---

Exhibit 99.3



Consolidated Financial
Statements(in United States Dollars, unless otherwise stated)



December 31, 2013

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Managements Responsibility for Financial Reporting

The accompanying consolidated financial statements of AuRico
Gold Inc. (the Company) and the information in this annual report are the
responsibility of management and have been reviewed and approved by the
Companys board of directors (the Board of Directors). The consolidated
financial statements have been prepared by management in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board. In preparation of these consolidated financial
statements, estimates are sometimes necessary when transactions affecting the
current accounting period cannot be finalized with certainty until future
periods. Management believes that such estimates, which have been properly
reflected in the accompanying consolidated financial statements, are based on
the best estimates and judgements of management. Management has prepared the
financial information presented elsewhere in the annual report and has ensured
that it is consistent with that in the consolidated financial statements.

To discharge its responsibilities for financial reporting and
safeguarding of assets, management depends on the Companys systems of internal
control over financial reporting. These systems are designed to provide
reasonable assurance that the financial records are reliable and form a proper
basis for the timely and accurate preparation of financial statements. The Chief
Executive Officer and Chief Financial Officer have assessed and concluded on the
design and operating effectiveness of internal control over financial reporting.

The Board of Directors oversees managements responsibilities
for the consolidated financial statements primarily through the activities of
its Audit Committee, which is composed solely of directors who are neither
officers nor employees of the Company. This Committee meets with management and
the Companys independent auditors, KPMG LLP, to ensure that management is
properly fulfilling its financial reporting responsibilities, review the
consolidated financial statements, and recommend approval by the Board of
Directors. The Audit Committee provides full and unrestricted access to the
independent auditors and also meets with the independent auditors, without the
presence of management, to discuss the scope and results of their audit, the
adequacy of internal control over financial reporting, and the quality of
financial reporting.

The consolidated financial statements have been audited by KPMG
LLP, an independent registered public accounting firm, in accordance with
Canadian generally accepted auditing standards and in accordance with the
standards of the Public Company Accounting Oversight Board (United
States).

March 3, 2014

---



INDEPENDENT AUDITORS REPORT OFREGISTERED PUBLIC
ACCOUNTING FIRM

To the Shareholders of AuRico Gold Inc.

We have audited the accompanying consolidated financial
statements of AuRico Gold Inc., which comprise the consolidated balance sheets
as at December 31, 2013 and December 31, 2012, the consolidated statements of
operations, comprehensive income, shareholders equity and cash flows for the
years then ended, and notes, comprising a summary of significant accounting
policies and other explanatory information.

Managements Responsibility for the Consolidated Financial
Statements

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

Auditors Responsibility

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

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidatedfinancial statements, whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the entitys preparation
and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances.An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.

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

KPMG LLP is a Canadian
limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity.KPMG Canada
provides services to KPMG LLP.

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Page 2

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position of AuRico
Gold Inc. as at December 31, 2013 and December 31, 2012, and its consolidated
financial performance and its consolidated cash flows for the years then ended
in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.

Other Matter

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), AuRico Gold Inc.s
internal control over financial reporting as of December 31, 2013, based on the
criteria established in Internal Control  Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated March 3, 2014 expressed an unqualified opinion on the
effectiveness of AuRico Gold Inc.s internal control over financial reporting.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada March 3, 2014

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of AuRico Gold Inc.

We have audited AuRico Gold Inc.s internal control over
financial reporting as of December 31, 2013, based on Internal Control 
Integrated Framework (1992)issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). AuRico Gold Inc.s management
is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting under the heading Controls and Procedures in Managements
Discussion and Analysis for the year ended December 31, 2013. Our responsibility
is to express an opinion on the Companys internal control over financial
reporting based on our audit.

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

A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

KPMG LLP is a Canadian
limited liability partnership and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International
Cooperative(KPMG International), a Swiss
entity.KPMG Canada provides services to KPMG LLP.

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Page 2

In our opinion, AuRico Gold Inc. maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2013, based on criteria established in Internal Control  Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).

We also have audited, in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of AuRico Gold
Inc. as of December 31, 2013 and 2012, and the related consolidated statements
of operations, comprehensive income, shareholders equity, and cash flows for
each of the years in the two-year period ended December 31, 2013, and our report
dated March 3, 2014 expressed an unmodified opinion on those consolidated
financial statements.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada March 3, 2014

---

|                                                                            |  
|--------------------------------------------------------------------------- | -
|CONSOLIDATED BALANCE SHEETS                                                 |  
|(in
      thousands of United States dollars)                               |  
|                                                                            |  
|                                                                            |  
|As at December 31                                                           |  
|                                                                            |  
|ASSETS                                                                      |  
|Current assets                                                              |  
|Cash and cash equivalents (Note 5)                                          | $
|Restricted cash (Note 16(d))                                                |  
|Receivables (Note 6)                                                        |  
|Current income tax receivable                                               |  
|Inventories (Note 7)                                                        |  
|Prepaids and deposits                                                       |  
|                                                                            |  
|                                                                            |  
|Non-current assets                                                          |  
|Investments (Note 8)                                                        |  
|Long-term inventories (Note 7)                                              |  
|Investment in jointly-controlled entity (Note
      9)                      |  
|Other long-term assets (Note 10)                                            |  
|Property, plant and equipment & mining
      interests (Note 11 and 13)     |  
|Intangible assets (Note 12 and 13)                                          |  
|Goodwill (Note 12 and 13)                                                   |  
|                                                                            | $
|                                                                            |  
|LIABILITIES                                                                 |  
|Current liabilities                                                         |  
|Trade payables and accrued liabilities                                      | $
|Dividend payable (Note 18(b))                                               |  
|Current income tax liability                                                |  
|Derivative liabilities and other liabilities
      (Note 14)                |  
|Current portion of debt and equipment
      financing obligations (Note 15) |  
|Current portion of provisions (Note 16)                                     |  
|                                                                            |  
|                                                                            |  
|Non-current liabilities                                                     |  
|Debt and equipment financing obligations (Note
      15)                    |  
|Option component of convertible senior notes
      (Note 15 and 26)         |  
|Provisions (Note 16)                                                        |  
|Deferred income tax liability (Note 17)                                     |  
|                                                                            |  
|                                                                            |  
|SHAREHOLDERS' EQUITY                                                        |  
|Capital stock (Note 18)                                                     |  
|Contributed surplus                                                         |  
|Deficit                                                                     |  
|Accumulated other comprehensive loss (Note 19)                              |  
|                                                                            |  
|                                                                            | $
|                                                                            |  

Commitments and contingencies (Note 11 and Note 25)

|Signed on behalf of the Board: | signed              |  | signed              
|------------------------------ | --------------------- |  | ----------------------
|                               | Scott Perry, Director |  | Ronald Smith, Director

|See accompanying notes to the consolidated financial
      statements | 1
|--------------------------------------------------------------------- | -

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|                                                                        |   |             |   |   |             |  
|----------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|CONSOLIDATED STATEMENTS OF
      OPERATIONS                             |  
|(in
      thousands of United States dollars)                           |  
|                                                                        |   | 2013        |   |   | 2012        |  
|                                                                        |   |             |   |   | Restated    |  
|For the years
      ended December 31                                   |   |             |   |   | (Note 3(a)) |  
|                                                                        |   |             |   |   |             |  
|Revenue from mining operations                                          | $ | 227,631     |   | $ | 163,622     |  
|                                                                        |   |             |   |   |             |  
|Cost of sales:                                                          |   |             |   |   |             |  
|Production costs (Note 7)                                               |   | 147,981     |   |   | 61,599      |  
|Refining costs                                                          |   | 526         |   |   | 466         |  
|Amortization and depletion (Note 7)                                     |   | 65,529      |   |   | 18,723      |  
|Reclamation, care and maintenance costs                                 |   | 4,417       |   |   | 14,066      |  
|Total cost of sales                                                     |   | 218,453     |   |   | 94,854      |  
|                                                                        |   |             |   |   |             |  
|General and administrative                                              |   | 27,677      |   |   | 35,730      |  
|Exploration and business development                                    |   | 1,014       |   |   | 1,385       |  
|Impairment charges (Note 13)                                            |   | 158,574     |   |   | 128,537     |  
|Loss from operations (Note 20)                                          |   | (178,087    | ) |   | (96,884     | )
|                                                                        |   |             |   |   |             |  
|Finance costs                                                           |   | (2,928      | ) |   | (2,237      | )
|Foreign exchange gain / (loss)                                          |   | 10,927      |   |   | (10,727     | )
|Other income (Note 21)                                                  |   | 10,167      |   |   | 8,762       |  
|Equity in (loss) / earnings of jointly-controlled entity
      (Note 9) |   | (2,533      | ) |   | 83          |  
|Loss before income taxes                                                |   | (162,454    | ) |   | (101,003    | )
|                                                                        |   |             |   |   |             |  
|Deferred income tax expense / (recovery) (Note 17)                      |   | 14,456      |   |   | (7,849      | )
|Current income tax (recovery) / expense (Note 17)                       |   | (140        | ) |   | 6,625       |  
|                                                                        |   | 14,316      |   |   | (1,224      | )
|                                                                        |   |             |   |   |             |  
|Net loss from continuing operations                                     | $ | (176,770    | ) | $ | (99,779     | )
|Net earnings from discontinued operations (Note 29(d))                  |   | -           |   |   | 131,052     |  
|Net (loss) / earnings                                                   | $ | (176,770    | ) | $ | 31,273      |  
|                                                                        |   |             |   |   |             |  
|                                                                        |   |             |   |   |             |  
|(Loss) / earnings per share (Note 22)                                   |   |             |   |   |             |  
|Basic loss per share from continuing
      operations                   | $ | (0.71       | ) | $ | (0.35       | )
|Basic earnings per share from discontinued
      operations             |   | -           |   |   | 0.46        |  
|Basic (loss) / earnings per share                                       | $ | (0.71       | ) | $ | 0.11        |  
|                                                                        |   |             |   |   |             |  
|Diluted loss per share from continuing
      operations                 | $ | (0.72       | ) | $ | (0.35       | )
|Diluted earnings per share from discontinued
      operations           |   | -           |   |   | 0.46        |  
|Diluted (loss) / earnings per share                                     | $ | (0.72       | ) | $ | 0.11        |  
|                                                                        |   |             |   |   |             |  
|Weighted average shares outstanding (Note 22)                           |   |             |   |   |             |  
|Basic                                                                   |   | 250,398,043 |   |   | 282,194,197 |  
|Diluted                                                                 |   | 265,729,061 |   |   | 282,194,197 |  
|                                                                        |   |             |   |   |             |  

|See accompanying notes to the consolidated financial
      statements | 2
|--------------------------------------------------------------------- | -

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|                                                                                        |   |          |   |   |             |  
|--------------------------------------------------------------------------------------- | - | -------- | - | - | ----------- | -
|CONSOLIDATED STATEMENTS OF
      COMPREHENSIVE INCOME                                   |  
|(in
      thousands of United States dollars)                                           |  
|                                                                                        |   | 2013     |   |   | 2012        |  
|                                                                                        |   |          |   |   | Restated    |  
|For the years
      ended December 31                                                   |   |          |   |   | (Note 3(a)) |  
|Net (loss) / earnings                                                                   | $ | (176,770 | ) | $ | 31,273      |  
|Items that may be reclassified subsequently to net (loss) /
      earnings:             |   |          |   |   |             |  
|Other comprehensive loss from continuing
      operations:                              |   |          |   |   |             |  
|Unrealized loss on investments                                                          |   | (5,331   | ) |   | (34         | )
|Reclassification of accumulated
      losses on investments to earnings                 |   | 168      |   |   | -           |  
|Tax effect                                                                              |   | -        |   |   | (78         | )
|Total other comprehensive loss
      from continuing operations                         |   | (5,163   | ) |   | (112        | )
|                                                                                        |   |          |   |   |             |  
|Other comprehensive income from discontinued
      operations:                          |   |          |   |   |             |  
|Unrealized gain on derivatives
      designated as cash flow hedges                     |   | -        |   |   | 5,458       |  
|Reclassification of realized
      losses on cash flow hedges to earnings               |   | -        |   |   | 4,179       |  
|Foreign exchange gain on
      translation                                              |   | -        |   |   | (538        | )
|Unrealized loss on investments
      and reclassification of losses to earnings         |   | -        |   |   | 58          |  
|Reclassification of foreign
      exchange loss on translation to earnings (Note 29(d)) |   | -        |   |   | 2,173       |  
|Total other comprehensive income
      from discontinued operations                     |   | -        |   |   | 11,330      |  
|Total other comprehensive (loss) / income                                               |   | (5,163   | ) |   | 11,218      |  
|Comprehensive (loss) / income                                                           | $ | (181,933 | ) | $ | 42,491      |  
|                                                                                        |   |          |   |   |             |  

|See accompanying notes to the consolidated financial
      statements | 3
|--------------------------------------------------------------------- | -

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|                                                                                                    |  
|--------------------------------------------------------------------------------------------------- | -
|CONSOLIDATED STATEMENTS OF CASH
      FLOWS                                                         |  
|(in
      thousands of United States dollars)                                                       |  
|                                                                                                    |  
|                                                                                                    |  
|For the years
      ended December 31                                                               |  
|                                                                                                    |  
|OPERATING ACTIVITIES                                                                                |  
|Net loss from continuing operations                                                                 | $
|Payments of disposition-related costs                                                               |  
|Payments to settle derivative liabilities                                                           |  
|Payments to settle other liabilities                                                                |  
|Payments to settle provisions                                                                       |  
|Items not affecting cash (Note 23)                                                                  |  
|Change in non-cash operating working capital
      (Note 23)                                        |  
|Operating cash flows from continuing
      operations                                               |  
|                                                                                                    |  
|INVESTING ACTIVITIES                                                                                |  
|                                                                                                    |  
|Expenditures on property, plant and equipment,
      mining interests and intangible assets         |  
|Proceeds from issuance of shares in a
      subsidiary (Note 9)                                     |  
|Increase in restricted cash                                                                         |  
|Purchase of investments (Note 8)                                                                    |  
|Sale of investments (Note 8)                                                                        |  
|Proceeds from disposition of Australian
      Operations, net of cash sold (Note 29(a))             |  
|Proceeds from disposition of El Cubo and
      Guadalupe y Calvo, net of cash sold (Note 29(b))     |  
|Proceeds from disposition of Ocampo, net of
      cash sold and taxes paid (Note 29(c) and Note 23) |  
|Investing cash flows from continuing
      operations                                               |  
|                                                                                                    |  
|FINANCING ACTIVITIES                                                                                |  
|Repayment of debt and equipment financing
      obligations                                         |  
|Proceeds from debt and equipment financing
      obligations                                        |  
|Payment of dividends                                                                                |  
|Payment of financing fees on debt                                                                   |  
|Proceeds from exercise of stock options                                                             |  
|Shares repurchased and cancelled (Note 18(a))                                                       |  
|Financing cash flows from continuing
      operations                                               |  
|Impact of foreign exchange on cash                                                                  |  
|                                                                                                    |  
|Net (decrease) / increase in cash from continuing
      operations                                  |  
|Net decrease in cash from discontinued operations (Note
      29(d))                                |  
|                                                                                                    |  
|Cash and cash equivalents, beginning of period                                                      |  
|Cash and cash equivalents, end of period                                                            | $
|                                                                                                    |  

|See accompanying notes to the consolidated financial
      statements | 4
|--------------------------------------------------------------------- | -

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|                                                                        |  
|----------------------------------------------------------------------- | -
|CONSOLIDATED STATEMENTS OF
      SHAREHOLDERS EQUITY                   |  
|(in
      thousands of United States dollars)                           |  
|                                                                        |  
|                                                                        |  
|For the year ended
      December 31                                    |  
|                                                                        |  
|Capital stock                                                           |  
|Balance, beginning of period                                            | $
|Shares repurchased and cancelled (Note 18(a))                           |  
|Shares issued through dividend reinvestment
      plan                  |  
|Shares issued as payment for
      disposition-related services         |  
|Shares issued through employee share purchase
      plan                |  
|Shares issued on redemption of deferred share
      units               |  
|Shares issued for cash pursuant to exercise of
      stock options      |  
|Fair value of share-based compensation on
      stock options exercised |  
|Balance, end of period                                                  | $
|                                                                        |  
|                                                                        |  
|Contributed surplus                                                     |  
|Balance, beginning of period                                            | $
|Fair value of deferred share units redeemed                             |  
|Fair value of share-based compensation on
      stock options exercised |  
|Share-based compensation                                                |  
|Balance, end of period                                                  | $
|                                                                        |  
|                                                                        |  
|Deficit                                                                 |  
|Balance, beginning of period                                            | $
|Dividends declared (Note 18(b))                                         |  
|Premium on shares repurchased and cancelled
      (Note 18(a))          |  
|Net (loss) / earnings                                                   |  
|Balance, end of period                                                  | $
|                                                                        |  
|                                                                        |  
|Accumulated other comprehensive loss                                    |  
|Balance, beginning of period                                            | $
|Other comprehensive (loss) / income                                     |  
|Balance, end of period                                                  | $
|                                                                        |  
|                                                                        |  
|Total
      shareholders' equity                                        | $
|                                                                        |  

|See accompanying notes to the consolidated financial
      statements | 5
|--------------------------------------------------------------------- | -

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|1. | Corporate information
|-- | ---------------------

AuRico Gold Inc. and its subsidiaries (collectively, the
Company or AuRico Gold) are engaged in the mining, development and
exploration of resource properties. AuRico Gold Inc., the ultimate parent, is a
publicly traded company with common shares listed on the Toronto Stock Exchange
(TSX: AUQ) and the New York Stock Exchange (NYSE: AUQ). The Company is
incorporated and domiciled in Canada and its head office and registered office
is located at 110 Yonge Street, Suite 1601, Toronto, Ontario, M5C 1T4.

The consolidated financial statements of the Company and its
subsidiaries were authorized for issue in accordance with a resolution of the
Board of Directors dated March 3, 2014.

|   |                                                       
|-- | ------------------------------------------------------
|2. | Basis of preparation and statement of
      compliance

These consolidated financial statements are prepared in
accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB), effective for the year
ended December 31, 2013.

These consolidated financial statements have been prepared
using the historical cost convention, other than for certain financial
instruments, which are measured in accordance with the policy disclosed in note
3(r).

|    |                                           
|--- | ------------------------------------------
|3.  | Summary of significant accounting policies
|    |                                           
|(a) | Adoption of new accounting standards      

The Company adopted the following accounting standards and
amendments to accounting standards, effective January 1, 2013:

IFRIC 20,Stripping Costs in the Production Phase of a Surface Mine, provides guidance
  on the recognition and measurement of stripping costs associated with surface
  mining operations. IFRIC 20 differentiates between two benefits that could
  accrue to an entity from stripping activities: (1) usable ore that can be used
  to produce inventory, and (2) improved access to further quantities of material
  that will be mined in future periods. IFRIC 20 provides guidance on when and how
  to account separately for these two benefits, as well as how to initially and
  subsequently measure them. If the costs of the stripping activity asset versus
  inventory produced are not separately identifiable, an entity is required to
  allocate production stripping costs between the two based on a relevant
  production measure. IFRIC 20 has been applied prospectively to the Companys
  production stripping costs incurred on or after January 1, 2012, as all
  historical stripping costs were associated with an identifiable component of the
  ore body.

The adoption of this interpretation resulted in an increase of
$3,330 in inventory, an increase of $3,276 in long-term inventory, a decline of
$8,564 in property, plant and equipment & mining interests, and an increase
of $1,958 in deficit in the Consolidated Balance Sheets as at December 31, 2012.
The adoption of this interpretation also resulted in an increase of $1,958 in
production costs in the Consolidated Statements of Operations for the year ended
December 31, 2012, which decreased both the Companys basic and diluted earnings
per share by $0.01. For the year ended December 31, 2012, the adoption of this
interpretation decreased expenditures on property, plant and equipment, mining
interests and intangible assets by $8,564, and decreased the cash outflow from
non-cash operating working capital by $6,606, in the Condensed Consolidated
Statements of Cash Flows.

IFRS 10, Consolidated Financial Statements, replaces the
consolidated financial statements section of IAS 27, Consolidated and Separate Financial Statements,and
SIC-12, Consolidation  Special Purposes Entities,in its entirety. IFRS
10 establishes the principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other
entities, regardless of the nature of relationship. The new standard introduces
a revised definition of control, and provides additional guidance on how to
apply the control principle in a number of situations. There was no impact on
the Companys consolidated financial statements upon the adoption of this
standard.

IFRS 11, Joint Arrangements, replaces IAS 31,
Interests in Joint Ventures, and requires the Company to classify its
interest in a joint arrangement as either a joint operation or a joint venture.
For a joint venture, the Company will account for its interest in the net assets
of the joint venture using the equity method of accounting. The Company will no
longer have the option to proportionately consolidate its share of the net
assets, revenues and expenses of joint ventures. There was no impact on the
Companys consolidated financial statements upon the adoption of this standard,
as the Company previously accounted for its interest in a joint venture using
the equity method of accounting.

IFRS 12, Disclosure of Interests in Other Entities,
outlines the disclosures required surrounding an entitys interests in
subsidiaries, associates, joint arrangements and unconsolidated structured
entities, to enable users of financial statements to evaluate the nature of, and risks associated
with, its interests in other entities, and the effects of those interests on its
financial position, financial performance and cash flows. The requirements of
IFRS 12 relate to disclosures only and are applicable for the first annual
period after adoption. These disclosure requirements have been incorporated into
the Companys consolidated financial statements.

6

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

IFRS 13, Fair Value Measurement, is a single source of
fair value measurement guidance under IFRS. IFRS 13 clarifies the definition of
fair value, provides a clear framework for measuring fair value, and enhances
the disclosures about fair value measurements. IFRS 13 is not only limited to
financial instruments, but also applies to fair value measurement in other IFRS,
such as impairment and employee future benefits. These disclosure requirements
have been incorporated into the Companys consolidated financial statements.

IFRS 7, Financial Instruments: Disclosures, and IAS 32,
Financial Instruments: Presentation, were amended to address offsetting
financial assets and financial liabilities in the financial statements. The
amendments to IFRS 7 contain new disclosure requirements for financial assets
and liabilities that are offset in the balance sheet or that are subject to
master netting arrangements or similar arrangements. There was no impact on the
Companys consolidated financial statements upon the adoption of this amendment.

IAS 1, Presentation of Financial Statements, was amended
to revise the presentation of other comprehensive income, requiring entities to
group items presented in other comprehensive income based on whether they are
potentially reclassifiable to profit or loss subsequently, with subtotals for
each group. There was no impact on the Companys consolidated financial
statements upon the adoption of this amendment as all items are reclassifiable
subsequently to net earnings.

The Company also adopted the amendments to IAS 19, Employee
Benefits, IAS 27, Separate Financial Statements,and IAS 28,
Investments in Associates and Joint Ventures, which did not have an
impact on the Companys consolidated financial statements.

|(b) | Basis of consolidation
|--- | ----------------------

These consolidated financial statements include the accounts of
the Company and the following subsidiaries:

|Company                                          |  | Principal activity      |  | Country of incorporation
|------------------------------------------------ |  | ----------------------- |  | ------------------------
|AuRicoGold Chihuahua, S.A. de C.V., SOFOM E.N.R. |  | Administrative services |  | Mexico                  
|AuRico Gold Holdings Inc.                        |  | Holding company         |  | Canada                  
|AuRico Gold Luxembourg S.à.r.l                   |  | Administrative services |  | Luxembourg              
|AuRico Gold (USA), Inc.                          |  | Administrative services |  | United States of America
|Capital Gold Corporation                         |  | Holding company         |  | United States of America
|Leadville Mining & Milling Holding Corporation   |  | Holding company         |  | United States of America
|Minera Santa Rita, S. de R.L. de C.V.            |  | Gold and silver mining  |  | Mexico                  
|Nayarit Gold Inc.                                |  | Holding company         |  | Canada                  
|Oro de Altar, S.A. de C.V.                       |  | Holding company         |  | Mexico                  

These subsidiaries are controlled by the Company, and are
wholly-owned. Control exists when the Company 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.

The Company also consolidates the accounts of Caborca
Industrial S.A. de C.V., a Mexican corporation wholly-owned by two senior
officers of the Company, which provides mining support services to the Companys
El Chanate mine. This entity is consolidated in accordance with IFRS 10,
Consolidated Financial Statements.

All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.

|(c) | Investments in joint
ventures
|--- | -----------------------------

The Company accounts for investments in joint ventures using
the equity method of accounting. The carrying value of the Companys investments
in joint ventures represents the cost of the investment, including the Companys
share of retained earnings and losses subsequent to formation. At the end of
each reporting period, the Company assesses its investments in joint ventures
for any indicators of impairment.

7

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                 
|--- | ----------------
|(d) | Foreign currency

Functional and presentation currency

These consolidated financial statements are expressed in United
States dollars (US dollars), which is the functional currency of the Company
and the presentation currency of the consolidated financial statements. The
functional currency of all of the Companys subsidiaries is also the US
dollar.

Translation of transactions and balances into the
functional currency

Transactions in currencies other than an entitys functional
currency (foreign currencies) are recognized at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting
period, monetary assets and liabilities denominated in foreign currencies are
translated at the rates prevailing at that date. Foreign currency non-monetary
items that are measured in terms of historical cost are not retranslated.

Exchange differences are recognized in net earnings in the
period in which they arise. Unrealized gains and losses due to movements in
exchange rates on cash and cash equivalents held in foreign currencies are shown
separately on the Consolidated Statements of Cash Flows.

|(e) | Revenue recognition
|--- | -------------------

Revenue from the sale of gold, silver and doré, including
by-product revenue, is recognized when persuasive evidence of a sale arrangement
exists, the risks and rewards of ownership pass to the purchaser, including
title risk, the selling price is measurable, and collectability is probable. The
risks and rewards of ownership are considered to have been transferred when
title passes to the customer. Revenue from the sale of gold, silver and doré is
measured at the fair value of the consideration received or receivable, and may
be subject to adjustment once final weights and assays are determined.

|(f) | Cash and cash equivalents
|--- | -------------------------

The Company considers deposits in banks, certificates of
deposits, and short-term investments with original maturities of three months or
less from the acquisition date as cash and cash equivalents.

|(g) | Inventories
|--- | -----------

Supplies inventory

Supplies inventory consists of mining supplies and consumables
used in the operation of the mines, and is valued at the lower of average cost
and net realizable value.

Ore stockpiles inventory

Stockpiles represent ore that has been mined and is available
for further processing. The carrying value of stockpiles are measured by
estimating the number of tonnes added and removed from the stockpile, the number
of contained ounces (based on assay data) and the estimated metallurgical
recovery rates (based on the expected processing method). Stockpile ore tonnages
are verified by periodic surveys. Costs are allocated to stockpiles based on the
current mining cost per tonne incurred up to the point of stockpiling the ore,
including applicable overhead, depletion and amortization relating to mining
operations, and are removed at the average cost per tonne. Ore stockpiles
inventory is measured at the lower of cost and net realizable value.

Ore in process inventory

The recovery of gold and silver is achieved through milling and
heap leaching processes. Costs are added to ore on leach pads and in the mill
based on the current stockpiled mining cost and current processing cost,
including applicable overhead, depletion and amortization relating to mining and
processing operations. Costs are removed from ore on leach pads and in the mill
as ounces are recovered, based on the average cost per recoverable ounce of gold
and silver in ore in process inventory. Ore in process inventory is measured at
the lower of cost and net realizable value.

Finished goods inventory

Finished goods inventory consists of gold, silver and doré
bars, and is valued at the lower of cost and net realizable value.

For all classes of ore inventory, net realizable value is
calculated as the difference between the estimated future metal revenue based on
prevailing and / or long-term metal prices as appropriate, and estimated costs
to complete production into a saleable form.

8

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                  
|--- | -----------------
|(h) | Long-lived assets

Property, plant and equipment

Property, plant and equipment is recorded at cost less
accumulated amortization and accumulated impairment losses. The initial cost of
an asset is comprised of its purchase price or construction cost, any costs
directly attributable to bringing the asset into operation, the initial estimate
of the reclamation obligation, and for qualifying assets, borrowing costs. The
purchase price or construction cost is the aggregate amount paid and the fair
value of any other consideration given to acquire the asset. The capitalized
value of a finance lease is also included within property, plant and equipment,
and is measured at the lower of the present value of the minimum lease payments
and the fair value of the leased asset.

Subsequent costs are included in the assets carrying amount
when it is probable that future economic benefits associated with the asset will
flow to the Company, and the costs can be measured reliably. This would include
costs related to the refurbishment or replacement of major components of an
asset, when the refurbishment results in a significant extension in the physical
life of the component. All other repairs and maintenance costs are recognized in
earnings as incurred.

The cost of property, plant and equipment, less any applicable
residual value, is allocated over the estimated useful life of the asset on a
straight-line basis, or on a unit-of-production basis if that method is more
reflective of the allocation of benefits among periods. Amortization commences
on an asset when it has been fully commissioned and is available for use.
Amortization rates applicable to each category of property, plant and equipment,
with the exception of land, are as follows:

|Asset                                |  | Useful life       
|------------------------------------ |  | ------------------
|Leasehold improvements               |  | 3 years           
|Equipment under finance lease        |  | 2-10 years        
|Mobile equipment                     |  | 2-10 years        
|Other equipment                      |  | 2-20 years        
|Processing plant                     |  | 2-20 years        
|Shaft and underground infrastructure |  | Unit-of-production
|Vehicles                             |  | 3-4 years         
|Buildings                            |  | 7-20 years        
|Office equipment                     |  | 2-9 years         

When components of an item of property, plant and equipment
have different useful lives than those noted above, they are accounted for as
separate items of property, plant and equipment. Each asset or components
estimated useful life is determined considering its physical life limitations;
however this physical life cannot exceed the remaining life of the mine at which
the asset is utilized. Estimates of remaining useful lives and residual values
are reviewed annually. Any changes in estimates of useful lives are accounted
for prospectively from the date of the change.

Exploration and evaluation assets

Expenditures incurred prior to the Company obtaining the right
to explore are expensed in the period in which they are incurred.

Exploration and evaluation expenditures include costs such as
exploratory drilling, sample testing, costs of pre-feasibility studies, and for
qualifying assets, borrowing costs. Subsequent to obtaining the legal right to
explore, these costs are capitalized on a project-by-project basis pending
determination of the technical feasibility and commercial viability of the
project. All capitalized exploration and evaluation expenditures are monitored
for indications of impairment, to ensure that exploration activities related to
the property are continuing and/or planned for the future. If an exploration
property does not prove viable, all unrecoverable costs associated with the
project are written off.

Exploration and evaluation assets are not depleted. These
amounts are reclassified from exploration and evaluation assets to mining
interests once the work completed to date supports the future development of the
property and management intends to develop the property. Prior to being
reclassified to mining interests, exploration and evaluation assets are assessed
for impairment.

Mining interests

All expenditures to ready the property for production are
capitalized within mining interests, other than those costs related to the
construction of related property, plant and equipment, which are capitalized
within construction in progress. Expenditures capitalized to mining interests
include all costs directly related to development activity and a proportion of
overhead costs related to development activity. Any proceeds from the sale of
metals during the development and commissioning phase of a project are netted against the
expenditures being capitalized. The development and commissioning phase ceases
upon the commencement of commercial production.

9

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Subsequent to the commencement of commercial production,
further development expenditures incurred with respect to a mining interest are
capitalized as part of the mining interest, when it is probable that additional
future economic benefits associated with the expenditure will flow to the
Company. Otherwise, such expenditures are classified as a cost of production.

Upon commencement of commercial production, mining interests
are depleted over the life of the mine using the unit-of-production method based
on estimated proven and probable reserves of the mine and the portion of
mineralization from measured, indicated and inferred resources expected to be
classified as reserves. The Company determines the portion of mineralization
expected to be classified as reserves by considering the degree of confidence in
the economic extraction of the resource, which is affected by long-term metal
price assumptions, cut-off grade assumptions, and drilling results. These
assessments are made on a mine-by-mine basis.

The expected useful lives used in depletion calculations are
determined based on the facts and circumstances associated with the mining
interest. Any changes in estimates of useful lives are accounted for
prospectively from the date of the change.

Commercial production

Commercial production is reached when an open pit or
underground mine is in the condition necessary for it to be capable of operating
in the manner intended by management. The Company considers a range of factors
when determining whether commercial production has been reached, which may
include the completion of all required major capital expenditures, the
demonstration of continuous production near the level required by the design
capacity of the processing facilities, and the demonstration of continuous
throughput levels at or above a target percentage of the design capacity. The
Company assesses the ability to sustain production and throughput over a period
of approximately one to three months, depending on the complexity of the
operation, prior to declaring that commercial production has been reached.

Capitalized stripping costs

Pre-production stripping costs are capitalized as part of the
cost of constructing a mine.

Mining costs associated with stripping activities during the
production phase of a mine are capitalized only if the Company can identify the
component of the ore body for which access is obtained, the costs associated
with the related stripping activities can be measured reliably, and the
activities represent a future benefit to the mining interest, in that access is
gained to sources of reserves and resources that will be produced in future
periods that would otherwise not have been accessible. Production stripping
costs are allocated between inventory and capital based on the expected volume
of waste extracted for a given volume of ore production. The expected volume of
waste to be allocated to inventory is determined with reference to the life of
mine stripping ratio of a particular mine or deposit, with the remaining amount
allocated to capital. The amount of waste capitalized is calculated by
multiplying the stripping tonnes mined during the period by the current mining
cost per tonne in the open pit.

Capitalized stripping costs are depleted over the expected
reserves and resources benefiting from the stripping activity using the
unit-of-production method based on estimated proven and probable reserves, and
the portion of mineralization expected to be classified as reserves.

Investment tax credits

Investment tax credits are earned as a result of incurring
eligible exploration and development expenses prior to commercial production.
Investment tax credits are accounted for as a reduction to property, plant and
equipment or mining interests. Investment tax credits also arise as a result of
incurring eligible research and development expenses and these credits are
recorded as a reduction to the related expenses.

Derecognition

Upon replacement of a major component, or upon disposal or
abandonment of a long-lived asset, the carrying amounts of the assets are
derecognized with any associated gains or losses recognized in net earnings.

|(i) | Intangible assets
|--- | -----------------

Identifiable intangible assets are recorded at cost less
accumulated amortization and accumulated impairment losses or at fair value on
the date of acquisition. Identifiable intangible assets with a finite useful
life are amortized on a straight-line basis over their expected useful life,
unless another method represents a more accurate allocation of the expense over
their useful life. Amortization of the retained interest royalty is determined
using the unit-of-production method based on the ounces of production that are expected to generate the cash flows that
will be attributable to the Company, and will commence once the Company becomes
entitled to receive cash flows. Amortization expense resulting from intangible
assets is included in amortization and depletion expense on the Consolidated
Statements of Operations. The estimated useful lives of the Companys intangible
assets with a finite useful life are as follows:

10

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|                          |  |                    
|------------------------- |  | -------------------
|Asset                     |  | Useful life        
|Transmission rights       |  | 8-20 years         
|Software                  |  | 1-3 years          
|Retained interest royalty |  | Units of production

|(j) | Goodwill
|--- | --------

Goodwill represents the difference between the consideration
transferred and the fair value of the identifiable net assets acquired, and is
not amortized. Goodwill, upon acquisition, is allocated to the cash-generating
unit (CGU) or group of CGUs expected to benefit from the related business
combination for the purposes of impairment testing. A CGU is defined as the
smallest identifiable group of assets that generates cash inflows, which are
largely independent of the cash inflows from other assets. Each of the Companys
operating mines is a CGU for purposes of goodwill impairment testing.

|(k) | Impairment of non-financial assets and
    goodwill
|--- | ---------------------------------------------------

The carrying amounts of non-financial assets, excluding
inventories and deferred income tax assets, are reviewed for impairment at each
reporting date, or whenever events or changes in circumstances indicate the
carrying amounts may not be recoverable. If there are indicators of impairment,
a review is undertaken to determine whether the carrying amounts are in excess
of their recoverable amounts. Reviews are undertaken on an asset-by-asset basis,
except where the recoverable amount for an individual asset cannot be
determined, in which case the review is undertaken at the CGU level.

On an annual basis, the Company evaluates the carrying amount
of CGUs to which goodwill has been allocated to determine whether such carrying
amount may be impaired. To accomplish this, the Company compares the recoverable
amount of a CGU to its carrying amount. This evaluation is performed more
frequently if there is an indication that a CGU may be impaired.

If the carrying amount of a CGU or non-financial asset exceeds
the recoverable amount, being the higher of its fair value less costs to sell
and its value-in-use, an impairment loss is recognized in net earnings as the
excess of the carrying amount over the recoverable amount. With respect to CGUs,
impairment losses are allocated first to reduce the carrying amount of any
goodwill allocated to the CGUs, and then to reduce the carrying amounts of the
other assets in the CGU on a pro-rata basis.

Where the recoverable amount is assessed using discounted cash
flow techniques, the resulting estimates are based on detailed mine or
production plans. The mine plan is the basis for forecasting production output
in each future year and for forecasting production costs. For value-in-use
calculations, production costs and output in the mine plan may be revised to
reflect the continued use of the asset in its present form.

Non-financial assets that have suffered an impairment are
tested for a possible reversal of the impairment whenever events or changes in
circumstances indicate that the impairment may have reversed. In these
instances, the impairment loss is reversed to the recoverable amount but not
beyond the carrying amount, net of amortization, that would have arisen if the
prior impairment loss had not been recognized. Goodwill impairments are not
reversed.

|(l) | 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,
other than those classified as fair value through profit or loss, is impaired.
Financial assets include receivables and investments. A financial asset or a
group of financial assets is deemed to be impaired if there is objective
evidence of impairment as a result of one or more events that have occurred
after the initial recognition of the asset that negatively impact the estimated
future cash flows of the financial asset or the group of financial assets.

|(m) | Provisions
|--- | ----------

Reclamation provisions

The Companys mining and exploration activities are subject to
various governmental laws and regulations relating to the protection of the
environment. These environmental regulations are continually changing, and the
Company has made, and intends to make in the future, expenditures to comply with
such laws and regulations. The timing of these expenditures is dependent upon a
number of factors including the life of the mine, the operating licence
conditions, and the laws, regulations, and environment in which the mine
operates.

11

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Reclamation provisions are recognized at the time an
environmental disturbance occurs and are measured at the Companys best estimate
of the expected value of future cash flows required to reclaim the disturbance,
which are discounted to their present value for each mine operation. Expected
future cash flows reflect the risks and probabilities that alternative estimates
of cash flows could be required to settle the obligation. The discount rate used
is a pre-tax rate that reflects current market assessments of the time value of
money specific to the currency in which the cash flows are expected to be paid.
The discount rate does not reflect risks for which the cash flows have been
adjusted. Significant estimates are involved in forming expectations of future
activities and the amount and timing of the associated cash flows. Those
expectations are based on existing environmental and regulatory requirements or,
if more stringent, Company policies that give rise to a constructive obligation.

Upon initial recognition of a reclamation provision, the
corresponding cost is capitalized as an asset, representing part of the cost of
acquiring the future economic benefits of the operation. The capitalized cost of
reclamation and rehabilitation activities is recognized in mining interests and
depreciated in accordance with the Company's policy for the related asset. The
provision is progressively increased over the life of the operation as the
effect of discounting unwinds, creating an expense included in finance costs on
the Consolidated Statements of Operations.

Reclamation provisions are adjusted for changes in estimates.
Such adjustments, which are not the result of the current production of
inventory, are accounted for as a change in the corresponding capitalized cost,
except where a reduction in the provision is greater than the unamortized
capitalized cost of the related assets. In the latter case, the capitalized cost
is reduced to nil and the remaining adjustment is recognized in reclamation,
care and maintenance costs on the Consolidated Statements of Operations. If
reclamation and restoration costs are incurred as a consequence of the
production of inventory, the costs are recognized as a cost of that inventory.
Factors influencing such changes in estimates include revisions to estimated
reserves, resources and lives of mines; developments in technologies; regulatory
requirements and environmental management strategies; changes in estimated costs
of anticipated activities, including the effects of inflation and movements in
foreign exchange rates; and movements in interest rates affecting the discount
rate applied.

Other provisions

Provisions are recognized when the Company has a present
obligation (legal or constructive), as a result of past events, and it is
probable that an outflow of resources that can be reliably estimated will be
required to settle the obligation. Provisions are measured at the present value
of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision due to
the passage of time is recognized as interest expense and included in finance
costs on the Consolidated Statements of Operations.

|(n) | Employee benefits
|--- | -----------------

Short-term employee benefits

The Company accrues liabilities for short-term employee
benefits such as wages, salaries, bonuses, paid vacation, and other benefits
expected to be settled within 12 months from the end of the reporting period.
The liabilities for short-term benefits are measured on an undiscounted basis at
the amounts expected to be paid when the liabilities are settled. These amounts
are recognized in accounts payable, with offsetting charges to cost of sales
(production costs) or general and administrative expense.

Termination benefits

The Company accrues liabilities for involuntary termination and
severance benefits when the termination has been communicated to the employee,
and the employee acknowledges receipt. The liabilities for termination benefits
are measured at their nominal amounts based on amounts expected to be paid when
the liabilities are settled.

|(o) | Share-based compensation
|--- | ------------------------

The Company measures all equity-settled share-based awards made
to employees and others providing similar services (collectively, employees)
based on the fair value of the options or units on the date of grant.

The grant date fair value of options is estimated using an
option pricing model and is recognized over the vesting period of the options as
compensation expense, with a corresponding increase to equity. The fair values
of the Companys deferred share units, equity-settled restricted share units and
performance share units are determined based on the market value of the
Companys shares on the date of grant, and is expensed over the vesting period
based on the estimated number of awards that are expected to vest.

The Company awards cash-settled share-based compensation to
certain employees in the form of restricted share units. In accounting for these
awards, the Company recognizes the fair value of the amount payable to employees
as compensation expense as they are earned, based on the estimated number of
units that are expected to vest. The corresponding liability is re-measured at
fair value on each reporting date and upon settlement, with changes in fair
value recognized in net earnings for the period. The fair value of restricted
share units is determined by reference to the Companys share price when the
units are awarded or re-measured.

12

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The Company also maintains an employee share purchase plan.
Under this plan, contributions by the Companys employees are matched to a
specific percentage by the Company and are recognized as an expense when the
Companys obligation to contribute arises.

Share-based arrangements in which the Company receives goods or
services as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions regardless of how the equity
instruments are obtained by the Company. These share-based arrangements are
measured at the fair value of goods or services received unless the fair value
of the goods or services cannot be reliably measured, in which case they are
measured at the fair value of the equity instruments issued.

|(p) | Income taxes
|--- | ------------

Income tax expense is comprised of current and deferred income
tax. Current and deferred income taxes are recognized in net earnings except to
the extent that they relate to a business combination, or to items recognized
directly in equity or other comprehensive income.

Current income taxes

Current income tax expense represents the income tax expected
to be payable on the Companys taxable earnings for the year using rates that
are enacted or substantively enacted at the balance sheet date. Taxable earnings
differ from accounting earnings reported in the Consolidated Statements of
Operations due to differences in timing of amounts deductible or taxable for tax
purposes and due to exclusions of items that are not taxable or deductible.
Current income tax includes adjustments for tax expense expected to be payable
or recoverable in respect of previous periods.

Deferred income taxes

Deferred income tax assets and liabilities represent income
taxes expected to be payable or recoverable on differences between the carrying
amount of assets and liabilities in the Companys consolidated financial
statements and the corresponding tax basis used in the computation of taxable
earnings. Deferred income tax assets also represent income taxes expected to be
recoverable on unused tax losses and tax credits carried forward. Deferred
income tax is calculated using the liability method on temporary differences
between the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.

Deferred income taxes are measured using the enacted or
substantively enacted tax rates at the balance sheet date that are expected to
be in effect when the differences reverse or when unclaimed losses are utilized.
Deferred income tax liabilities are generally recognized for all taxable
temporary differences, with some exceptions described below. Deferred income tax
assets are recognized to the extent that it is probable that taxable earnings
will be available against which deductible temporary differences, unused tax
losses and tax credits can be used. Neither deferred income tax liabilities, nor
deferred income tax assets, are recognized as a result of temporary differences
that arise from (a) the initial recognition of goodwill, (b) a transaction,
other than a business combination, that affects neither accounting earnings nor
taxable earnings, or (c) differences relating to investments in subsidiaries to
the extent that it is probable that they will not reverse in the foreseeable
future. Deferred income tax assets and liabilities are offset to the extent
there is a legally enforceable right to offset current income tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but the entity intends to
settle current income tax liabilities and assets on a net basis or their tax
assets and liabilities will be realized simultaneously.

The carrying amount of deferred income tax assets is reviewed
at the end of each reporting period and adjusted to the extent that it is no
longer probable that sufficient taxable earnings will be available to allow the
benefit, or all or part of the asset, to be utilized. To the extent that an
asset not previously recognized fulfils the criteria for asset recognition, a
deferred income tax asset is recognized.

|(q) | Earnings per share
|--- | ------------------

Basic earnings per share is calculated based on the weighted
average number of common shares and common share equivalents outstanding for the
period. Diluted earnings per share is determined by adjusting the weighted
average number of common shares and common share equivalents outstanding and
earnings attributable to common shareholders of the Company for the dilutive
effects of the potential conversion of all outstanding convertible senior notes,
and the potential exercise of all outstanding options and warrants issued using
the treasury stock method. The treasury stock method assumes that proceeds received from the exercise of the
in-the-money stock options and warrants issued are used to repurchase shares at
the average market price for the period.

13

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                      
|--- | ---------------------
|(r) | Financial instruments

Financial instruments are measured at fair value on initial
recognition of the instrument. Measurement in subsequent periods depends on
whether the financial instrument has been classified as financial assets at
fair value through profit or loss, available-for-sale financial assets,
held-to-maturity investments, loans and receivables, financial liabilities
at fair value through profit or loss, or other financial liabilities.

The Companys financial instruments are classified and
subsequently measured as follows:

|Asset / Liability                            |  | Classification                                                 |  | Subsequent Measurement
|-------------------------------------------- |  | -------------------------------------------------------------- |  | ----------------------
|Cash and cash equivalents                    |  | Fair value through profit or loss                              |  | Fair value            
|Receivables                                  |  | Loans and receivables                                          |  | Amortized cost        
|Contingent consideration                     |  | Fair value through profit or loss                              |  | Fair value            
|Investments                                  |  | Available-for-sale and fair value through
      profit or loss |  | Fair value            
|Warrants held                                |  | Fair value through profit or loss                              |  | Fair value            
|Restricted cash                              |  | Fair value through profit or loss                              |  | Fair value            
|Payables, provisions and other liabilities   |  | Other financial liabilities                                    |  | Amortized cost        
|Debt and equipment financing obligations     |  | Other financial liabilities                                    |  | Amortized cost        
|Option component of convertible senior notes |  | Fair value through profit or loss                              |  | Fair value            
|Derivatives                                  |  | Fair value through profit or loss                              |  | Fair value            

Financial assets and financial liabilities classified as fair
value through profit or loss are measured at fair value with changes in those
fair values recognized in net earnings. Financial assets classified as
available-for-sale are measured at fair value, with changes in those fair values
recognized in other comprehensive income.

Investments in equity securities classified as either
available-for-sale financial assets or financial assets at fair value through
profit or loss are accounted for at their fair value, which is determined based
on the last quoted market price. Changes in the market value of
available-for-sale equity securities as well as the related foreign exchange and
tax impact, if any, are accounted for in accumulated other comprehensive income
until the equity securities are sold or are determined to be
other-than-temporarily impaired. When available-for-sale equity securities are
sold or are determined to be other-than-temporarily impaired, the related
accumulated change in accumulated other comprehensive income is reversed and the
actual gain or loss on disposal, or the impairment charge, is recognized in net
earnings. Changes in market value of equity securities at fair value through
profit or loss, as well as the related foreign exchange and tax impact, if any,
are recognized in net earnings in the period in which they occur.

Warrants held are classified as financial assets at fair value
through profit or loss and measured at fair value using a pricing model.
Unrealized gains or losses related to changes in fair value are reported in
other income in the Consolidated Statements of Operations.

Convertible senior notes, under the terms of which the Company
has the right to settle all or part of the instrument in cash on the conversion
date, are classified as a financial liability with an embedded derivative. The
debt component of the convertible senior notes is presented within debt and
equipment financing obligations on the Consolidated Balance Sheets, and is
initially recognized as the difference between the fair value of the financial
instrument as a whole and the fair value of the embedded derivative. The debt
component is subsequently recognized at amortized cost using the effective
interest rate method. The embedded derivative represents the conversion feature
(option component, see note 15) and is classified as a financial liability at
fair value through profit or loss. The embedded derivative is subsequently
recognized at fair value with changes in fair value recognized in net earnings.
Interest expense relating to the debt component is also recognized in net
earnings, with the exception of interest expense capitalized as borrowing costs
in accordance with note 3(h).

Fair values are based on quoted market prices where available,
or where no active market exists, fair values are estimated using a variety of
valuation techniques and models. These valuation techniques and models include
recent arms length market transactions, reference to current market value of
another instrument which is substantially the same, and discounted cash flow
analysis, cash flow models, and option pricing models.

Transaction costs, other than those related to financial
instruments classified as fair value through profit or loss, which are expensed
as incurred, are combined with the fair value of the financial asset or
financial liability on initial recognition and amortized using the effective
interest rate method. If future modifications are made to a financial asset or
liability that are not considered to be substantial, the transaction costs
related to this modification are combined with the carrying amount, and amortized over the life of the instrument using the effective
interest rate method. If future modifications are made that are considered to be
substantial, the transaction costs related to the modification are expensed,
along with any remaining unamortized costs.

14

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

All derivative instruments, including embedded derivatives, are
recorded on the balance sheet at fair value unless exempted from derivative
treatment as an own-use instrument. All changes in fair value are recorded in
net earnings unless they are designated in a valid cash flow hedging
relationship (note 3(s)), in which case changes in fair value are recorded in
accumulated other comprehensive income.

Financial assets are derecognized when the rights to receive
cash flows from the asset have expired or have been transferred and the Company
has transferred substantially all of the risks and rewards of ownership.
Financial liabilities are derecognized when they have been settled by the
Company, or when an obligation expires. In instances where a financial liability
is replaced by another from the same lender on substantially different terms, or
the terms of the existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original liability and the
recognition of a new liability, with any difference recognized in the
Consolidated Statements of Operations.

Financial assets and financial liabilities are offset and the
net amount reported in the Consolidated Balance Sheets only if there is an
enforceable legal right to offset the recognized amounts and the intention is to
settle on a net basis, or to realize the assets and settle the liabilities
simultaneously.

|(s) | Hedges
|--- | ------

Hedging relationships that meet documentation requirements, and
that can be proven to be effective both at the inception and over the term of
the relationship qualify for hedge accounting. At the inception of the
transaction, the Company documents the relationship between hedging instruments
and hedged items, the method for assessing effectiveness, as well as its risk
management objective and strategy for undertaking various hedge transactions.
The Company makes an assessment, both at the inception of the hedge and on an
ongoing basis, of whether the derivatives that are used in hedging transactions
have been and will continue to be highly effective in offsetting changes in fair
values or cash flows of hedged items.

The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow hedges are recognized
as other comprehensive income and are presented within equity as accumulated
other comprehensive income. The gain or loss relating to the ineffective portion
is recognized immediately in net earnings. Amounts accumulated in equity are
recycled to net earnings in the period in when the hedged item will affect net
earnings. However, when the forecasted transaction that is hedged results in the
recognition of a non-financial asset or liability, the gains and losses
previously deferred in equity are transferred from equity and included in the
measurement of the initial cost or carrying amount of the related asset or
liability.

When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognized
when the forecasted transaction is ultimately recognized in net earnings. When a
forecasted transaction is no longer expected to occur, the cumulative gain or
loss existing in accumulated other comprehensive income is immediately charged
to net earnings.

|(t) | Assets held for sale and discontinued
      operations
|--- | ------------------------------------------------------

Non-current assets, or disposal groups comprised of assets and
liabilities, that are expected to be recovered primarily through sale rather
than through continuing use, are classified as held for sale. Immediately before
classification as held for sale, the assets, or components of a disposal group,
are re-measured at the lower of their carrying amount and fair value less costs
to sell, with the exception of financial assets and deferred income tax assets,
which continue to be measured in accordance with the Companys accounting
policies. Impairment losses on initial classification as held for sale and
subsequent gains and losses on re-measurement are recognized in net earnings
from discontinued operations. Subsequent gains are not recognized in excess of
any cumulative past impairment losses. The Company presents assets held for sale
separately from the Companys other assets and separately from liabilities
directly associated with the assets held for sale. Liabilities associated with
assets held for sale are presented separately from the Companys other
liabilities.

A discontinued operation is a component of the Company that has
either been disposed of or that is classified as held for sale. A component of
the Company is comprised of operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest
of the Company. Net earnings of a discontinued operation and any gain or loss on
disposal are combined and presented as net earnings from discontinued operations
in the Consolidated Statements of Operations.

15

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                  
|--- | -----------------
|(u) | Segment reporting

Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the
Chief Executive Officer. The Companys operating segments, before aggregation,
have been identified as the Companys individual operating and development stage
mines. Aggregation of one or more operating segments into a single operating
segment is permitted if aggregation is consistent with the core principle of the
standard, the operating segments have similar economic characteristics, and the
operating segments have a number of other similarities, including similarities
in the nature of their products, production processes, and regulatory
environment. The Companys reportable segments are consistent with the
identified operating segments and consist of the geographical regions in which
the Company operates.

|(v) | Standards issued but not yet
  adopted
|--- | --------------------------------------

For the purposes of preparing and presenting the Companys
consolidated financial statements, the Company has adopted all standards and
interpretations issued other than those discussed in this note. These standards
have not been adopted because they are not effective for the Company until
subsequent to December 31, 2013. Standards and interpretations issued, but not
yet adopted include:

|                                                                | Effective for the Company
|--------------------------------------------------------------- | -------------------------
|IFRS 9, Financial Instruments                                   | To be determined         
|IFRIC 21, Levies                                                | January 1, 2014          
|Amendments to IAS 32, Financial Instruments:
      Presentation | January 1, 2014          

IFRS 9, Financial Instruments, proposes to replace IAS
39 Financial Instruments: Recognition and Measurement. The replacement
standard has three main phases, the first of which provides new guidance for the
classification and measurement of financial assets and liabilities, including
elimination of the existing IAS 39 categories of held-to-maturity,
available-for-sale and loans and receivables, in exchange for the classification
of financial assets and liabilities into the categories of either financial
assets measured at amortized cost or financial assets measured at fair value.
The second part, which is currently an exposure draft, provides guidance for
amortized cost and impairment methodology for financial assets. The third part,
which is also currently an exposure draft, proposes a revised general hedge
accounting model. The IASB recently suspended the originally planned effective
date of January 1, 2015 and at present the effective date has not been
determined. The Company will evaluate the impact of the change to its
consolidated financial statements based on the characteristics of financial
instruments outstanding at the time of adoption.

IFRIC 21, Levies, sets out criteria for the recognition
of liabilities for levies imposed by governments. The IFRIC identifies the
obligating event for the recognition of a liability as the activity that
triggers the payment of the levy in accordance with the relevant legislation.
The Company is currently evaluating the impact of this interpretation on its
consolidated financial statements.

The proposed amendments to IAS 32, Financial Instruments:
Presentation, clarify situations in which an entity has a legally
enforceable right to set-off a financial liability and financial asset. The
amendments to IAS 32 also clarify when a settlement mechanism provides for net
settlement or gross settlement that is equivalent to net settlement. The Company
is currently evaluating the impact of these amendments on its consolidated
financial statements.

|   |                                               
|-- | ----------------------------------------------
|4. | Critical accounting estimates and
  judgements

Many of the amounts included in the Consolidated Balance Sheets
require management to make estimates and judgements. Accounting estimates and
assumptions are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Revisions to accounting estimates are
recognized in the period in which the estimates are revised.

Critical accounting estimates

The following is a list of the accounting estimates that the
Company believes are critical, due to the degree of uncertainty regarding the
estimates or assumptions involved and the magnitude of the asset, liabilities,
revenue or expense being reported. Actual results may differ from these
estimates.

|− | The Company makes estimates of gold and silver
      recoverable from ore stacked on leach pads in the determination of ore in
      process inventory. The quantities of recoverable gold and silver placed on
      the leach pads are reconciled to the quantities of gold and silver
      actually recovered (metallurgical balancing), by comparing the estimate of
      contained ounces placed on the leach pads to actual ounces recovered. The
      nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a
      result, the metallurgical balancing process is constantly monitored and
      the engineering estimates are refined based on actual results over time.
      The ultimate recovery of gold and silver from a pad will not be known
      until the leaching process is completed. Leach pad recovery estimates are
      used in the determination of the Companys inventories.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|− | The Company makes estimates of the quantities of proven
      and probable reserves of the mine and the portion of mineralization
      expected to be classified as reserves. The estimation of quantities of
      reserves and resources is complex, requiring significant subjective
      assumptions that arise from the evaluation of geological, geophysical,
      engineering and economic data for a given ore body. This data could change
      over time as a result of numerous factors, including new information
      gained from development activities, evolving production history and a
      reassessment of the viability of production under different economic
      conditions. Reserve estimates are used in the calculation of depletion
      expense and to calculate the recoverable amount of a CGU, and to forecast
      the life of the mine. The Company has forecasted a mine life of 10 years
      for El Chanate and 20 years for Young-Davidson.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company forecasts prices of commodities, exchange
      rates, production costs, discount rates, and recovery rates. These
      estimates may change the economic status of reserves and may result in
      reserves and resources being revised. In addition, these estimates are
      used to calculate the recoverable amount of a CGU for the purpose of
      impairment testing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company values inventory at the lower of cost and net
      realizable value. The calculation of net realizable value relies on
      forecasted gold prices, forecasted exchange rates, and estimated costs to
      complete the processing of ore inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company amortizes its property, plant and equipment,
      net of residual value, over the estimated useful life of each asset, not
      to exceed the life of the mine at which the asset is utilized. The
      physical life of these assets, and related components, may differ from the
      Companys estimate, which would result in an adjustment to amortization
      and depletion expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company makes estimates of the likelihood of whether
      or not all or some portion of each deferred income tax asset and
      investment tax credits will be realized, which is impacted by
      interpretation of tax laws and regulations, historic and future expected
      levels of taxable income, timing of reversals of taxable temporary timing
      differences, and tax planning initiatives. Levels of future taxable income
      are affected by, among other things, market gold prices, production costs,
      quantities of proven and probable gold reserves, interest rates, and
      foreign currency exchange rates.                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company makes estimates of the timing and amount of
      expenditures required to settle the Companys reclamation provisions. The
      principal factors that can cause expected future expenditures to change
      are: the construction of new processing facilities; changes in the
      quantities of material in reserves and a corresponding change in the life
      of mine plan; changing ore characteristics that ultimately impact the
      environment; changes in water quality that impact the extent of water
      treatment required; and changes in laws and regulations governing the
      protection of the environment. In general, as the end of the mine life
      nears, the reliability of expected cash flows increases, but earlier in
      the mine life, the estimation of a reclamation provision is inherently
      more subjective.                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|− | The Company makes estimates of amounts receivable in
      order to value the retained interest royalty. Future amounts receivable
      will be impacted by future gold prices, future production from the
      Fosterville and Stawell mines in Victoria, Australia, future foreign
      exchange rates, as well as related operating and capital expenditures
      required to sustain that production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Critical accounting judgements

The following are critical judgements that management has made
in the process of applying accounting policies that may have a significant
impact on the amounts recognized in the consolidated financial statements.

|− | The Company makes judgements about whether or not
      indicators of impairment, or indicators of a reversal of impairment, exist
      at each reporting period. For all assets, this determination impacts
      whether or not a detailed impairment assessment is performed at December
      31, 2013 and 2012. These judgements did not impact cash generating units
      that contain goodwill at December 31, 2013, as these are required to be
      tested for impairment regardless of whether or not an indicator exists.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|− | The Company is subject to income taxes in different
      jurisdictions. Significant judgment is required in determining the
      provision for income taxes, due to the complexity of legislation.                                                                                                                                                                                                                                                                                                                                   

17

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|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|  |                                                                                                                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|− | The Company makes judgements about which indicators to
      consider when evaluating whether a mine has reached commercial production,
      which may impact the timing and amount of depreciation and depletion, the
      amount of revenue recognized in the Consolidated Statements of Operations,
      and the amount of costs capitalized to mine development during 2013 and
      2012.
|  |                                                                                                                                                                                                                                                                                                                                                                                                   

|5. | Cash and cash equivalents
|-- | -------------------------

Cash and cash equivalents are comprised of the following:

|                    |   | December 31 |  |   | December 31 | 
|------------------- | - | ----------- |  | - | ----------- | 
|                    |   | 2013        |  |   | 2012        | 
|Cash                | $ | 141,125     |  | $ | 603,401     | 
|Short-term deposits |   | 1,527       |  |   | -           | 
|                    | $ | 142,652     |  | $ | 603,401     | 




|   |            
|-- | -----------
|6. | Receivables

|                           |   | December 31 |  |   | December 31 | 
|-------------------------- | - | ----------- |  | - | ----------- | 
|                           |   | 2013        |  |   | 2012        | 
|Trade receivables          | $ | 1,012       |  | $ | 1,639       | 
|Value-added tax receivable |   | 14,888      |  |   | 9,651       | 
|Advances                   |   | 1,658       |  |   | 526         | 
|Other                      |   | 11,696      |  |   | 17,687      | 
|                           | $ | 29,254      |  | $ | 29,503      | 

Included in other receivables at December 31, 2013 is an
insurance receivable of $10,254(December 31, 2012 - $10,956) relating to
the settlement of a lawsuit (see note 16(d)), and a receivable from the
Companys jointly-controlled entity (see note 9) of $1,442 (December 31, 2012 -
$358). In the prior year, other receivables also included a purchase price
adjustment receivable from Endeavour Silver Corp. (Endeavour) (see note 29(b))
of $6,373.

Included in value-added tax receivable was $7,340 and $7,548
collectable from the Government of Canada and Government of Mexico,
respectively, at December 31, 2013 (December 31, 2012 - $5,663 and $3,988,
respectively).

The Company has not recorded a provision for doubtful trade
receivables as there is no indication that the debtors will not meet their
payment obligations.

|   |            
|-- | -----------
|7. | Inventories

|                            |   | December 31 |   |   | December 31 |  
|--------------------------- | - | ----------- | - | - | ----------- | -
|                            |   | 2013        |   |   | 2012        |  
|                            |   |             |   |   | Restated    |  
|                            |   |             |   |   | (Note 3(a)) |  
|Supplies                    | $ | 17,391      |   | $ | 15,020      |  
|Ore stockpiles              |   | 35,122      |   |   | 27,274      |  
|Ore in process              |   | 117,984     |   |   | 109,840     |  
|Finished goods              |   | 7,842       |   |   | 7,922       |  
|                            |   | 178,339     |   |   | 160,056     |  
|Less: Long-term inventories |   | (93,696     | ) |   | (85,979     | )
|                            | $ | 84,643      |   | $ | 74,077      |  

During the year ended December 31, 2013, the carrying value of
El Chanate and Young-Davidson ore inventories exceeded their net realizable
values due to a decline in realized gold prices and higher estimated future
processing costs. As a result, the Company recognized net realizable valuation
adjustments of $42,069 which impacted production costs and amortization and
depletion. Ore stockpile and ore in process inventories include mining and
processing costs, along with amortization and depletion related to mining and
processing operations. The net realizable value adjustments were allocated on a
pro-rata basis between production costs and amortization and depletion based on
their relative values. Inventories carried at fair value less cost to sell
totaled $74,074 at December 31, 2013 (December 31, 2012 - $nil).

18

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The impact on production costs and amortization and depletion
is as follows:

|                                     |   | Year ended  | 
|------------------------------------ | - | ----------- | 
|                                     |   | December 31 | 
|                                     |   | 2013        | 
|Operating production costs           | $ | 114,555     | 
|Net realizable value adjustment      |   |             | 
|El Chanate                           |   | 23,376      | 
|Young-Davidson                       |   | 10,050      | 
|Production costs                     | $ | 147,981     | 
|                                     |   |             | 
|Operating amortization and depletion | $ | 56,886      | 
|Net realizable value adjustment      |   |             | 
|El Chanate                           |   | 2,083       | 
|Young-Davidson                       |   | 6,560       | 
|Amortization and depletion           | $ | 65,529      | 

Ore in process inventory at December 31, 2013 included $6,095
(December 31, 2012 - $16,697) related to the excess of the fair value of El
Chanate inventory over its carrying value at the acquisition date, which is
being charged to earnings as the related inventory is sold.

|   |            
|-- | -----------
|8. | Investments

|                                               |   |                   |  |   |             |  |   | Year ended        |  
|---------------------------------------------- | - | ----------------- |  | - | ----------- |  | - | ----------------- | -
|                                               |   |                   |  |   |             |  |   | December 31, 2013 |  
|                                               |   |                   |  |   |             |  |   |                   |  
|                                               |   |                   |  |   |             |  |   | Unrealized        |  
|                                               |   |                   |  |   |             |  |   | gains/(losses)    |  
|                                               |   | December 31, 2013 |  |   | included in |  |   | included in       |  
|                                               |   | Cost              |  |   | Fair value  |  |   | OCI               |  
|Securities  available-for-sale                | $ | 20,948            |  | $ | 15,510      |  | $ | (5,163            | )
|Securities  fair value through profit or loss |   | 235               |  |   | -           |  |   | -                 |  
|Warrants  fair value through profit or loss   |   | 494               |  |   | 41          |  |   | -                 |  
|                                               | $ | 21,677            |  | $ | 15,551      |  | $ | (5,163            | )

|                                               |   |                   |  |   |             |  |   | Year ended        |  
|---------------------------------------------- | - | ----------------- |  | - | ----------- |  | - | ----------------- | -
|                                               |   |                   |  |   |             |  |   | December 31, 2012 |  
|                                               |   |                   |  |   |             |  |   |                   |  
|                                               |   |                   |  |   |             |  |   | Unrealized        |  
|                                               |   |                   |  |   |             |  |   | gains/(losses)    |  
|                                               |   | December 31, 2012 |  |   | included in |  |   | included in       |  
|                                               |   | Cost              |  |   | Fair value  |  |   | OCI               |  
|Securities  available-for-sale                | $ | 170               |  | $ | 64          |  | $ | (34               | )
|Securities  fair value through profit or loss |   | 235               |  |   | 47          |  |   | -                 |  
|Warrants  fair value through profit or loss   |   | 80                |  |   | -           |  |   | -                 |  
|                                               | $ | 485               |  | $ | 111         |  | $ | (34               | )

Unrealized losses on available-for-sale investments totalled
$5,331 (2012 - $34 unrealized loss) which were offset by $168 in losses
reclassified to net earnings. All losses recognized on available-for-sale
investments during the year, as well as associated foreign exchange losses, were
recorded in other comprehensive income on the Consolidated Statements of
Operations.

19

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Realized and unrealized losses on equity securities classified
at fair value through profit or loss totalled $497 (2012 - $1,367). Foreign
exchange gains and losses on equity securities measured at fair value through
profit or loss are included in foreign exchange gain / (loss) in the
Consolidated Statements of Operations.

During the year ended December 31, 2013, the Company purchased
shares in various publicly listed entities with a total cost of $20,778. In some
of these transactions, warrants were also acquired, with a total cost of $494.
The cost of the shares and warrants were determined based on their fair value on
the date of acquisition.

As part of the consideration received upon the disposition of
the Companys Australian operations on May 4, 2012, the Company received 20
million shares of Crocodile Gold Corporation (Crocodile Gold). These shares
were classified as financial assets at fair value through profit or loss and
initially recognized at a fair value of $9,642. On October 23, 2012, these
shares were sold for gross proceeds of $7,449, less transaction costs of $201,
resulting in net proceeds of $7,248.

As part of the consideration received upon the disposition of
the El Cubo mine and Guadalupe y Calvo exploration property on July 13, 2012,
the Company received 11,037,528 common shares of Endeavour. These shares were
classified as financial assets at fair value through profit or loss and
initially recognized at a fair value of $87,746. On October 22, 2012, these
shares were sold for gross proceeds of $95,511, less transaction costs of
$1,910, resulting in net proceeds of $93,601.

During 2011, the Company received 2,500,000 shares of Golden
Queen Mining Company Ltd. through the exercise of warrants. The shares received
were classified as financial assets at fair value through profit or loss and
initially recognized at a fair value of $4,562. During 2012, these shares were
sold for gross proceeds of $6,683, less transaction costs of $50, resulting in
net proceeds of $6,633. During 2012, the Company also sold other equity
securities for net proceeds of $748.

|   |                                          
|-- | -----------------------------------------
|9. | Investment in jointly-controlled
  entity

On December 14, 2012, Minera Frisco, S.A. de C.V. (Minera
Frisco) acquired a 50% interest in the Orion development project (Orion),
located in Nayarit Mexico (refer to note 29 for further information). In
accordance with the purchase and sale agreement, the Company issued shares
representing 50% ownership interest of Nayarit Gold de Mexico, S.A. de C.V., a
subsidiary with ownership of this project, to Minera Frisco in exchange for $27
million. Both the Company and Minera Frisco have 50% ownership in the entity and
equal representation on the Board of Directors of the joint venture company. As
a result, it was determined that the Company and Minera Frisco have joint
control over the joint venture company.

The book value of the major classes of assets and liabilities
of Orion on the date of sale were as follows:

|                                                 |   | Book Value |  
|------------------------------------------------ | - | ---------- | -
|Current assets                                   | $ | 244        |  
|Property, plant and equipment & mining interests |   | 53,800     |  
|Current liabilities                              |   | (382       | )
|Deferred income tax liability                    |   | (12,902    | )
|Net assets                                       | $ | 40,760     |  

In 2012, the Company treated the sale of the 50% interest in
Orion to Minera Frisco as a contribution of assets to the joint venture. Upon
the recognition of $27,000 of cash consideration received and the derecognition
of 50% of the Companys net interest in Orion, the Company recognized a gain of
$6,620. The gain is included in other income on the Consolidated Statements of
Operations.

20

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The following table contains selected financial information for
a 100% interest in the jointly-controlled entity at December 31, 2013 and 2012:

|                                                 |   | December 31 |   |   | December | 
|------------------------------------------------ | - | ----------- | - | - | -------- | 
|                                                 |   | 2013        |   |   | 2012     | 
|Current assets                                   |   | 308         |   |   | 240      | 
|Property, plant and equipment & mining interests |   | 54,836      |   |   | 53,800   | 
|Total assets                                     | $ | 55,144      |   | $ | 54,040   | 
|                                                 |   |             |   |   |          | 
|Current liabilities                              |   | 1,467       |   |   | 376      | 
|Deferred income tax liability                    |   | 17,817      |   |   | 12,738   | 
|Total liabilities                                | $ | 19,284      |   | $ | 13,114   | 
|                                                 |   |             |   |   |          | 
|Net assets of jointly-controlled entity          | $ | 35,860      |   | $ | 40,926   | 
|Ownership interest                               |   | 50%         |   |   | 50%      | 
|Net investment in jointly-controlled entity      |   | 17,930      |   |   | 20,463   | 
|                                                 |   |             |   |   |          | 
|Net investment, beginning of year                | $ | 20,463      |   | $ | 20,380   | 
|Share of net (loss) / earnings during the period |   | (2,533      | ) |   | 83       | 
|Net investment, end of year                      | $ | 17,930      |   | $ | 20,463   | 

Included in current liabilities of the jointly-controlled
entity at December 31, 2013 was a payable due to the Company of $1,442(December 31, 2012 - $358). The Company has included a corresponding amount
in receivables on the Consolidated Balance Sheets at December 31, 2013.

At December 31, 2013, the Company did not have any significant
commitments or contingent liabilities related to this jointly-controlled entity.

|    |                       
|--- | ----------------------
|10. | Other long-term assets

|                                          |   | December 31 |  |   | December 31 | 
|----------------------------------------- | - | ----------- |  | - | ----------- | 
|                                          |   | 2013        |  |   | 2012        | 
|Restricted cash in closure bonds          | $ | 26,249      |  | $ | 27,729      | 
|Other restricted cash                     |   | 5,230       |  |   | 4,184       | 
|Investment tax credits recoverable        |   | 36,508      |  |   | 39,021      | 
|Contingent consideration (Note 26)        |   | -           |  |   | 7,395       | 
|Deposits on property, plant and equipment |   | 4,001       |  |   | 4,960       | 
|                                          | $ | 71,988      |  | $ | 83,289      | 

Restricted cash in closure bonds consists of cash and
short-term deposits pledged by the Company relating to site closure and
reclamation obligations at Kemess South, a mine in the decommissioning stage,
and Young-Davidson.

Other restricted cash consists of letters of credit issued
against certain of the Companys bank accounts relating to site infrastructure,
site closure, and other mine activities.

The Companys investment tax credits (ITC) recoverable relate
to ITCs earned primarily on expenditures at Young-Davidson. These ITCs will be
used to reduce income taxes payable in the future and have been netted against
the cost of the related items of property, plant and equipment.

---

21

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                                                       
|--- | ------------------------------------------------------
|11. | Property, plant and equipment & mining
      interests

Mining interestsPlant
    
    
    
    
    
    
    
    
    Explorationand
    
    
    
    
    
    Non-
    
    
    andequipment
    
    
    Depletable
    
    
    depletable
    
    
    evaluation
    
    
    TotalCostAt December 31, 2011
    $
    651,708
    
    $
    638,600
    
    $
    850,785
    
    $
    211,251
    
    $
    2,352,344Additions
    
    226,648
    
    
    133,495
    
    
    69,921
    
    
    7,903
    
    
    437,967Reclassifications
    
    -
    
    
    54,071
    
    
    (54,071
    )
    
    -
    
    
    -Disposals
    
    (334,531
    )
    
    (620,434
    )
    
    (60,610
    )
    
    (152,744
    )
    
    (1,168,319
    )Restatement (a)
    
    -
    
    
    (8,564
    )
    
    -
    
    
    -
    
    
    (8,564
    )At December 31, 2012
    $
    543,825
    
    $
    197,168
    
    $
    806,025
    
    $
    66,410
    
    $
    1,613,428Additions
    
    123,133
    
    
    62,516
    
    
    71,238
    
    
    6,237
    
    
    263,124Reclassifications
    
    -
    
    
    853,408
    
    
    (853,408
    )
    
    -
    
    
    -Disposals
    
    (5,792
    )
    
    -
    
    
    -
    
    
    -
    
    
    (5,792
    )At December 31, 2013
    $
    661,166
    
    $
    1,113,092
    
    $
    23,855
    
    $
    72,647
    
    $
    1,870,760Accumulated amortization and depletion and
      impairment chargesAt December 31, 2011
    $
    (132,660
    )
    $
    (126,911
    )
    $
    -
    
    $
    (59,973
    )
    $
    (319,544
    )Amortization and depletion
    
    (35,271
    )
    
    (44,650
    )
    
    -
    
    
    -
    
    
    (79,921
    )Impairment charges
    
    -
    
    
    -
    
    
    -
    
    
    (1,537
    )
    
    (1,537
    )Disposals
    
    149,469
    
    
    135,301
    
    
    -
    
    
    61,510
    
    
    346,280At December 31, 2012
    $
    (18,462
    )
    $
    (36,260
    )
    $
    -
    
    $
    -
    
    $
    (54,722
    )Amortization and depletion
    
    (27,789
    )
    
    (62,441
    )
    
    -
    
    
    -
    
    
    (90,230
    )Impairment charges
    
    (12,279
    )
    
    (35,200
    )
    
    (4,574
    )
    
    -
    
    
    (52,053
    )Disposals
    
    2,200
    
    
    -
    
    
    -
    
    
    -
    
    
    2,200At December 31, 2013
    $
    (56,330
    )
    $
    (133,901
    )
    $
    (4,574
    )
    $
    -
    
    $
    (194,805
    )Carrying valueAt December 31, 2012
    $
    525,363
    
    $
    160,908
    
    $
    806,025
    
    $
    66,410
    
    $
    1,558,706At December 31, 2013
    $
    604,836
    
    $
    979,191
    
    $
    19,281
    
    $
    72,647
    
    $
    1,675,955


22

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The carrying values by mine are as follows:

Mining interestsPlant
    
    
    
    
    
    
    
    
    Explorationand
    
    
    
    
    
    Non-
    
    
    andequipment
    
    
    Depletable
    
    
    depletable
    
    
    evaluation
    
    
    TotalEl Chanate
    $
    35,307
    
    $
    84,975
    
    $
    10,945
    
    $
    -
    
    $
    131,227Young-Davidson
    
    540,537
    
    
    894,216
    
    
    8,336
    
    
    -
    
    
    1,443,089Corporate and other
    
    28,992
    
    
    -
    
    
    -
    
    
    72,647
    
    
    101,639At December 31, 2013
    $
    604,836
    
    $
    979,191
    
    $
    19,281
    
    $
    72,647
    
    $
    1,675,955El Chanate
    $
    44,793
    
    $
    108,952
    
    $
    7,544
    
    $
    -
    
    $
    161,289Young-Davidson
    
    450,753
    
    
    51,956
    
    
    798,481
    
    
    -
    
    
    1,301,190Corporate and other
    
    29,817
    
    
    -
    
    
    -
    
    
    66,410
    
    
    96,227At December 31, 2012 (a)
    $
    525,363
    
    $
    160,908
    
    $
    806,025
    
    $
    66,410
    
    $
    1,558,706


|(a) | The El Chanate depletable mining interests balance at
      December 31, 2012 was restated to reflect the adoption of IFRIC 20, which
      has been applied prospectively to the Companys production stripping costs
      incurred on or after January 1, 2012. Refer to note 3(a) for further
      details.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the year ended December 31, 2013, $8,409 (year ended
December 31, 2012 - $12,166) of borrowing costs associated with capital projects
were capitalized within property, plant and equipment & mining interests on
the Consolidated Balance Sheets. The applicable capitalization rate for general
borrowings was 5.82% (year ended December 31, 2012 - 5.08%) . During the year
ended December 31, 2012, $7,902 of borrowing costs related to the convertible
senior notes were capitalized to Young-Davidson mine development as specific
borrowings until the declaration of commercial production on September 1, 2012.
Subsequent to the declaration of commercial production, the borrowing costs
related to the convertible senior notes have been included in general borrowing
costs.

The carrying value of equipment pledged as security for related
equipment financing obligations at December 31, 2013 was $22,175 (December 31,
2012 - $21,299).

The carrying value of construction in progress at December 31,
2013 was $70,025 (December 31, 2012 - $105,791), including $69,249 (December 31,
2012 - $99,165) relating to projects at the Young-Davidson mine.

The Company has made commitments to acquire property, plant and
equipment totalling $10,981 at December 31, 2013 (December 31, 2012 - $9,580).

---

23

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                               
|--- | ------------------------------
|12. | Intangible assets and
goodwill

Included in intangible assets is the retained interest royalty
received as part of consideration from the disposition of the Australian
operations (see note 29(a)) and the rights to use the capacity of power lines
connecting the El Chanate and Young-Davidson mines to national / provincial
electricity grids (transmission rights).

Intangible assetsRetained
    
    
    
    
    
    
    
    
    Totalinterest
    
    
    Transmission
    
    
    
    
    
    intangibleGoodwill
    
    
    royalty
    
    
    rights
    
    
    Software
    
    
    assets
    
    
    TotalCostAt December 31, 2011
    $
    582,013
    
    $
    -
    
    $
    22,087
    
    $
    2,648
    
    $
    24,735
    
    $
    606,748Additions
    
    -
    
    
    34,004
    
    
    2,950
    
    
    784
    
    
    37,738
    
    
    37,738Disposals
    
    (106,799
    )
    
    -
    
    
    (4,019
    )
    
    (1,193
    )
    
    (5,212
    )
    
    (112,011
    )At December 31, 2012
    
    475,214
    
    
    34,004
    
    
    21,018
    
    
    2,239
    
    
    57,261
    
    
    532,475Additions
    
    -
    
    
    -
    
    
    -
    
    
    370
    
    
    370
    
    
    370At December 31, 2013
    $
    475,214
    
    $
    34,004
    
    $
    21,018
    
    $
    2,609
    
    $
    57,631
    
    $
    532,845Accumulated amortization and impairment
      chargesAt December 31, 2011
    $
    (106,799
    )
    $
    -
    
    $
    (1,045
    )
    $
    (1,855
    )
    $
    (2,900
    )
    $
    (109,699
    )Amortization
    
    -
    
    
    -
    
    
    (1,401
    )
    
    (620
    )
    
    (2,021
    )
    
    (2,021
    )Impairment charges
    
    (127,000
    )
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (127,000
    )Disposals
    
    106,799
    
    
    -
    
    
    1,336
    
    
    1,149
    
    
    2,485
    
    
    109,284At December 31, 2012
    
    (127,000
    )
    
    -
    
    
    (1,110
    )
    
    (1,326
    )
    
    (2,436
    )
    
    (129,436
    )Amortization
    
    -
    
    
    -
    
    
    (847
    )
    
    (692
    )
    
    (1,539
    )
    
    (1,539
    )Impairment charges
    
    (106,521
    )
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (106,521
    )At December 31, 2013
    $
    (233,521
    )
    $
    -
    
    $
    (1,957
    )
    $
    (2,018
    )
    $
    (3,975
    )
    $
    (237,496
    )Carrying valueAt December 31, 2012
    $
    348,214
    
    $
    34,004
    
    $
    19,908
    
    $
    913
    
    $
    54,825
    
    $
    403,039At December 31, 2013
    $
    241,693
    
    $
    34,004
    
    $
    19,061
    
    $
    591
    
    $
    53,656
    
    $
    295,349


|13. | Impairment
|--- | ----------

Non-financial assets and CGUs are tested for impairment or a
reversal of impairment whenever there are indicators that an impairment has
occurred or should be reversed. CGUs containing goodwill are tested for
impairment each year at December 31. For the purpose of testing for impairment,
or a reversal of impairment, the recoverable amounts for non-financial assets
and CGUs are based on fair value less costs of disposal (FVLCD) calculations.
When observable market prices are not available for the asset, FVLCD is
calculated using a discounted cash flow methodology taking into account the
assumptions that would be made by market participants. Management projects cash
flows over the remaining life of each mine using forecasted production and costs
per the Companys life of mine plans and the long-term forecasted price of gold
to project future revenues. The Company does not use growth rates in determining
cash flow projections. The fair value of these non-financial assets are based on
unobservable inputs (level 3 of fair value hierarchy, refer to note 26).

The key assumptions used in determining FVLCD at December 31,
2013 were gold prices, discount rates, operating costs, capital expenditures,
foreign exchange rates and net asset value (NAV) multiples. Of these
assumptions, reasonably possible changes in gold prices, discount rates,
operating costs, and NAV multiples could have caused the carrying value of the
Companys El Chanate CGU and Young-Davidson CGU to exceed their recoverable
amounts, as outlined below in (a) and (b).

The Company develops long-term gold price forecasts by
reference to numerous external analyst forecasts. The long-term gold pricing
used in the impairment tests approximated the mean of these forecasts, after
adjusting for outliers. The Company used a gold price of $1,300 per ounce for
all future production in its impairment test (December 31, 2012 - range of
$1,825 to $1,425 per ounce).

24

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The Company forecasts production, operating costs and capital
expenditures based on expected life of mine plans developed from technical
reports and historical cost experience.

The discount rates used by the Company in calculating FVLCD
were based on the weighted average cost of capital applicable to each property.
The rates chosen reflect a market participants view of the risk inherent in the
cash flows associated with each property.

The discount rates used for each test are summarized as
follows:

|                   |  | December 31 |  |  | December 31 | 
|------------------ |  | ----------- |  |  | ----------- | 
|                   |  | 2013        |  |  | 2012        | 
|El Chanate CGU     |  | 6.50%       |  |  | 6.00%       | 
|Young-Davidson CGU |  | 5.25%       |  |  | 5.00%       | 

Gold companies can trade at a market capitalization greater
than their estimated discounted cash flows. This NAV multiple represents the
multiple applied to the estimated discounted cash flows to arrive at the trading
price. The NAV multiple is generally understood to take into account a variety
of additional value factors such as the exploration potential of the mineral
property, namely the ability to find and produce more metal than what is
currently included in the life of mine plan, and the benefit of gold price
optionality. A NAV multiple of 1.0 and 1.05 (December 31, 2012  1.0 and 1.15)
was applied to the estimated discounted cash flows for El Chanate and
Young-Davidson, respectively.

The results of impairment evaluations conducted are summarized
as follows:

|(a) | El Chanate CGU
|--- | --------------

The carrying value of goodwill resulting from the acquisition
of Capital Gold has been allocated to the El Chanate CGU, which is comprised of
all assets and liabilities related to the El Chanate mine. At December 31, 2013,
the carrying value of the El Chanate CGU exceeded its recoverable amount by
$74,000, which resulted in an impairment charge. This charge consisted of a
reduction of goodwill of $26,521 and a reduction in property, plant and
equipment and mining interests of $47,479. The related income tax impact was a
deferred tax recovery of $15,373.

At June 30, 2013, the carrying value of the El Chanate CGU
exceeded its recoverable amount by $80,000, which resulted in recognizing an
impairment charge related entirely to goodwill. The primary contributors to this
impairment charge were the revised short-term and long-term gold price
assumptions used in the June 30, 2013 test as compared to the assumptions used
in the test performed at December 31, 2012.

The total impairment charge recorded for the year ending
December 31, 2013 was $154,000. After the deferred tax recovery of $15,373, the
total net impairment charge for the year ending December 31, 2013 was $138,627.

The key assumptions used in the fair value measurement at
December 31, 2013 were consistent with the assumptions used at June 30, 2013, as
discussed above, with the exception of: (1) reduction in gold price assumptions
from a range of $1,300 to $1,400 per ounce at June 30, 2013 to $1,300 for all
future production at December 31, 2013, (2) an increase in the discount rate
from 6.0% to 6.5%, and (3) higher processing costs in the life of mine plan due
to higher quantities of solution applied to the leach pad for all future
production.

|(b) | Young-Davidson CGU
|--- | ------------------

The carrying value of goodwill resulting from the acquisition
of Northgate has been allocated to the Young-Davidson CGU, which is comprised of
all assets and liabilities related to the Young-Davidson mine. At December 31,
2013, the recoverable amount of the Young-Davidson CGU exceeded its carrying
value by $140,695.

It is estimated that the following reasonably possible changes
in key assumptions would cause the carrying value of the Young-Davidson CGU to
exceed its recoverable amount:

|− | Increase in discount rate to 6.35%        
|- | ------------------------------------------
|− | 4.93% decline in gold price assumptions   
|− | 9.90% strengthening of the Canadian dollar
|− | 14.50% increase in operating costs        
|− | Decrease in NAV multiple to 0.96          

25

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                          
|--- | -------------------------
|(c) | Retained interest royalty

At June 30, 2013, the carrying value of the retained interest
royalty exceeded its recoverable amount of $15,316 by $18,688, which resulted in
an impairment charge. As a result of the impairment charge, the Company also
recorded a deferred tax recovery of $2,186, which resulted in a net impairment
charge of $16,502. The primary contributors to this impairment charge were the
revised short-term and long-term gold price assumptions used in the June 30,
2013 test. The remaining assumptions, including the life of mine plan, were the
same as was utilized by the Company for the December 31, 2012 impairment test.

At December 31, 2013, due to the receipt of an updated life of
mine plan from Crocodile Gold, the Company determined that an indicator of
impairment reversal existed and conducted an impairment test at that date.
Utilizing the updated life of mine plan, adjusted for the Companys gold price
and foreign exchange rate assumptions, it was determined that the recoverable
amount of this asset exceeded its original carrying value of $34,004 and, as a
result, an impairment reversal of $18,688 was recorded. The Company also
recorded a deferred tax expense of $2,103 related to this reversal.

The Company determined the fair value of the retained interest
royalty using a valuation model, which was based on the combined free cash flow
expected to be generated by the Australian Operations (refer to note 29(a)).
This model used a discounted cash flow methodology taking into account the
assumptions that would be made by market participants. The key assumptions used
in determining the fair value of these payments were future production, gold
prices, operating costs, capital expenditures, foreign exchange rates and the
discount rate. The Company relied on the forecasted future production, operating
costs and capital expenditures contained within the updated life of mine
received from Crocodile Gold. In determining the fair value of the retained
interest royalty at December 31, 2013, the Company used a gold price forecast of
$1,300 per ounce, an average Australian to US dollar forward exchange rate of
1.16 to 1 USD, an average Australian dollar to Canadian dollar forward exchange
rate of 1.06 to 1 CAD, and a discount rate of 12%.

The key assumptions used in the fair value measurement at
December 31, 2013 were consistent with the assumptions used at June 30, 2013, as
discussed above, with the exception of: (1) an extension of mine life at the
Fosterville mine at December 31, 2013, (2) a strengthening of the USD resulted
in higher Australian dollar revenues, and (3) a decline in gold price
assumptions from a range of $1,300 to $1,400 per ounce at June 30, 2013 to
$1,300 per ounce for all future production at December 31, 2013.

During the year ended December 31, 2013, the impairment charge
recognized on June 30, 2013 and its subsequent reversal did not have an impact
on net loss, other than the difference in deferred tax expense/recovery noted
above.

|(d) | Other
|--- | -----

During the year ended December 31, 2013, the Company impaired
various brownfield exploration assets due to unsuccessful drilling results
during the year. As a result, the Company recognized an impairment charge of
$4,574 in the Consolidated Statements of Operations, which also impacted the
carrying value of non-depletable mining interests at December 31, 2013.

During the year ended December 31, 2012, the Company
discontinued its exploration program on the La Bandera exploration property,
which was reported in Corporate and Other. As a result, the Company recognized
an impairment charge of $1,537 and a tax recovery of $400, for a net impairment
charge of $1,137 in the Consolidated Statements of Operations.

|    |                                               
|--- | ----------------------------------------------
|14. | Derivative liabilities and other
  liabilities

During theyearendedDecember 31, 2013,
1,585,000 warrants issued by the Company expired, including 750,000 warrants
with an exercise price of CAD $10.13 that expired on April 8, 2013 and 835,000
warrants with an exercise price of CAD $9.52 that expired on October 26, 2013.
As the warrants were issued in a foreign currency, they met the definition of a
derivative instrument and were classified as financial liabilities at fair value
through profit or loss. They were initially measured at the fair value of the
services provided and were re-measured at fair value at the end of each
reporting period, with gains and losses recognized in other income in the
Consolidated Statements of Operations until exercised or expired. At December
31, 2012, these warrants had a fair value of $1,401 (see note 26).

During 2013 and 2012, the Company held forward contracts to
hedge against the risk of an increase in the value of the Mexican peso versus
the US dollar. These forward contracts are described in further detail in note
26. At December 31, 2013, the Company had no forward contracts outstanding. At
December 31, 2012, these forward contracts had a negative fair value of $1,348,
which was included in the current portion of derivative liabilities on the
Consolidated Balance Sheet.

26

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

At December 31, 2012, the current portion of other liabilities
included the liability associated with a consultancy agreement. The consultancy
agreement obligation was non-interest bearing, and was recorded at fair value
using a discount rate of 7%. In January 2013, the Company made a one-time
payment of $2,750 to settle this liability.

|    |                                           
|--- | ------------------------------------------
|15. | Debt and equipment financing
  obligations

|    |                                                                         |   | December 31 |   |   | December 31 |  
|--- | ----------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|    |                                                                         |   | 2013        |   |   | 2012        |  
|(a) | Revolving credit facility                                               | $ | 75,000      |   | $ | -           |  
|(b) | Convertible senior notes                                                |   | 157,133     |   |   | 153,910     |  
|(c) | Equipment financing obligations                                         |   | 17,522      |   |   | 18,625      |  
|(d) | Other                                                                   |   | 1,894       |   |   | -           |  
|    |                                                                         |   | 251,549     |   |   | 172,535     |  
|    | Less: Current portion of debt and
      equipment financing obligations |   | (7,355      | ) |   | (5,038      | )
|    |                                                                         | $ | 244,194     |   | $ | 167,497     |  

The estimated future minimum payments under debt and equipment
financing obligations are as follows:

|2014 | $ | 13,946  | 
|---- | - | ------- | 
|2015 | $ | 12,074  | 
|2016 | $ | 251,075 | 
|2017 | $ | 2,316   | 
|2018 | $ | 947     | 

|(a) | Revolving credit facility
|--- | -------------------------

On January 31, 2013, the Company amended its revolving credit
facility, which reduced the amount available from $250,000 to $150,000. The
amended credit facility carries an interest rate of LIBOR plus 2.25% to 3.50%,
depending on the leverage ratio of the Company. The facility matures on April
25, 2016 and may be extended upon mutual agreement by all parties. No payments
under the facility are due until the maturity date.

At December 31, 2013, the Company amended the leverage ratio
covenant, which is determined as indebtedness compared to annual EBITDA, such
that indebtedness is net of cash held. The credit facility contains various
covenants that include (a) an interest coverage ratio of at least 3:1, measured
by rolling interest incurred compared to annual earnings before interest, tax,
depreciation, and amortization (EBITDA), (b) a leverage ratio of no more than
3:1, measured by net indebtedness at the end of the period compared to annual
EBITDA, (c) a tangible net worth of at least $557,600 plus 50% of the net
proceeds of all equity issued by the Company and 50% of cumulative positive net
earnings for each fiscal quarter subsequent to September 30, 2011, and (d)
proven and probable reserves of at least 2,000,000 ounces. The facility is
secured by a first-ranking lien on all present and future assets, property and
undertaking of the Company. At December 31, 2013, the Company was in compliance
with all covenants.

During the year ended December 31, 2013, the Company received
proceeds of $75,000 (December 31, 2012 - $66,410) and made repayments of $nil
(December 31, 2012 - $127,790). At December 31, 2013, the Company had $75,000
drawn against this revolving facility (December 31, 2012 - $nil).

|(b) | Convertible senior notes
|--- | ------------------------

The Company has $167,000 of convertible senior notes (the
notes) that were originally issued in October 2010. The notes pay interest
semi-annually at a rate of 3.50% per annum, and mature on October 1, 2016.

The holders of the notes may, within specified time periods,
convert their notes prior to July 1, 2016 under the following circumstances: (1)
the closing sale price of the Companys shares exceeds 130% of the conversion
price for at least 20 trading days in the 30 consecutive trading days ending on
the last trading day of the immediately preceding quarter; (2) the trading price
per $1,000 principal amount of the convertible note is equal to or less than 97%
of the product of the closing sale price of the Companys common shares and the
applicable conversion rate; (3) the convertible notes are called for redemption
by the Company; (4) upon the occurrence of specified corporate transactions; and
(5) a delisted event occurs and is continuing. In addition, the notes will be
unconditionally convertible at the option of the holder from July 1, 2016 to the
business day immediately preceding the maturity date of the notes. Following the
payment of dividends on January 29, 2014, the conversion rate is 94.3882 common
shares per $1,000 principal amount of notes, which represents a conversion price of approximately $10.59 per
share. Upon conversion, the Company may settle the obligation either in common
shares, or in cash at an equivalent value.

27

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

For the year ended December 31, 2013, the Company recorded
interest expense, including the amortization of the discount, of $9,068 (year
ended December 31, 2012 - $8,917) in relation to the debt component of the
notes, at an effective interest rate of 5.89% (year ended December 31, 2012 -
5.89%) . Of this amount, $7,461 (year ended December 31, 2012 - $7,902) was
capitalized to mine development and $1,607 (year ended December 31, 2012 -
$1,015) was recognized as a finance cost in the Consolidated Statements of
Operations. The option component of the notes, which is accounted for as an
embedded derivative, is re-measured at fair value at each reporting date. The
fair value of the option component was determined to be $413 at December 31,
2013 (December 31, 2012 - $16,035), resulting in an unrealized gain of $15,622
(year ended December 31, 2012 - $4,046) that was recognized in other income on
the Consolidated Statements of Operations for the year ended December 31, 2013
(see note 21). At December 31, 2013, $167,000 (December 31, 2012 - $167,000) of
convertible senior notes remained outstanding at a carrying value of $157,133
(December 31, 2012 - $153,910) for the debt component and $413 (December 31,
2012 - $16,035) for the option component.

|(c) | Equipment financing
obligations
|--- | -------------------------------

The Company has entered into financing obligations for
equipment, which expire at various dates between 2015 and 2018 and that are
secured by the financed assets. Interest payable on the various obligations
ranges from a fixed rate of 2.71% to 5.77% . During the year ended December 31,
2013, the Company received proceeds of $4,813 (year ended December 31, 2012 -
$12,441) from equipment financing arrangements.

|(d) | Other
|--- | -----

During the year, the Company purchased lands near its El
Chanate mine and entered into loan agreements as part of the consideration. The
majority of these balances are payable in one year.

|    |           
|--- | ----------
|16. | Provisions

|    |                                                |   | December 31 |   |   | December 31 |  
|--- | ---------------------------------------------- | - | ----------- | - | - | ----------- | -
|    |                                                |   | 2013        |   |   | 2012        |  
|(a) | Reclamation provisions                         | $ | 28,245      |   | $ | 32,943      |  
|(b) | Royalty interests provision                    |   | -           |   |   | 2,086       |  
|(c) | Provision for restricted share
      unit plan |   | 792         |   |   | 1,895       |  
|(d) | Provision for lawsuit                          |   | 12,458      |   |   | 13,318      |  
|    | Other                                          |   | 3,040       |   |   | 1,444       |  
|    |                                                |   | 44,535      |   |   | 51,686      |  
|    | Less: Current portion of
      provisions      |   | (15,955     | ) |   | (19,326     | )
|    |                                                | $ | 28,580      |   | $ | 32,360      |  

|(a) | Reclamation provisions
|--- | ----------------------

The Companys reclamation provisions consist of reclamation and
rehabilitation costs for each of the Companys operating mines and Kemess South.
The present value of the combined provision is currently estimated at $28,245
(December 31, 2012 - $32,943), reflecting ongoing payments relating to Kemess
South, and future payments that will commence in 8 - 20 years for the Companys
operating mines. Significant reclamation activities include land rehabilitation,
demolition and decontamination of mine facilities, monitoring, and other costs.

The Company estimates the costs to conduct significant
reclamation activities based on the most recent experience and cost data
available for the applicable mine. These expected expenditures are then
risk-adjusted by considering the time remaining until reclamation activities
commence, recent industry experience in the region, and other relevant factors.
This current cost estimate is then inflated to the estimated date of settlement
using the rate disclosed below.

The undiscounted value of the reclamation costs liability is
$42,263 (December 31, 2012 - $42,128). The discount rates used in estimating the
obligation were determined based on the yields from government bonds from the
country in which the related mine operates, with a term to maturity similar to
the estimated timing of future payments. The inflation rates used were
determined based on external forecasts for inflation in the country in which the
related mine operates.

28

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The discount and inflation rates used are summarized as
follows:

|                |  | December 31 |  |  | December 31 | 
|--------------- |  | ----------- |  |  | ----------- | 
|                |  | 2013        |  |  | 2012        | 
|Discount rates  |  |             |  |  |             | 
|El Chanate      |  | 6.33%       |  |  | 5.52%       | 
|Young-Davidson  |  | 3.24%       |  |  | 2.36%       | 
|Kemess South    |  | 1.95%       |  |  | 1.38%       | 
|                |  |             |  |  |             | 
|Inflation rates |  |             |  |  |             | 
|El Chanate      |  | 3.10%       |  |  | 3.30%       | 
|Young-Davidson  |  | 2.00%       |  |  | 2.00%       | 
|Kemess South    |  | 2.00%       |  |  | 2.00%       | 

Changes to the reclamation and closure cost obligation balance
during the year were as follows:

|                                                |   | December 31 |  
|----------------------------------------------- | - | ----------- | -
|                                                |   | 2013        |  
|Reclamation provisions, beginning of period     | $ | 32,943      |  
|Obligations incurred and revisions to estimates |   | (4,621      | )
|Accretion expense                               |   | 769         |  
|Reclamation expenditures                        |   | (846        | )
|Reclamation provisions, end of period           |   | 28,245      |  
|Less: Current portion                           |   | (583        | )
|                                                | $ | 27,662      |  

Of the $4,621 of adjustments made to reclamation provisions
during the year, $3,718 was credited against capital expenditures and included
in property, plant and equipment & mining interests on the Consolidated
Balance Sheets and $903 was recognized as a reduction of expenses in
reclamation, care and maintenance costs on the Consolidated Statements of
Operations.

|(b) | Royalty interests
provision
|--- | ---------------------------

During the year ended December 31, 2013, the Company settled a
royalty payable to Royal Gold Inc., which arose upon the purchase of the El
Chanate property in 2001. Settlement of the liability occurred through the
payment of net smelter returns up to a maximum amount. Changes to the royalty
interests provision balance during the year were as follows:

|                                                 |   | December 31 |  
|------------------------------------------------ | - | ----------- | -
|                                                 |   | 2013        |  
|Royalty interests provision, beginning of period | $ | 2,086       |  
|Accretion expense                                |   | 21          |  
|Payments of royalties                            |   | (2,107      | )
|Royalty interests provision, end of period       | $ | -           |  

|(c) | Provision for restricted share unit
  plan
|--- | ------------------------------------------

The Company provides a Restricted Share Unit (RSU) plan for
directors, officers, employees, and consultants of the Company. Each unit
entitles the participant to receive a cash payment equal to the market price of
one share as of the RSU vesting date, one share, or any combination of cash and
shares equal to the market price of one share as of the RSU vesting date. The
Company records RSUs to be cash-settled in provisions and RSUs to be
share-settled within Shareholders Equity. Cash-settled RSUs vest equally over a
period of not more than three years, and at the end of a vesting period, they
may be redeemed for cash based on the Companys volume-weighted average closing
share price for the five days immediately preceding the redemption date. A total
of 26,974 cash-settled RSUs, with a grant date fair value of $192, were granted
during the year ended December 31, 2013 (year ended December 31, 2012 - 161,700
RSUs with a grant date fair value of $1,481). In accounting for these awards,
the Company recognizes the fair value of the units as compensation expense as
they are earned, based on the estimated number of units that are expected to
vest. At December 31, 2013, 279,254 RSUs were outstanding, including 125,461 vested units
(December 31, 2012 - 347,428 RSUs outstanding including 103,563 vested units).

29

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                      
|--- | ---------------------
|(d) | Provision for lawsuit

The Company was named as a defendant in a claim originally
filed by Ed J. McKenna, which was certified as a class action lawsuit with
damages sought from $80 million to $160 million. On October 5, 2012, the Company
reached an agreement to settle this class action lawsuit, subject to approval of
the court and the right of the Company to terminate the agreement under certain
circumstances. The Company has recognized a provision of $12,458 relating to
this lawsuit, which was partially offset by a corresponding insurance receivable
of $10,254 (refer to note 6 for further information), for a net settlement
amount of $2,204. At December 31, 2013, the net settlement amount is being held
in escrow pending settlement of the lawsuit, and is included in restricted cash
on the Consolidated Balance Sheets. The provision is included in the current
portion of provisions on the Consolidated Balance Sheets as it is payable as at
December 31, 2013.

|    |             
|--- | ------------
|17. | Income taxes

The following table represents the major components of income
tax expense / (recovery) recognized in the Consolidated Statements of Operations
for the year ended December 31, 2013:

|                                         |   | December 31 |   |   | December 31 |  
|---------------------------------------- | - | ----------- | - | - | ----------- | -
|                                         |   | 2013        |   |   | 2012        |  
|Current income tax (recovery) / expense  | $ | (140        | ) | $ | 6,625       |  
|Deferred income tax expense / (recovery) |   | 14,456      |   |   | (7,849      | )
|Provision for income taxes               | $ | 14,316      |   | $ | (1,224      | )

The following table reconciles the expected income tax expense
/ (recovery) at the statutory income tax rate to the amounts recognized in the
Consolidated Statements of Operations for the year ended December 31, 2013:

|                                                                         |   | December 31 |   |   | December 31 |  
|------------------------------------------------------------------------ | - | ----------- | - | - | ----------- | -
|                                                                         |   | 2013        |   |   | 2012        |  
|Loss before income taxes                                                 | $ | (162,454    | ) | $ | (101,003    | )
|Income tax rate                                                          |   | 25.20%      |   |   | 25.30%      |  
|Expected income tax recovery based on above rates                        |   | (40,938     | ) |   | (25,554     | )
|Effect of higher tax rates in foreign jurisdictions                      |   | (14,643     | ) |   | (297        | )
|Non-deductible stock option expense                                      |   | 1,583       |   |   | 2,085       |  
|Non-taxable gain on change to joint venture accounting                   |   | -           |   |   | (1,633      | )
|Effect of non-deductible goodwill impairment                             |   | 37,513      |   |   | 35,941      |  
|Impact of local mining taxes                                             |   | 7,037       |   |   | (1,284      | )
|Impact of changes in tax rates applicable to temporary
      differences |   | 3,207       |   |   | -           |  
|Permanent differences                                                    |   | (1,185      | ) |   | 131         |  
|Change in unrecognized temporary differences                             |   | -           |   |   | 1,185       |  
|Impact of foreign exchange                                               |   | 21,742      |   |   | (11,798     | )
|Provision for income taxes                                               | $ | 14,316      |   | $ | (1,224      | )

The statutory tax rate for 2013 was 25.20% (2012  25.30%) .
This represents a decrease of 0.1%, primarily attributable to a change in
provincial allocation for the year ended December 31, 2013.

30

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The following reflects the deferred income tax liability at
December 31, 2013:

|                                                                                       |   | December 31 |   |   | December 31 |  
|-------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                       |   | 2013        |   |   | 2012        |  
|Accounting value of mineral properties and capital assets
      in excess of tax value | $ | 281,457     |   | $ | 289,142     |  
|Accounting value of inventories in excess of tax value                                 |   | 34,670      |   |   | 30,203      |  
|Unrealized foreign exchange (loss) / gain                                              |   | (619        | ) |   | 1,514       |  
|Other taxable / (deductible) temporary differences                                     |   | 883         |   |   | (6,548      | )
|Non-capital losses carried forward                                                     |   | (29,211     | ) |   | (26,180     | )
|Deferred income tax liability                                                          | $ | 287,180     |   | $ | 288,131     |  

The change in deferred income tax liability is explained as
follows:

|                                                                                                     |   | December 31 |   |   | December 31 |  
|---------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                     |   | 2013        |   |   | 2012        |  
|Balance, beginning of year                                                                           | $ | 288,131     |   | $ | 429,525     |  
|Deferred income tax expense / (recovery) recognized in net
      earnings from continuing operations |   | 14,456      |   |   | (7,849      | )
|Deferred income tax recovery recognized in net earnings
      from discontinued operations           |   | -           |   |   | (1,932      | )
|Impact of foreign exchange                                                                           |   | (15,216     | ) |   | 19,358      |  
|Deferred income tax recovery recognized in other
      comprehensive income                          |   | -           |   |   | 78          |  
|Deferred income tax liability recognized in retained
      earnings                                  |   | (191        | ) |   | -           |  
|Deferred income tax liability derecognized on disposition
      of El Cubo and Guadalupe y Calvo     |   | -           |   |   | (51,719     | )
|Deferred income tax liability derecognized on disposition
      of Ocampo                            |   | -           |   |   | (86,428     | )
|Deferred income tax liability derecognized on disposition
      of 50% interest in Orion             |   | -           |   |   | (12,902     | )
|Deferred income tax liability                                                                        | $ | 287,180     |   | $ | 288,131     |  

The Company has tax loss carryforwards expiring in the
following years:

|                     |   | Canada  |  |   | Mexico |  |   | United States |  |   | Total   | 
|-------------------- | - | ------- |  | - | ------ |  | - | ------------- |  | - | ------- | 
|2014                 | $ | 3,845   |  | $ | -      |  | $ | -             |  | $ | 3,845   | 
|2023                 |   | -       |  |   | 9,390  |  |   | -             |  |   | 9,390   | 
|2024                 |   | 940     |  |   | -      |  |   | -             |  |   | 940     | 
|2025                 |   | 7,285   |  |   | -      |  |   | -             |  |   | 7,285   | 
|2026                 |   | 18,297  |  |   | -      |  |   | -             |  |   | 18,297  | 
|2027                 |   | 5,971   |  |   | -      |  |   | 1,448         |  |   | 7,419   | 
|2028                 |   | 27,532  |  |   | -      |  |   | 5,751         |  |   | 33,283  | 
|2029                 |   | 12,934  |  |   | -      |  |   | 7,831         |  |   | 20,765  | 
|2030                 |   | 5,879   |  |   | -      |  |   | 5,248         |  |   | 11,127  | 
|2031                 |   | 14,089  |  |   | -      |  |   | -             |  |   | 14,089  | 
|2032                 |   | 15,697  |  |   | -      |  |   | 14            |  |   | 15,711  | 
|At December 31, 2013 | $ | 112,469 |  | $ | 9,390  |  | $ | 20,292        |  | $ | 142,151 | 

The Company has unrecognized deferred income tax assets in
respect of aggregate loss carryforwards, deductible temporary differences and
unused tax credits of $28,649 (December 31, 2012 - $27,965).

At December 31, 2013, the Company has unrecognized deferred
income tax liabilities on taxable temporary differences of $174,485 (December
31, 2012 - $163,961) for taxes that would be payable on the unremitted earnings
of certain subsidiaries of the Company.

---

31

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                     
|--- | --------------------
|18. | Shareholders equity
|    |                     
|(a) | Capital stock       

Authorized:

Unlimited number of common shares. The Companys shares
have no par value.

Issued and outstanding:

|                                                          |  | December 31, 2013 |   |   | December 31, 2012 |  
|--------------------------------------------------------- |  | ----------------- | - | - | ----------------- | -
|                                                          |  | Number of         |   |   |                   |  
|                                                          |  | common            |   |   | Ascribed          |  
|                                                          |  | shares            |   |   | value             |  
|Balance, beginning of period                              |  | 282,326,547       |   | $ | 2,307,978         |  
|Shares repurchased and cancelled                          |  | (36,144,578       | ) |   | (295,536          | )
|Shares issued as payment for disposition-related services |  | -                 |   |   | -                 |  
|Shares issued through employee share purchase plan        |  | 390,032           |   |   | 2,008             |  
|Shares issued through dividend reinvestment plan          |  | 467,797           |   |   | 1,969             |  
|Shares issued on redemption of deferred share units       |  | 71,845            |   |   | 499               |  
|Shares issued on exercise of stock options                |  | 458,168           |   |   | 3,094             |  
|Fair value of share-based compensation                    |  | -                 |   |   | 1,825             |  
|Balance, end of period                                    |  | 247,569,811       |   | $ | 2,021,837         |  

On January 29, 2013, the Company repurchased and cancelled
36,144,578 common shares under a modified Dutch auction substantial issuer
bid, for a total purchase price of $301,066, including transaction costs. Of the
$301,066 paid, $295,536 was recognized in capital stock to reduce the book value
of the shares repurchased and the premium paid, including transaction costs, of
$5,353 was recognized in deficit.

|(b) | Dividends
|--- | ---------

On February 21, 2013, the Company announced an inaugural
dividend policy, whereby the Company would pay an annual dividend of $0.16 per
share in 2013 (payable quarterly). Subsequent to 2013, the dividend will be
linked to operating cash flow, whereby the Company intends to pay out 20% of
operating cash flow generated in the preceding quarter. At December 31, 2013,
subsequent to approval of the fourth quarter dividend by the Companys Board of
Directors, the Company recognized a dividend payable of $9,960, which was
charged directly to deficit in the Consolidated Balance Sheets. The Company
announced the declaration of the dividend of $0.04 per share on January 3, 2014,
payable to shareholders of record on January 14, 2014. The dividend was paid on
January 29, 2014. During the year ended December 31, 2013, the Company declared
$39,592 in dividends, or $0.16 per share.

On June 11, 2013, the Company announced a dividend reinvestment
plan, whereby shareholders may elect to reinvest dividends in additional common
shares of the Company, commencing with the July 2013 dividend. Common shares
issued under this plan will be issued at a 5% discount from the average market
price of the common shares over the five day period preceding the relevant
dividend payment date. The discount may be adjusted at a future date, but cannot
exceed 5%. During the year ended December 31, 2013, the Company issued 467,797
shares with a total value of $1,969 under this plan.

|(c) | Stock options (in Canadian
  dollars)
|--- | -------------------------------------

The Company has a long-term incentive plan under which
share-based compensation, including stock options, deferred share units,
performance share units, and restricted share units may be granted to directors,
officers, employees, and consultants of the Company. The maximum number of
common shares that may be reserved and set aside for issuance under the plan is
6.5% of the common shares outstanding at the time of granting the award (on a
non-diluted basis). Stock options are generally exercisable for a maximum period
of five to seven years from the grant date, and have vesting periods of three to
four years or as determined by the Companys Board of Directors.

Stock option disclosures are in Canadian dollars as the
Canadian dollar is the source currency of the Companys stock option grants.

32

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The fair value of the options granted during the year-to-date
was calculated using the Black-Scholes option-pricing model with the following
weighted average assumptions:

|                        |   | December 31 |  |   | December 31 | 
|----------------------- | - | ----------- |  | - | ----------- | 
|                        |   | 2013        |  |   | 2012        | 
|Dividend yield          |   | 2.27%       |  |   | 0%          | 
|Expected volatility     |   | 55.06%      |  |   | 56.11%      | 
|Risk free interest rate |   | 1.25%       |  |   | 1.25%       | 
|Expected life           |   | 2.98 years  |  |   | 3.39 years  | 
|Exercise price          | $ | 4.90        |  | $ | 7.94        | 
|Share price             | $ | 4.92        |  | $ | 7.85        | 
|Grant date fair value   | $ | 1.62        |  | $ | 3.12        | 

Expected volatility was determined based on historical share
price volatility over the expected life of the option granted.

|                                   |  | December 31, 2013 |   |   | December 31, 2012 | 
|---------------------------------- |  | ----------------- | - | - | ----------------- | 
|                                   |  |                   |   |   | Weighted          | 
|                                   |  | Options           |   |   | average price     | 
|Outstanding, beginning of period   |  | 10,239,564        |   | $ | 8.24              | 
|Granted                            |  | 3,251,179         |   | $ | 4.90              | 
|Forfeited                          |  | (167,500          | ) | $ | 9.87              | 
|Expired                            |  | (1,551,775        | ) | $ | 8.39              | 
|Exercised                          |  | (458,168          | ) | $ | 6.76              | 
|Outstanding, end of period         |  | 11,313,300        |   | $ | 7.29              | 
|Options exercisable, end of period |  | 5,171,118         |   | $ | 8.19              | 

During the year ended December 31, 2013, employees,
consultants, officers and directors of the Company exercised 458,168 options
(year ended December 31, 2012 - 234,282) for total proceeds of $3,091 (year
ended December 31, 2012 - $1,198). The weighted average share price at the date
of exercise for stock options exercised during the year ended December 31, 2013
was $7.39 (year ended December 31, 2012 - $8.47) .

Set forth below is a summary of the outstanding options to
purchase common shares as at December 31, 2013:

Options outstanding
    
    
    Options exercisableNumber
    
    
    Weighted average
    
    
    Average life
    
    
    Number
    
    
    Weighted averageOption Price
    
    
    outstanding
    
    
    exercise price
    
    
    (yrs)
    
    
    exercisable
    
    
    exercise price$
    2.51 - 4.00
    
    
    305,684
    
    $
    2.96
    
    
    2.31
    
    
    275,684
    
    $
    2.84$
    4.01 - 6.00
    
    
    2,392,378
    
    $
    4.05
    
    
    4.91
    
    
    34,675
    
    $
    5.50$
    6.01 - 7.00
    
    
    1,610,500
    
    $
    6.71
    
    
    3.85
    
    
    1,048,750
    
    $
    6.73$
    7.01 - 7.50
    
    
    888,226
    
    $
    7.15
    
    
    4.01
    
    
    179,750
    
    $
    7.33$
    7.51 - 9.00
    
    
    3,482,174
    
    $
    8.11
    
    
    3.92
    
    
    1,831,172
    
    $
    8.08$
    9.01 - 9.50
    
    
    762,500
    
    $
    9.29
    
    
    4.82
    
    
    391,250
    
    $
    9.29$
    9.51 - 10.00
    
    
    919,143
    
    $
    9.72
    
    
    3.37
    
    
    759,892
    
    $
    9.74$
    10.01 -
      10.50
    
    
    200,000
    
    $
    10.09
    
    
    3.79
    
    
    100,000
    
    $
    10.09$
    10.51 -
      11.00
    
    
    250,000
    
    $
    10.95
    
    
    4.87
    
    
    125,000
    
    $
    10.95$
    11.01 - 12.50
    
    
    502,695
    
    $
    11.38
    
    
    1.72
    
    
    424,945
    
    $
    11.32$
    Total
    
    
    11,313,300
    
    
    
    
    
    
    
    
    5,171,118


33

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                             
|--- | ----------------------------
|(d) | Employee share purchase
plan

The Company has an Employee Share Purchase Plan which enables
employees to purchase Company shares through payroll deduction. Employees can
contribute up to 10% of their annual base salary, and the Company will match 75%
of the employees contributions. The common shares are purchased based on the
volume weighted average closing price of the last five days prior to the end of
the quarter. During the year ended December 31, 2013, the Company recognized
$781 as an expense (year ended December 31, 2012 - $699) related to this plan.
At December 31, 2013, $217 of the expense was payable by the Company (December
31, 2012 - $182).

|(e) | Deferred share unit plan
|--- | ------------------------

The Company awards Deferred Share Units (DSUs) as an
alternative form of compensation for employees, officers, consultants, and
members of the Companys Board of Directors. Each unit entitles the participant
to receive one common share of the Company from treasury upon redemption. DSUs
are measured on the grant date using the Companys closing price on that date. A
total of 67,795 DSUs (year ended December 31, 2012 - 38,310) were granted during
the year ended December 31, 2013 with a grant date fair value of $366 (year
ended December 31, 2012 - $331). A total of 71,845 DSUs were redeemed during the
year ended December 31, 2013 (year ended December 31, 2012 - 34,419). At
December 31, 2013, 248,596 DSUs were vested and outstanding (December 31, 2012 -
252,646).

|(f) | Performance share unit
plan
|--- | ---------------------------

The Company awards Performance Share Units (PSUs) as an
alternative form of compensation for employees, officers, consultants, and
members of the Companys Board of Directors. Each unit entitles the participant
to receive a cash payment equal to the market price of one share as of the PSU
vesting date, one share, or any combination of cash and shares equal to the
market price of one share as of the PSU vesting date, assuming certain
performance conditions are met. PSUs are measured using the volume weighted
average closing price of the last five days prior to granting of the units. A
total of 348,040 equity-settled PSUs were granted during the year ended December
31, 2013 (year ended December 31, 2012 - nil). For the year ended December 31,
2013, the Company incurred an expense of $44 on 348,040 PSUs outstanding, of
which none were vested at December 31, 2013 (December 31, 2012 - nil).

|(g) | Restricted share unit plan
|--- | --------------------------

The Company awards Restricted Share Units (RSUs) as an
alternative form of compensation for employees, officers, consultants, and
members of the Companys Board of Directors. Each unit entitles the participant
to receive a cash payment equal to the market price of one share as of the RSU
vesting date, one share, or any combination of cash and shares equal to the
market price of one share as of the RSU vesting date. The Company records RSUs
to be cash-settled in provisions and RSUs to be share-settled within
shareholders equity. RSUs are measured using the volume weighted average
closing price of the last five days prior to granting of the units. A total of
356,155 equity-settled RSUs were granted during the year ended December 31, 2013
(year ended December 31, 2012 - nil). For the year ended December 31, 2013, the
Company incurred an expense of $472 on 356,155 RSUs outstanding, of which 35,843
were vested at December 31, 2013 (December 31, 2012 - nil).

|    |                                       
|--- | --------------------------------------
|19. | Accumulated other comprehensive
  loss

Accumulated other comprehensive loss related to investments
made by the Company was impacted by the other comprehensive loss during the year
ended December 31, 2013:

|Balance, beginning of period                           | $ | (105   | )
|------------------------------------------------------ | - | ------ | -
|Other comprehensive loss - continuing
      operations |   | (5,163 | )
|Balance, end of period                                 | $ | (5,268 | )
|                                                       |   |        |  

34

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                     
|--- | --------------------
|20. | Loss from operations

The Companys loss from operations includes the following
expenses presented by function:

|                                     |   | Year ended  | 
|------------------------------------ | - | ----------- | 
|                                     |   | December 31 | 
|                                     |   | 2013        | 
|Cost of sales                        | $ | 372,453     | 
|General and administrative           |   | 27,677      | 
|Exploration and business development |   | 5,588       | 
|                                     | $ | 405,718     | 

Cost of sales for the year ended December 31, 2013 includes
impairment charges of $154,000 relating to the El Chanate mine (year ended
December 31, 2012 - $127,000). These impairment charges are discussed further in
note 13.

Included in general and administrative expense for the year
ended December 31, 2013 is $7,388 of share-based compensation expense (year
ended December 31, 2012 - $7,375).

Included in exploration and business development for the years
ended December 31, 2013 and 2012 are impairment charges of $4,574 related to
brownfield exploration properties included in non-depletable mining interests,
and $1,537 related to exploration properties, respectively. These impairment
charges are discussed further in note 13.

The following employee benefits expenses are included in cost
of sales, general and administrative, and exploration and business development
expenses:

|                         |   | Year ended  | 
|------------------------ | - | ----------- | 
|                         |   | December 31 | 
|                         |   | 2013        | 
|Salaries and benefits    | $ | 26,821      | 
|Share-based compensation |   | 7,946       | 
|Other                    |   | 180         | 
|                         | $ | 34,947      | 

|    |             
|--- | ------------
|21. | Other income

|                                                                                        |   | Year ended  |  
|--------------------------------------------------------------------------------------- | - | ----------- | -
|                                                                                        |   | December 31 |  
|                                                                                        |   | 2013        |  
|Fair value adjustment on option component of convertible
      senior notes (Note 26)   | $ | 15,622      |  
|Unrealized (loss) / gain on contingent consideration (Note
      26)                    |   | (7,395      | )
|Unrealized and realized gains on derivative assets and
      liabilities (Note 26)      |   | 2,183       |  
|Interest income                                                                         |   | 951         |  
|Unrealized loss on investments (Note 8)                                                 |   | (497        | )
|Reclassification of accumulated losses on
      available-for-sale investments (Note 8) |   | (168        | )
|Realized gain on investments (Note 8)                                                   |   | -           |  
|Loss on extinguishment of debt                                                          |   | -           |  
|Loss on discontinuance of hedge accounting (Note 26)                                    |   | -           |  
|Net provision for lawsuit (Note 16)                                                     |   | -           |  
|Gain on sale of 50% interest in Orion (Note 9)                                          |   | -           |  
|Other                                                                                   |   | (529        | )
|                                                                                        | $ | 10,167      |  
|                                                                                        |   |             |  

35

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                            
|--- | ---------------------------
|22. | (Loss) / earnings per
share

Basic (loss) / earnings per share is calculated based on the
weighted average number of common shares and common share equivalents
outstanding during the years ended December 31, 2013 and 2012. Diluted (loss) /
earnings per share is based on the assumption that stock options, convertible
debentures and other share-based instruments issued that have an exercise price
less than the average market price of the Companys common shares during the
period have been exercised on the later of the beginning of the year and the
date granted. Net earnings and basic weighted average shares outstanding are
reconciled to diluted net earnings and diluted weighted average shares
outstanding, respectively, as follows:

|                                              |   | Year ended  |  
|--------------------------------------------- | - | ----------- | -
|                                              |   | December 31 |  
|                                              |   | 2013        |  
|Net loss from continuing operations           | $ | (176,770    | )
|Dilution adjustments:                         |   |             |  
|Convertible senior notes                      |   | (14,730     | )
|Diluted net (loss) from continuing operations |   | (191,500    | )
|Net earnings from discontinued operations     |   | -           |  
|Diluted net (loss) / earnings                 | $ | (191,500    | )
|                                              |   |             |  
|Basic weighted average shares outstanding     |   | 250,398,043 |  
|Dilution adjustments:                         |   |             |  
|Convertible senior notes                      |   | 15,331,018  |  
|Diluted weighted average shares outstanding   |   | 265,729,061 |  

The following items were excluded from the computation of
diluted weighted average shares outstanding for the years ended December 31,
2013 and 2012 because their effect would have been anti-dilutive:

|                        |  | Year ended  | 
|----------------------- |  | ----------- | 
|                        |  | December 31 | 
|                        |  | 2013        | 
|Stock options           |  | 11,007,616  | 
|Warrants issued         |  | -           | 
|Restricted share units  |  | 55,749      | 
|Performance share units |  | 6,328       | 
|                        |  |             | 

36

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                                     
|--- | ------------------------------------
|23. | Supplemental cash flow
  information

|                                                                               |   | Year ended  |  
|------------------------------------------------------------------------------ | - | ----------- | -
|                                                                               |   | December 31 |  
|Items not affecting cash:                                                      |   | 2013        |  
|Impairment charges                                                             | $ | 158,574     |  
|Amortization and depletion                                                     |   | 65,529      |  
|Net realizable value adjustments                                               |   | 33,426      |  
|Fair value adjustment on option component of
      convertible senior notes    |   | (15,622     | )
|Unrealized foreign exchange (gain) / loss                                      |   | (11,810     | )
|Unrealized loss / (gain) on contingent
      consideration                     |   | 7,395       |  
|Share-based compensation, net of forfeitures                                   |   | 7,388       |  
|Deferred income tax expense / (recovery)                                       |   | 14,456      |  
|Equity in loss / (earnings) of
      jointly-controlled entity                 |   | 2,533       |  
|Unrealized and realized gains on derivative
      assets and liabilities       |   | (2,183      | )
|Unrealized loss on investments                                                 |   | 497         |  
|Reclassification of accumulated losses on
      available-for-sale investments |   | 168         |  
|Realized gain on sale of investments                                           |   | -           |  
|Loss on extinguishment of debt                                                 |   | -           |  
|Loss on discontinuance of hedge accounting                                     |   | -           |  
|Net provision for lawsuit                                                      |   | -           |  
|Other non-cash items                                                           |   | 1,404       |  
|                                                                               | $ | 261,755     |  
|Change in non-cash operating working capital:                                  |   |             |  
|Receivables                                                                    | $ | (1,800      | )
|Current income tax receivable                                                  |   | 8,507       |  
|Prepaids and deposits                                                          |   | (380        | )
|Inventories                                                                    |   | (35,806     | )
|Trade payables and accrued liabilities                                         |   | 19,696      |  
|Current income tax liability                                                   |   | (5,030      | )
|                                                                               | $ | (14,813     | )
|                                                                               |   |             |  
|Supplemental information:                                                      |   |             |  
|Interest paid                                                                  | $ | 7,104       |  
|Interest received                                                              | $ | 994         |  
|Income taxes paid(1)                                                           | $ | 4,728       |  

|(1) | Included in income taxes paid for the year ended December
      31, 2012 is $77,096 in taxes paid on the sale of the Ocampo mine on
      December 14, 2012. Refer to note 29(c) for further
  information.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Non-cash transactions:                                                              |   |       |  |   |        | 
|----------------------------------------------------------------------------------- | - | ----- |  | - | ------ | 
|Receipt of Endeavour shares upon disposition
      of El Cubo and Guadalupe y Calvo | $ | -     |  | $ | 87,746 | 
|Receipt of Crocodile Gold shares upon
      disposition of Australian operations    | $ | -     |  | $ | 9,642  | 
|Unwinding of discount on convertible notes
      capitalized to mining interests    | $ | 2,897 |  | $ | 2,654  | 
|Interest payable capitalized to mining
      interests                              | $ | 935   |  | $ | 1,160  | 
|Shares issued in exchange for
      disposition-related services                    | $ | -     |  | $ | 1,736  | 

---

37

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                          
|--- | -------------------------
|24. | Related party disclosures

Related party transactions in 2013 included the compensation of
the Companys key management personnel and a receivable from the
jointly-controlled entity that holds the Orion development project, disclosed in
note 9. The Companys key management personnel include the Companys executives
and members of the Board of Directors. The compensation of key management
personnel was as follows:

|                             |   | Year ended  | 
|---------------------------- | - | ----------- | 
|                             |   | December 31 | 
|                             |   | 2013        | 
|Short-term employee benefits | $ | 6,047       | 
|Long-term benefits           |   | 39          | 
|Termination benefits         |   | -           | 
|Share-based compensation     |   | 4,497       | 
|                             | $ | 10,583      | 
|                             |   |             | 

|25. | Commitments and
contingencies
|--- | -----------------------------

Commitments

Young-Davidson royalty agreements

The Company is subject to two royalty agreements on certain
claims on the Young-Davidson property. The first royalty agreement requires the
Company to pay a minimum of $1.50 per tonne of ore mined and processed. The
second royalty agreement requires the Company to pay $1.00 per tonne of ore
mined and processed, as well as an additional royalty of 5% of the increase in
gold price per ounce recovered above the base price of gold of $270.00 per ounce
for each ounce recovered.

Contingencies

The Company is also involved in legal proceedings arising in
the ordinary course of its business. In the opinion of management, the ultimate
liability with respect to these actions will not materially affect the Companys
financial position, results of operations or cash flows.

|    |                                            
|--- | -------------------------------------------
|26. | Financial instruments and risk
  management

Fair values of financial instruments

The following table sets forth the Companys financial assets
and liabilities that are measured at fair value on a recurring basis by level
within the fair value hierarchy. The Company does not have any non-recurring
fair value measurements, other than the fair value of non-financial assets
disclosed in note 13. Levels 1 to 3 are defined based on the degree to which
fair value inputs are observable or unobservable, as follows:

|- | Level 1 inputs are quoted prices (unadjusted) in active
      markets for identical assets or liabilities;                                                           
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Level 2 inputs are based on inputs which have a
      significant effect on fair value that are observable, either directly or
      indirectly from market data; and
|- | Level 3 inputs are unobservable (supported by little or
      no market activity).                                                                                   

38

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|                                                           |   |                   |  |   |                   |  
|---------------------------------------------------------- | - | ----------------- |  | - | ----------------- | -
|                                                           |   | December 31, 2013 |  |   | December 31, 2012 |  
|                                                           |   | Level 1           |  |   | Level 2           |  
|Cash                                                       | $ | 142,652           |  | $ | -                 |  
|Restricted cash                                            |   | 33,683            |  |   | -                 |  
|Financial assets at fair value through profit or loss      |   |                   |  |   |                   |  
|Equity investments (a)                                     |   | -                 |  |   | -                 |  
|Warrants held (b)                                          |   | -                 |  |   | 41                |  
|Contingent consideration (c)                               |   | -                 |  |   | -                 |  
|Available-for-sale financial assets                        |   |                   |  |   |                   |  
|Equity investments (a)                                     |   | 15,510            |  |   | -                 |  
|Financial liabilities at fair value through profit or loss |   |                   |  |   |                   |  
|Option component of convertible senior notes
      (d)     |   | -                 |  |   | (413              | )
|Currency forwards (e)                                      |   | -                 |  |   | -                 |  
|Warrants issued (b)                                        |   | -                 |  |   | -                 |  
|                                                           | $ | 191,845           |  | $ | (372              | )

The methods of measuring each of these financial assets and
liabilities have not changed during the past year. The Company does not have any
financial assets or liabilities measured at fair value based on unobservable
inputs (Level 3).

|(a) | Equity investments
|--- | ------------------

The Companys equity investments, both available-for-sale and
at fair value through profit or loss, are valued using quoted market prices in
active markets and as such are classified within Level 1 of the fair value
hierarchy. The fair value of investment securities is calculated as the closing
market price of the investment equity security multiplied by the quantity of
shares held by the Company.

|(b) | Warrants held and issued
|--- | ------------------------

The fair value of warrants, both held and issued, that are not
traded on an active market is determined using a Black Scholes pricing model
based on assumptions that are supported by observable current market conditions
and as such are classified within Level 2 of the fair value hierarchy.

|(c) | Contingent consideration
|--- | ------------------------

The Company calculates the fair value of the contingent
consideration using a valuation model, which is based on the rolling twelve
month average gold price exceeding specified levels during the three years
following the closing date of the transaction. The valuation model uses a
risk-neutral valuation approach paired with a Monte Carlo numerical method that
relies on simulated weekly gold prices over the remaining term, which ends on
July 13, 2015, using a gold price of $1,205 per ounce as the initial spot price
within the simulation model at December 31, 2013 (December 31, 2012 - initial
spot price of $1,674 per ounce). As the valuation of the contingent
consideration is dependent on inputs derived from observable data, it is
classified within Level 2 of the fair value hierarchy. The contingent
consideration asset is included within other long-term assets on the
Consolidated Balance Sheets.

The fair value of the contingent consideration at December 31,
2013 is $nil. However, for the yearended December 31, 2012, changes in
gold price assumptions would have had the following impact on net (loss) /
earnings:

|                           |   | December 31 |  
|-------------------------- | - | ----------- | -
|                           |   | 2012        |  
|5% increase in gold prices | $ | 2,601       |  
|5% decrease in gold prices | $ | (2,215      | )

|(d) | Option component of convertible senior
  notes
|--- | ----------------------------------------------

The Company calculates the fair value of the option component
of convertible senior notes using a convertible bond valuation model, which uses
inputs, including the Companys share price, volatility of the notes, and credit
spreads. Because the valuation is dependent on inputs derived from observable
market data, the option component of the convertible senior notes is classified
within Level 2 of the fair value hierarchy. The fair value was calculated using
the following assumptions:

39

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|               |  |             |  |  |             | 
|-------------- |  | ----------- |  |  | ----------- | 
|               |  | December 31 |  |  | December 31 | 
|               |  | 2013        |  |  | 2012        | 
|Volatility     |  | 30%         |  |  | 25%         | 
|Credit spreads |  | 4.70%       |  |  | 3.50%       | 

Changes in these assumptions would have the following impact on
net (loss) / earnings for the year ended December 31, 2013 and 2012:

|                                |   | December 31 |   |   | December 31 |  
|------------------------------- | - | ----------- | - | - | ----------- | -
|                                |   | 2013        |   |   | 2012        |  
|5% increase in volatility       | $ | (557        | ) | $ | (4,714      | )
|5% decrease in volatility       | $ | 298         |   | $ | 4,666       |  
|0.5% increase in credit spreads | $ | (29         | ) | $ | (779        | )
|0.5% decrease in credit spreads | $ | 27          |   | $ | 758         |  

|(e) | Currency forwards
|--- | -----------------

The fair value of forward contracts is determined using forward
pricing spreads in effect at the balance sheet date. These spreads are supported
by observable market conditions and are classified within Level 2 of the fair
value hierarchy. The use of reasonably possible alternative assumptions would
not significantly affect the Companys results.

Risks

In the normal course of operations, the Company is exposed to
credit risk, liquidity risk and the following market risks: commodity price,
market price, interest rate and foreign currency exchange rate. The Company has
developed a risk management process to identify, analyze and assess these and
other risks, and has formed a Risk Committee to monitor all significant risks to
the Company. The Board of Directors has overall responsibility for the oversight
of the Companys risk management framework, and receives regular reports from
the Risk Committee.

Commodity price risk

The profitability of the Companys mining operations will be
significantly affected by changes in the market price for gold. Gold prices
fluctuate on a daily basis and are affected by numerous factors beyond the
Companys control. The supply and demand for gold, the level of interest rates,
the rate of inflation, investment decisions by large holders of gold, including
governmental reserves, and the stability of exchange rates can all cause
significant fluctuations in gold prices. Such external economic factors are in
turn influenced by changes in international investment patterns and monetary
systems, and political developments. From time to time, the Company will enter
into zero cost collars or other financial instruments to manage short term
commodity price fluctuations. At December 31, 2013 and 2012, the Company did not
have any commodity-related financial instruments outstanding.

Market price risk

The Company is exposed to fluctuations in the fair value of
investments made in equity securities and warrants. A 10% increase or reduction
in each companys share price at December 31, 2013 would have increased or
reduced other comprehensive (loss) / income by $1,555 and net (loss) / earnings
by $nil (December 31, 2012 - $6 and $5).

As discussed above, the fair value of the option component of
the convertible senior notes is also affected by fluctuations in the Companys
share price.

Interest rate risk

The Company is exposed to interest rate risk on its variable
rate debt. The Company has not entered into any agreements to hedge against
unfavourable changes in interest rates. If interest rates had been 0.5% higher
during the year ended December 31, 2013, net (loss) / earnings would have
decreased by $44 (December 31, 2012 - $684). This analysis assumes that other
variables remain constant (a 50 basis points decrease in interest rates would
have had the equal but opposite effect) and that none of the additional interest
is capitalized to capital projects. At December 31, 2013, the Company had no
variable rate debt outstanding.

Interest payable on the Companys convertible senior notes is
fixed at a rate of 3.50% and interest payable on the Companys equipment
financing arrangements is fixed at rates between 2.71% and 5.77% .

Foreign currency exchange rate risk

40

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Metal sales revenues for the Company are denominated in US
dollars. During 2012, the Company received sales proceeds in Australian dollars
for the Companys Australian operations, prior to their disposition. The Company
is primarily exposed to currency fluctuations relative to the US dollar on
expenditures that are denominated in Canadian dollars and Mexican pesos, but was
also exposed to currency fluctuations on expenditures denominated in Australian
dollars for the periods prior to the disposition of the Australian operations in
2012. These potential currency fluctuations could have a significant impact on
production costs and thereby, the profitability of the Company. The Company is
also exposed to the impact of currency fluctuations on its monetary assets and
liabilities.

At December 31, 2013, the Companys balance sheet exposure to
foreign currency exchange rate risk in Canadian dollars (CAD) and Mexican
pesos (MXN) was as follows:

|                                         |   | CAD      |   |   | MXN      |  
|---------------------------------------- | - | -------- | - | - | -------- | -
|Cash and cash equivalents                | $ | 23,118   |   | $ | 24,932   |  
|Restricted cash                          |   | 2,345    |   |   | -        |  
|Receivables                              |   | 18,954   |   |   | 101,094  |  
|Current income tax receivable            |   | 25,899   |   |   | 46,977   |  
|Investments                              |   | 16,540   |   |   | -        |  
|Other long-term assets                   |   | 72,328   |   |   | -        |  
|Payables and accrued liabilities         |   | (72,787  | ) |   | (34,063  | )
|Dividend payable                         |   | (2,236   | ) |   | -        |  
|Current income tax liability             |   | (3,351   | ) |   | (5,549   | )
|Debt and equipment financing obligations |   | (13,519  | ) |   | -        |  
|Provisions                               |   | (17,266  | ) |   | (754     | )
|Deferred income tax liability            |   | (242,720 | ) |   | (772,525 | )
|Net balance sheet exposure               | $ | (192,695 | ) | $ | (639,888 | )

At December 31, 2012, the Companys balance sheet exposure to
foreign currency exchange rate risk in Canadian dollars (CAD), Mexican pesos
(MXN) was as follows:

|                                         |   | CAD      |   |   | MXN      |  
|---------------------------------------- | - | -------- | - | - | -------- | -
|Cash and cash equivalents                | $ | 25,198   |   | $ | 18,387   |  
|Restricted cash                          |   | 2,345    |   |   | -        |  
|Receivables                              |   | 15,218   |   |   | 52,231   |  
|Current income tax receivable            |   | 23,863   |   |   | 90,671   |  
|Investments                              |   | 98       |   |   | -        |  
|Other long-term assets                   |   | 70,418   |   |   | -        |  
|Payables and accrued liabilities         |   | (49,134  | ) |   | (38,205  | )
|Current income tax liability             |   | (3,861   | ) |   | (22,925  | )
|Debt and equipment financing obligations |   | (18,531  | ) |   | -        |  
|Other liabilities                        |   | -        |   |   | (35,653  | )
|Provisions                               |   | (15,884  | ) |   | -        |  
|Deferred income tax liability            |   | (221,224 | ) |   | (852,311 | )
|Net balance sheet exposure               | $ | (171,494 | ) | $ | (787,805 | )

A 10% strengthening of these currencies against the US dollar
at each balance sheet date would have impacted net losses by the amounts shown
below. This analysis assumes that other variables, in particular interest rates,
remain constant.

|                                |   | December 31 |   |   | December 31 |  
|------------------------------- | - | ----------- | - | - | ----------- | -
|                                |   | 2013        |   |   | 2012        |  
|Translation of net CAD exposure | $ | (18,117     | ) | $ | (15,670     | )
|Translation of net MXN exposure |   | (4,885      | ) |   | (5,524      | )

During 2013, the Company held forward contracts to hedge
against the risk of an increase in the value of the Mexican peso versus the US
dollar. During the year ended December 31, 2013, a gain of $112 was recognized
in net earnings on settlement of these forward contracts. As at December 31, 2013,
the Company had no foreign exchange derivatives outstanding.

41

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Outstanding US dollar to Mexican peso contracts at December 31,
2012 had a negative fair value of $1,348, which was included in the current
portion of derivative liabilities on the Consolidated Balance Sheets. During
2012, these currency hedges had been accounted for as cash flow hedges of
specified, peso-denominated costs at the Ocampo mine. However, hedge accounting
was discontinued at September 30, 2012 due to the forecasted transactions no
longer being highly probable as a result of the potential disposition of the
mine. Subsequent to discontinuation of hedge accounting, all changes in the fair
value of these contracts, along with any realized gains or losses on settlement,
were recognized in net earnings. Prior to September 30, 2012, these amounts had
all been recognized in other comprehensive income. Upon the discontinuation of
hedge accounting, these amounts were reclassified from other comprehensive
income to net earnings. This resulted in the recognition of a loss on
discontinuance of hedge accounting of $1,882 included in other income on the
Consolidated Statements of Operations for the year ended December 31, 2012.

During the three months ended December 31, 2012, a gain of $218
was recognized in net earnings relating to these forward contracts. Three
forward contracts settled during the nine months ended September 30, 2012, prior
to the discontinuation of hedge accounting, resulting in a net loss of $2,297.
The recognition of this hedging loss resulted in a $747 increase in production
costs, a $529 increase in inventory, a $149 increase in general and
administrative costs, and an $872 increase in mining interests.

Credit risk

Credit risk relates to receivables and other contracts, and
arises from the possibility that any counterparty to an instrument fails to
perform. For cash and cash equivalents, restricted cash, and receivables, the
Companys credit risk is limited to the carrying amount on the balance sheet.
The Company manages credit risk by transacting with highly-rated counterparties
and establishing a limit on contingent exposure for each counterparty based on
the counterpartys credit rating. Exposure on receivables is limited as the
Company sells its products to a small number of organizations, on which the
historical level of defaults is minimal.

Liquidity risk

Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset. The Company manages this
risk through regular monitoring of its cash flow requirements to support ongoing
operations and expansionary plans. The Company ensures that there are sufficient
committed loan facilities to meet its business requirements, taking into account
anticipated cash flows from operations and holdings of cash and cash
equivalents.

The contractual maturities of financial liabilities are
outlined in note 15.

|    |                   
|--- | ------------------
|27. | Capital management

The primary objective of managing the Companys capital is to
ensure that there is sufficient available capital to support the long-term
growth strategy of the Company in a way that optimizes the cost of capital and
shareholder returns, and ensures that the Company remains in a sound financial
position. There were no changes to the Companys overall capital management
approach during the current year.

The capital of the Company consists of items included in
shareholders equity and debt and equipment financing obligations. The Company
manages and makes adjustments to the capital structure as opportunities arise in
the market place, as and when borrowings mature, or when funding is required.
This may take the form of raising equity or debt, or may result in the Company
repurchasing equity or debt.

42

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

The Company monitors capital through the gross debt to total
equity ratio, and targets a ratio of less than 25%. As at December 31, 2013, the
ratio of gross debt to total equity was 14.07% (December 31, 2012 - 7.52%),
calculated as follows:

|                                                            |   | December 31 |  |   | December 31 | 
|----------------------------------------------------------- | - | ----------- |  | - | ----------- | 
|                                                            |   | 2013        |  |   | 2012        | 
|Current portion of debt and equipment financing obligations | $ | 7,355       |  | $ | 5,038       | 
|Debt and equipment financing obligations                    |   | 244,194     |  |   | 167,497     | 
|Gross debt                                                  |   | 251,549     |  |   | 172,535     | 
|Shareholders' equity                                        | $ | 1,787,882   |  | $ | 2,295,837   | 
|Gross debt / Shareholders' equity                           |   | 14.07%      |  |   | 7.52%       | 
|                                                            |   |             |  |   |             | 

|28. | Segmented information
|--- | ---------------------

The Companys reportable segments are consistent with the
Companys operating segments and consist of the geographical regions in which
the Company operates. In determining the Companys segment structure, the
Company considered the basis on which management, including the chief operating
decision maker, reviews the financial and operational performance of the
Company, and whether any of the Companys mining operations share similar
economic, operational and regulatory characteristics. The Company has two
reportable segments, as follows:

|− | Mexico: El Chanate mine    
|- | ---------------------------
|− | Canada: Young-Davidson mine

Corporate and other consists of the Companys corporate offices
and exploration properties. Discontinued operations consist of the Fosterville
mine and Stawell mine in Australia, as well as the Ocampo mine, the El Cubo mine
and Guadalupe y Calvo exploration property in Mexico. Refer to note 29 for
further information on the Companys discontinued operations.

The following are the operating results by reportable segment:

|                                                                                          |   | Year ended December 31, 2013 |  
|----------------------------------------------------------------------------------------- | - | ---------------------------- | -
|                                                                                          |   |                              |  
|                                                                                          |   | Mexico                       |  
|                                                                                          |   |                              |  
|Revenue from mining operations                                                            | $ | 103,192                      |  
|                                                                                          |   |                              |  
|Production costs                                                                          |   | 71,625                       |  
|Refining costs                                                                            |   | 367                          |  
|Amortization and depletion                                                                |   | 17,836                       |  
|Reclamation, care and maintenance costs                                                   |   | -                            |  
|General and administrative                                                                |   | 1,371                        |  
|Exploration and business development                                                      |   | -                            |  
|Impairment charges                                                                        |   | 155,625                      |  
|                                                                                          |   | 246,824                      |  
|Loss from operations                                                                      | $ | (143,632                     | )
|Expenditures on property, plant and equipment, mining
      interests & intangible assets | $ | 44,088                       |  

43

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Year ended December 31, 2012Corporate
    
    
    
    
    
    DiscontinuedMexico
    
    
    Canada
    
    
    and other
    
    
    Total
    
    
    operationsRevenue from mining operations
    $
    118,130
    
    $
    45,492
    
    $
    -
    
    $
    163,622
    
    $
    293,745Production costs
    
    40,298
    
    
    21,301
    
    
    -
    
    
    61,599
    
    
    155,920Refining costs
    
    417
    
    
    49
    
    
    -
    
    
    466
    
    
    1,517Amortization and depletion
    
    10,431
    
    
    7,805
    
    
    487
    
    
    18,723
    
    
    43,625Reclamation, care and maintenance costs
    
    -
    
    
    -
    
    
    14,066
    
    
    14,066
    
    
    -General and administrative
    
    680
    
    
    228
    
    
    34,822
    
    
    35,730
    
    
    12,595Exploration and business development
    
    -
    
    
    -
    
    
    1,385
    
    
    1,385
    
    
    911Impairment charges
    
    127,000
    
    
    -
    
    
    1,537
    
    
    128,537
    
    
    22,857178,826
    
    
    29,383
    
    
    52,297
    
    
    260,506
    
    
    237,425(Loss) / earnings from operations
    $
    (60,696
    )
    $
    16,109
    
    $
    (52,297
    )
    $
    (96,884
    )
    $
    56,320Expenditures on property, plant and equipment, mining
      interests & intangible assets
    $
    44,681
    
    $
    309,232
    
    $
    7,587
    
    $
    361,500
    
    $
    143,520


The following are total assets by reportable segment:

|                                  |   |         |  |   |           |  |   | Corporate |  |   |           | 
|--------------------------------- | - | ------- |  | - | --------- |  | - | --------- |  | - | --------- | 
|                                  |   | Mexico  |  |   | Canada    |  |   | and other |  |   | Total     | 
|Total assets at December 31, 2013 | $ | 265,028 |  | $ | 1,822,533 |  | $ | 374,847   |  | $ | 2,462,408 | 
|Total assets at December 31, 2012 | $ | 396,733 |  | $ | 1,669,632 |  | $ | 828,876   |  | $ | 2,895,241 | 

Total non-current assets, excluding long-term financial assets,
by geographical region, are as follows:

|       |   | December 31 |  |   | December 31 | 
|------ | - | ----------- |  | - | ----------- | 
|       |   | 2013        |  |   | 2012        | 
|Mexico | $ | 217,294     |  | $ | 345,927     | 
|Canada |   | 1,865,636   |  |   | 1,718,985   | 
|       | $ | 2,082,930   |  | $ | 2,064,912   | 

Goodwill by reportable segment is as follows:

|       |   | December 31 |  |   | December 31 | 
|------ | - | ----------- |  | - | ----------- | 
|       |   | 2013        |  |   | 2012        | 
|Mexico | $ | -           |  | $ | 106,521     | 
|Canada |   | 241,693     |  |   | 241,693     | 
|       | $ | 241,693     |  | $ | 348,214     | 

Goodwill recognized in the Mexico reportable segment relates to
the El Chanate CGU. Goodwill recognized in the Canada reportable segment relates
to the Young-Davidson CGU.

The Companys revenue is derived from the sale of gold and
silver in Mexico and Canada, as disclosed above. Prior to the disposition of the
Australian operations, the Ocampo mine, and the El Cubo mine, the Company sold
all gold and silver produced to four customers. The Company now sells all gold
and silver produced to two customers. The Company is not economically dependent
on these customers for the sale of its product because gold and silver can be
sold through numerous commodity market traders worldwide.

---

44

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                        
|--- | -----------------------
|29. | Discontinued operations
|    |                        
|(a) | Australian operations  

On May 4, 2012, the Company completed the sale of the
Fosterville and Stawell mines and their related subsidiaries (collectively, the
Australian Operations) to Crocodile Gold. The consideration received was
comprised of CAD $55 million in cash, 20 million Crocodile Gold common shares,
and additional payments based on the future life-of-mine free cash flows, as
defined in the agreement, from the Fosterville and Stawell mines (the retained
interest royalty). Per the agreement, once the cumulative free cash flow
generated by the mines subsequent to closing has reached CAD $60 million, the
Company will receive 100% of the next CAD $30 million of cumulative free cash
flow in excess of CAD $60 million, and 50% of the next CAD $30 million of
cumulative free cash flow in excess of CAD $90 million. In addition, the Company
will receive 20% of any cumulative free cash flow in excess of CAD $120 million.
The results of the Australian Operations up to the date of disposal have been
presented as discontinued operations within these consolidated financial
statements.

During the year ended December 31, 2012, the Company recognized
an impairment charge of $22,857 that resulted from the carrying value of the
Australian net assets exceeding the estimated fair value of the consideration
less costs to sell, measured at March 31, 2012.

The Company also recognized a loss on disposal of $1,736 that
resulted from the carrying value of the Australian net assets exceeding the
estimated fair value of consideration received in the transaction, measured at
May 4, 2012. The impairment charge and the loss on disposal have been included
in net earnings from discontinued operations in the Consolidated Statements of
Operations for the year ended December 31, 2012.

The carrying value of major classes of assets and liabilities
as well as the fair value of consideration as at the date of disposal were as
follows:

|Cash and cash equivalents                                   | $ | 10,487  |  
|----------------------------------------------------------- | - | ------- | -
|Receivables                                                 |   | 2,174   |  
|Inventories                                                 |   | 20,645  |  
|Prepaids and deposits                                       |   | 1,092   |  
|Other long-term assets                                      |   | 11,845  |  
|Property, plant and equipment & mining interests            |   | 106,986 |  
|Trade payables and accrued liabilities                      |   | (18,449 | )
|Current portion of debt and equipment financing obligations |   | (5,608  | )
|Current portion of provisions                               |   | (11,075 | )
|Debt and equipment financing obligations                    |   | (2,386  | )
|Provisions                                                  |   | (15,087 | )
|Net carrying value                                          | $ | 100,624 |  
|                                                            |   |         |  
|Cash                                                        | $ | 55,242  |  
|Crocodile Gold shares                                       |   | 9,642   |  
|Retained interest royalty                                   |   | 34,004  |  
|Total fair value of consideration received                  | $ | 98,888  |  

The Company determined the fair value of the retained interest
royalty using a valuation model, which was based on the combined free cash flow
expected to be generated by the Fosterville and Stawell mines. This model uses a
derivative valuation approach that relies on the gold forward curve, the US
dollar to Australian dollar exchange rate forward curve, and the Canadian dollar
to Australian dollar exchange rate forward curve to estimate cash flows. The key
assumptions used in determining the fair value of these payments were future
production, gold prices, operating costs, capital expenditures and the discount
rate. The Company forecasted future production, operating costs and capital
expenditures based on the expected life-of-mine plans developed from technical
reports and historical cost experience. In determining the fair value of the
retained interest royalty, the Company assumed an initial spot gold price of
$1,642 per ounce, an average realized life of mine gold price of $1,679 per
ounce, and a credit-adjusted discount rate of 12.5% . The retained interest
royalty is included in intangible assets on the Consolidated Balance Sheets and
will be amortized into earnings as the Company becomes entitled to free cash
flows.

45

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Changes in the assumptions used in determining the fair value
of the retained interest royalty at May 4, 2012 would have resulted in an
increase / (decrease) in net earnings from discontinued operations for the year
ended December 31, 2012:

|5% increase in gold prices     | $ | 5,911  |  
|------------------------------ | - | ------ | -
|5% decrease in gold prices     | $ | (5,761 | )
|1% increase in discount rate   | $ | (776   | )
|1% decrease in discount rate   | $ | 798    |  
|5% increase in operating costs | $ | (3,682 | )
|5% decrease in operating costs | $ | 3,879  |  

|(b) | El Cubo mine and Guadalupe y Calvo exploration
      property
|--- | -------------------------------------------------------------

On July 13, 2012, the Company completed the sale of the El Cubo
mine and Guadalupe y Calvo exploration property (El Cubo and Guadalupe y
Calvo) to Endeavour, through the acquisition by Endeavour of all of the shares
of Mexgold Resources Inc., a wholly owned subsidiary of the Company with
ownership of these assets. The consideration was comprised of $100 million in
cash, 11,037,528 Endeavour common shares, $30 million in contingent payments to
be paid upon the gold price exceeding specified levels and $20 million in
contingent payments to be paid upon the occurrence of certain mine operating
performance conditions during the three years following the closing date of the
transaction.

The results of El Cubo and Guadalupe y Calvo up to the date of
disposal have been presented as discontinued operations within these
consolidated financial statements. The El Cubo mine had previously been reported
in the Mexico reportable segment and the Guadalupe y Calvo exploration property
had previously been reported in Corporate and Other.

During the year ended December 31, 2012, the Company recognized
a gain on disposal of $21,785 that resulted from the estimated fair value of the
consideration received in the transaction exceeding the carrying value of the El
Cubo and Guadalupe y Calvo net assets, measured at July 13, 2012. The gain on
disposal has been included in net earnings from discontinued operations in the
Consolidated Statements of Operations for the year ended December 31, 2012.

The carrying value of major classes of assets and liabilities
as well as the fair value of consideration as at the date of disposal were as
follows:

|Cash and cash equivalents                        | $ | 843     |  
|------------------------------------------------ | - | ------- | -
|Receivables                                      |   | 8,133   |  
|Inventories                                      |   | 6,853   |  
|Property, plant and equipment & mining interests |   | 223,573 |  
|Other assets                                     |   | 230     |  
|Trade payables and accrued liabilities           |   | (7,513  | )
|Provisions                                       |   | (2,239  | )
|Deferred income tax liability                    |   | (51,719 | )
|Net carrying value                               | $ | 178,161 |  
|                                                 |   |         |  
|Cash                                             | $ | 100,000 |  
|Endeavour shares                                 |   | 87,746  |  
|Purchase price adjustment receivable             |   | 6,373   |  
|Contingent consideration                         |   | 5,827   |  
|Total fair value of consideration received       | $ | 199,946 |  

The initial contingent consideration asset fair value of $5,827
relates to the $30 million in contingent payments to be paid upon the gold price
exceeding specified levels. This asset has been accounted for as a derivative,
and has been included in other long-term assets on the Consolidated Balance
Sheets. The fair value of the $20 million in contingent payments based on the
occurrence of certain mine operating performance conditions was determined to be
$nil at the disposition date as the Company determined that it was not likely
that these conditions would be met. Refer to note 26 for further information on
the key assumptions and valuation methodology used in determining the fair value
of the contingent consideration asset. The model used to calculate the fair
value of the contingent consideration asset at July 13, 2012 used an initial
gold price of $1,588 per ounce.

46

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

Changes in the assumptions used in determining the fair value
of the contingent consideration at July 13, 2012 would have the resulted in an
increase / (decrease) in net earnings from discontinued operations for the year
ended December 31, 2012:

|5% increase in gold prices | $ | 2,129  |  
|-------------------------- | - | ------ | -
|5% decrease in gold prices | $ | (1,625 | )

|(c) | Ocampo mine
|--- | -----------

On December 14, 2012, the Company completed the sale of the
Ocampo mine and the Venus and Los Jarros exploration properties (collectively,
the Ocampo mine) to Minera Frisco S.A.B. de C.V. (Minera Frisco), through
the disposition of all of the shares of AuRicoGold de Mexico S.A. de C.V., a
wholly owned subsidiary of the Company with ownership of these assets. As part
of the transaction, Minera Frisco also acquired a 50% interest in the Orion
development project, located in Nayarit, Mexico (refer to note 9 for further
information). The consideration was comprised of $750 million in cash, including
$27 million for Minera Friscos 50% interest in the Orion development
project.

The results of the Ocampo mine up to the date of disposal have
been presented as discontinued operations within these consolidated financial
statements. The Ocampo mine had previously been reported in the Mexico
reportable segment.

During 2012, the Company recognized total net realizable value
adjustments of $16,070. These adjustments were required as the carrying value of
Ocampo ore in process heap leach inventory exceeded its net realizable
value.

During the year ended December 31, 2012 the Company recognized
a gain on disposal of $150,793 that resulted from the fair value of the
consideration received in the transaction exceeding the carrying value of the
net assets of the Ocampo mine, measured at December 14, 2012. The Company
recognized tax expense on disposal of $72,114. Of this amount, $39,168 was
recognized during the three months ended September 30, 2012 because, at that
time, it became probable that the temporary differences associated with the
Companys investment in the Ocampo mine would reverse in the foreseeable future.
The remaining income tax expense of $32,946 was recognized during the three
months ended December 31, 2012. The net gain on disposal has been included in
net earnings from discontinued operations in the Consolidated Statements of
Operations for the year ended December 31, 2012.

The carrying value of major classes of assets and liabilities
as well as the fair value of consideration as at the date of disposal were as
follows:

|Cash and cash equivalents                                   | $ | 4,485   |  
|----------------------------------------------------------- | - | ------- | -
|Receivables                                                 |   | 29,368  |  
|Inventories                                                 |   | 95,042  |  
|Prepaids and deposits                                       |   | 1,660   |  
|Long-term inventories                                       |   | 10,691  |  
|Other long-term assets                                      |   | 1,104   |  
|Property, plant and equipment & mining interests            |   | 540,008 |  
|Intangible assets                                           |   | 2,718   |  
|Trade payables and accrued liabilities                      |   | (19,427 | )
|Current portion of debt and equipment financing obligations |   | (1,186  | )
|Provisions                                                  |   | (5,828  | )
|Deferred income tax liability                               |   | (86,428 | )
|Net carrying value                                          | $ | 572,207 |  
|                                                            |   |         |  
|Total fair value of cash consideration received             | $ | 723,000 |  

47

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|    |                                       
|--- | --------------------------------------
|(d) | Results from discontinued
  operations

During the year ended December 31, 2012, the results of these
discontinued operations are presented as net earnings from discontinued
operations in the Consolidated Statements of Operations and as a net decrease in
cash and cash equivalents from discontinued operations in the Consolidated
Statements of Cash Flows.

|                                                                                                           |   | Year Ended  |  
|---------------------------------------------------------------------------------------------------------- | - | ----------- | -
|                                                                                                           |   | December 31 |  
|Net (loss) / earnings from discontinued operations:                                                        |   | 2012        |  
|Australian operations                                                                                      |   |             |  
|Revenue from mining operations                                                                             | $ | 87,267      |  
|Cost of sales                                                                                              |   | (57,288     | )
|General and administrative                                                                                 |   | (495        | )
|Exploration and business development                                                                       |   | (911        | )
|Impairment charge                                                                                          |   | (22,857     | )
|Earnings from operations                                                                                   |   | 5,716       |  
|Foreign exchange loss                                                                                      |   | (40         | )
|Other income                                                                                               |   | 92          |  
|Earnings before income taxes prior to
      disposition                                                    |   | 5,768       |  
|Income tax expense                                                                                         |   | -           |  
|Net earnings prior to disposition                                                                          |   | 5,768       |  
|Loss on disposal                                                                                           |   | (1,736      | )
|Disposition-related costs                                                                                  |   | (1,034      | )
|Income tax recovery on disposal                                                                            |   | 366         |  
|Reclassification of foreign exchange loss on
      translation from other comprehensive income to earnings |   | (2,173      | )
|Net earnings                                                                                               | $ | 1,191       |  
|El Cubo and Guadalupe y Calvo                                                                              |   |             |  
|Revenue from mining operations                                                                             | $ | 29,613      |  
|Cost of sales                                                                                              |   | (23,741     | )
|General and administrative                                                                                 |   | (748        | )
|Earnings from operations                                                                                   |   | 5,124       |  
|Foreign exchange loss                                                                                      |   | (3,403      | )
|Other loss                                                                                                 |   | (65         | )
|Earnings before income taxes prior to
      disposition                                                    |   | 1,656       |  
|Income tax expense                                                                                         |   | (25         | )
|Net earnings prior to disposition                                                                          |   | 1,631       |  
|Gain on disposal                                                                                           |   | 21,785      |  
|Disposition-related costs                                                                                  |   | (1,928      | )
|Income tax expense on disposal                                                                             |   | (2,617      | )
|Net earnings                                                                                               | $ | 18,871      |  

48

---

|                                                                     
|---------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                       
|(in thousands of
      United States dollars unless otherwise stated)

|                                                        |   |             |  
|------------------------------------------------------- | - | ----------- | -
|                                                        |   | Year Ended  |  
|                                                        |   | December 31 |  
|                                                        |   | 2012        |  
|Ocampo mine                                             |   |             |  
|Revenue from mining operations                          | $ | 176,865     |  
|Cost of sales                                           |   | (120,033    | )
|General and administrative                              |   | (11,352     | )
|Earnings from operations                                |   | 45,480      |  
|Foreign exchange loss                                   |   | (5,535      | )
|Other income                                            |   | 1,436       |  
|Earnings before income taxes prior to
      disposition |   | 41,381      |  
|Income tax recovery                                     |   | 91          |  
|Net earnings                                            | $ | 41,472      |  
|Gain on disposal                                        |   | 150,793     |  
|Disposition-related costs                               |   | (9,161      | )
|Income tax expense on disposal                          |   | (72,114     | )
|Net earnings prior to disposition                       | $ | 110,990     |  
|                                                        |   |             |  
|Net earnings from discontinued operations               | $ | 131,052     |  
|                                                        |   |             |  
|Net decrease in cash from discontinued operations:      |   |             |  
|Australian operations                                   |   |             |  
|Operating cash flows                                    | $ | 25,958      |  
|Investing cash flows                                    |   | (25,744     | )
|Financing cash flows                                    |   | (2,103      | )
|Impact of foreign exchange on cash                      |   | 31          |  
|Net decrease in cash                                    | $ | (1,858      | )
|                                                        |   |             |  
|El Cubo and Guadalupe y Calvo                           |   |             |  
|Operating cash flows                                    | $ | 4,008       |  
|Investing cash flows                                    |   | (13,471     | )
|Financing cash flows                                    |   | -           |  
|Impact of foreign exchange on cash                      |   | (21         | )
|Net decrease in cash                                    | $ | (9,484      | )
|                                                        |   |             |  
|Ocampo mine                                             |   |             |  
|Operating cash flows                                    | $ | 49,105      |  
|Investing cash flows                                    |   | (104,305    | )
|Financing cash flows                                    |   | (3,056      | )
|Impact of foreign exchange on cash                      |   | 806         |  
|Net decrease in cash                                    | $ | (57,450     | )
|                                                        |   |             |  
|Net decrease in cash from discontinued operations       | $ | (68,792     | )

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