UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 20-F



[]

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

OR

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR



[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

OR

[   ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report



Commission File Number:

001-32556



RADIUS GOLD INC.

(Exact name of Registrant as specified in its charter)



British Columbia, Canada

(Jurisdiction of incorporation or organization)



200 Burrard Street, Suite 650, Vancouver, British Columbia, Canada V6C 3L6

(Address of principal executive offices)



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



|                    |                                          
|------------------- | -----------------------------------------
|Title of each class | Name on each exchange on which registered
|                    |                                          
|None                | None                                     



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



Common Shares, without par value

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None



Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.   86,675,617 Common Shares, no par value



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ___     No  X



If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.   Yes ___   No  X



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



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes ___     No  X



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



Large accelerated filer ___  Accelerated filer  ___ Non-accelerated filer  X



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



U.S. GAAP [    ]

International Financial Reporting Standards as issued

Other [    ]

by the International Accounting Standards Board [  X  ]



Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17  Item 18 X



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

Yes     No X   N/A





Index to Exhibits on Page 56









TABLE OF CONTENTS



|          |                                                                              |   
|--------- | ---------------------------------------------------------------------------- | --
|PART I    |                                                                              |   
|Item 1.   | Identity of Directors, Senior Management and Advisors                        | 1 
|Item 2.   | Offer Statistics and Expected Timetable                                      | 1 
|Item 3.   | Key Information                                                              | 1 
|Item 4.   | Information on the Company                                                   | 6 
|Item 5.   | Operating and Financial Review and Prospects                                 | 21
|Item 6.   | Directors, Senior Management and Employees                                   | 32
|Item 7.   | Major Shareholders and Related Party Transactions                            | 40
|Item 8.   | Financial Information                                                        | 41
|Item 9.   | The Offer and Listing                                                        | 41
|Item 10.  | Additional Information                                                       | 44
|Item 11.  | Quantitative and Qualitative Disclosures about Market Risk                   | 52
|Item 12.  | Description of Other Securities Other Than Equity Securities                 | 52
|PART II   |                                                                              |   
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                              | 53
|Item 14.  | Material Modifications to the Rights of Security Holders and Use of Proceeds | 53
|Item 15.  | Controls and Procedures                                                      | 53
|Item 16.  | Reserved                                                                     | 54
|Item 16A. | Audit Committee Financial Expert                                             | 54
|Item 16B. | Code of Ethics                                                               | 54
|Item 16C. | Principal Accountant Fees and Services                                       | 54
|Item 16D. | Exemptions from Listing Standards for Audit Committees                       | 55
|Item 16E. | Purchase of Equity Securities by the Issuer and Affiliated Purchasers        | 55
|Item 16F. | Changes in Registrant's Certifying Accountant                                | 55
|Item 16G. | Corporate Governance                                                         | 55
|Item 16H. | Mine Safety Disclosure                                                       | 55
|PART III  |                                                                              |   
|Item 17.  | Financial Statements                                                         | 55
|Item 18.  | Financial Statements                                                         | 56
|Item 19.  | Exhibits                                                                     | 56









GLOSSARY OF TECHNICAL TERMS



In this Annual Report, the following technical terms have the following meanings:



Vein, Veinlet (small)

A tabular mineral deposit formed within or adjacent to faults or fractures by the deposition of minerals from hydrothermal fluids.



Adit

A passage driven horizontally into a mountainside providing access to a mineral deposit from the surface of the working of a mine.



Ag

The elemental symbol for silver.



Alteration

The chemical and mineralogical changes in a rock mass resulting from the passage of hydrothermal fluids.



Anomalous or anomalies

A sample or location in which either (i) the concentration of an element(s) or (ii) geophysical response is significantly different from the average background values that typify an area.



Anomaly

The geographical area corresponding to anomalous geochemical or geophysical values.



Arsenopyrite

A sulphide of arsenic and iron.



As

The elemental symbol for arsenic.



Assay

An analysis to determine the presence, absence or quantity of one or more elemental components.



Au

The elemental symbol for gold.



Au Eq. g/t

Denotes gold equivalent grades: gold grade plus silver grades which have been converted to gold grades by using a ratio generally based on the prevailing spot prices of gold and silver.



Background

The average concentration of an element or typical geophysical response in an area.



Breccia

A rock consisting of sharp fragments in fine grained material.



Cretaceous

The geologic period extending from 135 million to 63 million years ago.



Development

Preparation of a mineral deposit for commercial production including installations of plant and machinery and the construction of all related facilities.



Diamond drill

A type of rotary drill in which the cutting is done by abrasion rather than percussion. The cutting bit is set with diamonds and is attached to the end of long hollow rods through which water is pumped to the cutting face. The drill cuts a core of rock which is recovered in long cylindrical sections, an inch or more in diameter.





|     
|-----
|- i -
|     







Dip

The angle which a geological structure forms with a horizontal surface, measured perpendicular to the strike of the structure.



Epithermal

A term applied to high-level hydrothermal systems which form at depths of ~1 km to surficial hotspring settings.



Exploration

The prospecting, mapping, sampling, remote sensing, geophysical surveying, diamond drilling and other work involved in the searching for ore bodies.



Fault

A fracture in a rock across which there has been displacement.



Fracture

Breaks in a rock, usually planar.



GPS

Global Positioning System  a space based satellite positioning system whereby receiver units on the ground or in the air use triangulation from known satellite signals to derive a location in three dimensional space.



Grade

The concentration of an ore metal in a rock sample, given either as weight percent for base metals (e.g. Cu, Zn, Pb) or in grams per tonne (g/t) or ounces per short ton (oz/t) for precious metals. The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.



g/t

Grams of per metric tonne. Usually used in association with gold or silver.



Heap leach

A process used for the recovery of metals from crushed ore in heaps using a suitable leaching solution.



Hectare or ha

An area totaling 10,000 square metres.



Highly anomalous

An anomaly which is 50 to 100 times average background.



Host rock

The body of rock in which mineralization of economic interest occurs.



Hydrothermal

Pertaining to hot fluids, dominantly water, in the earths crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.



ICP

A type of assay technique.



Intrusive

A rock mass formed below earths surface from magma which has intruded into a preexisting rock mass



|      
|------
|- ii -
|      







Mesothermal

A hydrothermal ore deposit typically a vein system- formed at intermediate temperatures (200-300oC) and pressures/depths.



Mineral resource,

measured mineral  resource,

indicated mineral resource,

inferred mineral resource

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



The terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource used in this Annual Report are mining terms defined under CIM standards and used in accordance with Canadian National Instrument 43-101  Standards of Disclosure for Mineral Projects. They are not defined terms under United States standards and generally may not be used in documents filed with the SEC by U.S. companies.



A mineral resource estimate is based on information on the geology of the deposit and the continuity of mineralization. Assumptions concerning economic and operating parameters,including cut-off grades and economic mining widths, based on factors typical for the type of deposit, may be used if these factors have not been specifically established for the deposit at the time of the mineral resource estimate. A mineral resource is categorized on the basis of the degree of confidence in the estimate of quantity and grade or quality of the deposit, as follows:



Inferred mineral resource:

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



Indicated mineral resource:

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



Measured mineral resource:

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





|       
|-------
|- iii -
|       







Mineralization

Minerals of value occurring in rocks.



Mt

A million tonnes.



Ore

A natural aggregate of one or more minerals which, at a specified time and place may be mined, processed and sold at a profit, or from which some part may profitably be separated.



Ounce / oz

Troy ounce, equal to approximately 31.103 grams.



Outcrop

An exposure of rock at the earths surface.



Quartz

A common rock-forming mineral (SiO2) that is frequently a dominant constituent of veins, especially those containing gold and silver mineralization.



RC

Reverse Circulation drilling.



Rhyolite

A silica-rich volcanic rock chemically equivalent to granite. Usually light colored, very fine-grained or glassy-looking.



Silicification / silicified

Complete or partial replacement of a rock by quartz, often during hydrothermal alteration.



Strike

Azimuth of a plane surface aligned at right angles to the dip of the plane used to describe the orientation of stratigraphic units or structures.



Tertiary

The geological period extending from the end of the Cretaceous (65 million years ago) to approximately 2 million years before the present time.



Tonne

A metric tonne, 1000 kilograms or 2,204.6 pounds.



UTM

The UTM (Universal Transverse Mercator) system is a world-wide geographic coordinate system defined in meters.







|      
|------
|- iv -
|      







NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements within the meaning of section 21E of the United States Securities Exchange Act of 1934, as amended (the Exchange Act), which represent expectations or beliefs of the Company about future events. These statements can be identified generally by forward-looking words such as expect, believe, anticipate, plan, intend, estimate, may, will or similar words.  Information concerning the interpretation of drill results and mineral resource estimates also may be deemed to be forward-looking statements, as such information constitutes a prediction of what mineralization might be found to be present if and when a project is actually developed.  Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in Item 3.D. of this Annual Report under the heading, Risk Factors, and elsewhere in this Annual Report.



Some of these risks and assumptions include:



·

completion of environmental review;

·

general economic and business conditions, including changes in exchange rates;

·

prices of natural resources, costs associated with mineral exploration and development, and other economic conditions;

·

natural phenomena;

·

actions by government authorities, including changes in government regulation;

·

uncertainties associated with legal proceedings; and

·

changes in the resources market.



The Companys forward-looking statements contained in this Annual Report are made as of the respective dates set forth in this Annual Report.  Such forward-looking statements are based on the beliefs, expectations and opinions of management as of the date the statements are made.  The Company does not intend to update these forward-looking statements.  For the reasons set forth above, investors should not place undue reliance on forward-looking statements. You should carefully review the cautionary statements and risk factors contained in this and other documents that we file from time to time with the Securities and Exchange Commission (the SEC).





|     
|-----
|- v -
|     





PART I



Item 1.

Identity of Directors, Senior Management and Advisers.



A.

Directors and Senior Management.

Not Applicable



B.

Advisers.

Not Applicable



C.

Auditors.

Not Applicable



Item 2.

Offer Statistics and Expected Timetable.

Not Applicable



Item 3.

Key Information.



A.

Selected Financial Data.

The following tables set forth and summarize selected consolidated financial data for the Company, prepared in accordance with International Financial Reporting Standards (IFRS) as issued bythe International Accounting Standards Board (IASB) for 2012, 2011 and 2010.  The Companys transition date to IFRS was January 1, 2010.  The financial data for dates and periods prior to January 1, 2010 have not been restated.  The consolidated financial statements have been audited by BDO Canada LLP, Chartered Accountants as at and for the years ended December 31, 2012 and 2011 and are reported in Canadian dollars.

The selected financial data should be read in conjunction with Item 5, Operating and Financial Review and Prospects and in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto contained elsewhere in this Annual Report.  The Companys fiscal period ends on December 31 of each year.

The following are summaries of certain selected financial information for the Companys most recently completed fiscal year and the fiscal years ended December 31, 2011 and 2010.







|     
|-----
|- 1 -
|     







|                                                       |                                   |                            |               
|------------------------------------------------------ | --------------------------------- | -------------------------- | --------------
|IFRS                                                   | (in 000s, except per share data)
|                                                       | As at
12/31/12                    | As at
12/31/11
(*Restated) | As at
12/31/10
|Working Capital                                        | 17,690                            | 3,650                      | 8,245         
|Exploration and Evaluation Assets (Mineral Properties) | 531                               | 4,103                      | 4,910         
|Long Term Debt                                         | -                                 | -                          | -             
|Shareholders Equity                                   | 18,988                            | 9,576                      | 13,398        
|Total Assets                                           | 19,243                            | 10,351                     | 14,584        
|                                                       |                                   |                            |               
|Revenue                                                | -                                 | -                          | -             
|Net Income (Loss)                                      | 8,929                             | (2,633)                    | (4,578)       
|Income (Loss) Per Share                                | 0.10                              | (0.03)                     | (0.07)        
|Comprehensive Income (Loss)                            | 9,026                             | (2,001)                    | (4,952)       
|Dividends Per Share                                    | -                                 | -                          | -             
|Weighted Average Number of Shares                      | 86,676                            | 83,232                     | 61,530        



*Correction of error in previously issued consolidated financial statements

During the third quarter of 2012, the Company discovered an error in its previously reported consolidated financial statements as at and for the year ended December 31, 2011. The Company is required to separately disclose the impact of correction of errors, if any, in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

In accordance with IAS 39 Financial Instruments: Recognition and Measurement, the Company has classified its marketable securities as available-for-sale financial instruments. Available-for-sale investments are carried at fair value with changes in fair value recognized in accumulated other comprehensive loss/income. During the third quarter of 2012, the Company re-assessed and determined that its investment in the shares of Focus, a public company with common directors and officers, suffered an impairment as at December 31, 2011.

As a result of this determination, and in accordance with IAS 39, the Company has reclassified the loss previously recognized in other comprehensive income from accumulated other comprehensive income to accumulated deficit. As at and for the year ended December 31, 2011, this reclassification adjustment resulted in a $465,925 increase in other comprehensive income, a $465,925 increase in loss on impairment of available-for-sale investments, a $465,925 increase in accumulated other comprehensive income, and a $465,925 increase in accumulated deficit.  For the year ended December 31, 2011, the reclassification adjustment did not have an impact on operating, financing, or investing cash flow activities and there was no change in loss per share.





|     
|-----
|- 2 -
|     







|                                                       |                                      |                     
|------------------------------------------------------ | ------------------------------------ | --------------------
|                                                       | For the year ended December 31, 2011
|                                                       | As previously reported               | As restated         
|Consolidated statement of financial position:          |                                      |                     
|Accumulated other comprehensive (loss) income          | $                 44,449             | $            510,374
|Deficit                                                | (53,312,682)                         | (53,778,607)        
|                                                       |                                      |                     
|Consolidated statement of comprehensive income (loss): |                                      |                     
|Impairment on available-for-sale investments           | $                           -        | $         (465,925) 
|Income (loss) before income taxes                      | (2,884,131)                          | (3,350,056)         
|Net income (loss) for the year                         | (2,167,377)                          | (2,633,302)         
|Fair value gains on available-for-sale investments     | 165,966                              | 631,891             
|Total comprehensive loss                               | (2,001,411)                          | (2,001,411)         
|Basic and diluted earnings (loss) per share            | $(0.03)                              | $(0.03)             





Except where otherwise indicated, all information extracted from or based on the Consolidated Financial Statements of the Company are presented in accordance with IFRS.

No dividends have been declared in any of the years presented above.

Exchange Rate Information

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars.  References in this document to $ and CDN$ refer to Canadian dollars, unless otherwise specified; and references to US$ refer to US dollars.

The following table sets forth the high and low rates of exchange for the Canadian dollar, expressed as Canadian dollars per U.S. dollar, for each month during the previous six months and the average of such exchange rates during the five most recent years ended December 31.  The average rates presented in the table below represent the average of the exchange rates on the last day of each month during a year for the past five fiscal years.  Exchange rates represent the noon buying rate in New York City for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The noon rate of exchange on April 8, 2013 as set forth in the H.10 statistical release of the Federal Reserve Board, for the conversion of Canadian dollars into United States dollars was US$1.00 = CDN$1.0199.



|                              |                                                  |       
|----------------------------- | ------------------------------------------------ | ------
|                              | Exchange Rate U.S. Dollars into
Canadian Dollars
|                              | High                                             | Low   
|Month ended March 31, 2013    | 1.0314                                           | 1.0155
|Month ended February 28, 2013 | 1.0286                                           | 0.9959
|Month ended January 31, 2013  | 1.0078                                           | 0.9839
|Month ended December 31, 2012 | 0.9958                                           | 0.9841
|Month ended November 30, 2012 | 1.0029                                           | 0.9927
|Month ended October 31, 2012  | 1.0003                                           | 0.9763



|                                     |        
|------------------------------------ | -------
|                                     | Average
|Fiscal year ended December 31, 2012  | 0.9994 
|Fiscal year ended December 31, 2011  | 0.9858 
|Fiscal year ended December 31, 2010  | 1.0298 
|Fiscal year ended December 31, 2009  | 1.1373 
|Fiscal year ended December 31, 20081 | 1.0679 

1 For the year ended December 31, 2008, the exchange rate refers to the noon buying rate as reported by the Federal Reserve Bank of New York.  For January 2009 and later periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board.





|     
|-----
|- 3 -
|     







B.

Capitalization and Indebtedness.

Not Applicable



C.

Reasons for the Offer and Use of Proceeds.

Not Applicable



D.

Risk Factors.

Mining operations and exploration activities are subject to various federal, provincial and local laws and regulations.

The mineral projects in which the Company has an interest are located in Guatemala, Nicaragua and Mexico.  Mineral exploration and mining activities in these countries may be affected in varying degrees by political instability and government regulations relating to the mining industry.  Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business.  Future operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriations of property, environmental legislation and mine safety.

The mining industry involves substantial risks and there is no assurance that the business of the Company will achieve profitable operations.

Few properties that are explored are ultimately developed into producing mines.  At present, there are no known bodies of commercial ore on any of the Companys properties and the proposed exploration programs are an exploratory search for ore.  At December 31, 2012, the Company had not yet achieved profitable operations, has accumulated losses since inception, and is expected to incur further losses in the development of its business.

Risks involved in the conduct of exploration programs include unusual or unexpected formation, formation pressures, fires, power outages, labour disruptions, flooding, explorations, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour.  Although the management of the Company has experience in the exploration and development of mineral properties, it has relied on and may continue to rely upon consultants and others for exploration and operating expertise.  The economics of developing mineral properties is affected by many factors including the cost of operations, variation of the grade of minerals mined and fluctuations in the price of any minerals produced.

The Company is dependent on public and private distributions of equity to obtain capital in order to sustain operations.

The Company has depended on financing in order to conduct its planned work programs on mineral properties, meet its ongoing levels of corporate overhead and discharge its liabilities as they come due.  While the Company has been successful in securing financings in the past, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable.  Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of its projects with the possible loss of such properties.





|     
|-----
|- 4 -
|     







Dilution from further equity financing.

If the Company raises additional funding by issuing additional equity securities, such financing may substantially dilute the interests of existing shareholders of the Company and reduce the value of their investment.

Operating hazards and risks associated with the mining industry could result in the Company having to significantly reduce or cease operations.

Hazards such as unusual or unexpected formations and other conditions are involved in mineral exploration and development.  The Company may become subject to liability for pollution, cave-ins or hazards against which it cannot insure or against which it may elect not to insure.  The payment of such liabilities may have a material, adverse effect on the Companys financial position.

Title to mineral properties are not guaranteed and could result in future claims against the Company.

While the Company has obtained the usual industry standard title reports with respect to its properties which confirms ownership and that there are no registered encumbrances against the properties, this should not be construed as a guarantee of title.  The properties may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects or native land claims.

Permits and licenses may be required in order to carry out business activities.

The operations of the Company may require licenses and permits from various governmental authorities.  There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.

The Company may be adversely affected by metal prices.

Even if the Companys exploration programs are successful, factors beyond the control of the Company may affect the marketability of any metals discovered.  Metal prices have historically fluctuated widely and are affected by numerous factors beyond the Companys control, including international, economic and political trends, expectations for inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and worldwide production levels.  The effect of these factors cannot accurately be predicted.

The Companys financial position and its ability to finance may be adversely affected by fluctuations in securities markets.

The Company has no source of operating cash flow and has no assurance that additional funding will be available to it for further exploration and development of its projects.  Further exploration and development of one or more of the Companys projects may be dependent upon the Companys ability to obtain financing through equity or debt financing or other means.

Securities markets have at times in the past experienced a high degree of price and volume volatility, and the market price of securities of many companies, particularly those considered to be exploration stage companies such as the Company, have experienced wide fluctuations in share prices which have not necessarily been related to their operating performance, underlying asset values or prospects.  There can be no assurance that these kinds of share price fluctuations will not occur in the future, and if they do occur, they may negatively impact the Companys ability to raise additional funds through equity issues, or the Companys financial position by devaluing the Companys available-for-sale investments.





|     
|-----
|- 5 -
|     







The Company may not be able to compete with current and potential exploration companies.

The mineral exploration and mining industry is intensely competitive in all its phases. The Company competes with many companies possessing greater financial resources and technical facilities than itself for the acquisition of mineral interests as well as for the recruitment and retention of qualified employees.

It may be difficult for United States investors to effect services of process against the Company.

The Company is incorporated under the laws of the Province of British Columbia, Canada.  Consequently, it will be difficult for United States investors to affect service of process in the United States upon the directors or officers of the Company, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended.  The majority of the Companys directors and officers are residents of Canada and all of the Companys assets are located outside of the United States.  A judgment of a United States court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter.  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.



Item 4.

Information on the Company.



A.

History and Development of the Company

The Company was incorporated under the name Radius Explorations Ltd. on September 9, 1997 pursuant to the British Columbia Company Act by registration of its Memorandum and Articles.  On July 1, 2004, the Company and PilaGold Inc. amalgamated (the Amalgamation) under the British Columbia Business Corporations Act by registration of a Notice of Articles with the new name Radius Gold Inc..  The Companys registered address is 200 Burrard Street, Suite 650, Vancouver, BC  V6C 3L6 (tel:  604-801-5432).  See Item 4D, Property, Plant and Equipment, for information regarding capital expenditures made by the Company on its properties.



B.

Business Overview

The Company is a natural resource property exploration company in the exploration stage with no history of cash flows from operations.  In 1997, it commenced activities by carrying out exploration work in the Yukon Territory, Canada.  The Company changed its focus to Latin America when it acquired property interests in Mexico and Guatemala in 1999 and in Nicaragua in 2003.  In 2008, the Company signed joint venture agreements to develop its Tambor gold deposit in Guatemala, and to further explore the Rubi Property in Peru.  In 2009, the Company optioned out its Nicaragua portfolio of properties and its property in Mexico.  In 2009 and 2010, the Company acquired a significant land position in the Yukon Territory, Canada by staking and pursuant to option agreements. Also in 2010, the Company made applications for geothermal provisional land use permits in Guatemala.

On December 8, 2011, the Company completed a spin-out transaction (the Spin-Out) whereby the Company transferred all of its Yukon and Alaskan property assets, certain marketable securities, and $1.0 million in cash to a newly formed company called Rackla Metals Inc. (Rackla) in return for Rackla shares and warrants.  (See Item 5, Strategic Transactions below).





|     
|-----
|- 6 -
|     







In 2012, the Company sold its interest in the Tambor Project, Guatemala, and the majority of its Nicaragua properties pursuant to the following transactions:

Sale of Tambor Project, Guatemala

In August 2012, the Company sold its remaining interest in its subsidiary, Exploraciones Mineras de Guatemala S.A., which holds the Tambor gold project to Kappes, Cassiday & Associates (KCA), giving KCA a 100% interest in the project.  In consideration, KCA agreed to repay approximately US$400,000 owing to the Company (US$100,000 paid upon signing, and approximately US$300,000 if and when KCA has commenced shipment of gold produced from the property).  Also upon commercial production, KCA will make quarterly payments to the Company based on the then price of gold and the number of ounces produced from the property.

Sale of Nicaragua Assets

In the first quarter of 2012, B2Gold Corp. (B2Gold) had exercised its option to acquire a 60% interest in the Companys entire Nicaragua mineral property portfolio.  On April 5, 2012, the Company and B2Gold entered into a letter of intent pursuant to which B2Gold agreed to acquire a 100% interest in the Trebol and Pavon properties in consideration of $20 million, payable in common shares of B2Gold at a price per share equal to the volume weighted average price of B2Golds common shares on the Toronto Stock Exchange for the ten trading days immediately preceding the date of the letter agreement.  In addition, B2Gold agreed to make contingent payments to the Company of US$10 per ounce of gold on 40% of any proven and probable mineral reserves in excess of 500,000 ounces which might be outlined in the future at Trebol (on a 100% basis).

The property sale was completed in August 2012, and in consideration therefor, the Company was issued 4,815,894 common shares of B2Gold with a fair value at that time of $16,662,993.  A separate agreement was also signed covering the future contingent payments on the Trebol property.

As well, B2Gold and the Company have entered into joint venture agreements on 60% - 40% basis with respect to the Companys San Jose and B2Golds La Magnolia properties in Nicaragua which the companies are jointly exploring.

Currently, the Company has property interests in Guatemala, Nicaragua and Mexico.  (See Property and Equipment, below, and Note 9 to the Financial Statements).

The Company is in the exploration stage and its properties do not contain a known commercially viable minable deposit.  There is no assurance that a commercially viable mineral deposit exists on any of the Companys properties, and further exploration is required before a final evaluation of the economic and legal feasibility is determined.





|     
|-----
|- 7 -
|     







C.

Organizational Structure

The following table sets forth the name of each material subsidiary of the Company, the jurisdiction of its incorporation and the direct or indirect percentage ownership by the Company of such subsidiary.

|                               |                       |              |                 
|------------------------------ | --------------------- | ------------ | ----------------
|Name                           | Date of Incorporation | Jurisdiction | Percentage Owned
|Minerales Sierra Pacifico S.A. | November 17, 1999     | Guatemala    | 100%            
|Recursos Del Golfo, S.A.,      | December 10, 2004     | Guatemala    | 100%            
|Minerales de Nicaragua S.A.    | November 18, 2002     | Nicaragua    | 100%            
|Geometales Del Norte-Geonorte  | May 2, 2005           | Mexico       | 100%            
|Radius (Cayman) Inc            | January 31, 2005      | Cayman Isl.  | 100%            



D.

Property and Equipment

During 2012 and up to the date thereof, the Company held interests in properties in Guatemala, Nicaragua and Mexico, as set out in the following map and more particularly described below:

[radius_201220fannual001.jpg]





|     
|-----
|- 8 -
|     







Guatemala

In Guatemala, exploration concessions are granted for an initial period of three years.  Thereafter, an extension of two years may be obtained, and then a final extension of two years, for a total of seven years. Thereafter, the concession is either converted to an exploitation concession, or forfeited.

In order to keep its properties in Guatemala in good standing, the Company would have to pay filing fees to the Guatemala government, paid annually in advance, equal to US$387.66 per square kilometer (100 hectares), or fraction thereof, for the first three years after the granting of an exploration concession, and US$775.41 per square kilometer, or fraction thereof, for the fourth and fifth years, if so extended, and US$1,163.12 per square kilometer, or fraction thereof, for the sixth and seventh years, if so extended.  For exploitation concessions, an annual fee of US$1,550.82 per square kilometer is required.  The Company would have to also file annual exploration reports.

The Companys currently held properties in Guatemala are set out below:



1.

Southeastern Guatemala

As at April 8, 2013, the Company holds a 100% interest in 34 concessions (one reconnaissance application, three exploitation applications, and 30 exploration applications) located in southeastern Guatemala, as follows:

|                |                 |                                                
|--------------- | --------------- | -----------------------------------------------
|Concession Name | Size (Hectares) | Expiry Date / Application Date                 
|                |                 |                                                
|La Luz          | 2,000.00        | Exploitation licence applied for June 21, 2011 
|Aurora          | 2,000.00        | Exploitation licence applied for June 21, 2011 
|El Dorado II    | 2,000.00        | Exploitation licence applied for June 21, 2011 
|Joyita          | 1,364.32        | Exploration licence applied for Sept. 9, 2008  
|Marisol I       | 3,407.02        | Exploration licence applied for Feb. 3, 2010   
|Marisol II      | 2,772.33        | Exploration licence applied for Feb. 3, 2010   
|CECI            | 3,044.67        | Exploration licence applied for Feb. 3, 2010   
|Cirilo I        | 1,350.00        | Exploration licence applied for March 18, 2010 
|Cirilo II       | 320.00          | Exploration licence applied for March 18, 2010 
|Salvador I      | 6,195.57        | Exploration licence applied for March 18, 2010 
|Frida           | 7,133.92        | Exploration licence applied for May 12, 2010   
|Belen           | 7,372.28        | Exploration licence applied for May 12, 2010   
|Paola           | 9,956.11        | Exploration licence applied for May 12, 2010   
|El Caminero     | 9,322.38        | Exploration licence applied for May 12, 2010   
|Eliza           | 62,215.63       | Reconnaissance licence applied for May 27, 2010
|Carolina        | 9,806.80        | Exploration licence applied for June 11, 2010  
|Conchita        | 8,579.55        | Exploration licence applied for June 11, 2010  
|La Pena         | 8,037.73        | Exploration licence applied for June 11, 2010  
|Karen           | 6,838.05        | Exploration licence applied for June 11, 2010  
|Juanita         | 5,167.80        | Exploration licence applied for July 13, 2010  
|Las Pomas       | 6,124.30        | Exploration licence applied for Feb. 23, 2011  
|El Arco         | 169.92          | Exploration licence applied for April 15, 2011 
|El Muro         | 514.50          | Exploration licence applied for April 15, 2011 
|La Tuna         | 8,404.60        | Exploration licence applied for March 27, 2012 
|Pitaya          | 8,664.02        | Exploration licence applied for March 27, 2012 
|Fedora          | 3,324.99        | Exploration licence applied for June 11, 2012  
|Arabel          | 4,650.00        | Exploration licence applied for August 8, 2012 
|Arely           | 4,850.00        | Exploration licence applied for August 8, 2012 
|Azafran         | 7,990.00        | Exploration licence applied for August 10, 2012
|Scarlett        | 5,350.00        | Exploration licence applied for August 13, 2012
|Alcea           | 8,940.00        | Exploration licence applied for Sept. 10, 2012 
|La Regia        | 5,629.50        | Exploration licence applied for March 11, 2013 
|Guirnalda       | 3,900.37        | Exploration licence applied for March 12, 2013 
|Tulipan         | 3,202.75        | Exploration licence applied for March 25, 2013 
|                | 230,599.12      |                                                





|     
|-----
|- 9 -
|     







The three exploitation applications were filed in order to convert one previously granted exploration licence to exploitation; until the exploitation licences are issued, the granted exploration licence remains in place.

The majority of these concessions lie within extensive hydrothermal fields in Tertiary volcanic and sedimentary rocks in southeastern Guatemala which host both Escobal, Tahoe Resources Inc.s mesothermal Ag-Au-Pb-Zn deposit and Cerro Blanco, Goldcorp Inc.s hot-spring epithermal Au-Ag deposit.  The hydrothermal field is a product of Tertiary to Quaternary-aged extension tectonics related to the Jocotan, Motagua, and Polochic continental wrench faults and their associated structures.

Pyramid Hill, M28, and Holly Prospects

In April 2010, the Company commenced a reactivation of its exploration efforts at these prospects (these collectively have been previously referred to as the Holly-Banderas property).  The Company discovered and drilled these gold-silver occurrences between 2002 and 2004 when gold and silver spot prices were close to their record lows.  However, the recent discovery of the world-class Escobal deposit some 70 km west of these prospects underscores the potential of the district and has led the Companys technical team to review the geology and the results obtained by the previous work.

The Pyramid Hill prospect is a northwest-trending, subvertical brittle fault with associated mineralized cataclastic breccias and veins.  The extent of mineralization has been mapped to over 2 km in strike length. Less than 500 meters northeast of Pyramid Hill, the M28 zone consists of a series of stacked southwest dipping hydrothermal quartz veins offset by late normal block faulting.  Drilling highlights from previous early work programs on these zones include 2.2m of 6.9 ppm Au and 261 ppm Ag in hole BDD-014 at Pyramid Hill, and 4.3m of 6.0 ppm Au and 72 ppm Ag in hole BDD-04 at M28 (for full drill results from these drill campaigns (see Radius news release dated April 13, 2004).

The Holly zone is spatially associated with the east-west trending Jocotan continental wrench fault, approximately 9 km west-northwest of the Pyramid Hill prospect.  Previous drilling returned results of up to 14.2 meters of 4.14 ppm Au and 150 ppm Ag in hole HDD-001, and 9 meters of 1.84 ppm Au and 45 ppm Ag in hole HDD-007 (see Radius Explorations Ltd. news release from December 17, 2002).  Mineralization occurs in association with epithermal quartz and quartz-hematite veins within the Jocotan fault conglomerates and basinal sediments as well as in the metamorphic phyllites to the north of the fault, although only the former have been drill tested.

Recent prospecting at the Holly zone has led to the discovery of hydrothermal quartz veins (El Pino and La Peña occurrences) hosted in the metamorphic rocks to the north of the Jocotan fault, bearing grades of up to 58 ppm Au and 1937 ppm Ag over 5.1 meters in surface trenching (see Radius news release of May 16, 2011).  The metamorphic rocks north of the Jocotan fault were not previously believed to be a likely host for epithermal mineralization, and this discovery opens up the area to significant further exploration.

Previous drilling on the Pyramid Hill, M28, and Holly prospects only tested the epithermal systems to relatively shallow depths, generally less than 150 meters below surface.  In contrast, the metal-productive depths of most low-sulphidation epithermal systems is generally thought to be 200 to 600 meters below the hydrothermal systems water table, indicating that the present drilling does not adequately test the mineralization system.  Upon review, and with the present gold and silver prices in mind, management feels that these prospects warrant significant deeper drilling to comprehensively test the potential metal-productive zones of these prospects.





|      
|------
|- 10 -
|      







El Zapote Prospects

The El Zapote Zone is located approximately 1 km southwest of the Pyramid Hill zone (see Radius news release dated February 3, 2011), and consists of a northwest-trending stockwork zone exposed along a ridge and a southwest-facing cliff.  The stockwork zone consists of centimetre-scale epithermal quartz-chalcedony veins and veinlets hosted in felsic volcanic and volcaniclastic rocks.  The general orientation, nature of the mineralization, and spatial proximity suggests it is part of the same epithermal ore system as Pyramid Hill and M28 zones.

Anomalous gold and silver mineralization has been detected in rock and soil samples obtained by the Company over more than 600m strike length, and reconnaissance soil sampling indicates that the zone may extend for up to 3 km in total. 250 samples, a mix of outcrop and float, were collected across a 500 x 300 meter area trending northwest along the exposed southwest facing cliff.  The samples returned gold values ranging from trace to 6.06 ppm Au, and averaged 0.94 ppm Au.  Of the samples taken, 55% graded > 0.5 ppm Au, including 25% samples grading > 1 ppm Au.

Future Work

The Company is designing the next phase program of drilling at El Zapote, which is fully permitted for drilling and offers the possibility for a near-surface, broad mineralized stockwork breccia zone.  Exploratory drill holes have been planned to test its orientation, thickness, and grade distribution under the surface showings.  Deeper drilling programs at Pyramid Hill, M28, and Holly are also being considered to test for high grade mineralization systems at depth, such as that discovered by Tahoe Resources Inc. at their Escobal deposit, 70 km west of the Property.

As well, the Companys Guatemalan team is continuing its regional work through stream sediment sampling, prospecting, and mapping.

All work at the southeastern Guatemala concessions is being funded from the Companys existing cash resources, and the work is supervised by the Companys Exploration Manager.  No Resource or Reserve has been defined within the southeastern Guatemala concessions.



2.

Geothermal Licences

The Company has revisited its hot spring database for Guatemala and in June 2010 submitted applications for Provisional Use Permits for a number of active geothermal systems that may have potential as geothermal resources for power generation.  To date, a Provisional Use Permit has been granted on 15,300 hectares.  The Company is seeking a joint venture partner to further develop these geothermal systems.





|      
|------
|- 11 -
|      







3.

Tambor Project



The Tambor Project consists of six concessions located in south-central Guatemala.

In June 2008, the Company granted to KCA the right to earn a 51% interest in the Tambor Project by spending a total of US$6.5M on the property within 4 years through staged annual expenditure commitments, or by putting the property into commercial production within 4 years.

As set out in Item 4.B above, the Company sold its interest in the Tambor Project to KCA in August 2012.

In January 2004, the Company obtained a National Instrument 43-101 Technical Report compliant gold resource estimate on the Tambor Project for the Company.  There are no material changes to the property since the date of this report.  The Technical Report has been filed in SEDAR.com.  The following is a summary of the Technical Report.

Exploration and Development History

The Tambor Project is located in south-central Guatemala.  Tambor is a metasediment and greenstone hosted, structurally controlled mesothermal lode gold deposit.  Quartz-gold-arsenopyrite mineralization occurs in veins and breccias localized by kink bands in sheared host rocks. The project hosts at least 13 gold-bearing mineral occurrences spread over a 14 km by 6 km area.

The Tambor property received progressively more-detailed work programs between 2000 and 2003. The bulk of the work was completed by Gold Fields Ltd. who formed a joint venture with the Company in 2001 to explore the property.  The initial exploration program included the establishment of 100 line-kilometers of grid and soil sampling.  A total of 3,958 soil samples were collected over an 11 square kilometer area.  The grid area was also geologically mapped and over 1,400 rocks samples were collected along the 7-kilometer gold trend.

Early work focused on the Bella Vista area, including the Laguna North, Laguna South and JNL targets and on the Tierra Blanca area, all in the western end of the JV property. In the Bella Vista area, 15 hand trenches were excavated on six of the nine known soil anomalies.

During 2002, Gold Fields conducted initial scout drilling on seven areas, mainly on the western end and east end of the JV properties.  Of these seven areas, only the Laguna North area has received follow up drilling. In the final months of 2002, high grade quartz vein hosted mineralization with visible gold was located at Guapinol South.  Hand excavated trenches there returned values up to 10.1 meters of 31g/t Au in trench GP-5.

In early 2003, Gold Fields made a new high grade discovery 200 meters east of the Guapinol South veins in an area called Poza del Coyote.  The first trench on this zone returned a high-grade core of 10.93 meters at 66.83 g/t Au within a broader lower grade mineralized zone.  An initial ten-hole reverse circulation (RC) drilling program returned high grade intercepts in five holes with moderate-grade intercepts in four additional holes.

After completing the first stage drilling at Poza del Coyote, Gold Fields moved a core drill onto the Guapinol South area and had completed 31 core holes by the end of July 2003.  About half the holes had high grade intercepts, although some were fairly narrow (1.5 to 2.0 meter core length).  The core drill was then moved to Poza del Coyote and the Cliff Zone between there and Coyote.  The results from the cliff zone returned some high grade intercepts.





|      
|------
|- 12 -
|      







In late 2003, the Company commissioned the calculation of a resource estimate on Tambor which was completed in January 2004 (see above).

During February and March 2004, the Company completed a geophysical orientation survey over the Tambor gold project in Guatemala.  The survey was designed to test the suitability of a new 3D Induced Polarization (IP) method to locate additional mineralization.  At total of 18 line km of surveying was completed on the Guapinol and Laguna Norte zones, over drill sections containing known mineralized intercepts.  Initial interpretations suggest that there is a correlation between the known geochemical anomalies and the 3D IP geophysical anomalies.

During late 2006, the Company initiated the planning and development of an underground exploration adit on the Guapinol zone at Tambor.  In early 2007 permits were obtained and underground exploration commenced at the Tambor project by way of an exploration drift to access the high grade gold zones at Guapinol.  The primary objective of the underground work was to provide information on the structural controls, continuity and grade of the high grade gold mineralization and hence the potential to develop additional resources.  In July 2007, the exploration adit intersected the target vein as planned 202.1 meters into the hill.  The width of the vein exposure in the main tunnel was 3.2 meters, with a dip of 75o for a true width of 3.09 meters.  Diamond drill hole PDD-03-033, first reported in the Companys news release dated August 13, 2003, returned 80.5g/t Au over 5.3 meters from a quartz vein.  The vein was sampled on both sidewalls of the adit and gave results of:

 74.5 g/t Au over 3.40 meters (includes 0.2 meters of quartz veining on HW) from the vein on the east tunnel wall (est. true width 3.28 meters)

 77.7 g/t Au over 2.40 meters from the vein on the west tunnel wall (est. true width 2.32 meters)



In order to understand the continuity of the mineralized structure and plunge of the vein, four crosscuts were excavated underground: 2 parallel and to the west of the main drift (CW-1 & 2), and 2 parallel and to the east of the main drift (CE1 & 2).  All four cross cuts intercepted the zone and confirmed the continuity of the shoot and demonstrated the assumed easterly-dipping plunge to the high grade mineralized.

Geology, Mineral Deposits and Resources

Current understanding of the gold mineralization on the Tambor property suggests that it is a classic example of an orogenic (mesothermal) lode gold deposit. Specifically, Tambor is a metasediment and greenstone hosted, structurally controlled mesothermal lode gold deposit. Quartz-gold-arsenopyrite mineralization occurs in veins and breccias localized by kink bands in sheared host rocks. The project hosts at least 13 gold-bearing mineral occurrences spread over a 14 km by 6 km area.

Gold mineralization is associated with the convergence of the North American and Caribbean plates along major structures which evolved from transpressional to transcurrent movement. Mineralization is post-peak metamorphism.  The gold zones are structurally controlled discordant veins, quartz-crush zones and vein stock works associated with shear zones.

Gold Fields prepared several resource estimates for Tambor JV properties but has not made them public.  The main part of the resource is in the Guapinol South, Cliff and Poza del Coyote area.





|      
|------
|- 13 -
|      







The NI 43-101 compliant gold resource estimate for the Tambor Gold Project.  Tambor contains 216,000 ounces of gold in inferred resources and 57,800 ounces in indicated resources.  The definitions of the measured, indicated and inferred resources conform to CIM Guidelines as defined in CIM Standards on the Mineral Resources and Reserves Definitions and Guidelines, dated August 20, 2000.

The resource estimate is tabulated below:



Cautionary Note to U.S. Investors concerning estimates of Indicated ResourcesThis section uses the term indicated resources. We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them.  U.S. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.



|                                    |         |                |                        
|----------------------------------- | ------- | -------------- | -----------------------
|Tambor: Indicated Resource Estimate
|Area                                | Tonnes  | Grade (g/t Au) | Contained Gold (Ounces)
|Guapinol South Cliff Zone           | 336,000 | 3.910          | 42,200                 
|Poza del Coyote                     | 120,000 | 4.024          | 15,500                 
|Total                               | 456,000 | 3.940          | 57,800                 



Cautionary Note to U.S. Investors concerning estimates of Inferred ResourcesThis section uses the term inferred resources. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it.  Inferred resources have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility.  It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category.  Under Canadian rules estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies.  U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.



|                                   |           |                |                        
|---------------------------------- | --------- | -------------- | -----------------------
|Tambor: Inferred Resource Estimate
|Area                               | Tonnes    | Grade (g/t Au) | Contained Gold (Ounces)
|Guapinol South Cliff Zone          | 368,000   | 5.325          | 63,000                 
|Poza del Coyote                    | 228,000   | 4.219          | 31,000                 
|Laguna North                       | 1,951,000 | 1.950          | 122,200                
|Total                              | 2,547,000 | 2.641          | 216,200                





|      
|------
|- 14 -
|      







To assess the mineable continuity of a deposit and hence how far resources may reasonably be projected, the estimate used indicator variograms at an approximate mining cutoff.  Using reasonable economic criteria in effect when the resource estimate was prepared in late 2003 of:  a gold price of $250 per ounce; gold recovery of 70% for a heap leach operation; and an operating cost of $4.00 per tonne, results in a calculated economic cutoff grade of 0.5 g/t Au.  For purposes of the initial resource assessment, a cutoff grade of 0.3 g/t Au was selected.



A cutoff grade of 0.3 g/t Au is considered appropriate for resource estimation because of the demonstrated continuity of gold mineralization at this grade.  Material included in the resource having a grade between 0.3 g/t Au and 0.5 g/t Au can be considered internal dilution that may need to be mined with the ore.  The average grade of the resource estimate at the 0.3 g/t Au cutoff is 2.83 g/t Au, well above the economic cutoff grade. It should be noted that selection of a final cutoff for the deposit will require detailed metallurgical testing.

Core drilling in 2003 defined a NI43-101 resource estimate of 57,800 ounces gold in the indicated category, and 216,200 ounces gold in the inferred category (see the Companys press release dated December 10, 2003).  This resource was established within a 1 km strike length of a soil anomaly that is consistent for over 14 km.

Sample Collection, Preparation and Analysis

A rigorous Quality Assurance/Quality Control approach was adopted by Goldfields throughout the programme and all data supplied to the Company was reviewed by a Qualified Person according to Ni 43-101 to ensure reliable results. Samples were prepared at Rocky Mountain Geochemical/BSi Inspectorate Laboratories in Guatemala City. BSi is a subsidiary of Inspectorate America Corporation, a ISO 9002-certified laboratory. Rock samples were crushed to minus 10 mesh and a 300 gramme sub-sample was pulverized to minus 200 mesh. These Pulps were flown to Reno, Nevada for analayis at Rocky Mountains geochemical laboratory. Gold was assyed by a 30g Fire Assay/Atomic Absorption and for 30 additional elements by aqua regia ICP. All rock samples returning >1 g/t Au were subsequaently re-assayed by 30 gramme fire assay with gravimetric finish. Sample standards, blanks and duplicates account for approximately 10 percent of samples which were inserted into the sample stream, and duplicate samples were also sent to a second laboratory for gold check analysis. Goldfields also completed metallic sieve analysis on selected mineralized intervals from Guapinol South drilling and results indicated that normal for assays are good indicators of the total gold content of the samples.

Nicaragua

In Nicaragua, concessions are granted for 25 years.  If the Company decides to keep its properties in good standing the Company must pay yearly filing fees as follows:



|        |                         
|------- | ------------------------
|Year    | US$ per hectare per year
|        |                         
|1       | $0.25                   
|2       | $0.75                   
|3, 4    | $1.50                   
|5, 6    | $3.00                   
|7, 8    | $4.00                   
|9, 10   | $8.00                   
|11 - 25 | $12.00                  

One-half of each yearly payment must be paid in January and the second half in July.  The Company must also file annual exploration reports.





|      
|------
|- 15 -
|      







The Company began exploring in Nicaragua in 2003.  In addition to discovering a number of exploration projects with potential to host gold resources, namely, the Trebol, Pavon and San Jose exploration properties (the Properties), the Companys technical team also compiled an extensive regional exploration data base covering much of the Central American country (the Regional Exploration Projects).



1.

Trébol Property

The Trébol Property is comprised of three granted exploration concessions located within the Region Autonoma Atlantico Norte in northeastern Nicaragua, as follows:



|           |                 |               
|---------- | --------------- | --------------
|Name       | Size (Hectares) | Expiry Date   
|           |                 |               
|La Amapola | 13,809.90       | April 19, 2032
|El Trébol  | 28,383.17       | April 19, 2032
|La Flor    | 15,504.91       | April 19, 2032
|           | 57,697.98       |               



2.

Pavon Project

The Pavon gold project is located in central Nicaragua, a 5 hour drive from Managua and about 1 hour from the town of Waslala.  It outcrops on a main road and access to most parts of the project area is possible by foot or on horse back.  It is located in a hilly agricultural region largely given over to cattle grazing.  The original forest cover has been cut down over many years by slash and burn farmers.  The property consists of one granted exploration concession as follows:



|          |                 |                  
|--------- | --------------- | -----------------
|Name      | Size (Hectares) | Expiry Date      
|          |                 |                  
|Natividad | 1,301.10        | February 11, 2029



3.

San Jose Property

The San Jose Property is comprised of applications for two granted exploration concessions located in the east-central Nicaragua, as follows:



|         |                 |                  
|-------- | --------------- | -----------------
|Name     | Size (Hectares) | Expiry Date      
|         |                 |                  
|San Jose | 12,474.57       | November 25, 2035
|Tatiana  | 13,657.00       | July 22, 2035    
|         | 26,131.57       |                  

Access to the Property is via truck from Copalar to San Pedro (2 hrs), boat to La Estrelia (20mins), followed by a 5km horse ride to the camp, 5km.  From the camp it is possible to walk to all of the showings in the northwest of the San Jose project, which cover a 2km by 1.5km area.  In the dry season you can drive to about 1km west of the zone.





|      
|------
|- 16 -
|      







Transactions with B2Gold Corp.

In June 2009, the Company granted to B2Gold Corp. (B2Gold) an option (the Option) to acquire an interest in the Companys entire Nicaragua mineral property portfolio.

B2Gold had the right to acquire a 60% interest in the Trebol, Pavon and San Jose properties in Nicaragua by spending a total of US$4 million on exploration on any one or more of the properties within 4 years from the date of the agreement.  When B2Gold had spent the US$4 million, it would own a 60% interest in all of the properties and a joint venture would be formed whereby each party would contribute its pro-rated share of the exploration costs.

In addition, B2Gold had the right to review the conceptual gold resource outlined by Meridian Gold on the Pavon vein system, and had the right to decide to put the property into production within a time frame of 3 years.  After production is achieved, ownership of the Pavon resource area would be transferred 100% to B2Gold, and the Company would receive 40% of the net cash flow generated from the operation.

The Company also agreed to provide its regional exploration data base to B2Gold, on an exclusive basis.  If as a result of reviewing the regional data, B2Gold identified a prospect or project for acquisition and exploration on ground that is not covered by an existing concession, the Company would apply for a concession over the area and that area would then be designated a project area.

On April 5, 2012, Radius and B2Gold entered into a binding letter agreement pursuant to which B2Gold has agreed to acquire a 100% interest in the Trebol and Pavon properties (other than the San Jose concession) in consideration of $20 million, payable in common shares of B2Gold at a price per share equal to the volume weighted average price of B2Golds common shares on the Toronto Stock Exchange for the ten trading days immediately preceding the date of the letter agreement. In addition, B2Gold agreed to make contingent payments to Radius of US$10 per ounce of gold on 40% of any proven and probable mineral reserves in excess of 500,000 ounces (on a 100% basis).  All aspects of the existing option and joint venture arrangements were terminated.

The property sale transaction was completed on August 10, 2012 pursuant to which the Company received 4,815,894 common shares of B2Gold.  In addition, B2Gold and the Company entered into a joint venture agreement with respect to each of the Companys San Jose and B2Golds La Magnolia properties in Nicaragua to jointly explore the properties with B2Gold and the Company owning 60% and 40% respectively, of the rights and obligations of each joint venture.



No proven and probable mineral reserves or resources have been defined within the Trebol, Natividad or San Jose properties.





|      
|------
|- 17 -
|      







Joint Venture Exploration

In February 2013, B2Gold reported on its exploration work conducted during the fourth quarter of 2012 at the San Jose property.  B2Gold have been trenching various anomalies and veins as follow up to work done by Radius in 2007/2008 and to identify new targets.

Trenches 9 through 18 were cut along the PM-1 vein zone where Radius drilled in 2008.  The results define zones of strong mineralization over significant widths.  For example, Trench 11 cut 27.3 meters of 1.65 g/t Au and Trench 14, 25 meters southeast, cut 20.1 meters of 2.31 g/t Au.  The area with the wide intervals corresponds well with the Radius drilling (hole SP-DH-007) which intersected 35 meters of 1.88 g/t Au from 13.7 meters to 46.6 meters just below Trench 9 (5.5 meters of 2.3 g/t Au).  Highlights include:



|           |              |         
|---------- | ------------ | --------
|Trench No. | Interval (m) | Au (g/t)
|           |              |         
|TR-SJ-009  | 5.5          | 2.3     
|TR-SJ-010  | 3.0          | 1.87    
|TR-SJ-011  | 27.3         | 1.65    
|including  | 17.0         | 2.4     
|TR-SJ-012  | 5.9          | 1.4     
|TR-SJ-013  | 22.0         | 0.77    
|including  | 12.9         | 1.19    
|TR-SJ-014  | 20.1         | 2.31    
|including  | 12.0         | 3.38    
|TR-SJ-015  | 16.0         | 0.96    
|including  | 6.4          | 1.49    

Trenches 5, 6, and 8 were cut along the PM‐2 vein zone. Trenching indicates that the southeast portion of the PM‐2 structure is essentially barren.  To the northwest, the grades improve.  Trench 8 contained 2 samples of roughly 2 g/t Au and Radius Trench PM2‐B2 had 1.35 meters of 6.89 g/t Au. Several float samples in this area returned grades as high as 18.63 g/t Au. More work will need to be done to follow up here but for now most of the effort is being focused on the PM‐1 area.

A new 80 meter long trench has been cut just to the southeast of the PM-1 zone, near an historic Radius trench (TR-PM1-B7) that returned 4.0 meters at 9.43 g/t Au.  B2Gold are investigating this area for bulk tonnage potential to see if the known veins coalesce, hopefully accompanied by anomalous gold grades and a well-developed stockwork.  Trenching beyond the southeast end of the PM-1 zone, on what appears to be an offshoot structure, yielded no significant values.

The trenching is now stepping out at 50 meter intervals to the northwest in order to track the continuity of the zone.  Radiuss historic trenching in the area returned some high grade values; for example Radius’s Trench PM1‐A8 which cut 2.53 meters at 12.88 g/t Au.  This trench lies over 200 meters northwest along strike from B2Gold’s Trench 15 (16.0 meters at 0.96 g/t Au).  It is important to point out that this trench ended in high grade mineralization (last two samples at 14 & 23 grams).





|      
|------
|- 18 -
|      







Mexico



1.

Tlacolula Property

The Tlacolula Property consists of one granted exploration concession, described as follows:



|                      |                 |                  
|--------------------- | --------------- | -----------------
|Name                  | Size (Hectares) | Expiry Date      
|                      |                 |                  
|Reduccion Tlacolula 2 | 12,642          | November 21, 2057

The Company discovered silver mineralization in 2005 following a regional stream geochemical survey in various areas of the state of Oaxaca.  The Tlacolula Property is located 14 km east-southeast of the city of Oaxaca and 30 km northeast of the San Jose silver-gold mine owned by Fortuna Silver Mines Inc. (Fortuna).  An initial trenching program on the Tlacolula property defined a broad low grade silver/gold anomaly associated with opaline silica, indicating a high level system.

By an agreement signed in September 2009 and amended in December 2012, the Company optioned the Tlacolula silver project to Fortuna which can earn a 60% interest by spending US$2-million on exploration, which is to include at least 1,500 metres of drilling, and making staged annual payments to the Company totalling US$250,000 cash and US$250,000 in common shares, by January 31, 2015.  To date, the Company has received US$150,000 cash and 34,589 shares of Fortuna, of which US$50,000 cash and 11,415 shares were received subsequent to December 31, 2012.  The Company and Fortuna have certain directors in common.

No Resource or Reserve has been defined within the Tlacolula Property.



2.

Santa Brigida

In February 2013, the Company was granted an option to acquire a 100% interest in the Santa Brigida project, a 10,800 hectare property which hosts a low-sulphidation, epithermal silver-gold vein system located approximately 80 km ENE of the city of Guanajuato in Mexico.

Artisanal-scale mining of surface outcrop is known to have occurred in the area from pre-colonial times. Reliable historical reports indicate that more modern small-scale underground mining operations produced, from the late 1800s up to 1926, over 40 Moz of silver and 400 koz of gold from 1.05 Mt at weighted-average grades of 1,300 g/t Ag and 13 g/t Au.

Mineralization is associated with two principal vein swarms, the Pozos system and the Santa Brígida system, each striking generally NW with steep SW dips.  Historic production focused on discrete high-grade ore shoots within hydrothermal quartz veins and surrounding altered wall-rock. Historical production records indicate that individual operations mined mineralized shoots ranging from 5 kt to 300 kt in size, with average grades ranging from 200 g/t Ag to 2,500 g/t Ag, and 2 g/t Au to 40 g/t Au.  The richest shoot documented produced 300 kt grading 2,500 g/t Ag and 15 g/t Au.

The property is underlain by folded Jurassic to Cretaceous-aged sedimentary rocks including carbonaceous shales, shales, arenites, and greywackes, which are discordantly overlain by Cretaceous limestones and Tertiary volcanic rocks.  Most of the district is covered by recent soils and caliche, and known areas of mineralization are all hosted by the Jurassic-Cretaceous sedimentary sequences where these outcrop.





|      
|------
|- 19 -
|      







The Companys initial exploration efforts will be concentrated on the Santa Brígida vein system, near the town of Mineral de Pozos, in flat-lying agricultural and cattle grazing lands.  The veins are exposed in discontinuous outcrop over 1 km in strike length, along a regional topographic lineament likely related to faulting, and which is parallel and potentially genetically related to the mineralized system.  The Company believes there is excellent potential for the extension of the Santa Brígida vein system in both directions. A geophysical resistivity & induced polarization survey is currently underway on the property to explore the strike extent of the Santa Brigida system under the alluvial cover; any positive anomalies discovered have the potential to be drilled later in 2013.

All work at the Santa Brigida project is being funded from the Companys existing cash resources, and the work is supervised by the Companys Exploration Manager.  No Resource or Reserve has been defined within the Santa Brigida project.



Item 5.

Operating and Financial Review and Prospects

Overview

At the date of this Annual Report, the Company has not been able to identify a known body of commercial grade ore on any of its properties, and the ability of the Company to realize the costs it has incurred to date on these properties is dependent upon the Company being able to identify a commercial ore body, to finance its exploration costs and to resolve any environmental, regulatory or other constraints which may hinder the successful development of the property, or being able to realize the costs incurred on a subsequent disposal of the property.

The following discussion and analysis of the financial condition and operating results of the Company for the two years ended December 31, 2012 and 2011 should be read in conjunction with the Consolidated Financial Statements and related notes to the financial statements which have been prepared in accordance with IFRS.  The discussion and analysis set forth below covers the results measured under IFRS.

Strategic Transactions

In 2004, Radius Explorations Ltd. and PilaGold Inc. amalgamated (the Amalgamation) and continued as one company, Radius Gold Inc., pursuant to the provisions of the British Columbia Business Corporations Act.  The holders of Radius Explorations shares received one (1) Radius Gold share for every one (1) Radius Explorations share held, and PilaGold shareholders received one (1) Radius Gold share for every two and one-quarter (2.25) PilaGold shares held.

Pursuant to an Arrangement Agreement dated November 3, 2011, and effective December 8, 2011, the Company completed the Spin-Out whereby the Company transferred all of its Yukon and Alaskan property assets, certain marketable securities, and $1.0 million in cash to Rackla in return for Rackla shares and warrants, the majority of which were distributed to the Companys shareholders by way of a plan of arrangement.

The objective of the Spin-Out is to maximize shareholder value by allowing the market to independently value geographically separate property portfolios.  The Spin-Out has resulted in two strategically positioned companies, one focused on Latin America and the other focused on the Yukon.





|      
|------
|- 20 -
|      







A.

Operating Results



Compliance

The Companys consolidated financial statements of the Company as at and for the years ended December 31, 2012 and 2011 have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB).  The Companys transition date to IFRS was January 1, 2010, having previously prepared its consolidated financial statements in accordance with pre-changeover Canadian GAAP.

Critical Accounting Policies

Investment in Associate

Where the Company has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate.  Associates are initially recognized in the consolidated statement of financial position at cost.  The Company's share of post-acquisition profits and losses is recognized in the consolidated statement of comprehensive income, except that losses in excess of the Companys investment in the associate are not recognized unless there is an obligation to make good those losses.

Profits and losses arising on transactions between the Company and its associates are recognized only to the extent of unrelated investors' interests in the associate.  The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Company's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalized and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.



Mineral Exploration and Evaluation Expenditures



Acquisition costs for exploration and evaluation assets are capitalized and include the cash consideration paid and the fair value of common shares issued on acquisition, based on the trading price of the shares on the date of the agreement to issue the shares.  Exploration expenditures, net of recoveries, are charged to operations as incurred.  After a property is determined by management to be commercially feasible, exploration and development expenditures on the property will be capitalized. On transfer to development properties, capitalized exploration and evaluation assets are assessed for impairment.

Options are exercisable entirely at the discretion of the optionee and amounts received from optionees in connection with option agreements are credited against the capitalized acquisition costs classified as exploration and evaluation assets on the balance sheet and amounts received in excess are credited to gain from exploration and evaluation asset option agreements on the statement of operations.





|      
|------
|- 21 -
|      







Where the Company has entered into option agreements to acquire interests in exploration and evaluation assets that provide for periodic payments or periodic share issuances, amounts unpaid and unissued are not recorded as liabilities since they are payable and issuable entirely at the Companys option. Option payments are recorded as exploration and evaluation costs when the payments are made or received and the share issuances are recorded as exploration and evaluation costs using the fair market value of the Companys common shares at the earlier of the date the counterpartys performance is complete or the issuance date.

The Company is in the process of exploring and developing its exploration and evaluation assets and has not yet determined the amount of reserves available.  Management reviews the carrying value of exploration and evaluation assets on a periodic basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by the Company, the assessment of future probability of profitable revenues from the asset or from the sale of the asset.  Amounts shown for exploration and evaluation assets represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values.

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate.  Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed.  Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated.  Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Companys commitment to a plan of action based on the then known facts.

Share-based payments

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive loss/income over the vesting period.  Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied.  The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statements of comprehensive loss/income over the remaining vesting period.

Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date.  The grant date fair value is recognized in comprehensive loss/income over the vesting period, described as the period during which all the vesting conditions are to be satisfied.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive loss/income.  Options or warrants granted related to the issuance of shares are recorded as a reduction of share capital.





|      
|------
|- 22 -
|      







When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model.

All equity-settled share-based payments are reflected in other equity reserve, until exercised.  Upon exercise, shares are issued from treasury and the amount reflected in other equity reserve is credited to share capital, adjusted for any consideration paid.

Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognized the amount that otherwise would have been recognized for services received over the remainder of the vesting period.  Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date.  Any such excess is recognized as an expense.

Impairment of Non-Financial Assets

Impairment tests on non-financial assets, including exploration and evaluation assets are undertaken whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the assets cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets.

An impairment loss is charged to the profit or loss, except to the extent they reverse gains previously recognized in other comprehensive loss/income.

Financial Instruments

Financial Assets

Financial assets are classified into one of the following categories based on the purpose for which the asset was acquired.  All transactions related to financial instruments are recorded on a trade date basis.  The Companys accounting policy for each category is as follows:

Loans and Receivables

These assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lender to a borrower in return for a promise to repay on a specified date or dates, or on demand.  They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and subsequently carried at amortized cost, using the effective interest rate method, less any impairment losses. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transactions costs. Gains or losses are recognized in the profit or loss when the loans and receivables are derecognized or impaired, as well as through the amortization process.

TheCompanys loans and receivables comprise advances and other receivables, amounts due from related parties, deposits and cash and cash equivalents in the consolidated statement of financial position.





|      
|------
|- 23 -
|      







Available-For-Sale Investments

Non-derivative financial assets not included in the other categories are classified as available-for-sale and comprise principally the Companys strategic investments in entities not qualifying as subsidiaries or associates.  Available-for-sale investments are carried at fair value with changes in fair value recognized in accumulated other comprehensive loss/income. Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously recognized in other comprehensive loss/income, is recognized in profit or loss.  If there is no quoted market price in an active market and fair value cannot be readily determined, available-for-sale investments are carried at cost.

Purchases and sales of available-for-sale financial assets are recognized on a trade date basis. On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassified from accumulated other comprehensive loss/income to profit or loss.

Impairment of Financial Assets

At each reporting date the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.

Financial Liabilities

Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability was incurred, and comprise trade payables and accrued liabilities. These liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using the effective interest rate method.  This ensures that any interest expense over the period of repayment is at a constant rate on the balance of the liability carried in the statement of financial position.  Interest expense, in this context, includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid. Trade payable amounts are unsecured and are usually paid within forty-five days of recognition.





|      
|------
|- 24 -
|      







Critical Accounting Estimates and Judgments

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

The key areas of judgment applied in the preparation of the consolidated financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:



a)

Where the Company holds less than 20% of the voting rights in an investment but the Company has the power to exercise significant influence through common officers and board members, such an investment is treated as an associate. The Company can exercise significant influence over Rackla Metals Inc;



b)

The determination of when an investment is impaired requires significant judgment. In making this judgment, the Company evaluates, amongst other things, the duration and extent to which the fair value of the investment is less that its original cost at each reporting period.



c)

The application of the Companys accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future economic benefits will flow to the Company.

If, after exploration and evaluation expenditure is capitalized, information becomes available suggesting that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount, the Company carries out an impairment test at the cash generating unit or group of cash generating units level in the year the new information becomes available.

The key estimate applied in the preparation of the consolidated financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:



a)

The Company is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite the company's belief that its tax return positions are supportable, the company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law.  This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.





|      
|------
|- 25 -
|      







Results of Operations

Year Ended December 31, 2012 compared to December 31, 2011

The year ended December 31, 2012 recorded a net income before income taxes of $8,929,357 compared to a net loss before income taxes of $3,350,056 for the year ended December 31, 2011, a positive difference of $12,279,413.  The current year showed a net income instead of a loss due to a net gain of $16,278,410 from the B2Gold Sale.  This gain more than offset a loss of $3,823,118 recorded on the disposal of the Tambor property during the current year.  As was the case with the quarterly comparison, the net loss before income taxes for the comparative year was significantly reduced by the gain of $4,807,443 resulting from the distribution of assets to Rackla.  Both the current and comparative years recorded impairment charges stemming from the value of shares held in other companies, with the current year having impairment charges of $855,632 relating to the Companys investment in Rackla and $20,148 relating to the shares held in Focus. The impairment charge in the comparative year was $465,925 and was related to the shares held in Focus as well. There was no deferred income tax recovery or expense recorded for the current year but the comparative year recorded a deferred income tax recovery of $716,754 relating to flow-through share issuances.

Exploration expenditures for the current year totaled $884,966 compared to $6,390,053 for the comparative year, a decrease of $5,505,087.  As in the quarterly comparison, the higher exploration expenditures in the comparative year relate mostly to the Companys drilling programs and other exploration activities on its formerly held Yukon properties. During the current year, exploration expenditures were significantly reduced as the Company had been awaiting a drill permit for its properties in Guatemala.   Both the current and comparative years recorded gains of $101,564 and $157,088 respectively from property option payments received with respect to the Tlacolula property in Mexico.

General and administrative expenses for the year ended December 31, 2012 were $1,498,618 compared to $1,242,463 for the year ended December 31, 2011, an increase of $256,155. Unlike the quarterly comparison, both the current and comparative years recorded significant share-based compensation expenses of $385,320 and $306,915 respectively. Notable cost increases in the current year were $81,000 in management fees, $53,299 in legal and audit fees, $48,516 in salaries and benefits, $34,248 in travel and accommodation, and $32,642 in rent and utilities. Management fees were higher due to a bonus of $72,000 paid to the Chief Executive Officer and an increase in his monthly management fee. Legal and audit fees were higher for the same reasons given in the quarterly comparison.  Salaries and benefits and travel and accommodation costs were both impacted with an increase in property investigation during the current year.  Rent and utilities costs were higher in the current year because of a new office lease that took effect in the fourth quarter of 2011. A notable cost decrease was $56,361 in public relations which was due to the increased requirements resulting from the Spin-Out in the comparative year.





|      
|------
|- 26 -
|      







Year Ended December 31, 2011 compared to December 31, 2010

The net loss for the year ended December 31, 2011 was $2,633,302 compared to $4,578,174 for the year ended December 31, 2010, a decrease of $1,944,872.  The gain of distribution of Rackla assets recorded for the year was the same as that stated above in the fourth quarter comparison.  Excluding this gain the current year would show a net loss of $7,440,745, an increase of $2,682,571 over the comparative year.  This significant increase is due to a higher level of exploration activities during the current year on both the Yukon and Guatemala properties.  Exploration expenditures for the current year totalled $6,390,053 compared to $2,838,390 for the comparative year, an increase of $3,551,663.  Included in exploration expenditures during the current year were flow-through expenditures of approximately $4.38 million compared to less than half that amount in 2010.  The Company also conducted a drill program during the current year in southeast Guatemala.  Overall costs for both the current and comparative year were offset by property option payments received by the Company which resulted in a gain on mineral property option payments totalling $157,088 in 2011 and $247,447 in 2010.  Both annual periods also recorded a deferred income tax recovery with the current year amount reducing the net loss before income taxes by $716,754 and the comparative year amount by $358,533.  As the Company fulfilled its flow-through commitments on exploration expenditures, a previously recorded deferred tax liability was transferred to the statement of comprehensive loss.  Two significant cost items that were recorded in the current year but not in the comparative year were an impairment charge on available-for-sale investments of $465,925 and $289,313 in plan of arrangement costs.  The plan of arrangement costs were associated with the Spin-Out.

Corporate expenses in the year ended December 31, 2011 were $1,242,463 compared to $2,445,015 in the year ended December 31, 2010, a decrease of $1,202,552.  However, the current year only recorded an amount of $306,915 in share-based compensation charges compared to $1,612,792 being charged in the comparative year.  When excluding this non-cash item, the current years corporate expenses were higher by $103,325.  Once again, a notable cost increase concerned consulting fees.  Besides the financial advisory and services agreement entered into during 2011, there were consulting costs associated with an IFRS consultant and geological software training.  Also similar to the quarterly comparison, salaries and wages for the current year were noticeably less due to the same reasons given above.

Mineral Properties

Year Ended December 31, 2012

During the year ended December 31, 2012, the Company incurred the following expenditures on its mineral properties:

Guatemala - $794,388 was incurred on exploration and property investigation.

Nicaragua - $17,406 was incurred on miscellaneous exploration and administrative related costs.

Mexico - The Company received option payments on its Tlacolula Property from Fortuna in the form of cash and shares with a combined value of $101,564 and incurred $73,172 on property investigation and miscellaneous administrative costs.



|      
|------
|- 27 -
|      







Year Ended December 31, 2011

A summary of the Companys expenditures on its mineral properties, including the properties spun-out to Rackla, during the year ended December 31, 2011 is as follows:

Yukon/Alaska - $4,954,479 was incurred on exploration activities but this amount was offset by a $25,000 government grant received and other recovered costs totalling $13,199 during the year.  Acquisition costs during the year totalled $386,619 of which $266,919 was cash and $119,700 was the value of shares issued.  Acquisition costs were then offset by $75,000, which was a portion of the proceeds received as an option payment from Solomon Resources Limited (Solomon) on the Ten Mile Creek property.

Guatemala - $1,387,041 was incurred on exploration.

Nicaragua - $29,899 was incurred on miscellaneous exploration related costs.

Mexico - $18,634 was incurred on miscellaneous exploration related costs.  The Company also received cash and shares from Fortuna with a combined value of $59,588 as a result of option payments received on its Tlacolula Property.

Year Ended December 31, 2010

During the year ended December 31, 2010, the Company incurred the following expenditures on its mineral properties:

Yukon/Alaska - $828,844 was incurred on acquisition costs and $2,016,987 on exploration.  Of the $828,844 in acquisition costs, $111,300 was the value of common shares issued pursuant to option agreements. During 2010, the Company received an option payment on its Ten Mile Creek Property of $116,000, consisting of $100,000 cash and $16,000 in Solomon shares and received 400,000 shares of Cordoba Minerals Corp. (Cordoba) (formerly Wesgold Minerals Inc.) as option payments on the Snowcap Property.  As a result, there were cost recoveries that reduced the carrying value of acquisition costs of the Ten Mile Creek Property and the Snowcap Property to nil.

Nicaragua - $55,992 was incurred on exploration.

Guatemala - $753,900 was incurred on exploration.

Mexico - $11,511 was incurred on miscellaneous exploration related costs.  The Company also received cash and shares from Fortuna with a combined value of $41,148 as a result of option payments received on its Tlacolula Property.





|      
|------
|- 28 -
|      







Per Share Income (Loss)

The Company reported a net income and income per share for fiscal 2012 compared to a net loss and loss per share for fiscal 2011.  The net income and income per share was the result of a net gain of $16.3 million on the sale of Nicaraguan properties to B2Gold during fiscal 2012.  Fiscal 2011 also recorded a gain on distribution of $4.8 million due to the Spin-Out which significantly reduced the net loss and net loss per share for that period. The Companys weighted average number of shares did not change throughout fiscal 2012 due to no share capital activity but increased significantly in fiscal 2011, as a result of private placements during fiscal 2011 and the latter part of fiscal 2010.



B.

Liquidity and Capital Resources

Outlook

The Company expects its current capital resources to be sufficient to carry out its planned exploration programs and operating costs for the next twelve months; however, the Company has not yet achieved profitable operations, has accumulated losses of $44,849,250 since inception, and is expected to incur further losses in the development of its business.  However, the Company has sufficient cash resources and a working capital surplus of $17.69 million to meet its obligations for at least the next twelve months from the end of the reporting year. Actual funding requirements may vary from those planned due to a number of factors, including the progress of exploration and development activity.  Management believes it will be able to raise equity capital as required in the long term, but recognizes the uncertainty attached thereto.  The Company continues to use various strategies to minimize its dependence on equity capital, including the securing of joint venture partners where appropriate.

Year ended December 31, 2012 compared to December 31, 2011

The Companys cash decreased from approximately $1.76 million at December 31, 2011 to $0.99 million at December 31, 2012; however, working capital has significantly increased. As at December 31, 2012 working capital was $17.69 million compared to $3.65 million at December 31, 2011.  The increase was due to the receipt of 4,815,894 B2Gold common shares as consideration for the B2Gold Sale. As at December 31, 2012, these shares had a fair value of $16.2 million, and the Company is entitled to sell a maximum of 10% of the original number of B2Gold shares within any 30-day period without encumbrance. If the Company wishes to exceed this limitation, there may be a delay of up to 15 days before the selling of the shares can be completed. During the year ended December 31, 2012, the Company sold 255,000 B2Gold shares for proceeds of $928,365.  Subsequent to December 31, 2012, the Company sold an additional 677,500 B2Gold shares for proceeds of approximately $2.6 million.

The Company also currently holds a portfolio of available-for-sale investments consisting of 1,007,406 common shares of Focus Ventures Ltd. (Focus), 34,589 common shares of Fortuna, , of which 11,415 were received subsequent to December 31, 2012, and 7,175,700 warrants in Rackla, all public companies with common directors or officers. As at December 31, 2012, the carrying amount for all available-for-sale investments was $16.55 million compared to $0.64 million as at December 31, 2011.  As at December 31, 2012, the Company also held 9,866,376 common shares in Rackla with a fair value of $0.49 million and carrying amount of $0.87 million but these are recorded as an investment in Rackla which is being accounted for under the equity method for investments with significant influence instead of as available-for-sale investments. The Company also holds 1,345,338 warrants of Rackla by way of a private placement during the current year and although these warrants are transferable, they are not traded on the TSX-V as are the other 7,175,700 Rackla warrants held.



|      
|------
|- 29 -
|      







Year ended December 31, 2011 compared to December 31, 2010

The Companys cash decreased from approximately $7.72 million at December 31, 2010 to $1.76 million at December 31, 2011.  Working capital at December 31, 2011 was $3.65 million compared to $8.24 million at December 31, 2010.  Flow-through proceeds raised in 2010 were required to be spent on eligible exploration activities on its previously held Yukon properties.  As at December 8, 2011, the date of the Spin-Out, the Company had fulfilled its 2010 flow-through commitment of $4.38 million during 2011.  During the current year, the Company closed a non-flow-through private placement to raise gross proceeds of $3.66 million, of which $1.0 million was transferred to Rackla as part of the Spin-Out.  The remaining funds continue to be used for exploration activities on the Companys southeast Guatemala properties and for general working capital purposes.

While the Company transferred its available-for-sale investments in Cordoba and Solomon to Rackla as part of the Spin-Out, it continues to hold a portfolio of available-for-sale investments consisting of 1,007,406 common shares of Focus Ventures Ltd., 14,569 common shares of Fortuna, and 7,175,700 warrants in Rackla, all public companies with common directors or officers.  As at December 31, 2011, the carrying amount for the available-for-sale investments was $641,707 compared to $994,609 as at December 31, 2010.  An unrealized gain (net of tax) of $165,966 has been recorded in other comprehensive income during the current year. The Company also holds 7,175,700 common shares in Rackla but they are not included in available-for-sale investments on the statement of financial position.  Instead, the shares are included in the investment in Rackla which is being accounted for under the equity method for investments with significant influence. The fair market value of the Rackla shares was $1.65 million and the carry amount of the investment in Rackla was $1.5 million as at December 31, 2011.



C.

Research and Development, Patents and Licenses, etc.

Not applicable.



D.

Trend Information

The Company is an exploration stage natural resource company engaged in the process of exploring and evaluating its mineral properties and projects and has not yet determined whether its properties and projects contain ore reserves that are economically recoverable.  Consequently, there is no production, sales, or inventory in the conventional sense.  The Companys financial success will be dependent upon the extent to which it can discover mineralization and the economic viability of developing such properties.  Such development may take years to complete and the amount of resulting income, if any, is difficult to determine with any certainty.  The sales value of any mineralization discovered by the Company is largely dependent upon factors beyond the Companys control such as the market value of the commodities produced.

The Company is not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect upon the Companys net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.





|      
|------
|- 30 -
|      







E.

Off-balance Sheet Arrangements

The Company has no Off-Balance Sheet Arrangements.



F.

Tabular Disclosure of Contractual Obligations

The following table lists as of December 31, 2012 information with respect to the Companys known contractual obligations.



|                                                                                |                        |                  |           |           |                  
|------------------------------------------------------------------------------- | ---------------------- | ---------------- | --------- | --------- | -----------------
|                                                                                | Payments due by period
|Contractual Obligations                                                         | Total                  | less than 1 year | 1-3 years | 3-5 years | more than 5 years
|Long-Term Debt Obligations                                                      | 0                      | 0                | 0         | 0         | 0                
|Capital (Finance) Lease Obligations                                             | 0                      | 0                | 0         | 0         | 0                
|Operating Lease Obligations(1)                                                  | $1,691,499             | $294,481         | $599,504  | $416,298  | $381,216         
|Purchase Obligations                                                            | 0                      | 0                | 0         | 0         | 0                
|Other Long-Term Liabilities Reflected on the Company's Balance Sheet under IFRS | 0                      | 0                | 0         | 0         | 0                
|Total                                                                           | $1,691,499             | $294,481         | $599,504  | $416,298  | $381,216         



(1)

Amount indicated is for office rent leases for the Companys corporate operations in Vancouver, BC.



G.

Safe harbour

See Note Regarding Forward-Looking Statements.





|      
|------
|- 31 -
|      







Item 6.

Directors, Senior Management and Employees



A.

Directors and Senior Management

The following table lists as of April 8, 2013 the names of the directors and senior management of the Company.  The directors and senior management have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting of Shareholders or until a successor is duly elected, unless the office is vacated in accordance with the Companys Articles.



|                                           |                                                  |                          
|------------------------------------------ | ------------------------------------------------ | -------------------------
|Name and Municipality of Residence         | Position(s) held                                 | Date of First Appointment
|Simon Ridgway
Pemberton, BC, Canada        | Director, President & Chief Executive Officer    | September 30, 1997       
|Ralph Rushton
Vancouver, BC, Canada        | Director & Vice-President, Corporate Development | May 2, 2003              
|Mario Szotlender,
Caracas, Venezuela       | Director                                         | December 13, 1999        
|Bradford Cooke
North Vancouver, BC, Canada | Director                                         | July 1, 2004             
|William Katzin
North Vancouver, BC, Canada | Director                                         | July 27, 2011            
|Kevin Bales
Delta, BC, Canada              | Chief Financial Officer                          | July 23, 2009            
|Sally Whittall
Maple Ridge, BC, Canada     | Corporate Secretary                              | December 2, 2011         





|      
|------
|- 32 -
|      







Biographical Information

The following is a brief description of the employment background of the Companys directors and senior management:

Simon T.P. Ridgway, Age 64  Director, President & Chief Executive Officer

Mr. Simon Ridgway is an exploration financier with over 20 years experience financing and managing exploration companies operating in North, Central and South America.  Mr. Ridgway began his career prospecting for gold in the Yukon Territory where he learned the value added approach of grass roots exploration.  A firm believer in the gold potential of Central America, his practical, low cost approach to exploration management has led to major discoveries in Honduras and Guatemala.  He is a director of Fortuna Silver Mines Inc., Cordoba Minerals Corp, Focus Ventures Ltd., Medgold Resources Corp. and Rackla Metals Inc., all publicly-traded resource companies.

Ralph Rushton, Age 50  Vice President, Corporate Development and Director

Mr. Ralph Rushton earned a BSc. in Geology from Portsmouth in the UK, an MSc from the University of Alberta, and studied Business Communications at Simon Fraser University in Vancouver. With over 15 years experience in gold mining and exploration gained mainly with the Anglo American group in Southern Africa, the Middle East and Eastern Europe, Mr. Rushtons current responsibilities include corporate development work and investor relations, and maintaining the Companys links with senior mining companies.  He is also a director of Cordoba Minerals Corp., Medgold Resources Corp., Rackla Metals Inc. and Western Pacific Resources Corp., all publicly-traded resource companies.

Mario Szotlender, Age 52 - Director

Mr. Szotlender holds a degree in international relations and is fluent in several languages.  He has successfully directed Latin American affairs for numerous private and public companies over the past 25 years, specializing in developing new business opportunities and establishing relations within the investment community.  He has been involved in various mineral exploration and development joint ventures (precious metals and diamonds) in Central and South America, including heading several mineral operations in Venezuela, such as Las Cristinas in the 1980s.

Mr. Szotlender is a Director of Atico Mining Corporation, Endeavour Silver Corp., Focus Ventures Ltd., Fortuna Silver Mines Inc., Iron Creek Capital Corp. and Magellan Minerals Ltd., all publicly-traded resource companies.  He also consults to other public companies, and to several private exploration companies.

Bradford Cooke, Age 58 - Director

Bradford Cooke, P. Geo., is a professional geologist with 35 years experience in the mining industry, specializing in the financing, acquisition, exploration and development in mineral deposits.  Mr. Cooke received his B.Sc. Geology (Honors) degree in 1976 and a M.Sc. Geology degree in 1984.  He has participated in the discovery of several mineral deposits, including uranium in Labrador, gold and tungsten in B.C., gold in Suriname and silver in Mexico, and has raised over CAD$350 million in equity and joint venture financings for resource projects since 1988.  From 1976 to 1987, he worked as a project geologist for Noranda Mines, Shell Minerals, Chevron Minerals and as a geological consultant to junior mining companies.  Mr. Cooke founded Canarc Resource Corp. in 1988 and Endeavour Silver Corp. in 2003, both publicly-traded resource companies.





|      
|------
|- 33 -
|      







William Katzin, Age 58 - Director

Mr. Katzin is a graduate of the University of Cape Town, South Africa with a Bachelor of Commerce and Law degree.  He is a member of the Institute of Chartered Accountants of British Columbia.  He has been a partner in private practice with a Vancouver firm of Chartered Accountants since 1986 and has experience working with resource and exploration companies.  Mr. Katzin is a director of Rackla Metals Inc., a publicly-traded resource company.

Kevin Bales, Age 46  Chief Financial Officer

Mr. Bales has 19 years of financial reporting experience in mining and information technology industries.  He currently serves as Chief Financial Officer for several public junior exploration companies with operations in North America, Western Europe, Central America and South America.  Mr. Bales holds a Bachelor of Management degree with a major in accounting from the University of Lethbridge.  He is also CFO of Cordoba Minerals Corp., Focus Ventures Ltd., Medgold Resources Corp. and Rackla Metals Inc., all publicly-traded resource companies.

Sally Whittall, Age 53  Corporate Secretary

Ms. Whittall was a corporate securities legal assistant in a major Vancouver law firm for six years prior to joining a group of mineral exploration companies in 1994.  She has completed the Canadian Securities Course.  Ms. Whittall is currently the Corporate Secretary of and handles the corporate regulatory work for Cordoba Minerals Corp., Focus Ventures Ltd., Fortuna Silver Mines Inc., Medgold Resources Corp., Rackla Metals Inc. and Western Pacific Resources Corp., all publicly-traded resource companies.

There are no family relationships among the members of the board of directors or the members of senior management of the Company.  There are no arrangements or understanding with major shareholders, customers, suppliers or others, pursuant to which any member of the board of directors or member of senior management was selected.





|      
|------
|- 34 -
|      







B.

Compensation

Directors and senior management are compensated in a manner consistent with their respective contributions to the overall benefit of the Company.  During the fiscal year ended December 31, 2012, the Company paid to its Directors and senior management the following amounts:



|                      |                                       |            
|--------------------- | ------------------------------------- | -----------
|Name                  | Position                              | Amount     
|                      |                                       |            
|Simon Ridgway (1) (2) | President & Chief Executive Officer   | $  141,000 
|Kevin Bales           | Chief Financial Officer               | $    25,625
|Ralph Rushton (2)     | Vice-President, Corporate Development | $    79,804
|Sally Whittall        | Corporate Secretary                   | $    34,488



(1)

Paid to Mill Street Services Ltd., a private company owned by the Ridgway Family Trust, of which Simon Ridgway is the Trustee.



(2)

Simon Ridgways position changed from Chairman to President on December 13, 2012 and Ralph Rushtons position changed from President to Vice-President, Corporate Development on December 13, 2012.

During the fiscal year ended December 31, 2012, a total of 700,000 vested options held by directors and officers of the Company exercisable at $0.56 per share expired unexercised, and the following 1,165,000 stock options were granted to the directors and officers:



|                 |                                  |                |                |              
|---------------- | -------------------------------- | -------------- | -------------- | -------------
|Name             | Position                         | No. of
Options | Exercise
Price | Expiry Date  
|                 |                                  |                |                |              
|Simon Ridgway    | Director, President & CEO        | 300,000        | $0.20          | Dec. 12, 2022
|William Katzin   | Director                         | 200,000        | $0.20          | Dec. 12, 2022
|Mario Szotlender | Director                         | 175,000        | $0.20          | Dec. 12, 2022
|Ralph Rushton    | Director & VP, Corp. Development | 100,000        | $0.20          | Dec. 12, 2022
|Bradford Cooke   | Director                         | 100,000        | $0.20          | Dec. 12, 2022
|Kevin Bales      | CFO                              | 140,000        | $0.20          | Dec. 12, 2022
|Sally Whittall   | Corporate Secretary              | 150,000        | $0.20          | Dec. 12, 2022





|      
|------
|- 35 -
|      







The Company has no standard arrangement pursuant to which directors are compensated for their services in their capacity as such except for the granting from time to time of incentive stock options.  The following table sets out all options in the Company which are held as of April 8, 2013 by the current directors and officers:



|                 |                               |                    |                                                     
|---------------- | ----------------------------- | ------------------ | ----------------------------------------------------
|Optionees        | Number of Shares Subject      | Exercise Price ($) | Expiration Date                                     
|Simon Ridgway    | 200,000
220,000300,000720,000 | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|Mario Szotlender | 125,000
100,000175,000400,000 | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|Ralph Rushton    | 200,000
100,000100,000400,000 | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|Bradford Cooke   | 125,000
100,000100,000325,000 | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|William Katzin   | 150,000200,000350,000         | $0.81
$0.20        | July 26, 2021
December 12, 2022                     
|Kevin Bales      | 110,000
100,000140,000350,000 | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|Sally Whittall   | 70,000
100,000150,000320,000  | $0.29
$0.69
$0.20  | January 7, 2020
September 23, 2020
December 12, 2022
|TOTAL:           | 2,865,000                     |                    |                                                     





|      
|------
|- 36 -
|      







C.

Board Practices.

The directors of the Company are elected annually and hold office until the next Annual General Meeting of the members of the Company or until their successors in office are duly elected or appointed.  All directors are elected for a one-year term.  All officers serve at the pleasure of the board of directors.  The next annual general meeting will be held no later than December 31, 2013.

Currently, there are no directors service contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment.

Audit Committee

The Audit Committee of the Company is comprised of William Katzin, Mario Szotlender and Bradford Cooke, all of whom are independent and financially literate.  The Audit Committee Charter provides that the primary function of the Audit Committee is to assist the Board of Directors of the Company (the Board) in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the shareholders and others, the systems of internal controls and management information systems established by management and the Companys external audit process and monitoring compliance with the Companys legal and regulatory requirements with respect to its financial statements.

The Audit Committee is accountable to the Board.  In the course of fulfilling its specific responsibilities hereunder, the Audit Committee is expected to maintain an open communication between the Companys external auditors and the Board.  The responsibilities of a member of the Audit Committee are in addition to such members duties as a member of the Board.

The Audit Committee does not plan or perform audits or warrant the accuracy or completeness of the Companys financial statements or financial disclosure or compliance with generally accepted accounting procedures as these are the responsibility of management and the external auditors.

Compensation Committee

The Compensation Committee of the Company is comprised of William Katzin, Mario Szotlender and Bradford Cooke, all of whom are independent of management.  The Compensation Committee Charter provides that the function of the Compensation Committee is to assist the Board in discharging its oversight responsibilities relating to compensation, including the compensation of key senior management employees of the Company.

The Compensation Committee is to review and make recommendations to the Board on an annual basis with respect to the Companys stock option plan and make recommendations respecting grants of options.  It shall also review and recommend to the Board annually, or more frequently as required, managements succession plans for the Executive Management, including the specific development plans and career planning for potential successors to occupy these positions.

Disclosure Committee

The Disclosure Committee of the Company is comprised of Simon Ridgway and Ralph Rushton, and was formed in order to ensure that communications with the investing public about the Company are timely, factual, accurate, and broadly disseminated in accordance with all applicable legal and regulatory requirements.



The Disclosure Committee Charter extends to all employees of the Company, its Board of Directors, those authorized to speak on its behalf and all other insiders.  It covers disclosures in documents filed with the securities regulators, financial and non-financial disclosure, including managements discussion and analysis and written statements made in the Companys annual and quarterly reports, new releases, letter to shareholders, presentations by senior management and information contained on the Companys website and other electronic communications with analysts and investors, interviews with the media as well as speeches, press conferences and conference calls.





|      
|------
|- 37 -
|      







D.

Employees.

As at December 31, 2012, the Company had 17 employees, 13 in the Vancouver office and 4 in Guatemala and Nicaragua.  13 employees provide administrative services and 4 employees provide geological services.  None of the employees is represented by a union.



E.

Share Ownership.

The following table sets forth, as of April 8, 2013, the number of the Companys Common Shares beneficially owned by (a) the directors and members of senior management of the Company, individually, and as a group, and (b) the percentage ownership of the outstanding Common Shares represented by such shares.  The security holders listed below are deemed to be the beneficial owners of Common Shares underlying options and warrants which are exercisable within 60 days from the above date.  Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.



|                |                                                                |                      |                        
|--------------- | -------------------------------------------------------------- | -------------------- | -----------------------
|Title 
of Class | Name and Address of Beneficial Owner                           | Amount
and Nature(1) | Percentage 
of Class(1)
|Common          | Simon Ridgway
Pemberton, BC                                    | 6,001,452(2)         | 6.83%                  
|Common          | Ralph Rushton
Vancouver, BC                                    | 505,001(3)           | 0.58%                  
|Common          | Mario Szotlender
Caracas, Venezuela                            | 2,133,066(4)         | 2.44%                  
|Common          | Bradford Cooke
North Vancouver, BC                             | 600,000(5)           | 0.69%                  
|Common          | William Katzin
West Vancouver, BC                              | 350,000(6)           | 0.40%                  
|Common          | Kevin Bales
Delta, BC                                          | 350,000(7)           | 0.40%                  
|Common          | Sally Whittall
Maple Ridge, BC                                 | 325,757(8)           | 0.37%                  
|Common          | All Directors and Senior Management as a group
(7 individuals) | 10,265,276           | 11.71%                 





|      
|------
|- 38 -
|      







(1)

Based on 86,675,617 shares outstanding as at April 8, 2013, plus any Common Shares deemed to be beneficially owned by the individual (or, for the last row of the table, by the group) pursuant to options and warrants which are exercisable by the individual (or, for the last row of the table, by the group) within 60 days from the above date.



(2)

1,220,000 of these shares represent currently exercisable warrants and stock options.  3,069,640 of the free trading shares are held by Mill Street Services Ltd., a private company owned by the Ridgway Family Trust, of which Simon Ridgway is the Trustee.  1,389 of the free trading shares are held by Elvietri Holdings AVV, a private company owned by Simon Ridgway.



(3)

400,000 of these shares represent currently exercisable warrants and stock options.



(4)

614,285 of these shares represent currently exercisable stock options.



(5)

400,000 of these shares represent currently exercisable warrants and stock options.



(6)

All of these shares represent currently exercisable stock options.



(7)

All of these shares represent currently exercisable stock options.



(8)

320,000 of these shares represent currently exercisable stock options.

Stock Option Plan



In January 2010, the Company established a Director and Employee Stock Option Plan, the material terms of which are as follows:



1.

the Plan reserves a rolling maximum of 10% of the issued capital of the Company at the time of granting of each option, with no vesting provisions;

2.

no more than 5% of the issued capital may be reserved for issuance to any one individual in any 12 month period;

3.

no more than 2% of the issued capital may be reserved for issuance to any Consultant (as defined by the TSX Venture Exchange (TSXV) or to an optionee providing investor relations services in any 12 month period;

4.

the minimum exercise price of an option cannot be less than the Market Price (as defined by the TSXV) of the Companys shares;

5.

options will be granted for a period of up to 10 years;

6.

options are non-assignable and non-transferable; and

7.

there are provisions for adjustment in the number of shares issuable on exercise of options in the event of a share consolidation, split, reclassification or other relevant change in the Companys corporate structure or capitalization.

As at April 8, 2013, there were 5,610,000 shares reserved for issuance and subject to outstanding options granted under the Plan.





|      
|------
|- 39 -
|      







Item 7.

Major Shareholders and Related Party Transactions.



A.

Major Shareholders.

A major shareholder of the Company is a person that beneficially owns, directly or indirectly, more than 5% of the Companys issued and outstanding Common Shares including any Common Shares deemed to be beneficially owned by the shareholder pursuant to options and warrants which are exercisable by the shareholder within 60 days.  To the best of the Companys knowledge, as of April 8, 2013 the only major shareholders in the Company are:



| |               |               |           
| | ------------- | ------------- | ----------
| | Name          | No. of Shares | Percentage
| | Simon Ridgway | 6,001,452     | 6.83%     
| | Sprott Inc.   | 7,248,600     | 8.36%     



To the best of the Companys knowledge, there are no arrangements the operation of which may result in a change in control of the Company.

The Company is a publicly-owned corporation, the shares of which are owned by residents of Canada, the United States, and other countries.  The Company is not controlled directly or indirectly by another corporation or any foreign government.  As of April 8, 2013, there were 86,675,617 shares of the Company outstanding, of which approximately 1,984 U.S. holders of record or beneficial holders held a total of 17,938,482 shares (20.7%).  The number of beneficial holders was determined based on a report prepared by Broadridge Investor Communications, a U.S. mailing service.



B.

Related Party Transactions.

From January through March 2012, the Company paid to Mill Street Services Ltd. $5,000 per month for Simon Ridgways services as Chief Executive Officer of the Company.  Mill Street Services Ltd. is a private company owned by the Ridgway Family Trust, of which Simon Ridgway is the Trustee.  As of April 1, 2012, the month fee was increased to $6,000 per month.

During the fiscal year ended December 31, 2012, the Company paid an aggregate of $280,917 to directors, officers and companies which have common directors with the Company for consulting, management and administrative services.  This amount includes a $72,000 bonus paid to Mill Street Services Ltd. in recognition of the services of Simon Ridgway in completing the Companys sale of its Nicaragua properties to B2Gold.



C.

Interests of Experts and Counsel.

Not Applicable.





|      
|------
|- 40 -
|      







Item 8.

Financial Information.



A.

Consolidated Statements and Other Financial Information.

The financial statements as required under Item 18 are attached hereto and found immediately following Item 19 of this Annual Report.  The Companys auditor is BDO Canada LLP, Chartered Accountants.  An auditors report of BDO Canada LLP with respect to the fiscal years ended December 31, 2012 and 2011 and the statements of financial position as at December 31, 2012 and 2011, are included herein immediately preceding the consolidated financial statements.

There are no legal proceedings currently pending which may have, or have had in the recent past, significant effects on the Companys financial position or profitability.

The Company has no history of paying dividends and the Company does not contemplate that any dividends will be paid on its shares in the immediate or the foreseeable future.  The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.



B.

Significant Changes.

There have been no significant changes in the Company since the date of the Companys annual financial statements.



Item 9.

The Offer and Listing.



The Company shares were listed and posted for trading on the TSXV (formerly the Canadian Venture Exchange and before that, the Vancouver Stock Exchange) on October 7, 1998 and currently trades on the TSXV.  The TSXV trading symbol is RDU.



Effective October 4, 2002, the Company began trading on the Regulated Unofficial Market of the Frankfurt Stock Exchange under the trading symbol RE1.  The Company has the German Security ID number of 725224.

Effective December 22, 2004, the Companys shares began trading on the U.S. Over-the-Counter Bulletin Board (OTCBB) under the trading symbol RDUFF.





|      
|------
|- 41 -
|      







A.

Offer and Listing Details.

The following tables set forth the reported high and low closing bid prices on the TSXVand the OTCBBfor (a) the Companys five most recent fiscal years; (b) each quarterly period for the Companys past two fiscal years and for the first quarter of the Companys 2013 fiscal year, and (c) for each of the six months from October 2012 to March 2013.

|                                                         |             |             |       |      
|-------------------------------------------------------- | ----------- | ----------- | ----- | -----
|High and Low Price for the Five Most Recent Fiscal Years
|Fiscal Year ended December 31                            | TSXV (CAD$) | OTCBB (US$)
|High                                                     | Low         | High        | Low  
|2012                                                     | $0.39       | $0.15       | $0.39 | $0.15
|2011                                                     | $0.93       | $0.20       | $0.97 | $0.17
|2010                                                     | $0.97       | $0.20       | $0.33 | $0.06
|2009                                                     | $0.28       | $0.09       | $0.57 | $0.02
|2008                                                     | $0.58       | $0.04       | $0.77 | $0.36



|                                                                                                                     |             |             |       |      
|-------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ----- | -----
|High and Low Prices for Each Quarterly Period for the Past Two Fiscal Years and For the First Quarter of Fiscal 2013
|Period Ended                                                                                                         | TSXV (CAD$) | OTCBB (US$)
|High                                                                                                                 | Low         | High        | Low  
|March 31, 2013                                                                                                       | $0.23       | $0.15       | $0.23 | $0.14
|December 31, 2012                                                                                                    | $0.30       | $0.17       | $0.27 | $0.17
|September 30, 2012                                                                                                   | $0.30       | $0.17       | $0.31 | $0.17
|June 30, 2012                                                                                                        | $0.38       | $0.15       | $0.35 | $0.15
|March 31, 2012                                                                                                       | $0.39       | $0.24       | $0.39 | $0.22
|December 31, 2011                                                                                                    | $0.49       | $0.20       | $0.49 | $0.18
|September 30, 2011                                                                                                   | $0.93       | $0.37       | $0.93 | $0.35
|June 30, 2011                                                                                                        | $0.84       | $0.44       | $0.88 | $0.48
|March 31, 2011                                                                                                       | $0.92       | $0.53       | $0.93 | $0.54



|                                                   |             |             |       |      
|-------------------------------------------------- | ----------- | ----------- | ----- | -----
|High and Low Prices for the Most Recent Six Months
|                                                   | TSXV (CAD$) | OTCBB (US$)
|Period                                             | High        | Low         | High  | Low  
|March 2013                                         | $0.19       | $0.15       | $0.19 | $0.14
|February 2013                                      | $0.19       | $0.16       | $0.19 | $0.15
|January 2013                                       | $0.23       | $0.19       | $0.23 | $0.18
|December 2012                                      | $0.30       | $0.17       | $0.24 | $0.17
|November 2012                                      | $0.24       | $0.17       | $0.23 | $0.17
|October 2012                                       | $0.27       | $0.20       | $0.27 | $0.21





|      
|------
|- 42 -
|      







On April 8, 2013, the closing price of the Common Shares was $0.15 per Common Share on TSXV and US$0.15 per Common Share on the OTCBB.  During the last three years, the Common Shares have not been subject to any trading suspensions.



B.

Plan of Distribution.

Not Applicable



C.

Markets.

The Companys shares were listed and posted for trading on the TSXV (formerly the Canadian Venture Exchange and before that, the Vancouver Stock Exchange) on October 7, 1998 and currently trades on the TSXV.  The TSXV trading symbol is RDU.



Effective October 4, 2002, the Companys shares began trading on the Regulated Unofficial Market of the Frankfurt Stock Exchange under the trading symbol RE1.  The Company has the German Security ID number of 725224.

Effective December 22, 2004, the Companys shares began trading on the U.S. Over-the-Counter Bulletin Board under the trading symbol RDUFF.



D.

Selling Shareholders.

Not Applicable.



E.

Dilution.

Not Applicable



F.

Expenses of the Issue.

Not Applicable





|      
|------
|- 43 -
|      







Item 10.

Additional Information.



A.

Share Capital.

Not Applicable



B.

Articles of Association.

The Companys Articles do not contain any restrictions on the type of business in which the Company may engage.

Section 17 of the Companys Articles provides that, A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.  A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

Section 13.5 of the Articles provides that the directors may from time to time determine the remuneration of directors.  However, a disclosable interest does not include compensation to be paid to a director, and therefore such interest is not required to be disclosed pursuant to Section 17 of the Articles.  Management believes that, in the absence of an independent quorum, a director cannot vote compensation to himself or herself.

The borrowing powers of the directors are addressed in Part 8, which states that, The Company, if authorized by the directors, may:



(1)

borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;



(2)

issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;



(3)

guarantee the repayment of money by any other person or the performance of any obligation of any other person; and



(4)

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.





|      
|------
|- 44 -
|      







There is no provision in the Companys Articles regarding a mandatory age for retirement of directors.  There is no requirement for a director to hold shares of the Company.

All of the authorized shares of common stock of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefor.

Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities.  No shares have been issued subject to call or assessment.  There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.

Any modification, amendment or variation of such shareholder rights or provisions are governed by the British Columbia Business Corporations Act and must be approved by a vote of at least 2/3 of the votes cast at a shareholders meeting.  Unless the British Columbia Business Corporations Act or the Companys Articles otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution or by a vote of a majority of the shares represented at the shareholders meeting.



The conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are convoked, including the conditions of admission are described in the Articles of the Company in Section 10  Meetings of Shareholders.

Section 10.1 states that, Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.

Section 10.4 states that, The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:



(1)

if and for so long as the Company is a public company, 21 days;



(2)

otherwise, 10 days.



The conditions of admission are described in Section 11.5 where it is stated that, The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

There are no limitations on the rights to own securities.





|      
|------
|- 45 -
|      







There is no provision of the Companys Articles, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries).

There are no conditions imposed by the Articles governing changes in the capital, where such conditions are more stringent that is required by law.



C.

Material Contracts.

Other than as disclosed elsewhere in this Annual Report, the Company has not entered into any material contracts, other than contracts entered into in the ordinary course of business, during the two year period immediately preceding the filing of this Annual Report.



D.

Exchange Controls.

The Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the common shares.  There are no limitations on the right of non-Canadian owners to hold or vote the common shares imposed by Canadian federal or provincial law or by the charter or other constituent documents of the Company.



E.

Taxation

The following summary of the material Canadian federal income tax consequences are stated in general terms and are not intended to be advice to any particular shareholder.  Each prospective investor is urged to consult his or her own tax advisor regarding the tax consequences of his or her purchase, ownership and disposition of Common Shares.  The tax consequences to any particular holder of Common Shares will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holders particular circumstances.  This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arms length with the Company, hold their Common Shares as capital property and who will not use or hold the Common Shares in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the Tax Act or ITA) and the Canada-United States Tax Convention (the Tax Convention) as at the date of this Annual Report and the current administrative practices of Canada Customs and Revenue Agency.  This summary does not take into account provincial income tax consequences.

Management urges each holder to consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.





|      
|------
|- 46 -
|      







Canadian Income Tax Consequences

The summary below is restricted to the case of a holder (a Holder) of one or more Common Shares who for the purposes of the Tax Act is a non-resident of Canada, holds his Common Shares as capital property and deals at arms length with the Company.

Dividends

A Holder will be subject to Canadian withholding tax (Part XIII Tax) equal to 25%, or such lower rates as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on his Common Shares. Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other case, 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares

A Holder who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the common Share constituted taxable Canadian property as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arms length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the Company.

A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the ten years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one half of the capital gain (taxable capital gain) in computing his taxable income earned in Canada.  The Holder may, subject to certain limitations, deduct one half of any capital loss (allowable capital loss) arising on disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains of any of the three preceding years or any subsequent year.



|      
|------
|- 47 -
|      







United States Federal Income Tax Consequences

The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of Common Shares.  This discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the Code), Treasury Regulations, published Internal Revenue Service (IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possible on a retroactive basis, at any time.  In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.  The discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of Common Shares of the Company.  Each holder and prospective holder of Common Shares of the Company is advised to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of Common Shares of the Company applicable to their own particular circumstances.

U.S. Holders

As used herein, a (U.S. Holder) includes a holder of Common Shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code.  This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a functional currency other than the U.S. dollar, shareholders who hold Common Shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their Common Shares through the exercise of employee stock options or otherwise as compensation for services.  This summary is limited to U.S. Holders who own Common Shares as capital assets.  This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire Common Shares.

Distribution of Common Shares

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holders United States Federal Income tax liability or, alternatively, for individuals may be deducted in computing the U.S. Holders United States Federal taxable income by those individuals who itemize deductions.  (See more detailed discussion at Foreign Tax Credit below).  To the extent that distributions exceed current or accumulated earnings and profits of the Company, they generally will be treated first as a return of capital up to the U.S. Holders adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Dividend income will be taxed at marginal tax rates applicable to ordinary income while preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust.  There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.





|      
|------
|- 48 -
|      







In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale of other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.

Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a foreign personal holding company or a passive foreign investment company, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

Under current Treasury Regulations, dividends paid on the Companys common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Companys common shares paid in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 30% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against the U.S. Holders U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

For individuals whose entire income from sources outside the United States consists of qualified passive income, the total amount of creditable foreign taxes paid or accrued during the taxable year does not exceed $300 ($600 in the case of a joint return) and an election is made under section 904(k), the limitation on credit does not apply.

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of Common Shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayers income subject to tax.  This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holders United States income tax liability that the U.S. Holders foreign source income bears to his/her or its worldwide taxable income in the determination of the application of this limitation.  The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as passive income, high tax income, financial services income, and certain other classifications of income.  Dividends distributed by the Company will generally constitute passive income or, in the case of certain U.S. Holders, financial services income for these purposes.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and management urges holders and prospective holders of common shares of the Company to consult their own tax advisors regarding their individual circumstances.





|      
|------
|- 49 -
|      







Disposition of Common Shares

A U.S. Holder will recognize gain or loss upon the sale of Common Shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholders tax basis in the Common Shares of the Company.  Preferential tax rates apply to long-term capital gains of U.S. Holders, which are individuals, estates or trusts.  This gain or loss will be capital gain or loss if the Common Shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders which are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted, but individuals may not carry back capital losses.  For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of Common Shares of the Company.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (PFIC), as defined in Section 1297 of the Code, depending upon the percentage of the Companys income which is passive, or the percentage of the Companys assets which is held for the purpose of producing passive income.

Certain United States income tax legislation contains rules governing PFICs, which can have significant tax effects on U.S. shareholders of foreign corporations.  These rules do not apply to non-U.S. shareholders.  Section 1297(a) of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is passive income, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the company is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of passive income is 50% or more.  The taxation of a US shareholder who owns stock in a PFIC is extremely complex and is therefore beyond the scope of this discussion.  Management urges US persons to consult with their own tax advisors with regards to the impact of these rules.





|      
|------
|- 50 -
|      







Controlled Foreign Corporation

A Controlled Foreign Corporation (CFC) is a foreign corporation more than 50% of whose stock by vote or value is, on any day in the corporations tax year, owned (directly or indirectly) by U.S. Shareholders.  If more than 50% of the voting power of all classes of stock entitled to vote is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own actually or constructively 10% or more of the total combined voting power of all classes of stock of the Company, then the Company could be treated as a controlled foreign corporation under Subpart F of the Code.  This classification would affect many complex results, one of which is the inclusion of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFCs Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFCs earnings invested in U.S. property.  The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation, and such U.S. Holder owned 10% or more of the voting power at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company (accumulated in corporate tax years beginning after 1962, but only while the shares were held and while the Company was controlled) attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to the United States Shareholders of the CFC.  This rule generally will be effective for taxable years of United States Shareholders beginning after 1986 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders.  The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to the U.S. Holders that are less than 10% shareholders.  Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.

The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holders federal income tax liability.

Filing of Information Returns

Under a number of circumstances, a United States Investor acquiring Common Shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns.  In particular, any U.S. Holder who becomes the owner, directly or indirectly, of 10% or more of the Common Shares of the Company will be required to file such a return.  Other filing requirements may apply, and management urges U.S. Holders to consult their own tax advisors concerning these requirements.



F.

Dividends and Paying Agents.

Not Applicable



G.

Statement by Experts.

Not Applicable



H.

Documents on Display.

The documents concerning the Company which are referred to in this Annual Report may be inspected at the Companys executive offices, located at Suite 650, 200 Burrard Street, Vancouver, BC V6C 3L6.



I.

Subsidiary Information.

Not Applicable





|      
|------
|- 51 -
|      







Item 11.

Quantitative and Qualitative Disclosures about Market Risk.:

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.  Market prices are comprised of three types of risk: foreign currency risk, interest rate risk, and equity price risk.



Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to fluctuations in foreign currencies through its operations in foreign countries.  The Company monitors this exposure, but has no hedge positions. As at December 31, 2012, cash totalling $191,445 (December 31, 2011: $255,717) was held in US dollars, $741 (December 31, 2011: $2,441) in Nicaragua Cordoba, $4,706 (December 31, 2011: $8,091) in Guatemala Quetzal, $5,476 (December 31, 2011: $21,859) in Mexican Pesos and $715 (December 31, 2011: $696) in Peruvian Sols. Based on the above net exposures at December 31, 2012, a 10% depreciation or appreciation of the above currencies against the Canadian dollar would approximately result in a $20,300 increase or decrease in the Companys after tax net earnings, respectively.



Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates.  The Company does not have any borrowings.  Interest rate risk is limited to potential decreases on the interest rate offered on cash held with chartered Canadian financial institutions.  The Company considers this risk to be limited.

Equity Price Risk

Equity price risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.  The Companys available-for-sale investments are exposed to significant equity price risk due to the potentially volatile and speculative nature of the businesses in which the investments are held. The available-for-sale investments held in B2Gold, Focus, Rackla and Fortuna are monitored by the Board with decisions on sale taken by Management.  A 10% decrease in fair value of the shares would approximately result in a $1,655,000 decrease in equity.



Item 12.

Description of Securities Other than Equity Securities.

Not Applicable





|      
|------
|- 52 -
|      







PART II



Item 13.

Defaults, Dividend Arrearages and Delinquencies.

None.



Item 14.

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

None.



Item 15.

Controls and Procedures

Disclosure Controls and Procedures

The Companys management, including the Chief Executive Officer and the Chief Financial Officer, has reviewed and evaluated the effectiveness of the Companys disclosure controls and procedures as of December 31, 2012.  Based on that review and evaluation, management has concluded that the Companys disclosure controls and procedures are effective in providing management with all material information required to be disclosed in this annual report on a timely basis.



Managements Annual Report on Internal Control over Financial Reporting



Management is responsible for establishing and maintaining adequate internal control over financial reporting. All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.



Managements framework for evaluating the effectiveness of its internal controls is based upon the criteria established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.



As at December 31, 2012, management assessed the effectiveness of our internal controls over financial reporting and concluded that such internal controls over financial reporting are effective and that there were no material weaknesses in our internal controls over financial reporting.



Attestation Report of the Registered Accounting Firm.



This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this Annual Report.



Changes in Internal Controls Over Financial Reporting



There has been no material change in the Companys internal controls over financial reporting that occurred during the period covered by this annual report that has materially affected or is reasonably likely to materially affect, the Companys internal controls over financial reporting.





|      
|------
|- 53 -
|      









Item 16.

[Reserved]



Item 16A.

Audit Committee Financial Expert



The Company has identified among the three directors currently serving on the audit committee, William Katzin as an Audit Committee Financial Expert.  Mr. Katzin has been a Chartered Accountant for over 25 years and has experience working with resource and exploration companies.



Item 16B.

Code of Ethics

The Company has not adopted a formal written code of ethics given its relatively small size.  Directors and officers of the Company are subject to the laws of the Province of British Columbia, Canada, whereby they are required to act honestly, in good faith and in the best interests of the Company.



Item 16C.

Principal Accountant Fees and Services

The chart below sets forth the total amounts billed the Company by BDO Canada LLP during the Companys fiscal years ended December 31, 2012 and 2011, and breaks down these amounts by category of service:



|                    |                         |         
|------------------- | ----------------------- | --------
|                    | Years ended December 31
|                    | 2012                    | 2011    
|Audit Fees:         | $178,048                | $167,300
|Audit Related Fees: | -                       | -       
|Tax Fees            | $8,500                  | $5,500  
|All Other Fees      | -                       | -       
|Total               | $186,548                | $172,800



Audit Fees are the aggregate fees billed for the audit of the Companys consolidated annual financial statements, as well as for IFRS transition assistance, U.S. filings review, and review of various transactions completed by the Company.

Audit-Related Fees are fees charged for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements and are not reported under Audit Fees.

Tax Fees are fees for professional services rendered for preparation of tax returns.

All Other Fees are for amounts not included in the above categories.





|      
|------
|- 54 -
|      







Audit Committee's pre-approval policies and procedures

The Audit Committee nominates and engages the independent auditors to audit the financial statements, and approves all audit, audit-related services, tax services and other services provided by the Companys outside auditors.  Any services provided by the auditors that are not specifically included within the scope of the audit must be pre-approved by the audit committee prior to any engagement.  The audit committee is permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimusexception before the completion of the engagement.  In 2012, none of the fees paid to the auditors were approved pursuant to the de minimusexception.



Item 16D.

Exemptions from the Listing Standards for Audit Committees.

Not Applicable



Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

None



Item 16F.

Changes in Registrants Certifying Accountant.

None



Item 16G.

Corporate Governance.



Not applicable



Item 16H.

Mine Safety Disclosure.



Not applicable



PART III



Item 17.

Financial Statements.

Not Applicable





|      
|------
|- 55 -
|      







Item 18.

Financial Statements.



The Companys Consolidated Financial Statements are stated in Canadian Dollars and are prepared in accordance with IFRS as issued by the IASB, effective with the Companys transition to IFRS on January 1, 2010..

The Consolidated Financial Statements of the Company as required under Item 18 of Form 20-F attached hereto are individually listed under Item 19, and are found immediately following the text of this Annual Report.  The audit report of BDO Canada LLP, Chartered Accountants is included herein immediately preceding the Consolidated Financial Statements.



Item 19.

Exhibits.

Financial Statements

The Consolidated Financial Statements of the Corporation and exhibits listed below are filed with this Annual Report on Form 20-F in the United States.

The following financial statements are attached to and form part of this Annual Report:

|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|Consolidated Financial Statements of the Company                                                             
|-
Independent Auditors Report of BDO Canada LLP, Chartered Accountants                                      
|-
Consolidated Statements of Financial Position as at December 31, 2012 and 2011                             
|-
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 2010
|-
Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010          
|-
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010                 
|-
Notes to the Consolidated Financial Statements for the year ended December 31, 2012                        

Exhibits

The following exhibits are attached to and form part of this Annual Report:

|            |                                                                            
|----------- | ---------------------------------------------------------------------------
|Exhibit No. | Description                                                                
|1 (1)       | Certificate of Amalgamation and Articles of the Company dated July 1, 2004.
|4 (2)       | Agreement dated November 3, 2011 between the Company and Rackla Metals Inc.
|4 (2)       | Agreement dated April 6, 2012 between the Company and B2Gold Corp.         
|8 (3)       | List of Subsidiaries                                                       
|31.1        | Section 302 Certification of the President, C.E.O. and C.F.O.              
|32.1        | Section 906 Certification of the President, C.E.O. and C.F.O.              



(1)

Incorporated by reference to the Companys Form 20-F Registration Statement dated July 13, 2005.



(2)

Incorporated by reference to the Companys Form 20F Registration Statement dated April 16, 2012.



(3)

See Item 4.C, Organizational Structure, herein.





|      
|------
|- 56 -
|      













[radius_201220fannual002.jpg]





(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2012

(Expressed in Canadian Dollars)











|      
|------
|- 57 -
|      









|                              |                                                  |                                                                                       
|----------------------------- | ------------------------------------------------ | --------------------------------------------------------------------------------------
|[radius_201220fannual004.gif] | Tel:  604 688 5421
Fax:  604 688 5132
www.bdo.ca | BDO Canada LLP
600 Cathedral Place
925 West Georgia Street
Vancouver BC V6C 3L2 Canada





INDEPENDENT AUDITOR'S REPORT



To the shareholders of Radius Gold Inc.



We have audited the accompanying consolidated financial statements of Radius Gold Inc. and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2012 and 2011 and the consolidated statements of comprehensive income (loss), changes in equity, and cash flows for each of the years in the three year period ended December 31, 2012, and a summary of significant accounting policies and other explanatory information.



Management's Responsibility for the Consolidated Financial Statements

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



Auditor's Responsibility

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



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



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



Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Radius Gold Inc., and its subsidiaries as at December 31, 2012 and 2011 and its financial performance and its cash flows for each of the years in the three year period ended December 31, 2012, in accordance with International Financial Reporting Standards, as issued by the IASB.



Emphasis of Matter

Without modifying our opinion, we draw attention to Note 18 of the consolidated financial statements, which explains that the consolidated financial statements for the year ended December 31, 2011 have been amended for a correction of an error from those on which we originally reported on April 25, 2012.



(signed) BDO Canada LLP



Chartered Accountants

April 26, 2013





|      
|------
|- 58 -
|      







RADIUS GOLD INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian Dollars)



|                                                   |                 |                     
|-------------------------------------------------- | --------------- | --------------------
|As at:                                             | December 31,    | December 31,        
|                                                   | 2012            | 2011                
|                                                   |                 | (Restated 
Note 18)
|ASSETS                                             |                 |                     
|                                                   |                 |                     
|Current assets                                     |                 |                     
|Cash and cash equivalents (Note 5)                 | $       994,367 | $    1,763,574      
|Available-for-sale investments (Note 6)            | 16,550,166      | 641,707             
|Advances and other receivables (Note 14)           | 40,150          | 766,939             
|Taxes receivable                                   | 49,203          | 361,697             
|Due from related parties (Note 14)                 | 116,947         | 541,889             
|Prepaid expenses and deposits (Note 14)            | 194,078         | 349,833             
|Total current assets                               | 17,944,911      | 4,425,639           
|                                                   |                 |                     
|Non-current assets                                 |                 |                     
|Long-term deposits                                 | 73,623          | 70,425              
|Property and equipment (Note 7)                    | 199,606         | 251,100             
|Exploration and evaluation assets  (Notes 8 and 9) | 531,369         | 4,103,346           
|Investment in associate (Note 8)                   | 493,319         | 1,500,647           
|Total non-current assets                           | 1,297,917       | 5,925,518           
|                                                   |                 |                     
|TOTAL ASSETS                                       | $  19,242,828   | $  10,351,157       
|                                                   |                 |                     
|LIABILITIES AND SHAREHOLDERS' EQUITY               |                 |                     
|                                                   |                 |                     
|Current liabilities                                |                 |                     
|Accounts payable and accrued liabilities (Note 14) | $       255,301 | $       775,439     
|Total liabilities                                  | 255,301         | 775,439             
|                                                   |                 |                     
|Shareholders' equity                               |                 |                     
|Share capital  (Note 11)                           | 56,592,613      | 56,592,613          
|Other equity reserve                               | 6,636,658       | 6,251,338           
|Deficit                                            | (44,849,250)    | (53,778,607)        
|Accumulated other comprehensive (loss) income      | 607,506         | 510,374             
|Total shareholders' equity                         | 18,987,527      | 9,575,718           
|                                                   |                 |                     
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         | $  19,242,828   | $  10,351,157       



Events after the reporting date  Note 19



APPROVED ON BEHALF OF THE BOARD OF DIRECTORS AND AUTHORIZED FOR ISSUE ON APRIL 26, 2013 BY:



Simon Ridgway, Director

Ralph Rushton, Director

Simon Ridgway

Ralph Rushton



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





|      
|------
|- 59 -
|      







RADIUS GOLD INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the years ended December 31, 2012, 2011 and 2010

(Expressed in Canadian Dollars)



|                                                                              |                  |                      |                
|----------------------------------------------------------------------------- | ---------------- | -------------------- | ---------------
|                                                                              | 2012             | 2011                 | 2010           
|                                                                              |                  | (Restated - Note 18) |                
|EXPLORATION EXPENDITURES                                                      | $        884,966 | $     6,390,053      | $     2,838,390
|GENERAL AND ADMINISTRATIVE EXPENSES                                           |                  |                      |                
|Amortization                                                                  | 53,865           | 58,334               | 48,000         
|Communications (Note 14)                                                      | 9,834            | 18,798               | 12,300         
|Consulting fees (Note 14)                                                     | 127,826          | 114,544              | 30,000         
|Donations                                                                     | 11,973           | 1,593                | 2,000          
|Legal and audit fees                                                          | 186,062          | 132,763              | 133,896        
|Management fees (Note 14)                                                     | 141,000          | 60,000               | 60,000         
|Office and miscellaneous (Note 14)                                            | 43,182           | 62,186               | 46,344         
|Public relations (Note 14)                                                    | 68,301           | 124,662              | 103,779        
|Rent and utilities (Note 14)                                                  | 58,356           | 25,714               | 25,105         
|Repair and maintenance (Note 14)                                              | 29,450           | 27,802               | 6,549          
|Salaries and benefits (Note 14)                                               | 264,951          | 216,435              | 247,271        
|Share-based compensation (Notes 12 and 14)                                    | 385,320          | 306,915              | 1,612,792      
|Transfer agent and regulatory fees (Note 14)                                  | 17,192           | 25,659               | 34,936         
|Travel and accommodation (Note 14)                                            | 101,306          | 67,058               | 82,043         
|                                                                              | 1,498,618        | 1,242,463            | 2,445,015      
|Loss before other income/(expenses)                                           | (2,383,584)      | (7,632,516)          | (5,283,405)    
|OTHER INCOME (EXPENSES)                                                       |                  |                      |                
|Share of post-tax losses of associate (Note 8)                                | (366,950)        | (6,250)              | -              
|Impairment on shares held in associate (Note 8)                               | (855,632)        | -                    | -              
|Gain on distribution (Note 8)                                                 | -                | 4,807,443            | -              
|Plan of arrangement costs (Note 8)                                            | -                | (289,313)            | -              
|Foreign currency exchange gain (loss)                                         | (13,062)         | 15,134               | 10,106         
|Gain on sale of properties (Note 9)                                           | 16,278,410       | -                    | -              
|Loss on disposal of property (Note 9)                                         | (3,823,118)      | -                    | -              
|Gain (loss) on disposal of property and equipment                             | (41,780)         | 2,886                | 4,365          
|Gain on sale of marketable securities                                         | 46,065           | -                    | 1,213          
|Impairment on available-for-sale investment (Notes 6 and 18)                  | (20,148)         | (465,925)            | -              
|Gain from mineral property option agreements                                  | 101,564          | 157,088              | 247,447        
|Investment income                                                             | 8,883            | 61,397               | 34,275         
|Write off of accounts payable and accrued liabilities                         | -                | -                    | 52,500         
|Write off of prepaid expenses and deposits                                    | -                | -                    | (3,208)        
|Write off of receivables (Note 9)                                             | (1,291)          | -                    | -              
|Income (loss) before income taxes                                             | 8,929,357        | (3,350,056)          | (4,936,707)    
|Deferred income tax recovery (Note 13)                                        | -                | 716,754              | 358,533        
|Net income (loss) for the year                                                | $     8,929,357  | $  (2,633,302)       | $  (4,578,174) 
|Other comprehensive income (loss)                                             |                  |                      |                
|Fair value gains (losses) on available-for-sale investments          (Note 6) | 97,132           | 631,891              | (373,790)      
|Total comprehensive income (loss)                                             | $     9,026,489  | $  (2,001,411)       | $  (4,951,964) 
|Basic and diluted earnings (loss) per share (Note 3)                          | $0.10            | $(0.03)              | $(0.07)        
|Weighted average number of common shares outstanding                          | 86,675,617       | 83,231,679           | 61,530,309     



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





|      
|------
|- 60 -
|      







RADIUS GOLD INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2012, 2011 and 2010

(Expressed in Canadian Dollars)



|                                                         |                         |                    |                      |                                               |                   |                    
|-------------------------------------------------------- | ----------------------- | ------------------ | -------------------- | --------------------------------------------- | ----------------- | -------------------
|                                                         | Number of common shares | Share capital      | Other equity reserve | Accumulated other comprehensive income (loss) | Deficit           | Total              
|Balance, January 1, 2010                                 | 53,548,488              | $      42,587,194  | $       4,332,232    | $            252,273                          | $    (40,499,827) | $         6,671,872
|Loss for the year                                        | -                       | -                  | -                    | -                                             | (4,578,174)       | (4,578,174)        
|Shares issued for private placements                     | 24,406,143              | 9,816,211          | -                    | -                                             | -                 | 9,816,211          
|Shares issued for finders' fees                          | 953,549                 | 415,404            | -                    | -                                             | -                 | 415,404            
|Shares issued for property acquisition                   | 222,509                 | 111,300            | -                    | -                                             | -                 | 111,300            
|Options exercised                                        | 460,000                 | 187,100            | -                    | -                                             | -                 | 187,100            
|Warrants exercised                                       | 136,850                 | 68,650             | -                    | -                                             | -                 | 68,650             
|Transfer of other equity reserve on
exercise of options  | -                       | 137,282            | (137,282)            | -                                             | -                 | -                  
|Transfer of other equity reserve on
exercise of warrants | -                       | 243                | (243)                | -                                             | -                 | -                  
|Share issuance costs                                     | -                       | (692,175)          | 159,128              | -                                             | -                 | (533,047)          
|Available-for-sale investments                           | -                       | -                  | -                    | (373,790)                                     | -                 | (373,790)          
|Share-based compensation                                 | -                       | -                  | 1,612,792            | -                                             | -                 | 1,612,792          
|Balance, December 31, 2010                               | 79,727,539              | 52,631,209         | 5,966,627            | (121,517)                                     | (45,078,001)      | 13,398,318         
|Loss for the year                                        | -                       | -                  | -                    | -                                             | (2,633,302)       | (2,633,302)        
|Shares issued for private placements                     | 6,100,000               | 3,660,000          | -                    | -                                             | -                 | 3,660,000          
|Shares issued for finders' fees                          | 199,250                 | 119,550            | -                    | -                                             | -                 | 119,550            
|Shares issued for property acquisition                   | 159,512                 | 119,700            | -                    | -                                             | -                 | 119,700            
|Options exercised                                        | 105,000                 | 37,250             | -                    | -                                             | -                 | 37,250             
|Warrants exercised                                       | 384,316                 | 195,448            | -                    | -                                             | -                 | 195,448            
|Transfer of other equity reserve on
exercise of options  | -                       | 33,213             | (33,213)             | -                                             | -                 | -                  
|Transfer of other equity reserve on
exercise of warrants | -                       | 22,252             | (22,252)             | -                                             | -                 | -                  
|Share issuance costs                                     | -                       | (226,009)          | 33,261               | -                                             | -                 | (192,748)          
|Available-for-sale investments                           | -                       | -                  | -                    | 631,891                                       | -                 | 631,891            
|Fair value of distributed assets (Note 8)                | -                       | -                  | -                    | -                                             | (6,067,304)       | (6,067,304)        
|Share-based compensation                                 | -                       | -                  | 306,915              | -                                             | -                 | 306,915            
|Balance, December 31, 2011                               | 86,675,617              | 56,592,613         | 6,251,338            | 510,374                                       | (53,778,607)      | 9,575,718          
|Income for the year                                      | -                       | -                  | -                    | -                                             | 8,929,357         | 8,929,357          
|Available-for-sale investments                           | -                       | -                  | -                    | 97,132                                        | -                 | 97,132             
|Share-based compensation                                 | -                       | -                  | 385,320              | -                                             | -                 | 385,320            
|Balance, December 31, 2012                               | 86,675,617              | $       56,592,613 | $        6,636,658   | $             607,506                         | $    (44,849,250) | $       18,987,527 

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





|      
|------
|- 61 -
|      







RADIUS GOLD INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2012, 2011 and 2010

(Expressed in Canadian Dollars)



|                                                                     |                     |                    |                 
|-------------------------------------------------------------------- | ------------------- | ------------------ | ----------------
|                                                                     | 2012                | 2011               | 2010            
|Cash provided by (used in):                                          |                     |                    |                 
|OPERATING  ACTIVITIES                                                |                     |                    |                 
|Net income/(loss) for the year                                       | $         8,929,357 | $      (2,633,302) | $   (4,578,174) 
|Items not involving cash:                                            |                     |                    |                 
|Amortization                                                         | 53,839              | 58,334             | 48,000          
|Gain from mineral property option agreements                         | (101,564)           | (157,088)          | (247,447)       
|Gain on sale of exploration and evaluation asset (Note 9)            | (16,278,410)        | -                  | -               
|Loss from disposal of exploration and evaluation asset (Note 9)      | 3,823,118           | -                  | -               
|Loss (gain) from disposal of property and equipment                  | 41,780              | (2,886)            | (4,365)         
|Write off of receivables                                             | 1,291               | -                  | -               
|Write off of prepaid expenses and deposits                           | -                   | -                  | 3,208           
|Write off of accrued liabilities                                     | -                   | -                  | (52,500)        
|Investment income                                                    | (8,883)             | (61,397)           | -               
|Impairment of available-for-sale investments (Notes 6 and 18)        | 20,148              | 465,925            | -               
|Impairment of shares held in associate                               | 855,632             | -                  | -               
|Gain on sale of marketable securities                                | (46,065)            | -                  | (1,213)         
|Gain on distribution                                                 | -                   | (4,807,443)        | -               
|Share of post-tax losses of associate                                | 366,950             | 6,250              | -               
|Deferred income tax recovery                                         | -                   | (716,754)          | (358,533)       
|Share-based compensation                                             | 385,320             | 306,915            | 1,612,792       
|                                                                     | (1,957,461)         | (7,541,446)        | (3,578,232)     
|Changes in non-cash working capital items:                           |                     |                    |                 
|Advances and other receivables                                       | 295,770             | (463,329)          | (191,904)       
|Taxes receivable                                                     | 312,494             | (266,193)          | (83,562)        
|Prepaid expenses and deposits                                        | 155,755             | (204,685)          | (95,527)        
|Long-term deposits                                                   | (3,198)             | (46,544)           | -               
|Due from related parties                                             | 424,942             | (365,381)          | (23,560)        
|Accounts payable and accrued liabilities                             | (520,138)           | 227,461            | 352,047         
|                                                                     | (1,291,836)         | (8,660,117)        | (3,620,738)     
|FINANCING ACTIVITIES                                                 |                     |                    |                 
|Costs of issue of shares                                             | -                   | (73,198)           | (117,643)       
|Proceeds on issuance of common shares                                | -                   | 3,892,698          | 11,098,514      
|                                                                     | -                   | 3,819,500          | 10,980,871      
|INVESTING  ACTIVITIES                                                |                     |                    |                 
|Cash distributed on distribution of Rackla Metal shares              | -                   | (1,000,000)        | -               
|Investment in associate (Note 8)                                     | (215,254)           | -                  | -               
|Expenditures on exploration and evaluation asset
acquisition costs   | -                   | (191,919)          | (717,544)       
|Investment income                                                    | 8,883               | 61,397             | -               
|Proceeds from mineral property option agreements                     | 50,782              | 106,206            | 120,574         
|Proceeds from disposal of mineral property (Note 9)                  | 98,750              | -                  | -               
|Expenses incurred on sale of mineral property rights (Note 9)        | (304,746)           | -                  | -               
|Proceeds from sale of marketable securities and investments (Note 6) | 928,365             | 1,412              | 539,299         
|Proceeds from sale of property and equipment                         | 4,078               | 24,477             | 28,199          
|Purchase of property and equipment (Note 7)                          | (48,229)            | (113,599)          | (110,938)       
|                                                                     | 522,629             | (1,112,026)        | (140,410)       
|Foreign exchange on opening cash and cash equivalents                | -                   | 870                | (3,642)         
|Decrease in cash and cash equivalents                                | (769,207)           | (5,951,773)        | 7,216,081       
|Cash and cash equivalents - beginning of year                        | 1,763,574           | 7,715,347          | 499,266         
|Cash and cash equivalents - end of year                              | $           994,367 | $       1,763,574  | $      7,715,347



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





|      
|------
|- 62 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



1.

CORPORATE INFORMATION



Radius Gold Inc. (the Company) was formed by the amalgamation of Radius Explorations Ltd. and PilaGold Inc. effective on July 1, 2004.



The Company is domiciled in Vancouver, Canada and is engaged in acquisition and exploration of mineral properties located primarily in Central America and up to December 8, 2011, in Canada (Note 8). The address of the Companys head office is #650  200 Burrard Street, Vancouver, BC, Canada V6C 3L6.



2.

BASIS OF PREPARATION



Statement of Compliance

These consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).



Basis of Measurement

These consolidated financial statements have been prepared on the historical cost basis, as modified by any revaluation of available-for-sale financial assets.



The consolidated financial statements are presented in Canadian dollars (CDN), which is also the Companys functional currency.



The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Companys accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.



Nature of Operations



The Company has not generated revenue from operations. The Company has an accumulated deficit of $44,849,250. However, the Company has sufficient working capital to meet its obligations for at least twelve months from the end of the reporting year. As the Company is in the exploration stage, the recoverability of the costs incurred to date on exploration properties is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its properties and upon future profitable production or proceeds from the disposition of the properties and deferred exploration expenditures. The Company will periodically have to raise funds to continue operations and, although it has been successful in doing so in the past, there is no assurance it will be able to do so in the future.





|      
|------
|- 63 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements.



a)

Basis of Consolidation



These consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries. A wholly owned subsidiary is an entity in which the Company has control, directly or indirectly, where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. All material intercompany transactions and balances have been eliminated on consolidation. Subsidiaries are deconsolidated from the date control ceases.



Details of the Companys principal subsidiaries at December 31, 2012 are as follows:



| |                                |                        |            |                    
| | ------------------------------ | ---------------------- | ---------- | -------------------
| | Name                           | Place of Incorporation | Interest % | Principal Activity 
| | Minerales Sierra Pacifico S.A. | Guatemala              | 100%       | Exploration company
| | Recursos Del Golfo, S.A.,      | Guatemala              | 100%       | Exploration company
| | Minerales de Nicaragua S.A.    | Nicaragua              | 100%       | Exploration company
| | Geometales Del Norte-Geonorte  | Mexico                 | 100%       | Exploration company
| | Radius (Cayman) Inc            | Cayman Islands         | 100%       | Holding company    



b)

Investment in Associate



Where the Company has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognized in the consolidated statement of financial position at cost. The Company's share of post-acquisition profits and losses is recognized in the consolidated statement of comprehensive income, except that losses in excess of the Companys investment in the associate are not recognized unless there is an obligation to fund those losses.



Profits and losses arising on transactions between the Company and its associates are recognized only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.



Any premium paid for an associate above the fair value of the Company's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalized and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.



c)

Available-for-sale Investments



Available-for-sale investments are recorded at fair market value as they are considered available-for-sale.





|      
|------
|- 64 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



d)

Foreign Currency Translation



The functional and presentation currency of the Company and its principal subsidiaries is the Canadian dollar. Transactions entered into in a currency other than the entitys functional currency are translated as follows: unsettled monetary items denominated in a foreign currency are translated into Canadian dollars at exchange rates prevailing at the balance sheet date and non-monetary items are translated at exchange rates prevailing when the assets were acquired or obligations incurred. Foreign currency denominated revenue and expense items are translated at exchange rates prevailing at the transaction date.  Gains or losses arising from the translations are included in operations.



e)

Cash and Cash Equivalents



Cash and cash equivalents includes cash at banks and on hand, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and are subject to an insignificant risk of change of value.



f)

Mineral Exploration and Evaluation Expenditures



Acquisition costs for exploration and evaluation assets are capitalized and include the cash consideration paid and the fair value of common shares issued on acquisition, based on the trading price of the shares on the date of the agreement to issue the shares. Exploration expenditures, net of recoveries, are charged to operations as incurred.  After a property is determined by management to be commercially feasible, exploration and development expenditures on the property will be capitalized. On transfer to development properties, capitalized exploration and evaluation assets are assessed for impairment.



Options are exercisable entirely at the discretion of the optionee and amounts received from optionees in connection with option agreements are credited against the capitalized acquisition costs classified as exploration and evaluation assets on the balance sheet and amounts received in excess are credited to gain from exploration and evaluation asset option agreements on the statement of operations.



Where the Company has entered into option agreements to acquire interests in exploration and evaluation assets that provide for periodic payments or periodic share issuances, amounts unpaid and unissued are not recorded as liabilities since they are payable and issuable entirely at the Companys option. Option payments are recorded as exploration and evaluation costs when the payments are made or received and the share issuances are recorded as exploration and evaluation costs using the fair market value of the Companys common shares at the earlier of the date the counterpartys performance is complete or the issuance date.



The Company is in the process of exploring and developing its exploration and evaluation assets and has not yet determined the amount of reserves available. Management reviews the carrying value of exploration and evaluation assets on a periodic basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the Company will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by the Company, the assessment of future probability of profitable revenues from the asset or from the sale of the asset. Amounts shown for exploration and evaluation assets represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values.



Environmental expenditures that relate to current operations are expensed or capitalized as appropriate.  Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated.  Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Companys commitment to a plan of action based on the then known facts.





|      
|------
|- 65 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



g)

Property, Equipment and Amortization



Recognition and Measurement



On initial recognition, property and equipment are valued at cost, being the purchase price and directly attributable costs of acquisition required to bring the asset to the location and condition necessary to be capable of operating in a manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.



Property and equipment is subsequently measured at cost less accumulated amortization, less any accumulated impairment losses, with the exception of land, which is not amortized.



When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.



Subsequent Costs



The cost of replacing part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of day-to-day servicing of property and equipment are recognized in profit or loss as they are incurred.



Major Maintenance and Repairs



Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.



Gains and Losses



Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount, that are recognized net within other income in profit or loss.



Amortization



Amortization is recognized in profit or loss and property and equipment is amortized over their estimated useful lives using the following methods:



Leasehold improvements

7  8 years straight-line

Trucks

4  8 years straight-line

Computer equipment

25% - 50% declining balance

Field equipment

30% declining balance

Furniture and equipment

20% declining balance

Geophysical equipment

20% declining balance



Additions to equipment are amortized at one-half rate during the year of acquisition.





|      
|------
|- 66 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



h)

Earnings / Loss per Share



Basic income/(loss) per share is calculated by dividing the net income/(loss) available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflects the potential dilution of securities that could share in earnings of an entity. In a loss year, potentially dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive.  Basic and diluted earnings and losses per share are the same for the periods presented.



For the years ended December 31, 2012, 2011 and 2010, potentially dilutive common shares (relating to options and warrants outstanding at year-end) totalling 14,945,001 (2011: 15,945,737; 2010: 14,294,696) were not included in the computation of earnings/(loss) per share, because they were out of the money (2011 and 2010: their effect was anti-dilutive).



i)

Income Taxes



Income tax expense comprises current and deferred tax. Current and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.



Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for those taxable temporary differences arising on the initial recognition of goodwill or on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.



Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset only to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.



j)

Share Capital



Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Companys commons shares, share warrants, and options are classified as equity instruments.



Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.



Warrants issued by the Company typically accompany an issuance of shares in the Company (a unit), and entitle the warrant holder to exercise the warrants for a stated price and a stated number of common shares in the Company. The fair value of the units components sold is measured using the residual value approach.





|      
|------
|- 67 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



k)

Share-based Payments



Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive loss/income over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.



Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statements of comprehensive loss/income over the remaining vesting period.



Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/income over the vesting period, described as the period during which all the vesting conditions are to be satisfied.



Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive loss/income. Options or warrants granted related to the issuance of shares are recorded as a reduction of share capital.



When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model.



All equity-settled share-based payments are reflected in other equity reserve, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in other equity reserve is credited to share capital, adjusted for any consideration paid.



Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date.  Any such excess is recognized as an expense.



l)

Provisions



Rehabilitation Provision



The Company is subject to various government laws and regulations relating to environmental disturbances caused by exploration and evaluation activities. The Company records the present value of the estimated costs of legal and constructive obligations required to restore the exploration sites in the year in which the obligation is incurred. The nature of the rehabilitation activities include restoration, reclamation and revegetation of the affected exploration sites.



The rehabilitation provision generally arises when the environmental disturbance is subject to government laws and regulations. When the liability is recognized, the present value of the estimated costs is capitalized by increasing the carrying amount of the related exploration properties. Over time, the discounted liability is increased for the changes in present value based on current market discount rates and liability specific risks.



The company has determined that there are no rehabilitation provisions as at December 31, 2012 and December 31, 2011.





|      
|------
|- 68 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



l)

Provisions (contd)



Other Provisions



Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events, it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in any provision due to passage of time is recognized as accretion expense.



m)

Impairment of Non-Financial Assets



Impairment tests on non-financial assets, including exploration and evaluation assets are undertaken whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.



Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the assets cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets.



An impairment loss is charged to the profit or loss, except to the extent they reverse gains previously recognized in other comprehensive loss/income.



n)

Financial Instruments



Financial Assets



Financial assets are classified into one of the following categories based on the purpose for which the asset was acquired. All transactions related to financial instruments are recorded on a trade date basis. The Companys accounting policy for each category is as follows:



Loans and Receivables



These assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lender to a borrower in return for a promise to repay on a specified date or dates, or on demand.  They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and subsequently carried at amortized cost, using the effective interest rate method, less any impairment losses. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transactions costs. Gains or losses are recognized in the profit or loss when the loans and receivables are derecognized or impaired, as well as through the amortization process.



TheCompanys loans and receivables comprise advances and other receivables, amounts due from related parties, deposits and cash and cash equivalents in the consolidated statement of financial position.





|      
|------
|- 69 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



n)

Financial Instruments (contd)



Available-For-Sale Investments



Non-derivative financial assets not included in the other categories are classified as available-for-sale and comprise principally the Companys strategic investments in entities not qualifying as subsidiaries or associates.  Available-for-sale investments are carried at fair value with changes in fair value recognized in accumulated other comprehensive loss/income. Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously recognized in other comprehensive loss/income, is recognized in profit or loss.  If there is no quoted market price in an active market and fair value cannot be readily determined, available-for-sale investments are carried at cost.



Purchases and sales of available-for-sale financial assets are recognized on a trade date basis. On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassified from accumulated other comprehensive loss/income to profit or loss.



Impairment of Financial Assets



At each reporting date the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.



Financial Liabilities



Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability was incurred, and comprise trade payables and accrued liabilities. These liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using the effective interest rate method. This ensures that any interest expense over the period of repayment is at a constant rate on the balance of the liability carried in the statement of financial position.  Interest expense, in this context, includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.



Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid. Trade payable amounts are unsecured and are usually paid within forty-five days of recognition.



The Company has made the following designations of its financial instruments:



|                                         |  |                                    
|---------------------------------------- |  | -----------------------------------
|Cash                                     |  | Loans and receivables              
|Available-for-sale investments           |  | Available-for-sale financial assets
|Advances and other receivables           |  | Loans and receivables              
|Amounts due from related parties         |  | Loans and receivables              
|Accounts payable and accrued liabilities |  | Other financial liabilities        





|      
|------
|- 70 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (contd)



o)

Standards, Amendments and Interpretations Not Yet Effective



The following new standards and interpretations have been issued by the IASB but are not yet effective:



IFRS 9 Financial Instruments



IFRS 9 is part of the IASB's wider project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on or after January 1, 2015. The Company is in the process of evaluating the impact of the new standard.



IFRS 10 Consolidated Financial Statements



IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation - Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. The Company is yet to assess the full impact of IFRS 10 and intends to adopt the standard no later than the accounting period beginning January 1, 2013.



IFRS 11 Joint Arrangements



IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-monetary Contributions by Venturers. The Company is yet to assess the full impact of IFRS 11 and intends to adopt the standard no later than the accounting period beginning January 1, 2013.



IFRS 12 Disclosure of Interests in Other Entities



IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entitys interests in other entities. The Company is yet to assess the full impact of IFRS 12 and intends to adopt the standard no later than the accounting period beginning January 1, 2013.



IFRS 13 Fair Value Measurement



IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. The Company is yet to assess the full impact of IFRS 13 and intends to adopt the standard no later than the accounting period beginning January 1, 2013.



No additional new standards, amendments and interpretations have been early adopted in these consolidated financial statements and there are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.





|      
|------
|- 71 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



4.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS



The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.



The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.



The key areas of judgment applied in the preparation of the consolidated financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:



a)

Where the Company holds less than 20% of the voting rights in an investment but the Company has the power to exercise significant influence through common officers and board members, such an investment is treated as an associate. The Company can exercise significant influence over Rackla Metals Inc;



b)

The determination of when an investment is impaired requires significant judgment. In making this judgment, the Company evaluates, amongst other things, the duration and extent to which the fair value of the investment is less that its original cost at each reporting period.



c)

The application of the Companys accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future economic benefits will flow to the Company.



If, after exploration and evaluation expenditure is capitalized, information becomes available suggesting that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount, the Company carries out an impairment test at the cash generating unit or group of cash generating units level in the year the new information becomes available.



The key estimate applied in the preparation of the consolidated financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:



a)

The Company is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite the company's belief that its tax return positions are supportable, the company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law.  This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.



5.

CASH AND CASH EQUIVALENTS



Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. The Company does not hold any deposits with maturities of greater than three months from the date of acquisition. Cash at banks and on hand earns interest at floating rates based on daily bank deposit rates.





|      
|------
|- 72 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



6.

AVAILABLE-FOR-SALE INVESTMENTS



Available-for-sale investments are recorded at fair value.  As of December 31, 2012, available-for-sale investments consisted of 4,560,894 common shares of B2Gold Corp. (B2Gold), 1,007,406 common shares of Focus Ventures Ltd. (Focus), 23,174 common shares of Fortuna Silver Mines Inc. (Fortuna), and 7,175,700 warrants of Rackla Metals Inc. (Rackla), all of which are public companies.  Focus, Foturna, and Rackla have common directors or officers with the Company. The Company originally received 4,815,894 B2Gold shares on August 10, 2012, pursuant to the disposal of a mineral property (note 9). The Company is entitled to sell a maximum of 10% of the original number of B2Gold shares within any 30-day period without encumbrance.  If the Company wishes to exceed this limitation, there may be a delay of up to 15 days before the selling of the shares can be completed.  During the year ended December 31, 2012, the Company sold shares in B2Gold for proceeds of $928,365. Subsequent to December 31, 2012, the Company sold an additional 677,500 shares in B2Gold for proceeds of approximately $2.6 million.



As at December 31, 2012, the recorded amount for the available-for-sale investments was $16,550,166 (December 31, 2011: $641,707). An unrealized gain (net of tax) of $97,132 was recorded in other comprehensive income during year ended December 31, 2012 (2011: gain of $631,891, net of tax of $79,000; 2010: loss of $373,790, net of tax of $28,215).



For the year ended December 31, 2012, the Company determined that the decline in value of Focus shares was other than temporary and accordingly recorded an impairment of $20,148 For the year ended December 31, 2011, the Company determined that the decline in value of Focus shares was other than temporary and accordingly recorded an impairment of $465,925 (Note 18). There were no impairment provisions on the available-for-sale financial assets in 2010.



The fair value of quoted securities is based on published market prices.



|                                                                |                  |             |                  |                  |                   |                           |                        |             
|--------------------------------------------------------------- | ---------------- | ----------- | ---------------- | ---------------- | ----------------- | ------------------------- | ---------------------- | ------------
|                                                                | B2Gold           | Focus       | Fortuna          | Rackla(1)(2)     | Cordoba(3)        | Solomon Resources Limited | Portfolio Invest-ments | Total       
|Balance, January 1, 2010                                        | $              - | $1,037,628  | $              - | $              - | $     11,000      | $ 130,000                 | $   537,022            | $  1,715,650
|Acquisition of shares                                           | -                | -           | 20,574           | -                | 180,000           | 16,000                    | -                      | 216,574     
|Disposition of investments                                      | -                | -           | -                | -                | -                 | -                         | (535,610)              | (535,610)   
|Net change in fair value recorded in
other comprehensive income | -                | (513,777)   | 16,772           | -                | 109,000           | (14,000)                  | -                      | (402,005)   
|Balance, December 31, 2010                                      | -                | 523,851     | 37,346           | -                | 300,000           | 132,000                   | 1,412                  | 994,609     
|Acquisition of shares                                           | -                | -           | 29,794           | -                | -                 | 22,500                    | -                      | 52,294      
|Transferred on distribution of assets                           | -                | -           | -                | -                | (600,000)         | (48,750)                  | -                      | (648,750)   
|Disposition of investments                                      | -                | -           | -                | -                | -                 | -                         | (1,412)                | (1,412)     
|Impairment adjustment (Note 18)                                 | -                | (465,925)   | -                | -                | -                 | -                         | -                      | (465,925)   
|Net change in fair value recorded in
other comprehensive income | -                | 143,555     | 14,301           | 358,785          | 300,000           | (105,750)                 | -                      | 710,891     
|Balance, December 31, 2011                                      | -                | 201,481     | 81,441           | 358,785          | -                 | -                         | -                      | 641,707     
|Acquisition of shares                                           | 16,662,993       | -           | 50,782           | -                | -                 | -                         | -                      | 16,713,775  
|Disposition of shares                                           | (882,300)        |             |                  |                  |                   |                           |                        | (882,300)   
|Impairment adjustment                                           | -                | (20,148)    | -                | -                | -                 | -                         | -                      | (20,148)    
|Net change in fair value recorded in
other comprehensive income | 456,090          | -           | (36,051)         | (322,907)        | -                 | -                         | -                      | 97,132      
|Balance, December 31 2012                                       | $16,236,783      | $   181,333 | $    96,172      | $    35,878      | $               - | $               -         | $            -         | $16,550,166 



(1)

Rackla warrants trade on the TSX-V.

(2)

The Company also holds 9,866,376 free trading common shares of Rackla but they are recorded as an investment in associate (Note 8).

(3)

Cordoba Minerals Corp. (formerly Wesgold Minerals Inc.)





|      
|------
|- 73 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



7.

PROPERTY AND EQUIPMENT



| |                            |                        |                  |                    |                         |                       |                     |                 
| | -------------------------- | ---------------------- | ---------------- | ------------------ | ----------------------- | --------------------- | ------------------- | ----------------
| |                            | Leasehold improvements | Trucks           | Computer equipment | Furniture and equipment | Geophysical equipment | Field equipment     | Total           
| | Cost                       |                        |                  |                    |                         |                       |                     |                 
| | Balance, December 31, 2010 | $            21,328    | $       259,918  | $       191,418    | $          43,452       | $            91,494   | $            2,480  | $        610,090
| | Additions                  | 30,565                 | 23,504           | 51,433             | 9,415                   | -                     | -                   | 114,917         
| | Disposals                  | -                      | (24,477)         | -                  | -                       | (7,900)               | -                   | (32,377)        
| | Balance, December 31, 2011 | 51,893                 | 258,945          | 242,851            | 52,867                  | 83,594                | 2,480               | 692,630         
| | Additions                  | 7,111                  | 26,095           | 5,234              | 9,789                   | -                     | -                   | 48,229          
| | Disposals                  | -                      | (69,402)         | -                  | -                       | -                     | -                   | (69,402)        
| | Balance, December 31, 2012 | $          59,004      | $      215,638   | $      248,085     | $         62,656        | $          83,594     | $           2,480   | $       671,457 
| |                            |                        |                  |                    |                         |                       |                     |                 
| | Accumulated amortization   |                        |                  |                    |                         |                       |                     |                 
| | Balance, December 31, 2010 | $            17,246    | $       187,968  | $       136,714    | $          16,908       | $            31,174   | $               372 | $        390,382
| | Charge for period          | 4,401                  | 9,663            | 26,364             | 6,109                   | 12,592                | 632                 | 59,761          
| | Disposals                  | -                      | (8,613)          | -                  | -                       | -                     | -                   | (8,613)         
| | Balance, December 31, 2011 | 21,647                 | 189,018          | 163,078            | 23,017                  | 43,766                | 1,004               | 441,530         
| | Charge for period          | 4,320                  | 9,951            | 24,463             | 6,722                   | 7,966                 | 443                 | 53,865          
| | Disposals                  | -                      | (23,544)         | -                  | -                       | -                     | -                   | (23,544)        
| | Balance, December 31, 2012 | $          25,967      | $      175,425   | $      187,541     | $         29,739        | $          51,732     | $           1,447   | $       471,851 
| |                            |                        |                  |                    |                         |                       |                     |                 
| | Carrying amounts           |                        |                  |                    |                         |                       |                     |                 
| | At December 31, 2011       | $            30,246    | $         69,927 | $         79,773   | $          29,850       | $            39,828   | $            1,476  | $        251,100
| | At December 31, 2012       | $          33,037      | $        40,213  | $        60,544    | $         32,917        | $          31,862     | $           1,033   | $       199,606 





|      
|------
|- 74 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



8.

INVESTMENT IN ASSOCIATE



Spin-out transaction



Rackla Metals Inc. (Rackla) was incorporated pursuant to a plan of arrangement (the Arrangement) with the Company completed on December 8, 2011. As part of the Arrangement, the Companys interest in the Scarlet property, Sixty Mile Area properties, Ten Mile Creek property, Rivier property, and other staked Yukon properties (collectively, the Projects) were transferred to Rackla, together with $1.0 million in cash, and available-for-sale investments consisting of 750,000 common shares of Solomon Resources Limited (Solomon) and 600,000 common shares of Cordoba Minerals Corp., formerly called Wesgold Minerals Inc. (Cordoba).



Under the Arrangement, each shareholder of the Company received one common share and one full share purchase warrant in Rackla for every three common shares of the Company held by the shareholder, thereby splitting the Companys exploration and evaluation assets in Canada from non-Canadian exploration and evaluation assets remaining with the Company. Each share purchase warrant entitles the holder to purchase one common share of Rackla at $0.30 until June 8, 2013. On December 8, 2011, the Company received the requisite shareholder approval for the Arrangement which resulted in the Company retaining 7,175,701 common shares and 7,175,700 share purchase warrants of Rackla, representing 19.9% of Racklas outstanding common shares and share purchase warrants in exchange for the assets distributed to Rackla. Rackla meets the definition of an associate and has been equity accounted for in the consolidated financial statements. The major assets distributed to Rackla on December 8, 2011, which gave rise to a gain on distribution of $4,807,443 are as follows:



|                                                 |                    
|------------------------------------------------ | -------------------
|                                                 | December 8, 2011   
|Cash and cash equivalents                        | $         1,000,000
|Available for sale investments                   | 648,750            
|Evaluation and exploration cost and expenditures | 4,527,717          
|Net assets distributed to Rackla                 | $        6,176,467 



The fair market value of Evaluation and Exploration  cost and expenditures was comprised of $850,000 in acquisitions costs one would need to pay on the Evaluation and Exploration asset to maintain its rights if owned and a multiple of 0.5 times of the $7.3 million in exploration costs incurred to date on the properties, or $3,677,717.



In accordance with IFRIC 17 Distribution of Non-Cash Assets to Owners, a gain was recognized during the year ended December 31, 2011 on the difference between the fair value and the carrying value of the net assets distributed to Rackla, calculated as follows:



|                                                  |                  
|------------------------------------------------- | -----------------
|                                                  | December 8, 2011 
|Fair value of common shares on distribution       | $       7,574,201
|Net assets distributed to Rackla                  | (6,176,467)      
|Gain on distribution of assets to Rackla          | 1,397,734        
|Plus: recovered expended exploration expenditures | 3,409,709        
|Gain on distribution of assets to Rackla          | $       4,807,443



The fair value of the common shares distributed was based on the share price of Rackla on December 9, 2011, its first day of trading, of $0.21 multiplied by the total number of the 36,067,626 shares in issue. The distribution of the 80.1% of the common shares amounting to $6,067,304 was recorded through deficit.



The gain on distribution of assets is not re-measured on changes in share price of Rackla. A total of $289,313 was expensed during the year ended December 31, 2011 in connection with this plan of arrangement.





|      
|------
|- 75 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



8.

INVESTMENT IN ASSOCIATE (contd)



On the same date of distribution, the Company lost control in Rackla and recorded its retained interest in Rackla at fair value, being 19.9% of the fair value of Racklas common shares on distribution. See table below showing the continuity of the Companys interest in Rackla for the years ended December 31, 2012 and 2011.



|                                                                  |                     
|----------------------------------------------------------------- | --------------------
|Initial fair value of investment in associate on December 8, 2011 | $          1,506,897
|Less: share of losses in associate                                | (6,250)             
|Balance, December 31, 2011                                        | 1,500,647           
|Increase in investment                                            | 215,254             
|Impairment on shares held in associate                            | (855,632)           
|Less: share of losses in associate                                | (366,950)           
|Balance, December 31, 2012                                        | $          493,319  



During the year ended December 31, 2012, the Company participated in a private placement of Rackla whereby 2,690,675 units at $0.08 per unit were acquired by the Company for a total cost of $215,254. Each unit consisted of one common share and one-half warrant. Each whole warrant entitles the Company to purchase one additional common share of Rackla at $0.10, expiring October 10, 2014. With the acquisition of the 2,690,675 common shares, the Company has a 19.5% interest in Rackla as of December 31, 2012.  Given the decline in the underlying quote market price of the shares held in Rackla, an impairment charge of $855,632 was recorded as at December 31, 2012.



Included in the initial fair value of investment in associate is a premium of approximately $280,000 which is the excess of the value of the investment above the fair value of the Companys share of net assets distributed to Rackla. Rackla is a company incorporated in Canada, pursuing opportunities related to exploration of mineral resource properties principally in the Yukon Territory, Canada, with a year end of December 31, 2012.

The amounts relating to associates are as follows:



|                                                     |                      |                       
|---------------------------------------------------- | -------------------- | ----------------------
|                                                     | December 31,
2012    | December 31,
2011     
|Total assets                                         | $          5,691,377 | $          6,136,475  
|Total liabilities                                    | 133,734              | 60,726                
|Net loss                                             | 1,856,402            | 31,396                
|Unrecognized share of losses arising during the year | $          1,489,452 | $               25,146





|      
|------
|- 76 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



9.

EXPLORATION AND EVALUATION ASSETS



| |                                                                           |                 |                    |                       |                    
| | ------------------------------------------------------------------------- | --------------- | ------------------ | --------------------- | -------------------
| | Acquisition costs                                                         | Guatemala       | Nicaragua          | Canada                | Total              
| | Balance, December 31, 2010                                                | $     4,020,864 | $      82,482      | $       806,389       | $        4,909,735 
| | Shares                                                                    | -               | -                  | 119,700               | 119,700            
| | Cash                                                                      | -               | -                  | 266,919               | 266,919            
| | Acquisition costs recovered                                               | -               | -                  | (75,000)              | (75,000)           
| | Distribution of exploration and evaluation
assets on spin-out transaction | -               | -                  | (1,118,008)           | (1,118,008)        
| | Balance, December 31, 2011                                                | 4,020,864       | 82,482             | -                     | 4,103,346          
| | Disposal of mineral properties                                            | (3,489,495)     | (82,482)           | -                     | (3,571,977)        
| | Balance,   December 31, 2012                                              | $       531,369 | $                - | $                   - | $           531,369



Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history, characteristic of many mineral properties. The Company has reviewed title to all of its mineral properties and, to the best of its knowledge, title to all of its properties are in good standing.



Nicaragua



i)

Sale to B2Gold Corp



Based on a previous option agreement with the Company, B2Gold earned in 2012 a 60% interest in the Companys Trebol and Pavon gold properties in Nicaragua by expending a total of US$4 million on exploration, resulting in a 60% - 40% B2Gold  the Company joint venture.  On April 5, 2012 the Company and B2Gold entered into a binding letter agreement pursuant to which B2Gold agreed, among other things, to acquire a 100% interest in the Trebol and Pavon properties. On August 10, 2012 the sale was completed with the Company receiving consideration of 4,815,894 common shares of B2Gold, with a fair value of $16,662,993 at the time of issuance.  In addition, B2Gold has agreed to make contingent payments to the Company of US$10 per ounce of gold on 40% of any proven and probable mineral reserves outlined at the Trebol property in excess of 500,000 ounces (on a 100% basis).





|      
|------
|- 77 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



9.

EXPLORATION AND EVALUATION ASSETS (contd)



i)

Sale to B2Gold Corp  (contd)



In connection with the sale, B2Gold and the Company terminated all other aspects of the existing option and joint venture arrangements entered into between the parties in December 2009 in respect of the Trebol, Pavon and San Jose exploration properties.



The Company has recorded gain on the sale to B2Gold of $16,278,410, net of costs, as follows:



|                                         |                   
|---------------------------------------- | ------------------
|Proceeds of disposition                  | $       16,662,993
|Less:                                    |                   
|Carrying value of mineral property       | (82,482)          
|Transaction costs                        | (302,101)         
|Net gain on disposal of mineral property | $     16,278,410  



ii)

Joint Venture Properties



As of the completion of the property sale described above, B2Gold and the Company entered into a joint venture agreement with respect to each of the Companys San Jose and B2Golds La Magnolia properties in Nicaragua to jointly explore the properties with B2Gold and the Company owning 60% and 40% respectively, of the rights and obligations of each joint venture.



Guatemala



i)

Sale of Tambor Property



In June 2008, the Company signed a binding Letter of Intent with Kappes, Cassiday & Associates (KCA) whereby KCA could earn a 51% interest in the Tambor Project by incurring exploration expenditures on the property totaling US$6,500,000 over 4 years, or by putting the property into commercial production within 4 years.  Once KCA earned its 51% interest, a joint venture was to be formed between KCA and the Company.



In August 2012, the Company sold its remaining interest in its subsidiary, Exploraciones Mineras de Guatemala S.A., which holds the Tambor gold project to KCA, giving KCA a 100% interest in the project.  In consideration, KCA agreed to repay approximately US$400,000 owing to the Company (US$100,000 paid upon signing and approximately US$300,000 to be paid once KCA has commenced shipment of gold produced from the property).  Also upon commercial production, KCA will make quarterly payments to the Company based on the then price of gold and the number of ounces produced from the property.



A loss on the disposal of the property totaling $3,823,118, net of costs, has been charged to the consolidated statement of comprehensive loss as follows:



|                                         |                     
|---------------------------------------- | --------------------
|Proceeds of disposition                  | $             98,750
|Less:                                    |                     
|Carrying value of mineral property       | (3,489,495)         
|Transaction costs                        | (2,645)             
|Write-off of amount receivable           | (429,728)           
|Net loss on disposal of mineral property | $    (3,823,118)    



Due to the uncertainty of receiving future production payments from KCA, the Company wrote-off a receivable balance of $429,728 and has not recognized a contingent gain on potential royalty payments.  Future payments from KCA, whether as a royalty or repayment of the outstanding receivable balance, will be recorded as revenue at such time they are virtually certain to be received, which was the position as at December 31, 2012. As of December 31, 2012, future payments from KCA remain uncertain.





|      
|------
|- 78 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



9.

EXPLORATION AND EVALUATION ASSETS (contd)



Guatemala (contd)



ii)

Southeast Guatemala Ag-Au Epithermal Fields (formerly called Banderas)



The Companys 100% owned land holdings in southeast Guatemala as at December 31, 2012 consist of 34 concessions (three exploitation applications, 30 exploration applications, and one reconnaissance application) filed with the Guatemala Ministry of Energy and Mines (MEM) covering a total of 230,599 hectares.  The three exploitation applications were filed in order to convert one previously granted exploration licence to exploitation; until the exploitation licences are granted, the granted exploration licence remains in place.



iii)

Geothermal Permits



In 2010, the Company submitted applications for provisional use permits for a number of geothermal systems in Guatemala. As of December 31, 2012 a provisional use permit has been granted on 15,300 hectares and all other applications have expired.



iv)

Regional Exploration



During 2012, 2011 and 2010, the Company conducted property investigation work on other potential properties.



Mexico



i)

Tlacolula Property



The Company owns a 100% interest in the Tlacolula Property which consists of one granted exploration concession covering 12,642 hectares.



By an agreement signed in September 2009 and amended in December 2012, the Company granted to Fortuna the option to earn a 60% interest in the Tlacolula Property by spending US$2 million on exploration of the Property and making staged payments totaling US$250,000 cash and US$250,000 in common stock no later than January 31, 2015 and according to the following schedule:



a)

US$20,000 cash and US$20,000 cash equivalent in shares upon regulatory approval (received);

b)

US$30,000 cash and US$30,000 cash equivalent in shares by the first year anniversary (received);

c)

US$50,000 cash and US$50,000 cash equivalent in shares by the second year anniversary (received);

d)

US$50,000 cash and US$50,000 cash equivalent in shares by the third year anniversary (received subsequent to December 31, 2012);

e)

incurring US$2 million on exploration of the Property within 12 months of receipt of a drill permit, such work to include at 1,500 metres of drilling; and

f)

US$100,000 cash and US$100,000 cash equivalent in shares within 90 days of completion of the 1,500 metres of drilling.



The Company and Fortuna have two common directors.



ii)

Santa Brigida Property



Subsequent to year end, in February 2013, the Company was granted by a private exploration company (the Optionor)  the option to acquire a 100% interest in the Santa Brigida property which consists of eight contiguous concessions covering 10,802 hectares located approximately 80 km ENE of the City of Guanajuato in Mexico.  In order to exercise the option, the Company must complete the following:



a)

Pay US$160,000 to the Optionor to cover outstanding underlying property payments (paid subsequent to December 31, 2012);

b)

Complete a 3,000 metre drill program (Drill Program) on the property within 12 months of the issuance of a drill permit; and

c)

Within 90 days of completing the Drill Program, pay US$700,000 to the Optionor.



If the Company exercises the option, it will own a 100% interest in the property, subject to a 2.5% Net Smelter Return (NSR) royalty to the Optionor and a 2.0% NSR royalty to the underlying property owner.





|      
|------
|- 79 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



9.

EXPLORATION AND EVALUATION ASSETS (contd)



Canada (Properties distributed to Rackla- Note 8)



Pursuant to the Arrangement, on December 8, 2011, the Company assigned to Rackla all of its rights and obligations relating to its previously held Yukon and Alaska properties.  Total exploration and evaluation asset acquisition costs were reduced by $1,118,008 and have been recorded as a distribution to Rackla.



10.

COMMITMENT



The Company has entered into operating lease agreements for its office premises. The Company also sub leases rental space to other companies related by common directors and officers on a month to month basis which are netted against rental expense; however, there are no commitments from these companies and thus the amounts presented below are the gross commitments.  The annual commitments under the leases are as follows:



| |      |                     
| | ---- | --------------------
| | 2013 | $            294,481
| | 2014 | 298,506             
| | 2015 | 300,998             
| | 2016 | 225,690             
| | 2017 | 190,608             
| | 2018 | 190,608             
| | 2019 | 190,608             
| |      | $         1,691,499 



11.

SHARE CAPITAL AND RESERVES



a)

Common Shares



The Company is authorized to issue an unlimited number of common shares without par value.



Fiscal 2012



There was no share capital activity during the year ended December 31, 2012.



Fiscal 2011



During the year ended December 31, 2011, as part of option payments relating to portions of the Sixty Mile Property, the Company issued 34,246 shares on May 11, 2011 and 100,266 shares on August 16, 2011. The Company issued 25,000 shares on July 27, 2011 as part of the option payments due on the Rivier Property.



On July 4, 2011, the Company closed a private placement of 6,100,000 units at $0.60 per unit for gross proceeds of $3,660,000.  The proceeds on the sale of units are allocated all to share capital and none to warrants, based on a residual method approach to assigning proceeds to warrants. The Company paid $52,350 cash, 199,250 units and 286,499 warrants as finders fees in connection with the financing.  Each private placement unit consists of one common share and one-half of a share purchase warrant.  The 99,624 warrants issued as part of the finders fee units and the additional 286,499 warrants issued as finders fees entitle the holder to purchase an additional common share exercisable for one year at a price of $0.75.  The fair value of the 286,499 finders fee warrants was $33,261 and was recorded as share issuance costs and an offset to other equity reserve.  The fair value of each finders fee warrant has been estimated as of the date of the issuance using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.24%, dividend yield of 0%, volatility of 79% and expected life of one year.





|      
|------
|- 80 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



11.

SHARE CAPITAL AND RESERVES (contd)



a)

Common Shares (contd)



Fiscal 2011 (contd)



During the year ended December 31, 2011, 105,000 stock options were exercised for gross proceeds of $37,250.  The Company reallocated the fair value of these options previously recorded in the amount of $33,213 from other equity reserve to capital stock.



During the year ended December 31, 2011, 384,316 share purchase warrants were exercised for gross proceeds of $195,448. The Company reallocated the fair value of those share purchase warrants previously recorded in the amount of $22,252 from other equity reserve to capital stock.



Fiscal 2010



During the year ended December 31, 2010, as part of option payments relating to portions of the Sixty Mile Property, the Company issued 50,633 shares on March 16, 2010, 79,309 shares on August 26, 2010 and 67,567 shares on September 10, 2010.  The Company issued 25,000 shares on September 8, 2010 as part of the option payments due on the Rivier Property.



On December 3, 2010, the Company closed a private placement of 5,800,000 flow-through common shares at $0.65 per share for gross proceeds of $3,770,000. The Company issued 194,422 common shares and 259,230 share purchase warrants and paid $42,125 cash as finders fees in connection with the financing.  All warrants issued entitle the holder to purchase an additional common share exercisable for one and a half years at a price of $0.70.  The fair value of the warrants issued for finders fees was $109,515 and was recorded as share issuance costs and an offset to other equity reserve.  The fair value of each finders fee warrant has been estimated as of the date of the issuance using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.62%, dividend yield of 0%, volatility of 87% and expected life of one and a half years.



On June 17, 2010, the Company closed a private placement of 13,000,000 units at $0.35 per unit for gross proceeds of $4,550,000.  The proceeds on the sale of units are all allocated to share capital and none to warrants. The Company paid $15,857 cash, 525,766 units and 571,071 warrants as finders fees in connection with the financing.  Each private placement unit consists of one common share and one-half of a share purchase warrant.  The warrants issued as part of the private placement unit entitle the holder to purchase an additional common share exercisable for two years at a price of $0.50.  The 571,071 warrants issued as finders fees entitle the holder to purchase an additional common share exercisable for one year at a price of $0.55. The fair value of the 571,071 finders fee warrants was $30,919 and was recorded as share issuance costs and an offset to other equity reserve. The fair value of each finders fee warrant has been estimated as of the date of the issuance using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.76%, dividend yield of 0%, volatility of 84% and expected life of one year.



On May 27, 2010, the Company closed a private placement of 5,606,143 flow-through common shares at $0.45 per share for gross proceeds of $2,522,764. The Company issued 233,361 common shares and 233,361 share purchase warrants as finders fees in connection with the financing.  All warrants issued entitle the holder to purchase an additional common share exercisable for one year at a price of $0.50.  The fair value of the warrants issued for finders fees was $18,694 and was recorded as share issuance costs and an offset to other equity reserve.  The fair value of each finders fee warrant has been estimated as of the date of the issuance using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.60%, dividend yield of 0%, volatility of 87% and expected life of one year.



During the year ended December 31, 2010, 460,000 stock options were exercised for gross proceeds of $187,100.  The Company reallocated the fair value of these options previously recorded in the amount of $137,282 from other equity reserve to capital stock.





|      
|------
|- 81 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



11.

SHARE CAPITAL AND RESERVES (contd)



a)

Common Shares (contd)



Fiscal 2010 (contd)



During the year ended December 31, 2010, 136,850 share purchase warrants were exercised for gross proceeds of $68,650. The Company reallocated the fair value of these share purchase warrants previously recorded in the amount of $243 from other equity reserve to capital stock.



b)

Share Purchase Warrants



The following is a summary of changes in warrants from January 1, 2010 to December 31, 2012:



|                           |                    |                                
|-------------------------- | ------------------ | -------------------------------
|                           | Number of
warrants | Weighted
average
exercise price
|Balance, January 1, 2010   | -                  | $      -                       
|Issued                     | 7,826,546          | $0.51                          
|Exercised (1)              | (136,850)          | $0.50                          
|Balance, December 31, 2010 | 7,689,696          | $0.51                          
|Forfeited / expired        | (500,766)          | $0.55                          
|Issued                     | 3,436,123          | $0.75                          
|Exercised (2)              | (384,316)          | $0.51                          
|Balance, December 31, 2011 | 10,240,737         | $0.59                          
|Forfeited / expired        | (905,736)          | $0.49                          
|Balance, December 31, 2012 | 9,335,001          | $0.43                          

(1)

The average share price was $0.71 at the time the warrants were exercised.

(2)

The average share price was $0.72 at the time the warrants were exercised.



As at December 31, 2012, the following share purchase warrants were outstanding:



|                  |                    |                         |                           
|----------------- | ------------------ | ----------------------- | --------------------------
|Expiry date       | Number of
warrants | Original
exercise price | Adjusted
exercise price(1)
|June 16, 2013 (2) | 6,285,001          | $0.50                   | $0.37                     
|July 3, 2013 (2)  | 3,050,000          | $0.75                   | $0.55                     
|                  | 9,335,001          |                         |                           

(1)

On February 6, 2012, the exercise prices for outstanding warrants were reduced to 73% of their original exercise price as a result of the Spin-Out.

(2)

On May 31, 2012, the Company extended the expiry dates of 6,285,001 outstanding warrants exercisable at $0.37 per share by one year to June 16, 2013, and 3,050,000 outstanding warrants exercisable at $0.55 per share by one year to July 3, 2013.





|      
|------
|- 82 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



11.

SHARE CAPITAL AND RESERVES (contd)



c)

Nature and Purpose of Equity and Reserves



The reserves recorded in equity on the Companys balance sheet include Other equity reserve, Deficit and Accumulated Other Comprehensive Loss/Income.



Other equity reserve is used to recognize the value of stock option grants and share purchase warrants prior to exercise.



Deficit is used to record the Companys change in deficit from earnings from period to period.



Accumulated other comprehensive loss/income comprises of available-for-sale reserve. This reserve is used to recognize fair value changes on available-for-sale investments.



12.

SHARE-BASED PAYMENTS



a)

Option Plan Details



The Company has a formal stock option plan in accordance with the policies of the TSX Venture Exchange (TSX-V) under which it is authorized to grant options up to 10% of its outstanding shares to officers, directors, employees and consultants. The exercise price of each option is not less than the closing market price of the Companys stock on the trading day prior to the date of grant. Options granted to investor relations personnel vest in accordance with TSX-V regulation. The options are for a maximum term of ten years.



The following is a summary of changes in options for the year ended December 31, 2012:



|                                |              |              |                |                 |                 |           |                     |                 |                       
|------------------------------- | ------------ | ------------ | -------------- | --------------- | --------------- | --------- | ------------------- | --------------- | ----------------------
|                                |              |              |                |                 | During the year |           |                    
|                                | Grant date   | Expiry date  | Exercise price | Opening balance | Granted         | Exercised | Forfeited / expired | Closing balance | Vested and exercisable
|                                | Apr 17, 2007 | Apr 16, 2012 | $0.52          | 565,000         | -               | -         | (565,000)           | -               | -                     
|                                | Sep 06, 2007 | Sep 05, 2012 | $0.56          | 850,000         | -               | -         | (850,000)           | -               | -                     
|                                | May 06, 2008 | May 05, 2013 | $0.26          | 575,000         | -               | -         | -                   | 575,000         | 575,000               
|                                | Jan 08, 2010 | Jan 07, 2020 | $0.29          | 1,595,000       | -               | -         | (25,000)            | 1,570,000       | 1,570,000             
|                                | May 26, 2010 | May 25, 2020 | $0.36          | 100,000         | -               | -         | -                   | 100,000         | 100,000               
|                                | Sep 24, 2010 | Sep 23, 2020 | $0.69          | 1,570,000       | -               | -         | (750,000)           | 820,000         | 820,000               
|                                | Nov 18, 2010 | Nov 17, 2020 | $0.69          | 75,000          | -               | -         | (75,000)            | -               | -                     
|                                | Jul 04, 2011 | Jul 03, 2021 | $0.60          | 55,000          | -               | -         | (55,000)            | -               | -                     
|                                | Jul 27, 2011 | Jul 26, 2021 | $0.81          | 320,000         | -               | -         | (30,000)            | 290,000         | 290,000               
|                                | Dec 13, 2012 | Dec 12, 2022 | $0.20          | -               | 2,255,000       | -         | -                   | 2,255,000       | 2,255,000             
|                                |              |              |                | 5,705,000       | 2,255,000       | -         | (2,350,000)         | 5,610,000       | 5,610,000             
|Weighted average exercise price | $0.50        | $0.20        | -              | $0.60           | $0.34           | $0.34    





|      
|------
|- 83 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



12.

SHARE-BASED PAYMENTS (contd)



a)

Option Plan Details  (contd)



The following is a summary of changes in options for the year ended December 31, 2011:



|                                |              |              |                |                 |                 |           |                     |                 |                       
|------------------------------- | ------------ | ------------ | -------------- | --------------- | --------------- | --------- | ------------------- | --------------- | ----------------------
|                                |              |              |                |                 | During the year |           |                    
|                                | Grant date   | Expiry date  | Exercise price | Opening balance | Granted         | Exercised | Forfeited / expired | Closing balance | Vested and exercisable
|                                | Feb 22, 2006 | Feb 21, 2011 | $0.70          | 1,110,000       | -               | -         | (1,110,000)         | -               | -                     
|                                | Apr 17, 2007 | Apr 16, 2012 | $0.52          | 595,000         | -               | -         | (30,000)            | 565,000         | 565,000               
|                                | Sep 06, 2007 | Sep 5, 2012  | $0.56          | 850,000         | -               | -         | -                   | 850,000         | 850,000               
|                                | May 06, 2008 | May 5, 2013  | $0.26          | 615,000         | -               | (40,000)  | -                   | 575,000         | 575,000               
|                                | Jan 08, 2010 | Jan 7, 2020  | $0.29          | 1,640,000       | -               | (45,000)  | -                   | 1,595,000       | 1,595,000             
|                                | May 26, 2010 | May 25, 2020 | $0.36          | 100,000         | -               | -         | -                   | 100,000         | 100,000               
|                                | Sep 24, 2010 | Sep 23, 2020 | $0.69          | 1,620,000       | -               | (20,000)  | (30,000)            | 1,570,000       | 1,570,000             
|                                | Nov 18, 2010 | Nov 17, 2020 | $0.69          | 75,000          | -               | -         | -                   | 75,000          | 75,000                
|                                | Jul 04, 2011 | Jul 3, 2021  | $0.60          | -               | 55,000          | -         | -                   | 55,000          | 55,000                
|                                | Jul 27, 2011 | Jul 26, 2021 | $0.81          | -               | 320,000         | -         | -                   | 320,000         | 320,000               
|                                |              |              |                | 6,605,000       | 375,000         | (105,000) | (1,170,000)         | 5,705,000       | 5,705,000             
|Weighted average exercise price | $0.52        | $0.78        | $0.35          | $0.70           | $0.50           | $0.50    



The following is a summary of changes in options for the year ended December 31, 2010:



|                                |              |              |                |                 |                 |           |           |                 |                        |         
|------------------------------- | ------------ | ------------ | -------------- | --------------- | --------------- | --------- | --------- | --------------- | ---------------------- | --------
|                                |              |              |                |                 | During the year |           |           |                
|                                | Grant date   | Expiry date  | Exercise price | Opening balance | Granted         | Exercised | Forfeited | Closing balance | Vested and exercisable | Unvested
|                                | Feb 22, 2006 | Feb 21, 2011 | $0.70          | 1,870,000       | -               | -         | (760,000) | 1,110,000       | 1,110,000              | -       
|                                | Apr 17, 2007 | Apr 16, 2012 | $0.52          | 835,000         | -               | (240,000) | -         | 595,000         | 595,000                | -       
|                                | Jun 01, 2007 | May 31, 2012 | $0.62          | 50,000          | -               | -         | (50,000)  | -               | -                      | -       
|                                | Sep 06, 2007 | Sep 5, 2012  | $0.56          | 850,000         | -               | -         | -         | 850,000         | 850,000                | -       
|                                | May 06, 2008 | May 5, 2013  | $0.26          | 665,000         | -               | (50,000)  | -         | 615,000         | 615,000                | -       
|                                | Jan 08, 2010 | Jan 7, 2020  | $0.29          | -               | 1,810,000       | (170,000) | -         | 1,640,000       | 1,590,000              | 50,000  
|                                | May 26, 2010 | May 25, 2020 | $0.36          | -               | 100,000         | -         | -         | 100,000         | 50,000                 | 50,000  
|                                | Sep 24, 2010 | Sep 23, 2020 | $0.69          | -               | 1,620,000       | -         | -         | 1,620,000       | 1,488,750              | 131,250 
|                                | Nov 18, 2010 | Nov 17, 2020 | $0.69          | -               | 75,000          | -         | -         | 75,000          | 75,000                 | -       
|                                |              |              |                | 4,270,000       | 3,605,000       | (460,000) | (810,000) | 6,605,000       | 6,373,750              | 231,250 
|Weighted average exercise price | $0.57        | $0.48        | $0.41          | $0.70           | $0.52           | $0.51     | $0.53    



There were no options exercised during the year ended December 31, 2012. The average share price at the time the options were exercised during the year ended December 31, 2011 was $0.80 (2010: was $0.76).





|      
|------
|- 84 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



12.

SHARE-BASED PAYMENTS (contd)



b)

Fair Value of Options Issued During the Year



The weighted average fair value at grant date of options granted during the year ended December 31, 2012 was $0.17 per option (2011: $0.67; 2010: $0.46).



The weighted average remaining contractual life of the options outstanding at December 31, 2012 is 7.71 years.



Options Issued to Employees



The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.



Options Issued to Non-Employees



Options issued to non-employees are measured based on the fair value of the goods or services received, at the date of receiving those goods or services. If the fair value of the goods or services received cannot be estimated reliably, the options are measured by determining the fair value of the options granted using the Black-Scholes option pricing model.



The model inputs for options granted during the years ended December 31, 2012, 2011 and 2010 included:



| |            |             |                           |                |                         |               |                   |               
| | ---------- | ----------- | ------------------------- | -------------- | ----------------------- | ------------- | ----------------- | --------------
| | Grant
date | Expiry date | Share price at grant date | Exercise price | Risk-free interest rate | Expected life | Volatility factor | Dividend yield
| | 12/13/12   | 12/12/22    | $0.20                     | $0.20          | 1.80%                   | 10 years      | 89%               | 0%            
| | 07/27/11   | 07/26/21    | $0.81                     | $0.81          | 2.88%                   | 10 years      | 90%               | 0%            
| | 07/04/11   | 07/03/21    | $0.55                     | $0.60          | 3.08%                   | 10 years      | 89%               | 0%            
| | 11/18/10   | 11/17/20    | $0.59                     | $0.69          | 3.12%                   | 10 years      | 89%               | 0%            
| | 09/24/10   | 09/23/20    | $0.74                     | $0.69          | 2.86%                   | 10 years      | 90%               | 0%            
| | 05/26/10   | 05/25/20    | $0.36                     | $0.36          | 3.25%                   | 10 years      | 89%               | 0%            
| | 01/08/10   | 01/07/20    | $0.35                     | $0.29          | 3.59%                   | 10 years      | 89%               | 0%            



The expected volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information. The risk free rate of return is the yield on a zero-coupon Canadian Treasury Bill of a term consistent with the assumed option life. The expected average option term is the average expected period to exercise, based on the historical activity patterns for each individually vesting tranche.



Option pricing models require the input of highly subjective assumptions, including the expected price volatility.  Changes in these assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Companys stock options.



c)

Expenses Arising from Share-based Payment Transactions



Total expenses arising from the share-based payment transactions recognized during the year as part of share-based compensation expense were $385,320 (2011: $306,915; 2010: $1,612,792).



As of December 31, 2012 and 2011 there was no amount (2010: $56,697) of total unrecognized compensation cost related to unvested share-based compensation awards.



d)

Amounts Capitalized Arising from Share-based Payment Transactions



Total expenses arising from the share-based payment transactions that were capitalized during the year as part of exploration and evaluation asset acquisition costs were $Nil (2011: $119,700; 2010: $111,300).





|      
|------
|- 85 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



13.

INCOME TAXES



Taxation in the Company and its subsidiaries operational jurisdictions is calculated at the rates prevailing in the respective jurisdictions.



The difference between tax expense for the year and the expected income taxes based on the statutory tax rate arises as follows:



| |                                                                                     |                          |                    |                   
| | ----------------------------------------------------------------------------------- | ------------------------ | ------------------ | ------------------
| |                                                                                     | December 31,
2012        | December 31,
2011  | December 31,
2010 
| |                                                                                     |                          | (Restated)         |                   
| | Income (loss) before income taxes                                                   | $     8,929,357          | $    (3,350,056)   | $    (4,936,707)  
| | Tax charge/(recovery) based on the statutory rate of 25% (2011: 26.5%; 2010: 28.5%) | 2,232,000                | (888,000)          | (1,407,000)       
| | Non-deductible expenses                                                             | 190,000                  | (1,095,000)        | 551,000           
| | Different tax rates in other jurisdictions                                          | (3,172,000)              | 298,000            | 98,000            
| | Non-taxable portion of capital gains                                                | 150,000                  | (555,000)          | (21,000)          
| | Expiry of loss carry forward                                                        | -                        | -                  | 503,000           
| | Flow-through shares renunciation                                                    | -                        | 449,000            | 97,000            
| | Spin out impact                                                                     | -                        | 1,250,000          | -                 
| | Initial recognition exemption and other                                             | 197,000                  | (67,000)           | (24,000)          
| | Changes in unrecognized deferred tax assets                                         | 403,000                  | (108,000)          | (155,000)         
| | Total income tax expense / (recovery)                                               | $                      - | $        (716,000) | $        (358,000)



Effective January 1, 2012, the Canadian Federal corporate tax rate decreased from 16.5% to 15% and the British Columbia provincial tax stayed at 10%.



The tax rate of 0.0% represents the federal statutory rate applicable for the 2012 taxation year for the Cayman Islands, 30.0% for Mexico, 5.0% for Guatemala and 30.0% for Nicaragua.



No deferred tax asset has been recognized in respect of the following losses and temporary differences as it is not considered probable that sufficient future taxable profit will allow the deferred tax asset to be recovered:



| |                                        |                        |                             
| | -------------------------------------- | ---------------------- | ----------------------------
| |                                        | December 31,
2012      | December 31,
2011
(Restated)
| | Loss carry forwards                    | $        907,000       | $        640,000            
| | Property and equipment                 | 105,000                | 82,000                      
| | Mineral Properties                     | 571,000                | 565,000                     
| | Other deductible temporary differences | 130,000                | 23,000                      
| | Unrecognized tax assets                | (1,713,000)            | (1,310,000)                 
| |                                        | $                    - | $                    -      



As at December 31, 2012, the Company has estimated non-capital losses for Canadian income tax purposes that may be carried forward to reduce taxable income derived in future years.



Non-capital Canadian tax losses expiring as follows:



| |                |                 
| | -------------- | ----------------
| | Year of expiry | Taxable losses  
| | 2026           | $        108,000
| | 2027           | $     1,009,000 
| | 2028           | $        653,000
| | 2030           | $        831,000
| | 2032           | $     1,027,000 
| | Total          | $     3,628,000 





|      
|------
|- 86 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



14.

RELATED PARTY TRANSACTIONS



The Companys related parties with transactions during the year ended December 31, 2012 consist of directors, officers and companies with common directors as follows:



| |                                                     |                                           
| | --------------------------------------------------- | ------------------------------------------
| | Related Party                                       | Nature of Transactions                    
| | Mill Street Services Ltd. (Mill Street)           | Management fees                           
| | Gold Group Management Inc. (Gold Group)           | Shared general and administrative expenses
| | Rackla Metals Inc. (Rackla) (Associate)           | Shared general and administrative expenses
| | Fortuna Silver Mines Inc. (Fortuna)               | Shared general and administrative expenses
| | Focus Ventures Ltd. (Focus)                       | Shared general and administrative expenses
| | Iron Creek Capital Corp. (Iron Creek)             | Shared general and administrative expenses
| | Emerick Resources Corp. (Emerick)                 | Shared general and administrative expenses
| | Western Pacific Resources Corp. (Western Pacific) | Shared general and administrative expenses
| | Cordoba Minerals Corp. (Cordoba)                  | Shared general and administrative expenses
| | Voyager Gold Corp. (Voyager)                      | Shared general and administrative expenses



In addition to related party transactions disclosed elsewhere in the consolidated financial statements (Note 8 and 9), the Company incurred the following expenditures charged by non-key management officers and companies which have common directors with the Company in the year ended December 31, 2012:



|                           |                          |                      |                     
|-------------------------- | ------------------------ | -------------------- | --------------------
|                           | 2012                     | 2011                 | 2010                
|Expenses:                  |                          |                      |                     
|Consulting                 | $                      - | $             10,000 | $             30,000
|Salaries and benefits      | 34,488                   | 23,014               | 22,630              
|Mineral property costs:    |                          |                      |                     
|Salaries and benefits      | 76,979                   | 62,650               | 48,829              
|Geological consulting fees | -                        | -                    | 3,170               
|                           | $         111,467        | $           95,664   | $        104,629    



Effective July 1, 2012, the Company reimburses Gold Group, a company controlled by the Chief Executive Officer of the Company, for shared administrative costs and other business related expenses paid by Gold Group on behalf of the Company.  During the year ended December 31, 2012, the Company reimbursed Gold Group, $63,532  in general and administrative expenses consisting of $5,690  in communications, $12,987  in office and miscellaneous, $4,048  in public relations, $11,151  in repairs and maintenance, $10,707  in salary and benefits, and $18,949  in travel and accommodation. There were no transactions with Gold Group for the years ended December 31, 2011 and 2010.



These transactions are in the normal course of operations and are measured at the fair value of the services rendered.



Advances and other receivables include $Nil (December 31, 2011: $75,329) due from directors and officers of the Company. These were funds advanced for Company expenses and any balance owed will be repaid in the normal course of business.



Prepaid expenses and deposits include an amount of $60,000 (December 31, 2011: $Nil) paid to Gold Group as a deposit on the shared office and administrative services agreement that became effective July 1, 2012.



Due from related parties of $116,947 (December 31, 2011: $541,889) are amounts due from companies which have a common director with the Company and arose from shared administrative costs. These amounts are unsecured, non-interest bearing and are due on demand.



Accounts payable and accrued liabilities include $85,380 payable to Gold Group for shared administrative costs (December 31, 2011: $70,917 payable to the former Corporate Secretary of the Company for general administrative and Yukon camp maintenance and exploration expense reimbursements and $5,600 to Mill Street, a company controlled by the Chief Executive Officer of the Company, for management fees).





|      
|------
|- 87 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)





14.

RELATED PARTY TRANSACTIONS (contd)



Key management compensation



Key management personnel are persons responsible for planning, directing and controlling the activities of an entity, and include certain directors and officers. Key management compensation comprises:



|                            |                     |                      |                     
|--------------------------- | ------------------- | -------------------- | --------------------
|                            | 2012                | 2011                 | 2010                
|Management fees             | $           141,000 | $             60,000 | $             60,000
|Salaries, benefits and fees | 105,429             | 71,141               | 86,422              
|Share-based payments        | 92,271              | -                    | 439,837             
|                            | $         338,700   | $         131,141    | $         586,259   



Total share-based payments to directors not specified as key management personnel during the year ended December 31, 2012 was $81,165 (2011: $105,128; 2010: $308,667).



15.

SEGMENTED INFORMATION



Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. All of the Companys operations are within the mining sector relating to precious metals exploration. Due to the geographic and political diversity, the Companys exploration operations are decentralized whereby exploration managers are responsible for business results and regional corporate offices provide support to the exploration programs in addressing local and regional issues. The Companys operations are therefore segmented on a district basis. The Companys assets are located in Canada, Guatemala, Nicaragua, Caymans and Mexico. Details of identifiable assets by geographic segments are as follows:



| |                                                        |                         |                  |                    |                    |                    |  |  |  | 
| | ------------------------------------------------------ | ----------------------- | ---------------- | ------------------ | ------------------ | ------------------ |  |  |  | 
| | Year ended December 31, 2012                           |                         |                  |                    |                    |                   
| |                                                        | Canada                  | Guatemala        | Nicaragua          | Other              | Consolidated      
| | Exploration expenditures                               | $                     - | $        794,388 | $           17,406 | $           73,172 | $         884,966 
| | Interest income                                        | 8,883                   | -                | -                  | -                  | 8,883             
| | Amortization                                           | 41,125                  | 10,964           | 1,776              | -                  | 53,865            
| | Profit/(loss) before income taxes                      | (2,779,050)             | (4,442,082)      | (450,324)          | 16,600,813         | 8,929,357         
| | Capital expenditures*                                  | 19,670                  | 28,559           | -                  | -                  | 48,229            
| |                                                        |                         |                  |                    |                    |                   
| | Year ended December 31, 2011                           |                         |                  |                    |                    |                   
| |                                                        | Canada                  | Guatemala        | Nicaragua          | Other              | Consolidated      
| | Exploration expenditures                               | $      4,954,479        | $     1,387,041  | $           29,899 | $           18,634 | $        6,390,053
| | Exploration and evaluation assets
Distributed (Note 8) | 1,118,008               | -                | -                  | -                  | 1,118,008         
| | Interest income                                        | 61,397                  | -                | -                  | -                  | 61,397            
| | Amortization                                           | 44,119                  | 5,304            | 6,803              | 2,108              | 58,334            
| | Loss before income taxes                               | (1,491,668)             | (1,423,545)      | (33,034)           | (401,809)          | (3,350,056)       
| | Capital expenditures*                                  | 471,788                 | 29,748           | -                  | -                  | 501,536           
| |                                                        |                         |                  |                    |                    |                   





|      
|------
|- 88 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



15.

SEGMENTED INFORMATION  (contd)





| |                                                                                                             |                  |                     |                      |                     |                    |  |  |  | 
| | ----------------------------------------------------------------------------------------------------------- | ---------------- | ------------------- | -------------------- | ------------------- | ------------------ |  |  |  | 
| | Year ended December 31, 2010                                                                                |                  |                     |                      |                     |                   
| |                                                                                                             | Canada           | Guatemala           | Nicaragua            | Other               | Consolidated      
| | Exploration expenditures                                                                                    | $  2,016,987     | $     753,900       | $       55,992       | $        11,511     | $   2,838,390     
| | Interest income                                                                                             | 34,275           | -                   | -                    | -                   | 34,275            
| | Amortization                                                                                                | 30,562           | 4,950               | 10,002               | 2,486               | 48,000            
| | Profit/(loss) before income taxes                                                                           | (4,195,847)      | (757,195)           | (92,242)             | 108,577             | (4,936,707)       
| | Capital expenditures*                                                                                       | 917,785          | 1,596               | 991                  | -                   | 920,372           
| |                                                                                                             |                  |                     |                      |                     |                   
| | *Capital expenditures consists of additions of property and equipment and exploration and evaluation assets
| |                                                                                                             |                  |                     |                      |                     |                   
| | As at December 31, 2012                                                                                     |                  |                     |                      |                     |                   
| |                                                                                                             | Canada           | Guatemala           | Nicaragua            | Other               | Consolidated      
| | Total current assets                                                                                        | $   17,505,772   | $          82,082   | $             9,441  | $         347,616   | $      17,944,911 
| | Total non-current assets                                                                                    | 713,276          | 578,152             | 6,489                | -                   | 1,297,917         
| | Total assets                                                                                                | $   18,219,048   | $        660,234    | $           15,930   | $         347,616   | $     19,242,828  
| | Total liabilities                                                                                           | $        223,111 | $          20,272   | $                660 | $           11,258  | $          255,301
| |                                                                                                             |                  |                     |                      |                     |                   
| | As at December 31, 2011                                                                                     |                  |                     |                      |                     |                   
| |                                                                                                             | Canada           | Guatemala           | Nicaragua            | Other               | Consolidated      
| | Total current assets                                                                                        | $     3,692,139  | $        347,633    | $           13,876   | $         371,991   | $       4,425,639 
| | Total non-current assets                                                                                    | 1,616,331        | 4,172,136           | 137,051              | -                   | 5,925,518         
| | Total assets                                                                                                | $     5,308,470  | $     4,519,769     | $         150,927    | $         371,991   | $     10,351,157  
| | Total liabilities                                                                                           | $        759,362 | $               163 | $           11,405   | $             4,509 | $          775,439
| |                                                                                                             |                  |                     |                      |                     |                   





|      
|------
|- 89 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



16.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT



The Company is exposed to the following financial risks:



·

Market Risk

·

Credit Risk

·

Liquidity Risk



In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments.  This note describes the Companys objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.



General Objectives, Policies and Processes



The Board of Directors has overall responsibility for the determination of the Companys risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Companys finance function. The Board of Directors receive periodic reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Companys competitiveness and flexibility.  Further details regarding these policies are set out below.



a)

Market Risk



Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of three types of risk: foreign currency risk, interest rate risk, and equity price risk.



Foreign Currency Risk



Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to fluctuations in foreign currencies through its operations in foreign countries.  The Company monitors this exposure, but has no hedge positions. As at December 31, 2012, cash totalling $191,445 (December 31, 2011: $255,717) was held in US dollars, $741 (December 31, 2011: $2,441) in Nicaragua Cordoba, $4,706 (December 31, 2011: $8,091) in Guatemala Quetzal, $5,476 (December 31, 2011: $21,859) in Mexican Pesos and $715 (December 31, 2011: $696) in Peruvian Sols. Based on the above net exposures at December 31, 2012, a 10% depreciation or appreciation of the above currencies against the Canadian dollar would approximately result in a $20,300 increase or decrease in the Companys after tax net earnings, respectively.



Interest Rate Risk



Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates.  The Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered on cash held with chartered Canadian financial institutions. The Company considers this risk to be limited.



Equity Price Risk



Equity price risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.  The Companys available-for-sale investments are exposed to significant equity price risk due to the potentially volatile and speculative nature of the businesses in which the investments are held. The available-for-sale investments held in B2Gold, Focus, Rackla and Fortuna are monitored by the Board with decisions on sale taken by Management.  A 10% decrease in fair value of the shares would approximately result in a $1,655,000 decrease in equity.





|      
|------
|- 90 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



16.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (contd)



b)

Credit Risk



Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Companys credit risk is primarily attributable to its cash and cash equivalents, available-for-sale investments and advances and other receivables. The Company limits exposure to credit risk by maintaining its cash and cash equivalents with large financial institutions. The Company does not have cash and cash equivalents or available-for-sale investments that are invested in asset based commercial paper. For advances and other receivables, the Company estimates, on a continuing basis, the probable losses and provides a provision for losses based on the estimated realizable value.



c)

Liquidity Risk



Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Companys approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows required by operations and anticipated investing and financing activities.  At December 31, 2012, the Company had working capital of $17.7 million (December 31, 2011: $3.6 million) available to apply against short-term business requirements. All of the Companys financial liabilities have contractual maturities of less than 45 days and are subject to normal trade terms.



Determination of Fair value



Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.



The Statement of Financial Position carrying amounts for cash, due from related parties, advances and other receivables, deposits, accounts payables and accrued liabilities, and due to related parties approximates fair value due to their short-term nature. Due to the use of subjective judgments and uncertainties in the determination of fair values these values should not be interpreted as being realizable in an immediate settlement of the financial instruments.



Fair Value Hierarchy



Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:



| |         |  |                                                                                                                                                                                     
| | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 1 |  | Unadjusted quoted prices in active markets for identical assets or liabilities;                                                                                                     
| | Level 2 |  | Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
| | Level 3 |  | Inputs for the asset or liability that are not based on observable market data (unobservable inputs).                                                                               



The available-for-sale investments for B2Gold, Focus, Fortuna, and Rackla are based on quoted prices and are therefore considered to be Level 1.





|      
|------
|- 91 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



17.

CAPITAL MANAGEMENT



The Companys objectives when managing capital are to safeguard the Companys ability to continue as a going concern in order to advance its mineral properties. In order to facilitate the management of its capital requirements, the Company prepares periodic budgets that are updated as necessary. The Company manages its capital structure and makes adjustments to it to effectively support the acquisition and exploration of mineral properties. 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 general 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 if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.



Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company monitors its cash, available-for-sale investments, common shares, warrants and stock options as capital. There were no changes in the Companys approach to capital management during the year ended December 31, 2012. The Companys investment policy is to hold cash in interest bearing bank accounts, which pay comparable interest rates to highly liquid short-term interest bearing investments with maturities of one year or less and which can be liquidated at any time without penalties. Neither the Company nor its subsidiaries are subject to externally imposed capital requirements and do not have exposure to asset-backed commercial paper or similar products. The Company expects its current capital resources to be sufficient to carry out its planned exploration programs and operating costs for the next twelve months.





|      
|------
|- 92 -
|      







Radius Gold Inc.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2012

(Expressed in Canadian Dollars)



18.

CORRECTION OF ERROR IN PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS



During the third quarter of 2012, the Company discovered an error in its previously reported consolidated financial statements as at and for the year ended December 31, 2011. The Company is required to separately disclose the impact of correction of errors, if any, in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.



In accordance with IAS 39 Financial Instruments: Recognition and Measurement, the Company has classified its marketable securities as available-for-sale financial instruments. Available-for-sale investments are carried at fair value with changes in fair value recognized in accumulated other comprehensive loss/income. During the third quarter of 2012, the Company re-assessed and determined that its investment in the shares of Focus, a public company with common directors and officers, suffered an impairment as at December 31, 2011.



As a result of this determination, and in accordance with IAS 39, the Company has reclassified the loss previously recognized in other comprehensive income from accumulated other comprehensive income to accumulated deficit. As at and for the year ended December 31, 2011, this reclassification adjustment resulted in a $465,925 increase in other comprehensive income, a $465,925 increase in loss on impairment of available-for-sale investments, a $465,925 increase in accumulated other comprehensive income, and a $465,925 increase in accumulated deficit.  For the year ended December 31, 2011, the reclassification adjustment did not have an impact on operating, financing, or investing cash flow activities and there was no change in loss per share.



| |                                                        |                                      |                     
| | ------------------------------------------------------ | ------------------------------------ | --------------------
| |                                                        | For the year ended December 31, 2011
| |                                                        | As previously
reported               | As restated         
| | Consolidated statement of financial position:          |                                      |                     
| | Accumulated other comprehensive (loss) income          | $                 44,449             | $            510,374
| | Deficit                                                | (53,312,682)                         | (53,778,607)        
| |                                                        |                                      |                     
| | Consolidated statement of comprehensive income (loss): |                                      |                     
| | Impairment on available-for-sale investments           | $                           -        | $         (465,925) 
| | Income (loss) before income taxes                      | (2,884,131)                          | (3,350,056)         
| | Net income (loss) for the year                         | (2,167,377)                          | (2,633,302)         
| | Fair value gains on available-for-sale investments     | 165,966                              | 631,891             
| | Total comprehensive loss                               | (2,001,411)                          | (2,001,411)         
| | Basic and diluted earnings (loss) per share            | $ (0.03)                             | $ (0.03)            



19.

EVENTS AFTER THE REPORTING DATE



Subsequent to December 31, 2012, the Company sold 677,500 shares of its available-for-sale investment in B2Gold for proceeds of approximately $2.6 million.





|      
|------
|- 93 -
|      









SIGNATURE PAGE



Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.





Dated: April 30, 2013

By  /s/ Simon Ridgway

Simon Ridgway,

Chief Executive Officer









|      
|------
|- 94 -
|