 one month after closing and
US$1,000,000 on the first anniversary which would be secured by an 8% promissory
note. The share issuances are due as to one million shares on closing and a
further two million shares at the earlier of their finding a gold resource of at
least one million ounces and three years after the closing.  The
convertible debenture bears interest at 8% and can be repaid by Constitution at
any time prior to maturity by paying US$1,250,000.  At maturity, the
balance outstanding may be converted in shares of Constitution, at Seabridge’s
option, based on a US$1.00 per share conversion.
 
 c)
                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.
 
 d)
                Hog
  Ranch
 In 2000,
the Company entered into a mining lease agreement for mineral claims located in
Washoe County, Nevada. Advance royalties were established at US$15,000 payable
on November 15, 2006; US$17,500 on November 15, 2007; and US$20,000 on November
15, 2008 and, each November 15 thereafter. A production royalty is payable
varying with the price of gold, ranging from 3% to 5%, plus a 3.5% royalty on
the gross proceeds from other metals.  40% of the production royalty
may be purchased by the Company for US$2 million.
 
 In
February 2009, the Company signed a letter for an option of the Hog Ranch
property to Icon Industries Ltd. (“ICON”).  The terms of the agreement
required ICON to issue one million common shares to the Company, pay $500,000 on
closing and to issue a further one million common shares and pay a further
$525,000 within 12 months of the agreement being accepted by the TSX Venture
Exchange.  In April 2009, the option agreement was closed and
acceptance by the TSX Venture Exchange was received.  ICON issued the
first one million shares and paid the $500,000 and these amounts have been
credited against mineral interest costs.  The Company will record the
additional consideration when received and will offset it against the mineral
property at that time.
 
 e)
                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 property to Noranda Inc. (which subsequently became
Falconbridge Limited and then Xstrata 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 in
British Columbia, Canada from Falconbridge Limited. 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 at $13.50 each. The warrants were to become exercisable
five years from the date each new ounce of gold resources was declared (up to 2
million ounces of gold) for work undertaken on the property through the year
2010. At closing of the formal agreement in August 2006 the fair value of
warrants was estimated at $11,436,000 using a Black-Scholes option-pricing
model, using a volatility of 60%, interest rate of 4% and expected life of 1.5
years.   Falconbridge also had a right of first refusal should
the Company desire to sell all or any portion of its interest
therein.  The 2,000,000 warrants were exercised in May and June 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.
  10
  f)
                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 May
2009, the Company completed an option agreement on part of the Quartz Mountain
property.  To earn a 50% interest in the project, the optionee must
complete $500,000 in exploration expenditures by December 31, 2010 and issue
200,000 shares to the Company over the period of which 50,000 shares have been
issued to date.  The optionee has the right to increase its percentage
holdings to 70% by funding and completing a feasibility study within three
years.
 
 g)
                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 array of 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 June
2009, the Company signed a letter of intent to sell the Red Mountain project for
$7 million in cash and a three-year $5 million 3% convertible debenture. In
connection with this agreement, the Company would also recoup its $1 million
reclamation deposit on closing, which was expected by September 30, 2009 and was
subsequently amended to October 31, 2009.  In October 2009, the
agreement was cancelled as the proposed purchaser was unable to raise the
required funds.
 
 h)
                Pacific Intermountain Gold
      Corporation
 During
2002, the Company and an unrelated party incorporated Pacific Intermountain Gold
Corporation (“PIGCO”). The Company funded PIGCO’s share capital of $755,000 and
received a 75% interest. The other party provided the exclusive use of an
exploration database and received a 25% interest. In July 2004, the Company
acquired the 25% interest in PIGCO which it did not own by forgiving debt of
approximately $65,000 and agreeing to pay 10% of the proceeds of any sale of
projects to third parties.
 
 Please
see b) Castle Black Rock project above for letter of intent to sell these
properties.
 
 i)
                Noche Buena,
      Mexico
 In April
2006, the Company acquired 100% interest in the Noche Buena gold project in the
Sonora district of Mexico for US$4,350,000 in cash. In February 2008, the
Company acquired the surface rights encompassing the Noche Buena property in
Mexico for US$1,780,000.
  In
December 2008, the Company sold the project for US$25 million ($30,842,000) in
cash less a commission to the Company’s agent of $2,538,000.  A
further US$5 million is payable by the purchaser upon commencement of commercial
production from the property and a 1.5% net smelter royalty is payable on all
production of gold sold for US$800 per ounce or greater.  In
connection with the sale, the Company accrued income taxes payable amounting to
$5,326,000 (approximately 60 million Mexican pesos) to the government of Mexico
as at December 31, 2008.
 
 5.
                RECLAMATION
      DEPOSITS AND PROVISIONS FOR RECLAMATION
  LIABILITIES
 The
reclamation deposits consist of short-term investments or cash deposits held as
security for either the governments in Canada or the United States to cover
estimated reclamation liabilities on various exploration
properties.
 
 The
balance in the provision for reclamation liabilities is as follows:
 
 AmountBalance
      at December 31, 2007
                
                $
                1,849,475Reduction
      of reclamation liability - net
                
                
                (9,200
                )Accretion
                
                
                158,713Balance
      at December 31, 2008
                
                
                1,998,988Increase
      in reclamation liability
                
                
                85,200Accretion
                
                
                172,105Balance
      at December 31, 2009
                
                $
                2,256,293
 
 The fair
value of the asset retirement obligations was calculated using the total
undiscounted cash flows required to settle estimated obligations (estimated to
be $5,082,000), expected timing of cash flow payments required to settle the
obligations between 2010 and 2020, credit-adjusted risk-free discount rates of
7.9% to 8.76% and an inflation rate of 2.0%.
  11
  6.
                SHAREHOLDERS’
      EQUITY
  a)
Share Capital
 Shares
                
                
                AmountAuthorizedUnlimited
      number of common shares without par value
                  Unlimited
      number of preference shares (none issued)Issued
      – Common sharesBalance,
      December 31, 2006
                
                
                34,090,685
                
                
                $
                66,774,637Issued
      during yearFor
      cash, exercise of stock options
                
                
                1,207,200
                
                
                
                4,327,426For
      cash, exercise of share purchase warrants (Note 4(e))
                
                
                2,000,000
                
                
                
                27,000,000Value
      of  warrants and stock options exercised
                
                
                -
                
                
                
                12,840,972Renunciation of flow-through
      share value (i)
                
                
                -
                
                
                
                (1,206,562
                )3,207,200
                
                
                
                42,961,836Balance,
      December 31, 2007
                
                
                37,297,885
                
                
                
                109,736,473Issued
      during yearFor
      cash, exercise of stock options
                
                
                50,800
                
                
                
                383,126Value
      of stock options exercised
                
                
                -
                
                
                
                101,17350,800
                
                
                
                484,299Balance,
      December 31, 2008
                
                
                37,348,685
                
                
                
                110,220,772Issued
      during yearFor
      cash, exercise of stock options
                
                
                175,000
                
                
                
                966,876Purchase
      of mineral property (Note 4 e))
                
                
                75,000
                
                
                
                2,442,749Value of stock options
      exercised
                
                
                -
                
                
                
                396,732250,000
                
                
                
                3,806,357Balance,
      December 31, 2009
                
                
                37,598,685
                
                
                $
                114,027,129
  (i)   In
January 2007, the Company renounced $3,656,250 in Canadian Exploration Expenses
to investors of flow-through shares in 2006.  The tax value of these
renunciations has been recorded as a future tax liability and charged against
share capital.
  Capital
Management
 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.
 
 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, 2009.
 
 The
Company is not subject to externally imposed capital
requirements.
  b) Stock
Options Outstanding
 The Company provides compensation to
directors, employees and consultants in the form of stock
options.  Option grants to directors and senior management prior to
2008 are subject to a two-tiered vesting policy.  Option grants to
directors and senior management in 2008 only vest when the Company enters into a
significant transaction involving either its interest in the Courageous Lake
project or the KSM project or the acquisition of a majority interest in the
Company.  These vesting provisions were designed to better align
option compensation with the interests of shareholders.  Grants to
other employees and consultants do not have these provisions but generally vest
immediately or in one year.
 
 The
two-tier option grants required a certain share price above the grant date price
for 10 successive days for the first third to vest, a higher share price for the
second third to vest and a further higher share price for the final third to
vest. Once the share price has met the first test, the Company’s share price
performance must have exceeded the S&P/TSX Global Gold Index by more than
20% over the preceding six months or these options would be
cancelled.
 
 The Board
has granted the following two-tiered options:
 
 Date
      of Grant
                
                Number
                
                Exercise
      Price
                
                Share
      Price Vesting
                
                Year
      VestedAugust
      2002
                
                600,000
                
                $  2.20
                
                $6,
      $9, $12
                
                2005
      and 2006August
      2004
                
                100,000
                
                $  3.37
                
                $6,
      $9, $12
                
                2005
      and 2006January
      2005
                
                50,000
                
                $  4.00
                
                $6,
      $9, $12
                
                2005
      and 2006January
      2006
                
                875,000
                
                $10.56
                
                $15,
      $18, $21
                
                2006
      and 2007August
      2007
                
                120,000
                
                $29.60
                
                $34,
      $37, $40
                
                40,000
      in 2008
  12
  The
weighted average grant date fair value of the 55,000 options granted during 2009
which were not subject to directors and management vesting provisions described
above was $24.78 (2008 - $15.05, 2007 - $9.73).  The grant of these
55,000 options resulted in compensation costs totaling $579,190 compared to
190,000 options resulting in compensation of $1,253,690 during 2008 and 200,000
options resulting in compensation costs totaling $1,945,640 during
2007.  25,000 of the 2009 options will vest over the period March 2009
to March 2010 and consequently $526,163 of the total compensation expense of the
2009 grants was expensed in 2009 and $53,027 will be expensed in 2010.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:
  2009
                  2008
                  2007Dividend
      yield
                  Nil
                  Nil
                  NilExpected
      volatility
                  76%
                  64%
                  55%Risk
      free rate of return
                  1.5%
                  2.2%
                  4.3%Expected
      life of options
                  2.8
      years
                  4.1
      years
                  2.7
      years
  The
weighted average grant date fair value of the 120,000 two-tiered options granted
during 2007 and approved by shareholders in June 2008 was $7.63.  The
fair value of the options granted was estimated on the date of grant using a
Monte Carlo simulation and a binomial option-pricing model to consider the
two-tier vesting probabilities using the following assumptions:
  Dividend
      yield
                  NilExpected
      volatility
                  61%Risk
      free rate of return
                  3.4%Expected
      life of options
                  4.1
      years
 
 The
estimated fair value of the 120,000 two-tiered options granted in 2007 amounted
to $915,160.  In 2008, after the options were approved by shareholders
and recorded as granted, the $34 per share vesting requirement had been
met.  During 2009 $138,076 (2008 - $418,084) of this amount was
expensed and the balance of $359,000 will be expensed over the remaining vesting
period.
 
 A summary
of the status of the plans at December 31, 2009 and changes during the years are
presented below:
 
 Shares
                
                
                Weighted
      Average Exercise Price
                
                
                AmountOutstanding,
      December 31, 2006
                
                
                2,185,500
                
                
                $
                5.93
                
                
                $
                2,857,676Granted
                
                
                200,000
                
                
                
                25.29
                
                
                
                948,448Exercised
                
                
                (1,207,200
                )
                
                
                (3.58
                )
                
                
                (1,404,973
                )Value
      of 2006 options vested
                
                
                -
                
                
                
                -
                
                
                
                1,881,823Outstanding,
      December 31, 2007
                
                
                1,178,300
                
                
                
                11.62
                
                
                
                4,282,974Granted
      to employees and consultants
                
                
                190,000
                
                
                
                15.05
                
                
                
                436,463Granted
      to directors and management
                
                
                635,000
                
                
                
                14.14
                
                
                
                418,084Exercised
                
                
                (50,800
                )
                
                
                (7.54
                )
                
                
                (101,173
                )Value
      of 2007 options vested
                
                
                -
                
                
                
                -
                
                
                
                997,457Outstanding,
      December 31, 2008
                
                
                1,952,500
                
                
                
                12.88
                
                
                
                6,033,805Granted
      to employees and consultants
                
                
                55,000
                
                
                
                24.78
                
                
                
                614,143Exercised
                
                
                (175,000
                )
                
                
                (5.53
                )
                
                
                (396,732
                )Expired
                
                
                (20,000
                )
                
                
                (25.10
                )
                
                
                (106,515
                )Value
      of 2008 options vested
                
                
                -
                
                
                
                -
                
                
                
                867,324Outstanding,
      December 31, 2009
                
                
                1,812,500
                
                
                $
                13.60
                
                
                $
                7,012,025
 
 
 Number
      of Shares
                
                
                Options
      Vested
                
                
                Option
      Price Per Share
                
                Expiry
      Date57,500
                
                
                
                57,500
                
                
                $
                4.00
                
                January
      11, 201020,000
                
                
                
                20,000
                
                
                $
                9.50
                
                December
      20, 2010725,000
                
                
                
                725,000
                
                
                $
                10.56
                
                January
      4, 201130,000
                
                
                
                30,000
                
                
                $
                13.77
                
                January
      17, 2012260,000
                
                
                
                180,000
                
                
                $
                29.60
                
                August
      8, 201230,000
                
                
                
                30,000
                
                
                $
                26.64
                
                March
      3,  2013635,000
                
                
                
                120,000
                
                
                $
                10.54
                
                December
      4, 201325,000
                
                
                
                -
                
                
                $
                21.88
                
                March
      4, 201415,000
                
                
                
                15,000
                
                
                $
                28.70
                
                April
      1, 201015,000
                
                
                
                15,000
                
                
                $
                25.70
                
                November
      30, 20101,
      812,500
                
                
                
                1,192,500
                
                
                $
                13.60
  13
  c) Share
Purchase Warrants
 The
Company’s movement in share purchase warrants is as follows:
 Number
      of Warrants
                
                AmountBalance
      at December 31, 2006
                
                
                2,000,000
                
                
                $
                11,346,000Exercised
                
                
                (2,000,000
                )
                
                
                (11,436,000
                )Balance
      at December 31, 2007, 2008 and 2009
                
                
                -
                
                
                $
                -
  7.
                RELATED
      PARTY TRANSACTIONS
 a)
                During
      the year, a private company controlled by a director of the Company was
      paid $39,000 (2008 - $14,800, 2007 - $33,300) for technical services
      provided by his company related to the mineral
  properties.
 
 b)
                During
      the year, a private company controlled by a second director was paid
      $200,000 (2008 - $250,000, 2007 - $360,000) for consulting services
      rendered.
 
 c)
                During
      the year, a third director was paid $18,200 (2008 - $16,600, 2007 -
      $17,300) for geological consulting
services.
 
 These
transactions were in the normal course of operations and were measured at the
exchange amount, which is the amount of consideration established and agreed to
by the related parties.
 
 8.
                FINANCIAL
      INSTRUMENTS
 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 investments
included in cash and cash equivalents 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. Financial instruments included in
amounts receivable and prepaid expenses consist of goods and services tax due
from the Federal Government of Canada. Management believes that the risk of loss
with respect to financial instruments included in amounts receivable and prepaid
expenses to be remote.  The Company also has investments in other
publicly listed exploration companies which are included in marketable
securities.  These shares were received as part of option payments on
certain exploration properties the Company owns.  The credit risk on
these investments is significant due to the nature of the business but the
amounts are not significant to the Company.
 
 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, 2009, the
Company had cash balances of $285,000 (December 31, 2008 - $8,099,000) to settle
current liabilities of $1,410,000 (December 31, 2008 - $8,695,000). At December
31, 2009, the Company also had bank-guaranteed short-term deposits of $9,002,000
(2008 - $30,896,000) which mature in December 2010, but are cashable in whole or
in part with interest at any time to maturity.  All of the Company's
financial liabilities have contractual maturities of 30 days and are subject to
normal trade terms.
 
 Market
Risk
 (a)
Interest Rate Risk
 The
Company has cash balances and no interest-bearing debt. The Company's current
policy is to invest excess cash in Canadian bank guaranteed notes. The Company
periodically monitors the investments it makes and is satisfied with the credit
ratings of its banks.
 
 (b)
Foreign Currency Risk
 The
Company's functional currency is the Canadian dollar and major purchases are
transacted in Canadian, US dollars and Mexican pesos. 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. In December 2008, the Company sold the Mexican property
Noche Buena at a profit which attracted income taxes payable in Mexican
pesos.  The income taxes were paid in January 2009 and there is no
further exposure to the Mexican peso currency.  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.
 
 Sensitivity
Analysis
 The
Company has designated its cash and cash equivalents and short term deposits as
held-for-trading, which are measured at fair value. Financial instruments
included in amounts receivable and prepaid expenses are classified as loans and
receivables, which are measured at amortized cost. Accounts payable and accrued
liabilities are classified as other financial liabilities, which are measured at
amortized cost.
 
 As at
December 31, 2009, the carrying and fair value amounts of the Company's
financial instruments are the same.
 
 Based on
management's knowledge and experience of the financial markets, the Company
believes the following movements are "reasonably possible" over a
year:
  14
  (i) Short
term deposits are re-invested each 30 days to one year. The investments held at
December 31, 2009 are one-year notes but are cashable in whole or in part with
interest at any time to maturity.  Sensitivity to a plus or minus
0.25% change in rates would affect net loss by $23,000 on an annualized
basis.
 
 (ii) At
December 31, 2009, the Company had net current liabilities in US dollars of
$123,000, which with a 10% change in exchange rates, would affect net income by
$12,000.
 
 (iii)
Price risk is remote since the Company is not a producing entity.
 
 Fair
Value Estimation
 During
2009, CICA Handbook Section 3862, Financial Instruments – Disclosures, was
amended to require disclosures about the inputs to fair value measurements,
including their classification within a hierarchy that prioritizes the inputs to
fair value measurement.  The three levels of the fair value hierarchy
are:
 
 Level 1 -
Unadjusted quoted prices in active markets for identical assets and
liabilities
 Level 2 -
Inputs other than quoted prices that are observable for the asset or liability
either directly or indirectly; and
 Level 3 -
Inputs that are not based on observable market data
 
 The
Company’s financial assets measured at fair value, as at December 31, 2009 which
include cash and cash equivalents, short-term deposits and marketable securities
are classified as Level 1.
 
 9.
                INCOME
      TAXES
 Income
      (taxes) recoveries varies from the amounts that would be computed by
      applying the basic federal and provincial income tax rates aggregating to
      33% (2008 – 33.5%, 2007 – 36.12%) as
follows:
 
 2009
                
                
                2008
                
                
                2007Statutory
      rate applied to (profit) loss for year
                
                $
                1,487,498
                
                
                $
                (5,124,052
                )
                
                $
                2,225,636Non
      deductible items
                
                
                (492,000
                )
                
                
                (700,000
                )
                
                
                (1,026,000
                )Tax
      on harmonization of federal/Ontario tax pools
                
                
                (171,000
                )Non
      taxable portion of gain on sale of Noche Buena
                
                
                -
                
                
                
                3,331,754
                
                
                
                -Difference
      in foreign tax rate
                
                
                -
                
                
                
                (2,260,445
                )
                
                
                -Loss
      not tax benefited
                
                
                -
                
                
                
                (253,246
                )
                
                
                -Valuation
      allowance
                
                
                (995,498
                )
                
                
                -
                
                
                
                (1,199,636
                )Reduction
      in valuation allowance
                
                
                -
                
                
                
                -
                
                
                
                620,000$
                (171,000
                )
                
                $
                (5,005,989
                )
                
                $
                620,000
 
 Significant
      components of the Company’s future tax assets and liabilities are as
      follows:
 
 2009
                
                
                2008Future
      income tax assets (liabilities)Mineral
      interests
                
                $
                (3,785,000
                )
                
                $
                (3,068,000
                )Property
      and equipment
                
                
                47,000
                
                
                
                36,000Share
      issue costs
                
                
                9,000
                
                
                
                32,000Non
      capital losses
                
                
                4,209,000
                
                
                
                3,637,000Provision
      for reclamation liabilities
                
                
                602,000
                
                
                
                565,000Tax on
      harmonization of federal/Ontario tax pools
                
                
                171,000
                
                
                
                -Unrealized
      capital losses
                
                
                -
                
                
                
                31,0001,253,000
                
                
                
                1,233,000Valuation
      allowance
                
                
                (1,253,000
                )
                
                
                (1,233,000
                )Future
      income tax liabilities, net
                
                $
                -
                
                
                $
                -A
      future tax asset of approximately $2,940,000 (2008 - $3,218,000) in one
      Canadian entity has been offset with a future tax liability in another
      Canadian entity on the basis that management has undertaken to carry out
      tax planning measures when required.
 
 The
Company has accumulated non-capital losses for Canadian tax purposes of
approximately $13,579,000 which expire in various years to 2029 as
follows:
 
 2010
                
                $
                707,0002014
                
                
                943,0002015
                
                
                1,092,0002026
                
                
                2,140,0002027
                
                
                3,160,0002028
                
                
                2,746,0002029
                
                
                2,791,000$
                13,579,000
 
 The tax
value of the non-capital losses is included in the future tax assets
above.
  15
  10.
                COMMITMENTS
 The
Company is committed to payments for an operating lease for business premises as
follows:
 
 2010
                $
      113,0002011
                $
      113,0002012
                $   38,000
 
 
 11.
                SUBSEQUENT
      EVENTS
 
 a)
                In
      March 2010, the Company completed a base shelf prospectus financing with
      the issuance of 2,875,000 common shares at US$22.90 each for gross
      proceeds of US$65,837,500.  The Company paid commissions to the
      underwriters of US$4,279,438 and incurred additional expenses of
      approximately $642,000.
 
 b)
                Subsequent
      to December 31, 2009, 61,500 stock options were exercised for proceeds to
      the Company of $272,160.