SEABRIDGE GOLD INC.



MANAGEMENT’S DISCUSSION AND ANALYSIS



FOR THE YEAR ENDED



DECEMBER 31, 2016













SEABRIDGE GOLD INC.



Management’s Discussion and Analysis



The following is a discussion of the results
of operations and financial condition of Seabridge Gold Inc. and its subsidiary companies for the years ended December 31, 2016
and 2015. This report is dated March 29,
2017 and should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2016
and 2015, the Company’s Annual Information Form filed on SEDAR at www.sedar.com, and the Annual Report on Form 40-F filed
on EDGAR at www.sec.gov/edgar.shtml. Other corporate documents are also available on SEDAR and EDGAR as well as the Company’s
website www.seabridgegold.net. As the Company has no operating project at this time, its ability to carry out its business plan
rests with its ability to sell projects or to secure equity and other financings. All amounts contained in this document are stated
in Canadian dollars unless otherwise disclosed.



The consolidated financial statements for
the year ended December 31, 2016 and the comparative year ended December 31, 2015 have been prepared by the Company in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.



Company Overview



Seabridge Gold Inc. is a development stage
company engaged in the acquisition and exploration of gold properties located in North America. The Company’s objective is
to provide its shareholders with exceptional leverage to a rising gold price. The Company’s business plan is to increase
its gold ounces in the ground but not to go into production on its own. The Company will either sell projects or participate in
joint ventures towards production with major mining companies. During the period 1999 through 2002, when the price of gold was
lower than it is today, Seabridge acquired 100% interests in eight advanced-stage gold projects situated in North America. Seabridge’s
principal projects include the KSM (Kerr-Sulphurets-Mitchell) property located in British Columbia and the Courageous Lake property
located in the Northwest Territories, and in the current fiscal year, the Company acquired 100% of the common shares of SnipGold
Corp. (“SnipGold”) and its 100% owned Iskut Project in British Columbia. Seabridge’s common shares trade in Canada
on the Toronto Stock Exchange under the symbol “SEA” and in the United States on the New York Stock Exchange under
the symbol “SA”.



Selected Annual Information





|Summary operating results ($000's- except per share amounts) | 2016    | 2015    | 2014    
|------------------------------------------------------------ | ------- | ------- | --------
|Corporate and administrative costs                           | (9,679) | (9,410) | (14,091)
|Other income - flow-through shares                           | 4,321   | 2,907   | 7,489   
|Gain on investments                                          | 866     | 266     | -       
|Gain on disposition of mineral properties                    | -       | 1,000   | 2,489   
|Impairment of mineral interests                              | -       | (350)   | (2,437) 
|Impairment of investments                                    | -       | (891)   | (1,236) 
|Income taxes                                                 | (2,974) | (2,700) | (5,899) 
|Other                                                        | 177     | 112     | 662     
|Net loss                                                     | (7,289) | (9,066) | (13,023)
|Basic loss per share                                         | (0.14)  | (0.18)  | (0.27)  
|Diluted loss per share                                       | (0.14)  | (0.18)  | (0.27)  





1







|Summary statements of financial position data ($000's) | 2016    | 2015    | 2014   
|------------------------------------------------------ | ------- | ------- | -------
|Current assets                                         | 13,064  | 20,134  | 16,282 
|Non-current assets                                     | 324,921 | 280,393 | 262,074
|Total assets                                           | 337,985 | 300,527 | 278,356
|Current liabilities                                    | 5,721   | 2,373   | 4,743  
|Non-current liabilities                                | 20,906  | 16,170  | 13,779 
|Equity                                                 | 311,358 | 281,984 | 259,834
|Total liabilities and equity                           | 337,985 | 300,527 | 278,356





Results of Operations 2016 Compared to 2015



The Company incurred a $7.3 million net
loss for the year ended December 31, 2016 or $0.14 per share compared to a net loss of $9.1 million or $0.18 per share in 2015.



Corporate and administrative expenses,
including stock-based compensation, were the most significant items contributing to losses in both fiscal 2016 and the comparative
2015 years. In the previous year, impairments of investments and mineral interests contributed to losses in that year, but no comparable
impairments were recognized in the current year. Offsetting expenses in both years were gains recorded on the Company’s investments
and the recognition of other income relating to flow-through share premiums. These items are discussed further below.



In 2016, corporate and administrative expenses
increased marginally from $9.4 million in 2015 to $9.7 million in the current year, representing a 3% increase. Cash compensation
decreased by 3% from $3.5 million in 2015, to $3.3 million in 2016, reflecting a net of increases in annual salaries and an offsetting
decrease in bonus compensation. Stock-based compensation increased less than 1%; however the 2016 expense of $3.7 million was largely
a result of stock options ($2.7 million) and the remainder related to restricted share units. In 2015, the expense related to an
even split of $1.8 million each of stock option and restricted share unit costs. Corporate, non-project related staffing levels
remained consistent between the fiscal years, as did the level of stock option and restricted share unit compensation awarded to
management. Cash compensation is not expected to vary significantly from current levels as no new additions to staffing levels
are anticipated. Stock-based compensation however, is expected to increase in 2017 as the remaining fair value of stock options
granted late in 2016 is amortized over the remaining vesting period.



The Company’s stock-based compensation
expenses related to stock options and restricted share units are illustrated on the following tables:





|                                                                     | Number of options | Exercise price ($) | Grant date fair value ($000's) | Expensed prior to 2015 ($000's) | Expensed in 2015 ($000's) | Expensed in 2016 ($000's) | Remaining balance to be expensed ($000's)
|-------------------------------------------------------------------- | ----------------- | ------------------ | ------------------------------ | ------------------------------- | ------------------------- | ------------------------- | -----------------------------------------
|Options granted (000's except number of options and exercise prices)
|March 3, 2013                                                        | 705,000           | 12.60              | 2,577                          | 2,561                           | 16                        | -                         | -                                        
|June 5, 2013                                                         | 100,000           | 12.91              | 724                            | 618                             | 106                       | -                         | -                                        
|April 27, 2015                                                       | 475,000           | 9.00               | 1,414                          | -                               | 895                       | 519                       | -                                        
|December 21, 2015                                                    | 365,000           | 11.13              | 1,959                          | -                               | 803                       | 953                       | 203                                      
|March 24, 2016                                                       | 100,000           | 13.52              | 684                            | -                               | -                         | 493                       | 191                                      
|May 13, 2016                                                         | 50,000            | 17.16              | 499                            | -                               | -                         | 499                       | -                                        
|August 11, 2016                                                      | 50,000            | 17.14              | 438                            | -                               | -                         | 114                       | 324                                      
|December 19, 2016                                                    | 890,833           | 10.45              | 4,860                          | -                               | -                         | 149                       | 4,711                                    
|                                                                     |                   |                    |                                |                                 | 1,820                     | 2,727                     | 5,429                                    





2







|RSUs granted (000's except number of
        RSUs) | Number of RSUs | Grant date fair value ($000's) | Expensed prior to 2015 ($000's) | Cancelled in 2015 ($000's) | Expensed in 2015 ($000's) | Expensed in 2016 ($000's) | Remaining balance to be expensed ($000's)
|-------------------------------------------------- | -------------- | ------------------------------ | ------------------------------- | -------------------------- | ------------------------- | ------------------------- | -----------------------------------------
|December 19, 2013                                  | 235,000        | 2,267                          | 2,167                           | (24)                       | 124                       | -                         | -                                        
|December 9, 2014                                   | 272,500        | 2,624                          | 1,099                           | -                          | 1,184                     | 341                       | -                                        
|December 31, 2015                                  | 94,000         | 1,046                          | -                               | -                          | 542                       | 504                       | -                                        
|December 19, 2016                                  | 125,500        | 1,311                          | -                               | -                          | -                         | 98                        | 1,213                                    
|                                                   |                |                                | 3,266                           | (24)                       | 1,850                     | 943                       | 1,213                                    







Other corporate and administrative costs
increased marginally over the comparative year as the Company continued to source a joint venture partner for KSM. Professional
fees paid to advisors increased marginally (4%) and general and administrative costs increased 23%, from $1.4 million to $1.7 million
as the Company absorbed the acquisition of SnipGold into its operations. It is anticipated that corporate and administrative expenses
overall are to remain comparable to 2016 levels.



The Company recognized $4.3 million of
other income in 2016 (2015 - $2.9 million) related to the recovery of flow-through share premiums recorded on financings completed
in April 2015 and May 2016. In April 2015, the Company issued 1,610,000 flow-through common shares and in May 2016, the Company
issued 500,000 flow-through shares both at premium prices to the market value of the Company’s shares at the time of issuance.
Based on qualifying expenditures made in 2016, $1 million of the remaining premium as at December 31, 2015, for the April 2015
financing and the full $3.3 million premium related to the May 2016 financing was recorded as income. In the comparative year,
similar recoveries were recorded for a flow-through financing completed in 2014 and the April 2015 financing.



In the current year, the Company recognized
a $0.9 million (2015 - $0.3 million) net gain on investments it holds. The gain is derived from the recognition of a gain on the
disposition of one investment of $0.3 million (2015 - $28,000) and the $0.6 million net gain recorded on an investment in an associate,
accounted for on the equity basis.



In 2015, the Company recorded the receipt
of $1 million as a payment on an option IDM Mining (“IDM”) has on the Company’s Red Mountain Project. As all
historical acquisition and exploration costs for the project had been fully recovered through previous option payments and other
recoveries, the receipt was recorded as a gain on the disposition of mineral interests in that year. No comparable payments were
received in 2016. During 2016, IDM notified the Company of its intent to fully exercise the option on the Red Mountain Project
and upon the execution and closing of the option exercise expected early in 2017, the mineral interests will be fully transferred
to IDM.



The Company holds investments in common
shares of several mining companies that were received as consideration for optioned mineral properties, and other short-term investments,
including one gold exchange traded receipt. These available for sale financial assets are recorded at fair value on the statements
of financial position. In 2015, the Company determined that the recoverability of some of its available for sale investments was
impaired and recorded a $0.9 million charge in net loss. No impairments were related to investments were recorded in 2016.



Also in 2015 the Company was notified that
the remaining option on one of its projects in Nevada would be foregone. The Company determined that the recoverability of the
carrying costs, at that time, was impaired and recorded an impairment loss equal to the remaining carrying cost of $0.4 million.
No impairments to mineral interests were recognized in 2016.





3







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



Results of Operations 2015 Compared
to 2014



The net loss for the year ended December
31, 2015 was $9.1 million or $0.18 per share compared to a net loss of $13 million or $0.27 per share for 2014.



In both 2015 and 2014, the most significant
expenses contributing to net loss were corporate and administrative costs, and in particular, stock based compensation. Impairment
of investments and mineral properties and income taxes also contributed to the loss but to a lesser degree in 2015 than in 2014.
Offsetting some of these expenses were the recognition of gains on the disposition of mineral properties and other income relating
to the amortization of flow-through share premiums, obtained in financings completed in 2014 and the current year. These items
are discussed further below.



In 2015, corporate and administrative expenses
decreased significantly from $14.1 million in 2014 to $9.4 million in 2015 representing a 33% decline. The majority of the decline
resulted from a $6.0 million (62%) decrease in non-cash stock-based compensation. The fair value of stock options, granted in 2014,
and restricted share units (RSU), granted at the end of 2013 and in 2014, were amortized over a shorter service period and the
majority of those costs were recognized in 2014, prior to the start of the 2015, resulting in a higher expense in the 2014. Cash
compensation, however, increased from $2.5 million, in 2014 to $3.5 million or 40% in 2015, reflecting the award of bonuses to
management and the impact of a strengthened US versus the Canadian dollar on US denominated salaries. Other corporate and administrative
costs increased marginally in 2015 over 2014 as the Company continued to source a joint venture partner for KSM.



Quarterly Information



Selected financial information for the
last eight quarters ending December 31, 2015 is as follows:

(unaudited)





|Quarterly operating results ($000's) | 4th Quarter Ended December 31, 2016 | 3rd Quarter Ended September 30, 2016 | 2nd Quarter Ended June 30, 2016 | 1st Quarter Ended March 31, 2016
|------------------------------------ | ----------------------------------- | ------------------------------------ | ------------------------------- | --------------------------------
|Revenue                              | -                                   | -                                    | -                               | -                               
|Loss for period                      | (2,598)                             | (300)                                | (1,917)                         | (2,474)                         
|Basic loss per share                 | (0.04)                              | (0.01)                               | (0.04)                          | (0.05)                          
|Diluted loss per share               | (0.04)                              | (0.01)                               | (0.04)                          | (0.05)                          



|Quarterly operating results ($000's) | 4th Quarter Ended December 31, 2015 | 3rd Quarter Ended September 30, 2015 | 2nd Quarter Ended June 30, 2015 | 1st Quarter Ended March 31, 2015
|------------------------------------ | ----------------------------------- | ------------------------------------ | ------------------------------- | --------------------------------
|Revenue                              | -                                   | -                                    | -                               | -                               
|Loss for period                      | (2,373)                             | (2,629)                              | (1,590)                         | (2,474)                         
|Basic loss per share                 | (0.05)                              | (0.05)                               | (0.03)                          | (0.05)                          
|Diluted loss per share               | (0.05)                              | (0.05)                               | (0.03)                          | (0.05)                          







4







In all four quarters of 2016, corporate
and administrative expenses remained comparable. In the third quarter of 2016, the Company recorded $2.7 million of other income
related to flow-through shares versus approximately $1.6 million in the first two quarters and nil in the fourth quarter. In addition
the Company recognized $0.8 million of gains on investments. These two factors resulted in the reduction in loss for the period
and basic and diluted loss per share.



Significant activities in 2016 included
the acquisition of SnipGold, evaluating the results of the 2015 exploration and drill program at KSM, planning and completing the
2016 exploration and drilling programs at KSM and Iskut projects, finalizing the NI 43-101 technical report for KSM including the
results from an updated Preliminary Feasibility Study (the “2016 PFS”) and a new Preliminary Economic Assessment (the
“PEA”) and supporting an independent geotechnical review board (“IGRB”) to review and consider the project's
tailings management facility and water storage dam.



Mineral Interest Activities



During 2016, the Company added an aggregate
of $44.1 million to mineral interests. Expenditures associated with the Company’s two main exploration projects, KSM and
Courageous Lake collectively amounted to $24.3 million with the acquisition of SnipGold and exploration costs at the Iskut project,
$16.4 million and $3.4 million respectively, making up the difference.



At the KSM Project, the Company incurred
$20.1 million of costs in 2016 excluding the capitalization of a $3.6 million tax re-assessment accrued and further described below.
Spending related to executing the 2016 exploration and drilling programs. The program confirmed continuity of mineralization in
Deep Kerr over considerable distances south of the existing resource and subsequent to the year end, the Company announced an updated
mineral resource estimate for Deep Kerr that represented an increase of 3.0 million ounces of gold and 2.1 billion pounds of copper
over the previous estimate.  The new inferred resource totals 1.92 billion tonnes grading 0.41% copper and 0.31 g/T gold (containing
19.0 million ounces of gold and 17.3 billion pounds of copper) constrained by conceptual block cave shapes. The drill program also
found the down plunge extension of Iron Cap's higher grade core while also discovering a previously unknown deposit with initial
gold and copper grades among the best found to date at KSM. It is thought that the new discovery could represent a core zone which
could potentially have a positive impact on the project. The discovery is currently being evaluated and additional drill testing
is planned in 2017.



In addition to the exploration program,
the Company filed a NI 43-101 technical report for KSM, which includes the results from the 2016 PFS and the PEA.



The 2016 PFS incorporates KSM’s measured
and indicated mineral resources into mine plans generating proven and probable mineral reserves of 2.2 billion tonnes grading 0.55
grams per tonne gold, 0.21% copper and 2.6 grams per tonne silver (38.8 million ounces of gold, 10.2 billion pounds of copper and
183 million ounces of silver). The 2016 PFS does not include the higher grade resources delineated at Deep Kerr and the Iron Cap
Lower Zone as they are in the inferred mineral resources category which cannot be considered as mineral reserves required for inclusion
in a PFS.



The project design in the PEA includes
the higher grade resources from Deep Kerr and the Iron Cap Lower Zone, enabling the mining method to shift from predominantly open
pit in the PFS to primarily low cost block cave mining. This design significantly reduces the number and size of the open pits
and the project’s environmental impact. By including Deep Kerr, annual average maximum throughput of 130,000 tonnes per day
envisioned in the 2016 PFS has been increased to 170,000 tonnes per day in the PEA without significant redesign of facilities.
The net result is a substantial improvement in estimated economic returns. The inferred mineral resources are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves,
and therefore, there is no certainty that the results of the PEA will be realized. Mineral resources that are not mineral reserves
do not have demonstrated economic viability.





5







The PEA does not override the 2016 PFS
but instead represents an alternative viable option for developing the KSM project. The PEA demonstrates the potential for significant
project improvements over the 2016 PFS and demonstrates the potential value of the exploration discoveries the Company has made
at Deep Kerr and Lower Iron Cap over the last several years.



In 2014 and 2015, the Company received
$8.5 million related to the application for refund under the British Columbia Mineral Exploration Tax Credit program, for spending
in 2010 and 2011. In 2016 the Company was informed that, upon completion of an audit of the expenditures related to the application
by tax authorities, a portion has been categorized as not applicable to the recovery program and a $3.6 million re-assessment has
been delivered to the Company. Subsequent to the year-end, the Company filed an objection to the categorization of these costs
and paid $1.8 million, required by tax authorities while the objection is being reviewed. It is anticipated that the objection
will be reviewed at the end of 2017 or early 2018. The Company has recorded the full re-assessment within accounts payable and
accrued liabilities on the statement of financial position as at December 31, 2016, with a corresponding charge to mineral properties.



In 2016, the Company incurred $0.6 million
of costs at Courageous Lake (2015 - $0.6 million) completing analysis over drill target identification and costs to maintain the
project in good standing. Limited resources have been allocated to the project in recent years as the Company focused on advancing
KSM and, in 2016, completing the exploration program at Iskut (discussed below).



On June 21, 2016, the Company acquired
100% of the common shares of SnipGold and its 100% owned Iskut Project. The purchase price and associated costs of the SnipGold
acquisition amounted to $14.8 million with $13.1 million ascribed to the fair value of the Company’s common shares and other
convertible securities issued and $1.7 million of expenditures. The total cost of the acquisition of $14.8 million was allocated
to the relative fair values of the assets acquired and liabilities assumed according to the following table:





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



|Consideration paid (000's) |       
|-------------------------- | ------
|Share issuance             | 12,452
|Options and warrants       | 619   
|Acquisition costs          | 1,704 
|                           | 14,775





The Iskut Project is a contiguous block
of ground in excess of 286 sq. km within northwestern British Columbia. A preliminary economic assessment, on a portion of the
Iskut Project, was completed by SnipGold in 2010 and outlined a measured and indicated resource of 186 million tonnes of ore with
2.16 million ounces of contained gold and 500 million pounds of copper, among other elements. From an exploration standpoint, the
Iskut Project contains two main target types: a high-grade precious metal mineralization, with drill ready targets; and bulk tonnage
gold-copper porphyries with resource expansion potential. In 2016, post the acquisition, the Company executed a multi-pronged exploration
program at Iskut spending approximately $3.4 million on the project. The program resulted in the Company reporting that it had
identified a prospective new porphyry copper-gold system with a potentially intact epithermal precious metals zone at its top.
The results will be further analyzed and additional drilling and exploration is planned for 2017.





6







Liquidity and Capital Resources



The Company’s working capital position,
at December 31, 2016, was $7.3 million, down from $17.8 million at December 31, 2015. Cash and short-term deposits at December
31, 2016 totaled $7.8 million versus $15.5 million at December 31, 2015. Cash resources have fluctuated since the 2015 year-end
as the Company completed two financings in the current year and conducted its exploration and evaluation programs at KSM and Iskut.
The Company acknowledges that additional capital is required in 2017 to maintain title to its assets, undertake its proposed exploration
and development programs and cover general and administrative expenses. Accordingly, the Company is in the process of arranging
additional funding to be raised from equity financings and the sale of non-core assets.



In April 2016, the Company closed a public
offering of 500,000 common shares at a price of $17.40 per common share raising gross proceeds of $8.7 million. In May 2016, the
Company completed a financing whereby a syndicate of underwriters purchased 500,000 flow-through common shares at a price of $24.08
per flow-through common share for gross proceeds of $12 million. In addition, the exercise of 303,644 stock options in the year
raised an additional $3.2 million.



During 2016, operating activities, including
working capital adjustments, used $5.2 million compared to $7.4 million used by operating activities in 2015. Operating activities
in the near-term are not expected to deviate significantly from current levels. Cash expenditures on mineral interest activity
amounted to $24.1 million and are up from the $18.6 million spent in 2015. It is anticipated that mineral interest spending will
approximate the current year’s spending but this is contingent on adequate cash resources being sourced.



The Company will continue its objective
of advancing its major gold projects, KSM and Courageous Lake, and to further explore its new Iskut project, to either sell or
enter into joint venture arrangements with major mining companies. The Company also continues to dispose of certain non-core mineral
interest assets in Canada and the USA as well as various investments deemed no longer strategic to the Company.



In the previous year, the Company issued
1,610,000 flow-through common shares, at $10.17 per share, raising gross proceeds of $16.4 million. The purchase price represented
a 22% premium over the market price of the Company’s shares on that date. Share issuance costs of $1.0 million were incurred
in relation to the offering. The Company had committed to renounce its ability to deduct qualifying exploration expenditures for
the equivalent value of the gross proceeds of the financings and transfer the deductibility to the purchasers of the flow-through
shares. As at December 31, 2015, the Company had a remaining commitment to spend $5.5 million, on qualifying expenditures, that
was fulfilled in 2016. Also in 2015, the Company issued 1,800,000 common shares of the Company, through a non-brokered private
placement, at a price of $8.10 per share raising gross proceeds of $14.6 million.



The Company will continue to advance its
major gold projects, in order to either sell them or joint venture them towards production with major mining companies.



The Company has the following commitments:





|                                  |       | Payments due by years
|--------------------------------- | ----- | ---------------------
|Contractual obligations ($000's)  | Total | 2017                 
|Mineral interests                 | 4,183 | 636                  
|Business premises operating lease | 859   | 139                  
|                                  | 5,042 | 775                  







7







Amounts shown for mineral interests include
option payments and mineral lease payments that are required to maintain the Company’s interest in the mineral projects.



Outlook and subsequent event



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



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



In 2017 the Company is planning to conduct
additional exploration work at its existing projects, KSM and Iskut.



At KSM exploration will concentrate on
advancing the Iron Cap deposit. Drilling in 2016 confirmed the potential to extend the Lower Iron Cap deposit down plunge and encountered
a new blind target with high grade gold and copper. The exploration concept for 2017 is to fill-out the down plunge extension of
Lower Iron Cap and define the blind discovery.



At Iskut, plans are to evaluate a target
identified in the current year that may be indicative of an intermediate to high sulfidation epithermal occurrence associated with
a copper- gold porphyry intrusion and continue to refine targets throughout the project.



Limited work is planned for Courageous
Lake as the Company focuses on KSM, Iskut and prospectively Snowstorm projects. The Company is planning to deploy a ground geophysical
survey over a limited area of the Courageous Lake project.



Internal Controls Over Financial Reporting



The Company’s management under the
supervision of the Chief Executive Officer and Chief Financial Officer are responsible for designing adequate internal controls
over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Management evaluated
the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2016 based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on that evaluation of the internal controls at December 31, 2016, management has concluded that the Company’s
internal controls and procedures are appropriately designed and operating effectively. The registered public accounting firm that
audited the Company’s consolidated financial statements has issued their attestation report on management’s assessment
of the effectiveness of internal control over financial reporting as of December 31, 2016.





8







Changes to Internal Controls Over Financial
Reporting



There was no change in the Company’s
internal controls over financial reporting that occurred during the period beginning on October 1, 2016 and ended on December 31,
2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial
reporting



Disclosure Controls and Procedures



Disclosure controls and procedures have
been designed to ensure that information required to be disclosed by the Company is recorded, processed, summarized and reported
within the time periods specified in the rules and forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated to management
as appropriate, to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation of the design of the disclosure controls and procedures as of December
31, 2016, that they are appropriately designed and effective.



Limitations of controls and procedures



The Company’s management, including
the President and Chief Executive Officer and Chief Financial Officer, believe that any internal controls over financial reporting
and disclosure controls and procedures, no matter how well designed, can have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance that the objectives of the control system are met.



Shares Issued and Outstanding



At March
29, 2017, the issued and outstanding common shares of the Company totaled 54,460,531. In addition, there were 3,625,611
stock options, 62,750 RSUs and 1,587 warrants outstanding. Assuming the conversion of all of these instruments outstanding, there
would be 58,150,479 common shares issued and outstanding.



Related
Party Transactions



The following
is a listing of compensation to key management personnel of the Company:





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



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







9







Changes
in Accounting Standards Not Yet Adopted



New standards and amendments to standards
and interpretations that are relevant to the Company and effective for annual periods beginning on or after January 1, 2017, that
have not been applied in preparing the December 31, 2016 consolidated financial statements are:



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



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



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



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



Critical Accounting Estimates



Critical accounting estimates used in the
preparation of the consolidated financial statements include the Company’s estimate of recoverable value of its mineral properties
and related deferred exploration expenditures, the value of stock-based compensation, asset retirement obligations and deferred
income tax. All of these estimates involve considerable judgment and are, or could be, affected by significant factors that are
out of the Company’s control.





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The factors affecting stock-based compensation
include estimates of when stock options and compensation warrants might be exercised and the stock price volatility. The timing
for exercise of options is out of the Company’s control and will depend upon a variety of factors, including the market value
of the Company’s shares and financial objectives of the stock-based instrument holders. The Company used historical data
to determine volatility. However, the future volatility is uncertain.



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



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



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



Risks and Uncertainties



The risks and uncertainties are discussed
within the Company’s most recent Annual Information Form filed on SEDAR at www.sedar.com, and the Annual Report on Form 40-F
filed on EDGAR at www.sec.gov/edgar.shtml.



Forward Looking Statements



The consolidated financial statements and
management’s discussion and analysis contain certain forward-looking statements relating but not limited to the Company’s
expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such
as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”,
“estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations,
beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information
may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects and timing of
commencement of operations, and is based on current expectations that involve a number of business risks and uncertainties. Factors
that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure
to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, capital and
operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental
or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of
projects and other factors. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual
results to differ materially from expected results.





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Potential shareholders and prospective
investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could
cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not
to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions,
inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts,
projections and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise
any forward-looking information whether as a result of new information, future events or other such factors which affect this information,
except as required by law.





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