Exhibit 99.4

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|                                 |  |  |  |                         
|-------------------------------- |  |  |  | ------------------------
|KPMG LLP                         |  |  |  |                         
|Chartered Accountants            |  |  |  |                         
|Suite 1500 Purdys Wharf Tower I |  |  |  | Telephone (902) 492-6000
|1959 Upper Water Street          |  |  |  | Telefax (902) 492-1307  
|Halifax NS B3J 3N2               |  |  |  | www.kpmg.ca             
|Canada                           |  |  |  |                         

AUDITORS REPORT ON RECONCILIATION TO UNITED STATES GAAP

To the Board of Directors of Gammon Gold Inc.

On March 24,
2009, except as to note 22(i) which is as of March 31, 2009 and note 2 which is as of August 12, 2009, we reported on the consolidated balance sheets of Gammon Gold Inc. (the Company) as at December 31, 2008 and 2007, and
the consolidated statements of operations and comprehensive income (loss), cash flows and shareholders equity for each of the years in the two year period ended December 31, 2008 which are included in the annual report on Form 40-F/A. In
connection with our audits of the aforementioned consolidated financial statements, we also have audited the related supplemental note entitled Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles
included in the Form 40-F/A (Amendment No. 2). This supplemental information is the responsibility of the Companys management. Our responsibility is to express an opinion on this supplemental information based on our audit. In our
opinion, such supplemental note, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in note 2 to the consolidated financial statements, the December 31, 2008 consolidated financial statements have been restated.

/s/ KPMG LLP

Chartered Accountants

Halifax, Canada

October 7, 2009

March 24, 2009, except as to the following notes to the consolidated financial statements: note 22(i), which is as of
March 31, 2009, note 2, which is as of August 12, 2009 and notes 3, 4, 5, 6, 7 and 8 to the Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles, which are as of October 5, 2009.



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Auditors Report



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except
per share data)



The following represents
additional information to the restated consolidated financial statements of Gammon Gold Inc. (the Company) that were prepared in accordance with accounting principles generally accepted in Canada (Canadian GAAP). Details of
the restatement are provided in note 2 to the December 31, 2008 restated consolidated financial statements. Set out below are the material adjustments to net earnings / (loss) for the years ending December 31, 2008 and 2007, and to
shareholders equity at December 31, 2008, and December 31, 2007 in order to conform to accounting principles generally accepted in the United States of America (US GAAP). This reconciliation has been adjusted to present
the additional disclosure requirements of Form 20-F, Item 18.





Consolidated Statements of Operations and Comprehensive
Income / (Loss):



|                                                                                          |  |                                |         |   |                   |   |          |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ----------------- | - | -------- | -
|                                                                                          |  | Year ended                     |         |   | Year ended        |  
|                                                                                          |  | December 31, 2008(as restated) |         |   | December 31, 2007 |  
|                                                                                          |  |                               
|Net earnings / (loss) based on Canadian GAAP                                              |  | $                              | 39,994  |   |                   | $ | (101,314 | )
|Exploration costs (a)                                                                     |  |                                | (19,614 | ) |                   |   | (5,083   | )
|Amortization and depletion of exploration costs (a)                                       |  |                                | 929     |   |                   |   | 2,011    |  
|Stripping costs (b)                                                                       |  |                                | (4,562  | ) |                   |   | -        |  
|Depletion of mining properties (c)                                                        |  |                                | (4,574  | ) |                   |   | -        |  
|Interest expense on long-term debt adjusted to fair value (d)                             |  |                                | -       |   |                   |   | (264     | )
|Net realizable value adjustments (f)                                                      |  |                                | 1,578   |   |                   |   | -        |  
|Future income taxes on US GAAP differences                                                |  |                                | 7,348   |   |                   |   | 3,158    |  
|                                                                                          |  |                                |         |   |                   |   |          |  
|                                                                                          |  |                               
|Net earnings / (loss) based on US GAAP                                                    |  |                                | 21,099  |   |                   |   | (101,492 | )
|                                                                                          |  |                               
|Amortization of actuarial gains from AOCI to net loss, net of tax of $42 (2007 - $70) (e) |  |                                | (108    | ) |                   |   | 179      |  
|Change in funded status of employee benefit plans, net of tax of $8 (2007 - $189) (e)     |  |                                | (21     | ) |                   |   | (343     | )
|                                                                                          |  |                                |         |   |                   |   |          |  
|                                                                                          |  |                               
|Comprehensive income / (loss) based on US GAAP                                            |  | $                              | 20,970  |   |                   | $ | (101,656 | )
|                                                                                          |  |                                |         |   |                   |   |          |  
|                                                                                          |  |                               
|Earnings / (loss) per share                                                               |  |                                |         |   |                   |   |          |  
|Basic                                                                                     |  | $                              | 0.18    |   |                   | $ | (0.90    | )
|Diluted                                                                                   |  | $                              | 0.18    |   |                   | $ | (0.90    | )





Consolidated Statements of Shareholders Equity:

Deficit:



|                                                                |  |                                |          |   |                   |   |          |  
|--------------------------------------------------------------- |  | ------------------------------ | -------- | - | ----------------- | - | -------- | -
|                                                                |  | Year ended                     |          |   | Year ended        |  
|                                                                |  | December 31, 2008(as restated) |          |   | December 31, 2007 |  
|                                                                |  |                               
|Deficit based on Canadian GAAP                                  |  | $                              | (120,538 | ) |                   | $ | (161,669 | )
|Change in deficit due to reporting currency translation         |  |                                | 7,623    |   |                   |   | 7,623    |  
|Exploration costs (a)                                           |  |                                | (73,652  | ) |                   |   | (54,038  | )
|Amortization of mineral rights (a)                              |  |                                | (10,941  | ) |                   |   | (10,941  | )
|Amortization and depletion of exploration costs (a)             |  |                                | 4,152    |   |                   |   | 3,223    |  
|Stripping costs (b)                                             |  |                                | (4,562   | ) |                   |   | -        |  
|Depletion of mining properties (c)                              |  |                                | (4,574   | ) |                   |   | -        |  
|Interest expense on long-term debt adjusted to fair value (d)   |  |                                | (2,379   | ) |                   |   | (2,379   | )
|Foreign exchange gain on fair value adjusted long-term debt (d) |  |                                | (808     | ) |                   |   | (808     | )
|Future income tax adjustments                                   |  |                                | 16,819   |   |                   |   | 9,030    |  
|                                                                |  |                                |          |   |                   |   |          |  
|Deficit based on US GAAP                                        |  | $                              | (188,860 | ) |                   | $ | (209,959 | )
|                                                                |  |                                |          |   |                   |   |          |  



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except
per share data)



Accumulated other
comprehensive income:



|                                                                                          |  |                   |        |   |                   |   |        |  
|----------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                          |  | December 31, 2008 |        |   | December 31, 2007 |  
|                                                                                          |  |                  
|AOCI based on Canadian GAAP                                                               |  | $                 | 6,434  |   |                   | $ | 6,434  |  
|Change in AOCI due to reporting currency translation                                      |  |                   | (7,623 | ) |                   |   | (7,623 | )
|Change in funded status of employee benefit plans, net of tax of $197 (2007 - $189) (e)   |  |                   | (507   | ) |                   |   | (486   | )
|Amortization of actuarial gains from AOCI to net loss, net of tax of $28 (2007 - $70) (e) |  |                   | 71     |   |                   |   | 179    |  
|                                                                                          |  |                   |        |   |                   |   |        |  
|AOCI based on US GAAP                                                                     |  | $                 | (1,625 | ) |                   | $ | (1,496 | )
|                                                                                          |  |                   |        |   |                   |   |        |  





Consolidated Balance Sheets:

The following material balance
sheet differences exist between Canadian and US GAAP:

Inventory:



|                                                           |  |                                |         |   |                   |   |         |  
|---------------------------------------------------------- |  | ------------------------------ | ------- | - | ----------------- | - | ------- | -
|                                                           |  | December 31, 2008(as restated) |         |   | December 31, 2007 |  
|                                                           |  |                               
|Reported under Canadian GAAP                               |  | $                              | 60,128  |   |                   | $ | 51,586  |  
|Exploration costs (a)                                      |  |                                | (277    | ) |                   |   | -       |  
|Stripping costs (b)                                        |  |                                | 152     |   |                   |   | -       |  
|Depletion of mining interests (c)                          |  |                                | 441     |   |                   |   | -       |  
|                                                           |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|Reported under US GAAP                                     |  | $                              | 60,444  |   |                   | $ | 51,586  |  
|                                                           |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|Mineral properties and related deferred costs:             |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|                                                           |  | December 31, 2008(as restated) |         |   | December 31, 2007 |  
|                                                           |  |                               
|Reported under Canadian GAAP                               |  | $                              | 396,019 |   |                   | $ | 380,702 |  
|Exploration costs (a)                                      |  |                                | (73,652 | ) |                   |   | (54,038 | )
|Stripping costs (b)                                        |  |                                | (4,713  | ) |                   |   | -       |  
|Amortization of mineral rights (a)                         |  |                                | (10,941 | ) |                   |   | (10,941 | )
|Amortization and depletion of exploration costs (a)        |  |                                | 4,429   |   |                   |   | 3,223   |  
|Depletion of mining interests (c)                          |  |                                | (5,014  | ) |                   |   | -       |  
|Adjustment for mineral property purchase at fair value (d) |  |                                | (3,187  | ) |                   |   | (3,187  | )
|                                                           |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|Reported under US GAAP                                     |  | $                              | 302,941 |   |                   | $ | 315,759 |  
|                                                           |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|Future income tax liability:                               |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|                                                           |  | December 31, 2008(as restated) |         |   | December 31, 2007 |  
|                                                           |  |                               
|Reported under Canadian GAAP                               |  | $                              | 77,301  |   |                   | $ | 108,879 |  
|Future income tax adjustments                              |  |                                | (16,988 | ) |                   |   | (9,149  | )
|                                                           |  |                                |         |   |                   |   |         |  
|                                                           |  |                               
|Reported under US GAAP                                     |  | $                              | 60,313  |   |                   | $ | 99,730  |  
|                                                           |  |                                |         |   |                   |   |         |  



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except
per share data)



Employee future
benefits:



|                                            |  |                   |       |                   |   |      
|------------------------------------------- |  | ----------------- | ----- | ----------------- | - | -----
|                                            |  | December 31, 2008 |       | December 31, 2007
|                                            |  |                  
|Reported under Canadian GAAP                |  | $                 | 1,659 |                   | $ | 3,746
|Funded status of employee benefit plans (e) |  |                   | 605   |                   |   | 426  
|                                            |  |                   |       |                   |   |      
|                                            |  |                  
|Reported under US GAAP                      |  | $                 | 2,264 |                   | $ | 4,172
|                                            |  |                   |       |                   |   |      

Consolidated Statements of Cash Flows:

As a result of the treatment of mining interests and stripping costs under items (a) and (b) above, cash expended for exploration and stripping costs would be classified as operating rather than
investing, resulting in the following totals under US GAAP:



|                                 |  |                             |         |   |                             |   |         |  
|-------------------------------- |  | --------------------------- | ------- | - | --------------------------- | - | ------- | -
|                                 |  | Year endedDecember 31, 2008 |         |   | Year endedDecember 31, 2007 |  
|                                 |  |                            
|Cash from / (used in) operations |  | $                           | 31,607  |   |                             | $ | (20,026 | )
|                                 |  |                             |         |   |                             |   |         |  
|                                 |  |                            
|Cash used in investing           |  | $                           | (42,050 | ) |                             | $ | (84,863 | )
|                                 |  |                             |         |   |                             |   |         |  





Notes to the Reconciliation with United States Generally Accepted Accounting Principles

Note 1 - Adjustments from Canadian generally accepted accounting principles



|(a) | Mining interests and related deferred costs
|--- | -------------------------------------------

In March 2002, the
Emerging Issues Committee of the CICA issued EIC 126  Accounting by Mining Enterprises for Exploration Costs which affects mining companies with respect to the deferral of exploration costs. EIC 126 refers to CICA Handbook
Section 3061, Property, Plant and Equipment, paragraph .21 which states that for a mining property, the cost of the asset includes exploration costs if the enterprise considers that such costs have the characteristics of property, plant
and equipment.

Under Canadian GAAP, the Company considers that exploration costs have the characteristics of property, plant and equipment and,
accordingly, defers such costs.

Under United States GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as
incurred. Commercial feasibility is established in compliance with the US Securities and Exchange Commission Industry Guide 7, and consists of identifying that part of a mineral deposit that can be economically and legally extracted or produced at
the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized.



|(b) | Stripping costs
|--- | ---------------

In March 2006, the Emerging Issues Committee of
the CICA issued EIC 160  Stripping Costs Incurred in the Production of a Mining Operation, which addresses the treatment of stripping costs under Canadian GAAP. EIC 160 indicates that Stripping costs should be accounted for according to
the benefit received by the entity. Generally, stripping costs should be accounted for as variable production costs that should be included in the costs of the inventory produced (that is, extracted) during the period that the stripping costs are
incurred. However, stripping costs should be capitalized if the stripping activity can be shown to represent a betterment to the mineral property. A betterment occurs when the stripping activity provides access to sources of reserves that will be
produced in future periods that would not have otherwise been accessible in the absence of this activity.

Under Canadian GAAP, stripping costs relating
to all ore deposits that have not been previously mined are capitalized. Stripping costs for these deposits represent a benefit as access is gained to sources of reserves that will be produced in future periods, that would otherwise not have been
accessible.



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except per
share data)





EITF 04-6, Accounting for Stripping Costs Incurred during Production in the Mining Industry, addresses the
treatment of stripping costs under US GAAP. EITF 04-6 indicates that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of inventory produced during the period that the
stripping costs are incurred. In November 2007, a mining industry position paper was issued that concluded that it was the intent of EITF 04-6 that pre-production stripping costs incurred to develop each pit within a mining complex to access a
single or multiple ore bodies should generally be capitalized and separately amortized if certain operational, geological and other factors specific to the mining complex are met. As a result of this guidance, for United States GAAP, the Company has
capitalized stripping costs relating to one pit for which production has not commenced and for which there are no future plans to combine the pit with other pits that are currently in production. All other stripping costs have been included in the
costs of inventory produced.



|(c) | Depletion of mining interests
|--- | -----------------------------

Effective April 1, 2008, the
Company changed its estimate, for Canadian GAAP purposes, of the useful lives of its mines to be based on proven and probable reserves of the mine and the portion of mineralization expected to be classified as reserves. Previously, the Company
estimated the useful life based on proven and probable reserves to be mined.There is limited guidance under Canadian GAAP regarding the depletion of mineral interests, however Section 3061, Property, Plant & Equipment,
defines mining properties as items of property, plant and equipment represented by the capitalized costs of acquired mineral rights and the costs associated with exploration for and development of mineral reserves. Therefore,
mining properties are considered property, plant & equipment under Canadian GAAP. With respect to amortization of property, plant and equipment, Section 3061 indicates that amortization should be recognized in a
rational and systematic manner appropriate to the nature of an item of property, plant and equipment with a limited life and its use by the enterprise.The Company determined that the useful life of its mines is better represented by also
including a portion of mineralization expected to be classified as reserves, as opposed to only proven and probable reserves.

The United States
Securities and Exchange Commission indicated in Industry Guide 7 that disclosure of reserve information is limited to proven and probable reserves. Consequently, in December 1996 the American Institute of Certified Public Accountants
International Practices Task Force indicated that because disclosure of possible reserves is prohibited by SEC rules, under US GAAP, the base used for the depletion calculation also cannot include these amounts.



|(d) | Fair value of long-term debt
|--- | ----------------------------

In consideration for the Soyopa
claims acquired in November, 2001, the Company entered into a non-interest bearing loan agreement. Commencing in 2006, the loan has been presented at its fair value under Canadian GAAP. Under US GAAP, interest must be imputed on this loan in
accordance with Accounting Principles Board (APB) Opinion No. 21, Interest on Receivables and Payables. The reduction in the principal amount of the loan as a result of imputing a market rate of interest also reduces the
carrying values of the Companys mineral properties accordingly.

During the periods subsequent to November 2001, the interest imputed on the loan
is recorded as a period expense for US GAAP. For Canadian GAAP, the imputed interest is added to the cost of the mineral properties.



|(e) | Employee future benefits
|--- | ------------------------

In September 2006, the Financial
Accounting Standards Board issued FAS No. 58, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, which requires the recognition of the funding status of a benefit plan in the Companys financial
statements. FAS No. 158 also requires that the plan assets and benefit obligations be measured as of the date of the Companys fiscal year-end. Under FAS No. 158, the Company is required to recognize unamortized actuarial gains and
losses, prior service cost and remaining transitional amounts not recognized under Canadian GAAP, and to recognize changes in the funded status, through other comprehensive income, in the year in which the changes occur.



|(f) | Inventory net realizable value adjustments
|--- | ------------------------------------------

On January 1,
2008, the Company adopted CICA Section 3031, Inventories, which requires that previous write-downs of inventories be reversed when there is a subsequent increase in the net realizable value of the inventories. During the fourth quarter
of the current year, the Company recognized a net realizable value adjustment reversal of $2,899, relating to inventories that had been written down in the second and third quarters of the current year. In addition, on January 1, 2008, the
Company recognized a net realizable value adjustment reversal of $1,579 relating to inventories that had been written down in 2007.



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except per
share data)





ARB 43 addresses the accounting for net realizable value adjustment for US GAAP and indicates that when
inventories have been written down below cost at the close of a fiscal year, such reduced amount is to be considered the cost for subsequent accounting purposes, and therefore no future reversal of the write-down is permitted. APB 28, however,
indicates that recoveries of inventory losses from market declines in later interim periods of the same fiscal year should be recognized as a reversal of the original write-down.

As the reversal of the net realizable value adjustment recognized for Canadian GAAP in the fourth quarter related to a net realizable value adjustment recognized in the same fiscal year, no difference in the
accounting treatment required under Canadian and US GAAP exists. The net realizable value adjustment reversal recognized on January 1, 2008, however, is not permitted under US GAAP. The higher value inventories under Canadian GAAP would
have been expensed to production costs during the year. Therefore, the impact of this difference under US GAAP is to increase net earnings for the year ended December 31, 2008 of $1,579. This difference has no impact on the
December 31, 2008 inventory balance.





Note 2  Recent US accounting pronouncements

In
September 2006, the FASB issued FAS No. 157, Fair Value Measurements. FAS No. 157 provides guidance on how to use fair values to measure assets and liabilities and applies whenever other standards require or permit assets or
liabilities to be measured at fair value. Expanded disclosures about the use of fair value to measure assets and liabilities are also required. FAS No. 157 was effective for the Company on January 1, 2008 and is applied on a prospective
basis. In February 2008, the FASB issued FSP FAS No. 157-2 which delays the effective date of FAS No. 157 for non-financial assets and liabilities except for items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The adoption of FAS No. 157 had no impact on the Companys consolidated financial statements. The Company is evaluating the impact of FSP FAS
No. 157-2 on its consolidated financial statements.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115. FAS No. 159 expands the use of fair value accounting but does not affect existing standards which require assets or liabilities to be
carried at fair value. The objective of FAS No. 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. Under FAS No. 159, a company may elect to use fair value to measure eligible items at specified election dates and report unrealized gains and losses on items for which the fair value option
has been elected in earnings at each subsequent reporting date. Eligible items include, but are not limited to, accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable,
guarantees, issued debt and firm commitments. The Company did not elect to apply FAS 159 to any of its financial assets or liabilities.

In December
2007, FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51 and FAS No. 141R Business Combinations both of which are effective for annual
periods beginning after December 15, 2008. The first statement requires that third party ownership interests in subsidiaries be presented separately in the equity section of the balance sheet. In addition, the income attributable to the
noncontrolling interest will now be included in consolidated net income and will be deducted separately at the bottom of the income statement. The second statement requires that most identifiable assets, liabilities (including obligations for
contingent consideration), noncontrolling interests and goodwill be recorded at full fair value. Also, for step acquisitions, the acquirer will be required to re-measure its noncontrolling equity investment in the acquiree at fair value
as of the date control is obtained and recognize any gain or loss in income. The Company will adopt these standards on January 1, 2009.

In March
2008, FASB issued FAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, which requires enhanced disclosures about how and why a company uses derivative instruments, how derivative instruments and related hedged
items are accounted for under FAS 133 and its related interpretations and how derivative instruments and related hedged items affect a companys financial position, financial performance and cash flows. FAS 161 is effective fiscal years and
interim periods beginning after November 15, 2008, with early adoption encouraged. The issuance of this standard is expected to have no impact on the consolidated financial statements as the Company currently has no derivative instruments.



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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except per
share data)





In May 2008, FASB issued FAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This
standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted
accounting principles in the United States. FASB does not expect that this standard will result in a change in current practice. FAS No. 162 was effective November 15, 2008. The issuance of this standard had no impact on the consolidated
financial statements.





Note 3  Stock options (in Canadian dollars)

The
intrinsic value of options exercised during 2008 is $17,914 (2007 - $60,325). As at December 31, 2008 and 2007, the aggregate intrinsic value of options outstanding is $4,412 and $23,277 respectively, while the aggregate intrinsic value of the
options currently exercisable is $4,286 and $23,274, respectively. In 2008 and 2007, the 277,095 and 434,680 options that vested had a fair value of $1,396 and $4,069, respectively.

The weighted average remaining contractual life for options exercisable as at December 31, 2008 and 2007 is 1.12 years and 1.60 years respectively.

As at December 31, 2008 there was $5,977 in unrecognized compensation cost related to options which have not yet vested. This expense is expected to be
recognized over a weighted average period of 3.3 years.

The tax benefit realized from stock options exercised during the year is $Nil.





Note 4  Employee future benefits

The funded status of the Companys plans as at December 31, 2008 and 2007 is
($2,264) and ($4,172) respectively.

Amounts recorded in accumulated other comprehensive income as at December 31, 2008 and 2007 are as follows:



|                                                    |  |                   |     |                   |   |    
|--------------------------------------------------- |  | ----------------- | --- | ----------------- | - | ---
|                                                    |  | December 31, 2008 |     | December 31, 2007
|                                                    |  |                  
|Net loss, net of tax of $49 (2007 - $72)            |  | $                 | 127 |                   | $ | 185
|Prior service cost, net of tax of $120 (2007 - $47) |  |                   | 309 |                   |   | 122

The amount recognized in accumulated other comprehensive income expected to be recognized as components of net
periodic benefit cost during the year ended December 31, 2009 is $20.

The estimated future benefits payments are as follows:



|            |  |   |      
|----------- |  | - | -----
|2009        |  | $ | 70   
|2010        |  | $ | 53   
|2011        |  | $ | 70   
|2012        |  | $ | 83   
|2013        |  | $ | 110  
|2014  2019 |  | $ | 1,194







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Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except per
share data)





Note 5  Fair value measurements

FAS No. 157, Fair Value Measurements, establishes a valuation hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect the Companys own assumptions. The two types of inputs have created the following fair value hierarchy:



| |  |  | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
| | - |  | ----------------------------------------------------------------------------------------------------

| |  |  | Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted
prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data or other means.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Level 3 inputs are unobservable (supported by little or no market activity).
| | - |  | ----------------------------------------------------------------------------

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

The
Company does not have any material financial assets or liabilities measured at fair value on a recurring basis as at December 31, 2008.





Note 6  Income taxes

The income tax effects of differences between the accounting value and the tax value of assets and liabilities are as follows:



|                                                              |  |                                |         |   |                   |   |         |  
|------------------------------------------------------------- |  | ------------------------------ | ------- | - | ----------------- | - | ------- | -
|                                                              |  | December 31, 2008(as restated) |         |   | December 31, 2007 |  
|Deferred tax liabilities                                      |  |                                |         |   |                   |   |         |  
|Accounting value of mineral properties in excess of tax value |  | $                              | 68,504  |   |                   | $ | 99,636  |  
|Accounting value of inventories in excess of tax value        |  |                                | 11,328  |   |                   |   | 10,297  |  
|Unrealized foreign exchange gains                             |  |                                | 1,938   |   |                   |   | -       |  
|                                                              |  |                                |         |   |                   |   |         |  
|                                                              |  |                                | 81,770  |   |                   |   | 109,933 |  
|                                                              |  |                                |         |   |                   |   |         |  
|                                                              |  |                               
|Deferred tax assets                                           |  |                                |         |   |                   |   |         |  
|Deductible share issue costs                                  |  |                                | 1,871   |   |                   |   | 3,638   |  
|Employee future benefits                                      |  |                                | 605     |   |                   |   | 888     |  
|Unrealized foreign exchange losses                            |  |                                | -       |   |                   |   | 4,201   |  
|Other                                                         |  |                                | 2,146   |   |                   |   | -       |  
|Non-capital losses carried forward                            |  |                                | 64,251  |   |                   |   | 66,266  |  
|                                                              |  |                                |         |   |                   |   |         |  
|                                                              |  |                                | 68,873  |   |                   |   | 74,993  |  
|Valuation allowance                                           |  |                                | (47,416 | ) |                   |   | (64,790 | )
|                                                              |  |                                |         |   |                   |   |         |  
|                                                              |  |                                | 21,457  |   |                   |   | 10,203  |  
|                                                              |  |                                |         |   |                   |   |         |  
|                                                              |  |                               
|Net deferred tax liabilities                                  |  | $                              | 60,313  |   |                   | $ | 99,730  |  
|                                                              |  |                                |         |   |                   |   |         |  

Effective January 1, 2007, the Company adopted FASB Interpretation (FIN) 48, Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FAS No. 109,
Accounting for Income Taxes. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and
provides guidance on accounting and disclosure based on whether it is more likely than not that an uncertain tax position will be sustained on review by taxation authorities. The Company did not have any unrecognized tax benefits at
December 31, 2008, and no adjustments were recognized for uncertain tax benefits during the year. Accordingly, there is no impact on the Companys December 31, 2008 consolidated financial statements resulting from the application of
FIN 48.

The Company recognizes interest and penalties related to income taxes in interest expense.



8



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LOGO

Adjusted Restated Reconciliation with United States Generally Accepted Accounting Principles

December 31, 2008

(in thousands of United States Dollars except per
share data)





The Company and its subsidiaries are subject income tax in Canada, the United States, and Mexico. In Canada, years
ranging from 2004 through 2008, as applicable, are subject to examination by the taxing authorities in the respective jurisdictions where returns are filed. In the United States, years ranging from 2005 through 2008 are subject to examination by
taxing authorities. All years are subject to examination by the taxing authorities in Mexico.

The Company earns income and is subject to tax in the
following jurisdictions:



|                                                                |  |                                          |         |   |                             |   |         |  
|--------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | --------------------------- | - | ------- | -
|                                                                |  | Year endedDecember 31, 2008(as restated) |         |   | Year endedDecember 31, 2007 |  
|                                                                |  |                                         
|Provision / (recovery) for income taxes:                        |  |                                          |         |   |                             |   |         |  
|Current                                                         |  |                                          |         |   |                             |   |         |  
|Canada                                                          |  | $                                        | -       |   |                             | $ | -       |  
|Foreign                                                         |  |                                          | 1,044   |   |                             |   | -       |  
|Future                                                          |  |                                          |         |   |                             |   |         |  
|Canada                                                          |  |                                          | -       |   |                             |   | -       |  
|Foreign                                                         |  |                                          | (18,086 | ) |                             |   | 24,476  |  
|                                                                |  |                                         
|Geographic components of earnings / (loss) before income taxes: |  |                                          |         |   |                             |   |         |  
|Canada                                                          |  | $                                        | (28,179 | ) |                             | $ | (17,973 | )
|Foreign                                                         |  |                                          | 32,237  |   |                             |   | (59,041 | )
|                                                                |  |                                          |         |   |                             |   |         |  
|                                                                |  | $                                        | 4,058   |   |                             | $ | (77,014 | )
|                                                                |  |                                          |         |   |                             |   |         |  





Note 7  Receivables



|      |  |                                          |       |                             |   |      
|----- |  | ---------------------------------------- | ----- | --------------------------- | - | -----
|      |  | Year endedDecember 31, 2008(as restated) |       | Year endedDecember 31, 2007
|      |  |                                         
|Trade |  | $                                        | 2,254 |                             | $ | 1,738
|Other |  |                                          | 2,678 |                             |   | 2    
|      |  |                                          |       |                             |   |      
|      |  | $                                        | 4,932 |                             | $ | 1,740
|      |  |                                          |       |                             |   |      





Note 8  Accounts payable and accruals



|                |  |                                          |        |                             |   |       
|--------------- |  | ---------------------------------------- | ------ | --------------------------- | - | ------
|                |  | Year endedDecember 31, 2008(as restated) |        | Year endedDecember 31, 2007
|                |  |                                         
|Trade payables  |  | $                                        | 17,120 |                             | $ | 4,454 
|Accruals        |  |                                          | 5,745  |                             |   | 8,566 
|Accrued payroll |  |                                          | 7,221  |                             |   | 2,880 
|Other           |  |                                          | 371    |                             |   | 1,379 
|                |  |                                          |        |                             |   |       
|                |  | $                                        | 30,457 |                             | $ | 17,279
|                |  |                                          |        |                             |   |       







9