[financials001.jpg]





Platinum Group Metals Ltd.

(Exploration and Development Stage Company)

Consolidated Financial Statements (Audited)

For the year ended August 31, 2010





Filed: November 29, 2010



























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



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INDEPENDENT AUDITORS REPORT



To the Shareholders of Platinum Group Metals Ltd.



We have completed an integrated audit of Platinum Group Metals Ltd.s 2010, 2009 and 2008 consolidated financial statements and of its internal control over financial reporting as of August 31, 2010. Our opinions, based on our audits, are presented below.



Consolidated financial statements



We have audited the accompanying consolidated balance sheets of Platinum Group Metals Ltd. as of August 31, 2010 and August 31, 2009, and the related consolidated statements of operations and comprehensive income, shareholders equity, and cash flows for each of the three years ended August 31, 2010.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audit of the Companys financial statements 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 plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  A financial statement audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at August 31, 2010 and August 31, 2009 and the results of its operations and its cash flows for each of the three years in the three year period ended August 31, 2010 in accordance with Canadian generally accepted accounting principles.



Internal control over financial reporting



We have also audited Platinum Group Metals Ltd.s internal control over financial reporting as at August 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company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 included in the accompanying Managements Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.



We conducted our audit of internal control over financial reporting 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 as to whether effective internal control over financial reporting was maintained in all material respects.  An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and

performing such other procedures as we consider necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.



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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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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. We do not express an opinion or any other form of assurance on managements statement referring to the corrective action taken subsequent to the year end.



A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual financial statements will not be prevented or detected on a timely basis. It was determined  that the Company did not maintain effective internal control over financial reporting as at August 31, 2010, because of a material weakness identified in the period-end financial reporting control over appropriate documentation and analysis of non-routine transactions. The material weakness referred to above is described in the accompanying Management's Report on Internal Control over Financial Reporting.



We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the August 31, 2010 consolidated financial statements, and our opinion regarding the effectiveness of the Companys internal control over financial reporting does not affect our opinion on those consolidatedfinancial statements.



In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as at August 31, 2010 based on criteria established in Internal Control - Integrated Framework issued by the COSO.





PricewaterhouseCoopers LLP (signed)



Chartered Accountants

Vancouver, BC

November 29, 2010















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Managements responsibility for the Financial Statements



The preparation and presentation of the accompanying consolidated financial statements, Managements Discussion and Analysis (MD&A) and all financial information in the Annual Report are the responsibility of management and have been approved by the Board of Directors.



The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Financial statements, by nature are not precise since they include certain amounts based upon estimates and judgments. When alternative methods exist, management has chosen those it deems to be the most appropriate in the circumstances. The financial information presented elsewhere in the Annual Report is consistent with that in the consolidated financial statements.



Management, under the supervision of and the participation of the Chief Executive Officer and the Chief Financial Officer, have a process in place to evaluate disclosure controls and procedures and internal control over financial reporting as required by Canadian and U.S. securities regulations. We, as Chief Executive Officer and Chief Financial Officer, will certify our annual filings with the CSA and SEC as required in Canada by Multilateral Instrument 52-109 and in the United States as required by the Securities Exchange Act of 1934.



The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility principally through its Audit Committee which is independent from management.



The Audit Committee is appointed by the Board of Directors and reviews the consolidated financial statements and MD&A; considers the report of the external auditors; assesses the adequacy of our internal controls, including managements assessment described below; examines and approves the fees and expenses for the audit services; and recommends the independent auditors to the Board for the appointment by the shareholders. The independent auditors have full and free access to the Audit Committee and meet with it to discuss their audit work, our internal control over financial reporting and financial reporting matters. The Audit Committee reports its findings to the Board for consideration when approving the consolidated financial statements for issuance to the shareholders and managements assessment of the internal control over financial reporting.



Managements Report on Internal Control over Financial Reporting



Management is responsible for establishing and maintaining adequate internal control over financial reporting.



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, 2010. Based on this evaluation, management has concluded that as at August 31, 2010, the Companys internal control over financial reporting was not effective due to the accounting for the dissolution of the Western Bushvold joint venture (WBJV).  Although the companys controls are designed effectively, the Company's controls did not operate effectively to identify the correct tax attributes arising on the transaction, resulting in the Company initially estimating that the tax basis of the WBJV was approximately equal to the carrying amount on the consolidated financial statements of the Company for the third quarter ended May 31, 2010.  Accordingly, management has determined that this control deficiency constitutes a material weakness.The Company has performed further analysis and now estimates a taxable temporary
difference arising from the restructuring of the WBJV and the deemed sale for accounting purposes of WBJV Project 2 to Wesizwe for an additional interest in Maseve.  Going forward, the Company's internal controls relating to non-routine transactions will, where the Company believes necessary, include consultations with external experts to ensure that non-routine transactions are recorded and accounted for in accordance with GAAP.  Management believes that the material weakness has been remediated, subject to testing in fiscal 2011 as part of the Company's annual assessment of the effectiveness of internal control over financial reporting.





|                    |                                                         
|------------------- | --------------------------------------------------------
|[financials002.jpg] | [financials003.jpg]
Frank Hallam
Chief Financial Officer

November 29, 2010



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|                                                   |  |  |  |               |  |              
|-------------------------------------------------- |  |  |  | ------------- |  | -------------
|PLATINUM GROUP METALS LTD.                         |  |  |  |              
|(An exploration and development stage
    company) |  |  |  |              
|Consolidated Balance Sheets                        |  |  |  |               |  |              
|(expressed in Canadian dollars)                    |  |  |  | Aug. 31, 2010 |  | Aug. 31, 2009
|ASSETS                                             |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              
|CURRENT                                            |  |  |  |               |  |              
|Cash and cash equivalents                          |  |  |  | $ 2,366,136   |  | $ 32,965,685 
|Amounts receivable (Note 3)                        |  |  |  | 1,270,548     |  | 344,538      
|Available-for-sale securities (Note 4)             |  |  |  | -             |  | 2,135,002    
|Due from WBJV partners                             |  |  |  | -             |  | 988,880      
|Due from JOGMEC partner (Note 5(b))                |  |  |  | -             |  | 224,482      
|Prepaid expenses and other assets                  |  |  |  | 69,382        |  | 50,812       
|Assets held for sale (Note 6(c))                   |  |  |  | 951,928       |  | -            
|Total current assets                               |  |  |  | 4,657,994     |  | 36,709,399   
|PERFORMANCE BONDS                                  |  |  |  | 160,376       |  | 137,849      
|INVESTMENT IN WBJV (Note 5(a))                     |  |  |  | -             |  | 20,561,154   
|MINERAL PROPERTIES (Note 5)                        |  |  |  | 116,026,514   |  | 6,057,034    
|FIXED ASSETS (Note 6(a))                           |  |  |  | 309,417       |  | 365,079      
|SURFACE RIGHTS (Note 6(b))                         |  |  |  | 5,836,702     |  | 3,240,282    
|Total assets                                       |  |  |  | $ 126,991,003 |  | $ 67,070,797 
|                                                   |  |  |  |               |  |              
|LIABILITIES                                        |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              
|CURRENT                                            |  |  |  |               |  |              
|Accounts payable and accrued liabilities           |  |  |  | $ 1,402,938   |  | $ 861,041    
|Due to JOGMEC  (Note 5(b))                         |  |  |  | 423,456       |  | -            
|Due to Wesizwe  (Note 5(a))                        |  |  |  | 443,614       |  | -            
|Total current liabilities                          |  |  |  | 2,270,008     |  | 861,041      
|                                                   |  |  |  |               |  |              
|FUTURE INCOME TAXES (Note 14)                      |  |  |  | 21,822,522    |  | -            
|Total liabilities                                  |  |  |  | 24,092,530    |  | 861,041      
|                                                   |  |  |  |               |  |              
|NON CONTROLLING INTEREST (Note 5(a))               |  |  |  | $ 11,149,482  |  | $ -          
|                                                   |  |  |  |               |  |              
|SHAREHOLDERS' EQUITY                               |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              
|Share capital (Note 7)                             |  |  |  | 91,794,123    |  | 89,945,316   
|Contributed surplus                                |  |  |  | 10,929,202    |  | 11,458,915   
|Accumulated other comprehensive income             |  |  |  | (3,415,608)   |  | (975,575)    
|Deficit                                            |  |  |  | (7,558,726)   |  | (34,218,900) 
|Total shareholders' equity                         |  |  |  | 91,748,991    |  | 66,209,756   
|Total liabilities and shareholders' equity         |  |  |  | $ 126,991,003 |  | $ 67,070,797 
|CONTINGENCIES AND COMMITMENTS (NOTE 11)            |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              
|APPROVED BY THE DIRECTORS:                         |  |  |  |               |  |              
|"Iain McLean"                                      |  |  |  |               |  |              
|Iain McLean, Director                              |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              
|"Eric Carlson"                                     |  |  |  |               |  |              
|Eric Carlson, Director                             |  |  |  |               |  |              
|                                                   |  |  |  |               |  |              











See
accompanying notes to the consolidated financial statements







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|PLATINUM GROUP METALS LTD.                                     |              |               |               |               
|-------------------------------------------------------------- | ------------ | ------------- | ------------- | --------------
|(An exploration stage company)                                 |              |               |               |               
|Consolidated Statements of Operations and Comprehensive Income |              |               |              
|August 31, 2008 to August 31, 2010                             |              |               |               |               
|(expressed in Canadian dollars)                                |              |               |               | Cumulative    
|                                                               |              |               |               | amount from   
|                                                               |              |               |               | March 16, 2000
|                                                               | Year ended   | Year ended    | Year ended    | to August 31, 
|                                                               | August 31,   | August 31,    | August 31,    | 2010          
|                                                               | 2010         | 2009          | 2008          | (unaudited)   
|EXPENSES                                                       |              |               |               |               
|Amortization                                                   | $ 104,622    | $ 117,221     | $ 132,172     | $ 715,546     
|Annual general meeting                                         | 52,498       | 67,530        | 65,663        | 415,052       
|Filing and transfer agent fees                                 | 125,224      | 122,976       | 152,853       | 816,332       
|Foreign exchange loss (gain)                                   | 1,013,115    | (322,833)     | 37,340        | 908,814       
|Insurance                                                      | 106,861      | 119,160       | 105,844       | 488,735       
|Mineral property costs written off                             | -            | -             | -             | 6,430,293     
|Management and consulting fees                                 | 1,298,572    | 1,112,706     | 843,758       | 5,566,285     
|News releases, print and mailout                               | 107,544      | 42,974        | 75,688        | 854,467       
|Office and miscellaneous                                       | 160,444      | 201,680       | 227,497       | 1,409,370     
|Professional fees                                              | 1,991,002    | 1,082,643     | 973,425       | 5,534,434     
|Promotion                                                      | 106,681      | 195,604       | 214,524       | 1,139,562     
|Property investigations and other costs                        | 85,051       | -             | 170           | 214,425       
|Rent                                                           | 203,176      | 216,545       | 184,094       | 1,077,207     
|Salaries and benefits                                          | 1,890,827    | 1,615,361     | 1,345,722     | 8,420,649     
|Shareholder relations                                          | 166,116      | 299,397       | 128,340       | 1,514,205     
|Stock compensation expense                                     | 137,600      | 2,100,736     | 580,128       | 5,834,522     
|Telephone                                                      | 66,318       | 87,141        | 73,415        | 480,124       
|Travel                                                         | 416,670      | 568,413       | 859,139       | 3,395,043     
|Recoveries                                                     | (239,875)    | (199,015)     | (243,895)     | (1,779,739)   
|                                                               | (7,792,446)  | (7,428,239)   | (5,755,877)   | (43,435,326)  
|Less interest earned                                           | 442,142      | 139,548       | 243,339       | 1,514,389     
|Loss before other items                                        | (7,350,304)  | (7,288,691)   | (5,512,538)   | (41,920,937)  
|Other items:                                                   |              |               |               |               
|Write-down of and equity loss
in investment                    | -            | -             | -             | (429,275)     
|Realized gain on sale of marketable                            |              |               |               |               
|securities (Note 4)                                            | 2,796,738    | -             | -             | 2,844,420     
|Gain on WBJV reorganization (Note 5(a))                        | 45,619,744   | -             | -             | 45,619,744    
|Gain on exchange of assets                                     | 177,284      | 7,297         | -             | 175,651       
|                                                               | 48,593,766   | 7,297         | -             | 48,210,540    
|Income (loss) for the year before income taxes                 | 41,243,462   | (7,281,394)   | (5,512,538)   | 6,289,603     
|Future income tax (expense) recovery (Note 14)                 | (14,583,288) | 318,010       | 425,949       | (12,102,329)  
|Income (loss) for the year                                     | $ 26,660,174 | $ (6,963,384) | $ (5,086,589) | $ (5,812,726) 
|Other comprehensive income                                     |              |               |               |               
|Currency translation adjustment                                | (803,781)    | 428,820       | (674,771)     | (3,415,608)   
|Unrealized gain (loss) on marketable
securities (Note 4)       | -            | 864,452       | (821,101)     | 43,351        
|Realized gain on marketable securities (Note 4)                | (1,636,252)  | -             | -             | (1,636,252)   
|Comprehensive income (loss) for the year                       | $ 24,220,141 | $ (5,670,112) | $ (6,582,461) | $ (10,821,235)
|Basic earnings (loss) per common share                         | $ 0.29       | $ (0.10)      | $ (0.08)      |               
|Diluted earnings (loss) per common share                       | $ 0.28       | $ (0.10)      | $ (0.08)      |               
|Weighted-average number of                                     |              |               |               |               
|common shares outstanding - Basic                              | 93,498,192   | 72,466,079    | 61,978,849    |               
|Weighted-average number of                                     |              |               |               |               
|common shares outstanding - Diluted                            | 95,446,926   | 72,466,079    | 61,978,849    |               





See
accompanying notes to the consolidated financial statements







---





|                                                             |                   |              |               |               |                  |             
|------------------------------------------------------------ | ----------------- | ------------ | ------------- | ------------- | ---------------- | ------------
|PLATINUM GROUP METALS LTD.                                   |                   |              |               |               |                  |             
|(An exploration and development stage company)               |                   |              |               |               |                  |             
|Consolidated Statements of Shareholders' Equity              |                   |              |               |               |                  |             
|August 31, 2007, to August 31, 2010                          |                   |              |               |               |                  |             
|(expressed in Canadian
dollars)                              |                   |              |               |               | Retained         |             
|                                                             |                   |              |               |               | Earnings/Deficit |             
|                                                             |                   |              |               |               | accumulated      |             
|                                                             |                   |              |               | Accumulated   | during           |             
|                                                             | Common shares     |              | other         | exploration & | Total           
|                                                             | without par value | Contributed  | comprehensive | development   | shareholders'   
|                                                             | Shares            | Amount       | surplus       | income        | stage            | equity      
|Balance, August 31, 2007                                     | 60,988,747        | 52,373,858   | 3,006,384     | (2,365,876)   | (22,168,927)     | 30,845,439  
|Financial Instrument transition adjustment                   | -                 | -            | -             | 1,592,901     | -                | 1,592,901   
|Issued on exercise of warrants                               | 850,000           | 1,487,500    | -             | -             | -                | 1,487,500   
|Issued on exercise of stock options                          | 760,500           | 1,334,748    | (512,924)     | -             | -                | 821,824     
|Issued for mineral properties net of costs                   | 50,000            | 163,236      | -             | -             | -                | 163,236     
|Stock options granted                                        | -                 | -            | 1,288,383     | -             | -                | 1,288,383   
|Translation adjustment                                       | -                 | -            | -             | (674,771)     | -                | (674,771)   
|Unrealized loss on marketable securities                     | -                 | -            | -             | (821,101)     | -                | (821,101)   
|Net loss                                                     | -                 | -            | -             | -             | (5,086,589)      | (5,086,589) 
|Balance, August 31, 2008                                     | 62,649,247        | 55,359,342   | 3,781,843     | (2,268,847)   | (27,255,516)     | 29,616,822  
|Issuance of common shares and warrants for cash              | 29,969,770        | 34,174,382   | 5,288,917     | -             | -                | 39,463,299  
|Issued on exercise of stock options                          | 196,650           | 411,592      | (129,952)     | -             | -                | 281,640     
|Stock options granted                                        | -                 | -            | 2,518,107     | -             | -                | 2,518,107   
|Translation adjustment                                       | -                 | -            | -             | 428,820       | -                | 428,820     
|Unrealized gain on marketable securities                     | -                 | -            | -             | 864,452       | -                | 864,452     
|Net loss                                                     | -                 | -            | -             | -             | (6,963,384)      | (6,963,384) 
|Balance, August 31, 2009                                     | 92,815,667        | 89,945,316   | 11,458,915    | (975,575)     | (34,218,900)     | 66,209,756  
|Issued on exercise of stock options                          | 1,149,125         | 1,848,807    | (694,608)     | -             | -                | 1,154,199   
|Stock options granted                                        | -                 | -            | 164,895       | -             | -                | 164,895     
|Translation adjustment                                       | -                 | -            | -             | (803,781)     | -                | (803,781)   
|Realized gain on marketable securities transferred to income |                   |              |               | (1,636,252)   |                  | (1,636,252) 
|Net earnings                                                 | -                 | -            | -             | -             | 26,660,174       | 26,660,174  
|Balance, August 31, 2010                                     | 93,964,792        | $ 91,794,123 | $ 10,929,202  | $ (3,415,608) | $ (7,558,726)    | $ 91,748,991







See
accompanying notes to the consolidated financial statements







---







|                                                        |              |               |               |               
|------------------------------------------------------- | ------------ | ------------- | ------------- | --------------
|PLATINUM GROUP METALS LTD.                              |              |               |               |               
|(An exploration stage company)                          |              |               |               |               
|Consolidated Statements of Cash Flows                   |              |               |               |               
|August 31, 2008 to August 31, 2010                      |              |               |               |               
|(expressed in Canadian dollars)                         |              |               |               | Cumulative    
|                                                        |              |               |               | amount from   
|                                                        |              |               |               | March 16, 2000
|                                                        | Year ended   | Year ended    | Year ended    | to August 31, 
|                                                        | August 31,   | August 31,    | August 31,    | 2010          
|                                                        | 2010         | 2009          | 2008          | (unaudited)   
|OPERATING ACTIVITIES                                    |              |               |               |               
|Income (Loss) for the year                              | $ 26,660,174 | $ (6,963,384) | $ (5,086,589) | $ (5,812,726) 
|Add items not affecting cash                            |              |               |               |               
|Amortization                                            | 104,622      | 117,221       | 132,172       | 715,546       
|Loss on sale of fixed assets                            | -            | -             | -             | 8,930         
|Equity loss and write-down of investment                | -            | -             | -             | 429,275       
|Future income tax expense (recovery)                    | 14,583,288   | (318,010)     | (425,949)     | 12,102,329    
|Gain on sale of marketable securities                   | (2,796,738)  | -             | -             | (2,844,420)   
|Gain on exchange of assets                              | (175,623)    | -             | -             | (175,623)     
|Realized gain on WBJV reorganization                    | (45,619,744) | -             | -             | (45,619,744)  
|Mineral property costs written off                      | -            | -             | -             | 6,430,293     
|Finders fee received in shares (Note 4)                 | -            | -             | -             | (100,000)     
|Gain on sale of mineral property                        | -            | -             | -             | (240,000)     
|Non-cash stock compensation expense                     | 137,600      | 2,100,736     | 580,128       | 5,834,522     
|Net change in non-cash working                          |              |               |               |               
|capital (Note 13(a))                                    | 394,181      | (355,301)     | 252,810       | 484,257       
|                                                        | (6,712,240)  | (5,418,738)   | (4,547,428)   | (28,787,361)  
|                                                       
|FINANCING ACTIVITIES                                    |              |               |               |               
|Performance Bonds                                       | (22,527)     | (11,473)      | (76,965)      | (160,376)     
|Issuance of common shares                               | 1,154,199    | 39,744,939    | 2,309,324     | 93,265,289    
|                                                        | 1,131,672    | 39,733,466    | 2,232,359     | 93,104,913    
|                                                       
|INVESTING ACTIVITIES                                    |              |               |               |               
|Costs to acquire New Millennium Metals                  | -            | -             | -             | (231,325)     
|Acquisition of fixed assets                             | (48,960)     | (2,411)       | (240,609)     | (1,030,199)   
|Acquisition cost of mineral properties                  | (26,460,952) | (18,727)      | (41,881)      | (28,059,365)  
|Acquisition of surface rights                           | (1,881,100)  | (1,953,180)   | (1,287,102)   | (5,121,382)   
|Exploration expenditures, net of recoveries             | (287,571)    | (231,797)     | (388,973)     | (9,092,138)   
|Investment in and advances to WBJV                      | -            | (922,799)     | (8,615,562)   | (22,087,414)  
|Investment in and advances to Active Gold Group Ltd.    | -            | -             | -             | (246,677)     
|Redemption/(acquisition) of short-term investments, net | -            | -             | 2,000,000     | -             
|Proceeds on sale of assets held for sale                | 652,864      | -             | -             | 652,864       
|Proceeds on sale of marketable securities               | 3,006,738    | -             | -             | 3,264,220     
|                                                        | (25,018,981) | (3,128,914)   | (8,574,127)   | (61,951,416)  
|Net increase (decrease) in cash and cash equivalents    | (30,599,549) | 31,185,814    | (10,889,196)  | 2,366,136     
|Cash and cash equivalents, beginning of year            | 32,965,685   | 1,779,871     | 12,669,067    | -             
|Cash and cash equivalents, end of year                  | $ 2,366,136  | $ 32,965,685  | $ 1,779,871   | $ 2,366,136   











See accompanying notes to the consolidated financial statements.





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Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







1.

NATURE OF OPERATIONS

The Company 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 (New Millennium). The Company is an exploration and development company conducting work on mineral properties it has staked or acquired by way of option agreements in Ontario, Canada and the Republic of South Africa.



2.

SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) and include the significant policies outlined below.



(a)

Basis of presentation and principles of consolidation

The financial statements of entities controlled by the Company through voting equity interest, referred to as subsidiaries, are consolidated. Variable interest entities (VIEs), which include, but are not limited to, special purpose entities, trusts, partnerships and other legal structures, as defined by the Accounting Standards Board in Accounting Guideline 15, Consolidation of Variable Interest Entities, are entities in which equity investors do not have the characteristics of a controlling financial interest or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities expected losses and/or residual returns.  The Company does not have any VIEs.



These consolidated financial statements include the accounts of the Company and its principal wholly-owned subsidiaries, Platinum Group Metals (Barbados) Ltd. (PTM Bdos), Platinum Group Metals (RSA) (Pty) Ltd. (PTM RSA) (and in turn PTM RSAs wholly-owned subsidiary Wesplats Holdings (Proprietary) Limited (Wesplats) and the 54.75% owned subsidiary Maseve Investments 11 (Pty) Ltd. (Maseve). PTM RSA holds mineral rights and conducts operations in the Republic of South Africa. Wesplats owns surface rights areas overlying and adjacent to mineral rights held by PTM RSA and on behalf of the Company.  Maseve holds a 100% interest in Projects 1 and 3 of the former Western Bushveld Joint Venture (WBJV).  All significant intercompany balances and transactions have been eliminated upon consolidation.



(b)

Short-term investments

Short-term investments, when held, comprise guaranteed investment certificates with original maturities of more than 90 days and less than one year.



(c)

Mineral properties, surface rights, and deferred exploration and development costs

Mineral properties consist of exploration and mining concessions, options, contracts and associated surface rights. Surface rights that have no associated mineral title and which are owned by the Company outright are shown separately. Acquisition and leasehold costs, exploration costs and surface rights are capitalized until such time as the property is put into production or disposed of either through sale or abandonment. Development expenditures incurred subsequent to the establishment of economic recoverability and upon receipt of project development approval from the Board of Directors are capitalized and included in the carrying amount of the related property. If put into production, the costs of acquisition, exploration
and development will be amortized over the life of the property based on estimated economic reserves. If a property is abandoned, the property and deferred exploration costs are written off to operations.







---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010









Management of the Company reviews and evaluates the carrying value of each mineral property and its mineral investments for impairment annually, or more often if indicators of impairment arise. Where estimates of future net cash flows are available and the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is recognized and assets are written down to fair value.  Where estimates of future net cash flows are not available, management assesses whether the carrying value can be recovered by considering alternative methods of determining recoverable amount. When it is determined that carrying value of a mineral property cannot be recovered it is written down to its estimated fair value.



(d)

Cash and cash equivalents

Cash and cash equivalents consist of cash and short-term deposits, which are readily convertible to cash and have original maturities of 90 days or less.



(e)

Reclamation and closure costs

The Company recognizes the estimated fair value of liabilities for asset retirement obligations including reclamation and closure costs in the period in which they are incurred. A corresponding increase to the carrying amount of the related asset is recorded and amortized over the life of the asset. The liability is adjusted for changes in estimate at each reporting period and is accreted over time to the estimated asset retirement obligation ultimately payable through charges to operations.



The estimates are based on legal and regulatory requirements. It is possible that the Companys estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, the extent of environmental remediation required, changes in technology and the means and cost of reclamation. Management of the Company has determined that there are no significant reclamation liabilities as at period end.



(f)

Income taxes

Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment.



(g)

Earnings (loss) per common share

Basic earnings (loss) per common share are calculated using the weighted average number of common shares outstanding.



The Company uses the treasury stock method for the calculation of diluted earnings per share. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. In periods when a loss is incurred, the effect of potential issuances of shares under options and share purchase warrants would be anti-dilutive, and accordingly basic and diluted loss per share are the same.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(h)

Fixed assets

Fixed assets are recorded at cost and are amortized at the following annual rates:



Computer equipment and software

30% declining balance

Office furniture and equipment

20% declining balance

Vehicles

30% declining balance

Leasehold improvements

2 years straight line



(i)

Measurement uncertainty

The preparation of financial statements in conformity with Canadian generally accepted accounting principles 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 expenditures during the reporting period. Significant items where managements judgement is applied include the assessment of impairment of long-lived assets, amortization, income tax provisions, contingent liabilities, and stock-based compensation, asset retirement obligations and fair value estimates. Actual results could differ from those estimates.



(j)

Translation of foreign currencies

These consolidated financial statements are expressed in Canadian dollars. For integrated foreign operations, monetary assets and liabilities are translated at year end exchange rates and other assets and liabilities are translated at historical rates. Revenues, expenses and cash flows are translated at average exchange rates. Gains and losses on translation of monetary assets and monetary liabilities are charged to operations.



(k)

Stock-based compensation

The fair values for all stock-based awards are estimated using the Black-Scholes model and recorded in operations over the period of vesting. The compensation cost related to stock options granted is recorded in operations or capitalized to mineral properties, as applicable.



Cash received on exercise of stock options is credited to share capital and the amount previously recognized in contributed surplus is reclassified to share capital.



(l)

Financial instruments

The Companys financial instruments are comprised primarily of cash and cash equivalents, amounts receivable, amounts due to/from project partners, performance bonds, and accounts payable and accrued liabilities.  All financial instruments are recognized initially at fair value.  Held-for trading financial assets are measured at fair value with changes in fair value recognized in earnings.  Available-for-sale financial assets are also measured at fair value with changes in fair value recognized in comprehensive income until the investment is derecognized or impaired, at which time the amounts in accumulated comprehensive income are recorded in earnings.



Cash and cash equivalents are accounted for as held for trading.  Accounts receivable, amounts due to/from project partners, performance bonds and accounts payable and accrued liabilities are measured at amortized cost.















---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(m)

New accounting pronouncements

In February 2008, the CICA issued new pronouncements in Section 3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs, establishing revised standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets.  The new standard also provides guidance for  the  treatment  of  preproduction  and  startup  costs  and  requires  that  these  costs  be expensed  as  incurred. The new standard applies to annual and interim financial statements relating to fiscal years beginning on or after October 1, 2008.
Section 3064 was adopted September 1, 2009, and doing so has had no effect.

In July 2009, the CICA approved amendments to Section 3862, Financial Instruments  Disclosures. The amendments require additional fair value disclosure for financial instruments and liquidity risk disclosures. These amendments require a three-level hierarchy that reflects the significance of the inputs used in making fair value assessments as follows:

·

Level 1: Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

·

Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates; and

·

Level 3: Valuations based on significant inputs that are not derived from observable data, such as discounted cash flow methodologies based on internal cash flow forecasts.

There was no material impact upon adoption of this standard.



In January 2009, The CICA issued CICA Handbook Section 1582, Business Combinations, Section 1601, Consolidations, and Section 1602, Non-controlling Interests. These sections replace the former CICA Handbook Section 1581, Business Combinations and Section 1600, Consolidated Financial Statements and establish a new section for accounting for a non-controlling interest in a subsidiary. CICA Handbook Section 1582 establishes standards for the accounting for a business combination, and states that all assets and liabilities of an acquired business will be recorded at fair value. Obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. The section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. 
All three sections must be adopted concurrently. The Company is currently evaluating the impact of adopting the sections.



CICA Handbook Section 1625, has been amended as a result of issuing Sections, 1582 1601 and 1602.  These amendments are effective for the Company for its interim and annual financial statements beginning after January 3, 2011.  The Company is assessing the impact of these changes on its consolidated financial statements.



In June 2009, the CICA issued amendments to CICA Handbook Section 1506.  It was amended to exclude from its scope changes in accounting policies upon the total replacement of an entitys primary basis of accounting relating to fiscal years beginning on or after July 1, 2009.  The adoption of IFRS is not expected to qualify as an accounting change under Section 1506.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







3.

AMOUNTS RECEIVABLE

|                                                  |  |               |  |              
|------------------------------------------------- |  | ------------- |  | -------------
|                                                  |  | Aug. 31, 2010 |  | Aug. 31, 2009
|Expenditure advances receivable                   |  | $ 8,486       |  | $ 3,581      
|Due from related parties (Note 10 (d) and (e ))   |  | 36,089        |  | 17,172       
|Goods and services tax recoverable                |  | 126,803       |  | 37,160       
|Receivable from sale of assets (Note 6(c))        |  | 652,864       |  | -            
|South African value added tax ("VAT") recoverable |  | 444,736       |  | 272,973      
|Interest receivable                               |  | 1,570         |  | 13,652       
|                                                  |  | $ 1,270,548   |  | $ 344,538    
|                                                  |  |               |  |              





4.

AVAILABLE-FOR-SALE SECURITIES



The Company sold all of its marketable securities during the year. At August 31, 2010 the Company has a $Nil balance in this account. These securities had been accounted for as available-for-sale at the previous year-end August 31, 2009 as follows:



|                            |                  |           |                                  |               
|--------------------------- | ---------------- | --------- | -------------------------------- | --------------
|August 31, 2009             | Number of
Shares | Cost ($)  | Accumulated Unrealized
Gains ($) | Fair
Value ($)
|                            |                  |           |                                  |               
|MAG Silver Corp.            | 100,000          | 50,000    | 445,000                          | 495,000       
|West Timmins Mining Inc.    | 800,001          | 160,000   | 1,480,002                        | 1,640,002     
|Total Marketable Securities | 210,000          | 1,925,002 | 2,135,002                       



On November 6, 2009 pursuant to an agreement between West Timmins Mining Inc. and Lake Shore Gold Corp., the Company exchanged its 800,001 shares in West Timmins Mining Inc. for common shares in Lake Shore Gold Corp. at a share exchange rate of 1 West Timmins share to each 0.73 share of Lake Shore Gold Corp. A gain of $2,100,080 was realized on the exchange of shares.
In the second quarter of 2010 the Company sold its 584,000 shares of Lake Shore Gold Corp. realizing a further $44,080 gain on the sale of shares.  $222,337 was allocated to AOCI from this sale.



During the year the Company sold 100,000 MAG Silver Corp. shares for a realized gain of $652,578. $66,413 was allocated to AOCI from this sale.



MAG Silver Corp. and West Timmins Mining Inc. are related parties of the Company, as discussed in Note 10.



5.

MINERAL PROPERTIES





|                             |  |               |  |              
|---------------------------- |  | ------------- |  | -------------
|                             |  | Aug 31, 2010  |  | Aug. 31, 2009
|Projects 1 & 3 (a)           |  | $ 109,588,950 |  | -            
|Other mineral properties (b) |  | 6,437,564     |  | 6,057,034    
|                             |  |               |  |              
|                             |  | $ 116,026,514 |  | $ 6,057,034  
|                             |  |               |  |              





a)

Projects 1 & 3



On October 26, 2004 the Company entered into the WBJV with a subsidiary of Anglo Platinum Limited (Anglo) and Africa Wide Mineral Prospecting and Exploration (Pty) Limited (Africa Wide) to pursue platinum exploration and development on combined mineral rights covering approximately 67 square kilometres on the Western Bushveld Complex of South Africa. Later the total area of the WBJV became approximately 72
square kilometres through further property contributions by Anglo. The Company and Anglo Platinum each held a 37% working interest in the
WBJV, while Africa Wide held a 26% working interest.  The area of the WBJV was comprised of three functional areas described as Project 1 (100%
WBJV), Project 2 (50% WBJV: 50% Wesizwe Platinum Ltd.) and Project 3 (100% WBJV).  In April 2007 the shareholders of Africa Wide sold 100% of their company to Wesizwe Platinum Ltd (Wesizwe) and since then Wesizwe has become responsible for all of the rights and obligations of Africa Wide.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010









The Company published a Feasibility Study for Project 1 of the WBJV in July 2008 and later an Updated Feasibility Study in October 2009.  Based on the WBJV resource estimate contained in the July 2008 Feasibility Study, and under the terms of the original WBJV agreement, each party was allocated an equalization amount due or payable based upon their contribution of measured, indicated, and inferred ounces of combined platinum, palladium, rhodium and gold (4E) from their contributed properties. On April 22, 2010 the Company paid an equalization amount due to Anglo in the amount of $ 24.83 million (R 186.26 million).



Also on April 22, 2010, the partners of the WBJV completed a transaction first announced September 2, 2008 whereby the WBJV was dissolved and its underlying assets were reorganized with the following outcomes:



·

Wesizwe acquired all of Anglos rights and interests to the mineral rights underlying the WBJV, retained Anglos mineral rights to Project 2, and then transferred all of Anglos mineral rights underlying Projects 1 and 3 into project operating company Maseve.  The Company also transferred its interests in the mineral rights underlying Project 1 into Maseve, the result being that Wesizwe retained 100% of Project 2 and that Maseve obtained 100% of Projects 1 and 3.

·

In exchange for its 18.5% of Project 2 the Company effectively received a 17.75% interest in Maseve.  The Company also received a 37% interest in exchange for its share of Projects 1 and 3, bringing its holdings in Maseve to 54.75%.  Wesizwe received a 45.25 % initial interest in Maseve.

·

The Company has a right to acquire a further 19.25% interest in Maseve for subscriptions in the amount of R 408.8 million (approx. $59.52 million as of November 22, 2010), thereby allowing the Company to increase its shareholding in Maseve to 74%. The subscription funds paid into Maseve by the Company will be held in escrow to be applied towards Wesizwes capital requirements for Projects 1 and 3.  The cash subscriptions into Maseve are due by January 17, 2011 or the Company will lose the right to increase its interest to 74%.  The Company may make partial subscriptions if it so chooses.



Pursuant to the terms of the WBJV Agreement and the WBJV Restructuring, the Company agreed to reimburse Wesizwe for past exploration costs, not including overhead costs, related to Project 2.  Based on information provided by Wesizwe, the Company has accrued an amount due to Wesizwe of R9.72 million (approximately Cdn$1.41 million as at November 22, 2010) against amounts due  from Wesizwe for its share of costs related to the WBJV, resulting in a net payable of $443,614.



The sale of the Companys 18.5% interest in Project 2 was accounted for as an arms length transaction at a fair value of $65.42 million on April 22, 2010, versus an historic cost of $19.80 million, for a gain of $45.62 million.  The transfer of the Companys 37% interest in Projects 1 and 3 into Maseve was accounted for as a reorganization of existing business and was transferred into Maseve at book cost.  The April 22, 2010 transactions qualified for relief from capital gains tax in accordance with South African tax law.













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





The fair value of the additional 17.25% interest in Maseve was estimated by calculating the net present value of Project 1 cash flows extracted from the updated feasibility study using independently validated consensus metal prices, a discount rate of 10%, and a Rand to $US exchange rate of 8:1. The fair values are highly sensitive to changes in the key assumptions.



The Company consolidated the financial statements of Maseve from the effective date of the reorganization.  The portion of Maseve not owned by the Company and is accounted for as a non-controlling interest.

b) Other mineral properties



Year ended August 31, 2010

|                               |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|------------------------------ | ------------ | --------- |  | ----------- |  | --------- |  | --------- |  | ----------- |  | ------------ |  | --------- |  | -----------
|                              
|                               | South Africa |           |  |             |  |           |  |           |  |             | 
|                               |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|                               |              | Tweespalk |  | War Springs |  | Other     |  | LDI River |  | Shelby Lake |  | South Legris |  | Other     |  | Total      
|Acquisition costs              |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|of mineral rights              |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|Balance, beginning of year     |              | $ 59,995  |  | $ 144,498   |  | $ 3,321   |  | $ 598,571 |  | $ 313,864   |  | $ 60,000     |  | $ -       |  | $ 1,180,249
|Incurred during year           |              | 23,746    |  | 20,455      |  | 16,790    |  | -         |  | 7,992       |  | -            |  | 23,976    |  | 92,959     
|Balance, end of year           |              | $ 83,741  |  | $ 164,953   |  | $ 20,111  |  | $ 598,571 |  | $ 321,856   |  | $ 60,000     |  | $ 23,976  |  | $ 1,273,208
|                               |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|Deferred exploration costs     |              |           |  |             |  |           |  |           |  |             |  |              |  |           |  |            
|Assays and geochemical         |              | $ -       |  | $ 120,284   |  | $ 48,839  |  | $ -       |  | $ -         |  | $ -          |  | $ -       |  | $ 169,123  
|Drilling                       |              | -         |  | 839,149     |  | 103,373   |  | -         |  | -           |  | -            |  | -         |  | 942,522    
|Geological                     |              | 971       |  | 216,516     |  | 368,636   |  | 2,800     |  | 85,288      |  | 8,231        |  | 142,439   |  | 824,881    
|Maps, fees and licenses        |              | -         |  | -           |  | -         |  | -         |  | -           |  | -            |  | -         |  | -          
|Site administration            |              | -         |  | 134,210     |  | 18,588    |  | -         |  | -           |  | -            |  | -         |  | 152,798    
|Travel                         |              | -         |  | 78,593      |  | 63,658    |  | -         |  | -           |  | -            |  | -         |  | 142,251    
|                               |              | 971       |  | 1,388,752   |  | 603,094   |  | 2,800     |  | 85,288      |  | 8,231        |  | 142,439   |  | 2,231,575  
|Balance, beginning of year     |              | 892,135   |  | 2,271,260   |  | 632,011   |  | 363,755   |  | 563,687     |  | 153,937      |  | -         |  | 4,876,785  
|Recoveries                     |              | -         |  | (1,388,752) |  | (555,252) |  | -         |  | -           |  | -            |  | -         |  | (1,944,004)
|Balance, end of year           |              | $ 893,106 |  | $ 2,271,260 |  | $ 679,853 |  | $ 366,555 |  | $ 648,975   |  | $ 162,168    |  | $ 142,439 |  | $ 5,164,356
|Total Other Mineral Properties |              | $ 976,847 |  | $ 2,436,213 |  | $ 699,964 |  | $ 965,126 |  | $ 970,831   |  | $ 222,168    |  | $ 166,415 |  | $ 6,437,564



Year ended August 31, 2009

|                           |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|-------------------------- | ------------ | --------- |  | ----------- |  | --------- |  |  |  | --------- |  | ----------- |  | ------------ |  | -----------
|                          
|                           | South Africa |           |  |             |  |           |  |  |  |           | 
|                           |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|                           |              | Tweespalk |  | War Springs |  | Other     |  |  |  | LDI River |  | Shelby Lake |  | South Legris |  | Total      
|Acquisition costs          |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|of mineral rights          |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|Balance, beginning of year |              | $ 52,037  |  | $ 134,358   |  | $ 2,692   |  |  |  | $ 598,571 |  | $ 313,864   |  | $ 60,000     |  | $ 1,161,522
|Incurred during year       |              | 7,958     |  | 10,140      |  | 629       |  |  |  | -         |  | -           |  | -            |  | 18,727     
|Less amounts written off   |              | -         |  | -           |  | -         |  |  |  | -         |  | -           |  | -            |  | -          
|Balance, end of year       |              | $ 59,995  |  | $ 144,498   |  | $ 3,321   |  |  |  | $ 598,571 |  | $ 313,864   |  | $ 60,000     |  | $ 1,180,249
|                           |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|Deferred exploration costs |              |           |  |             |  |           |  |  |  |           |  |             |  |              |  |            
|Assays and geochemical     |              | $ -       |  | $ 88,570    |  | $ 14,539  |  |  |  | $ 1,458   |  | $ 2,453     |  | $ 7,531      |  | $ 114,551  
|Drilling                   |              | -         |  | 434,764     |  | -         |  |  |  | -         |  | 47,566      |  | 47,566       |  | 529,896    
|Geological                 |              | 777       |  | 160,620     |  | 82,625    |  |  |  | 3,655     |  | 13,083      |  | 13,083       |  | 273,843    
|Maps, fees and licenses    |              | -         |  | -           |  | -         |  |  |  | -         |  | 67          |  | -            |  | 67         
|Site administration        |              | 157       |  | 130,174     |  | 428       |  |  |  | -         |  | -           |  | -            |  | 130,759    
|Travel                     |              | -         |  | 17,740      |  | 85        |  |  |  | -         |  | -           |  | -            |  | 17,825     
|                           |              | 934       |  | 831,868     |  | 97,677    |  |  |  | 5,113     |  | 63,169      |  | 68,180       |  | 1,066,941  
|Balance, beginning of year |              | 891,201   |  | 2,235,318   |  | 573,552   |  |  |  | 358,642   |  | 500,518     |  | 85,757       |  | 4,644,988  
|Recoveries                 |              | -         |  | (795,926)   |  | (39,218)  |  |  |  | -         |  | -           |  | -            |  | (835,144)  
|Balance, end of year       |              | $ 892,135 |  | $ 2,271,260 |  | $ 632,011 |  |  |  | $ 363,755 |  | $ 563,687   |  | $ 153,937    |  | $ 4,876,785
|Total Mineral Properties   |              | $ 952,130 |  | $ 2,415,758 |  | $ 635,332 |  |  |  | $ 962,326 |  | $ 877,551   |  | $ 213,937    |  | $ 6,057,034















---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(1)

Republic of South Africa

(i)

War Springs and Tweespalk

On June 3, 2002, the Company acquired an option to 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.  The Company now holds New Order prospecting permits on 100% of this territory.  Acquisition and exploration costs on these properties to August 31, 2010 total $3,413,060 (2009 - $3,367,888).



The Company can settle the vendors residual interests in these mineral rights at any time for US$690 per hectare. The Company pays annual 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.



Black Economic Empowerment groups Africa Wide, a subsidiary of Wesizwe Platinum Ltd. and Taung Minerals (Pty) Ltd., a subsidiary of Platmin Limited, have each acquired a 15% interest in the Companys rights to the War Springs project carried to bankable feasibility. The Company retains a net 70% project interest.  Africa Wide also has a 30% participating interest in the Tweespalk property.



On March 5, 2009 the Company announced an agreement with the Japan Oil, Gas and Metals National Corporation (JOGMEC), an incorporated administrative institution of the Government of Japan,
whereby they may earn up to a 35% interest in the Companys rights to the War Springs project for an optional work commitment of US$10 million over 5 years. Total expenditures incurred by JOGMEC to August 31, 2010 amounted to approximately $2,184,678 (2009 - $795,926).  An amount of $186,416 in cash received from JOGMEC for work on this project remained to be spent at year end and was recorded as due to JOGMEC (2009 - $224,482 receivable from JOGMEC) as well as an amount for the Waterburg project which is stated below.



(ii)

Other



During 2009 the Company acquired by staking various prospecting permits in South Africa including the Sable Joint Venture project area on the Western Limb of the Bushveld Complex west of Pretoria and the Waterberg project area on the far Northern Limb of the Bushveld Complex.



In October 2009 the Company entered an agreement with JOGMEC and Mnombo Wethu Consultants CC (Mnombo) whereby JOGMEC may earn up to a 37% interest in the Waterberg project for an optional work commitment of US$3.2 million over 4 years, while at the same time in exchange for matching JOGMECs expenditures on a 26/74 basis, Mnombo may earn a 26% interest in the project. If required the Company has agreed to loan Mnombo their first $87,838 in project funding and the Company and JOGMEC may assist Mnombo to acquire commercial loans to fund their ongoing requirements, or may choose to allow Mnombo to defer those costs against their share of future proceeds from the project.  Total expenditures incurred by JOGMEC to August 31, 2010 amounted to approximately $555,252.  An amount of
$237,040 in cash received from JOGMEC for work on this project remained to be spent at year end and was recorded as due to JOGMEC as well as an amount for the Warsprings project which is stated above.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(2)

Ontario, Canada

(i)

Lac des Iles (LDI) River

On May 5, 2000, the Company 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 underlying 2.0% Net Smelter Return Royalties. 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.



(ii)

South Legris

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.



(iii)

Shelby Lake

On June 28, 2000, the Company 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), issue 30,303 shares (issued) and complete $500,000 in exploration expenditures over a four-year period. 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, of which the Company may buy back one half for $500,000.



(iv)

Other

The Company has staked other properties in the Lac des Isle camp and has paid $31,968 for staking these claims.



(3)

Title to mineral properties

Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Companys title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







6.

FIXED ASSETS



(a)

Equipment, Leaseholds and Vehicles

|                                |  |                 |  |              |  |          
|------------------------------- |  | --------------- |  | ------------ |  | ---------
|                                |  | August 31, 2010
|                                |  |                 |  | Accumulated  |  | Net Book 
|                                |  | Cost            |  | Amortization |  | Value    
|Computer equipment and software |  | $ 512,682       |  | $ 387,025    |  | $ 125,657
|Leasehold improvements          |  | 38,641          |  | 31,457       |  | 7,184    
|Office furniture and equipment  |  | 266,643         |  | 137,140      |  | 129,503  
|Vehicles                        |  | 82,447          |  | 35,374       |  | 47,073   
|                                |  | $ 900,413       |  | $ 590,996    |  | $ 309,417
|                                |  |                 |  |              |  |          





|                                |  |                 |  |              |  |          
|------------------------------- |  | --------------- |  | ------------ |  | ---------
|                                |  | August 31, 2009
|                                |  |                 |  | Accumulated  |  | Net Book 
|                                |  | Cost            |  | Amortization |  | Value    
|Computer equipment and software |  | $ 495,049       |  | $ 337,386    |  | $ 157,663
|Leasehold improvements          |  | 38,642          |  | 28,423       |  | 10,219   
|Office furniture and equipment  |  | 257,445         |  | 112,977      |  | 144,468  
|Vehicles                        |  | 85,818          |  | 33,089       |  | 52,729   
|                                |  | $ 876,954       |  | $ 511,875    |  | $ 365,079





(b)

Surface Rights



In 2004 the Company acquired surface and mineral rights to 365.64 hectares of the farm Elandsfontein 102 JQ in exchange for total payments of approximately $1.4 million.  The benefit of these rights became part of the WBJV under the original 2004 agreement.  The Elandsfontein mineral titles were transferred to project operating company Maseve on April 22, 2010 while the surface rights, valued at half of the original acquisition cost (approx. $715,000), remain under title to the Company and a 45.25% credit of approximately $320,000 was applied to amounts due to/from Wesizwe
in recognition of their attributable portion of the surface rights as at April 22, 2010.



During 2008 the Company purchased surface rights adjacent to the WBJV Project 1 deposit area measuring 216.27 hectares for Rand 8.0 million (approx. $1.10 million) and the Company also acquired surface rights directly over a portion of the WBJV Project 1 deposit area measuring 358.79 hectares for an amount of Rand 15.07 million plus legal and interest charges of Rand 621,214 for a total of Rand 15.69 (approx. $2.14 million).  The rights to these two properties are to the benefit of the Company alone and are distinct from the 365.64 hectare Elandsfontein Farm described above.



On August 12, 2010 the Company (once again alone) acquired the option to purchase surface rights covering 1,713 hectares, including accommodation facilities and overlaying the area of the planned Project 1 Platinum Mine, for Rand 130.0 million ($18.80 million at the time).  A non-refundable deposit of Rand 13.0 million (approx. $1.88 million at the time) was paid to the Vendor on August 26, 2010 and will be set against the final purchase amount. This deposit has been recorded in Surface Rights. The purchase price balance of Rand 117.0 million is subject to the grant of a mining authorization within one year of the deposit date.  PTM may waive the condition precedent at any time.  The Company can extend the option to purchase due date for a further year for a second Rand 13.0 million payment against the purchase price.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(c)

Rock Winders



During 2008 the Company acquired two rock winders at a cost of R 16.6 million (approx. $2.3 million) for use on a possible shaft facility for Project 1 of the WBJV.  Later designs excluded the use of winders and these winders have been held for sale and under title to the Company.  On April 22, 2010 the Company applied a 45.25% credit for R7.51 million (approx. $1.08 million) to the amount due to/from Wesizwe in recognition of their attributable share of the winders on that date.  During the year the Company sold one winder for US $1.28 million (approx. $1.30) of which a non-refundable deposit of 50% was received on June 23, 2010. Subsequent to the end of the year on November 17, 2010 the Company received the final payment.



7.

SHARE CAPITAL

(a)

Authorized

Unlimited common shares without par value



(b)

Issued and outstanding

At August 31, 2010 there were 93,964,792 shares outstanding.



During the year ended August 31, 2010:



(i)

1,149,125 stock options were exercised for proceeds of $1,154,199.



During the year ended August 31, 2009:



(ii)

the Company closed a brokered private placement on June 16, 2009 of 24,999,300 units for gross proceeds of $35,002,020 at a price of $1.40 per unit.  Each unit consisted of one common share and one-half of one common share purchase warrant.  Of the gross proceeds $29,713,103 was assigned to the common shares issued and $5,288,917 to the warrants.  Each whole warrant entitles the holder to purchase one additional common share at an exercise price of $1.75 until December 16, 2010.  The Company paid the underwriters a fee of $2,100,121 representing 6% of the aggregate gross proceeds of the offering. Other issue costs of $746,681 related to TSX and NYSE Alternext filing fees, underwriters expenses and legal fees.



(iii)

the Company closed a non-brokered private placement in October 2008 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.
Other issue costs of $117,148 related to TSX and NYSE Alternext filing fees and legal fees.



(iv)

196,650 stock options were exercised for proceeds of $281,640.



(c)

Incentive stock options



The Company has entered into Incentive Stock Option Agreements (Agreements) with directors, officers and employees. Under the terms of the Agreements, the exercise price of each option is set at a minimum, at the fair value of the common shares at the date of grant. Stock options granted to certain employees, directors and officers of the Company vest on average at an amount of 25% per six month period, while others vest immediately.













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





The following tables summarize the Companys outstanding stock options:



|         |  |                |  |              |  |               
|-------- |  | -------------- |  | ------------ |  | --------------
|         |  |                |  | Weighted     |  |               
|         |  | Number         |  | Average      |  | Number        
|         |  | Outstanding at |  | Remaining    |  | Exercisable at
|Exercise |  | August 31,     |  | Contractual  |  | August 31,    
|Price    |  | 2010           |  | Life (Years) |  | 2010          
|         |  |                |  |              |  |               
|1.40     |  | 1,379,000      |  | 3.95         |  | 1,379,000     
|1.50     |  | 9,500          |  | 0.36         |  | 9,500         
|1.60     |  | 1,492,000      |  | 3.13         |  | 1,492,000     
|1.85     |  | 175,000        |  | 0.98         |  | 175,000       
|1.95     |  | 50,000         |  | 3.43         |  | 50,000        
|2.27     |  | 10,000         |  | 3.44         |  | 10,000        
|2.57     |  | 885,000        |  | 1.38         |  | 885,000       
|4.15     |  | 150,000        |  | 2.15         |  | 150,000       
|4.40     |  | 850,000        |  | 2.15         |  | 850,000       
|         |  | 5,000,500      |  | 2.77         |  | 5,000,500     
|         |  |                |  |              |  |               





The weighted average exercise price of the exercisable options at year end was $2.28.



|                                       |  |             |  |         
|-------------------------------------- |  | ----------- |  | --------
|                                       |  |             |  | Weighted
|                                       |  |             |  | Average 
|                                       |  | Number      |  | Exercise
|                                       |  | of Shares   |  | Price   
|Options outstanding at August 31, 2008 |  | 3,857,875   |  | 2.56    
|Granted                                |  | 3,279,000   |  | 1.52    
|Exercised                              |  | (196,650)   |  | 1.43    
|Forfeited                              |  | (790,600)   |  | 2.54    
|Options outstanding at August 31, 2009 |  | 6,149,625   |  | $ 2.04  
|Granted                                |  | -           |  | -       
|Exercised                              |  | (1,149,125) |  | 1.00    
|Forfeited                              |  | -           |  | -       
|Options outstanding at August 31, 2010 |  | 5,000,500   |  | $ 2.28  





During the year ended August 31, 2010 the Company granted no stock options (August 31, 2009  3,279,000).  The Company recorded $164,895 ($137,600 expensed and $27,295 capitalized to the WBJV, not including gross up future income tax  liability of $10,900 (August 31, 2009 - $165,460)) of compensation expense relating to stock options vested in this period (August 31, 2009 - $2,518,108 ($2,100,736 expensed and $417,371 capitalized to the WBJV)). Cash received from the exercise of stock options during the year ended August 31, 2010 totalled $1,154,199 (August 31, 2009 - $281,640).



The Company used the Black-Scholes model to determine the grant date fair value of stock options granted. The following weighted average assumptions were used in valuing stock options granted during the year ended August 31, 2009:



|                         |  |  |  |      
|------------------------ |  |  |  | -----
|Risk-free interest rate  |  |  |  | 2.59 
|Expected life of options |  |  |  | 3.21 
|Annualized volatility    |  |  |  | 77.97
|Dividend rate            |  |  |  | 0.00%













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(d)

Share purchase warrants



During the year ended August 31, 2009, 12,537,150 purchase warrants were issued at $1.75 as a part of the placement on June 16, 2009 as described above. These warrants have an expiry date of December 16, 2010. None of the warrants had been exercised as of August 31, 2010. Subsequent to August 31, 2010, a total of 4,416,900 of these warrants were exercised.  There are no other warrants outstanding.



8.

CAPITAL RISK MANAGEMENT

The Companys objectives in managing its liquidity and capital are to safeguard the Companys ability to continue as a going concern and provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, contributed surplus, accumulated other comprehensive income and accumulated deficit.



The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may issue new shares, issue new debt, acquire or dispose of assets.



In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary based on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company does not currently declare or pay out dividends.



As at August 31, 2010, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements.



9.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other price risks.



(a)

Credit risk



Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amounts owed to the counterparty by the Company where a legal right of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements.



(i)

Trade credit risk



Total credit risk is limited to the carrying amount of amounts receivable.



(ii)

Cash and cash equivalents



In order to manage credit and liquidity risk we invest only in term deposits with Canadian Chartered and South African banks that have maturities of three months or less. A South African Bank Rand account held in the United Kingdom is used for holding Rand denominations only, and is controlled entirely by PTM. Deposit limits are also established based on the type of investment, the counterparty and the credit rating.













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





(b)

Liquidity risk



The Company has in place a planning and budgeting process to help determine the funds required to support the Company's normal operating requirements and its exploration and development plans. The annual budget is approved by the Board of Directors.



Future exploration, development, mining, and processing of minerals from the Companys properties will require additional financing.  The Company has no credit facilities in place at this time, although it is currently evaluating possible debt financing.  The only other current source of funds available to the Company is the issuance of additional equity capital, which if available, may result in substantial dilution to existing shareholders. There is no assurance that such funding will be available to the Company, or that it will be obtained on terms favourable to the Company.  Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration, development, or production on any or all of the Companys properties, or even a loss of property interests.



(c)

Currency risk



The Companys functional currency is the Canadian dollar, while its operations are in both Canada and South Africa; therefore the Company's net earnings (losses) and other comprehensive earnings (losses) are impacted by fluctuations in the value of foreign currencies in relation to the Canadian dollar. The Company's significant foreign currency exposures on financial instruments comprise cash and cash equivalents, performance bonds, accounts receivable, amounts due to Wesizwe, and accounts payable and accrued liabilities. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.



The Company's net loss and other comprehensive loss are affected by changes in the exchange rate between its operating currencies and the Canadian dollar.  At August 31, 2010, based on this exposure a 10% change in the Canadian dollar versus Rand foreign exchange rate would give rise to a change in income for the year presented of approximately $38,500. During the year, a large foreign exchange loss occurred due to the drop in the value of the Rand relative to the Canadian dollar immediately before an equalization payment was made in Rand to Anglo Platinum on April 22, 2010. The foreign exchange loss related to holding this money in Rand prior to this transaction was approximately $1 million.  Under normal business operations, large amounts of cash are not held in Rand to reduce the currency risks to the Company.



(d)

Interest rate risk



The Companys interest revenue earned on cash and cash equivalents and on short term investments is exposed to interest rate risk. At August 31, 2010, based on this exposure a 1% change in the average interest rate would give rise to an increase/decrease in the earnings for the year of approximately $24,000.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







10.

RELATED PARTY TRANSACTIONS

Transactions with related parties are as follows:



(a)

During the year, $679,121 (2009 - $385,967, 2008 - $449,807) was paid to non-independent directors for salary, consulting and bonus.  During the year, an additional $88,000 (2009 - $75,000, 2008 - $75,000) was paid to independent directors for annual and meeting fees. At August 31, 2010, $8,000 was included in accounts payable (2009 - $45,308, 2008 - $75,000).



(b)

The Company received $64,347 (2009 - $135,895, 2008 - $135,895) during the year from MAG Silver Corp. (MAG), a company with three directors in common.  Amounts receivable at the end of the year include an amount of $Nil (2009 - $4,408, 2008 - $1,819) due from MAG.
MAG terminated its service agreement with the Company on December 31, 2009.



(c)

During the year the Company accrued or received payments of $8,000 (2009  $38,000, 2008 - $108,000) from West Timmins Mining Inc. (WTM), a company that had three directors in common and an officer in common, for administrative services. Amounts receivable at the end of the year includes an amount of $Nil (2009 - $12,768, 2008 - $997). This agreement was terminated at December 15, 2009 after the amalgamation by plan of arrangement between Lakeshore Gold Corp. and WTM in November 2009.



(d)

During the year the Company accrued or received payments of $46,750 (2009 - $Nil, 2008 -$Nil) from West Kirkland Mining Inc. (WKM), a company with three directors in common, for administrative services. Amounts receivable at the end of the year includes an amount of $12,235 (2009 - $Nil, 2008 - $Nil).



(e)

During the year the Company accrued or received payments of $59,500 (2009 - $Nil, 2008 - $Nil) from Nextraction Energy Corp. (NE), a company with three directors in common, for administrative services. Amounts receivable at the end of the period includes an amount of $23,854 (2009 - $Nil, 2008 -$Nil).



(f)

The Company entered into an office lease agreement with Anthem Works Ltd. (Anthem), a company with a director in common in 2005. During the year ended August 31, 2010 the Company accrued or paid Anthem $86,879 under the office lease agreement (2009 - $86,849, 2008 - $88,382).



All amounts in Amounts receivable and Accounts payable owing to or from related parties are non-interest bearing with no specific terms of repayment.



These 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.



11.

CONTINGENCIES AND COMMITMENTS



The Companys remaining minimum payments under its office and equipment lease agreements in Canada and South Africa, which it has entered into for the years ending on August 31, are as follows:





|                |  |         
|--------------- |  | --------
|August 31, 2011 |  | 32,179  
|August 31, 2012 |  | 1,694   
|                |  | $ 33,873
|                |  |         















---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







12.

SUPPLEMENTARY CASH FLOW INFORMATION

Net change in non-cash working capital

|                           |  |               |  |               |  |              
|-------------------------- |  | ------------- |  | ------------- |  | -------------
|                           |  |               |  |               |  |              
|                           |  | Year Ended    |  | Year Ended    |  | Year Ended   
|                           |  | Aug. 31, 2010 |  | Aug. 31, 2009 |  | Aug. 31, 2008
|Amounts receivable         |  | $ (273,146)   |  | $ (253,844)   |  | $ 103,401    
|Prepaid expenses and other |  | (18,570)      |  | 41,263        |  | (6,620)      
|Accounts payable           |  | 685,897       |  | (142,720)     |  | 156,029      
|                           |  | $ 394,181     |  | $ (355,301)   |  | $ 252,810    
|                           |  |               |  |               |  |              





13.

SEGMENTED INFORMATION



The Company operates in one operating segment, that being exploration on mineral properties. Segmented information presented on a geographic basis follows:



Assets



|             |  |               |  |             
|------------ |  | ------------- |  | ------------
|             |  | August 31,    |  | August 31,  
|             |  | 2010          |  | 2009        
|             |  |               |  |             
|Canada       |  | $ 5,592,110   |  | $ 37,143,004
|South Africa |  | 121,398,893   |  | 29,927,793  
|             |  | $ 126,991,003 |  | $ 67,070,797
|             |  |               |  |             





Substantially all of the Companys capital expenditures are made in the South African geographical segment.



Results of Operations



|             |  |               |  |               |  |              
|------------ |  | ------------- |  | ------------- |  | -------------
|             |  | Year Ended    |  | Year Ended    |  | Year Ended   
|             |  | Aug. 31, 2010 |  | Aug. 31, 2009 |  | Aug. 31, 2008
|Canada       |  | $ (1,980,397) |  | $ (5,478,509) |  | $ (3,464,337)
|South Africa |  | 28,640,571    |  | (1,484,875)   |  | (1,622,252)  
|             |  | $ 26,660,174  |  | $ (6,963,384) |  | $ (5,086,589)
|             |  |               |  |               |  |              









---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







14.

INCOME TAXES

The provision for income taxes reported differs from the amounts computed by applying statutory Canadian federal and provincial tax rates to the loss before tax provision due to the following:



|                                                     |  |                |  |             |  |            
|---------------------------------------------------- |  | -------------- |  | ----------- |  | -----------
|                                                     |  | 2010           |  | 2009        |  | 2008       
|                                                     |  |                |  |             |  |            
|Statutory tax rates                                  |  | 29.00%         |  | 30.17%      |  | 32.00%     
|                                                     |  |                |  |             |  |            
|Recovery of income taxes computed at statutory rates |  | $ (11,960,605) |  | $ 2,203,883 |  | $ 1,775,959
|Changes in valuation allowance                       |  | (1,322,656)    |  | (864,210)   |  | (683,415)  
|Effect of lower tax rates in foreign jurisdictions   |  | (429,460)      |  | (32,699)    |  | (66,007)   
|Non-deductible expenses                              |  | (334,692)      |  | (638,247)   |  | (195,057)  
|Other                                                |  | (535,875)      |  | (350,717)   |  | (405,531)  
|Future income tax (expense) recovery                 |  | $ (14,583,288) |  | $ 318,010   |  | $ 425,949  
|                                                     |  |                |  |             |  |            



The approximate tax effect of the temporary differences that gives rise to the Companys future income tax assets and liability are as follows:



|                                                |  |                |  |                 
|----------------------------------------------- |  | -------------- |  | ----------------
|                                                |  | 2010           |  | 2009            
|Future income tax assets                        |  |                |  |                 
|Operating loss carryforwards                    |  | $ 13,403,828   |  | $ 4,298,432     
|Fixed assets                                    |  | 59,274         |  | 55,063          
|Mineral properties                              |  | 270,235        |  | 4,346,454       
|Share issuance costs                            |  | 486,782        |  | 691,422         
|                                                |  | 14,220,119     |  | 9,391,371       
|                                                |  |                |  |                 
|Valuation allowance on future income tax assets |  | (5,666,617)    |  | (8,647,412)     
|                                                |  | $ 8,553,502    |  | $  
    743,959 
|                                                |  |                |  |                 
|Future income tax liability                     |  |                |  |                 
|Investment in WBJV                              |  | -              |  | (455,209)       
|Marketable securities                           |  | -              |  | (288,750)       
|Mineral Properties                              |  | (30,376,024)   |  | -               
|                                                |  | $ (30,376,024) |  | $ (743,959)     
|                                                |  | $ (21,822,522) |  | $         
    -
|                                                |  |                |  |                 



At August 31, 2010, the Company has unrecognized non-capital loss carry forwards available to offset future taxable income in Canada of $19 million, which expire at various dates from 2011 to 2030.



The above estimated future tax liability is based on managements determination ofthe tax basis of the WBJV versus the carrying amount for accounting purposes. Thedetermination of these amounts and the resulting deferred tax liability remainssubject to measurement uncertainty.







---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







15.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES



These consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from US GAAP. The significant differences between Canadian and US GAAP affecting the Companys consolidated financial statements are summarized as follows:



Consolidated Balance Sheets

|                                                         |  |               |  |              
|-------------------------------------------------------- |  | ------------- |  | -------------
|                                                         |  | Aug. 31, 2010 |  | Aug. 31, 2009
|                                                         |  |               |  |              
|Total assets under Canadian GAAP                         |  | $ 126,991,003 |  | $ 67,070,797 
|Decrease due to lower investment in WBJV (a)             |  | -             |  | (16,578,389) 
|Decrease in mineral properties due to expensing          |  |               |  |              
|of exploration costs in WBJV (a)                         |  | (13,841,701)  |  | -            
|Decrease in mineral properties due to expensing          |  |               |  |              
|of exploration costs (b)                                 |  | (5,164,356)   |  | (4,876,785)  
|Decrease in mineral properties on reorganization         |  |               |  |              
|of WBJV (c)                                              |  | (8,088,816)   |  | -            
|Total assets under US GAAP                               |  | $ 99,896,130  |  | $ 45,615,623 
|                                                         |  |               |  |              
|Total liabilities under Canadian GAAP                    |  | $ 24,092,530  |  | $ 861,041    
|Decrease in future income taxes on reorganization of     |  |               |  |              
|WBJV (c)                                                 |  | (6,688,168)   |  | -            
|Total liabilities under US GAAP                          |  | $ 17,404,362  |  | $ 861,041    
|                                                         |  |               |  |              
|Non controlling interest under Canadian GAAP             |  | $ 11,149,482  |  | $ -          
|Decrease in non controlling interest on reorganization   |  |               |  |              
|of the WBJV (c)                                          |  | (5,823,079)   |  | -            
|Non controlling interest under US GAAP                   |  | 5,326,403     |  | -            
|                                                         |  |               |  |              
|Shareholders' equity under Canadian GAAP                 |  | 91,748,991    |  | 66,209,756   
|Cumulative mineral properties adjustment for WBJV (a)    |  | (16,885,686)  |  | (18,760,215) 
|Cumulative mineral properties adjustment (b)             |  | (5,164,356)   |  | (4,876,785)  
|Cumulative translation adjustment (a)                    |  | 3,043,985     |  | 2,181,826    
|Cumulative changes on reorganization of WBJV (c)         |  | 4,422,431     |  | -            
|Shareholders' equity under US GAAP                       |  | 77,165,365    |  | 44,754,582   
|Total liabilities and shareholders' equity under US GAAP |  | $ 99,896,130  |  | $ 45,615,623 
|                                                         |  |               |  |              















---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010





Consolidated Statements of Operations

|                                         |  |              |  |               |  |                |  |               
|---------------------------------------- |  | ------------ |  | ------------- |  | -------------- |  | --------------
|                                         |  |              |  |               |  |                |  | Cumulative    
|                                         |  |              |  |               |  |                |  | from          
|                                         |  |              |  |               |  |                |  | March 16,     
|                                         |  |              |  |               |  |                |  | 2000 to       
|                                         |  | Year ended   |  | Year ended    |  | Year ended     |  | August 31,    
|                                         |  | August 31,   |  | August 31,    |  | August 31,     |  | 2010          
|                                         |  | 2010         |  | 2009          |  | 2008           |  | (unaudited)   
|                                         |  |              |  |               |  |                |  |               
|Net income (loss) under Canadian GAAP    |  | $ 26,660,174 |  | $ (6,963,384) |  | (5,086,589)    |  | $ (6,057,648) 
|Mineral property costs                   |  |              |  |               |  |                |  |               
|written off                              |  | -            |  | -             |  | -              |  | 4,101,556     
|Adjustment for exploration               |  |              |  |               |  |                |  |               
|expenditures incurred in WBJV (a)        |  | -            |  | -             |  | (5,881,821)    |  | (18,470,466)  
|Increase in gain on sale of WBJV         |  |              |  |               |  |                |  |               
|Project #2 (c)                           |  | 1,874,529    |  | -             |  | -              |  | 1,874,529     
|Exploration expenditures (b)             |  | (287,571)    |  | (231,797)     |  | (388,973)      |  | (9,265,912)   
|Future income taxes - marketable         |  |              |  |               |  |                |  |               
|securities (d)                           |  | 288,750      |  | (152,550)     |  | (136,200)      |  | -             
|Future income taxes - stock based        |  |              |  |               |  |                |  |               
|compensation (e)                         |  | -            |  | -             |  | (289,749)      |  | (1,427,844)   
|Difference in future income taxes due to |  |              |  |               |  |                |  |               
|reorganization of WBJV (c)               |  | 4,422,431    |  |               |  |                |  | (9,754,733)   
|Other historical differences             |  | -            |  | -             |  | -              |  | 673,605       
|Net income (loss) under US GAAP          |  | $ 32,958,313 |  | $ (7,347,731) |  | $ (11,783,332) |  | $ (38,326,913)
|Basic income (loss) per common share     |  |              |  |               |  |                |  |               
|under US GAAP                            |  | $ 0.35       |  | $ (0.10)      |  | $ (0.19)       |  |               
|                                         |  |              |  |               |  |                |  |               
|Diluted income (loss) per common share   |  |              |  |               |  |                |  |               
|under US GAAP                            |  | $ 0.35       |  | $ (0.10)      |  | $ (0.19)       |  |               







Consolidated Statements of Cash Flows

|                            |  |                |  |               |  |                |  |               
|--------------------------- |  | -------------- |  | ------------- |  | -------------- |  | --------------
|                            |  |                |  |               |  |                |  | Cumulative    
|                            |  |                |  |               |  |                |  | from          
|                            |  |                |  |               |  |                |  | March 16,     
|                            |  |                |  |               |  |                |  | 2000 to       
|                            |  | Year ended     |  | Year ended    |  | Year ended     |  | August 31,    
|                            |  | August 31,     |  | August 31,    |  | August 31,     |  | 2010          
|                            |  | 2010           |  | 2009          |  | 2008           |  | (unaudited)   
|Operating activities        |  |                |  |               |  |                |  |               
|Operating activities under  |  |                |  |               |  |                |  |               
|Canadian GAAP               |  | $ (6,712,240)  |  | $ (5,418,738) |  | $ (4,547,428)  |  | $ (28,787,361)
|Deferred exploration (a)(b) |  | (287,571)      |  | (231,797)     |  | (7,594,871)    |  | (27,682,528)  
|Operating activities        |  |                |  |               |  |                |  |               
|under US GAAP               |  | $ (6,999,811)  |  | $ (5,650,535) |  | $ (12,142,299) |  | $ (56,469,889)
|Financing activities        |  |                |  |               |  |                |  |               
|Financing activities under  |  |                |  |               |  |                |  |               
|Canadian and US GAAP        |  | $ 1,131,672    |  | $ 39,733,466  |  | $ 2,232,359    |  | $ 93,104,913  
|Investing activities        |  |                |  |               |  |                |  |               
|Investing activities under  |  |                |  |               |  |                |  |               
|Canadian GAAP               |  | $ (25,018,981) |  | $ (3,128,914) |  | $ (8,574,127)  |  | $ (61,951,416)
|Deferred exploration (a)(b) |  | 287,571        |  | 231,797       |  | 7,594,871      |  | 27,682,528    
|Investing activities        |  |                |  |               |  |                |  |               
|under US GAAP               |  | $ (24,731,410) |  | $ (2,897,117) |  | $ (979,256)    |  | $ (34,268,888)
|                            |  |                |  |               |  |                |  |               
|                            |  |                |  |               |  |                |  |               
|                            |  | (30,599,549)   |  | 31,185,814    |  | (10,889,196)   |  | 2,366,136     
|                            |  |                |  |               |  |                |  | 14,668,867    
|                            |  |                |  |               |  |                |  | (12,302,731)  











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010









(a)

Investment in WBJV

Under Canadian and US GAAP the Company accounted for its working interest in the WBJV as an investment in the WBJV. Under Canadian GAAP these expenditures were capitalized to the investment in WBJV. Under US GAAP, exploration expenditures on mineral property costs can only be deferred subsequent to the establishment of mining reserves as defined under SEC regulations.



As disclosed in Note 5 the Company published a Feasibility Study for the WBJV late in the 2008 fiscal year. The study defined mining reserves and, as a consequence, exploration and development costs relating to this investment were deferred under US GAAP, subsequent to September 1, 2008. The carrying amount, however, is affected by foreign exchange translation.



(b)

Exploration expenses

Canadian GAAP allows exploration costs to be capitalized during the search for a commercially mineable body of ore if the Company considers such costs to have the characteristics of fixed assets. Under US GAAP, exploration expenditures on mineral property costs can only be deferred subsequent to the establishment of mining reserves as defined under SEC regulations. For US GAAP purposes the Company has expensed exploration expenditures in the period incurred. The Company believes that these cash expenditures under US GAAP are also more appropriately classified as cash operating activities as they were funded by the Company in the respective periods.



(c)

Reorganization of WBJV

On April 22, 2010, the partner of the WBJV completed a reorganization of the WBJV (refer to Note 5).  Under U.S GAAP, the Company expensed exploration costs until September 1, 2008, resulting in cumulative differences between the carrying amount of the investment in WBJV between Canadian GAAP and U.S. GAAP.  As a result of these differences, the accounting for the reorganization of the WBJV resulted in the following adjustments to reconcile from Canadian GAAP to U.S. GAAP:

·

Gain on sale of WBJV Project #2

·

Deferred income taxes arising on taxable temporary differences

·

Non-controlling interest



(d)

Comprehensive Income



Prior to September 1, 2007, the accounting for the Companys marketable securities was different under US GAAP compared with the accounting under Canadian GAAP. Effective September 1, 2007, the Company adopted CICA Section 3855, Financial Instruments, which requires financial instruments to be carried in the financial statements at fair value. The Company accounted for marketable securities as available for sale financial instruments and carried them at fair value which is consistent with US GAAP. However, the accounting for future income taxes with respect to the fair value adjustments is different under Canadian and US GAAP. Under Canadian GAAP, the Company recorded a future income tax liability of $288,750 with a corresponding amount recorded to accumulated other comprehensive income. Offsetting this, under Canadian GAAP the Company adjusted the valuation allowance for future income tax assets by $288,750 and recorded a future income tax recovery of $288,750 in the statement of operations. Under US
GAAP, the adjustment to the valuation allowance would have been recorded to accumulated other comprehensive income.  This amount was reversed in 2010 as the marketable securities were sold.











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







SFAS No. 130, Reporting Comprehensive Income, requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from non-owner sources. The impact of SFAS No. 130 on the Companys financial statements is as follows:



|                                           |  |              |  |               |  |               
|------------------------------------------ |  | ------------ |  | ------------- |  | --------------
|                                           |  | Year ended   |  | Year ended    |  | Year ended    
|                                           |  | August 31,   |  | August 31,    |  | August 31,    
|                                           |  | 2010         |  | 2009          |  | 2008          
|                                           |  |              |  |               |  |               
|Net income (loss) under US GAAP            |  | $ 32,958,313 |  | $ (7,347,731) |  | $ (11,783,332)
|Other comprehensive income (loss):         |  |              |  |               |  |               
|Unrealized gain on                         |  |              |  |               |  |               
|marketable securities                      |  | -            |  | 1,017,002     |  | (966,001)     
|Realized gain on marketable
    securities |  | (1,925,002)  |  | -             |  | -             
|Translation adjustment                     |  | 58,378       |  | 108,145       |  | (76,208)      
|Comprehensive net income (loss)            |  |              |  |               |  |               
|under US GAAP                              |  | $ 31,091,689 |  | $ (6,222,584) |  | $ (12,825,541)
|                                           |  |              |  |               |  |               



(e)

Future income taxes on stock based compensation

Under Canadian GAAP an income tax recovery is recorded in the statement of operations when eligible stock based compensation is capitalized against an asset, with the corresponding entry recorded against the asset. However, under US GAAP, the Company expenses all exploration expenditure prior to establishing mining reserves, including stock based compensation (refer to note 16(a) above for further discussion). Therefore, any income tax recovery recorded under Canadian GAAP is derecognized for US GAAP purposes until mining reserves are established.



(f)

Impact of Recent United States Accounting Pronouncements



(i)

FASB Accounting Standard Codification (ASC) No. 805, Business Combinations (ASC 805)



ASC 805, Business Combinations improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement establishes principles and requirements for how the acquirer recognizes and measures the identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.This standard was adopted and had no effect on the Companys financial statements.













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







(ii)

FASB Accounting Standard Codification (ASC) No. 810, Consolidation (ASC    810)



In December 2007, the FASB issued ASC 810, Consolidation. ASC 810 establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Standard clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. ASC 810 changes the way the consolidated earnings (loss) statement is presented by requiring consolidated net earnings (loss) to be reported including the amounts attributable to both the parent interest and the non-controlling interest. The Standard requires disclosure on the face of the consolidated statement of operations of the amounts of consolidated net earnings (loss) attributable to the parent interest and to the non-controlling interest. ASC 810 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company expects that the adoption of ASC 810 will not have significant effect on the Companys financial position, results of operations or cash flows.





(g)

Development stage enterprise



The Company meets the definition of a development stage enterprise under Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. The following additional disclosures are required under U.S. GAAP:



Consolidated summarized statements of operations and cash flows since March 16, 2000, the date the Company commenced operations.



Consolidated operations:

|                                           |  |               
|------------------------------------------ |  | --------------
|                                           |  | Period from   
|                                           |  | March 16, 2000
|                                           |  | (inception)   
|                                           |  | to August 31, 
|                                           |  | 2010          
|                                           |  |               
|Exploration expenditures incurred in WBJV  |  | $ 18,470,466  
|Exploration expenditures                   |  | 9,265,912     
|Gain on sale of WBJV Project #2            |  | (47,494,273)  
|Change in FIT                              |  | 9,060,857     
|General administrative, salaries and other |  | 34,601,865    
|                                           |  |               
|Ending deficit, August 31, 2010            |  | $ 23,904,827  











---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







Consolidated cash flows:



|                                            |  |               
|------------------------------------------- |  | --------------
|                                            |  | Period from   
|                                            |  | March 16, 2000
|                                            |  | (inception)   
|                                            |  | to August 31, 
|                                            |  | 2010          
|                                            |  |               
|Operating activities                        |  | $ (56,469,889)
|Investing activities                        |  | (34,268,888)  
|Financing activities                        |  | 93,104,913    
|                                            |  |               
|Cash and cash equivalents - August 31, 2010 |  | $ 2,366,136   













---

Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010







|                                                      |                   |            |              |             |               |               |              
|----------------------------------------------------- | ----------------- | ---------- | ------------ | ----------- | ------------- | ------------- | -------------
|                                                      |                   |            |              |             |               | Deficit       |              
|                                                      |                   |            |              |             |               | accumulated   |              
|                                                      |                   |            | Flow-through |             | Accumulated   | during        |              
|                                                      | Common shares     | Obligation | special      |             | other         | exploration & | Total        
|                                                      | without par value | to issue   | warrants     | Contributed | comprehensive | development   | shareholders'
|                                                      | Amount            | shares     | Amount       | surplus     | income        | stage         | equity       
|Issued for cash                                       | $ 89,000          | $ -        | $ 521,000    | $ -         | $ -           | -             | $ 610,000    
|Issued for mineral properties                         | -                 | 20,000     | -            | -           | -             | -             | 20,000       
|Net Loss                                              | -                 | -          | -            | -           | -             | (270,435)     | (270,435)    
|Balance, August 31, 2000                              | 89,000            | 20,000     | 521,000      | -           | -             | (270,435)     | 359,565      
|Issued for cash                                       | 1,356,532         | -          | 1,107,771    | -           | -             | -             | 2,464,303    
|Issued upon exercise of share purchase warrants       | 1,100             | -          | -            | -           | -             | -             | 1,100        
|Issued for mineral properties                         | 57,050            | (17,400)   | -            | -           | -             | -             | 39,650       
|Issued upon exercise of special warrants              | 521,000           | -          | (521,000)    | -           | -             | -             | -            
|Issued upon exercise of flow through special warrants | 1,107,771         | -          | (1,107,771)  | -           | -             | -             | -            
|Stock options granted                                 | -                 | -          | -            | 1,250       | -             | -             | 1,250        
|Net loss                                              | -                 | -          | -            | -           | -             | (960,202)     | (960,202)    
|Balance at August 31, 2001                            | 3,132,453         | 2,600      | -            | 1,250       | -             | (1,230,637)   | 1,905,666    
|Issuance of common shares for cash                    | 1,951,135         | -          | -            | -           | -             | -             | 1,951,135    
|Issued for mineral properties                         | 36,509            | (2,600)    | -            | -           | -             | -             | 33,909       
|Issued to acquire New Millennium Metals               | 1,310,385         | -          | -            | -           | -             | -             | 1,310,385    
|Unrealized loss on marketable securities              | -                 | -          | -            | -           | (18,450)      | -             | (18,450)     
|Stock options granted                                 | -                 | -          | -            | 428,747     | -             | -             | 428,747      
|Net loss                                              | -                 | -          | -            | -           | -             | (2,466,754)   | (2,466,754)  
|Balance at August 31, 2002                            | 6,430,482         | -          | -            | 429,997     | (18,450)      | (3,697,391)   | 3,144,638    
|Issuance of flow-through common shares for cash       | 678,589           | -          | -            | -           | -             | -             | 678,589      
|Issuance of common shares for cash                    | 1,411,342         | -          | -            | -           | -             | -             | 1,411,342    
|Issued on exercise of mineral property option         | 200,062           | -          | -            | -           | -             | -             | 200,062      
|Issued on exercise of warrants                        | 233,389           | -          | -            | -           | -             | -             | 233,389      
|Issued on exercise of stock options                   | 35,075            | -          | -            | -           | -             | -             | 35,075       
|Issued for mineral properties                         | 16,140            | -          | -            | -           | -             | -             | 16,140       
|Unrealized gain (loss) on marketable securities       | -                 | -          | -            | -           | 66,000        | -             | 66,000       
|Stock options granted                                 | -                 | -          | -            | (63,406)    | -             | -             | (63,406)     
|Tax effect of flow-through shares issued              | -                 | -          | (177,203)    | -           | -             | -             | (177,203)    
|Net loss                                              | -                 | -          | -            | -           | -             | (2,580,499)   | (2,580,499)  
|Balance at August 31, 2003                            | 9,005,079         | -          | (177,203)    | 366,591     | 47,550        | (6,277,890)   | 2,964,127    
|Issuance of flow-through common shares for cash       | 1,267,200         | -          | -            | -           | -             | -             | 1,267,200    
|Issuance of common shares for cash                    | 3,226,590         | -          | -            | -           | -             | -             | 3,226,590    
|Issued on exercise of warrants                        | 1,428,406         | -          | -            | -           | -             | -             | 1,428,406    
|Issued on exercise of stock options                   | 59,200            | -          | -            | -           | -             | -             | 59,200       
|Issued for mineral properties                         | 3,600             | -          | -            | -           | -             | -             | 3,600        
|Unrealized gain (loss) on marketable securities       | -                 | -          | -            | -           | 262,072       | -             | 262,072      
|Stock options granted                                 | -                 | -          | -            | 218,391     | -             | -             | 218,391      
|Tax effect of flow-through shares issued              | -                 | -          | (85,398)     | -           | -             | -             | (85,398)     
|Net loss                                              | -                 | -          | -            | -           | -             | (4,766,913)   | (4,766,913)  
|Balance at August 31, 2004                            | 14,990,075        | -          | (262,601)    | 584,982     | 309,622       | (11,044,803)  | 4,577,275    
|Issuance of flow-through common shares for cash       | 259,901           | -          | -            | -           | -             | -             | 259,901      
|Issuance of common shares for cash                    | 5,441,078         | -          | -            | -           | -             | -             | 5,441,078    
|Issued on exercise of warrants                        | 2,272,462         | -          | -            | -           | -             | -             | 2,272,462    
|Issued on exercise of stock options                   | 521,873           | -          | -            | (13,022)    | -             | -             | 508,851      
|Issued for mineral properties                         | 28,000            | -          | -            | -           | -             | -             | 28,000       
|Unrealized gain (loss) on marketable securities       | -                 | -          | -            | -           | (289,000)     | -             | (289,000)    
|Stock options granted                                 | -                 | -          | -            | 109,434     | -             | -             | 109,434      
|Tax effect of flow-through shares issued              | -                 | -          | (52,061)     | -           | -             | -             | (52,061)     
|Net loss                                              | -                 | -          | -            | -           |               | (8,112,593)   | (8,112,593)  
|Balance at August 31, 2005                            | 23,513,389        | -          | (314,662)    | 681,394     | 20,622        | (19,157,396)  | 4,743,347    
|Issuance of common shares for cash                    | 14,898,656        | -          | -            | -           | -             | -             | 14,898,656   
|Issued on exercise of warrants                        | 1,181,305         | -          | -            | -           | -             | -             | 1,181,305    
|Issued on exercise of stock options                   | 165,418           | -          | -            | (47,670)    | -             | -             | 117,748      
|Issued for mineral properties                         | 40,000            | -          | -            | -           | -             | -             | 40,000       
|Translation adjustment                                | -                 | -          | -            | -           | (658,380)     |               | (658,380)    
|Unrealized gain (loss) on marketable securities       | -                 | -          | -            |             | 333,375       | -             | 333,375      
|Stock options granted                                 | -                 | -          | -            | 160,376     | -             | -             | 160,376      
|Tax effect of flow-through shares issued              | -                 | -          | (80,755)     | -           | -             | -             | (80,755)     
|Net loss                                              | -                 | -          | -            | -           | -             | (8,537,460)   | (8,537,460)  
|Balance, August 31, 2006                              | 39,798,768        | -          | (395,417)    | 794,100     | (304,383)     | (27,694,856)  | 12,198,212   
|Issued on exercise of warrants                        | 11,454,791        | -          | -            | -           | -             | -             | 11,454,791   
|Issued on exercise of stock options                   | 892,557           | -          | -            | (266,982)   | -             | -             | 625,575      
|Issued for mineral properties net of costs            | 227,742           | -          | -            | -           | -             | -             | 227,742      
|Unrealized loss on marketable securities              |                   |            |              |             | 1,520,001     |               | 1,520,001    
|Stock options granted                                 | -                 | -          | -            | 1,487,660   | -             | -             | 1,487,660    
|Translation adjustment                                | -                 | -          | -            | -           | 196,444       |               | 196,444      
|Tax effect of flow-through shares issued              | -                 | -          | 105,514      | -           | -             | -             | 105,514      
|Net loss                                              | -                 | -          | -            | -           | -             | (10,037,221)  | (10,037,221) 
|Balance, August 31, 2007                              | 52,373,858        | -          | (289,903)    | 2,014,778   | 1,412,062     | (37,732,077)  | 17,778,718   
|Issued on exercise of warrants                        | 1,487,500         | -          | -            | -           | -             | -             | 1,487,500    
|Issued on exercise of stock options                   | 1,334,748         | -          | -            | (512,924)   | -             | -             | 821,824      
|Issued for mineral properties net of costs            | 163,236           | -          | -            | -           | -             | -             | 163,236      
|Translation adjustment                                | -                 | -          | -            | -           | (76,208)      |               | (76,208)     
|Unrealized loss on marketable securities              | -                 | -          | -            | -           | (966,001)     | -             | (966,001)    
|Stock options granted                                 | -                 | -          | -            | 1,288,383   | -             | -             | 1,288,383    
|Net loss                                              | -                 | -          | -            | -           |               | (11,783,332)  | (11,783,332) 
|Balance, August 31, 2008                              | 55,359,342        | -          | (289,903)    | 2,790,237   | 369,853       | (49,515,409)  | 8,714,120    
|Issuance of common shares for cash                    | 34,174,382        | -          | -            | 5,288,917   | -             | -             | 39,463,299   
|Issued on exercise of stock options                   | 411,592           | -          | -            | (129,952)   | -             | -             | 281,640      
|Translation adjustment                                | -                 | -          | -            | -           | 108,145       |               | 108,145      
|Unrealized gain on marketable securities              | -                 | -          | -            | -           | 1,017,002     | -             | 1,017,002    
|Stock options granted                                 | -                 | -          | -            | 2,518,107   | -             | -             | 2,518,107    
|Net loss                                              | -                 | -          | -            | -           | -             | (7,347,731)   | (7,347,731)  
|Balance, August 31, 2009                              | 89,945,316        | -          | (289,903)    | 10,467,309  | 1,495,000     | (56,863,140)  | 44,754,582   
|Issued on exercise of stock options                   | 1,848,807         | -          | -            | (694,608)   | -             | -             | 1,154,199    
|Stock options granted                                 | -                 | -          | -            | 164,895     | -             | -             | 164,895      
|Translation adjustment                                | -                 | -          | -            | -           | 58,378        | -             | 58,378       
|Realized gain on AFS securities transferred to income | -                 | -          | -            | -           | (1,925,002)   | -             | (1,925,002)  
|Net Income                                            | -                 | -          | -            | -           | -             | 32,958,313    | 32,958,313   
|Balance, August 31, 2010                              | 91,794,123        | -          | (289,903)    | 9,937,596   | (371,624)     | (23,904,827)  | 77,165,365   





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Platinum Group Metals Ltd.

(An exploration and development stage company)

Notes to the audited consolidated financial statements

For the year ended August 31, 2010









16.

SUBSEQUENT EVENTS



The following events occurred subsequent to year end.  These events and other non-material subsequent events may be mentioned elsewhere in these financial statements:





(a)

Bought Deal Financing

On October 1, 2010 the Company announced a bought deal financing for 61.0 million shares at a price of $2.05 per share for gross proceeds of $125,050,000.  The underwriters received a commission of 5.5% of the gross proceeds of the offering and were granted an over-allotment option for a further 15% of the shares issued under the offering, also at $2.05 per share.



On November 3, 2010 the Company announced that a further 9,150,000 shares were issued for gross proceeds of $18,757,500 pursuant to the full exercise of the over-allotment option described above.  The underwriters also received a commission of 5.5% of the gross proceeds from the over-allotment exercise.



b)

Warrant Exercises

Subsequent to year end 4,416,900 common share purchase warrants have been exercised at a price of $1.75 per share.  A total of 12,537,150 common share purchase warrants were issued at $1.75 as a part of the placement on June 16, 2009 as described above at note 7. (d). These warrants have an expiry date of December 16, 2010. None of the warrants had been exercised as of August 31, 2010.





c)

Options Exercises

Subsequent to year end 100,000 common share stock options have been exercised at $1.60 per share as well as 10,000 common share stock option exercised at $1.40 per share.





d)

Options Grant

On November 26, 2010 the Company granted 2,952,500 incentive stock option at a price of $2.10 per share to Directors, Officers, and employees.











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