Platinum
Group Metals Ltd.


(Exploration
Stage Company)


Supplementary
Information and MD&A


For the
year ended August 31, 2008





Dated:
November 29, 2008














A
copy of this report will be provided to any shareholder who requests
it.








Management
Discussion and Analysis




1.           DESCRIPTION
OF BUSINESS




Platinum
Group Metals Ltd. (the “Company” or “Platinum Group”) is a British Columbia
corporation incorporated on February 18, 2002 by an order of the Supreme Court
of British Columbia approving an amalgamation between Platinum Group Metals Ltd.
and New Millennium Metals Corporation. The Company is an exploration and
development company conducting work primarily on mineral properties it has
staked or acquired by way of option agreement in Ontario, Canada and the
Republic of South Africa. The Company has completed a definitive Feasibility
Study with respect to its Western Bushveld Joint Venture (“WBJV”) and included
in this Study dated July 7, 2008 is the declaration of reserves at that time.
The Company defers all acquisition, exploration and development costs related to
mineral properties. The recoverability of these amounts is dependent upon the
existence of economically recoverable reserves, the ability of the Company to
obtain the necessary financing to complete the development of the property, and
any future profitable production; or alternatively upon the Company’s ability to
dispose of its interests on an advantageous basis.





This
management discussion and analysis (“MD&A”) of the Company focuses on the
financial condition and results of operations of the Company for the years ended
August 31, 2008 and 2007. It is prepared as of November 21, 2008 and should
be read in conjunction with the audited consolidated financial statements of the
Company for the year ended August 31, 2008 together with the notes
thereto.







All
references herein to “dollars” or “$” refer to Canadian dollars unless otherwise
stated.





2.        DISCUSSION
OF OPERATIONS AND FINANCIAL CONDITIONS




a)
Results of Operations




Any
reference to “year” refers to the twelve month period ended August 31,
2008.





At August
31, 2008 the Company had cash, cash equivalents and short term investments on
hand of $1,779,871 as compared to $14,699,067 on August 31, 2007. Of this amount
approximately $Nil (August 31, 2007 – $3,613,919) relates to amounts advanced
from the partners of the WBJV to fund their share of the remaining portion of
approved work programs. The Company was owed $720,958 by the WBJV partners for
WBJV expenditures at August 31, 2008 and received this amount subsequent to year
end. Accounts payable at period end totaled $2,875,761 (August 31, 2007 -
$2,304,845) and of this ($1,872,000) was payable against Surface rights. $54,000
was payable against technical and exploration work completed for the WBJV. The
Company also held marketable securities at year end with a fair value of
$1,118,000 (August 31, 2007 – cost of $210,000).





During
the year the Company incurred a net loss before taxes of $5,512,538 (2007 -
$6,758,123). Before a non-cash charge for stock based compensation of $580,128
(2007 - $1,487,661) and mineral property costs written off of $Nil (2007 -
$1,323,222), general and administrative expenses totaled $5,175,749 (2007 -
$4,380,667). Interest earned amounted to $243,339 (2007 - $434,949). The
$795,082 increase in administrative expenses over the comparative year is
explained for the most part by a $556,480 increase in professional fees from
$416,945 in 2007 to $973,425 in 2008, an increase in travel expenses of $202,174
from $656,965 in 2007 to $859,139 in 2008, and an increase in management and
consulting fees by $153,254 from $690,504 in 2007 to $843,758 in 2008. These
costs increased as a result of the Company’s efforts during the year to complete
(and review for its own account) a Feasibility Study on Project 1 of the WBJV
and the Company’s use of strategic advisors and legal assistance during
negotiations with Anglo Platinum and Wesizwe Platinum. These costs were offset
by a $88,257 decrease in shareholder relations from $216,597 in 2007 to $128,340
in 2008, and by a $54,536 decrease in salaries and benefits from $1,400,258 in
2007 to $1,345,722 in 2008.





Apart
from interest of $243,339 (2007 - $434,949) earned on cash deposits during the
year the Company had no significant revenues to report. In October 2008 the
Company closed a non-brokered private placement for net cash proceeds of
$7,425,229.





During
the year Wesizwe Platinum Ltd. completed the acquisition of 100% of the
Company’s Black Economic Empowerment partner Africa Wide Mining and then repaid
the Company $18,750 for the cost of administrative amounts due and $211,840 for
past costs due for the Tweespalk property and also paid outstanding amounts due
to the WBJV of $2,991,745.





Total
global exploration and engineering expenditures for the Company’s account,
including the Company’s share of WBJV expenditures during the year totaled
$6,733,094 (2007 - $4,531,533). Of this amount $6,132,281 was for the WBJV (2007
- $3,775,890) and $600,813 was for other exploration (2007 - $755,643). After
meeting its earn in requirements in April 2006, Platinum Group is currently
responsible only for its 37% pro-rata share of expenditures for the WBJV. Total
WBJV expenditures during the year by all WBJV partners amounted to $17,359,357
(2007: $10,497,472).





Work
programs approved by the partners of the WBJV since 2006 have been completed at
the time of writing. The partners shared the cost of work programs pro-rata to
their interest in the WBJV. Rand 201 million (approximately $28.7 million) was
budgeted for work and funded by the partners of the WBJV since 2006. The work
was completed on budget including scope changes approved by the partners during
the year. During April 2008 the participants of the WBJV also approved and
funded a budget for the acquisition of long lead capital items in the amount of
R 21.086 million (approximately $2.74 million). Activities for the WBJV have
included research and data review, prospecting, mapping, detailed engineering,
drilling of project areas, geophysical studies, geotechnical work, metallurgical
studies and mine plan and scheduling work.





On
January 10, 2007, the Company completed a positive pre-feasibility study for the
Project 1 area of the WBJV titled “Technical Report – Western Bushveld Joint
Venture, Project 1 (Elandsfontein and Frischgewaagd)” and filed the report on
SEDAR January 30, 2007. During 2007 the WBJV then commissioned an
independent Feasibility Study for the Project 1 area of the WBJV, which was
completed and delivered to the partners of the WBJV on June 30, 2008. Details of
the Feasibility Study were published by the Company in a news release dated July
7, 2008.





The
Feasibility Study recommends a series of three simultaneous declines accessing
the Project 1 deposit with a mining rate of 140,000 tonnes per month. First ore
is reached by development 13 months from the commencement of underground work.
Mining is only scheduled on the reserves. There are a further 1.26 million
ounces of Inferred Resources in the Project 1 area which may represent some
additional production potential. The lower grade UG2 resources also provide some
future opportunities. The mining and development plan includes conventional hand
held drilling utilizing electrical drills and scraper winch cleaning similar to
the successful conventional mining at the adjacent producing Bafokeng Rasimone
Platinum Mine. Declines and primary access to the deposit is designed for
development with mechanized equipment. Ore is initially to be hauled out of the
mine with mechanized equipment and assisted then by conveyor from year 4 of mine
life to end of mine life.





The
Merensky Reef is planned to be mined at widths between 93cm and 176cm at an
average of 115cm and the UG2 Reef is planned to be mined at widths between 105cm
and 205cm at an average of 153cm.





At the
recommended mining rate and modifying factors the mine plan generates
approximately 235,000 – 271,000 platinum, palladium, rhodium and gold, (“4E”)
ounces in concentrate per year, of which approximately 160,000 ounces are
platinum at full steady state ounce production for 9 years from the Merensky
Reef horizon with a 22 year mine life.





The
results of the Feasibility Study show a 20.08% Internal Rate of Return “IRR”
(pre-tax) Base Case, using 3 year trailing metal prices to June 2008, calculated
on the monthly averages including US$1,295 per ounce for platinum. The
Feasibility Study model does not include escalation due to inflation of costs or
metal prices. At November 4, 2008 the three year trailing metal prices were
above those used in the study. At November 4, 2008 the spot prices of all metals
included in the basket price calculation were below the three year trailing
metal prices as at June 2008. Platinum was quoted at US$843 on November 4,
2008.





Average
life-of-mine cash operating costs to produce concentrate were estimated at R451
per tonne (US$56.38 at July 7, 2008) of ore or R3,504 (US$438 at July 7, 2008)
per 4E ounce on a life of mine basis. The Merensky Reef layer represents the
first 15 years of production and the basket price per 4E ounce is modeled at
US$1,168 (3 year trailing prices). The UG2 layer represents the balance of the
production. The model includes a subsequent average 15.16% discount from the
metal price to estimate the smelter pay discount. Operating margin life of mine
on three year trailing 4E (4 elements - platinum, palladium, rhodium and gold)
metal prices to June 2008 was approximately US$739 per ounce.





The
project has an estimated life of 22 years with 9 years at a steady state of
production of 235,000 to 271,000 ounces per year. The capital cost for the mine
and concentrator complex are estimated at R4.055 billion (US$422 million at
November 4, 2008) for peak funding and R5.474 billion (US$570 million at
November 4, 2008) for life of mine funding. The capital cost estimate includes
R506 million (US$53 million at November 4, 2008) for the capital costs for
self-generation of the electrical requirements of the project to the end of 2012
at full production levels. This includes the entire infrastructure for power
including diesel storage. If grid power becomes available it will significantly
reduce electricity costs. Eskom has indicated that an allocation of 2 MW should
be available for the construction phase of the project, and this has been
assumed in the Feasibility Study. A contingency of R467 million (US$49 million
at November 4, 2008) is included in the overall capital estimate.





Based on
the three year trailing average metals prices, current exchange rates and
probable lowering of input costs at the current time no change has been made to
the Feasibility Study information and reserves and resources. The agreement of
the WBJV calls for a “decision to mine” to be made within 90 days of the
Feasibility Study. However, due to events detailed below, this has been deferred
by mutual consent of the partners.





On
September 2, 2008 the Company announced in a news release its agreement to a
term sheet with Anglo Platinum and Wesizwe Platinum to consolidate and
rationalize the WBJV. Under the terms Platinum Group will control 74% of the
WBJV Projects 1 and 3 and Wesizwe will control 100% of Project 2 and 26% of
Projects 1 and 3. The term sheet is subject to regulatory and other approvals
and the completion of definitive agreements. In the transaction Anglo Platinum
will vend its 37% interest in the WBJV to Wesizwe for common shares representing
a 26.5% interest in Wesizwe. Platinum Group will concurrently acquire a 37%
interest in Projects 1 and 3 from Wesizwe in consideration of Platinum Group’s
interest in Project 2 and R408.6 million (approx. C $49 million at the time of
writing) in cash. The cash payment to Wesizwe is to deferred until six months
after closing the proposed transaction and will be held in escrow to be applied
towards its capital contribution for the Projects 1 and 3. Steps to the proposed
transaction are as follows:





1.
            Wesizwe
      will purchase Anglo Platinum’s 37% interest in the WBJV, comprised of 37%
      of Projects 1 and 3 and 18.5% of Project 2 (part of the Wesizwe
      Frischgewaagd-Ledig main project), for 211,850,125 Wesizwe common
      shares.





2.
            In
      a concurrent transaction Platinum Group will purchase the 37% interest in
      Projects 1 and 3 from Wesizwe for 785.5M Rand (approx. C $94 million at
      November 10, 2008), offset by the sale to Wesizwe of Platinum Group’s 18.5
      % of Project 2 for 376.9M Rand (approx. C $45 million at November 10,
      2008).





3.
            The
      balance, due by Platinum Group, of 408.6M Rand is to be paid into an
      escrow account within 6 months of the formal closing of this transaction.
      The escrow account will then be drawn down to satisfy Wesizwe’s
      obligations for the capital account of Projects 1 and 3. If the payment
      for the balance due is not made by Platinum Group then Wesizwe shall be
      entitled to claw back approximately 19% in the
  Projects.





The basis
of valuation for the negotiations was the 10% discount rate NPVs of the Projects
with platinum at US$1,199 per ounce for all projects and a Rand-to-Dollar
exchange rate set at 8. The project models included the Feasibility Study
results for Projects 1 and 2 and preliminary engineering on Project
3.





The
settlement of the “equalization payments” currently due to Anglo Platinum under
the terms of the WBJV are to be settled by Wesizwe in common shares and by
Platinum Group in cash by the later of the closing date of the transaction or
December 31, 2008. At present, equalization payments due are approximately US$18
million payable by Wesizwe and US$20 million payable by Platinum Group. If
Platinum Group does not pay Anglo Platinum by the due date, Anglo Platinum shall
elect to provide up to a 6 month extension with interest, Anglo Platinum shall
then elect to take Wesizwe shares for the amount due and the obligation of
Platinum Group will pass to Wesizwe. A total make up of approximately US$2.0M is
also payable by Platinum Group to Wesizwe for past exploration costs incurred on
Project 2.





The
parties have agreed to suspend the 90 day deadline for a Decision to Mine under
the terms of the WBJV until the transaction is completed or a condition
precedent is not able to be fulfilled. Anglo Platinum will hold a 60 day first
right of refusal on the sale of ore or concentrate over the original WBJV
mineral rights.





The
closing of the proposed transaction is pending the completion of definitive
agreements and certain conditions precedent, such as shareholder, regulatory and
governmental approvals. The deadline to enter into the definitive agreements has
been extended by the parties to December 6, 2008. At the time of writing the
definitive agreements are nearing completion and the fulfillment of all
conditions precedent is expected to then take several months beyond the
execution of the agreements.





Details
of the Company’s Revised Attributable Reserves and Resources in the proposed
transaction are shown below at Item 2d. “Exploration Programs and Expenditures”.
A technical report titled “WBJV Project 1, July 7, 2007 Effective Date –
Feasibility Study” was filed on SEDAR August 21, 2008.





The
Company also maintains two other projects in South Africa on the North Limb of
the Bushveld Complex. The Tweespalk and War Springs projects are currently the
subject of renewed consideration. During the year the Company conducted new soil
and geological surveys on the War Springs project. On March 17, 2008 the Company
published a revised and updated resource calculation for the War Springs
property based on drilling and exploration work conducted in the last three
years. (See Item 2d. “Exploration Programs and Expenditures” below). Further
work programs for the War Springs project in 2009 are currently being
considered.





During
the period the Company has conducted a new business generative program. Research
and implementation, including the staking of several new license areas on or
near to the Bushveld Complex, has cost approximately $576,552. The Company has
received the grant of several new prospecting permits as a result of this work
and several more are expected in the months ahead.





The
Company also conducted work on its Canadian projects during the period. A 1,125
metre drill program was completed on the Company’s Lac Des Iles projects in the
first quarter. A further small drilling program is planned for late 2008. The
Company maintains a large mineral rights position in the Lac des Iles area north
of Thunder Bay as a strategic holding against potential  increasing
prices for palladium and platinum. Encouraging exploration results for
palladium, platinum, nickel and copper continue to be returned and the Company
plans to invest further in this area in the future.





For more
information about the WBJV and the Company’s other mineral properties please
refer to Notes 5. and 6. of the Company’s August 31, 2008 audited financial
statements and below for further discussion regarding the WBJV.





Since
2005 the Company has seen its compliment of staff, consultants and casual
workers increase from approximately 20 to approximately 50 individuals in 2008.
Office space and support services requirements in Canada and South Africa have
also increased to accommodate these people. As the WBJV has matured there has
been a need for more administration and management oversight from Canada with a
corresponding increase in travel and communication expenses. At the same time
the general market for both skilled and unskilled personnel in Canada and South
Africa has seen increases in general compensation costs. The Company’s listing
on the American Stock Exchange in 2007 and the costs of compliance with
Sarbanes-Oxley legislation in the USA and Multilateral Instrument 52-109 in
Canada have resulted in increased professional fees in the year ended August 31,
2008. At the time of writing the global economic situation and capital markets
have become uncertain and the Company will review its ongoing plans, use of
outside professional staff, use of consultants and internal staffing
requirements on a regular basis.





The
Company still actively reviews many potential property acquisitions in the
normal course of business. The Company also makes efforts to raise its profile
and liquidity in the capital markets.





The
following tables set forth selected financial data from the Company’s annual
audited financial statements and should be read in conjunction with those
financial statements:





Year
      ended
              Aug.
      31, 2008
            Year
      ended
              Aug.
      31, 2007
            Year
      Ended
              Aug.
      31, 2006Interest
      earned
            $243,339(1)
            $434,949
            $72,597Net
      Loss
            ($5,086,589)(2)
            ($6,758,123)
            ($3,853,273)Net
      Loss per Share
            ($0.08)
            ($0.12)
            ($0.08)Total
      Assets
            $32,492,583(3)
            $36,764,203
            $27,664,441Long
      Term Debt
            Nil
            Nil
            NilDividends
            Nil
            Nil
            Nil





Explanatory
Notes:





(1)
            The
      Company’s only significant source of revenue during the years ending
      August 31, 2006 to 2008 was interest revenue from GIC’s held by the
      Company. The amount of interest earned correlates directly to the amount
      of cash on hand during the period
referenced.





(2)
            The
      Company’s net loss increased during the years ending August 31, 2006 to
      2007 and then decreased in 2008 due to several factors. A large factor is
      stock compensation expense which totalled $580,128 in 2008, $1,487,661 in
      2007, and $110,176 in 2006. Another factor is the write off of deferred
      mineral property costs of $Nil in 2008, $1,323,222 in 2007, and $1,174,325
      in 2006. If one removes the effect of these two factors from each fiscal
      year the recorded annual loss becomes modified to $4,506,461 for 2008,
      $3,947,240 for 2007, and $2,568,772 for 2006. During fiscal 2007 the
      Company completed a listing on the American Stock Exchange and for the
      first time was required to certify its internal and disclosure controls
      under Sarbanes-Oxley legislation in the USA as well as Multilateral
      Instrument 52-109 in Canada. This resulted in an increase in professional
      fees in 2007 over 2006 of $150,722. Professional fees increased by
      $556,480 from 2007 to 2008 due to continuing compliance costs for
      Sarbanes-Oxley, the use of external engineers to review the Feasibility
      Study for Project 1 of the WBJV and the Company negotiating the
      reorganization of the WBJV. This reorganization resulted in additional
      travel by management to South Africa and Europe which has increased travel
      expenses by $202,174 in 2008 over 2007. Management and consulting fees
      increased by an aggregate $153,254 in 2008 as a result of the engagement
      of a strategic advisor during the year. The remaining year-on-year
      increase in this modified loss value is then explained by the Company’s
      activities as described above at “Discussion of Operations and Financial
      Condition”.





(3)
            Total
      assets had been increasing year-on-year primarily as a result of the
      Company’s cash balance and continued investment in mineral properties
      funded by completion of private placement equity financings. However
      during the year ended August 31, 2008 the Company did not complete any
      equity financings, and the South African Rand, depreciated against the
      Canadian dollar, resulting in total assets decreasing. At August 31, 2008
      the Company held $1,779,871 (2007 -$14,669,067) in cash and cash
      equivalents and short term investments. At August 31, 2006 the Company
      held $10,066,801 in cash and cash
equivalents.





The
following table sets forth selected quarterly financial information for each of
the last eight (8) quarters.





Quarter
      Ending
            Interest
      1
            Net
      Loss2
            Net
      Loss per shareAugust
      31, 2008
            $22,396
            ($1,143,001)
            ($0.02)May
      31, 2008
            $38,027
            ($1,307,784)
            ($0.02)February
      29, 2008
            $78,337
            ($1,430,050)
            ($0.02)November
      30, 2007
            $104,579
            ($1,205,754)
            ($0.02)August
      31, 2007
            $137,331
            ($1,392,894)
            ($0.03)May
      31, 2007
            $119,764
            ($1,027,268)
            ($0.02)February
      28, 2007
            $92,799
            ($2,158,649)
            ($0.03)November
      30, 2006
            $85,055
            ($2,179,312)
            ($0.04)





The
Company has not declared nor paid dividends on its common shares. The Company
has no present intention of paying dividends on its common shares, as it
anticipates that all available funds will be invested to finance the growth of
its business.







b)
Trend Information




Other
than the financial obligations as set out in the table provided at Item 6.
below, there are no demands or commitments that will result in, or that are
reasonably likely to result in, the Company’s liquidity either increasing or
decreasing at present or in the foreseeable future. The Company will require
additional capital in the future to meet both its contractual and
non-contractual project related expenditures as set out in the table at Item 6.
below. It is unlikely that the Company will generate sufficient operating cash
flow to meet all of these expenditures in the foreseeable future. Accordingly,
the Company will need to raise additional capital by issuance of securities or
by a sale or partnering of project interests in order to meet the payment
requirements of the proposed transaction announced September 2, 2008.
See discussions at item 2. a) "Results of Operations" above and at item 6.
"Liquidity and Capital Resources" below. The Company hascompleted a Feasibility Study for the Project 1 areaof the WBJV. If a
production decision is taken the Company will most likely pursue both equity and
debt financing for its share of the capital requirements for that
project.





Since mid
calendar 2008 there has been a negative trend with regard to the market for
metal commodities and related products. See “Economic and Political instability
may affect the Company’s business” under Item 2c. “Risk Factors”
below.







c)
Risk Factors




The
Company’s securities should be considered a highly speculative investment and
investors should carefully consider all of the information disclosed in the
Company’s Canadian and U.S. regulatory filings prior to making an investment in
the Company. For a discussion of risk factors applicable to the Company, see the
section entitled “Risk Factors” in the Company’s most recent annual information
form filed with Canadian provincial securities regulators, which was also filed
as part of the Company’s most recent annual report on Form 40-F with the S.E.C.
Without limiting the foregoing, the following risk factors should be given
special consideration when evaluating an investment in the Company’s
securities.





General




Resource
exploration and development is a speculative business, characterized by a number
of significant risks including, among other things, unprofitable efforts
resulting not only from the failure to discover mineral deposits but also from
finding mineral deposits, which, though present, are insufficient in quantity
and quality to return a profit from production.





The
Company’s business is subject to exploration and development risks




All but
one of the Company’s properties are in the exploration stage and no known
reserves have been discovered on such properties, the exception being the
development stage Project 1 of the WBJV (see Item 2d. “Exploration Programs and
Expenditures” below). At this stage, favorable results, estimates and studies
are subject to a number of risks, including:







·
            the
      limited amount of drilling and testing completed to
  date;




·
            the
      preliminary nature of any operating and capital cost
      estimates;




·
            the
      difficulties inherent in scaling up operations and achieving expected
      metallurgical recoveries;




·
            the
      likelihood of cost estimates increasing in the future;
  and




·
            the
      possibility of difficulties procuring needed supplies of electrical power
      and water.





There is
no certainty that the expenditures to be made by us or by our joint venture
partners in the exploration of the properties described herein will result in
discoveries of precious metals in commercial quantities or that any of our
properties will be developed. Most exploration projects do not result in the
discovery of precious metals and no assurance can be given that any particular
level of recovery of precious metals will in fact be realized or that any
identified resource will ever qualify as a commercially mineable (or viable)
resource which can be legally and economically exploited. Estimates of reserves,
mineral deposits and production costs can also be affected by such factors as
environmental permit regulations and requirements, weather, environmental
factors, unforeseen technical difficulties, unusual or unexpected geological
formations and work interruptions. In addition, the grade of precious metals
ultimately discovered may differ from that indicated by drilling results. There
can be no assurance that precious metals recovered in small-scale tests will be
duplicated in large-scale tests under on-site conditions or in production
scale.





1 The
Company’s primary source of revenue during the quarters listed above was
interest revenue from GIC’s held by the Company. The amount of interest revenue
earned correlates directly to the amount of cash on hand during the period
referenced.


2 Net
losses by quarter are often materially affected by the timing and recognition of
large non-cash expenses or write-offs. For example, the quarter ended August 31,
2008 includes a non-cash charge for stock based compensation in the amount of
$Nil, and  the quarter ended May 31, 2008 includes a non-cash charge
for stock based compensation in the amount of $187,931. The quarter ended
February 29, 2008 includes a non-cash charge for stock based compensation in the
amount of $250,830. The quarter ended November 30, 2007 includes a non-cash
charge for stock based compensation in the amount of $141,367. The Quarter ended
August 31, 2007 includes a non-cash charge for stock based compensation in the
amount of $91,795. The May 31, 2007 quarter includes a non-cash charge for stock
based compensation in the amount of $11,890. The February 28, 2007 quarter
includes a non-cash charge for stock based compensation in the amount of
$1,171,517. The quarter ended November 30, 2006 includes a non-cash charge for
stock based compensation of $212,459 and a mineral property write off for
$1,323,222. When adjusting these non-cash charges the results for the quarters
listed show a more consistent trend, with a general growth in expenses over time
that is consistent with the Company’s increased exploration and corporate
activities over the past two years as described above at “Discussion of
Operations and Financial Condition”.


Economic
and Political instability may affect the Company’s business




Since mid
calendar 2008 there has been a negative trend with regard to the market for
metal commodities and related products as a result of global economic
uncertainty, reduced confidence in financial markets, bank failures and credit
availability concerns. These macro-economic events have negatively affected the
mining and minerals sectors in general. The Company’s market capitalization has
been significantly reduced. Although these circumstances may improve over the
longer term, the short term impact upon the Company’s liquidity and its ability
to raise the capital required to execute its business plans going forward will
be negative. As a result the Company will consider its business plans and
options carefully going forward into 2009. The Company’s intends to preserve its
cash balances to the greatest extent possible by curtailing capital and
operational expenditures where possible.





The
Company has assessed the carrying values of its mineral properties as a result
of the market downturn. Based on current and expected metals prices and cost
structures, management has determined that the values of the Company’s mineral
properties have not been impaired at this time. However, should current market
conditions and commodity prices worsen and/or persist for a prolonged period of
time, an impairment of mineral properties may be required.





South
Africa has undergone significant change in its government and laws since the
free elections in 1994. At present, Mining Legislation in South Africa is
continuing to undergo change. The new Mineral and Petroleum Resources
Development Act became law on May 1, 2004. The regulation and operation of this
new law is still being implemented. In association with the new Act, the Mining
Charter sets out a target of 26% ownership and participation in the mineral
industry by “Historically Disadvantaged Persons” within ten years, but the
mechanisms to fully affect this objective are still evolving. Accordingly, the
South African legal regime may be considered relatively new, resulting in risks
related to the possible misinterpretation of new laws, unilateral modification
of mining or exploration rights, operating restrictions, increased taxes,
environmental regulation, mine safety and other risks arising out of new
sovereignty over mining, any or all of which could have an adverse affect on the
Company. There is no certainty that the Company will be able to convert its
existing exploration rights into mining rights. The Company’s operations in
general may also be affected in varying degrees by political and economic
instability, terrorism, crime, fluctuations in currency exchange rates and
inflation.





The
Company is subject to risk of fluctuations in the relative values of the
Canadian Dollar as compared to the South African Rand and the U.S.
Dollar




The
Company may be adversely affected by foreign currency fluctuations. The Company
is primarily funded through equity investments into the Company denominated in
Canadian Dollars. In the normal course of business the Company enters into
transactions for the purchase of supplies and services denominated in South
African Rand. The Company also has cash and certain liabilities denominated in
South African Rand. Several of the Company’s options to acquire properties or
surface rights in the Republic of South Africa may result in payments by the
Company denominated in South African Rand or in U.S. Dollars. Exploration,
development and administrative costs to be funded by the Company in South Africa
will also be denominated in South African Rand. Fluctuations in the exchange
rates between the Canadian Dollar and the South African Rand or U.S. Dollar may
have an adverse or positive affect on the Company. In the past year to November
10, 2008 the South African Rand has devalued by approximately 16% to the
Canadian dollar and the Canadian dollar has devalued by approximately 19% to the
U.S. dollar.





The
Company’s properties are subject to title risks




The
Company’s properties may be subject to prior unregistered agreements or
transfers and title may be affected by undetected defects. These defects could
adversely affect the Company’s title to such properties or delay or increase the
cost of the development of such properties. In addition, the Company’s
properties may be subject to aboriginal or other historical rights that may be
claimed on Crown properties or other types of tenure with respect to which
mineral rights have been conferred. The Company is not aware of any aboriginal
land claims having been asserted or any legal actions relating to native issues
having been instituted with respect to any of the mineral properties in which
the Company has an interest. The Company is aware of the mutual benefits
afforded by co-operative relationships with indigenous people in conducting
exploration activity and is supportive of measures established to achieve such
co-operation.





Environmental
risk




Environmental
legislation on a global basis is evolving in a manner that will ensure stricter
standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessment of proposed development and a higher
level of responsibility for companies and their officers, directors and
employees. There is no assurance that future changes to environmental
legislation in Canada or South Africa will not adversely affect the Company’s
operations. Environmental risks may exist on properties in which the Company
holds interests which are unknown at present and which have been caused by
previous or existing owners or operators. Furthermore, future compliance with
environmental reclamation, closure and other requirements may involve
significant costs and other liabilities. In particular, the Company’s operations
and exploration activities are subject to Canadian and South African national
and provincial laws and regulations governing protection of the environment.
Such laws are continually changing, and in general are becoming more
restrictive.





The
mineral exploration industry is extremely competitive




The
resource industry is intensely competitive in all of its phases, and the Company
competes with many companies that possess greater financial resources and
technical facilities. Competition could adversely affect the Company’s ability
to acquire suitable new producing properties or prospects for exploration in the
future. Competition could also affect the Company’s ability to raise financing
to fund the exploration and development of its properties or to hire qualified
personnel.





Metal
prices affect the success of the Company’s business




Metal
prices have historically been subject to significant price fluctuation. No
assurance may be given that metal prices will remain stable. Significant price
fluctuations over short periods of time may be generated by numerous factors
beyond the control of the Company, including domestic and international economic
and political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumption patterns, speculative activities
and increases or decreases in production due to improved mining and production
methods. Significant reductions or volatility in metal prices may have an
adverse effect on the Company’s business, including the economic attractiveness
of the Company’s projects, the Company’s ability to obtain financing and, if the
Company’s projects enter the production phase, the amount of the Company’s
revenue or profit or loss. The current spot metals prices are significantly
below the three year trailing average prices used to asses the Company’s Project
1 Feasibility in July 2008. Long term and short term prices are currently
volatile.







d)
Exploration Programs and Expenditures




General




The
Company continues to be active in the Republic of South Africa (“RSA”). In 2003
the Company acquired a 100% South African subsidiary named Platinum Group Metals
RSA (Pty.) Ltd. (“PTM RSA”) for the purposes of holding mineral rights and
conducting operations on behalf of the Company. The Company conducts all of its
South African exploration and development work through PTM RSA.





Mineral
property acquisition and capital costs deferred during the year totaled
$1,065,570 (2007 - $365,514). Of this amount acquisition costs relating to the
Company’s 37% pro-rata share of the WBJV amounted to $858,189 (2007 -
$23,075). The Company also issued 50,000 shares (2007 – 50,000 shares) at a
value of $165,500 (2007 - $230,000) for property acquisition costs related to
the Company’s obligation to acquire certain portions of the farm Onderstepoort.
The balance $41,881 (2007 - $112,439) was spent on other mineral property costs
in Canada and South Africa. Exploration costs incurred globally in the year for
the Company’s interests totaled $6,733,094 (2007 - $4,531,533). Of that amount
$166,042 (2007 - $172,171) was incurred on the Company’s Canadian properties and
$6,567,052 (2007 - $4,359,362) was incurred on the Company’s South African
properties. Of the South African amount, $6,132,281 was for the Company’s 37%
share of WBJV expenditures (2007 - $3,775,890). The total amount (100%) of
exploration expenditures by all Joint Venture partners for the year for the WBJV
came to $14,874,427 which was higher than the 100% amount spent last year (2007
- $10,205,108).





During
the year there were no write-offs in deferred costs relating to South African or
Canadian projects, while write-offs in 2007 amounted to $1,323,222 for Canada
and $Nil for South African properties. For more information on mineral
properties see Note 5 and 6 of the Company’s August 31, 2008 Audited
Consolidated Financial Statements.





Western
Bushveld Joint Venture




On
October 26, 2004 the Company (37%) entered into a Joint Venture with Anglo
Platinum Limited (“Anglo Platinum”) (37%) and Africa Wide Mineral Prospecting
and Exploration (Pty) Limited ( “Africa Wide” ) (26%) to pursue platinum
exploration and development on combined mineral rights covering approximately 67
square kilometres on the Western Bushveld Complex of South Africa. The Company
contributed all of its interests in portions of the farms Onderstepoort 98 JQ
and Elandsfontein 102 JQ. Anglo Platinum contributed its interests in portions
of the farms Koedoesfontein 94 JQ, Elandsfontein 102 JQ and Frischgewaagd 96
JQ.





The
Company is the operator of the WBJV. From October 2004 to April 2006 the Company
funded a required exploration program in the amount of Rand 35 million (at
August 31, 2005 approx. C$6.44 million). Since then the partners of the WBJV
have funded their portion of further expenditures pro-rata based upon their
working interest in the Joint Venture. Work programs approved by the partners
totaling Rand 201 million (approximately $28.7 million) since 2006 have been
completed to October 2008. During April 2008 the participants of the WBJV also
approved and funded a budget for the acquisition of long lead capital items
(mine shaft hoists) in the amount of R 21.086 million (approximately $2.74
million). Activities for the WBJV have included research and data review,
prospecting, mapping, detailed engineering, drilling of project areas,
geophysical studies, geotechnical work, metallurgical studies, pre-feasibility
and feasibility studies, and mine plan and scheduling work.





In April
2007 Africa Wide accepted an offer for the purchase of 100% their company from
Wesizwe Platinum Ltd. (WEZ:JSE). The transaction closed in September 2007 and
Wesizwe paid consideration of 57.4 million new shares of Wesizwe at a deemed
price of Rand 10.48 per share for total consideration of Rand 601.5 million
(approximately C$90 million). Since September 2007 Wesizwe has become
responsible for all of the rights and obligations of Africa Wide.





On April
9, 2007 the Company announced the formal contribution to the WBJV of a 50%
interest in the mineral rights to the 494 hectare Portion 11 of the Farm
Frischgewaagd 96 JQ (“Portion 11”) by Rustenburg Platinum Mines Ltd., a
subsidiary of Anglo Platinum. With this addition the geographic area of the WBJV
now covers approximately 72 square kilometres of territory.





Under the
terms of the original WBJV agreement, once a final Feasibility Study has been
completed and a decision to mine has been taken the respective deemed capital
contribution of each party will be credited based on their contribution of
measured, indicated, and inferred PGM ounces from the contributed properties
comprising the WBJV, determined in accordance with the South African SAMREC
code. Under the terms of the original WBJV Agreement, inferred ounces will be
credited at US$0.50 per ounce, indicated ounces will be credited at US$3.20 per
ounce and measured ounces will be credited at US$6.20 per ounce. The Company
will also be credited for its Rand 35 million expenditure as described above.
For the later contribution of Portion 11 to the WBJV the original credit rates
for equalization as described above have been amended to US$0.62 per inferred
ounce, US$10.37 per indicated ounce and US$39.55 per measured ounce in order to
adjust for market conditions at the time. At the time of writing the estimated
equalization payment due to Anglo Platinum by the Company is approximately US$20
million.





A
Feasibility Study for Project 1 of the WBJV was delivered to the partners on
June 30, 2008 and results thereof were published by the Company in a news
release dated July 7, 2008.





Further
drilling is planned to investigate additional areas with reef potential along
strike on Project 3 within the Joint Venture area. Since January 2005 PTM has
drilled more than 178,000 metres of core in 274 boreholes, including 37
geotechnical holes.





The
Company provided a statement of Reserves and Resources with the Feasibility
Study. Resources in the Measured and Indicated categories can be included in a
financial model under SAMREC and NI-43-101 guidelines. Summary resource
details from published reports for Project 1 and Project 3 follow in the table
below. Platinum Group will hold a 74% interest in the 4E ounces attributable to
Projects 1 and 3 of the WBJV under the terms of the proposed transaction
announced on September 2, 2008. See Item 2. a) “Results of Operations” above for
more detail. The prill splits and 4E estimates for Project 1 and 3 have been
tested for reasonableness by kriging on the individual elements. Copper and
nickel as well as the minor platinum group elements have also been estimated
with a statistical process of Simple Kriging for Project 1. Absent values for
copper, nickel and the minor platinum group elements have been derived from
regressed values.


The
reader should take note that in the event the proposed transaction announced
September 2, 2008 and described herein does not close or become effective, the
Company will not have a 74% in the reserves and resources for Projects 1 and 3
as reported below. Instead the Company will revert to its original 37% interest
in Projects 1 and 3 and 18.5% in Project 2 as last reported in the Revised
Attributable Reserves and Resources statement for the WBJV Project 1 Feasibility
Study published on July 7, 2008 (filed on SEDAR August 21, 2008). The Company
has internally tested the resource assessment against the spot prices in October
2008 and the three year trailing prices at that time and have not amended their
resource and resource assessment.





The
following is a statement of Revised Attributable Reserves and Resources in the
event of the closing of the Proposed Transaction announced September 2, 2008
based on the WBJV Project 1 July 7, 2008  Feasibility Study (filed on
SEDAR August 21, 2008). The Proposed Transaction is pending
definitive agreements and conditions precedent. Reserves here are a sub-set
of measured and indicated resources including mining factors and are not in
addition to the resources.







MR
= Merensky
Reef              UG2
= Upper Group 2 Reef







Merensky
      Reserves Project 1   (74% Company Interest
      Pending)Tonnes
            4E
            Content
      4E
            Platinum
      Group
            Platinum
      Group Mozst
            g/t
            Moz
            InterestMerensky
      Proved6,706,482
            5.55
            1.198
            74%
            0.886Merensky
      Probable11,382,035
            5.39
            1.971
            74%
            1.459Total
      Merensky Mineral Reserves18,088,517
            5.45
            3.169
            74%
            2.345








UG2
      Reserves Project1 (74% Company Interest Pending)Tonnes
            4E
            Content
      4E
            Platinum
      Group
            Platinum
      Group Mozst
            g/t
            Moz
            InterestUG2
      Proved4,245,280
            3.38
            0.461
            74%
            0.341UG2
      Probable7,051,016
            3.42
            0.775
            74%
            0.574Total
      UG2 Mineral Reserves11,296,296
            3.40
            1.236
            74%
            0.915










See
Caution Notes on previous page with respect to Company interest.





C.
Muller QP PTM - Platinum Group Metals Ltd.





The
Qualified Persons, (“QP”) for the above information are Charles Muller and
Gordon Cunningham Independent Qualified Persons as at the effective dates in the
table. (Reports dated April 25, 2008 – filed June 11, 2008 and July 7, 2008 –
filed Aug 21, 2008 on www.sedar.com).





Cautionary Note to U.S.
Investors: The U.S. Securities and Exchange Commission permits U.S.
mining companies, in their filings with the SEC, to disclose only those mineral
deposits that a company can economically and legally extract or produce. We use
certain terms in this document, such as “measured,” “indicated,” and “inferred,”
“reserves,” “resources,” that the SEC guidelines strictly prohibit U.S.
registered companies from including in their filings with the SEC. “Resources”
are not “Reserves” and so do not have demonstrated economic viability. U.S.
investors are urged to consider closely the disclosure in our U.S. regulatory
filings, File No. 0-033562, which may be secured from us, or from the SEC’s
website at:  http://sec.gov





Project
1 Resource Calculation Detail





A 39% and
41% total geological loss for the Merensky Reef and UG2 Reef respectively was
applied to the resource area to accommodate for areas of potentially un-mineable
structural and geological conditions. This geological loss considers losses for
faults, dykes, potholes and areas of iron replacement pegmatite. Structural loss
estimates are based on drilling, field mapping and remote sense data which
include a high resolution aeromagnetic survey. The Merensky mineral resource
estimate is based on 158 boreholes with 178 intercepts and the UG2 is based on
192 intercepts within the 1,087 hectare area. The prill split has been
calculated by weighted averages as a proportion of the total 4E and the grades
have been estimated with a more rigorous statistical process of Simple Kriging.
The cut-off was determined on a practical mining width and the known costs and
mining methods regionally. Platinum Group’s independent consulting Qualified
Person has provided the resource estimate according to the SAMREC code. The
reconciliation to the CIM codes is that the categories are the same. The
resources are located on New Order prospecting permits that provide for the
right to be converted to mining rights. Charles Muller of Minxcon is the
Qualified Person (“QP”) for this report. He is registered with the SACNASP
(South African Council for Natural Scientific Professions) (Registration No.
400201/04). Mr. Muller is an independent consultant with 18 years experience as
a geologist, and resource evaluator. Samples were analyzed under Platinum
Group’s and Anglo Platinum’s protocols including insertion of blanks, duplicates
and certified reference materials in the assay stream once in every 24 or fewer
samples. This is in addition to internal quality control measures undertaken by
the contracted analytical facilities. Internal tests by the Company’s
non-independent qualified persons at October 2008 have not resulted in resource
changes but prolonged negative markets will result in resource
changes.





Project
3 Resource Calculation Detail




A 14%
geological loss for the Merensky Reef and UG2 Reef respectively was applied to
the area to accommodate for areas of potentially un-mineable structural and
geological conditions. This geological loss considers losses for faults, dykes,
potholes and areas of iron replacement pegmatite. Structural loss estimates are
based on drilling, field mapping and remote sense data which include a high
resolution aeromagnetic survey and a 3D seismic survey. The Merensky mineral
resource estimate is based on 24 boreholes with 27 intercepts and the UG2 is
based on 15 intercepts within the 224.28 hectare area. The prill split has been
calculated by weighted averages as a proportion of the total 4E and the grades
have been estimated with a more rigorous statistical process of Simple Kriging.
(The prill splits and 4E estimates have been tested for reasonableness by
kriging on the individual elements). Copper and nickel as well as the minor
platinum group elements have also been estimated with a statistical process of
Simple kriging. Absent values for copper, nickel and the minor platinum group
elements have been derived from regressed values. The cut-off was determined on
a practical mining width and the known costs and mining methods regionally.
Platinum Group’s independent consulting Qualified Person has provided the
mineral resource estimate according to the SAMREC code. The reconciliation to
the CIM codes is that the categories are the same. The resources are located on
new order prospecting permits that provide for the right to be converted to
mining rights. Charles Muller of Minxcon is the Qualified Person for this
report. He is registered with the South African Council for Natural Scientific
Professions (“SACNASP”) (Registration No. 400201/04).





Northern
Limb, Bushveld - War Springs and Tweespalk Properties




On June
3, 2002, the Company entered an option agreement whereby it may earn a 100%
interest in the 2,396 hectare War Springs property and the 2,177 hectare
Tweespalk property both located in the Northern Limb or Platreef area of the
Bushveld Complex north of Johannesburg. Acquisition and exploration costs on
these properties to August 31, 2008 total $3,312,914 (2007 -
$3,394,062).





By prior
agreement with the holders of the Old Order mineral rights the Company had an
option to purchase 100% of these mineral rights for US$690 per hectare. The
Company also agreed to pay prospecting fees to the vendors of US$3.25 per
hectare. The vendors retain a 1% NSR Royalty on the property, subject to the
Company’s right to purchase the NSR at any time for US$1.4 million. A 5%
finders’ fee applies to vendor payments.





Under the
new Mineral and Petroleum Resources Development Act (2002), which became
effective in May 2004, Old Order permits were to be converted into New Order
permits during a transition period. This process is now complete for the War
Springs and Tweespalk properties. The June 3, 2002 option agreement provides for
amendments as may be needed to maintain the parties in the same commercial
position as they were in under the preceding mineral legislation and such
amendments are yet to be completed.





Black
Economic Empowerment groups Africa Wide and Taung Minerals (Pty) Ltd. have each
acquired a 15% interest in the War Springs project carried to bankable
feasibility. The Company’s retains a net 70% project interest.





Africa
Wide also has a 30% participating interest in the Tweespalk property. During the
year the Company received payment in full from Wesizwe Platinum Ltd. for Africa
Wide’s share of costs to August 31, 2007, which amounted to R 1,549,673
(C$211,840 at August 31, 2008). The payment was treated as a recovery of costs
relating to the Tweespalk property.





On March
17, 2008 the Company published a revised and updated resource calculation for
the War Springs property based on drilling and exploration work conducted in the
last three years. Details are as follow:





Reef
            Cut-off
      3E
            Tonnage
            3E
            Ni
            Cu
            Channel
      Widthcmg/t
            T
            g/t
            G
            Moz
            %
            t
            %
            t
            cmB
      Reef
            300
            20,934,894
            0.95
            19,947,131
            0.641
            0.18
            35,870
            0.14
            27,863
            657C
      Reef
            300
            26,030,561
            1.24
            32,192,522
            1.035
            0.08
            25,812
            0.06
            19,388
            875Total
            300
            46,965,455
            1.11
            52,139,652
            1.676
            0.13
            64,965
            0.10
            49,868
            734





Reef
            Prill
      SplitsPt
            Pd
            Aug/t
            %
            g/t
            %
            g/t
            %B
      Reef
            0.32
            34
            0.55
            58
            0.08
            8C
      Reef
            0.20
            16
            0.97
            78
            0.07
            6







The War
Springs Mineral Resource is characterised by two distinct reef layers, termed
the "B" and "C" reefs. Both reefs are typically greater than 6m thick. The reefs
outcrop on surface and extend down dip in parallel sheets at a 65 degree angle
to a depth of 400 metres, remaining open at depth. A 5% geological loss has been
applied. Eighteen holes had been completed by the end of May 2005, relating to
7,433m of drilling. A total of 8,188 samples were collected for the
determination of elements Platinum, Palladium, Gold, Copper and Nickel. Four
additional boreholes were drilled (1,646m) during the period November 2005 to
early February 2006, on high priority soil targets (Phase 2 Drilling Program).
An additional 1,738 samples were collected for analysis. Of the 22 boreholes
drilled, 15 boreholes intersected the “B” Reef and 8 boreholes intersected the
“C” Reef. Drilling results from Phase 1 and 2 covering approximately 2,200
metres of strike length on a 250 metre spacing, combined with a review of the
cut-off, form the basis of the updated Inferred Mineral Resource estimation to
be reported in a NI43-101 document, compiled by Minxcon (Pty) Ltd, dated March,
2008. Mr. Charles Muller of Minxcon is the Qualified Person for the War Springs
resource estimate. He is registered with the South African Council for Natural
Scientific Professions (SACNASP) (Registration No. 400201/04). Mr. Muller is an
independent consultant with 18 years experience as a geologist, and resource
evaluator. Samples were analyzed under Platinum Group’s previously published
protocols for the project including insertion of blanks, duplicates and
certified reference materials in the assay stream once in every 24 or fewer
samples. This is in addition to internal quality control measures undertaken by
the contracted certified analytical facilities. Assays were completed by
standard fire assay procedures with preparation at the Setpoint facility at
Mokopane and final assays at Genalysis Laboratories Services Pty Ltd in Perth
Australia or Anglo Research Laboratories.







The
Tweespalk and War Springs projects are currently the subject of only modest work
efforts as the Company is focused on the WBJV. The Tweespalk and War Springs
projects are being considered for more active exploration work in
2009.





Lac
Des Iles Area Properties, Ontario




On May 5,
2000, New Millennium entered into an option agreement to acquire a 50% interest
in the Lac des Iles River property located near Thunder Bay, Ontario in exchange
for cash payments ($43,500 paid in total) and the completion of exploration
expenditures. On October 6, 2006, the Company and the property vendors entered
into a termination and sale agreement whereby the option agreement was cancelled
and the Company purchased an undivided 100% interest in the property subject
only to an underlying 2.0% Net Smelter Return Royalty. In settlement the Company
made a one-time payment to the vendors of $50,000 in lieu of past and future
exploration expenditure commitments not incurred.





In April
2000, and later as amended in January 2005, the Company acquired an option to
earn a 50% interest in the South Legris property located near Thunder Bay,
Ontario in exchange for cash payments ($105,000 paid in total) and the
completion of certain exploration expenditures. On October 13, 2006, the Company
and the property vendors entered into a termination and sale agreement whereby
the option agreement was cancelled and the Company purchased an undivided 100%
interest in the property subject only to underlying 2.0% Net Smelter Return
Royalties. In settlement the Company made a one-time payment of $50,000 in lieu
of past and future exploration expenditure commitments not
incurred.





On June
28, 2000, New Millennium entered into an option agreement to earn up to 60%
interest in the Shelby Lake property, located near Thunder Bay, Ontario in
exchange for cash payments of $15,000 (paid), the issue of 30,303 shares
(issued) and the completion of exploration expenditures. On October 18, 2006,
the Company and the property vendor entered into a termination and sale
agreement whereby the option agreement was cancelled and the Company purchased
an undivided 100% interest in the property for a one-time payment of $5,000
subject only to an underlying 2.0% Net Smelter Return Royalty.





In late
2006 a 1,090 metre drill program was conducted on the Company’s Lac Des Iles
area projects. A further drill program planned for 1,125 metres was
completed in December 2007. Costs for the program for 2008 have amounted to
$166,042. Results of exploration for the current program and those over the last
few years for palladium, platinum, nickel and copper have been encouraging and
the Company plans to invest further in this area in the future. At the time of
writing a 2009 exploration budget for the area is under
consideration.





e)
Administration Expenses




Before a
non-cash charge for stock based compensation of $580,128 (2007 - $1,487,661),
and mineral property costs written off of $Nil (2007 - $1,323,222), and not
including interest in the year of $243,339 (2007 - $434,949), general and
administrative expenses totaled $5,175,749 (2007 - $4,380,667). Since 2002 the
Company has grown substantially through its amalgamation with New Millennium
Metals Corporation and its expansion into the Republic of South Africa. This
growth is reflected in the costs described herein. During 2004 the Company
opened and staffed a permanent office in Johannesburg and commenced active
exploration on the ground. The costs described above include management and
consulting fees of $843,758 (2007 - $690,504); office and miscellaneous expenses
of $227,497 (2007 - $230,829); professional fees of $973,425 (2007 - $416,945);
salaries and benefits of $1,345,722 (2007 - $1,400,258); shareholder relations
expense of $128,340 (2007 - $216,597); travel expenses of $859,139 (2007 -
$656,965); news release, print and mailout expenses of $75,688 (2007 - $83,999)
and promotion expenses of $214,524 (2007 - $193,296).





f)
Related Party Transactions




Management,
consulting fees, salaries and directors’ fees for the year amounted to
$524,807 (2007 - $500,821). Of this amount approximately $241,474 (2007 -
$220,591) is related to fees for the Company’s President, an amount of $208,333
(2007 - $193,650) relates to salary for the Company’s CFO and the balance of
$75,000 (2007 - $86,580) relates to independent director fees. At August 31,
2008 there were $75,000 in fees (2007 - $21,869) owed and included in accounts
payable.





The
Company received $135,895 (2007 - $138,210) during the year from MAG Silver
Corp. (“MAG”), a company with two common directors and a common officer under an
administrative services agreement. The services provided include day-to-day
administration and accounting and are provided at market rates. There are no
long term obligations or commitments for either party with relation to the
services agreement. Amounts receivable at the end of the year includes an amount
of $1,819 due from MAG for other trade receivables (2007 - $267).





During
the year the Company accrued or received payments of $108,000 (2007 – $67,200)
from West Timmins Mining Inc. (“WTM”), a company with three common directors and
a common officer, for administrative services. The services provided include
day-to-day administration and accounting and are provided at market rates. There
are no long term obligations or commitments for either party with relation to
the provision of services. Amounts receivable at the end of the year includes an
amount of $997 due from WTM for other trade receivables (2007 - $16,895 for both
administration fees due ($9,540) and other trade receivables
($7,355)).





During
the year ended August 31, 2005, the Company entered into an office lease
agreement with Anthem Works Ltd. (“Anthem”), a company with a common director.
During the year ended August 31, 2008 the Company accrued or paid Anthem $88,382
under the office lease agreement (2007 - $66,684). The space occupied
approximates one third of 6,050 square feet in a first tier building located in
downtown Vancouver, British Columbia. The rental rate was negotiated on an
“arm’s length basis”. At the time of writing the Company has an obligation to
rent the premises until September 30, 2009 at a rate of $7,213 per
month.





All of
the above transactions are in the normal course of business and are measured at
the exchange amount which is the consideration established and agreed to by the
noted parties.





g)
Shareholder Relations’ Expenses




Shareholder
relations’ expense during the year totaled $128,340 (2007 - $216,597). The
Company manages its shareholder relations as an internal function. The Company
has been active in raising its profile with both retail and institutional
investors. From May 2005 until April 30, 2008 Roth Investor Relations (“Roth”)
was contracted at a rate of US$5,000 per month to provide distribution of the
Company’s information to US institutions and other international analysts and
money managers. Since June 2005 Mr. Tony Mahalski of LM Associates in London,
U.K., has been engaged for a fee of GBP 1,000 per month for the purpose of
general business development and the raising of the Company’s profile in
Europe.





h)
Travel and Promotion Expenses




Travel
expenses for the year amounted to $859,139 (2007 - $656,965). These activities
relate to the supervision of ongoing operations in South Africa and Canada, new
property investigations and meetings with potential and current institutional
and sophisticated investors. Travel related to all of these activities was
higher during the period than in the same period in 2007. Promotional expenses
in the period amounted to $214,524 (2007 - $193,296) and these costs relate to
design work, media relations, printed material, postage and trade show
attendance.





i)
Property Acquisition Expenses




Property
acquisition expenditures during the period totaled $1,065,570 (2007 - $365,514)
in cash and shares. This includes $4,558 (2007 - $105,000) for properties in
Ontario, and $1,061,012 (2007 - $260,514) to acquire or maintain option rights
to the South African properties. Cash payments or accruals totaled $900,070
(2007 - $135,514) and share issuances for property acquisitions totaled $165,500
(2007 - $230,000).





The
Company evaluates its property interests on an ongoing basis and intends to
abandon properties that fail to remain prospective. Apart from a possible
buy-out of the War Springs and Tweespalk properties, the Company has no other
required property acquisition payments due to vendors under mineral property
option agreements. At the time of writing the Company was incurring further
property acquisition expenses, such as research and staking expenses,
through its activities in Ontario, Canada and South Africa.





j)
Off-Balance Sheet Arrangements




The
Company has no off-balance sheet arrangements.








3.        CRITICAL
ACCOUNTING ESTIMATES




The
preparation of financial statements in conformity with Canadian GAAP requires
Management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent liabilities at the date of
the financial statements, and the reported amounts of revenues and expenditures
during the reporting period. Management has identified (i) mineral property
acquisition and exploration deferred costs (ii) provision for reclamation and
closure, (iii) future income tax provision (iv) stock based compensation and (v)
recoverability of its interest in the WBJV as the main estimates for the
following discussion. Please refer to Note 2 of the Company’s Audited
consolidated financial statements for a description of all of the significant
accounting policies.







Under
Canadian GAAP, the Company defers all costs relating to the acquisition and
exploration of its mineral properties. Any revenues received from such
properties are credited against the costs of the property. When commercial
production commences on any of the Company’s properties, any previously
capitalized costs would be charged to operations using a unit-of-production
method. The Company reviews when events or changes in circumstances indicate the
carrying values of its properties to assess their recoverability and when the
carrying value of a property exceeds the estimated net recoverable amount,
provision is made for impairment in value.




The
existence of uncertainties during the exploration stage and the lack of
definitive empirical evidence with respect to the feasibility of successful
commercial development of any exploration property does create measurement
uncertainty concerning the estimate of the amount of impairment to the value of
any mineral property. The Company relies on its own or independent estimates of
further geological prospects of a particular property and also considers the
likely proceeds from a sale or assignment of the rights before determining
whether or not impairment in value has occurred.





Reclamation
and closure costs have been estimated based on the Company’s interpretation of
current regulatory requirements, however changes in regulatory requirements and
new information may result in revisions to estimates. The Company recognizes the
fair value of liabilities for reclamation and closure costs in the period in
which they are incurred. A corresponding increase to the carrying amount of the
related assets is generally recorded and depreciated over the life of the
asset.





The
future income tax provision is based on the liability method. Future taxes arise
from the recognition of the tax consequences of temporary differences by
applying enacted or substantively enacted tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of certain assets and liabilities. The Company records a valuation
allowance against any portion of those future income tax assets that it believes
will, more likely than not, fail to be realized.





For its
2005 fiscal year, The Company adopted CICA Handbook Section 3870 – Stock-Based
Compensation and other Stock-Based Payments, which requires the fair value
method of accounting for stock options. Under this method, the Company is
required to recognize a charge to the income statement based on an
option-pricing model based on certain assumptions. For the year ended August 31,
2008 the assumptions were as follows; no dividends were paid, a weighted average
volatility of the Company’s share price of 64.04%, a weighted average annual
risk free rate of 4.08 per cent and an expected life of 3.32 years. The
resulting weighted average option pricing resulted in an expense for stock
options in the year ended August 31, 2008 of $1,288,383 (2007 - $1,487,661). Of
the $1,288,383 in cost calculated for August 31, 2008 an amount of $580,128 was
expensed while $708,255 was capitalized to deferred mineral property exploration
costs in the Company’s WBJV interest.





4.        SIGNIFICANT
ACCOUNTING POLICIES




The
Company’s significant accounting policies are set out in Note 2 of its
Consolidated Audited Financial Statements for the year ended August 31, 2008.
There are several policies that are significant to the financial results of the
Company.





Under
Canadian GAAP, the Company defers all costs relating to the acquisition and
exploration of its mineral properties. Any revenues received from such
properties are credited against the costs of the property. When commercial
production commences on any of the Company’s properties, any previously
capitalized costs would be charged to operations over the life of the property
using a unit-of-production method. The Company regularly reviews deferred
exploration costs to assess their recoverability when facts and circumstances
indicate that the carrying value of a property exceeds the estimated net
recoverable amount, provision is made for impairment in value.





The
existence of uncertainties during the exploration stage and the lack of
definitive empirical evidence with respect to the feasibility of successful
commercial development of any exploration property do create measurement
uncertainty concerning the calculation of the amount of impairment to the value
of any mineral property. The Company relies on its own or independent estimates
of further geological prospects of a particular property and also considers the
likely proceeds from a sale or assignment of the rights before determining
whether or not impairment in value has occurred.





Future
income taxes are calculated based on the liability method. Future income taxes
arise from the recognition of the tax consequences of temporary differences by
applying enacted or substantively enacted tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of certain assets and liabilities. The Company records a valuation
allowance against any portion of those future income tax assets that it believes
will, more likely than not, fail to be realized.





5.        ADOPTION
OF NEW ACCOUNTING STANDARDS




Effective
September 1, 2007, we have adopted CICA Handbook Sections 3855 Financial Instruments – Recognition
and Measurement; Section 3861 Financial Instruments – Disclosure
and Presentation; Section 3865 Hedges; Section 1530 Comprehensive Incomeand
Section 3251 Equity. As
the Company has not previously undertaken hedging activities, adoption of
Section 3865 currently has no impact. Prior to September 1, 2007, the principal
accounting policies affecting financial instruments related to marketable
securities that were valued at the lower of original cost and fair market
value.





CICA
Section 3855 requires that all financial assets, except those classified as
held-to-maturity, and loans and receivables, must be measured at fair value. All
financial liabilities must be measured at fair value when they are classified as
held-for-trading; otherwise, they are measured at amortized cost. Investments
classified as available-for-sale are reported at fair market value (or marked to
market) based on quoted market prices with unrealized gains or losses excluded
from earnings and reported as other comprehensive income or loss. Those
instruments classified as held-for-trading, have gains or losses included in
earnings in the period in which they arise. All of the Company’s investments
have been designated as available-for-sale.





Upon
adoption of these new standards, the Company has designated its cash and cash
equivalents as held-for-trading, which are measured at fair value. Accounts
receivable and other are classified as loans and receivables, which are measured
at amortized cost. Accounts payable and accrued liabilities are classified as
other liabilities, which are measured at amortized cost.





Comprehensive
income is the change in our net assets that results from transactions, events
and circumstances from sources other than our shareholders and includes items
that would not normally be included in net earnings such as unrealized gains or
losses on available-for-sale investments. Other comprehensive income includes
the unrealized gains and losses from available-for-sale securities which are not
included in net income (loss) until realized.





The
adoption of Sections 1530 and 3855 impacts our opening equity. On September 1,
2007, pursuant to adoption of the new CICA Handbook Section 3855 Financial Instruments – Recognition
and Measurement, the Company recorded an adjustment to increase the
carrying value of marketable securities by $1,874,001 with a corresponding
adjustment to accumulated other comprehensive income less the future income tax
adjustment of $281,100. The adjustment represents the unrealized gain on
available-for-sale marketable securities held by the Company at September 1,
2007.





During
the year ended August 31, 2008 after an adjustment of a future income tax
expense of $144,900 the Company recognized an unrealized loss of $821,101 (2007
- $nil) on marketable securities designated as available-for-sale instruments in
other comprehensive income.







6.        LIQUIDITY
AND CAPITAL RESOURCES




Since mid
calendar 2008 there has been a negative trend with regard to the market for
metal commodities and related products as a result of global economic
uncertainty, reduced confidence in financial markets, bank failures and credit
availability concerns. These macro-economic events have negatively affected the
mining and minerals sectors in general. The Company’s market capitalization has
been significantly reduced. Although these circumstances may improve over the
longer term, the short term impact upon the Company’s liquidity and its ability
to raise the capital required to execute its business plans going forward will
be negative. As a result the Company will consider its business plans and
options carefully going forward into 2009. The Company’s intends to preserve its
cash balances to the greatest extent possible by curtailing capital and
operational expenditures where possible.





The
Company issued a total of 1,660,500 (2007 – 7,297,569) common shares during the
year. Of this 1,610,500 shares (2007 – 7,247,569) were issued for cash proceeds
of $2,309,324 (2007 - $12,080,366). During the year 50,000 shares (2007 –
50,000) were issued for mineral properties at a fair value of $165,500 (2007 -
$230,000). Cash proceeds are net of share issuances to be spent on mineral
property acquisitions, exploration and development as well as for general
working capital purposes. The Company’s primary source of capital has been from
the sale of equity. At August 31, 2008 the Company had cash, cash equivalents
and short-term investments on hand of $1,779,871 compared to $14,669,067 at
August 31, 2007. Subsequent to year end the Company has completed a financing
which is detailed in the subsequent events section.





The
Company receives lump sum cash advances at various times as laid out in agreed
budgets from its joint venture partners to cover the costs of the WBJV. The
balance of cash outflows is made up of management fees and expenses of $843,758
(2007 - $690,504) and other general and administrative expenses of $4,331,991
(2007 - $3,690,163).





The
following Table discloses the Company’s continual obligations for optional
mineral property acquisition payments and contracted office and equipment
lease obligations. Apart from a possible buy-out of the War Springs and
Tweespalk properties, (which optional aquistion payment is included in the
following table) the Company has no other property acquisition payments due to
vendors under mineral property option agreements. The Company has no long term
debt or loan obligations. Under the terms of several of the Company’s mineral
property option and purchase agreements, the Company is required to make certain
scheduled acquisition payments as summarized in the table below in order to
preserve the Company’s interests in the related mineral properties. In the event
the Company is unable or unwilling to make these payments, it is likely that the
Company would forfeit our rights to acquire the related properties.





Payments
      by periodTotal
            <
      1
              Year
            1
      – 3
              Years
            3
      – 5
              Years
            >
      5
              YearsEqualization
      amount due Anglo Platinum 1
            $
      23,200,000
            $
      23,200,000
            $
      0
            $
      0
            $
      0Purchase
      price due Wesizwe Platinum 1
            $
      49,000,000
            $
      49,000,000
            $
      0
            $
      0
            $
      0Past
      Exploration Costs due Wesizwe Platinum 1
            $
      2,320,000
            $
      2,320,000
            $
      0
            $
      0
            $
      0Optional
      Acquisition Payments (War Springs & Tweespalk)
            $
      3,978,000
            $
      3,978,000
            $ 0
            $
      0
            $
      0Lease
      Obligations
            $
      275,890
            $
      193,246
            $
      80,985
            $
      1,659
            $
      0Totals
            $
      78,773,890
            $
      78,691,246
            $80,985
            $
      1,659
            $ 0





3
            The
      requirement to pay and the due date of these items is dependent upon
      the proposed transaction announced September 2, 2008. See discussions
      at item 2. a) "Results of Operations" above and below in this
      section.





As
detailed in the table above, the Company will be required to pay an equalizing
amount under the terms of the WBJV agreement based on the measured, indicated
and inferred 4E PGE ounces reported in a Feasibility Study. Under the original
terms of the WBJV this equalization amount would be due to Anglo Platinum only
after a decision to mine is taken by the partners of the WBJV, or as detailed
below. See item 2. d) “Exploration Programs and Expenditures” above for details
of how the equalizing payment will be calculated.





Should
the proposed transaction announced September 2, 2008 become final the
equalization amount will become due to Anglo Platinum on the later of December
31, 2008 or the effective date of the final agreement. The effective date will
occur once all conditions precedent have been fulfilled. It is anticipated this
date will be several months after the execution of definitive agreements, which
at November 12, 2008 are in process of being finalized. In the event the Company
does not make the equalization payment on the date required, Anglo Platinum
shall elect to extend the payment deadline for up to six months, with interest,
or may elect to take payment in common shares of Wesizwe, at which point the
right to accept the equalization payment would transfer to Wesizwe.





Also as
detailed in the table above, under the terms of the proposed transaction
announced September 2, 2008 to rationalize the WBJV ownership structure, the
Company would be required to make both a purchase payment and past exploration
cost payment to Wesizwe Platinum. The purchase payment would be due six months
after the effective date of the final agreement. See Item 2. a) “Results of
Operations” for more detail. In the event the Company does not make the required
Wesizwe purchase payment, Wesizwe would have the right to dilute the Company for
up to a 19% reduction in its 74% interest in Projects 1 and 3, taking the
Company to a 55% interest position.





Since mid
calendar 2008 there has been a negative trend with regard to the market for
metal commodities and related products. See “Economic and Political instability
may affect the Company’s business” under Item 2c. “Risk Factors” above. Current
market conditions will affect the Company’s ability to make the payments
described above under the proposed transaction announced September 2, 2008. The
Company will consider its business plans and options carefully going forward
into 2009. Cash at August 31, 2008 plus subsequent financings is sufficient to
fund general operation costs through fiscal 2009, but will be insufficient to
cover the payments envisioned should the proposed transaction announced
September 2, 2008 become effective.







7.        OUTSTANDING
SHARE DATA




The
Company has an unlimited number of common shares authorized for issuance without
par value. At November 10, 2008 there were 67,624,717 shares outstanding,
5,579,875 incentive stock options outstanding and no common share purchase
warrants outstanding. As of August 31, 2008 and August 31, 2007, the number of
unoptioned shares available for granting of stock options under the Company’s
Stock Option Plan was 2.407,050 and 2,553,500, respectively. During the fiscal
years ended August 31, 2008 and August 31, 2007, the Company made no changes to
the exercise price of outstanding options through cancellation and reissuance or
otherwise.





8.
            DISCLOSURE
      CONTROLS AND INTERNAL CONTROL OVER FINANCIAL
  REPORTING




The
Company maintains a set of disclosure controls and procedures designed to ensure
that information required to be disclosed in filings made pursuant to both U.S.
Securities and Exchange Commission and Canadian Securities Administrators
requirements are recorded, processed, summarized and reported in the manner
specified by the relevant securities laws applicable to the Company. The Company
operates in both Canada and the Republic of South Africa and work is ongoing to
improve and modernize these controls and to ensure that they remain consistently
applied in both jurisdictions. The Chief Executive Officer and the Chief
Financial Officer have evaluated the Company’s disclosure control procedures as
of August 31, 2008 through inquiry, review, and testing, as well as by drawing
upon their own relevant experience. The Company retained an independent third
party specialist in 2008 to assist in the assessment of its disclosure control
procedures. The Chief Executive Officer and the Chief Financial Officer have
concluded that, as at August 31, 2008, the Company’s disclosure control
procedures were effective. Management is also developing and implementing a plan
to address disclosure controls and procedures on a forward looking basis as the
Company continues to grow.





The
Company also maintains a system of internal controls over financial reporting
designed under the supervision of the Company’s Chief Executive Officer and
Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with Canadian GAAP. The Company retained an
independent third party specialist in 2008 to assist in the assessment of its
internal control procedures. The Board of Directors approves the financial
statements and ensures that management discharges its financial
responsibilities. The Board’s review is accomplished principally through the
audit committee, which is composed of independent non-executive
directors.





The audit
committee meets periodically with management and auditors to review financial
reporting and control matters. The Board of Directors has also appointed a
compensation committee composed of non-executive directors whose recommendations
are followed with regard to executive compensation.





From time
to time the board may also form special sub-committees, which must investigate
and report to the Board on specific topics.





During
the year ended August 31, 2007, the Company effected the changes in internal
control over financial reporting that have materially affected, or may
materially affect, the Company’s internal control over financial reporting. The
Company has (i) taken steps to improve segregation of duties and the
authorization process through the addition of accounting personnel; and (ii)
reviewed and refined internal control processes; and (iii) adopted and published
new corporate governance policies; and (iv) reviewed and improved general
controls over information technology; and (v) enhanced financial control over
period close processes. During the year ended August 31, 2008 there were no
significant changes with regard to internal controls.





The
Company’s management, including the Chief Executive Officer and the Chief
Financial Officer, is responsible for establishing and maintaining adequate
internal control over financial reporting, and evaluating the effectiveness of
the Company’s internal control over financial reporting as at each fiscal year
end. Management has used the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) framework to evaluate the effectiveness of the
Company’s internal control over financial reporting as at August 31, 2008. Based
on this evaluation, management has concluded that as at August 31, 2008, the
Company’s internal control over financial reporting was effective.





Management’s
effectiveness of internal control over financial reporting has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
who have expressed their opinion in their report included with the Company’s
annual consolidated financial statements.





9.        AMEX
CORPORATE GOVERNANCE




The
Company’s common shares are listed on the NYSE Alternext US LLC (formerly the
American Stock Exchange) (“AMEX”). Section 110 of the AMEX company guide permits
AMEX to consider the laws, customs and practices of foreign issuers in relaxing
certain AMEX listing criteria, and to grant exemptions from AMEX listing
criteria based on these considerations. A company seeking relief under these
provisions is required to provide written certification from independent local
counsel that the non-complying practice is not prohibited by home country law. A
description of the significant ways in which the Company’s governance practices
differ from those followed by domestic companies pursuant to AMEX standards is
posted on the Company’s website at www.platinumgroupmetals.net and a copy of
such description is available by written request made to the
Company.





10.           OTHER
INFORMATION





Additional
information relating to the Company, including the Company’s Annual Information
Form for the year ended August 31, 2008 may be found on SEDAR at www.sedar.com. and on
EDGAR at www.sec.gov.







11.           SUBSEQUENT
EVENTS




On
September 2, 2008 the Company announced the signing of a term sheet with Anglo
Platinum and Wesizwe Platinum to consolidate and rationalize the ownership of
the WBJV. In the proposed transaction Anglo Platinum will vend its entire 37%
interest in the WBJV to Wesizwe for common shares representing a 26.5% interest
in Wesizwe. The Company will concurrently acquire a 37% interest in Projects 1
and 3 from Wesizwe in consideration of its 18.5% interest in Project 2 and Rand
408 million in cash (approximately $51.0 million at September 2, 2008). The cash
payment to Wesizwe will be deferred until six months after closing the proposed
transaction and will then be held in escrow to be applied towards Wesizwe’s
capital requirements for Projects 1 and 3. The closing of the proposed
transaction is pending the completion of definitive agreements and certain
conditions precedent, such as shareholder, regulatory and governmental
approvals.





On
October 3 and October 7, 2008 the Company closed a non-brokered private
placement for $7,611,229 upon the issue of 4,910,470 common shares at a price of
$1.55 per share. A finders’ fee of $186,000 in cash and a further 60,000 shares
at the offering price was paid in respect of certain of the
subscriptions.





On
October 15, 2008 the Company granted 1,727,000 incentive stock options at a
price of $1.60 per share to Directors, Officers, and employees.







12.           LIST
OF DIRECTORS AND OFFICERS




a)
      Directors:
              R.
      Michael Jones (Chairman)
              Frank
      R. Hallam (Secretary)
              Iain McLean
              Barry W. Smee
              Eric Carlson
            b)
      Officers:
              R.
      Michael Jones (Chief Executive Officer)
              Frank
      R. Hallam (Chief Financial Officer)
              Peter
      C. Busse (Chief Operating Officer)