UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F



|£REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
      EXCHANGE ACT OF 1934
|-----------------------------------------------------------------------------------------------------
|OR                                                                                                   
|QANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934         
|For the fiscal year ended
      December 31, 2008                                                    
|OR                                                                                                   
|£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934     
|For the transition period from  to                                                                   
|OR                                                                                                   
|£SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934   
|Date of event requiring this shell company report                                                    



Commission file number 001-14598



RICHMONT MINES INC.

(Exact name of Registrant as specified in its charter)



Quebec, Canada

(Jurisdiction of incorporation or organization)



161, Avenue Principale, Rouyn-Noranda, Quebec, Canada J9X 4P6

(Address of principal executive offices)

|                                                                                           
|-------------------------------------------------------------------------------------------
|Martin Rivard                                                                              
|Telephone: 819-797-2465                                                                    
|Facsimile:  819-797-0166                                                                   
|161, Avenue Principale, Rouyn-Noranda,
    Quebec, Canada J9X 4P6                          
|(Name, Telephone, E-mail and/or Facsimile
    number and Address of Company Contact Person)



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

|                           |                                                                    
|-------------------------- | -------------------------------------------------------------------
|Title of each Class        | Name of each Exchange on which Registered                          
|                           |                                                                    
|Common Stock, no par value | The Toronto Stock Exchange and the
    New York Stock Exchange Amex



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



None



Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:



None

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Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:



As of December 31, 2008: 26,113,156



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes



      £                     No
Q

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes



      £                     No
Q



Note  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes
Q                     No



      £

Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Date File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such
files).

Yes






      £                    No
Q





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



Large Accelerated Filer






      £             Accelerated Filer
Q             Non-Accelerated Filer






      £



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

|£US GAAP | £International Financial Reporting Standards as Issued | Q  Other
|-------- | ------------------------------------------------------ | --------
|         | by the International Accounting Standards
    Board    |         



If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
Registrant has elected to follow:



Item 17
Q               Item 18






      £



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



Yes






      £                     No
Q

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TABLE OF
CONTENTS

|     |       |                                                                                        | PAGE  
|---- | ----- | -------------------------------------------------------------------------------------- | ------
|ITEM | 1.    | IDENTITY OF DIRECTORS,
      SENIOR MANAGEMENT AND ADVISERS                            | **1** 
|ITEM | 2.    | OFFER STATISTICS AND EXPECTED TIMETABLE                                                | 1     
|ITEM | 3.    | KEY INFORMATION                                                                        | 2     
|ITEM | 4.    | INFORMATION ON THE COMPANY                                                             | 13    
|ITEM | 4A.   | UNRESOLVED STAFF
      COMMENTS                                                        | 47    
|ITEM | 5.    | OPERATING AND FINANCIAL REVIEW AND
      PROSPECTS                                     | 47    
|ITEM | 6.    | DIRECTORS, SENIOR MANAGEMENT
      AND EMPLOYEES                                       | 69    
|ITEM | 7.    | MAJOR SHAREHOLDERS AND RELATED PARTY
      TRANSACTIONS                                | **75**
|ITEM | 8.    | FINANCIAL INFORMATION                                                                  | 76    
|ITEM | 9.    | THE OFFER AND LISTING                                                                  | 77    
|ITEM | 10.   | ADDITIONAL INFORMATION                                                                 | 79    
|ITEM | 11.   | QUANTITATIVE AND
      QUALITATIVE DISCLOSURES **ABOUT** MARKET
      RISK             | 88    
|ITEM | 12.   | DESCRIPTION OF SECURITIES
      OTHER THAN EQUITY SECURITIES                           | **88**
|ITEM | 13.   | DEFAULTS, DIVIDEND ARREARAGES AND
      DELINQUENCIES                                  | 88    
|ITEM | 14.   | MATERIAL MODIFICATIONS TO
      THE RIGHTS OF SECURITY **HOLDERS AND USE OF PROCEEDS** | **89**
|ITEM | 15.   | CONTROLS AND PROCEDURES                                                                | 89    
|ITEM | 16.A. | AUDIT COMMITTEE FINANCIAL
      EXPERT                                                 | 90    
|ITEM | 16.B. | CODE OF ETHICS                                                                         | 90    
|ITEM | 16.C. | PRINCIPAL ACCOUNTANT FEES
      AND SERVICES                                           | 90    
|ITEM | 16.D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR
      AUDIT COMMITTEES                       | 92    
|ITEM | 16.E. | PURCHASES OF EQUITY
      SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS           | 92    
|ITEM | 16.F. | CHANGE IN REGISTRANTS CERTIFYING
      ACCOUNTANT                                     | 92    
|ITEM | 16.G. | CORPORATE GOVERNANCE                                                                   | 92    
|ITEM | 17.   | CONSOLIDATED FINANCIAL STATEMENTS                                                      | 94    
|ITEM | 18.   | CONSOLIDATED FINANCIAL
      STATEMENTS                                                | 94    
|ITEM | 19.   | EXHIBITS                                                                               | 95    



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Forward-Looking Information

This Annual Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended
(the Exchange Act). All statements other than statements of historical facts included in this Annual Report, including, without limitation, those regarding the Companys financial position, business strategy, budgets, reserve
estimates, development and exploitation opportunities and projects, classification of reserves, and plans and objectives of management for future operations, are forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Companys expectations
are disclosed under Risk Factors and elsewhere in this Annual Report including, without limitation, in conjunction with the forward-looking statements included in this Annual Report.

Note to Investors Concerning Certain Measures of Performance

Throughout this document, the Company uses performance indicators that are not defined according to Canadian generally accepted accounting principles (GAAP), such as the total cash cost of production per ounce sold for each of the Company's
properties, excluding the rates of depreciation per ounce. These performance indicators are widely used in the mining industry. Nonetheless, they are in no way a standard prescribed by Canadian GAAP. The Company believes that some investors use
these indicators, in addition to the financial information prepared in accordance with Canadian GAAP, to evaluate the Company's performance and its ability to generate cash. Consequently, this information must be considered supplementary and should
not under any circumstances be regarded as a substitute for the performance indicators prepared in accordance with Canadian GAAP.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

1

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ITEM 3. KEY INFORMATION

A. Selected Financial Data

The selected financial data of Richmont Mines Inc. (consolidated with its wholly-owned subsidiaries, Camflo Mill Inc. and Patricia Mining Corporation (Patricia mining), its majority-owned subsidiary, Louvem Mines Inc.
(Louvem) and its 55% interest in the Island Gold Mine until December 15, 2008, Richmont Mines, Richmont or the Company) set forth below has been derived from the consolidated financial statements of
the Company which have been audited by Raymond Chabot Grant Thornton LLP, Chartered Accountants, as indicated in their Independent Registered Public Accounting Firms report as at December 31, 2008 and 2007 and by KPMG LLP, Chartered
Accountants, as indicated in their Independent Registered Public Accounting Firms report as at December 31, 2006, and which are included elsewhere in this Annual Report.

The selected financial data were extracted from the more detailed consolidated financial statements of the Company and related notes included in this Annual Report and should be read in conjunction with such consolidated financial statements and
with the information appearing under the heading Item 5  Operating and Financial Review and Prospects.

The Companys consolidated financial statements are stated in thousands of Canadian dollars and are prepared in accordance
with Canadian generally accepted accounting principles (Canadian GAAP). Reference is made to notes to the consolidated financial statements of the Company included in this Annual Report for a discussion of the material differences
between Canadian GAAP and U.S. generally accepted accounting principles (U.S. GAAP), and their effect on the Companys consolidated financial statements.

Herein, all references to $ and CAN$ refer to Canadian dollars and all references to US$ refer to United States dollars.

The information contained in this Annual Report on Form 20-F is current as at December 31, 2008, except where a different date is specified.

The Company has not declared or paid any dividends on its capital stock during the past five years.

2

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|Selected Financial
      Data                                            |  
|------------------------------------------------------------------------ | -
|(Canadian
      GAAP)                                                    |  
|(in thousands of Canadian dollars except per share and share
      data) |  
|                                                                         |  
|                                                                         |  
|Total revenues                                                           |  
|Net earnings (loss)                                                      |  
|Net earnings (loss) per share                                            |  
|Basic                                                                    | $
|Diluted                                                                  | $
|Total assets                                                             |  
|Long-term debt                                                           |  
|Working capital                                                          |  
|Shareholders equity                                                     |  
|Total                                                                    |  
|Capital stock                                                            |  
|Number of outstanding common
      shares at year end (000s)            |  

3

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|Selected
      Financial Data                                            |  
|------------------------------------------------------------------------ | -
|(U.S. GAAP
      Reconciliation)                                         |  
|(in thousands of Canadian dollars except per
      share and share data) |  
|                                                                         |  
|                                                                         |  
|                                                                         |  
|                                                                         |  
|Net income (loss)                                                        |  
|                                                                         |  
|Net earnings (loss) per share                                            |  
|Basic                                                                    | $
|Diluted                                                                  | $
|                                                                         |  
|Weighted average number of common shares outstanding (000s)             |  
|                                                                         |  
|Shareholders equity                                                     |  
|                                                                         |  
|Total assets                                                             |  

Restatement

During 2006, the Company reviewed the classification of its
East Amphi and Island Gold mining projects. These projects, which were
improperly considered as development stage, were reclassified as exploration
stage and the capitalized costs related to these projects were charged to
earnings under United States GAAP. Accordingly, the Company increased its net
loss by $3,585,656 in 2005 and $6,185,187 in 2004 compared to the previously
published results. The net loss per share was increased by $0.20 in 2005 and
$0.39 in 2004. Shareholders equity as at January 1, 2005 was decreased by
$6,238,184.

Exchange Rates

The Government of Canada permits a floating exchange rate to
determine the value of the Canadian dollar against the U.S. dollar.

Set forth below are the average rates of exchange for the
Canadian dollar and the U.S. dollar for each of the past five fiscal years, and
the range of high and low rates for each of the past six calendar months. For
purposes of these tables, the rate of exchange is fixed by the Bank of Canada.
The tables set forth the number of Canadian dollars required under that formula
to buy one U.S. dollar. The average rate means the average of the exchange rates
on the last day of each month during the period.

4

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U.S. Dollar/Canadian Dollar Exchange Rates

Year ended December 31
    Average2004
    1.302005
    1.212006
    1.132007
    1.072008
    1.07


The following table sets forth the high and low exchange rate
for the past six months. As of May 1, 2009, the exchange rate was 1.19.

U.S. Dollar/Canadian Dollar Exchange Rates

Month
    High
    LowNovember 2008
    1,2952
    1,1477December 2008
    1,3008
    1,1872January 2009
    1,2765
    1,1761February 2009
    1,2731
    1,2160March 2009
    1,3066
    1,2192April 2009
    1.2707
    1.1875


**B. Capitalization and Indebtedness**

Not
applicable.

C. Reasons for the Offer and Use of
Proceeds

Not applicable.

D. Risk Factors

See the discussion regarding forward-looking statements at page
1.

In addition to the other information contained herein, the
following risk factors should be carefully considered when evaluating an
investment in the Companys common shares:

Risks Associated with the Mining
Industry

Speculative Nature of the Mining Industry

Thegold mining industry is highly speculative in
nature. There is no assurance that Richmont Mines mineral development and
exploration activities will be successful. Success in increasing reserves is a
result of a number of factors, including the Companys level of geological and
technical expertise, the geological composition of land available for
exploration and other factors. Once gold mineralization is discovered, it may
take several years to identify, delineate and evaluate resources, during which
time the economic feasibility of production may change. Substantial
expendituresare required to establish proven and probable reserves through
drilling, to determine the optimal metallurgical process to extract the metals
from the ore and, in the case of new properties, to construct mining and
processing facilities. As a result of these uncertainties,
no assurance can be given that the Companys exploration programs will result in the expansion or replacement of current reserves with new reserves.

5

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Mining Risks

Because it holds interest in several mines, the Company is subject to risks and hazards inherent to the mining industry, including:

- fluctuations in commodity prices;
- costs of constructing and operating a mine as well as processing and refining facilities in a specific environment;
- availability of economic sources of energy and adequacy of water supply;
- adequate access to the site, including competing land uses and unanticipated transportation costs, delays and repair costs resulting from equipment failure;
- data on which engineering assumptions are made;
- changes in the regulatory environment (including regulations relating to prices, royalties, duties, taxes, restrictions on production, quotas on exportation of minerals, as well as the costs of protection of the environment and agricultural
lands);
- industrial accidents and labor actions or unrest;
- unusual or unexpected geological or geotechnical formations;
- unanticipated ground or water conditions;
- slope failure,rock bursts, cave-ins ,failure of pitwalls or dams and fire;
- environmental hazards, including discharge of pollutants or hazardous chemicals;
- unanticipated grade and tonnage of ore to be mined and processed;
- unusual or unexpected adverse operating conditions;
- hazards involved in the drilling and mining of ore;
- availability of qualified workforce;
- natural phenomena and acts of God, such as inclement weather conditions, floods, earthquakes and other phenomena.

The occurrence of any of these factors could materially and adversely affect a project and as a result materially and adversely affect the Companys business, financial condition, results of operations and cash flow. These occurrences could
result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. These factors may cause a mineral deposit that has
been mined profitably in the past to become unprofitable. Also, it is not unusual in new mining operations to experience unexpected problems during the start-up phase, and delays often can occur in the commencement of production. No assurance can be
given that current exploration programs will result in any commercial mining operation.

The processing of ore may subject Richmont Mines to liability under environmental legislation resulting from a failure to maintain dams around tailing disposal areas. Richmont Mines may become subject to liability for pollution, cave-ins or other
hazards against which it cannot insure, due to political or other reasons, or against which it may elect not to insure because of high
premium costs or for other reasons.This can result in delayed production, increase in production costs or liability. Paying compensation for obligations resulting from such liability may be very costly and could have an adverse effect on the
Companys financial position.

6

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Failure to Achieve Production Estimates

The ore reserves presented in this Annual Report are in large part estimates, and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized. There are numerous
uncertainties inherent in estimating proven and probable reserves including many factors beyond the Companys control. The estimation of reserves is a complex and subjective process and the accuracy of any such estimate is a function of the
quantity and quality of available data and of the assumptions made and judgements used in engineering and geological interpretation. Reserve estimates may require revision based on various factors such as actual production experience, exploration
results, market price fluctuations of gold, results of drilling, metallurgical testing, production costs or recovery rates. These factors may render the proven and probable reserves unprofitable to develop at a particular property or for a specific
mine. Any material reduction in estimates of the Companys reserves or its ability to extract these reserves could have a material adverse effect on its future cash flow, results of operations and financial condition.

Also, the grade of ore mined may differ from that indicated by drilling results, which variation may have an adverse impact on production results. In addition, the reliability of estimates of future production might also be affected by factors such
as weather, strikes and environmental occurrences.

The Companys failure to achieve its production estimates could have a material and adverse effect on any or all of the Companys future cash flows, results of operation and financial condition. The Companys annual production
estimates are developed based on, among other things, mining experience, reserve estimates, assumptions regarding ground conditions and physical characteristics of ores (such as hardness and presence or absence of certain metallurgical
characteristics) and estimated rates and costs of production. Actual production may vary from estimates for a variety of reasons, including risks and hazards of the types discussed above.

Additional Reserves for Gold Production

Because mines have limited lives based on proven and probable reserves, the Company must continually perform exploration and development to replace and expand its reserves as they are depleted. The Companys ability to maintain or increase its
annual production of gold will be dependent in significant part on its ability to bring certain projects into production and to expand existing operations. There are a number of uncertainties inherent in any exploration program relating to, amongst
other things, the location of economic mineral reserves, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities and the appropriate financing
thereof. Accordingly, there can be no assurance that the Companys exploration programs will yield new mineral reserves to replace mined reserves and to expand current mineral reserves.

Exploration and Development Risks

The exploration process generally begins with the identification and appraisal of mineral prospects. Exploration and development projects have no operating history upon which to base estimates of future operating costs and capital requirements.
Mining projects frequently require a number of years and significant expenditures during the mine development phase before production is possible. Development projects are subject to the
completion of successful feasibility studies and environmental assessments,
issuance of necessary governmental permits and receipt of adequate financing.
The economic feasibility of development projects is based on many factors such
as:

7

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- estimation of reserves;
- anticipated metallurgical recoveries;
- environmental considerations and permitting;
- future gold prices; and
- anticipated capital and operating costs of such projects.

Exploration and development of mineral deposits thus involve
significant financial risks which a combination of careful evaluation,
experience and knowledge may not eliminate. While the discovery of an ore body
may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines. A mine must generate sufficient
revenues to offset operating and development costs such as the costs required to
establish reserves by drilling, to develop metallurgical processes, to construct
facilities and to extract and process metals from the ore. Once in production,
it is impossible to determine whether current exploration and development
programs at any given mine will result in the establishment of new reserves.

Fluctuations in Gold Prices and Currencies (see Information
on the Company  Gold Marketing and Sales)

The profitability of the Company
is directly related to the market price of gold. Gold prices fluctuate
considerably and are affected by numerous factors beyond the Companys control,
such as industrial and jewellery demand, inflation and expectations with respect
to the rate of inflation, the strength of the U.S. dollar and of other
currencies, interest rates, gold sales by central banks, forward sales by
producers, production and cost levels, changes in investment trends and
international monetary systems and changes in the supply and demand for gold on
the public and private markets.The gold market is characterized by
significant above-ground reserves which can dramatically affect the price should
a portion of these reserves be brought to market. Gold price is sometimes
subject to rapid short-term changes because of speculative activities. If gold
prices were to decline significantly or for an extended period of time, the
Company might be unable to continue its operations, develop its properties or
fulfill its obligations under its agreements with its partners or under its
permits and licenses. As a result, the Company might lose its interest in, or be
forced to sell, some of its properties.

The following table sets out the annual average gold price
(London PM fix) in U.S. dollars over the past five years:

|     | (US$) | Exchange rate | (CAN$)
|---- | ----- | ------------- | ------
|     |       |               |       
|2004 | 410   | 1.30          | 534   
|2005 | 444   | 1.21          | 538   
|2006 | 604   | 1.13          | 685   
|2007 | 695   | 1.07          | 744   
|2008 | 872   | 1.07          | 933   

8

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When calculating its mineral reserve estimates, the estimate of the price of gold used by the Company for each of its mines was CAN$785 per ounce. In the event of a sustained, significant drop in gold price, the Company may be required to
re-evaluate its assets, resulting in reduced estimates of reserves and in material write-downs of the Companys investment in mining properties and increased amortization, reclamation and closure charges.

Furthermore, since gold price is established in U.S. dollars, a significant increase in the value of the Canadian dollar relative to the U.S. dollar coupled with stable or declining gold prices could adversely affect Richmont Mines results
with respect to gold revenues.

Richmont Mines has no gold hedging contracts and no U.S. dollar exchange contracts. However, the Company may engage in hedging activities in the future. Hedging activities are intended to protect a company from the fluctuations of the price of gold
and to minimize the effect of declines in gold prices on results of operations for a period of time. Although hedging activities may protect a company against low gold prices, they may also limit the price that can be realized on gold that is
subject to forward sales and call options where the market price of gold exceeds the gold price in a forward sale or call option contract. Also, the Company may in the future, if it considers it advisable, enter into hedging arrangements with a view
to reducing some risks associated with foreign exchange exposure. However, there is no assurance that such hedging strategies will be successful or that foreign exchange fluctuations will not materially adversely affect the Company's financial
performance and results of operations.

Competition

The mining industry is intensely competitive andthe Company is in competition with other mining companies for the acquisition of interests in precious and other metal or mineral mining properties. In the pursuit of such acquisition
opportunities, the Company competes with other Canadian and foreign companies that may have substantially greater financial and other resources. As a result of this competition, the Company may be unable to maintain or acquire attractive mining
properties on acceptable terms, or at all. Although the Company has acquired many such assets in the past, there can be no assurance that its acquisition efforts will succeed in the future.

Title to Properties

While the Company has verified title to its properties according to usual industry standards for the stage of development of such properties, the procedures undertaken do not guarantee the Companys title. Properties may be subject to prior
registered and unregistered agreements, transfers or aboriginal land claims, and title may be affected by undetected defects. In addition, transfers of title to certain properties of the Company are in the process of being completed. There may be
valid challenges to the title of the Companys properties which, if successful, could impair development and/or operations. Moreover, where the Companys interest in a property is less than 100%, the Companys entitlement to, and
obligations in respect of, the property are subject to the terms of the agreement relating to that property, which in certain circumstances may be the subject of differing interpretations as between the parties to that agreement.

Laws and Regulations

The Companys mining operations and exploration activities are subject to various laws and regulations governing the environment, agricultural zoning, prospecting, development, production, exports, taxes, labor standards, occupational health,
waste disposal, toxic substances, mine safety and other matters.

9

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The Canadian mining industry is subject to federal and provincial environmental protection legislation. This legislation sets high standards on the mining industry in order to reduce or eliminate the effects of waste generated by extraction and
processing operations and subsequently emitted into the air or water. Consequently, drilling, refining, extracting and milling are all subject to the restrictions imposed by such legislation. In addition, the construction and commercial operation of
a mine typically entail compliance with applicable environmental legislation and review processes, as well as the obtaining of permits, particularly for the use of the land, permits for the use of water, and similar authorizations from various
governmental bodies. Compliance with such laws and regulations increases the costs of planning, designing, drilling, developing, constructing, operating and closing mines and other facilities. No assurance can be given that additional significant
costs and liabilities will not be incurred to comply with current and future requirements.

All of the Companys operations are subject to reclamation, site restoration and closure requirements. Costs related to ongoing site restoration programs are expensed when incurred. The Company calculates its estimates of the ultimate
reclamation liability based on current laws and regulations and the expected future costs to be incurred in reclaiming, restoring and closing its operating mine sites. It is possible that the Companys estimates of its ultimate reclamation
liability could change as a result of possible changes in laws and regulations and changes in cost estimates.

Failure to comply with applicable laws and regulations may result in enforcement actions thereunder,
and may include corrective measures requiring capital expenditures, installation
of additional equipment or remedial actions. Parties engaged in mining
operations may be required to compensate those suffering loss or damage by
reason of the mining activities and may become subject to civil or criminal
fines or penalties for violations of applicable laws or regulations.

The Company believes that it is in compliance with all current
laws and regulations material to its activities. However, new or expanded
environmental regulations, if adopted, or more stringent enforcement of existing
laws and regulations, could affect the Companys projects or otherwise have a
material adverse effect on its operations. As a result, expenditures on any and
all projects, actual production quantities and rates and cash operating costs,
among other things, may be materially and adversely affected and may differ
materially from anticipated expenditures, production quantities and rates, and
costs, and estimated production dates may be delayed materially, in each case.
Any such event would materially and adversely affect the Companys business,
financial condition, results of operations and cash flow.

InsuranceThe Company carries insurance against property damage and comprehensive general liability insurance for all operations. It is also insured against gold and silver bullion thefts and losses of goods in transit. Such insurance, however, contains
exclusions and limitations on coverage. No assurance can be provided that such insurance will continue to be available, will be at economically acceptably premiums or will be adequate to cover any liability. In some cases, risk coverage is not
available or considered too expensive relative to the perceived risk.

Risks not insured against include mine cave-ins, mine flooding or other comparable hazards. Furthermore, there are risks attributable to most types of environmental pollution against which the Company cannot insure or against which it has elected
not to insure.

10

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Requirement of Additional Financing

The continuing development of the Companys properties will depend upon the Companys ability to obtain financing through the joint venturing of projects, debt financing, and equity financing or other means. No assurance can be given that
the Company will be successful in obtaining the required financing on acceptable terms, if at all.

Permits and Licenses

Mineral exploration and mining activities may only be conducted by entities that haveobtained or renewed exploration or mining permits and licenses in accordance with the relevant mining laws and regulations. No guarantee can be given that
the necessary exploration and mining permits and licenses will be issued to the Company or, if they are issued, that they will be renewed, or that the Company will be in a position to comply with all conditions that are imposed.

Nearly all mining projects require government approval. No assurance can be given that these approvals will be granted to the Company in a timely manner, or at all.

Joint Ventures

No assurance can be given that the Companys joint venture partners will not veto the Companys business plans, with regard to a specific joint venture, and prevent the Company from achieving its objectives.

Mining projects are often conducted through an unincorporated joint venture or an incorporated joint venture company. Joint ventures can often require unanimous approval of the parties to the joint venture or their representatives for certain
fundamental decisions, such as an increase or reduction of registered capital, merger, division, dissolution, amendment of the constating documents and the pledge of the joint venture assets, which means that each joint venture party has a veto
right with respect to such decisions, which could in turn lead to a deadlock.

Dependence on Personnel

The Companys ability to manage growth effectively will require the Company to continue to implement and improve the Companys management systems and to recruit and train new employees. Although the Company has done so in the past, no
assurance can be given that it will be successful in attracting and retraining skilled and experienced personnel.

Risks Inherent in Acquisitions

The Company is actively pursuing the acquisition of advanced exploration, development and production assets consistent with its acquisition and growth strategy. From time to time, the Company may also acquire securities of or other interests in
companies with respect to which the Company may enter into acquisition or other transactions. Acquisition transactions involve inherent risks, including:

- accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;
- ability to achieve identified and anticipated operating and financial synergies;
- unanticipated costs;
- diversion of management attention from existing business;
- potential loss of key employees or the key employees of any business the Company acquires;
- unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition; and
- decline in the value of acquired properties, companies or securities.

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Any one or more of these factors or other risks could cause the Company not to realize the benefits anticipated to result from the acquisition of properties or companies, and could have a material adverse effect on the Companys ability to grow
and on the Companys financial condition.

While the Company continues to seek acquisition opportunities consistent with its acquisition and growth strategy, no assurance can be given that it will be able to identify additional suitable acquisition candidates available for sale at reasonable
prices, to consummate any acquisition, or to integrate any acquired business into its operations successfully. Acquisitions may involve a number of special risks, circumstances or legal liabilities, some or all of which could have a material adverse
effect on the Companys business, results of operations and financial condition. Risks related to acquiring and operating acquired properties and companies could have a material adverse effect on the Companys results of operations and
financial condition. In addition, to acquire properties and companies, the Company would use available cash, incur debt, issue Common Shares or other securities, or a combination of any one or more of these. This could limit the Companys
flexibility to raise capital, to operate, explore and develop its properties and to make additional acquisitions, and could further dilute and decrease the trading price of the common shares. When evaluating an acquisition opportunity, the Company
cannot be certain that it will have correctly identified and managed the risks and costs inherent in the business that it is acquiring.

From time to time, the Company engages in discussions and activities with respect to possible acquisitions. At any given time, discussions and activities can be in process on a number of initiatives, each at different stages of development. No
assurance can be given that any potential transaction will be successfully completed, and, if completed, that the business acquired will be successfully integrated into the Companys operations. If the Company fails to manage its acquisition
and growth strategy successfully it could have a material adverse effect on its business, results of operations and financial condition.

Risks related to the Companys common shares

Fluctuation in Share Price

The market price of the Companys common shares may fluctuate due to a variety of factors relating to the Companys business, including the announcement of expanded exploration, development and production activities by Richmont Mines and
its competitors, gold price volatility, exchange rate fluctuations, consolidations, dispositions, acquisitions and financings, changes or restatements in the amount of the Companys mineral reserves, fluctuations in the Companys operating
results, sales of the Companys common shares in the marketplace, failure to meet analysts expectations, changes in quarterly revenue or earnings estimates made by the investment community, speculation in the press or investment community
about Richmont Mines strategic position, results of operations, business or significant transactions and general conditions in the mining industry or the worldwide economy. No assurance can be given that the
market price of the Companys common shares will not continue to experience significant fluctuations in the future, including fluctuations that are unrelated to the Companys performance.

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Sales of common shares

Sales of substantial amounts of the Companys common shares, or the availability of Companys common shares for sale, could adversely affect the prevailing market prices for the Companys common shares. A decline in the market price
of the Companys common shares could impair the Companys ability to raise additional capital through the sale of securities should the Company desire to do so.

Equity Financing

The Company may require additional funds to fund its capital expenditures programs and potential acquisitions. If the Company raises additional funding by issuing additional equity securities, such financing may substantially dilute the interests of
its existing shareholders.

Existing Agreements Provide for Additional Issuances of Common Shares

The Company may issue additional common shares in the future pursuant to existing agreements.

Dividend Policy

The Company has not declared or paid any dividends on its common shares since its incorporation. Richmont Mines has no current plans to pay dividends on its common shares. Its present policy is to retain earnings to finance its capital expenditures
program. The Board of Directors assesses its dividend policy on a yearly basis. In the future, the Board of Directors may declare dividends according to its assessment of the financial position of the Company, taking into account its financing
requirements for future growth and other factors that the Board of Directors may deem relevant in the circumstances.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

General

The legal and commercial name of the Company is Richmont Mines Inc. The Company is a corporation domiciled in Quebec, Canada. The Company was incorporated pursuant to Part 1A of the Companies Act (Quebec) on February 12, 1981 (File number
1843-2286) under the name Ressources Minières Rouyn Inc. By Article of Amendment filed February 10, 1987 the Company added the English version Rouyn Mining Resources Inc. and by another amendment filed with the Government of Quebec on June
20, 1991, the Company changed its name to Richmont Mines Inc. The Articles of Incorporation of the Company are registered by the Government of Quebec in register S02473, folio 10.

The Company has no specific objects or purposes set forth in its Articles of Incorporation or Bylaws.

The head office and principal place of business of the Company are located at offices of approximately 8,391 square feet at 161 avenue Principale, Rouyn-Noranda, Quebec, J9X 4P6, telephone number: (819) 797-2465. The Company also utilizes an office
of approximately 1,200
square feet in rented premises at 1 Place Ville-Marie, Suite #2130, Montreal, Quebec H3B 2C6. The common shares of Richmont Mines are listed and posted for trading on the Toronto Stock Exchange and the Nyse Amex. The co-transfer agent for the
Company in the United States is Computershare Trust Company of Canada, 350 Indiana Street, Suite 800, Golden Colorado, 80401.

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Richmont Mines is principally engaged in the acquisition, exploration, operation, financing, and development of mineral properties. Richmont Mines began its exploration activities in northwestern Quebec in the spring of 1984. During the following
years, it acquired a portfolio of properties with gold-bearing potential with a view to development and commercial operation.

Recent History

In 2006, the Company sold its Nugget Pond property and gold mill in Newfoundland to New Island Resources for a cash consideration of $2,250,000. In 2007, the Company sold its East Amphi property in Quebec for a cash consideration of
$2,450,000 and 1,109,000 common shares of Exploration Osisko Ltd. valued at $6,086,000. The Company retains a net smelter return royalty of 2% on a specified portion of the future production of the East Amphi property and a similar royalty
on future production of up to 300,000 ounces of gold on another portion of the property.

The Company currently produces gold from its Beaufor Mine and Island Gold Mine, its material properties. On December 16 2008, Richmont Mines acquired Patricia Mining Corp (Patricia Mining) by way of plan of arrangement. As a result of
the arrangement, Richmont Mines owns a 100% interest in the Island Gold Mine, which had been the subject of a joint venture between Richmont Mines and Patricia Mining and has been in commercial production since October 1, 2007.

On November 5, 2007, Richmont Mines announced that it entered into an agreement with LKA International Inc. (LKA), which granted the Company an option to earn a 50% joint-venture interest in LKAs Golden Wonder property located near
Lake City, Colorado. On October 23, 2008, Richmont Mines announced that results obtained to date had failed to confirm the continuity of an economically viable ore zone. In light of these results, Richmont Mines informed LKA of the termination of
its option to proceed with the joint venture agreement.

By October 31, 2007, Richmont Mines had acquired a 70% interest in the Valentine Lake property. On February 5, 2009 Mountain Lake Resources inc. (Mountain Lake) and Richmont Mines entered into an agreement (the Valentine Lake
Agreement) pursuant to which the Company granted Mountain Lake the option to purchase Richmont Miness 70% interest in the property. Mountain Lake agreed to pay an option fee to Richmont Mines of 2,500,000 common shares of Mountain Lake
at a deemed value of $625,000, or $0.25 per share, and may exercise the purchase option within a five-year period by making option payments to Richmont Mines totaling an additional $3,000,000, and by incurring $1,000,000 in
exploration and development expenditures at Valentine Lake within such timeframe. Until all such conditions to the option exercise are met, Richmont Mines will continue to own a 70% interest in the property.

An important exploration program was undertaken in 2008 at Beaufor Mine with 45,204 metres of drilling at a total cost of $2.92 million. This drilling included 11,439 metres of definition and 33,765 metres of exploration below the lower level of
the mine. This drilling, combined with the development, has permitted reserves to be maintained at approximately the same level as in 2007.

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Island Gold

Richmont Mines assumed responsibility for operations at the
Island Gold Mine on January 1, 2005. During the course of the fourth quarter of
2005, after having fulfilled its obligation to invest $10 million for the
development of the project, the Company acquired a 55% interest in the Island
Gold Mine.

On January 26, 2006, Richmont Mines and Patricia Mining
announced through the Island Gold joint venture the acquisition of Algoma Steel
Inc.s (Algoma) remaining joint venture interest in the Goudreau property near
Dubreuilville, Ontario for an aggregate purchase price of $100,000. The property
remains subject to a 15% net profits interest, as per the original joint venture
between Algoma and Patricia Mining.

The Island Gold Mine began commercial production on October 1,
2007. On December 16, 2008, Richmont Mines acquired 42,929,581common shares of
Patricia Mining (representing approximately 98.2% of Patricia Mining's
outstanding common shares) in exchange for CAN$0.15 cash and 0.055 of one common
share of Richmont Mines for each common share of Patricia Mining pursuant to a
plan of arrangement under the Business Corporations Act (Ontario).
Richmont now owns all 43,704,581 common shares of Patricia Mining. Patricia
Minings main asset is its joint venture interest in the Island Gold Mine.
Richmont Mines currently owns a 100% interest in the Island Gold Mine.

Capital Expenditures

The following table sets forth the Companys capital
expenditures on its properties for the past three fiscal years.

|                  |           | Years Ended December 31 |           
|----------------- | --------- | ----------------------- | ----------
|                  | 2008      | 2007                    | 2006      
|                  | $         | $                       | $         
|                  |           |                         |           
|Beaufor Mine      | 126,871   | 1,060,136               | 1,706,421 
|East Amphi Mine   | -         | 34,250                  | 822,245   
|Island Gold Mine  | 3,078,654 | 4,493,937               | 21,934,103
|Other investments | 1,986,918 | 582,034                 | 597,233   
|                  |           |                         |           
|                  | 5,192,443 | 6,170,357               | 25,060,002

The Companys major investment for 2008 was $3,078,654 at
Island Gold Mine to advance production at the mine to current levels. The
Companys major investments for 2007 and 2006 were $4,493,937 and $21,934,103
respectively, to carry out work to bring the Island Gold project into commercial
production.

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Property Interests

The following table outlines Richmont Mines interest in its
exploration properties as at December 31, 2008.

|Property                  | Year of acquisition | Number of claims     | Participation1
|------------------------- | ------------------- | -------------------- | --------------
|Quebec                    |                     |                      |               
|Francoeur                 | 1992                | 19                   | 100%          
|Monique                   | 1994                | 21                   | 81% by Louvem 
|Wasamac                   | 1988                | 3 mining concessions | 100%          
|                          |                     | + 1 claim            |               
|Camflo Northwest          | 2005                | 13                   | 80%           
|Newfoundland and Labrador |                     |                     
|Valentine Lake            | 2003                | 539                  | 70%           
|Ontario                   |                     |                      |               
|Sewell                    | 2002                | 6                    | 100%          
|Cripple Creek             | 2002                | 27                   | 100%          

1The Company will be required to pay royalties if
some of these properties are brought into commercial production.

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Exploration and Project Evaluation Expenditures

The following table presents Richmont Mines exploration and
project evaluation expenses in 2006, 2007 and 2008 and the budgeted estimated
amounts for 2009.

|                                                      | 2009       | 2008       | 2007        | 2006     
|----------------------------------------------------- | ---------- | ---------- | ----------- | ---------
|                                                      | $          | $          | $           | $        
|                                                      | Estimated  |            |             |          
|Quebec                                                |            |            |             |          
|Beaufor Mine                                          | 3,340,000  | 2,920,605  | 1,873,723   | 1,342,438
|East Amphi1                                           | -          | -          | 18,409      | 248,384  
|Francoeur4                                            | 4,500,000  | 119,417    | 96,199      | 146,165  
|Monique                                               | 40,000     | 717        | 7,650       | 403      
|Wasamac                                               | 46,710     | 64,320     | 45,387      | 53,855   
|Newfoundland                                          |            |            |             |          
|Cripple Creek2                                        | -          | -          | -           | 153,297  
|Valentine Lake                                        | -          | 346,890    | 1,016,446   | 66,606   
|Ontario                                               |            |            |             |          
|Island Gold                                           | 2,340,000  | 2,292,966  | 505,365     | 263,976  
|Sewell and Cripple Creek                              | 32,200     | 19,801     | 320         | 8,448    
|                                                      |            |            |             |          
|USA                                                   |            |            |             |          
|Golden Wonder3                                        | -          | 4,202,009  | 665,287     | -        
|                                                      |            |            |             |          
|Other properties                                      | 242,450    | -          | 135,923     | 5,411    
|Evaluation of projects                                | 431,300    | 373,066    | 124,082     | 582,646  
|Tax credits                                           | -          | (642,481)  | (1,200,620) | (792,110)
|Reclassification of exploration tax credits from 2007 |            | 849,945    | -           | -        
|                                                      |            |            |             |          
|                                                      | 10,972,660 | 10,547,255 | 3,288,171   | 2,079,519



|1 | Property sold in 2007.                                                                                                                                                                                                                                                                      
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | This property was abandoned in 2006.                                                                                                                                                                                                                                                        
|3 | The joint venture option was terminated in October
      2008.                                                                                                                                                                                                                              
|4 | In april 2009, Richmont announced a surface drilling
      program consisting of approximately 8,000 metres for 2009 summer with the
      objective of increasing known resources. Richmonts 2009 budget for the
      dewatering and drilling program is approximately CAN$4.5
  million.

2009 Trends

The Companys strategy is to capitalize on its existing
properties through exploration and development and to acquire advanced projects
in North America where its expertise in narrow vein operations can be applied
and to improve production efficiencies.

To further its strategy in 2009 the Company intends to focus on
advancing the Island Gold Mine towards its full rate of production. The Company
also plans major exploration programs on its producing mines and current
exploration properties. The Company will evaluate acquisition and partnership
opportunities in order to expand the value of its portfolio of mineral
properties, to build its reserve base and to accelerate its rate of production.
Additionally, the Company will continue to assess and rationalize the quality of
its non-core asset base in order to maximize future shareholder value.

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B. Business Overview

Beaufor Mine

Location and Property Description

The Beaufor Mine property along with other adjacent properties
such as Pascalis, Perron, Colombière, Courvan and Perron Blocks 2, 3 and 4, are
located approximately 27 kilometres to the northeast of the town of Val-dOr, in
the Abitibi-Est county, Province of Quebec, Canada.

Description of Mineral Rights

The property consists of a series of adjacent mining rights
subdivided into four projects: Perron, Beaufor, Pascalis and Colombière. The
projects are composed of two mining leases, one mining concession and 23 claims
for a total area of 591.5 hectares (ha). The Courvan project and Perron blocks
2, 3 and 4 form another group of mining titles with high economic potential but
currently presenting no mining activities. This group consists of two mining
concessions and 66 claims for a total area of 1,298 ha.

|Property                       | Number of claims | Area (ha) | Expiration date                                                                                    
|------------------------------ | ---------------- | --------- | ---------------------------------------------------------------------------------------------------
|Beaufor                        | 1                | 106       | Mining
      Concession 280PTA : 01/31/2010                                                        
|Colombière                     | 13               | 226       | Claims expire between 09/22/2009
      and 10/15/2009                                              
|Courvan                        | 61               | 1099      | Mining
      concession 295 and 280PTB and 59 claims expire between 01/31/2010 and
      09/17/2010
|Pascalis                       | 1                | 37.5      | Mining Lease BM 750 : 06/02/2016                                                                   
|Perron                         | 11               | 222       | Mining Lease BM
      858 : 03/11/2023 10 claims expire between 09/10/2009 and 09/16/2009          
|Perron blocks 2, 3
      and 4 | 7                | 199       | Claims expire between 09/06/2010 to 12/15/2010                                                     

All of these claims will be renewed before the anniversary date
because there are exceeding credits available. For the mining leases, taxes are
paid every year to the government to keep them in good standing. For a mining
concession, geological works are performed to keep it in good standing or the
taxes are paid every year. Richmont Mines has an internal procedure and an
external control to insure the follow up of the claims expiry dates. All the
mining claims, mining concessions and mining leases were in good standing in
2008 and will be for 2009. A detailed list and map of locations can be found in
the Technical Report for the Beaufor Mine as of December 31, 2006 filed on March
29, 2007 under the Company’s profile on the SEDAR web site at
www.sedar.com.

Ownership of Mineral Rights

All the mining titles of the Beaufor property are jointly held
by Richmont Mines (50%), which is the operator of the property, and by Louvem
(50%). Richmont Mines holds 70% of the shares of Louvem.

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Mineral Royalties

All the properties jointly held by Richmont Mines and Louvem
are subject to the payment of royalties and financial contractual obligations as
follows:

For Beaufor (only calculated on the 50% of production held
by Richmont Mines)

a) Royalties

Royalties are payable to Aurizon Mines Ltd. (Aurizon) on the
50% of production held by Richmont Mines. The amount of the royalty is
determined by the prevailing price of gold and the quantity of gold produced in
accordance with the following formula:

Gold Price (US$/oz)
    Royalties by oz of gold produced<300
    CAN$00.00300  325
    CAN$17.00325  350
    CAN$18.50350  375
    CAN$20.00375  400
    CAN$22.50400  500
    CAN$24.00>500
    CAN$30.00




|b) | Since the signing of an agreement in July 2001 with the
      Quebec Ministry of Natural Resources, the amounts of government assistance
      recorded in revenues and as a reduction of the cost of property, plant and
      equipment are $2,125,756 and $574,244,
respectively.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Perron and Perron Block-1

For each ounce produced on the Perron property and in relation
with the gold price, the royalty calculation, payable quarterly to Aurizon is
made as follows:

Gold Price (US$/oz)
    Royalties by oz of gold produced300
    CAN$00.00300  325
    CAN$17.00325  350
    CAN$18.50350  375
    CAN$20.00375  400
    CAN$22.50400  500
    CAN$24.00>500
    CAN$30.00


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Perron Block-2 (Claims 3493171, 3493172 and 3493173)

A Net Smelter Royalty (NSR) of 2% is payable monthly to Northwest Gold Corp. subject to the condition that the average monthly gold price be exceed US$300/oz on production from these claims. NSR means the amount of money which the
smelter or refinery pays the mining operator for the mineral product and is usually based on a spot, or current price of the mineral, with deductions for the costs associated with further processing.

Pascalis

A Net Profit Interest (NPI) of 25% payable to New Pascalis Mines Limited. NPI means a share of net proceeds from production paid solely from the working interest owners share.

Colombière

A 2% NSR is payable quarterly to Cambior Inc.

Environmental Obligations and Permitting Status

Over 75% of the development waste material is hoisted from the underground mine to the surface and placed on a waste dump. The waste rock is not acid generating and does not require any particular environmental measures.

The rehabilitation plan for the Beaufor Mine was approved in April 2008 by the Ministry of Natural Resources and Wildlife of Quebec (the MNRW).

Location of Mineralized Zones

The mineralized zones, including mineral reserves and mineral resources, underground infrastructure and the waste pad are located on mining concession 280 PTA of the Beaufor property, mining lease 750 of the Pascalis property and mining lease 858 of
the Perron property.

Permits

All necessary permits and authorizations have been requested and issued.

Infrastructures

Two mine shafts are located on the Beaufor property, the old Perron shaft No. 5 is currently used for hoisting and the Pascalis shaft is used as the ventilation air intake shaft and as an emergency exit. A series of buildings including warehouses,
workshops, offices are used to service a workforce of about 99 employees and approximately 25 independent contractors as of December 31, 2008. Over $1 million was invested to replace the structure of the wooden headframe between June and August
2007.

Access

The mine can be accessed from the highway 117, going East from Val-dOr to the Perron road and then north towards the village of Perron. The mine can also be accessed using the secondary road 397 from Val-dOr to Val-Senneville, and going
south on the Paré road to the Perron village.

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Climate

The average annual precipitation is some 954 mm with most falling in September (some 102 mm). Snowfalls occur between October and May with the most snowfall occurring between November and March. The monthly average for that period is about 54 mm
(expressed in mm of water).

The average daily temperature in Val-dOr is 1.2°C, slightly above freezing. The average temperature for July reaches 17.1°C, while in January the temperature falls to 17.0°C. The lowest temperature measured was -43.9°C
and the highest temperature measured was 36.1°C. Although the temperature of the area is below the freezing point an average of 209 days per year, mining operations arent affected by the climate.

Local Resources and Basic Infrastructures

The area is well served by existing infrastructure and human resources. The population of the town of Val-dOr is approximately 32,000 people. The town is accessible from the national road network and commercial flights are available daily at
the local airport. The area also hosts an excellent base of suppliers and manufacturers for the mining industry.

A railroad is located a few kilometres to the south of the property and power is supplied by Hydro-Québec.

The local manpower is well trained. Since the mining town of Val-dOr is very active, it is generally possible to recruit and retain a sufficient mining workforce. Professionals, engineers, geologists and technicians are usually well-trained
and available in this area.

Physiography

The regional landscape is typical of the Abitibi lowlands, with its small rolling hills and widespread swamps, and its mixed forests of broadleafs and conifers. The forest cover is relatively young, as a forest fire devastated the area in 1942. The
elevation is approximately 300 metres above sea-level.

Exploration History

Intermittent exploration fieldwork has been conducted on the Beaufor property since the 1930s. Following a development period, Aurizon Mines (50%) and Louvem (50%) started commercial production at the Beaufor Mine in January 1996. In August 2000,
Aurizon Mines stopped the mining operation at Beaufor Mine for reasons of risk instability of the crown pillar. In spring 2001, Aurizon Mines transferred the mining rights of the Perron, Beaufor, Pascalis, Colombière and Courvan properties to
Richmont Mines for an amount of $1.8 million. In September 2001, Richmont Mines undertook construction work to secure the crown pillar and commercial production resumed at Beaufor Mine jointly with Louvem in January 2002.

Geological SettingRegional geology

The mining town of Val-dOr is located in the South-East of the Abitibi greenstone belt formed of archean volcanic and sedimentary rocks from the Superior Province. The mining camp of Val-dOr belongs to the Malartic group corresponding to
a volcanic pile including ultramafic, basaltic
and rhyolitic flows. The Bourlamaque granodiorite intrusion hosts significant gold concentrations, namely at the Beaufor Mine.

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Beaufor Mine geology

The Beaufor, Perron, Pascalis, Colombière and Courvan properties belong to the same gold bearing hydrothermal system with a similar geometry. The Beaufor deposit is included in the Bourlamarque granodiorite. Gold mineralization occurs in
veins associated with shear zones moderately dipping south. The mineralization is associated with quartz-tourmaline veins resulting from the filling of shear and extension fractures. The gold bearing veins show a close association with mafic dykes
intrusive and undercutting the granodiorite. The dykes seem to have influenced the structural control of the gold bearing veins.

Mineralization

Gold-bearing veins at the Beaufor mine consist of quartz-tourmaline-pyrite veins, typical of Archean epigenetic lode gold deposits, that cross-cut the Bourlamaque Batholith. Mafic dykes that predate the mineralization are associated with
shear-hosted gold-bearing veins. Shallowly dipping extensional gold-bearing veins are commonly observed at the Beaufor mine. Shear zones striking N070o and dipping steeply to the southwest control the opening and gold enrichment of veins.

All the gold-bearing veins are contained in a strongly-altered granodiorite in the form of chlorite-silica forming anatomosing corridors of 5 to 30 m in thickness. The veins at the Beaufor Mine form panels of more than 300 m in length by 350 m in
height. The thickness of the veins varies from 5 cm to 5 metres. The zones are limited by the Beaufor fault (N115o /65o -75o) at 380 metres from the surface and a rythmic system of shearings (N70o /sub
vertical).

Work during 2008

In 2008, 115,674 tonnes of ore at an average recovered grade of 8.85 g/t were extracted from the Beaufor Mine. This production yielded gold sales of 32,908 ounces, produced at a cash cost of US$509 and CAN$543 per ounce sold.The cash cost
per ounce increased in 2008 compared to 2007, largely due to higher mining and milling costs and increased definition drilling. The following table summarizes the work completed over the last three years.

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|Beaufor
      Mine                                    |           |           |          
|----------------------------------------------------- | --------- | --------- | ---------
|                                                      | 2008      | 2007      | 2006     
|Tonnes                                                | 115,674   | 97,429    | 139,513  
|Recovered grade (g/t)                                 | 8.85      | 8.36      | 5.54     
|Ounces sold                                           | 32,908    | 26,182    | 24,866   
|Cash cost per ounce (US$)1                            | 509       | 468       | 580      
|Investment in property, plant and equipment
      ($) | 126,871   | 1,060,136 | 1,706,421
|Exploration expenses ($)                              | 2,920,605 | 1,873,723 | 1,342,438
|Differed development metres                           | -         | -         | 1,299    
|Diamond drilling (metres)                             |           |           |          
|Definition                                            | 11,439    | 3,095     | 18,513   
|Exploration                                           | 33,765    | 25,157    | 22,592   

1 The cash cost includes operating costs and royalties

Exploration Work

An important exploration program was undertaken in 2008
performed by a contractor under the supervision of the geological staff at the
Beaufor Mine with 45,204 metres of drilling at a total costs of $2.9 million.
This drilling included 11,439 metres of definition and 33,765 metres of
exploration below the last level of the mine. This drilling, combined with the
development, has permitted reserves to be maintained at approximately the same
level as in 2007. Reserves stood at 244 063 tonnes at a grade of 8.89 g/t for
69,792 ounces at the end of 2008 compared to 255,701 tonnes at a grade of 9.20
g/t for 75,632 ounces at the end of 2007. With the exploration drilling, Beaufor
has also increased its Inferred Mineral Resources to 154,927 ounces in 2008
compared to 30,278 ounces in 2007. The zones below the 20th level and up to the
12th level are still showing good gold intersections and continuities.

Drilling

Most of the drill holes are planned on vertical cross-sections
in order to undercut at right angles the shear veins. The drilling program is
sub-divided into two main categories as follows:

- Exploration drilling using a 40 to 80 metres by 40 to 80 metres grid;
- Definition drilling based on a 10 to 20 metres by 10 to 20 metres grid.

Drilling operations are performed by a drilling contractor,
under the supervision of the geological staff at the Beaufor Mine. Underground
drill holes are BQ and LTK48 (1 13/32") calibre. The
core recovery is better than 95%, including the fault zones where the RQD is
more than 75%. A detailed description of the drill cores is logged by
experienced and highly qualified personnel, in accordance with established
Beaufor Mine guidelines.

Sampling

Sampling of the rock mass is performed using drill cores and
blasted rock. Results of the drill cores analyses as well as the grades of ore
samples sent in the ore pass and in the car wagon are
taken into account for mineral reserve calculation. The weight of each sample is around 1⁄2 kg per
3.5 to 5 tonnes wagon. For development purposes, the weight of each sample is around 1⁄2 kg per
12 tonnes of blasted rock. There are currently no face-sampling chips at the Beaufor Mine.

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In definition drill holes, samples are collected over 1 metre intervals, and frequently include both vein material and wall rocks, since veins are often less than 1 metre thick. Recuperation of core is over 90%. The entire core is then analyzed at
the chemical assay laboratory.

For exploration holes, the length of the sample varies from 0.5 to 1 metre. The core is split in two using a hydraulic splitting machine. Recuperation of core is over 90%.

The drill cores and blasted rocks samples are representative and the mineralization style, with the presence of quartz veins, shows a nugget effect.

Assays

ALS Chemex Chimitec Laboratories in Val-dOr, was selected to analyze samples from the Beaufor mine. This laboratory is certified ISO 9001-2000 for the Supply of assays and geochemical analysis services by QMI, an ISO
certification firm. The step-by-step procedure for sample analyses is briefly described as follows:

- Upon reception of sample bags, all sample numbers are verified and entered into the Laboratory Information Management System (LIMS), a sample tracking system used by the laboratory.
- Samples are dried and crushed to 70% passing 2 mm using a jaw crusher. A representative sub-sample weighing 250 to 300 g of the 2 mm fraction is prepared using a Jones riffle splitter. The sub-sample is then pulverized to 85% passing 200
mesh using a ring pulverizer.
- Samples are then analyzed by fire assay with gravimetric finish using 30 g per sample.

Quality Control

The first quality control program done by the laboratory at different steps of the process are as follows:

- Crushing, pulverizing, weighing: daily monitoring;
- Fire assay: 1 blank, 2 standards and 3 duplicates are inserted in each batch of 84 samples.

A second quality control program established by the Beaufor Mine involves the insertion of blanks and standards. Furthermore, rejects for all samples exceeding 10 g/t Au are systematically re-assayed.

Security of Samples

There is no formal program established at the Beaufor Mine relating to shipment of samples. Samples are gathered in plastic boxes and collected daily by the laboratory. Historical production and milling data indicate reliability of the laboratory
results. When there is doubt such as to the
location of a sample, the sampling number or any other anomaly, the data is not used for the resource calculation.

24

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Mineral Reserve Estimates

General

In 2008, the reserve estimates were performed by qualified persons pursuant to National Instrument 43-101. The methodology and procedures for Mineral Reserve estimates have been adopted from a study completed in 2006 by Golder and Associates, an
independent firm. The database, factors and parameters used in the determination of the Mineral Reserves are based on the available information at the Beaufor Mine as of December 31, 2008. However, these parameters are revised on an annual basis in
order to take into consideration the experience gathered from the current mining operation.

The Mineral Reserves estimate is carried out in accordance with the National Instrument 43-101 requirements and regulations. Mineral Reserves were classified according to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
classification and adopted by the CIM Council on August 20 2000. All standards generally accepted in the mineral industry as well as National Instrument 43-101 requirements and CIM regulations for Mineral Reserve estimates have been fully applied in
this study.

A composite table of grades has been prepared for resource modelling on the basis of the current geological interpretation of each of the drilling sections, which are 10 metres apart. The composite values were arranged by zones of economic interest,
which allowed for the construction of distinct longitudinal sections for each zones. Each drilling section was projected onto the longitudinal sections, which made it possible to estimate the mineral reserves. For the drill holes, the gold value is
cut at 68 g/t for the B and C zones and 34.25 g/t Au for the others zones. The blasted rocks are cut at 16.50 g/t Au for all the zones except for the B zones where they are cut at 12.00 g/t Au. A density factor of 2,75 t/m3 is applied to
evaluate the volume.

All the geo-scientific data collected at the Beaufor Mine are grouped into two main databases. Internal procedures have been prepared in order to validate the information in the databases. All the entire work, performed by the
Beaufor Mine geology department, from data entry to layout drawings follows strict and established procedures, including crosschecks to ensure full validity. Access to all databases is restricted to selected personnel in order to retrieve complete
integrity.

The database and the parameters used to estimate the Mineral Reserves are based on past mining experience and the information available as of December 31, 2008. The parameters were reviewed and modified by Golder and Associates in 2006.
Thus, both the dilution and the ore recovery factors by mining methods used in the reserve estimate are based on actual results obtained in 2008. All these factors and parameters are updated on an annual basis in order to account for changes in the
mining operations.

The conversion of Mineral Resources to reserves is based on economical feasibility. As per National Instrument 43-101, only Mineral Resources in the measured and indicated categories can be used to outline the estimate of Mineral Reserves.

The budget costs used are based on actual and historic data of the mining operation and are updated based on experience and to reflect the changes in the prevailing economic situation.

25

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Technical Parameters

The basis and the parameters used in the economic study for reserve estimation are given in the following sections.

Mining Methods

The two major underground extraction methods currently used at Beaufor Mine are the room and pillar and long holes methods:

Room and Pillar

- Geometry : stopes width from six metres to ten metres in the plane of the vein with in-stope pillars of three metres by three metres section or two metres long in the plane of the vein;
- Maximum vein dip : 40°;
- Ore mining recovery: 80% used in the economic evaluation;
- Internal dilution : the ore block is designed with a true thickness of 2.4 metres. The drilling intersects are projected to the same lengths. The minimum mining width is 2.4 metres. The dilution grade is assumed to be 0 g/t Au;
- External dilution : a dilution amounting 5% at a grade of 0 g/t Au is added in the determination of the economic mineral reserves.

Long Holes

- Geometry : maximum panel length of 40 metres;
- Minimum dip of vein: 45°;
- Ore mining recovery : 100% for designed stopes with all recoverable pillars between stopes clearly identified during the process of mineral reserve estimation;
- Internal dilution : minimum mining width is three metres. The drilling intersections are projected to a minimum length of three metres;
- External dilution : a dilution rate of 10% for waste at a grade of 0 g/t Au is assumed for primary stopes.

Cut-off Grades

Cut-off grades have been calculated based on both developed and undeveloped workings for the two major mining methods used at Beaufor
Mine, which are rooms and pillars and long holes.

The main criteria are as follows :

- No profit margin is built-in in the estimate;
- Differed or capitalized capital is not used;
- Only the gold price is taken into account in the economic calculation;
- The price of gold used was CAN$785/oz applying an exchange rate of 1.00
  CAN$:US$;
- Operating costs include fixed costs budgeted for 2009 and variable costs
  (production and development) based on the results from January to June 2008
  for each method.

26

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The results of the cut-off grade study by mining methods for
both developed and undeveloped underground workings are listed in the following
table:

|Mining Methods  | Workings    | Cut-off Grade (g/t)
|--------------- | ----------- | -------------------
|Room and pillar | Developed   | 5.81               
|Room and pillar | Undeveloped | 6.68               
|Long holes      | Developed   | 4.77               
|Long holes      | Undeveloped | 5.64               

Reserve Classification

Descriptions with more details about classification of reserves
at the Beaufor Mine are set out below.

Proven Mineral Reserves

Golder and Associates have estimated the tonnage of Mineral
Reserves in the Proven category based on an economic study in order to determine
the economically mineable part of a Measured Mineral Resource. At the Beaufor
Mine, Proven Reserves are based on ore blocks developed from drifts or raises up
to a maximum of eight metres from these openings. The level of accuracy of the
economic evaluation is that of a feasibility study.

Probable Mineral Reserves

The Mineral Reserves estimate in the Probable category was
based on an economic study in order to determine the economically mineable part
of an Indicated Mineral Resource. At the Beaufor Mine, probable reserves extend
to a maximum of ten metres from drilling data. Dilution and mining recovery
rates are included in the reserve calculation.

Reserve Table

As of December 31, 2008, the mineral reserves of the Beaufor
Mine (before milling recovery of 95.8%) were estimated as follows:

|Reserve Category          | Tonnes   | Grade          | Au    
|------------------------- | -------- | -------------- | ------
|                          | (metric) | (g/t
      Au) | (oz)  
|Proven                    | 96,678   | 7.17           | 22,287
|Probable                  | 147,385  | 10.03          | 47,505
|                          |          |                |       
|Total (Proven + Probable) | 244,063  | 8.89           | 69,792

27

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As of December 31, 2008, the Mineral Reserves at Beaufor Mine
are estimated at 69,792 ounces of gold, calculated using a long-term gold price
of CAN$785 per ounce, for an expected mine life of approximately three years.

Mining Operations and Metallurgy

The two major underground extraction methods currently used at
Beaufor Mine are the room and pillar and long holes methods.

The Beaufor Mine ore is trucked to the Camflo Mill located
approximately 49 kilometres from the mine site. Camflo Mill Inc., the owner of
the Camflo Mill, is 100% owned by Richmont Mines. The Camflo Mill, with a rated
capacity of 1,300 short tons per day, is a Merrill-Crow conventional type mill
with circuits for crushing, grinding, gold cyanidation and precipitation using
zinc powder.

The historic average rate of recovery of the mill is 98.5% when
Beaufor ore is milled. No major operating problem was experienced at this mill
nor is anticipated in the near future. Usual maintenance and repairs are done
when deemed appropriate.

Production Summary

In 2008, ore totalling 115,674 tonnes at an average recovered
grade of 8.85 g/t was extracted from the Beaufor Mine. This production yielded
gold sales of 32,908 ounces, produced at a cash cost of US$509 per ounce,
compared to the previous year with 97,429 tonnes of ore at an average recovered
grade of 8.36 g/t, produced at a cash cost of US$468 per ounce. The cash cost of
production per ounce increased compared to 2007, mainly as a result of increases
in mining and milling costs and increased definition drilling.

**Beaufor Mine**

|                                       |   | Year ended   |  |   | Year ended   |  |   | Year ended   | 
|-------------------------------------- | - | ------------ |  | - | ------------ |  | - | ------------ | 
|                                       |   | December 31, |  |   | December 31, |  |   | December 31, | 
|                                       |   |              |  |   | 2008         |  |   |              | 
|                                       |   |              |  |   |              |  |   |              | 
|Precious metals revenues               | $ | 31,074,781   |  | $ | 19,503,789   |  | $ | 16,866,158   | 
|                                       |   |              |  |   |              |  |   |              | 
|Tonnes processed                       |   |              |  |   | 115,674      |  |   |              | 
|Grade (g/t)                            |   |              |  |   | 9.00         |  |   |              | 
|Gold recovery (%)                      |   |              |  |   | 98.31        |  |   |              | 
|Recovered grade (g/t)                  |   |              |  |   | 8.85         |  |   |              | 
|Ounces sold                            |   |              |  |   | 32,908       |  |   |              | 
|                                       |   |              |  |   |              |  |   |              | 
|Data per ounce of gold sold            |   | US$          |  |   | CAN$         |  |   | US$          | 
|Cash cost                              |   | 509          |  |   | 543          |  |   | 468          | 
|Depreciation and
      depletion       |   | 38           |  |   | 41           |  |   | 114          | 
|                                       |   |              |  |   |              |  |   |              | 
|Total                                  |   | 547          |  |   | 584          |  |   | 582          | 
|                                       |   |              |  |   |              |  |   |              | 
|Average price obtained per
      ounce |   | 886          |  |   | 944          |  |   | 693          | 

28

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Island Gold Mine

Location

The Island Gold Project is located approximately 85 km north
east of Wawa, Ontario, Canada, in the Sault Ste. Marie Mining Division.
Dubreuilville is approximately 15 km to the northwest of the Island Gold Mine.

Description of Mineral Rights

The Island Gold property consists of 137 patented, leased and
staked claims totalling 4,684 ha.

Property
    Number of claims
    Area
      (ha)
    Expiration dateKremzar
    20
    381
    Patented Claim : taxes are
      paid every year 2 Leased claims: 06/30/2009Lochalsh
    31
    368
    Patented Claim : taxes are paid every year
      Mining Leases : 06/30/2009 to 03/31/2012 Claims : 02/06/2012 to 03/26/2012Goudreau
    65
    1,003
    Patented Claims :taxes are
      paid every year 1 claim : 08/20/2012Island Gold
    197
    2,932
    Claims : 05/06/2010 to 11/25/2014


The claims will be renewed by exceeding credits available
before the anniversary date. For the Patented Claims and the Mining Leases,
taxes are paid every year to the government to keep them in good standing. 6
Mining Leases will have to be renewed for a term of 21 years in June 2009.
Richmont Mines has an internal procedure to insure the follow up of the claims
expiry dates. All of these mining claims, mining leases and patented leases were
in good standing in 2008 and will be for 2009.A detailed list and map of
locations can be found in the Island Gold Technical Report as of May 15, 2007,
filed on May 25, 2007 under the Companys profile on the SEDAR web site at
www.sedar.com.

With the acquisition of Patricia Mining, Richmont Mines added
four new groups of claims to its portfolio in Ontario:

- A group of 39 claims for an area of approximately 694 hectares, the
  Edwards property, is located to the east of the Island Gold property. These
  claims expire between July 24th, 2009 and April 5th, 2010. As the location of
  this property is strategic, on the strike of the Goudreau Lake shear zone,
  between the Island Gold and Cline Edwards Mines, Richmont Mines intends to
  renew all of these claims.
- The Little Brothers property, 4 claims for an area of approximately 573
  hectares, is located further east, near 4 patented claims that are owned by
  Richmont Mines. These claims expire on February 27th, 2009. After
  the review of the data, Richmont Mines has decided not to renew these claims.
- A group of 3 claims, the Ego property, for an area of approximately 73
  hectares, is located west of the Island Gold property. These claims expire on
  June 5th, 2009. Richmont Mines is currently assessing whether these
  claims will be renewed.
- A group of 2 claims for approximately 480 hectares in the Dunne Lake
  township is located 300 km to the north-east of Thunder Bay. These 2 claims
  expire on May 24th, 2009. Richmont Mines is currently assessing whether these
  claims will be renewed.

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Acquisition of Island Gold Interest

Richmont Mines entered into an agreement with Patricia Mining on August 28, 2003, pursuant to which Richmont Mines completed a private placement investment of $1.0 million in common shares of Patricia Mining at $0.50 cents per share and
obtained an option to acquire a 55% interest in the Island Gold property by investing up to $10 million or by bringing the project into commercial production. This initial investment was used to partly finance a $3 million exploration
program on the Island Gold project. On December 3, 2004, Richmont Mines decided to invest up to $10 million in order to acquire a 55% interest in this project. Richmont Mines became the project operator as of January 1, 2005. During the course
of the fourth quarter 2005, after having fulfilled its obligation to invest $10 million for the project development, the Company acquired its 55% interest in the Island Gold property.

In January 2006, Richmont Mines and Patricia Mining announced the purchase of Algomas remaining joint venture interest in the Goudreau property near Dubreuilville Ontario, for $100,000. The property remains subject to the 15% net profits
interest as per the original joint venture agreement between Algoma and Patricia Mining.

On December 16, 2008, Richmont Mines acquired all of the common shares of Patricia Mining that it did not already own pursuant to a plan of arrangement under the Business Corporations Act(Ontario). Richmont Mines currently owns a 100%
interest in Island Gold Mine.

Ownership of Mineral Rights

All mining titles on the Island Gold project were jointly held by Richmont Mines (55%), and Patricia Mining (45%). Since the acquisition of Patricia Mining on December 16, 2008, Richmont holds 100% of all mining titles relating to the Island Gold
property. Following the acquisition, the mining rights owned by Patricia (45%) were transferred to Richmont Mines in February and March 2009.

Mineral Royalties

All the properties held by Richmont Mines are subject to the payment of royalties and financial contractual obligations. Details can be found in the Technical Report for the Island Gold Project as of May 15, 2007 under the Companys profile on
the SEDAR web site at www.sedar.com.

Kremzar Property is subject to a 4% NSR in favour of Algoma Steel. The Algoma NSR will become payable at such time as the aggregate amount of NSRs received by the Company and Aur Resources Inc. (Aur)
equals the aggregate preproduction costs.

The Kremzar Property is also subject to a 3% NSR in favour of Aur, which is payable until such time as the Algoma NSR becomes payable. In the event the Algoma NSR becomes payable and is reduced below 4%, Aur will be entitled to receive a net smelter
return equal to 50% of the amount by which the Algoma royalty is reduced, payable on the same terms as the Algoma NSR.

The Lochalsh Property is subject to a 3% NSR in favour of Aur.

The Goudreau Property is subject to a 2% NSR in favour of Aur and a 15% NPI royalty in favour of Algoma.

30

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Environmental Obligations and Permitting Status

- The permit to operate the Kremzar Mill, at the Island Gold Mine was amended in September 2008 to include water treatment to clarify the effluent of the primary pond. The treatment is done by adding a coagulant and a flocculant. The new permit number
is 0734-7HYHVH.
- The primary pond could hold the tailings for another two to four years just by managing the water differently. Various scenarios are under consideration.
- The Lochalsh closure plan was approved on April 30, 2007. At that time, a financial assurance of $177,523 was put in place to cover the closure costs. The closure plan for the Kremzar property was filed with the Ontario Ministry of Northern
Development and Mines (MNDM) in 1998 by Patricia Mining and was also approved. A payment of $10,000 cash was made by Patricia Mining, and there was a collateral mortgage of $577,800 granted using the Kremzar Mill as security. In
January 2009, following the acquisition of Patricia Mining, Richmont Mines has provided the MNDM with a letter of credit to cover all closure plan costs. Since Richmont Mines has satisfied all the conditions by the MNDM, the mortgage on the Kremzar
Mill has been released. There are no environmental issues on the property at this time.

Infrastructures

The Island Gold Mine infrastructure includes the primary tailings pond, the secondary settling pond, the Kremzar mill (a carbon-in-pulp mill with a capacity of 650 tonnes per day), the Kremzar ramp and portal, the Lochalsh ramp and portal, the mine
access road, and the hydro lines, all with respect to the property . An office, a core logging and storage facility, and a mine dry are also located on the Kremzar mine site.

Access

Access to the Island Gold Mine is via an all-weather road from Highway 519, just west of Dubreuilville and the access is located approximately 35 km east of the junction between Highways 17 and 519. It takes approximately one hour to drive from Wawa
to the Mine site.

Climate

The Island Gold Mine is located within the Lake Superior Regional climatic zone, moderated by the influence of Lake Superior. The average day time temperature is 2°C, ranging from -41°C to 31°C. Annual precipitation is normally 669 mm of
rain and 278 cm of snow. Winter winds are from the northwest to north and during the summer south westerly to westerly winds prevail. The climate does not affect the mining operation, which extend all year long.

Local Resources and Infrastructures

Wawa has a population of approximately 3,500. Dubreuilville is a forestry community with a lumber mill and a population of approximately 900. The Island Gold Mine is also within a few kilometres of railway lines operated by Canadian National
Railways and Algoma Railways. Sidings for each of these railway lines are located at the towns of Goudreau and Lochalsh.

31

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A power substation connected to the provincial power grid, water supply, gravel roads, offices, maintenance buildings and living accommodation are all available within the Mine area. Power is supplied by Great Lakes Power Corporation.

Richmont Mines also offers living accommodations and flexible schedules to its employees. Training is offered in order to obtain a local qualified workforce.

Physiography

The Island Gold Mine area is within the Precambrian Shield adjacent to Lake Superior, in an area of low rolling hills that trend in an east-west direction with widespread swamps and mixed forests of broadleafs and conifers. Property relief is low,
from a high point of 488 m above sea level near Miller and Maskinonge Lakes, to a topographic low point of 381 m above sea level near Goudreau Creek. The mine area has been partially logged.

Exploration History

In 1983, Canamax Resources Inc. (Canamax) and Algoma Steel Inc. (Algoma) formed a joint venture to evaluate the mineral potential of Algoma's 117 patented claims covering the Goudreau iron range. In 1985, drilling by Canamax
about two kilometres south of the Kremzar mine intersected a series of sub-parallel lenses containing gold mineralization within deformed rocks of the Goudreau Lake Deformation Zone (GLDZ). These lenses, are known as the Lochalsh, Island
Gold, Shore, and Goudreau lake Zones. During 1989 and 1990, a 1,280 m long ramp was driven into the Island deposit beneath Goudreau lake from an adit on the north shore. Drifts and raises totalling 382 m were developed on two levels at depths of 125
m and 140 m below the Goudreau lake elevation at approximately 382 m. A bulk sample weighing 4,167 tonnes was extracted and processed at the Kremzar Mill.

Patricia Mining acquired the project in 1996 and completed 16,862 m of diamond drilling in 49 holes on the Island deposit and Lochalsh Zone between 1996 and 2002. In 2004, Patricia Mining started an underground exploration program and completed a
resource estimate at a cost of $3.0 million. A total of 125 drilling drifts, 53 metres of ore sill and 8,137 metres of drilling have been completed.

In 2005, Richmont Mines completed 2,111 metres of underground development and 7,903 metres of delimitation drilling. A total of 7,259 tonnes with a content of 6.23 g/t Au from ore development were stockpiled on the surface.

In 2006, Richmont Mines continued the exploration program. A total of 3,469 metres of development has been completed including 506.5 metres of ramp and 1,700.5 metres of ore silling. A total of 56,861 tonnes of development ore with a content of 6.96
g/t Au were stockpiled on the surface. At the end of December, a total of 41,531 tonnes of mineralized material grading 4.80 g/t Au were processed at the mill. A total of 28,149 metres of underground diamond drilling have been performed on the
Island Zone and 10,602 metres were completed from the surface on the Lochach and Goudreau zones. Reserve estimates have been performed by Genivar in 2007 based on this work.

On October 1, 2007, the Island Gold Mine began commercial production. On December 16, 2008, Richmont Mines acquired all of the outstanding shares of Patricia Mining and owns now a 100% interest in the property.

32

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Geological SettingRegional Geology

The Island Gold Mine is part of the Michipicoten greenstone belt which, is part of the Wawa sub-province and Superior province of Archean age. The Project is stratigraphically positioned in the upper portion of the Wawa Assemblage, composed by
intermediate to felsic volcanic rocks capped by pyrite-bearing iron formations.

Island Gold Project Geology

The Island Gold Mine covers part of the interface between the Catfish assemblage, composed of mafic rocks, and the Wawa assemblage, consisting of felsic rocks. The pyrite-rich Goudreau iron formation lies at the contact between the Wawa and Catfish
assemblages. A unit of pyroclastic rocks marks the transition between the two assemblages and hosts gold occurrences encountered on the property. This gold mineralization is controlled by the GLDZ. The GLDZ hosts the Island, Lochalsh, Goudreau,
Shore, and North Shear gold zones, all located within the Island Gold property.

Mineralization

Within the GLDZ are a series of parallel shear zones, up to 25 m wide by several hundred metres long, with dips ranging from -70° to -90°, that host the gold mineralization. Moderate to high strain intensity are present within the shear
zones containing pervasive alterations occurring in the form of iron carbonate, silica and calcite. Within areas of intense sericitization and silicification with 2% to 5% pyrite are narrow, subparallel quartz veins carrying gold mineralization.
Gold is found primarily in quartz stringers and veins one centimetres to 1,5 meters wide. Visible gold (VG) forms clouds of fine gold droplets up to 3 mm in diameter.

At the Island Gold deposit, five zones referred to as E1, E, D1, D,
and C, are defined and characterized by the presence of alteration halos ranging from 0.5 to over 8 metres in thickness, comprising intense silica alteration, albite alteration and quartz-carbonate veins. Two dominant envelopes are defined, namely
the C/D envelope and the E/E1 envelope, which includes the D1 zone. An anastamosing pattern defines the relationship between the zones.

Work During 2008

Exploration and project evaluation costs were $2.3 million in 2008, as Richmont Mines focused its exploration efforts also on the Island Gold Mine. The Island Gold Mine produced 161,320 tonnes of ore at an average recovered grade of 7.33 g/t,
for 38,037 ounces in 2008, compared with 35,202 tonnes at 6.45 g/t and 7,302 ounces in 2007. The Island Gold Mine commenced production on October 2007.

33

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**Island Gold Mine**1

|                                                      |  | 2008      |  |  | 2007      |  |  | 2006       | 
|----------------------------------------------------- |  | --------- |  |  | --------- |  |  | ---------- | 
|                                                      |  |           |  |  |           |  |  |            | 
|Tonnes                                                |  | 161,320   |  |  | 35,202    |  |  | -          | 
|Recovered Grade (g/t)                                 |  | 7.33      |  |  | 6.45      |  |  | -          | 
|Ounces sold                                           |  | 38,037    |  |  | 7,302     |  |  | -          | 
|Cash cost per ounce (US$)                             |  | 659       |  |  | 621       |  |  | -          | 
|                                                      |  |           |  |  |           |  |  |            | 
|Investment in property, plant and equipment
      ($) |  | 3,078,654 |  |  | 4,493,937 |  |  | 21,934,103 | 
|Exploration expenses ($)                              |  | 2,292,966 |  |  | 505,365   |  |  | 263,975    | 
|                                                      |  |           |  |  |           |  |  |            | 
|Differed development metres                           |  | 605       |  |  | -         |  |  | -          | 
|Development metres                                    |  | -         |  |  | 4,075     |  |  | 3,469      | 
|                                                      |  |           |  |  |           |  |  |            | 
|Diamond drilling                                      |  |           |  |  |           |  |  |            | 
|Definition                                            |  | 14,764    |  |  | -         |  |  | -          | 
|Exploration                                           |  | 1,901     |  |  | 12,940    |  |  | 38,751     | 



|1 | Prior to its acquisition of Patricia Mining in December
      2008, which held a 45% interest in the Island Gold Project, Richmont Mines
      reported 100% of the consolidated results of the Island Gold Mine, in
      compliance with AcG-15, which stipulates that a holder of variable
      interests must consolidate the accounts if it intends to assume the
      majority of the expected losses and/or receive the majority of the
      residual returns of the variable interest entity (VIE). Richmont Mines
      held a 55% stake in the unincorporated joint venture, and as its share of
      the earnings and/or losses differed from the percentage that it owned the
      Company was considered the primary beneficiary of the
  VIE.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exploration

The update of the Reserves estimate was performed by Genivar on
February 2, 2009 based on work completed up to December 31, 2008. Proven and
Probable Mineral Reserves of 1,031,187 tonnes at a grade of 8.72 g/t Au
containing 289,069 ounces of gold have been evaluated.

Approximately 16,665
metres of diamond drilling in 90 drill holes were completed in 2008. From this
drilling, about third of the holes were drilled in the Island Gold extension,
between two diabase dykes (East of 15 200 E). The drilling in this extension has
enabled the Company to add about 190,000 tonnes of Probable Mineral Reserves.

Drilling

A total of 763 holes totalling 144,124 metres of surface and
underground diamond drilling were completed on the property from the early
1980s to December 2007. The majority of the drill-holes used for resource
estimates were BQ size. In 2008, 88 drill holes for 16,665 metres were drilled
from underground.

Most of the drill holes are planned on vertical cross-sections,
in order to intercept mineralized zones at right angles along a grid spacing of
20 by 15 metres, targeting alteration assemblages in the E1/E Zone. Drilling
operations are performed by a drilling contractor, under the supervision of the
geological staff at the Island Gold Mine. Underground drill holes are BQ
calibre. Core recovery is 100%. The drill core is logged in detail by
experienced and highly skilled staff, following established guidelines for the
Island Gold Mine. A rock quality designation (RQD) analysis was completed for
most of the drill holes drilled in the 2008 program and the RQD for the zones is
excellent ( 90%).The interpretation and development of each section was
completed after receipt of the drill holes assays and section plots. This
interpretation has served to complete the reserves estimates.

34

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Sampling

For the drill hole, the sampling approach is defined to coincide with lithological contacts and the samples have a minimum width of 0.3 metre and a maximum length of 1 metre. The core recovery is very good and can be considered to be representative.

The panel (or chip) sampling method consisted of taking horizontal representative samples of the geology (units or alteration) that was exposed either in the face or in the adjacent walls. The samples weighed an average of 1.5 to 2 kg for a zone of
1.5 metres vertically by 0.3 to 1.0 metre horizontally. Each face was sampled and the number of assays varied based on the geology and the opening.

The drill cores and chip samples are representative and the mineralization style, with the presence of quartz veins and free gold shows a nugget effect.

Assays

Swastika Laboratories Ltd of Swastika, Ontario was used for the underground drilling and development program to perform fire assay, gravimetric and specific gravity analyses for 2007. A number of underground muck and chip samples were sent to the
Wesdome assay lab in Wawa. Swastika laboratories are accredited ISO 9001-2000, hold a Certificate of Laboratory Proficiency (PTP-MAL) and have been assessed Satisfactory in both cycles of test samples for Program Years 2005-2006,
2006-2007 and 2007-2008.

Gold assays are completed by fire assay with 30 g of material with either a gravimetric or AA finish. The cut-off for gravimetric versus AA finish has been established at 3 g/t Au. When the grade exceeds 30 g/t Au, a Metallic Sieve assay is
performed. Detection limit for gold safely is at 3 ppb. Rejects and pulps are kept by the laboratory or stored at the Island Gold site. These methods and the routine sample preparation are described in the following section. A detailed procedure can
be found in the Technical Report for the Island Gold as of May 15, 2007, filed on May 25, 2007 under the Companys profile on the SEDAR web site at www.sedar.com.

The step-by-step procedure for sample analyses is briefly described as
follows:

|1) | Dry samples, if required;                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                               
|2) | Crush total sample to 1⁄2 inch (Jaw Crusher);                                                                                                                                                   
|   |                                                                                                                                                                                               
|3) | Split approximately 350 g using a Jones riffle;                                                                                                                                               
|   |                                                                                                                                                                                               
|4) | Remaining rejects are placed in a plastic bag and packed in cartons with sample numbers listed on the outside;                                                                                
|   |                                                                                                                                                                                               
|5) | Pulverize the 350 g sample;                                                                                                                                                                   
|   |                                                                                                                                                                                               
|6) | Homogenize the pulp, it is then ready for assay;                                                                                                                                              
|   |                                                                                                                                                                                               
|7) | Samples are then analyzed by fire assay with an absorption atomic or gravimetric finish. A total of 30 g of representative material are subjected to the fire assay and to gravimetric finish.

The Pulp and Metallic Method is used to overcome sampling
difficulties caused by coarse particles of gold, native silver or other similar
metals that do not pulverize very well.

Swastikas adaptation of this method for Gold Assay is as
follows: pulverize the entire sample if possible, screen through a 100 Mesh
sieve (other Mesh sizes can be used depending on sample size and allowable
deviation). The -100 Mesh fraction is weighted, homogenized and assayed in
duplicate using one assay tonne (30 g) portions. The +100 Mesh fraction
(approximately 20 g) is weighted and entirely fused. The correction resulting
from gold found in the metallic portion is incorporated in the final calculated
result. The weight and grade of both fractions are also reported.

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Quality Control

During the course of the geological confirmation program, an evaluation of Quality Assurance/Quality Control (QA/QC) data was done to address the three (3) main concerns of analytical determination protocols, namely: (i) contamination,
(ii) accuracy, and (iii) precision, as measured by the results obtained from field and analytical blank standards, certified reference standards and an assortment of specific duplicate samples collected and/or prepared, in addition to the regular
samples submitted to the laboratory. A certified standard and blank assay are run with each sample batch of samples. In addition, a replicate assay is run on every 10th sample to be used for checking the reproducibility of the assays.

The results of field and analytical blanks used to monitor for potential contamination during sample processing and assaying indicate that no significant contamination is likely to have occurred during the sampling/assaying programs completed for
2008. The assays supporting the Island Deposit Mineral Reserves estimate are based on sample preparation and analytical protocols that meet standard industry practice and are reasonable and acceptable.

Security of Samples

There is no formal program established at the Island Gold Mine relating to shipment of the samples.

Mineral Reserve Estimates

In 2008, methodology and procedures for Mineral Reserves estimates were reviewed by Genivar, an independent firm, under the supervision of Nicole Rioux, geo. a qualified person under National Instrument 43-101. The base data, factors and parameters
used in the determination of the Mineral Reserves estimates were based on the knowledge of the Island Gold Mine as of December 31, 2008.

The Mineral Reserves estimates were carried out in accordance with National Instrument 43-101 recommendations and regulations. Mineral reserves are classified according to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
classification and adopted by the CIM Council on December 11, 2005. All standards generally accepted in the mineral mining industry as well as National Instrument 43-101 recommendations and CIM regulations for mineral reserve estimates have been
fully complied with in the determination of mineral reserve estimates included herein.

The source data and parameters used in the resource calculation correspond to knowledge acquired and best estimates as at December 31, 2008. Budget costs used in the evaluation are based on estimated and actual data, taking into account acquired
experience.

Procedures and Technical Parameters

At the Island Gold Mine, Promine software was used to prepare the resource calculation. A block model technique used inverse distance as interpolation method with a maximum of 4 composites using data within a maximum radius of 20 metres from diamond
drill hole intercepts. A composite table of grades has been prepared for resource modelling on the basis of the current
geological interpretation of each of the drilling sections, which are 10 metres apart. The composite values were arranged by zones of economic interest, which allowed for the construction of distinct longitudinal sections for each zones.

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All the geo-scientific data collected at the Island Gold Mine are entered into a Gemcom database. Internal procedures have been prepared in order to validate the information in the database. All this work is performed by the Island Gold Mine geology
department and all steps, from data entry to layout drawings, follow strict and established procedures, including crosschecks to ensure full validity. Access to all databases is restricted to selected personnel in order to ensure complete integrity.

The main parameters used to estimate mineral reserves are as follows:

- A cut-off grade of 5 g/t Au fixed with a gold price at CAN$785/oz with an exchange rate of CAN$1.0 for US$1.0;
- Operating costs of $127,50/tonne;
- Grade capping at 75 g/t Au for all zones;
- A minimum true thickness of 2.0 metres based on the mining method (transversal long hole);
- An average rock density of 2.82 t/m3is defined;
- Ore mining recovery: 100% for designed stopes in which pillars between the stopes have been excluded;
- External dilution: a dilution rate of 20% for waste at a grade of 0.5 g/t Au is assumed; and
- Excluded mill recovery of 94.0 %.

The database and the parameters used to estimate the Mineral Reserves are based on the results from 2008, the forecast for 2009 and information available as at December 31, 2008. The technical parameters were reviewed by Genivar. Thus, both the
dilution and the ore-recovery factors by mining methods used in the reserve estimate are based on actual results obtained in 2008. All these factors and parameters are updated on an annual basis in order to account for changes in mining
operations.

The conversion of Mineral Resources to Reserves is based on economical feasibility. As per National Instrument 43-101, only Mineral Resources in the measured and indicated categories can be used to establish the estimate of Mineral Reserves.

Reserve Classification

Descriptions with more detail about classification of reserves at the Island Gold Mine are set out below.

Proven Mineral Reserves

Genivar estimates the tonnage of mineral reserves in the Proven category based on an economic study in order to determine the economically mineable part of a Measured Mineral Resource. At the Island Gold Mine, Proven Reserves are based on ore blocks
developed from drifts to a maximum of ten metres from the opening.

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Probable Mineral Reserves

The Mineral Reserves estimate in the Probable
category was based on an economic study in order to determine the economically
mineable part of an Indicated Mineral Resource. At the Island Gold Mine,
Probable Reserves extend to a maximum of 20 metres from drilling intercept.

Dilution and mining recovery rates are included
in the reserve calculation.

Reserve Table

As of December 31, 2008, the Mineral Reserves (before mill
recovery of 94%) of the Island Gold Mine are estimated were estimated by Genivar
to be as follows:

|Categories of reserves    | Tonnes    | Grade          | Au     
|------------------------- | --------- | -------------- | -------
|                          | (metric)  | (g/t
      Au) | (oz)   
|Proven                    | 308,205   | 9.08           | 89,925 
|Probable                  | 722,982   | 8.57           | 199,144
|                          |           |                |        
|Total (Proven + Probable) | 1,031,187 | 8.72           | 289,069

As of December 31, 2008, the Mineral Reserves at Island Gold
are 289,069 ounces of gold, calculated using a long-term gold price of CAN$785
per ounce and an expected mine life of five years.

Mining Operations and Metallurgy

The extraction method is by transversal long hole with a
maximum panel length fixed by hydraulic radius factor of 4.5.

The Island Gold ore was hauled by truck to the Kremzar mill
located at an approximate distance of 0.8 km from the portal of the ramp. The
Kremzar mill is a traditional gold recovery mill using a conventional Carbon in
Pulp (CIP) process, with circuits for crushing, grinding, gold cyanidation and
carbon-in-pulp and two electrowinning (EW) cells.

Gold recovery of the Carbon in Pulp circuit at the Kremzar
mill is 95.8%.

Summary of Exploration and Development Work

For the year ended December 31, 2008, 161,320 tonnes of ore
were processed at an average recovered grade of 7.33 g/t, and 38,037 ounces of
gold were sold at an average price of US$867 (CAN$924) per ounce. During the
first nine months of 2008, the mine produced at approximately 65% of its design
capacity. In the fourth quarter of 2008, production was at around 80% of design
capacity resulting in a notable improvement in the cash cost of production.

At the Island Gold Mine, Proven Mineral Reserves and Probable
Mineral Reserves were estimated at 1,031,187 tonnes of ore at a grade of 8.72
g/t for 289,069 ounces of gold at December 31, 2008. Measured Mineral Reserves
and Indicated Mineral Resources totalled 146,254 ounces of gold while Inferred
Mineral Resources were estimated at 209,985 ounces of gold as the Companys
exploration program identified new Mineral reserves sufficient to replace the
2008 production. Overall, more than 26,000 metres of definition and exploration
drilling are planned for 2009 at Island Gold.

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|                                 |  | Year ended   |  |   | Year ended   |  |  | Year ended   | 
|-------------------------------- |  | ------------ |  | - | ------------ |  |  | ------------ | 
|                                 |  | December 31, |  |   | December 31, |  |  | December 31, | 
|                                 |  |              |  |   | 2008         |  |  |              | 
|                                 |  |              |  |   |              |  |  |              | 
|Precious metals revenues         |  | 35,162,781   |  | $ | 5,696,095    |  |  |              | 
|                                 |  |              |  |   |              |  |  |              | 
|                                 |  |              |  |   |              |  |  |              | 
|Tonnes processed                 |  |              |  |   | 161,320      |  |  |              | 
|Grade (g/t)                      |  |              |  |   | 7.65         |  |  |              | 
|Gold recovery (%)                |  |              |  |   | 95.83        |  |  |              | 
|Recovered grade (g/t)            |  |              |  |   | 7.33         |  |  |              | 
|Ounces sold                      |  |              |  |   | 38,037       |  |  |              | 
|                                 |  |              |  |   |              |  |  |              | 
|Data per ounce of gold sold      |  | US$          |  |   | CAN$         |  |  | US$          | 
|Cash cost                        |  | 659          |  |   | 703          |  |  | 621          | 
|Depreciation and depletion       |  | 94           |  |   | 100          |  |  | 98           | 
|                                 |  |              |  |   |              |  |  |              | 
|Total                            |  | 753          |  |   | 803          |  |  | 719          | 
|                                 |  |              |  |   |              |  |  |              | 
|Average price obtained per ounce |  | 867          |  |   | 924          |  |  | 726          | 

Exploration Projects and Other Properties

General

Richmont Mines owns or holds interests in many mining
properties at different stages of exploration. However, the Company has
determined that none of such properties is significant.

Valentine Lake, Newfoundland, Canada

Location and Access

The Valentine Lake Property is located in Central Newfoundland,
55 km south of the town of Buchans. The property can be accessed by a 75 km long
gravel road from Millertown via the Buchans Highway.

Description of the Property

The Valentine Lake property consists of four grouped mineral
exploration licences covering a total area of 13,475 hectares and a total of 539
claims.

Agreement

In November 2003, Richmont Mines entered into an option
agreement with Mountain Lake to acquire a 70% interest in the Valentine Lake
Property from Mountain Lake by carrying out $2.5 million in exploration work by
October 31, 2007. This condition was fulfilled and on October 31, 2007, Richmont
Mines acquired a 70% interest in the Valentine Lake property. On February 5,
2009 Mountain Lake and Richmont Mines entered into the Valentine Lake agreement
pursuant to thich the Company granted Mountain Lake the option to purchase
Richmont Miness 70% interest in the property. Mountain Lake agreed to pay an
option fee to Richmont Mines of
2,500,000 common shares of Mountain Lake at a deemed value of $625,000, or $0.25 per share and may exercise the purchase option within a five-year period by making option payments to Richmont Mines totaling an additional $3,000,000, and
by incurring $1,000,000 in exploration and development expenditures at Valentine Lake within such timeframe. Until all such conditions are met, Richmont Mines will continue to own the 70% interest in the Valentine Lake property.

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2008 Work and Results

In 2008, all the exploration work was performed by Mountain Lake, which owns a 30% interest in the property. A soil sampling program was undertaken on two groups of claims. This sampling did not result in any significant targets for further follow
up. The main work performed by Mountain Lake was to build a new road and to upgrade existing roads totalling 40 km to provide access to the Leprechaum Pond deposit. The last 500 metres of the road are expected to be completed in 2009.

Wasamac, Quebec, CanadaLocation and Access

The Wasamac property is located approximately 15 km southwest of Rouyn-Noranda, Province of Quebec. The property can be reached from Rouyn-Noranda via the Trans Canada Highway 117 to the town of Arntfield and then by a secondary road that leads
directly to the property.

Description of the Property

The Wasamac property consists of three mining concessions (CM 349, CM 364, and CM 370) and one claim which represent a total area of 759.36 hectares in the Beauchastel township. Richmont Mines owns 100% of the mining concessions relating to the
Wasamac property.

2008 Work and Results

In 2008, one drill hole of 306 metres, was drilled on the Wasamac property. The target was a possible shear zone located south of the main Francoeur-Wasamac shear zone. An alteration zone was intersected with some sulphides associated and assays are
pending. It is anticipated that two others holes will be drilled on this property in 2009.

Francoeur, Quebec, CanadaLocation and Access

The Francoeur property is located approximately 25 km southwest of Rouyn-Noranda, Province of Quebec. The property can be reached from Rouyn-Noranda via the Trans Canada Highway 117 to the town of Arntfield and then by a secondary road from the
north that crosses the town of Arnfield and leads directly to the property.

Description and Infrastructures of the Property

The Francoeur property consists of 13 mining claims, including 3 mining concessions and 4 mining leases, covering a total surface area of 363 hectares. These claims are located in Beauchastel Township and are wholly owned by Richmont Mines.

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The Francoeur mine was in operation from 1938 to 1947, from 1968 to 1971, and again from 1991 to 2001. Two head frames are present on the property, as well as various basic infrastructures.

Agreement

In 2004, the Company concluded an agreement with Cadillac-West Exploration Inc. for the Norcoeur and Lac Fortune group of properties, adjacent to the Francoeur property. Cadillac-West Exploration undertook to invest $0.5 million in exploration,
after which it would have the right to acquire from Richmont Mines an interest of 50% in the Norcoeur and Lac Fortune group of properties by completing exploration programs of $2.2 million and $1.5 million over three years. The agreement was
terminated in 2007 as Cadillac-West Exploration did not make the expenditures required under the agreement. Richmont Mines owns 100% of the Norcoeur and Lac Fortune properties.

2008 Work and Results

In 2008, no drilling or exploration work was undertaken on the Francoeur property. On April 27, 2009, A surface drilling program consisting of approximately 8,000 metres is also planned for this summer with the objective of increasing known
resources. Richmonts 2009 budget for the dewatering and drilling program is approximately CAN$4.5 million., located 25 km west of Rouyn-Noranda. The dewatering of the mine, which reaches a depth of approximately 820 metres, will also
include the commissioning of the existing hoist and the upgrade of the related infrastructure. This work is expected to be completed over an eight month period. A surface drilling program consisting of approximately 8,000 metres is also planned for
the summer 2009 with the objective of increasing known resources. Richmonts 2009 budget for the dewatering and drilling program is approximately CAN$4.5 million.

Golden Wonder, Colorado, USALocation and Access

The Golden Wonder property is located approximately 4 km south of Lake City, Hinsdale County, Colorado, USA. The property can be reached by following Colorado State Highway 149 south of Lake City to the Vickers Dude Ranch and then following an
unimproved road through the ranch to the property.

Description and Infrastructures of the Property

The Golden Wonder Mine is a high-grade, epithermal deposit, with veins averaging two to three feet in width, located in the historically precious metal rich Colorado Mineral Belt near the mining districts of Ouray, Telluride, Silverton and Creede.
The Golden Wonder property consists of 3 patented claims and 25 mining claims, covering a total surface area of 194 hectares. Previously in commercial production from 1998 through June 2006, the mine produced approximately 8,400 tons of ore with an
average grade of 16 ounces/ton (oz/t) and yielded 133,701 ounces of gold. Mining operations were conducted between the third and sixth levels from two horizontal access drifts along the Gold Hill in the San Juan Mountains. Exploration efforts in
1998 also included a 100-foot shaft down to the seventh level, with horizontal extension on the seventh level of about 50 feet. The main lower access is located on the sixth level and consists of a nine-by-nine foot trackless haulage crosscut over
1,000 feet in length.

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Agreement

Richmont Mines completed its initial evaluation of the Golden
Wonder Mine and exercised its option to acquire a 50% joint venture interest in
the Golden Wonder project. LKA held the other 50% joint venture interest.
Richmont Mines was required and invested US$3 million in certain project-related
expenditures prior to September 1, 2008. Included in this amount were
expenditures for exploration and development of the mine plus the option fee and
project-related finders fees. Results obtained failed to confirm the continuity
of an economically viable ore zone below current infrastructures at the sixth
level. In light of these results, in October 2008 Richmont Mines informed LKA of
the termination of its option to proceed with the joint venture agreement.

2008 Work and Results

Richmont Mines had completed in 2008 a diamond drilling program
at the Golden Wonder Mine. A total of 16 holes were drilled for a total of 2,037
metres of drilling. Most of the drilling was targeted at confirming the depth
extension of the previously mined-out area which was Richmont Miness main
exploration target. Only limited exploration was conducted in other areas of the
mine. Results obtained failed to confirm the continuity of an economically
viable ore zone below current infrastructures.

**TABLE OF RESERVES**

|                                   | December 31, 2008 | December 31, 2007
|---------------------------------- | ----------------- | -----------------
|                                   | Tonnes            | Grade            
|                                   | (metric)          | (g/t Au)         
|Island Gold1                       |                   |                  
|Proven reserves2                   | 308,205           | 9.08             
|Probable reserves2                 | 722,982           | 8.57             
|Beaufor Mine                       |                   |                  
|Proven reserves2                   | 96,678            | 7.17             
|Probable reserves2                 | 147,385           | 10.03            
|East Amphi
      Mine3             |                   |                  
|Proven reserves2                   | -                 | -                
|TOTAL GOLD                         |                   |                  
|Proven and probable
      reserves | 1,275,250         | 8.75             



|1 | Richmont Mines holds a 100% interest upon its acquisition
      of Patricia Mining in December 2008. December 2007 reported at 100%;
      Richmonts ownership was 55%.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | In 2008, based on a price of US$785/oz and an exchange
      rate of 1.00 (in 2007, a price of US$650 and an exchange rate of
    1.00).                                
|3 | Property sold in June 2007.                                                                                                                                             

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National Instrument 43-101  Standards of Disclosure of
Mineral Projects

Mineral reserve calculations for the Companys material
properties were established by qualified persons as defined under National
Instrument 43-101, and their names are set out in the table below. These
reserves and resources estimations were reviewed by Mr. Daniel Adam, Ph.D., P.
Geo., Exploration Director, an employee of Richmont Mines Inc.

|Mines            | Qualified Persons     | Titles                                              
|---------------- | --------------------- | ----------------------------------------------------
|Beaufor Mine     | Richard Dubuc, p.geo  | Chief Geologist, Beaufor Mine                       
|                 | Jessy Thelland, p.geo | Geologist, Beaufor Mine                             
|Island Gold Mine | Nicole Rioux, p.geo   | Senior Geologist for Genivar, Independent Contractor

On the next page you will find a map of the Companys
properties.

43

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---

Gold Marketing and Sales

The profitability of gold mining is directly related to the
market price of gold as compared to the cost of production. Gold prices
fluctuate widely and are affected by numerous factors, including expectations
with respect to the rate of inflation, exchange rates (specifically the U.S.
dollar relative to other currencies), interest rates, global and regional
political and economic crises and governmental policies with respect to gold
holdings by a nations central bank. The demand and supply of gold usually
affect gold prices but not necessarily in the same manner as supply and demand
affect the prices of other commodities. The whole of gold available for sale
includes a combination of mine production, stock and gold bullion held by
governments, public and private financial institutions, industrial organizations
and private individuals. As the amounts produced in any single year account for
a small portion of the total available supply of gold, normal variations in
current production do not have a significant impact on the supply of gold or on
its price.

The following table sets out the annual average gold price
(London PM fix) in U.S. dollars over the past five years:

|                                      |       | Exchange |       
|------------------------------------- | ----- | -------- | ------
|                                      | (US$) | rate     | (CAN$)
|                                      |       |          |       
|2004                                  | 410   | 1.30     | 534   
|2005                                  | 444   | 1.21     | 538   
|2006                                  | 604   | 1.13     | 685   
|2007                                  | 695   | 1.07     | 744   
|2008                                  | 872   | 1.07     | 933   
|2009 (January
      1stuntil May 1st) | 904   | 1.24     | 1,121 

Gold can be easily sold on numerous markets throughout the
world and it is not difficult to ascertain its market price at any particular
time. Richmont Mines is not dependent upon the sale of its gold to any one
customer because of the large number of available gold purchasers.

Richmont
Mines may occasionally use put and call options on gold, and forward sales
contracts on gold and U.S. dollars. All such contracts are previously approved
by the Companys Board of Directors.

Gold bars are carried between the mills and the refinery by
commercial armored truck. These bars are refined at the Royal Canadian Mint of
Ottawa refinery under a service contract at competitive rates. Refined metal is
sold on the spot market to commercial bullion dealers (or under forward sales
contracts if previously approved by the Companys Board of Directors).

As at December 31, 2008 and 2007, Richmont Mines had not
entered into any gold derivatives contracts.

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Governmental Regulation

The principal operations of Richmont Mines are the production of gold from mining development, extraction and processing of minerals and mining exploration to maintain and increase its ore reserves. These operations are subject to various levels of
control and strict government regulations, such as laws and regulations in respect of activities related to natural resources and the protection of the environment. Richmont Mines Richmont
Mines is not aware of any further legislation or amendments that may have an
impact on its operations.

Environmental protection legislation, applicable to the Canadian
mining industry mandates high standards for the reduction or elimination of
emissions, deposits, issuance or release into the environment of contaminants
caused by the extraction or processing of ore. In addition, certificates of
authorization must be obtained in advance for the construction and commercial
operation of a mine, plant, concentrator or refinery, since such types of
operations that are specific to the mining industry may result in emissions,
deposits, issuance or release of contaminants into the environment or may affect
the quality of the environment.

Quebec & Ontario

Provincial legislation in Quebec and Ontario in mining matters regulates the acquisition and ownership of mining titles, safety standards, royalties and mining taxes. The Mining Act governs the rehabilitation and restoration of lands affected
by mining activities. In Ontario, the approval is required from the MNDM, while in Quebec approval is required from the MNRW for any plan for the rehabilitation and restoration of land affected by mining operations; the mining company must comply
with the plan and provide a financial guarantee to that effect.

In Quebec, when a person commences mining operations, it must submit its rehabilitation and restoration plan within one year following the beginning of its activities. In Ontario, the rehabilitation and restoration plan must be approved before the
beginning of commercial production; moreover, a local public consultation must also be held.

The MNRW and the MNDM may require or impose additional conditions or obligations before giving their approval to the rehabilitation and restoration plan. Either Ministry may review the financial guarantee if it is of the opinion that the guarantee
is insufficient and may require additional guarantees.

The Ministries may enjoin a person who has already ceased its mining operations on a particular site to perform the rehabilitation and restoration work required by the presence of tailings. If the person does not comply with such requirements, the
MNRW and the MNDM may have the rehabilitation and restoration work executed by a third party at the cost of such person.

Richmont Mines does not foresee any specific difficulty in meeting the requirements under the Mining Act (Quebec) and the
Mining Act (Ontario).

Richmont Mines holds certificates of authorization issued by the Ministère du Développement durable, de lEnvironnement et des Parcs (the Ministry of Sustainable Development, Environment and Parks, the MDEP) and by the
Ontarios Ministry of the Environment with respect to its mining operations at the Francoeur Mine, at the Beaufor Mine, at the Island Gold Mine and to those of its subsidiary, Camflo Mill Inc.

46

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C. Organization Structure

See Exhibit 8.1 to this Annual Report.

D. Property, Plants and Equipment

See Item 4.B. Business Overview.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The discussion and analysis of the operating results and
financial position of the Company for the three years ended December 31, 2006,
2007 and 2008 should be read in conjunction with the Companys consolidated
financial statements and the accompanying notes included in this Annual Report.
Notice should also be taken of the cautionary statement regarding
forward-looking statements on page 1 of this Annual Report, in particular with
respect to trend and other forward looking information and disclosure regarding
the Companys contractual obligations.

The preparation of financial statements involves making estimates
and assumptions that have a significant impact on the reported amounts of
revenues, expenses, assets and liabilities. The items most dependent on the use
of estimates include the useful life of assets, amortization and depletion
calculations based on proven and probable reserves, and the calculation of asset
retirement obligations as well as future income and mining taxes. Consequently,
future results may differ from these estimates.

A. Operating Results

Year ended December 31, 2008 compared to year ended December 31, 2007 (all dollar amounts are in thousands of Canadian dollars unless otherwise stated except for share and per ounce data).

Overview

Gold Prices and Currency Fluctuations

The gold market remained strong in 2008 as the average price rose to approximately US$872 per ounce from an average price of approximately US$695 in 2007. The price per ounce at the beginning of 2008 was approximately US$833 per ounce
and the closing price at December 31, 2008 was approximately US$882 per ounce. In the month of March 2008, gold rose to over US$1,000 per ounce, but by October the global economic crisis had contributed to a drop in the price to
approximately US$712 per ounce.

In 2007, the average market price of gold rose more than 15% to US$695 per ounce compared with US$604 in 2006. In 2006, the price rose 36% over the average price of US$444 per ounce for 2005. These consecutive rises in gold prices have
resulted in growth that has benefited all gold producers in recent years.

47

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Production

Richmont achieved significant revenue and income growth in 2008 as a result of higher gold sales at a higher average selling price per ounce. In 2008, Richmont sold 70,945 ounces of gold at an average price of US$876 (CAN$934) per ounce, for
revenue of $66,237. The Company produced 73,577 ounces of gold at an average cash cost per ounce of US$590 (CAN$629). Net earnings were $1,635, or $0.07 per share. These revenue compare favourably with 2007 when the Company sold
46,193 ounces of gold at an average price of US$699 (CAN$751) per ounce and produced 45,304 ounces of gold at an average cash cost per ounce of US$499 (CAN$536). Net earnings in 2007 totalled $6,671, or $0.28 per share,
including a gain of $8,066 on the sale of mining assets.

Richmont is currently producing at the Island Gold Mine in Ontario and at the Beaufor Mine in Quebec. The Island Gold Mine has proven and probable reserves of 1,031,187 tonnes of ore at a grade of 8.72 g/t, for 289,069 ounces of gold. The Beaufor
Mine has proven and probable reserves of 244,063 tonnes of ore at 8.89 g/t, for 69,792 ounces of gold. Total proven and probable reserves at both operations equate to 358,861 ounces of gold. Richmont Mines has a 100% equity interest in the Island
Gold Mine since the acquisition of Paricia Mining in December 2008.

Commercial production at the Island Gold Mine began on October 1, 2007. Approximately 16,665 metres of diamond drilling in 90 drill holes were completed in 2008. From this drilling, about third of the holes were drilled in the Island Gold extension,
between two diabase dykes (East of 15 200 E). The drilling in this extension has enabled to add about 190,000 tonnes of Probable Mineral Reserves.

The Beaufor Mine, which has been in commercial production since 1996, had strong performance in 2008 despite the cash cost per ounce increased during 2008 compared with 2007, due primarily to increased definition drilling and higher mining and
milling costs.

Investments

In 2008, the Company invested $3,079 in plant and equipment at Island Gold Mine to advance production at the mine to current levels. The majority of the other investment in property, plant and equipment was invested at the Camflo Mill and in
equipment used at the Golden Wonder project.

In 2007, the Company invested $21,270 at Island Gold Mine mainly in development cost. This investment was reduced by the application of $16,775 in proceeds from precious metal sales during development activities. At the Beaufor Mine, the
Company invested $1,060, mainly to replace the headframe structure.

Summary of operational and financial results

During 2008, the Company had a net profit of $1,635 or $0.07 per share, compared with a net profit of $6,671 or $0.28 per share, in 2007.

The Companys mining operations generated cash flows of $12,117 in 2008 compared with $5,999 in 2007.

The Company had no long-term debt and possessed working capital of $26,753 as at December 31, 2008 compared with no long-term debt and $33,970 of working capital as at

48

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December 31, 2007. The $7,217 decrease is attributed to a $2,975 decrease in cash and cash equivalents and short-term investments related to the Companys acquisition of Patricia Mining Corp. in December 2008, a $1,061 increase in
mining and income taxes payable mainly due to federal and mining taxes of $1,207 applicable to the Companys subsidiary, Louvem Mines Inc., along with higher accounts payable and accrued charges of $1,907. In addition, last years
accounts receivable balance included an amount of $1,500 that was reimbursable from Patricia Mining, its minority partner until the recent acquisition. The Company believes that it would have access to other sources of financing if additional
capital became necessary to finance its operations.

Changes in accounting policies

Inventories

On January 1, 2008, in accordance with the applicable transitional dispositions, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Sections 3031, Inventories, which replaces Section 3030
carrying the same title and harmonizes the Canadian standards related to inventories with International Financial Reporting Standards (IFRS). This Section provides changes to the measurement and more extensive guidance on the
determination of cost, including allocation of overhead; it reduces the number of methods available to determine cost; it requires impairment testing; and it expands the disclosure requirements to increase transparency. The adoption of this standard
did not have a significant impact on the Companys consolidated financial statements and on comparative data.

Capital disclosures

On January 1, 2008, in accordance with the applicable transitional dispositions, the Company adopted Section 1535 of the CICA Handbook, Capital disclosures. This section establishes standards for disclosing information about an
entitys capital and how it is managed; i) qualitative information about the Companys objectives, policies and processes for managing capital, ii) quantitative data about what the Company regards as capital, iii) the fact that the Company
has complied with any externally capital requirements, and iv) if it has not complied, the consequences of such non-compliance. As a result of the adoption of this standard, note 16 to the Companys financial statements included in this Annual
Report has been added to the Companys consolidated financial statements. The adoption of this standard did not have a significant impact on the consolidated financial statements and on comparative data.

Financial instruments  disclosures and presentation

On January 1, 2008, in accordance with the applicable transitional provisions, the Company adopted two new CICA Handbook sections: Section 3862, Financial instruments  disclosures and Section 3863, Financial instruments
 presentation. Together, these two sections replace Handbook Section 3861, Financial instruments  disclosures and presentation. These Sections require additional disclosure, particularly regarding the documentation of
risks to which the Company is exposed and how the Company manages those risks. The results of the application of these new standards are included in note 17 to the Companys financial statements and their application did not have a significant
impact on the Companys consolidated financial statements.

49

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Future accounting changes (Canadian GAAP)

Goodwill and intangible assets

In February 2008, the CICA issued the new Handbook Section
3064, Goodwill and Intangible Assets, which will replace Section 3062,
carrying the same title. This section provides revised standards for the
recognition, measurement, presentation and disclosure of goodwill and intangible
assets. This Section applies to Companys interim and annual financial
statements beginning on or after January 1, 2009. The Company does not expect
the adoption of these standards to have any significant impact on its
consolidated financial statements.

International Financial Reporting Standards

The Canadian Accounting Standards Board confirmed, in February
2008, that the use of IFRS would be required for Canadian publicly accountable
enterprises for fiscal years beginning on or after January 1, 2011. IFRS uses a
conceptual framework similar to Canadian GAAP, but there are significant
differences in recognition, measurement and disclosures.

The Company commenced its IFRS conversion project in 2008. The
project consists of four phases: diagnosis, design and planning, solution
development and implementation. The plan addresses the impact of IFRS on
Accounting policies and implementation decisions, infrastructure, business
activities and control activities.

As at December 31, 2008, the Company was finalising the first
phase of its IFRS conversion, consisting of a preliminary study of its existing
financial information and identifying the main sectors where IFRS might have an
impact. Throughout fiscal year 2009, in its MD&A and quaterly reports, the
Company will be reporting on the progress of its IFRS implementation plan.

Future accounting changes (US GAAP)

In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations (FAS 141R), which replaces FAS 141 and SFAS no. 160,
Non-controlling Interest in Consolidated Financial Statements, an amendment of
ARB No. 51 (FAS 160). FAS 141R establishes principles and requirements for how
an acquirer in a business combination recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
controlling interest; 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. FAS 160 requires
retroactive adoption of the presentation and disclosure requirements for
existing minority interests. FAS 141R and FAS 160 shall be applied prospectively
on or after an entitys fiscal year that begins on or after December 15, 2008.
The Company is currently assessing the impact that FAS 141R and FAS 160 will
have on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, which identifies the sources of
accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented in
conformity with GAAP. SFAS No. 162 will become effective 60 days following the
SECs approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The adoption of SFAS No. 162 is not expected to
have a material impact on the Companys consolidated financial statements.

50

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In March 2008, the FASB issued SFAS No. 161 Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133 (SFAS No. 161), to enhance the current disclosure framework in SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended. SFAS No. 161 amends and expands the disclosures required by SFAS No.
133 so that they provide an enhanced understanding of i) how and why an entity
uses derivative instruments, ii) how derivative instruments and related hedged
items are accounted for under SFAS No. 133 and its related interpretations, and
iii) how derivative instruments affect an entitys financial position, financial
performance, and cash flows. SFAS No. 161 is effective for both interim and
annual reporting periods beginning after November 15, 2008. The Company is
currently evaluating the potential impact of this statement on its consolidated
financial statements and at this time the Company does not anticipate a material
effect.

Revenue

Precious metal revenue
 Precious metals revenue
in 2008 totaled $66,237 compared to $34,691 in 2007, constituting a $31,546
increase, which was primarily due to higher gold sales at a higher average
selling price per ounce. During 2008, the Company sold 70,945 ounces of gold at
an average price of US$876 (CAN$934) per ounce compared with 46,193 ounces of
gold in 2007 at an average price of US$699 (CAN$751) per ounce. The Island Gold
Mine, which began commercial production at the beginning of the fourth quarter
of 2007, sold 38,037 ounces of gold at an average price of US$867 (CAN$924) per
ounce in 2008, while in 2007, 7,302 ounces of gold were sold at an average price
of US$726 (CAN$780). The Beaufor Mine sold 32,908 ounces of gold at an average
price of US$ 886 (CAN$944) per ounce in 2008, while in 2007, 26,182 ounces of
gold were sold at an average price of US$693 (CAN$745) per ounce. The East Amphi
Mine, which was sold in June 2007, sold 12,709 ounces of gold at US$695
(CAN$747) in 2007.

Other revenue 
Other revenue of $4,354 in 2008, up $974
when compared with 2007, was the result of higher custom milling revenue at the
Camflo Mill and a foreign exchange gain. In 2008, Richmont processed 74,703
tonnes of custom milling ore at the Camflo Mill compared with 46,193 tonnes
processed in 2007.

Expenses

Operating costs Operating costs in 2008 were $44,589,
$19,825 above operating costs of $24,764 in 2007. Operating costs increased
$21,854 at Island Gold as Richmont advanced the mine, which opened in October
2007, to current production levels. At Beaufor, costs increased $4,695 as a
result of increased production. During the year, a total of 276,994 tonnes of
ore from Island Gold and Beaufor mines were milled compared with a total of
260,820 tonnes of ore from the Island Gold, Beaufor and East Amphi mines in
2007. The cash cost of production per ounce increased to an average of US$590
(CAN$629) in 2008 from US$499 (CAN$536) in 2007 due to increased definition
drilling and higher mining and milling costs.

Royalties The amount of royalties paid out in 2008
increased to $1,591 compared with $565 in 2007 due to a 3% net smelter return
(NSR) royalty payable on gold production at the Island Gold Mine. The increase
was also attributable to higher gold production at the Beaufor Mine, for which
the Company has paid royalties of $30.00 per ounce to a third party on 50% of
the ounces produced since November 2006. Prior to 2006, the royalty was $12.50
per ounce. No royalties were payable on the ounces of gold produced at the East
Amphi Mine.

51

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Custom milling- In 2008, ore totalling 74,703 tonnes
was milled by the Company, compared with 46,317 tonnes in 2007. Activities
related to custom milling represented expenses of $1,785 in 2008, compared with
$1,023 in 2007. Revenues from custom milling are presented under the caption
Other revenues in the consolidated financial statements of the Company
included in this Annual Report. Richmont Mines expects to perform custom milling
of approximately 157,500 tonnes of ore in 2009.

AdministrationAdministrative expenses were
$3,665 in 2008 compared with $3,315 in 2007, representing a 11% increase due to
increased costs related to a recording of a provision for future closure costs,
which were somewhat offset by a decline in stock-based compensation, which is a
non-cash expense. Of the 445,000 options granted in 2008, 55,000 options
represent renewals of expired options to directors and employees, 165,000
options represent the granting of options to new employees or to employees who
were promoted and the balance of 225,000 options represents new issuance for
directors and officers. The weighted-average fair value calculated according to
the BlackScholes model of evaluation at the date on which each option was
granted was $0.76 compared with $1.06 in 2007.

Exploration and project evaluation As in previous
years, Richmont Mines continued its investments related to exploration and
project evaluation. These expenses increased from $3,288 in 2007 to $10,547 in
2008. The increase is attributable to an increase in actual exploration and
project evaluation expenditures, as detailed in the table below.

Investments for exploration and project evaluation

|                                                                      |  | 2008   |   |  | 2007   |  
|--------------------------------------------------------------------- |  | ------ | - |  | ------ | -
|                                                                      |  | **$**  |   |  | $      |  
|Exploration costs - Mines                                             |  |        |   |  |        |  
|Island Gold Mine                                                      |  | 2,293  |   |  | 505    |  
|Beaufor Mine                                                          |  | 2,921  |   |  | 1,874  |  
|East Amphi Mine                                                       |  | -      |   |  | -      |  
|                                                                      |  | 5,214  |   |  | 2,379  |  
|Exploration costs - Other properties                                  |  |        |   |  |        |  
|Valentine Lake property                                               |  | 347    |   |  | 1,017  |  
|Golden Wonder property                                                |  | 4,202  |   |  | 665    |  
|Francoeur/Wasamac properties                                          |  | 184    |   |  | 142    |  
|Camflo Northwest property                                             |  | -      |   |  | 112    |  
|Other properties                                                      |  | 20     |   |  | 49     |  
|Project evaluation                                                    |  | 373    |   |  | 124    |  
|                                                                      |  | 10,340 |   |  | 4,488  |  
|Exploration tax credits                                               |  | (643   | ) |  | (1,200 | )
|Reclassification of exploration tax credits
      from previous years |  | 850    |   |  | -      |  
|                                                                      |  | 10,547 |   |  | 3,288  |  

52

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Accretion expense of asset retirement obligations This
charge was $182 in 2008, compared with $178 in 2007, As the Companys production
and exploration activities are subject to a variety of laws and federal and
provincial regulations governing the protection of the environment, the Company
has reported the asset retirement obligations for the mining sites on the basis
of managements best estimate of the future costs. These estimates may be
subject to changes if the laws and regulations are changed or if new
circumstances arise.

Depreciation and depletion The amounts related to
depreciation and depletion totalled $5,687 in 2008, compared with $5,628 in
2007. The increase is attributable primarily to the increase in gold sales,
which were 70,945 ounces in 2008, compared with 46,193 ounces in 2007 and by the
increase in the Beaufor and Island Gold properties Mineral Reserves, which were
determined at the end of 2007.

Loss on disposal of mining assets No major disposal
held in 2008. In 2007, the disposal of mining assets of the East Amphi property
contributed to the majority of the gain of $8,066.

Mining and income taxes

For the year 2008, mining and income tax expense included a
credit of $1,200 as a result of a reclassification of exploration tax credits
from previous years. When the Company filed its 2007 income tax declarations,
the Company reduced its current taxes by using carried forward fiscal expenses
instead of using exploration tax credits, as was planned and recorded on
December 31, 2007. This change in fiscal planning increased the exploration
expenses by $850 and the investment in property, plant and equipment by $350.
The mining and income taxes also include a mining duties expense of $175 from
the previous year and exploration tax credits of $643 recorded against
exploration expenses instead of mining and income taxes. The future income tax
credit of $359 was mainly due to a reduction in liabilities for future mining
taxes.

In 2007, current income taxes of $1,640 were comprised of
federal and provincial taxes and mining taxes applicable to the year 2007 in the
amount of $1,891, offset by $251 in adjustments for previous years not
previously recorded. The tax expense calculated at the combined stationary rate
was impacted by a reduction in the valuation allowance. The future income tax
credit of $334 was mainly due to a reduction in liabilities for future mining
taxes. Unrecorded available tax credits of $350 was used during the year and
applied against property, plant and equipment while $1,200 was applied against
exploration expenses.

Details on taxes are found in note 8 of the Companys
consolidated financial statements included in this Annual Report.

Minority interest

Minority interest expense totalled $2,035 in 2008, compared
with a recovery of $36 in 2007. This amount represents the share of earnings or
losses due to the minority shareholders of Louvem, in which Richmont Mines owns
a 70% interest, and the share of the earnings or losses from the Island Gold
Mine that belongs to Patricia Mining Corp., a partner in this project until its
acquisition by Richmont Mines on October 15, 2008.

Net earnings

Net earnings in 2008 were $1,635, or $0.07 per share, compared
with net earnings of $6,671, or $0.28 per share, in 2007, which included a
$8,066 gain on the sale of mining assets. A 54% increase in the number of ounces
sold at a 24% higher selling price in Canadian dollars was partially offset by 17% increase in the cash cost in Canadian
dollars per ounce sold and by higher exploration and project evaluation costs,
as the Company focused its exploration efforts on the Island Gold and Beaufor
mines.

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Balance sheet

Assets

The total assets of Richmont Mines decreased from $85,976 as at
December 31, 2007, to $82,881 at the end of 2008. The decrease is due to the
decrease in the cash and cash equivalents, short-term investments and accounts
receivable along with the cancellation of the advance to a minority partner
followed by its acquisition.

At December 31, 2008, Richmont had working capital of $26,753
compared with $33,970 at December 31, 2007. The $7,217 decrease is attributed to
a $2,975 decrease in cash and cash equivalents and short-term investments
related to the Companys acquisition of Patricia Mining Corp. in December 2008,
a $1,061 increase in mining and income taxes payable mainly due to federal and
mining taxes of $1,207 applicable to the Companys subsidiary, Louvem Mines
Inc., along with higher accounts payable and accrued charges of $1,907. In
addition, last years accounts receivable balance included an amount of $1,500
that was reimbursable from Patricia Mining, its minority partner until the
recent acquisition.

Liabilities

The amount of liabilities of the Company was $15,863 as at
December 31, 2008, compared with $24,163 at December 31, 2007, and is composed
of short-term liabilities, asset retirement obligations, the minority interest
and future mining and income taxes. Richmont Mines has no long-term debt.

Asset retirement obligations

Richmont Mines must evaluate on a periodic basis the
assumptions used in the calculation of the asset retirement obligations related
to eventual closure of its mining sites. At the end of the fiscal year ended
December 31, 2008, the Company had the following financial legal obligations:

|                   |  | Total amount     |  |  |                  |  |  |                 | 
|------------------ |  | ---------------- |  |  | ---------------- |  |  | --------------- | 
|                   |  | of the estimated |  |  | Cash flow        |  |  | Credit-adjusted | 
|                   |  | cash flow        |  |  | payment schedule |  |  | risk-free rate  | 
|                   |  | $                |  |  |                  |  |  | %               | 
|                   |  |                  |  |  |                  |  |  |                 | 
|Beaufor Mine       |  | 391              |  |  | 2012             |  |  | 5.5             | 
|Camflo Mill        |  | 3,121            |  |  | 2012             |  |  | 5.5             | 
|Island Gold Mine   |  | 945              |  |  | 2013             |  |  | 5.5             | 
|Francoeur property |  | 193              |  |  | 2012             |  |  | 5.5             | 
|                   |  | 4,650            |  |  |                  |  |  |                 | 

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Future mining and income taxes

Note 8 of the Companys consolidated financial statements
included in this Annual Report provides detailed information about tax
reconciliation as well as future income tax assets and liabilities.

Non-refundable provincial tax credits of $4,583 and
non-refundable federal tax credits of $3,207, which may be used within the next
ten to twenty years to reduce income taxes otherwise payable, have not been
accounted for by the Company.

At December 31, 2008, the Company has net operating federal,
Quebec and Ontario loss carry forwards of approximately $3,797, $3,606 and
$1,878 respectively, which expire at various dates through 2028.

Shareholders equity

Shareholders equity totalled $67,018 as at December 31, 2008,
compared with $61,813 as at December 31, 2007.

At December 31, 2008, Richmont Mines had 26,113,156 shares
outstanding and 2,308,000 options granted under its stock-purchase plan compared
with 24,053,353 shares outstanding and 2,023,000 options granted at December 31,
2007.

Commitments and contingencies

On February 11, 2009, the Company entered into an agreement
with Mountain Lake Resources Inc. (Mountain Lake) pursuant to which the
Company granted Mountain Lake an option to purchase Richmonts 70% interest in
the Valentine Lake Property located in Central Newfoundland. Mountain Lake
currently owns a 30% interest in the Valentine Lake Property. Mountain Lake has
agreed to pay an option fee to Richmont of 2,500,000 common shares of Mountain
Lake at a deemed value of $625, or $0.25 per share.

Mountain Lakemay exercise the option within a five-year
period by makingoption payments to Richmont totaling an additional
$3,000 and by incurring $1,000 in exploration and development expenditures on
theValentine Lake Property within that timeframe. The option payments
may be in cash, or 50% in cash and 50% in Mountain Lake common shares, at the
sole election of Mountain Lake. The option payments can be made in instalments
by the second, third, and fourth years of the five-year period. During the
option period, $500 of the exploration and development expenditures must be
incurred by the end of the second year and the remaining $500 must be incurred
by the end of the fifth year.

In addition, the Company is subject to royalty payments on 50%
of the production of the Beaufor Mine at the rate of $30 per ounce produced, a
3% royalty per ounce produced at the Island Gold Mine, and also on other
properties, if they enter into commercial production which are detailed under
Item 4. INFORMATION ON THE COMPANY  Business Overview  Mineral Royalties.

Critical accounting estimates

The preparation of financial statements requires the use of
estimates and the formulation of assumptions that have a significant impact on
revenues and expenses as well as on the amounts of assets and liabilities. The
following factors represent the estimates that management considers the most significant and for which the actual amounts may differ
considerably and affect operating results.

55

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Mineral reserves

The main parameters used to determine the mineral reserves are
the following:

|                         |  | 2008 |  |  | 2007 |  |  | 2006 | 
|------------------------ |  | ---- |  |  | ---- |  |  | ---- | 
|                         |  |      |  |  |      |  |  |      | 
|Gold (US$/ounce)         |  | 785  |  |  | 650  |  |  | 513  | 
|Exchange rate (US$/CAN$) |  | 1.00 |  |  | 1.00 |  |  | 1.12 | 
|Gold (CAN$/ounce)        |  | 785  |  |  | 650  |  |  | 575  | 

Property, plant and equipment

The costs related to the development of a mining property are
recorded at the time when the property shows potential for development. When
commercial production begins, these capitalized development costs and
construction costs are amortized over the mineral reserves of the deposit. The
mineral reserves are estimated by professional geologists and engineers
according to industry standards and the estimated future prices of metals,
operating costs and technical parameters. The annual tests for depreciation are
carried-out by using the same parameters and the estimated residual value of the
equipment. Changes to any key estimate of assumption may result in a
considerable reduction of mineral reserves, which could have a negative impact
on the book value of these properties.

For 2009 and 2010, the assumption used in the asset valuation
process was a price of CAN$900 per ounce of gold. For 2011, 2012 and 2013, a
price of CAN$815 per ounce of gold was used in order to estimate future revenue.

Depreciation

The Company uses the units-of-production method for the
depreciation of property, plant and equipment at mine sites based on proven and
probable reserves. Any significant changes in the reserves could impact the
amount of annual depreciation.

Asset retirement obligations

The future costs of the restoration of a mining site are
estimated according to the projected cost of labour, the known environmental
impact and the effectiveness of measures to repair and restore the site. The
time frame for making the expenditures is subject to changes related to the
continuity of operations and to the discovery of new reserves.

Option-based compensation

The Company grants stock options as part of its compensation
program. The prevalent Black-Scholes model is used to evaluate the cost of these
options. This model requires management to make a number of estimates.

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Future mining and income taxes

The Company accounts for mining and income taxes under the
asset and liability method. Under this method, future tax assets and liabilities
are recognized for the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Future tax assets and liabilities are measured using current tax rates or tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The impact on future tax
assets and liabilities of a change in tax rates is recognized in the statement
of earnings in the year in which the revised tax rate comes into effect.

Total cash cost

Total cash cost per ounce is not a recognized measure under
Canadian GAAP and this data may not be comparable to data presented by other
gold producers. The Company believes that this generally accepted industry
measure is a realistic indication of operating performance and is useful in
allowing year over year comparisons. As illustrated in the table below, total
cash cost per ounce is calculated by adding operating costs and royalties as
shown in the Companys Consolidated Statements of Earnings and then dividing by
the number of ounces of gold sold. The cash costs obtained from this calculation
in Canadian dollars are converted into US dollars. Total cash cost per ounce in
US dollars is intended to provide investors with information about the cash
generating capabilities of the Companys mining operations. Management uses this
measure to monitor the performance of the Companys mining operations. Since
market prices for gold are quoted on a per ounce basis, using this per ounce
measure allows management to assess the mines cash generating capabilities at
various gold prices. Management is aware that this per ounce measure of
performance is affected by fluctuations of the exchange rates.

Reconciliation of Total cash cost per ounce to production
costs:

|(in thousand
      $)                                                |  | 2008   |  |  | 2007   |  |  | 2006   | 
|-------------------------------------------------------------------- |  | ------ |  |  | ------ |  |  | ------ | 
|Operating costs per consolidated statements
      of earnings (CAN$) |  | 42,998 |  |  | 24,199 |  |  | 27,169 | 
|Royalties per consolidated statements of earnings (CAN$)             |  | 1,591  |  |  | 565    |  |  | 189    | 
|Cash costs (CAN$)                                                    |  | 44,589 |  |  | 24,764 |  |  | 27,358 | 
|Ounces of gold sold                                                  |  | 70,945 |  |  | 46,193 |  |  | 44,866 | 
|Total cash cost in CAN$/per ounce                                    |  | 629    |  |  | 536    |  |  | 610    | 
|Average exchange rate (US$/CAN$)                                     |  | 1.0660 |  |  | 1.0748 |  |  | 1.1341 | 
|Total cash cost in US$/per ounce                                     |  | 590    |  |  | 499    |  |  | 538    | 

57

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Year ended December 31, 2007 compared to year ended December
31, 2006 (all dollar amounts are in thousands of Canadian dollars unless
otherwise stated except per share and per ounce data)

Overview

Gold Prices and Currency Fluctuations

The gold market continued its strong pricing trend in 2007
rising from approximately US$640 per ounce at the beginning of the year to close
at more than US$833 per ounce. In the month of March 2008, gold rose to over
US$1,000 per ounce.

In 2007, the average market price of gold rose more than 15% to
US$695 per ounce compared with US$604 in 2006. The rise in gold prices have
resulted in growth that has benefited all gold producers in recent years,
although the strength of the Canadian dollars has lessened the impact on
Canadian producers.

Production

Richmont achieved significant revenue and income growth in 2007
as the price of gold continued an upward trend that began earlier this decade.
In 2007, Richmont sold 46,193 ounces of gold at an average price of US$699 per
ounce, for revenue of $34,691. The Company produced 45,304 ounces of gold at an
average cash cost per ounce of US$499. Net earnings were $6,671, or $0.28 per
share, including a gain of $7,439 on the sale of the East Amphi property. These
results compare favourably with 2006 when the Company sold 44,866 ounces of gold
at an average price of US$600 per ounce and produced 44,865 ounces of gold at an
average cash cost per ounce of US$538. Net earnings in 2006 totalled $3,194 or
$0.14 per share.

Richmont is currently producing at the Island Gold Mine in
Ontario and the Beaufor Mine in Quebec. The Island Gold Mine has proven and
probable reserves of 1,058,880 tonnes of ore at a grade of 8.39 g/t, for 285,536
ounces of gold. The Beaufor Mine has proven and probable reserves of 255,701
tonnes of ore at 9.20 g/t, for 75,632 ounces of gold. Total proven and probable
reserves at both operations equate to 361,168 ounces of gold. Richmont Mines has
a 55% equity interest in the Island Gold Mine.

Commercial production at the Island Gold Mine began on October
1, 2007. Initial production is progressing gradually as expected. The mine is
being developed to maximize production and increase output in order to build the
ore inventory. Once inventory is built, the mill is expected to be able to
operate at the approximately 675 tonnes per day for which it was designed. More
than 20,000 metres of definition and exploration drilling are planned at Island
Gold in 2008.

The Beaufor Mine, which has been in commercial production since
1996, had strong performance in 2007 despite a five-week shut down that was
required to replace the headframe structure. A measurably improved average grade
enabled the operation to exceed 2006 sales during 2007, despite the shut down.
The higher grade also resulted in a 19% reduction in the cash cost of production
to US$468 per ounce. Richmont has planned an additional 42,000 metres of
drilling at the Beaufor Mine for 2008, of which 19,500 metres will be dedicated
to further test the newly discovered Q zone.

58

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Investments

In 2007, the Company invested $21,270 at Island Gold mainly in
development costs. This investment was reduced by $16,775 from precious metal
sales during development activities. At Beaufor, the Company invested $1,060
mainly to replace the headframe structure. Total 2007 investments in property,
plant and equipment were $6,171.

In 2006, the bulk of the Companys investments, or a total of
$21,934, was allocated to the Island Gold project. More modest investments were
made at the Beaufor Mine and at other sites. Total 2006 investments in property,
plant and equipment were $25,059.

The $18,888 decrease in investments in property, plant and
equipment in 2007 compared with 2006 was mainly due to the application of
proceeds from precious metal sales as a reduction of development costs during
development activities at the Island Gold Mine of $16,775.

Financial aspects

The preparation of financial statements involves making
estimates and assumptions that have a significant impact on the reported amounts
of revenues, expenses, assets and liabilities. The items most dependent on the
use of estimates include the useful life of assets, depreciation and depletion
calculations based on proven and probable reserves, and the calculation of asset
retirement obligations as well as future income and mining taxes. Consequently,
future results may differ from these estimates.

Summary of operational and financial results

During 2007, the Company had a net profit of $6,671 or $0.28
per share, compared with a net profit of $3,194 or $0.14 per share, in 2006.

The Companys mining operations generated cash flows of $11,811
in 2007 compared with $2,429 in 2006.

The Company had no long-term debt and possessed working capital
of $33,970 as at December 31, 2007 compared with no long-term debt and $21,171
of working capital as at December 31, 2006. The Company believes that it would
have access to other sources of financing if additional capital became necessary
to finance its operations.

Changes in accounting policies

On January 1, 2007, the Company adopted the Canadian Institute
of Chartered Accountants (CICA) Handbook Sections 1530 Comprehensive Income,
3251 Equity, 3855 Financial Instruments  Recognition and Measurement and
3861 Financial Instruments  Disclosure and Presentation. These new CICA
Handbook Sections provide comprehensive requirements for the recognition, the
measurement and the disclosure of financial instruments. CICA Handbook Section
1530 establishes standards for reporting comprehensive income.

Comprehensive income is defined as the change in the Companys
net assets that results from transactions from sources other than the Companys
shareholders and includes items that would not normally be included in net
earnings. Other comprehensive income refers to items recognized in comprehensive
income but that are excluded from net earnings calculated in accordance with
Canadian generally accepted accounting principles.

59

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At the adoption date, all financial assets and liabilities are
estimated and recorded at fair value. Subsequently, all financial instruments
are classified into one of the following five categories: held-for-trading
financial assets, held-to-maturity investments, loans and receivables,
available-for-sale financial assets or other financial liabilities. All
financial instruments are recorded on the consolidated balance sheet and are
measured at fair value with the exception of loans and receivables,
held-to-maturity investments and other financial liabilities, which are measured
at amortized cost.

Available-for-sale financial assets are measured at fair value
with revaluation gains and losses included in other comprehensive income until
the asset is removed from the balance sheet.

As a result of the adoption of these standards, the Company has
classified its cash and cash equivalents as assets held-for-trading, its
short-term investments as available-for-sale financial assets, its accounts
receivable and the advance to a minority partner as loans and receivables, and
its accounts payable and accrued charges as other financial liabilities.

The adoption of CICA Handbook Sections 1530 and 3855 as of
January 1, 2007 had the impact of adjusting the opening balance of accumulated
other comprehensive income by an amount of $323 to reflect the cumulative
unrealized gains on available-for-sale investments at that date.

On January 1, 2007, the Company adopted the recommendations of
Section 1506 of the CICA Handbook, Accounting changes. The revised
Section establishes criteria for changing accounting policies, together with the
accounting treatment and disclosure of changes in accounting policies, changes
in accounting estimates and correction of errors. The adoption of these
recommendations did not have any impact on the financial statements of the
Company.

Future accounting changes

Capital disclosures

In December 2006, the CICA adopted Section 1535 of the
Handbook, Capital disclosures, which applies to years beginning on or
after October 1, 2007. This Section establishes standards for disclosing
information about an entitys capital and how it is managed.

Financial instruments  disclosures and presentation

In December 2006, the CICA adopted two new Handbook sections:
Section 3862, Financial instruments  disclosures and Section 3863,
Financial instruments  presentation. Together, these two sections
replace Section 3861, Financial instruments  disclosures and
presentation which apply to years beginning on or after October 1, 2007.
These Sections require additional disclosure, particularly regarding the
documentation of risks.

Inventories

In June 2007, the CICA issued Section 3031, Inventories,
which replaces Section 3030 and harmonizes the Canadian standards related to
inventories with International Financial Reporting Standards (IFRS). This
Section provides changes to the measurement and more extensive guidance on the
determination of cost, including allocation of overhead; it reduces the number
of methods available to determine cost; it requires impairment testing; and it
expands the disclosure requirements to increase transparency. This Section
applies to interim and annual financial statements beginning on or after January
1, 2008.

60

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Revenue

Precious metal revenue
 Precious metal revenue
in 2007 totaled $34,691 compared to $30,539 in 2006, constituting a $4,152
increase, which was primarily due to higher gold sales at a higher average price
per ounce during 2007. During 2007, the Company sold 46,193 ounces of gold at an
average price of US$699 per ounce compared with 44,866 ounces of gold in 2006 at
an average price of US$600 per ounce. The Island Gold Mine, which began
commercial production at the beginning of the fourth quarter of 2007, sold 7,302
ounces of gold at an average price of US$726 per ounce in 2007. The Beaufor Mine
sold 26,182 ounces of gold at an average price of US$693 per ounce in 2007,
while in 2006, 24,866 ounces of gold were sold at an average price of US$598 per
ounce. The East Amphi Mine sold 12,709 ounces of gold at US$695 in 2007 and
20,000 ounces of gold at US$603 in 2006.

Other revenue Other revenue of $3,380 in 2007, up
$1,030 when compared with 2006, was the result of higher custom milling revenue
at the Camflo Mill, as well as from an increase in interest income and variation
of fair market value on cash equivalents.

Expenses

Operating costs Lower operating costs in 2007
of $24,199 compared with $27,169 in 2006 reflected improvements in productivity,
refocused operations and enhanced mining plans at the Beaufor Mine, resulting in
a 51% increase in the average recovery grade, from 5.54 g/t in 2006 to 8.36 g/t
in 2007. The lower operating costs during 2007 were offset by early phase
commercial production costs at the Island Gold Mine. During the year, a total of
260,820 tonnes of ore from the Island Gold, Beaufor and East Amphi mines were
milled compared with a total of 318,707 tonnes of ore from the Beaufor and East
Amphi mines in 2006. The cash cost of production per ounce decreased to an
average of US$499 in 2007 from US$538 in 2006.

Royalties The amount of royalties paid by the Company
in 2007 was $565 compared to $189 in 2006, representing a $376 increase
primarily due to increased gold production at the Beaufor Mine, for which the
Company has paid royalties of $30.00 per ounce to a third party on 50% of the
ounces produced since November 2006. Prior to November 2006, the royalty was
$12.50/ounce. The increase in royalties paid during 2007 is also partially
attributable to a 3% net smelter return (NSR) royalty payable since commercial
production began at the Island Gold Mine in October 2007. No royalties were
payable on the ounces of gold produced at the East Amphi Mine.

Custom milling- In 2007, ore totalling 46,317 tonnes
was milled by the Company, compared with 33,509 tonnes in 2006. In 2007, with
Beaufor and East Amphi mines in production, there was less capacity for custom
milling. Activities related to custom milling represented expenses of $1,023 in
2007, compared with $591 in 2006. Revenues from custom milling are presented
under the caption Other revenues in the consolidated financial statements of
the Company included in this Annual Report. Richmont Mines expects to perform
custom milling of approximately 170 000 tonnes of ore in 2008.

AdministrationAdministrative expenses were
$3,315 in 2007 compared with $2,957 in 2006, representing a 12% increase due to
higher stock-based compensation, which is a non-cash expense. Of the 620,000
options granted in 2007, 510,000 options represent renewals of expired options
to directors and employees, and the balance of 110,000 options represents the
granting of options to new employees or to employees who were promoted. The
weighted-average fair value calculated according to the BlackScholes model of
evaluation at the date on which each option was granted was $1.06 compared with
$1.42 in 2006.

61

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Exploration and project evaluation As in previous
years, Richmont Mines continued its investments related to exploration and
project evaluation. These expenses increased from $2,080 in 2006 to $3,288 in
2007. The increase is attributable to an increase in actual exploration and
project evaluation expenditures, as detailed in the table below.

Investments for exploration and project evaluation

|                                     |  | 2007   |   |  | 2006  |  
|------------------------------------ |  | ------ | - |  | ----- | -
|                                     |  | $      |   |  | $     |  
|Exploration costs - Mines            |  |        |   |  |       |  
|Beaufor Mine                         |  | 1,874  |   |  | 1,342 |  
|East Amphi Mine                      |  | -      |   |  | 248   |  
|Island Gold Mine                     |  | 505    |   |  | 264   |  
|                                     |  | 2,379  |   |  | 1,854 |  
|Exploration costs - Other properties |  |        |   |  |       |  
|Valentine Lake property              |  | 1,017  |   |  | 67    |  
|Golden Wonder property               |  | 665    |   |  | -     |  
|Francoeur property                   |  | 96     |   |  | 146   |  
|Wasamac property                     |  | 46     |   |  | 54    |  
|Other properties                     |  | 162    |   |  | 168   |  
|Project evaluation                   |  | 124    |   |  | 583   |  
|                                     |  | 4,489  |   |  | 2,872 |  
|Exploration tax credits              |  | (1,201 | ) |  | (792  | )
|                                     |  | 3,288  |   |  | 2,080 |  

Accretion expense of asset retirement obligations This
charge was $178 in 2007, compared with $214 in 2006, representing a 17% decrease
due to ending of mining at East Amphi. As the Companys production and
exploration activities are subject to a variety of laws and federal and
provincial regulations governing the protection of the environment, the Company
has reported the asset retirement obligations for the mining sites on the basis
of managements best estimate of the future costs. These estimates may be
subject to changes if the laws and regulations are changed or if new
circumstances arise.

Depreciation and depletion The amounts related to
depreciation and depletion totalled $5,628 in 2007, compared with $3,146 in
2006. The increase is attributable primarily to the increase in gold sales,
which were 46,193 ounces in 2007, compared with 44,866 ounces in 2006 and by the
decline in the Beaufor and East Amphi properties mineral reserve, which were
determined at the end of 2006.

Gain on disposal of mining assets A factor that
contributed to the improvement in earnings in 2007 was the gain on disposal of
mining assests of the East Amphi property in the amount of $7,439 compared to
2006 with the $3,224 gain on the sale of the assets of Richmonts Nugget Pond
property, located in Newfoundland.

62

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Write-down of mining assets As part of its periodic
evaluation of the book value of its assets as described in note 1 g) of the
Companys consolidated financial statements included in this Annual Report, the
Company determined that no write-down of the mining assets was required as at
December 31, 2007.

Mining and income taxes

In 2007, current income taxes of $1,640 were comprised of
federal and provincial taxes and mining taxes applicable to the year 2007 in the
amount of $1,891, offset by $251 in adjustments for previous years not
previously recorded. The tax expense calculated at the combined stationary rate
was impacted by a reduction in the valuation allowance. The future income tax
credit of $334 was mainly due to a reduction in liabilities for future mining
taxes.

Unrecorded available tax credits of $350 were used during the
year and applied against property, plant and equipment while $1,201 was applied
against exploration expenses.

In 2006, Richmont had a tax recovery of $885 due principally to
a federal tax refund of $955, resulting from the carry-back of losses to prior
years and to a tax expense of $85 related to the $7,500 flow-through share
financing completed in 2005. The $1,801 future income tax was attributable
primarily to the recovery of $2,293 in future taxes related to the reduction in
the valuation allowance. This reduction was related to the future income tax
liability recognized during the year as a result of the issue of $7,500 in
flow-through shares completed in December 2005, for which the Company renounced
its tax deductions, to the benefit of the shareholders, in February 2006.
Furthermore, a reduction of $578 in future tax assets, related to the reduction
in valuation allowance for the subsidiary Louvem Mines Inc., diminished the
future tax recovery.

Details on taxes are found in note 8 of the Companys
consolidated financial statements included in this Annual Report.

Minority interest

Minority interest recovery totalled $36 in 2007, compared with
a recovery of $730 in 2006. This amount represents the share of earnings or
losses due to the minority shareholders of Louvem, in which Richmont Mines owns
a 70% interest, and the share of the losses from the Island Gold project for
2007 that belongs to Patricia Mining Corp., a partner in this project.

Net earnings (loss)

Net earnings were $6,671, or $0.28 per share, including a gain
of $7,439 on the sale of the East Amphi property. Net earnings in 2006 totalled
$3,194 or $0.14 per share.

Balance sheet

Assets

The total assets of Richmont Mines rose from $78,498 as at
December 31, 2006, to $85,976 at the end of 2007. The increase is due to the
increase in the cash and cash equivalents.

As at December 31, 2007, the Company had working capital of
$33,970 compared with $21,171 as of December 31, 2006. The increase was
primarily the result of a $12,234 increase in cash and short-term investments
due to higher cash generated from operations of $3,494 and proceeds of $8,536
realized on the sale of the assets of the East Amphi property. The cash balance
was $27,291 on December 31, 2007 compared with $16,126 on December
31, 2006, an increase of 69%.

63

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The total advance to Patricia Mining Corp., the minority
partner in the Island Gold Mine, was $3,375 at December 31, 2007 compared with
$4,500 at December 31, 2006. An amount of $1,500 compared with $1,125 at
December 31, 2006 is presented in accounts receivable as it is reimbursable
within the next twelve months. The total advance bears interest at prime rate
plus 3% (effective rate of 9% in 2007 and 2006) and is to be reimbursed in 36
equal and consecutive monthly instalments, which started on April, 2007. This
advance is secured by the 45% interest which the borrower has in the Island Gold
Mine.

An amount of $159 included in accounts receivable which
represents Patricia Mining Corps share of the November 2007 cash call of $90
and accrued interest of $69 had not been settled at December 31, 2007.

Liabilities

The amount of liabilities of the Company was $24,163 as at
December 31, 2007, compared with $23,808 at December 31, 2006, and is composed
of short-term liabilities, asset retirement obligations, the minority interest
and future mining and income taxes. Richmont Mines has no long-term debt.

Asset retirement obligations

Richmont Mines must evaluate on a periodic basis the
assumptions used in the calculation of the asset retirement obligations related
to eventual closure of its mining sites. At the end of the fiscal year ended
December 31, 2007, the Company had the following financial legal obligations:

|                   |  | Total amount     |  |  |                  |  |  |                 | 
|------------------ |  | ---------------- |  |  | ---------------- |  |  | --------------- | 
|                   |  | of the estimated |  |  | Cash flow        |  |  | Credit-adjusted | 
|                   |  | cash flow        |  |  | payment schedule |  |  | risk-free rate  | 
|                   |  | $                |  |  |                  |  |  | %               | 
|                   |  |                  |  |  |                  |  |  |                 | 
|Beaufor Mine       |  | 391              |  |  | 2011             |  |  | 5.5             | 
|Camflo Mill        |  | 2,381            |  |  | 2010             |  |  | 5.5             | 
|Island Gold Mine   |  | 901              |  |  | 2010             |  |  | 5.5             | 
|Francoeur property |  | 193              |  |  | 2010             |  |  | 5.5             | 
|                   |  | 3,866            |  |  |                  |  |  |                 | 

Future mining and income taxes

Note that future mining and income taxes, in 2006, were
recorded as both assets and liabilities, since these amounts come from different
corporate entities and a variety of legislation, such as federal, provincial and
mining taxes. Note 8 of the Companys consolidated financial statements included
in this Annual Report provides detailed information about tax reconciliation as
well as future income tax assets and liabilities.

The available non-refundable provincial and federal tax credits
of $4,572 and $2,181, respectively, can be carried forward for the next ten to
twenty years and were not reported as assets because the Company assessed that it was not more likely
than not that they will reduce the taxes due in future years.

64

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Shareholders equity

Shareholders equity totalled $61,813 as at December 31, 2007,
compared with $54,690 as at December 31, 2006.

At December 31, 2007, Richmont Mines had 24,053,353 shares
outstanding and 2,023,000 options granted under its stock-purchase plan compared
with 24,180,353 shares outstanding and 2,117,700 options granted at December 31,
2006.

Commitments and contingency

On November 5, 2007, the Company signed an agreement (amended
December 21, 2007) with LKA International, Inc. (LKA) to acquire an option to
acquire a 50% interest in the Golden Wonder property, located near Lake City,
Colorado, USA. In accordance with the terms of the agreement, the Company paid
an initial option payment of US$150,000 to evaluate the Golden Wonder property.
In December 2007, the Company paid an additional option fee amount of
US$150,000. As a condition precedent to Richmont Mines exercise of this option,
the Company must invest a total amount of US$3,000,000 prior to September 1,
2008, which amount includes exploration and development expenditures, the option
payment of US$300,000 and transaction costs. In addition, in order to acquire
the 50% interest in the Golden Wonder project, the Company must (i) subscribe to
US$1,500,000 in common shares of LKA and (ii) make additional mine-related
expenditures of US$3,000,000 (during an 8-month period starting September 1,
2008), US$6,000,000 (during the following 24-month period) and a final amount of
US$6,000,000 (during the 24-month period ending on April 30, 2013). Under the
agreement, failure by the Company to make any of the above-described payments
would result in the loss of the option right and forfeiture of any interest of
the Company in the Golden Wonder project. In accordance with the agreement, the
Company will receive 50% of the net proceeds of gold sales made during all
phases on the project so long as the Company has fulfilled its investment
obligations described above.

In October 2008, Richmont announced that drilling results at
the past-producing Golden Wonder Project in Colorado failed to confirm the
continuity of an economically viable ore zone below current infrastructures, and
that the Company had notified LKA International, its partner on the project,
that it was not exercising its option to a 50% interest in the project.

In addition, the Company is subject to royalty payments on 50%
of the production of the Beaufor Mine at the rate of $30 per ounce produced, a
3% royalty per ounce produced at the Island Gold Mine, and also on other
properties, if they enter into commercial production which are detailed under
Item 4. INFORMATION ON THE COMPANY  Business Overview  Mineral Royalties.

Critical accounting estimates

The preparation of financial statements requires the use of
estimates and the formulation of assumptions that have a significant impact on
revenues and expenses as well as on the amounts of assets and liabilities. The
following factors represent the estimates that management considers the most
significant and for which the actual amounts may differ considerably and affect
operating results.

65

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Mineral reserves

The main parameters used to determine the mineral reserves are
the following:

|                         |  | 2007 |  |  | 2006 |  |  | 2005 | 
|------------------------ |  | ---- |  |  | ---- |  |  | ---- | 
|                         |  |      |  |  |      |  |  |      | 
|Gold (US$/ounce)         |  | 650  |  |  | 513  |  |  | 450  | 
|Exchange rate (US$/CAN$) |  | 1.00 |  |  | 1.12 |  |  | 1.20 | 
|Gold (CAN$/ounce)        |  | 650  |  |  | 575  |  |  | 540  | 



|B. | Liquidity and Capital Resources (all dollar amounts
      are in thousands of Canadian dollars)
|-- | -----------------------------------------------------------------------------------------------

At December 31, 2008, Richmont had working capital of $26,753
compared with $33,970 at December 31, 2007. The $7,217 decrease is attributable
to a $2,975 decrease in cash and cash equivalents and short-term investments
related to the Companys acquisition of Patricia Mining Corp. in December 2008,
a $1,061 increase in mining and income taxes payable mainly due to federal and
mining taxes of $1,207 applicable to the Companys subsidiary, Louvem Mines
Inc., along with higher accounts payable and accrued charges of $1,907. In
addition, last years accounts receivable balance included an amount of $1,500
that was reimbursable from Patricia Mining, its minority partner until the
recent acquisition.

As at December 31, 2008, a credit facility is available the
Company in the amount of $3,000 for the issuance of letters of credit as
guarantees for the settlement of asset retirement obligations. The credit
facility has a fixed fee of 0.75%. The following table provides the allocation
of these letters of credit issued as at December 31, 2008:

|                   |  | 2008  |  |  | Date of                            | 
|------------------ |  | ----- |  |  | ---------------------------------- | 
|                   |  | **$** |  |  | renewal                            | 
|                   |  |       |  |  |                                    | 
|Camflo Mill        |  | 1,332 |  |  | **July**
      **20,** **2009**    | 
|Beaufor Mine       |  | 52    |  |  | **August** **11,**
      **2009**  | 
|Francoeur property |  | 54    |  |  | **August**
      **12, 2009**      | 
|Island Gold Mine   |  | 101   |  |  | **October** **27,**
      **2009** | 
|                   |  | 1,539 |  |  |                                    | 

Cash flow from operating activities

Cash flow from operations increased from an earning of $1,648
in 2006 to an amount of $5,999 in 2007 mainly due to the net change in non-cash
working capital items which used an amount of $927 in 2006 compared to
generating an amount of $1,803 in 2007.

Cash flow used in investing activities

In 2007, the bulk of the Companys investments, or a total of
$4,495, was allocated to the Island Gold Mine while in 2006 this amount was
$21,934 for the Island Gold project.

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Cash flow from financing activities

The Company issued 9,000 common shares during 2008 and 102,000
common shares during 2007 in connection with the exercise of options, for a
total cash consideration of $25 and $183, respectively. In 2006, the Company
issued 143,300 common shares in connection with the exercise of options, for a
total cash consideration of $334.

Under its normal course issuer bid programs, Richmont Mines
bought back 296,200 common shares during 2008, 229,000 common shares in 2007 and
57,500 common shares in 2006, for a total amount of $768, $658 and $171,
respectively. These shares were cancelled immediately after their repurchase.

In 2006, Richmont Mines issued 3,100,000 common shares at $4.90
each, for gross proceeds of $15,190 as part of a financing by short-form
prospectus concluded in June 2006, for net proceeds of $13,777. This financing
was completed in order to fund the exploration and development of the Island
Gold project and the ongoing exploration programs.

In 2006, one of the Companys subsidiaries, Louvem Mines Inc.,
bought back 35,000 common shares under its own share buyback program, for a
total amount of $13.

Richmont Miness current investment forecast for its existing
projects is limited and is expected to be funded with existing cash and cash
equivalents and with cash flow from operations.

C. Research and Development, Patents and
Licenses, etc.

None.

D. Trend Information

See discussions in Parts A and B of Item 5 Operating Results
and Financial Review and Prospects.

E. Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as
of December 31, 2008 that have or are reasonably likely to have a current or
future effect on the Companys financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.

F. Tabular Disclosure of Contractual
Obligations

As of December 31, 2008, the Company had the following
long-term liabilities required to be reflected on the Companys balance sheet
under Canadian generally accepted accounting principles.

Payments due by period (in thousand $)Less than
    
    
    More thanContractual
      obligations
    Total
    1
      year
    1-3 years
    3-5 years
    5
      yearsAsset retirement obligations
    $4,650
    -
    -
    4,650


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As of December 31, 2008, the Company had no long-term debt
obligations, capital lease obligations, operating lease obligations or purchase
obligations.

In 2008, cash payment schedules with respect to the Companys
asset retirement obligations for the above described asset retirement obligation
were revised from 2011 to 2012 for the Beaufor Mine, from 2010 to 2012 for the
Camflo Mill and Francoeur property and from 2010 to 2013 for the Island Gold
Mine.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES

A. Directors and Senior Management

The names, offices, principal occupations, length of service
and share ownership of the directors and senior management of the Company are as
follows:

Name and Municipality of Residence
    Office held with the Company
    Principal Occupation
    Director or Officer since
    Number of shares owned on May 1, 20091Jean-Guy Rivard2Rouyn-Noranda (Quebec)
      Canada
    Chairman of the Board and Director
    Chairman of the Board of Richmont Mines
    Feb. 25, 1981 to March 28, 2009
    1,220,800Martin Rivard6Rouyn-Noranda (Quebec)
      Canada
    President, Chief Executive Officer and Director
    President and CEO of Richmont Mines
    Oct. 1, 2005
    30,000Denis Arcand 3, 4Brossard
      (Quebec) Canada
    Director
    Businessman
    Sept. 28, 1995
    36,348Raynald Vézina, Eng. 3, 4Quebec city
      (Quebec) Canada
    Director
    Consultant
    Oct. 30, 2006
    5,000Réjean Houle 3, 4Montréal
      (Quebec) Canada
    Director
    Ambassador, Canadiens Hockey Club Inc.
    Jan. 27, 1989
    39,000Sandra Cauchon Rouyn-Noranda (Quebec) Canada
    Secretary
    Lawyer of Richmont Mines inc.
    February 24, 2009
    3,000Stephanie Lee5Montréal (Quebec) Canada
    Secretary
    Lawyer, McCarthy Tétrault LLP, law firm
    April 13, 2007 to February 24, 2009
    NilChristian Pichette Brossard (Quebec) Canada
    Vice President, Operations
    Vice President, Operations of Richmont Mines
    October 6, 2005
    4,500Nicole Veilleux
      Rouyn-Noranda (Quebec) Canada
    Financial Director
    Financial Director of Richmont Mines
    March
      1, 2006
    5,000




|1 | As the Company has no direct knowledge of the number of
      shares controlled by the above-mentioned directors and officers, the
      information was provided by each of them.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | Jean-Guy Rivard died on March 28, 2009.                                                                                                                                           
|3 | Member of the Audit Committee.                                                                                                                                                    
|4 | Member of the Compensation Committee.                                                                                                                                             
|5 | Stephanie Lee was replaced by Sandra Cauchon as secretary
      of the Company on February 24, 2009.                                                                              
|6 | Martin Rivard is Jean-Guys Rivard son.                                                                                                                                           

69

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The Company does not have any other Board committee other than
those mentioned above.

The above-mentioned individuals have held their principal
occupation as indicated opposite their respective names during the last five
years, except for Mr. Martin Rivard, who, prior to October 2005, was Executive
Vice-President of Richmont Mines, Mr. Christian Pichette, who was, prior to
October 2005, General Manager of Niobec Mine, Cambior Inc.; and Ms. Nicole
Veilleux, who was, prior to March 2006, Controller of Richmont Mines.

Each director shall, unless he resigns from the Board or leaves
the Board for any reason, hold his directorship until the close of the next
annual meeting of shareholders or until his successor is elected or appointed.

The directors and officers mentioned above own a total of
1,343,648 voting shares, of the Company as of May 1, 2008, which represents
about 5.2% of all the shares issued and outstanding of Richmont Mines Inc.
Furthermore, no director or officer owns voting shares of Louvem Mines Inc.

B. Compensation

Compensation of senior officers

During the year ended December 31, 2008 the four Named
Executive Officers of the Company (as hereinafter defined) were paid an
aggregate cash remuneration of $1,067,672.

The following information indicates the remuneration paid for
the financial year ended December 31, 2008 by the Company and its subsidiaries
to the Companys President and Chief Executive Officer, the Financial Director
and other senior officers (collectively, the Named Executive Officers) who
have received during the latest fiscal year, in return for services rendered to
the Company or its subsidiaries in any capacity, compensation exceeding
$150,000. The Company does not offer a long term incentive plan.

70

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Remuneration summary table

Name and main position
    Fiscal year
    Salary ($)
    Appropriation of
      shares ($)
    **Appropriation**
      of options ($)2
    Remuneration
      under a non security based plan ($)
    Value of pension
    plan($)
    Other revenue
      ($)
    Total
      remuneration ($)Annual incentive plans (Bonus)
    Long **term** **incentive**
      plansMartin Rivard3President
      and Chief Executive Officer
    2008
    206,265
    0
    31,500
    75,000
    0
    8,250
    0
    321,015Nicole Veilleux Financial Director
    2008
    121,127
    0
    39,500
    10,000
    0
    4,516
    0
    175,143Christian Pichette Vice President,
      Operations
    2008
    242,943
    0
    55,250
    50,000
    0
    9,718
    0
    357,911Jean-Guy
      Rivard1,3,4Chairman of the Board
    2008
    188,603
    0
    0
    25,000
    0
    0
    0
    213,603




| | Notes:
| | ------
| | 1)    
| | 2)    



2008No risk rate:
    3.0%Predicted life:
    4 yearsVolatility:
    39%Predicted dividends performance:
    0.0%




| | 3) | Despite the fact that the Chairman of the Board and the
      President and Chief Executive Officer are also board directors, neither
      receives remuneration in this capacity.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4) | Mr. Jean-Guy Rivard died on March 28,
  2009.                                                                                                                                      

Compensation of Directors

On December 12, 2008, the Companys compensation committee
adopted an amendment to the Companys remuneration plan of directors who are not
employees of the Company or its subsidiaries. Under the amended remuneration
plan, a base annual salary of $7,500 will be paid to every director as of 2008
(compared to $5,000 in 2007), with an additional $750 per meeting attended by
the Named Directors in 2009 (compared to $500 in 2008 for each meeting attended),
including committee meetings.

Pursuant to this, three directors received a total remuneration
slightly exceeding $44,000 during the financial year ended December 31, 2008. A
total of 75,000 share options for common shares at an exercise price of $1.80
per common share were issued to independent directors in 2008, in accordance
with the modalities of the Companys Share Option Plan.

71

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Directors remuneration table

Name
    Fees ($)
    Share-based appropriati ons
      ($)
    Option- based
      appropriations1 ($)
    Remunerati on under an incentive plan
      not security based ($)
    Value of the retirement plan
    Other revenue ($)
    Total ($)Denis Arcand Vice-President of the Board
    14,087
    0
    15,750
    0
    0
    0
    29,837Réjean Houle Director
    15,145
    0
    15,750
    0
    0
    0
    30,895Raynald
      Vézina Director
    15,145
    0
    15,750
    0
    0
    0
    30,895




| | Note: |                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1)    | The fair value of annually issued share options
      is determined by multiplying the number of share options issued by their
      value following the Black & Scholes model. This value is equal to the
      generally recognized accounting fair value in accordance with generally
      recognized accounting principles and taking into consideration the
      following hypotheses:



2008No risk rate:
    3.1%Predicted life:
    4 yearsVolatility:
    39%Predicted dividends performance:
    0.0%


The Company has directors and officers liability insurance
for a maximum amount of $5,000,000 for which the Company pays an annual premium
of $28,612.

No director or executive officer of the Company is currently
indebted to the Company or was indebted to the Company during the year ended
December 31, 2008.

C. Board Practices

The directors serve as directors of the Company from their
election on the day of the Annual General Meeting of the Company, last held on
May 13, 2008, until the next Annual and Special General Meeting that will be
held on May 14, 2009 or until a successor is duly elected.

Directors

Name
    Elected or Appointed DirectorJean-Guy Rivard(1)
    February 1981Martin Rivard
    October 2005Denis Arcand
    September 1995Réjean Houle
    January 1989Raynald Vézina
    October 20061. Jean-Guy Rivard died on March 28, 2009


72

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The Company has entered into an agreement for an indeterminate
term with each of the President and Chief Executive Officer, the Vice-President,
Operations and the Financial director pursuant to which each of them will
receive a payment equal to two times (or, in the case of the Chairman, three
times) his total compensation (the total compensation is defined as the average
of the sum of the base salary, cash bonus and other perquisites paid to such
officer in the last two years before termination) in case of termination without
cause by the Company or his resignation following reductions in his
responsibilities and/or compensation within two years following a change of
control.

A change of control occurs when:
(i) another party acquires 33 1⁄3% or more of the
outstanding voting securities of the Company, (ii) the composition of a majority
of the Companys board changes following a take-over, merger, consolidation or
other corporate restructuring, or (iii) the shareholders of another entity own
33 1⁄3% or more of the outstanding voting securities of
the Company resulting from a merger, consolidation or other corporate
restructuring involving the Company and such entity.

The Compensation Committee reviews annually the compensation
paid to the directors and senior management by taking into account and comparing
it with compensation paid to directors and senior management of comparable
companies. The Compensation Committee takes into account senior managements
responsibilities and workload in setting each officers compensation. The
Committee favours competitive compensation in order to keep competent key
employees. The Compensation Committee meets at least annually. The members of
the Compensation committee are Mrrs. Raynald Vézina, Réjean Houle and Denis
Arcand.

The Audit Committee meets at least four times a year in order
to review the Companys financial position, meets with auditors and analyzes
performance, existing and potential investments and the mining property
portfolio. The Companys audit committee charter is annexed hereto as Exhibit
15.1.

D. Employees

The number of employees of the Company as of December 31, 2008,
2007 and 2006, was 312, 262 and 305 respectively. The distribution of the
employees was the following:

Category of Activity or
      Geographical Location
    December 31,2008
    2007
    2006Corporate Office Exploration Beaufor Camflo
      Island Gold Newfoundland East Amphi
    19 5 99 26 163 - -
    14 3 91 22 132 - -
    12 2 104 26 135 - 26Total
    312
    262
    305


E. Share Ownership

See item 6 A « Directors and Senior Management »

73

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Information regarding the outstanding stock options held by
directors and senior management of the Company as of May 1, 2009, is set forth
below.

Stock Options Outstanding

Name
    Unexercised
      underlying securities (unit)
    Unexercised Options
      at Year- End (#)2 Exercisable/
      Unexercisable
    Exercise price of
      share options ($)
    Share options expiry
      dateMartin Rivard
    50,000
    
    5.30
    July 7, 2010President and Chief
    50,000
    
    4.36
    Jan. 30, 2011Executive Officer
    50,000
    150,000 / 150,000
    2.83
    Dec. 13, 201150,000
    
    2.88
    August 7, 201250,000
    
    3.15
    Dec. 13, 201250,000
    
    1.80
    Dec.
      11, 2013TOTAL
    300,000Nicole Veilleux
    10,000
    
    5.30
    July 7, 2010Financial Director
    15,000
    
    4.04
    August 3, 201115,000
    33,000 / 57,000
    2.74
    Jan. 7, 201225,000
    
    2.83
    July 10, 201325,000
    
    1.80
    Dec.
      11, 2013TOTAL
    90,000Christian Pichette
    50,000
    
    4.97
    Oct. 5, 2010Vice-President, Operations
    50,000
    115,000 / 110,000
    4.36
    Jan. 30, 201150,000
    
    2.83
    Dec. 13, 201125,000
    
    2.83
    July 10, 201350,000
    
    1.80
    Dec.
      11, 2013TOTAL
    225,000Jean-Guy Rivard(1)
    150,000
    
    6.60
    Jan. 14, 2009Chairman of the Board
    100,000
    
    5.30
    June 29, 2010200,000
    650,000 / 300,000
    5.30
    July 7, 2010100,000
    
    4.04
    August 3, 2011100,000
    
    2.83
    Dec. 13, 2011100,000
    
    3.11
    April 4, 2012200,000
    
    3.15
    Dec.
      13, 2012TOTAL
    950,000Denis Arcand
    50,000
    
    5.30
    June 29, 2010Interim President of the
    25,000
    60,000 / 40,000
    2.74
    Jan. 7, 2012Board
    25,000
    
    1.80
    Dec.
      11, 2013TOTAL
    100,000Réjean Houle
    50,000
    
    5.30
    June 29, 2010Director
    25,000
    60,000 / 40,000
    2.74
    Jan. 7, 201225,000
    
    1.80
    Dec.
      11, 2013TOTAL
    100,000Raynald Vézina
    50,000
    35,000 / 40,000
    2.95
    Oct. 30, 2011Director
    25,000
    
    1.80
    Dec.
      11, 2013TOTAL
    75,000




|1) | Jean-Guy Rivard died on March 28, 2009        
|-- | ----------------------------------------------
|2) | None of them exercised their options in
  2008

74

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

A. Major Shareholders

Except for Jean-Guy Rivard, Gregory Chamandy and Oxbridge Bank
and Trust SCC, (Mr. Chamandy, a shareholder of Oxbridge Bank and Trust SCC,
holds 900,000 shares and 1,706,500 through Oxbridge Bank and Trust, for a total
of 2,606,500 shares, which represent 9.98% of all the outstanding shares),
as disclosed in item 6.E Directors, Senior Management and Employees  Share
Ownership above, the Company does not know of any person who owns,
beneficially, directly or indirectly, more than 5% of any class of the Companys
voting securities.

There has been no significant change in the percentage
ownership of company common stock held by Jean-Guy Rivard during the past three
years. Mr. Chamandy and Oxbridge Bank and Trust SCC are new shareholders since
this year.

Mr. Rivard does not have different voting rights from the
Companys other shareholders.

The Company is not directly or indirectly owned or controlled
by another corporation or by any foreign government or by any other natural or
legal person, severally or jointly.

The Company has no knowledge of any arrangement that may, at a
subsequent date, result in a change of control of the Company.

B. Related Party Transactions

During the period since the beginning of the Companys
preceding financial year up to the date of this Annual Report, there have been
no transactions or loans between the Company and (a) enterprises that directly
or indirectly through one or more intermediaries, control or are controlled by,
or are under common control with, the Company; (b) associates; (c) individuals
owning, directly or indirectly, an interest in the voting power of the Company
that gives them significant influence over the Company, and close members of any
such individuals family; (d) key management personnel, that is, those persons
having authority and responsibility for planning, directing and controlling the
activities of the Company, including directors and senior management and close
members of such individuals families; and (e) enterprises in which a
substantial interest in the voting power is owned, directly or indirectly, by
any person described in (c) or (d) or over which such a person is able to
exercise significant influence.

C. Interests of Experts and Counsel

Not applicable.

75

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ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial
Information

The following consolidated financial statements of the Company
are attached to this Annual Report:

Report of the Independent Registered Public Accounting Firm on
Internal Control dated February 9, 2009

Report of the Independent Registered Public Accounting Firm
dated February 9, 2009 on the Consolidated Balance Sheets as at December 31,
2008 and 2007, Consolidated Statements of Earnings, Comprehensive Income,
Deficit, Accumulated other Comprehensive Income and Cash Flows for the two-year
period then ended.

Comments by Auditors for American Readers on Canada  US
Reporting differences dated February 9, 2009

Report of the Independent Registered Public Accounting Firm
dated February 2, 2007 on the Consolidated Statements of Earnings, Comprehensive
Income, Accumulated other Comprehensive Income, Deficit and Cash Flows for the
year ended December 31, 2006.

Consolidated Balance Sheets at December 31, 2008 and December
31, 2007.

Consolidated Statements of Earnings for the Years ended
December 31, 2008, December 31, 2007 and December 31, 2006.

Consolidated Statements of Comprehensive Income and Deficit for
the Years ended December 31, 2008, December 31, 2007 and December 31, 2006.

Consolidated Statements of Cash Flow for the Years ended
December 31, 2008, December 31, 2007 and December 31, 2006.

Notes to Consolidated Financial Statements.

The Company has not declared or paid any dividends on its
common shares since its incorporation. Richmont Mines has no current plans to
pay dividends on its common shares. Its present policy is to retain earnings to
finance its capital expenditures program. In the future, the Board of Directors
may declare dividends according to its assessment of the financial position of
the Company, taking into account its financing requirements for future growth
and other factors that the Board of Directors may deem relevant in the
circumstances. The Company had no export sales during 2008.

The Company knows of no active, pending or overtly threatened
legal or arbitration proceeding to which the Company is a party or to which any
of its properties is subject which may have, or has had in the recent past, a
significant effect on the Companys financial position or profitability.

B. Significant Changes

No significant change has occurred since December 31, 2008 in
the Companys financial condition or results of operations.

76

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ITEM 9. THE OFFER AND LISTING

The Companys common stock is traded on the Toronto Stock
Exchange under the symbol RIC and on the NYSE Amex also under the symbol
RIC.

Toronto Stock Exchange

Set forth below are the high and low sell prices on the Toronto
Stock Exchange for actual trades of shares of the Companys common stock for the
periods indicated.

Last Five Full Years Toronto Stock Exchange Common
Stock Trading Activity

- Price -Canadian DollarsYear Ended
    High
    LowDecember 31, 2004
    $6.90
    $4.00December 31, 2005
    $5.85
    $3.82December 31, 2006
    $5.40
    $2.40December 31, 2007
    $4.00
    $2.56December 31, 2008
    $4.20
    $1.21


Last Two Full Years Toronto Stock Exchange Common
Stock Trading Activity

- Price -Canadian DollarsQuarter Ended
    High
    LowMarch 31, 2007
    $3.30
    $2.56June 30, 2007
    $4.00
    $2.84September 30, 2007
    $3.10
    $2.65December 31, 2007
    $3.79
    $2.91March 31, 2008
    $4.18
    $2.03June 30, 2008
    $4.20
    $2.85September 30, 2008
    $3.00
    $1.80December 31, 2008
    $2.80
    $1.21


77

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Last Six Months Toronto Stock Exchange Common Stock
Trading Activity

- Price -Canadian DollarsMonth Ended
    High
    LowNovember 30, 2008
    $2.00
    $1.21December 31, 2008
    $2.10
    $1.31January 31, 2009
    $3.20
    $2.04February 28, 2009
    $3.69
    $2.80March 31, 2009
    $4.85
    $2.96April 30, 2009
    $4.93
    $3.55


American Stock Exchange and NYSE
Amex

The Companys common stock was listed for trading on the
American Stock exchange effective on March 6, 1997. In 2008, the American Stock
exchange was bought by NYSE Alternext and became NYSE Amex in the beginning of
2009. Set forth below are the high and low sell prices on the American Stock
Exchange until December 2007 and NYSE Amex for actual trades of shares of the
Companys Common Stock for the periods indicated.

Last Five Full Years American Stock Exchange / NYSE Amex
Common Stock Trading Activity

- Price -US DollarsYear Ended
    High
    LowDecember 31, 2004
    $5.39
    $3.00December 31, 2005
    $4.73
    $3.20December 31, 2006
    $4.75
    $2.18December 31, 2007
    $4.07
    $2.19December 31, 2008
    $4.18
    $0.95


78

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Last Two Full Years American Stock Exchange / NYSE Amex
Common Stock Trading Activity

- Price -US DollarsQuarter Ended
    High
    LowMarch 31, 2007
    $2.82
    $2.19June 30, 2007
    $3.44
    $2.49September 30, 2007
    $3.05
    $2.50December 31, 2007
    $4.07
    $2.95March 31, 2008
    $4.18
    $2.50June 30, 2008
    $4.13
    $2.85September 30, 2008
    $3.00
    $1.57December 31, 2008
    $2.19
    $0.95


Last Six Months American Stock Exchange / NYSE Amex
Common Stock Trading Activity

- Price -US DollarsMonth Ended
    High
    LowNovember 30, 2008
    $1.83
    $0.95December 31, 2008
    $1.80
    $1.04January 31, 2009
    $2.61
    $1.60February 28, 2009
    $2.95
    $2.22March 31, 2009
    $3.84
    $2.30April 30, 2009
    $3.91
    $2.86


ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The Company was incorporated pursuant to Part 1A of the
Companies Act (Quebec) on February 12, 1981 (File number 1843-2286) under
the name Resources Minières Rouyn Inc. By Article of Amendment filed February
10, 1987 the Company added the English version Rouyn Mining Resources Inc. and
by another amendment filed with the Government of Quebec on June 20, 1991, the
Company changed its name to Richmont Mines Inc. The Articles of Incorporation of
the Company are registered by the Government of Quebec in register S02473, folio
10.

The Company has no specific objects or purposes set forth in
its Articles of Incorporation or Bylaws.

79

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Directors

A director who is a party to a contract or proposed contract
with the Company or who is a director or officer of a company which is a party
to a contract or proposed contract with the Company must disclose such interest
in writing to the Company and ask that the nature and extent of his interest be
recorded in the minutes of the Board of Directors meetings.

Such director may not attend nor participate in discussions
relating to such contract or proposed contract, unless authorized by the Board,
nor vote on any resolution regarding approval of the contract or proposed
contract.

However, notwithstanding the foregoing, directors have the
right to vote on determining the compensation of directors; provided that no
director who is a paid employee or officer of the Company may receive fees from
the Company.

The directors of the Company may:

| | (a) | borrow funds on the Companys credit for the amounts and
      on conditions that are deemed suitable;                                                                                                                                                                                                                                                                                                        
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) | hypothecate or pledge all or part of the real property of
      the Company, or pawn or otherwise encumber all or part of the moveable
      property of the Company, or give various guarantees to ensure payment of
      loans other than through the issue of bonds, as well as the payment or
      execution of other debts, contracts or commitments of the
  Company;                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) | issue bills, bonds (debentures) and debenture-stock or
      other securities of the Company for such amounts and on such conditions
      they deem appropriate, and give as security or sell them for the amounts
      and prices deemed suitable;                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | hypothecate, pledge, pawn, assign and convey the movable
      or immovable property, present or future, of the Company, to secure
      payment of such bonds or other securities, or give only part of such
      guarantees for the same purposes; and constitute the aforementioned
      hypothecation, pledge, pawn, assignment and conveyance by way of a trust
      deed, or in any other manner; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (e) | delegate to one or more members of management or to one
      or more directors of the Company who may be designated by the Directors,
      all or part of the powers conferred by the aforementioned clause to the
      extent and in the manner that the Board of Directors determines in such
      delegation of the said powers.                                                                       

There is no age limitation, or minimum share ownership
requirement, for the Companys directors. Directors are elected for one year
terms.

Capital Stock

There is only one authorized class of capital stock of the
Company: common stock. All issued and outstanding common shares are fully paid
and non-assessable. Each holder of record of common shares is entitled to one
vote for each common share so held on all matters requiring a vote of
shareholders, including the election of directors. The holders of common shares
will be entitled to dividends on a pro-rata basis, if and when as declared by
the board of directors. There are no preferences, conversion rights, pre-emptive
rights, subscription rights, or restrictions on transfer attached to the common shares. In the event of
liquidation, dissolution, or winding up of the Company, the holders of common
shares are entitled to participate in the assets of the Company available for
distribution after satisfaction of the claims of creditors. There are no
redemption or sinking fund provisions applicable to the common shares or any
liability to further capital calls by the Company.

80

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Under Quebec law (i) the Articles of Incorporation of the
Company may be amended by the affirmative vote of the holders of two thirds
(2/3) of the vote cast by the shareholders at a special meeting and (ii) the
Bylaws of the Company may be amended by the Companys directors and ratified by
the majority of the vote cast by the shareholders at the meeting.

The annual meeting of shareholders must be held each year
within six (6) months of the end of the fiscal year. For any general meeting, a
notice specifying the date, time and place of the meeting and the items to be
discussed at the meeting must be sent to each shareholder entitled to vote at
that meeting at least twenty-one (21) days before the date of such a meeting at
the address indicated in the books of the Company or, if no address is
indicated, the last address known by the registrar.

Quorum at any shareholders meeting is two (2) shareholders
attending in person and holding or representing by proxies at least ten per cent
(10%) of the voting shares issued by the Company and carrying the right to vote
at the meeting. Two shareholders attending in person and entitled to vote will
constitute the quorum at any meeting of shareholders for the choice of the
Chairman and adjournment of the meeting.

No business may be transacted unless the required quorum has
been achieved.

There is no limitation imposed by the laws of Canada or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote the common shares, other than as provided in the
Investment Canada Act, (the Investment Act) discussed below.

The Investment Canada Act (the ICA), which became
effective on June 30, 1985, regulates the acquisition by non-Canadians of
control of a Canadian business enterprise. In effect, the ICA required review by
Investment Canada, the agency which administers the ICA, and approval by the
Canadian government in the case of an acquisition of control of a Canadian
business by a non-Canadian where: (i) in the case of a direct acquisition (for
example, through a share purchase or asset purchase), the assets of the Canadian
business are $5 million or more in value; or (ii) in the case of an indirect
acquisition (for example, the acquisition of the foreign parent of the Canadian
business) where the Canadian business has assets of $50 million or more in value
or if the Canadian business represents more than 50% of the assets of the
original group and the Canadian business has assets of $5 million or more in
value. Review and approval are also required to the acquisition or establishment
of a new business in areas concerning Canadas cultural heritage or national
identity such as book publishing, film production and distribution, television
and radio, production and distribution of music, and the oil and natural gas
industry, regardless of the size of the investment.

In the context of the Company, in essence, three methods of
acquiring control of a Canadian business are regulated by the ICA: (i) the
acquisition of all or substantially all of the assets used in carrying on the
Canadian business; (ii) the acquisition, directly or indirectly, of voting
shares of a Canadian corporation carrying on the Canadian business; (iii) the
acquisition of voting shares of an entity which controls, directly or
indirectly, another entity carrying on a Canadian business. An acquisition of a
majority of the voting interests of an entity, including a corporation, is
deemed to be an acquisition of control under the ICA. An acquisition of less
than one-third of the voting shares of a corporation is deemed not to be an
acquisition of control. An acquisition of less than a majority, but one-third or
more, of the voting shares of a corporation is presumed to be an acquisition of
control unless it can be established that on the acquisition, the corporation is
not, in fact, controlled by the acquirer through the ownership of voting shares.
For partnerships, trusts, joint ventures or other unincorporated entities, an
acquisition of less than a majority of the voting interests is deemed not to be
an acquisition of control.

81

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In 1988, the ICA was amended pursuant to the North American
Free Trade Agreement dated January 2, 1988 between Canada and the United States
to relax the restrictions of the ICA. As a result of these amendments, except
where the Canadian business is in the cultural, oil and gas, uranium, financial
services or transportation sectors, the threshold for direct acquisition of
control by US investors and other foreign investors acquiring control of a
Canadian business from US investors has been raised from $5 million to $150
million of gross assets, and indirect acquisitions are not reviewable.

In addition to the foregoing, the ICA requires that all other
acquisitions of control of Canadian businesses by non-Canadians are subject to
formal notification to the Canadian government.

C. Material Contracts

East Amphi Sale Agreement

On June 29, 2007, Richmont Mines entered into the Asset
Purchase Agreement between Richmont Mines and Osisko Exploration Ltd (Osisko),
pursuant to which Richmont Mines sold its East Amphi property and related
surface equipment to Osisko in consideration for a cash payment of $2,450,000
and 1,109,000 common shares of Osisko valued at $6,086,000 at the time of the
sale. In connection with the sale, Richmont Mines was released from all claims
and other liabilities relating to the East Amphi Mine.

Golden Wonder Option Agreement

On November 5, 2007, the Company entered into the Letter
Agreement with LKA, pursuant to which LKA granted the Company the option to
acquire a 50% interest in the Golden Wonder property, located near Lake City,
Colorado, USA. Under this agreement, in order to exercise its option to acquire
the 50% interest in the Golden Wonder property, the Company is obligated to (i)
pay an upfront option fee of US$300,000, which the Company has already paid,
(ii) invest US$3 million prior to September 8, 2008, inclusive of the US$300,000
option fee and transaction costs incurred by the Company, (iii) invest a further
US$15 million over a 56-month period following September 1, 2008, and (iv)
subscribe for US$1.5 million of LKA common shares. Under the agreement, failure
by the Company to make any of the above-described payments would result in the
loss of the option right and forfeiture of any interest of the Company in the
Golden Wonder project. Upon fulfillment of all such conditions, the Companys
50% interest in the Golden Wonder property will be fully earned. Under this
agreement, the Company is entitled to 50% of the net proceeds of gold sales so
long as it has not failed to make any of the required investments described
above.

Richmont Mines completed its initial evaluation of the Golden
Wonder Mine and exercised its option to acquire a 50% joint venture interest in
the Golden Wonder project. LKA held the other 50% joint venture interest.
Richmont Mines was required and invested US$3 million in certain project-related
expenditures prior to September 1, 2008. Included in this amount were
expenditures for exploration and development of the mine plus the option fee and
project-related finders fees. Results obtained failed to confirm the continuity
of an economically viable ore zone below current infrastructures at the sixth level. In light of
these results, in October 2008 Richmont Mines informed LKA of the termination of
its option to proceed with the joint venture agreement.

82

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Valentine Lake Option Agreement

In November 2003, Richmont Mines entered into an option
agreement with Mountain Lake to acquire a 70% interest in the Valentine Lake
Property from Mountain Lake by carrying out $2.5 million in exploration work by
October 31, 2007.This condition was fulfilled and by October 31, 2007, Richmont
Mines acquired a 70% interest in the Valentine Lake property. On February 5,
2009 Mountain Lake and Richmont Mines entered into an agreement pursuant to
which the Company granted Mountain Lake the option to purchase Richmont Miness
70% interest in the property. Mountain Lake agreed to pay an option fee to
Richmont Mines of 2,500,000 common shares of Mountain Lake at a deemed value of
$625,000, or $0.25 per share and may exercise the purshase option within a
five-year period by making option payments to Richmont Mines totaling an
additional $3,000,000, and by incurring $1,000,000 in exploration and
development expenditures at Valentine Lake within such timeframe. Until all such
conditions are met, Richmont Mines will continue to own a 70% interest in the
Valentine Lake property.

D. Exchange Controls

There are no governmental laws, decrees, regulations or other
legislation in Canada that may affect the export or import of capital, or the
remittance of interest, dividends or other payments to non-residents holders of
the Companys common shares, except that any remittance of dividends to United
States residents is subject to a 15% withholding tax (5% if the shareholder is a
corporation owning at least 10% of the common shares of the Company) pursuant to
Article X of the reciprocal income treaty between Canada and the United States.

E. Taxation

The following summary of the material Canadian federal income
tax considerations generally applicable in respect of the common stock reflects
the Companys opinion. The tax consequences to any particular holder of common
stock will vary according to the status of that holder as an individual, trust,
corporation or member of a partnership, the jurisdiction in which that holder is
subject to taxation, the place where that holder is resident and, generally,
according to that holders particular circumstances. This summary is applicable
only to holders who are resident in the United States, have never been resident
in Canada, deal at arms length with the Company, hold their common stock as
capital property and who will not use or hold the common stock in carrying on
business in Canada. Special rules, which are not discussed in this summary, may
apply to a United States holder that is an issuer that carries on business in
Canada and elsewhere.

This summary is not exhaustive of all possible income tax
consequences. It is not intended as legal or tax advice to any particular holder
of common stock and should not be so construed. Each holder should consult his
own tax advisor with respect to the income tax consequences applicable to him in
his own particular circumstances.

Disposition of Common Stock

If a non-resident were to dispose of common stock of the
Company to another Canadian corporation which deals or is deemed to deal on a
non-arms length basis with the non-resident and which, immediately after the
disposition, is connected with the Company (i.e., the nonresident and any person
with whom the non-resident does not deal at arms length holds directly or indirectly shares representing more than 10% of the voting
power and more than 10% of the market value of all issued and outstanding shares
of the Company), the amount by which the fair market value of any consideration
(other than any shares of the purchaser corporation) exceeds the paid-up capital
of the common stock sold will be deemed to be taxable as a dividend paid by the
purchasing corporation, either immediately or eventually by means of a deduction
in computing the paid-up capital of the purchasing corporation, and subject to
withholding taxes as described below.

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Under the Income Tax Act (Canada), a gain from the sale
of common stock of the Company by a non-resident will not be subject to Canadian
tax since the common stock of the Company is listed on a prescribed stock
exchange, provided the shareholder (and persons who do not deal at arms length
with the shareholder) have not held a substantial interest in the Company (25%
or more of the shares of any class of the Companys stock) at any time in the
five years preceding the disposition. Generally, the Canada-United States Income
Tax Convention (1980) (the Treaty) will exempt from Canadian taxation any
capital gain realized by a resident of the United States, provided that the
value of the common stock is not derived principally from real property situated
in Canada.

Dividend

In the case of any dividends paid to non-residents, the
Canadian tax is withheld by the Company, which remits only the net amount to the
shareholder. By virtue of Article X of the Treaty, the rate of tax on dividends
paid to residents of the United States is generally limited to 15% of the gross
dividend (or 5%, in the case of certain corporate shareholders owning at least
10% of the Companys voting shares). In the absence of treaty provisions, the
rate of Canadian withholding tax imposed on non-residents is 25% of the gross
dividend. Stock dividends received by nonresidents from the Company are taxable
by Canada as ordinary dividends.

If a non-resident holder disposes of common stock to the
Company (unless the Company acquired the common stock in the open market in the
manner in which shares would normally be purchased by any member of the public),
this will result in a deemed dividend to the non-resident holder equal to the
amount by which the consideration paid by the Company exceeds the paid-up
capital of such stock. The amount of such dividend will be subject to
withholding tax as described above.

Capital Gains

A non-resident of Canada is not subject to tax under the
Income Tax Act (Canada) in respect of a capital gain realized upon the
disposition of a share of a capital gain realized upon the disposition of a
share of a class that is listed on a prescribed stock exchange unless the share
represents taxable Canadian property to other holder thereof. A common share
of the Company will be taxable Canadian property to a non-resident holder if, at
any time during the period of five years immediately preceding the disposition,
the non-resident holder, persons with whom the nonresident holder did not deal
at arms length, or the non-resident holder and persons with he/she did not deal
at arms length owned 25% or more of the issued shares of any class or series of
the Company. In the case of a non-resident holder to whom shares of the Company
represent taxable Canadian property and who is resident in the United States,
American tax will be payable on a capital gain realized on such shares by reason
of the Treaty unless the value of such shares is derived principally from real
property situated in Canada or the non-resident holder previously held the
shares while resident in Canada. However, in such a case, certain transitional
relief under the Treaty may be available.

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Certain United States Federal Income Tax Consequences

The following is a summary of the material United States
federal income tax consequences of the acquisition, ownership and disposition of
common shares of the Company by a United States Holder (as defined below) that
holds the common shares as a capital asset. The discussion does not cover all
aspects of United States federal income taxation that may be relevant to, or the
actual tax effect that any of the matters described herein will have on, the
acquisition, ownership or disposition of common shares of the Company by
particular shareholders, and does not address state, local, foreign or other tax
laws. In particular, this summary does not address tax considerations applicable
to persons that own (directly or indirectly) 10 percent or more of the Companys
voting shares, nor does this summary discuss all of the tax considerations that
may be relevant to certain types of persons subject to special treatment under
the United States federal income tax laws (such as financial institutions,
insurance companies, persons liable for the alternative minimum tax, individual
retirement accounts and other tax-deferred accounts, tax-exempt organisations,
dealers in securities or currencies, persons that hold the common shares as part
of straddles, hedging transactions or conversion transactions for United States
federal income tax purposes or persons whose functional currency is not the
United States dollar).

As used herein, the term United States Holder means a
beneficial owner of the Companys common shares that is (i) a citizen or
resident of the United States for United States federal income tax purposes,
(ii) a corporation, or other entity treated as a corporation, created or
organised under the laws of the United States or any State thereof, (iii) an
estate the income of which is subject to United States federal income tax
without regard to its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust.

The summary is based on the tax laws of the United States,
including the Internal Revenue Code of 1986, as amended (the Code), its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, as well as on the income tax treaty between the
United States and Canada (the Treaty), all as currently in effect and all
subject to change at any time, possibly with retroactive effect.

Distributions on Common Shares of the Company

General. United States Holders receiving dividend
distributions (including constructive dividends) with respect to common shares
of the Company are required to include in gross income for United States Federal
income tax purposes the gross amount of such distributions to the extent that
the Company has current or accumulated earnings and profits (as determined for
United States federal income tax purposes), without reduction for any Canadian
income tax withheld from such distributions. Such income will be foreign source
dividend income and generally will not be eligible for the dividends received
deduction allowed to corporations. Canadian tax withheld from such distributions
may be credited, subject to certain limitations, against the United States
Holders United States Federal income tax liability or, alternatively, may be
deducted in computing the United States Holders US Federal taxable income by
those who itemize deductions. (See more detailed discussion in the section
captioned Foreign Tax Credit below). To the extent that distributions exceed
current or accumulated earnings and profits of the Company, they will be treated
first as a return of capital up to the United States Holders adjusted basis in
the common shares, and then as capital gain. Preferential tax rates for
long-term capital gains are applicable to a United States Holder that is an
individual, estate or trust. There are currently no preferential tax rates for
long-term capital gains for a United States Holder that is a corporation. The Company does not maintain
calculations of its earnings and profits in accordance with US Federal income
tax accounting principles.

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For taxable year beginning before January 1, 2011, dividends
paid by foreign qualified corporations to non-corporate taxpayers will be taxed
at the same rate as long-term capital gains, rather than at the higher ordinary
income tax rate. A foreign corporation such as the Company is a qualified
corporation (i) if the corporation is eligible for the benefits of a
comprehensive income tax treaty with the United States which the United States
Internal Revenue Service (IRS) determines is satisfactory and which contains
an exchange of information provision, or (ii) to the extent that the dividends
are paid with respect to stock that is readily tradable on an established
securities market in the United States. The IRS has ruled that the Treaty is a
satisfactory treaty for this purpose. Accordingly, dividends paid with respect
to shares of the Company should be eligible for the reduced tax rate.
Eligibility for the reduced tax rate is dependent on satisfying a holding period
and certain other limitations. The reduced tax rate also cannot be claimed with
respect to dividends that are included as investment income for purposes of the
limitation on the deduction of investment interest.

Foreign Currency Dividends.Dividends paid in
Canadian dollars will be included in income in a US dollar amount calculated by
reference to the exchange rate in effect on the day the dividends are received
by the US Holder, regardless of whether the Canadian dollars are converted into
US dollars at that time. If dividends received in Canadian dollars are converted
into US dollars on the day they are received, the US Holder generally will not
be required to recognize foreign currency gain or loss with respect to the
dividend income. A United States Holder may have foreign currency gain or loss
if it does not convert the amount of such dividend into U.S. dollars on the
date of its receipt.

Effect of Canadian Withholding Taxes.As
discussed above in Taxation, Dividend, under current law payments by the Company
to foreign investors are subject to a 25 % Canadian withholding tax. The rate of
withholding applicable to United States Holders that are eligible for benefits
under the Treaty generally is reduced to a maximum rate of 15 % (except for
certain corporate holders). For United States federal income tax purposes,
United States Holders will be treated as having received the amount of Canadian
taxes withheld by the Company, and as then having paid over the withheld taxes
to the Canadian taxing authorities. As a result of this rule, the amount of
dividend income included in gross income for United States federal income tax
purposes by a United States Holder with respect to the payment of dividends may
be greater than the amount of cash actually received (or receivable) by the
United States Holder from the Company with respect to the payment.

Foreign Tax Credit

Subject to certain limitations, a United States Holder who pays
(or has withheld from distributions) Canadian income tax with respect to the
ownership of common shares of the Company may be entitled, at the option of the
United States Holder, to either a deduction or a tax credit for such foreign tax
paid or withheld. United States Holders that are eligible for benefits under the
Treaty will not be entitled to a foreign tax credit for the amount of Canadian
taxes withheld in excess of the 15 % maximum rate available under the
Treaty, and with respect to which the United States Holder can obtain a refund
from the Canadian taxing authorities. The limitation in foreign taxes eligible
credit is calculated separately with respect to specific classes of income. The
rules governing foreign tax credits are complex and, therefore, United States
Holders should consult their tax advisor regarding the availability of foreign
tax credits in their particular circumstances.

United States Holders that are accrual basis taxpayers must
translate Canadian taxes into United States dollars at a rate equal to the
average exchange rate for the taxable year in which the taxes accrue, while all
United States Holders must translate taxable dividend income into US dollars at
the spot rate on the date received. This difference in exchange rates may reduce
the US dollar value of the credits for Canadian taxes relative to the United
States Holders United States federal income tax liability attributable to a
dividend.

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Disposition of Common Shares of the Company

A United States Holder will recognize gain or loss from the
sale of common shares of the Company equal to the difference, if any, between
(i) the amount of cash plus the fair market value of any property received, and
(ii) the shareholders tax basis in the common shares of the Company. This gain
or loss will be capital gain or loss if the common shares are a capital asset in
the hands of the United States Holder, which will be a short-term or long-term
capital gain or loss depending upon the holding period of the United States
Holder. Gains and losses are netted and combined according to special rules in
arriving at the overall capital gain or loss for a particular tax year.
Deductions for net capital losses are subject to significant limitations. For
United States Holders that are not corporations, net capital loss may be offset
against up to $3,000 of ordinary income each tax year, and any unused portion of
such net capital loss may be carried over to be used in later tax years until
such net capital loss is thereby exhausted. For United States Holders that are
corporations (other than corporations subject to Subchapter S of the Code), an
unused net capital loss may be carried back three years from the loss year and
carried forward five years from the loss year to be offset against capital gains
until the earlier of five years or the exhaustion of the net capital loss.

Backup Withholding and Information Reporting

Payments of dividends or other proceeds with respect to common
shares of the Company by a United States paying agent or other United States
intermediary will be reported to the IRS and to the United States Holder as may
be required under applicable regulations. Backup withholding at a rate of 28 per
cent may apply to these payments if the United States Holder fails to provide an
accurate taxpayer identification number or certification of foreign or other
exempt status or fails to report all interest and dividends required to be shown
on its United States federal income tax returns. Certain United States Holders
(including, among others, corporations) are not subject to backup withholding.
United States Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining exemption.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

Subject to confidentiality concerns, all documents concerning
the Company that are referred to in this Report may be inspected by shareholders
upon reasonable advance notice, at the Companys headquarters at 161, Avenue
Principale, Rouyn-Noranda, Quebec J9X 4P6. A summary in English of any such
document not in English will be provided.

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I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk Disclosure

See Item 4.B Information on the Company - Gold Marketing and
Sales above.

At current 2009 estimates of production of 78,500 ounces of
gold and at an estimated average gold price of US$900, including managements
estimates of the Companys operating expenses, a US$90.00 change in the market
price of gold would result in an increase or decrease of approximately
CAN$7,100,000 in annual net income and in annual cash flows.

Foreign Currency Risk Disclosure

The Companys revenues are mainly denominated in US dollars,
while investments and operating costs, primarily accrue in Canadian dollars. The
Companys cash flow and results of operations will therefore be affected by
fluctuations in the US/CAN dollar exchange rate.

At current 2009 estimates of production of 78,500 ounces of
gold and at an estimated average gold price of US$900 excluding managements
estimates of the Companys operating expenses, a $0.10 change in the CAN dollar
exchange rate would result in an increase or decrease of approximately
CAN$7,100,000 in annual net income and in annual cash flow.

To reduce the effects of fluctuations in US/CAN dollar exchange
rates, the Company may use financial instruments to hedge currency exposures in
the ordinary course of business. The Company has not entered into such
agreements over the last three (3) years.

The Company does not require or place collateral for its
foreign currency and gold hedging derivatives. However, the Company seeks to
minimize its credit risk by dealing with only major international banks and
financial institutions.

Interest Rate Risk Disclosure

At December 31, 2008, the Company had no outstanding long-term
debt. Therefore, the Company does not believe it is exposed to significant
interest rate risk.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

There have been no defaults, dividend arrearages or
delinquencies.

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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS

There have been no material modifications to the rights of
security holders.

ITEM 15. CONTROLS AND PROCEDURES

|a) | Disclosure Controls and Procedures. Based on their
      evaluation of the Companys disclosure controls and procedures as of the
      end of the period covered by this Annual Report, and pursuant to Rule
      13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, Martin
      Rivard, President and Chief Executive Officer and Nicole Veilleux,
      Financial Director, have concluded that the Companys disclosure controls
      and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e)) are
      designed to ensure that information required to be disclosed by the
      Company in the reports that it files under the Securities Exchange Act of
      1934 is recorded, processed, summarized and reported within the time
      periods specified in the SECs rules and forms and are operating in an
      effective manner.                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|b) | Managements Annual Report on Internal Control Over
      Financial Reporting. Management is responsible for establishing and
      maintaining adequate internal control over financial reporting as defined
      in Rule 13a-15(f) or 15d-15(f) under the Exchange Act. The Companys
      internal control system was designed to provide reasonable assurance to
      the Companys management and board of directors regarding the reliability
      of financial reporting and the preparation of published financial
      statements in accordance with generally accepted accounting principles.
      All internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective may
      not prevent or detect misstatements and can provide only reasonable
      assurance with respect to financial statement preparation and
      presentation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Management assessed the effectiveness of our internal
      control over financial reporting as of December 31, 2008. In making this
      assessment, management used the criteria for effective internal control
      over financial reporting set forth by the Committee of Sponsoring
      Organizations of the Treadway Commission ("COSO") in Internal
      Control-Integrated Framework. Based on this assessment, management has
      concluded that, as of December 31, 2008, our internal control over
      financial reporting was effective based on those criteria.                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The effectiveness of the Companys internal control over
      financial reporting as of December 31, 2008 has been audited by Raymond
      Chabot Grant Thorton LLP, an independent registered public accounting
      firm, as stated in their report which appears herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company will continue to periodically review its
      disclosure controls and procedures and internal controls over financial
      reporting and may make modifications from time to time as considered
      necessary or disireable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|c) | Attestation Report of the Registered Public Accounting
      Firm.The attestation report of Raymond Chabot Grant Thornton LLP, an
      independent registered public accounting firm, regarding the Companys
      internal control over financial reporting is included under Item
  17.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|d) | Changes in Internal Control Over Financial
      Reporting. Management regularly reviews its system of internal control
      over financial reporting and make changes to the Companys processes and
      systems to improve controls and increase efficiency, while ensuring that
      the Company maintains an effective internal control environment. Changes
      may include such activities as implementing new, more
efficient systems, consolidating activities, and migrating processes.                                                                                                                                                                                                                                                                                                                                                                                                                                       

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There were no changes in the Companys
internal control over financial reporting that occurred during the period
covered by this Annuel Report on Form 20-F that have materially affected, or are
reasonable likely to materially affect, the Companys internal control over
financial reporting.

ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT

The Companys board of directors has determined that Denis
Arcand serves as audit committee financial expert on its audit committee and
that he is also an independent director as defined under the listing standards
of the NYSE Amex.

Mr. Arcand received his Bachelor of Commerce from the HÉC in
Montreal. He is also a Fellow of the Investment Dealers Association of Canada,
having begun his career as a sales representative with Nesbitt Thomson in 1966.
From 1972 to 1988, he held various positions with the investment dealer Bell
Gouinlock Ltd., most notably heading up its Montreal office as Director and
Vice-President. He was also responsible for its corporate finance department.
Under his leadership many industrial and particularly mining company financings
were completed, resulting in Bell Gouinlock, which merged with Pemberton
Securities Ltd, becoming the leader in mining financing in Quebec.

ITEM 16.B. CODE OF ETHICS

The Company has adopted a Code of Ethics that applies to the
Companys principal executive officer, principal financial officer and principal
accounting officer or controller. The Company will provide to any person,
without charge a copy of the Companys Code of Ethics, upon a request in writing
made to Richmont Mines, Inc., 161, Avenue Principale, Rouyn-Noranda, Quebec, JPX
4P6, Canada, Attention: Corporate Secretary.

ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Committees Pre-Approval Policies and Procedures

Beginning in 2004, the Companys audit committee provided to
the Companys principal independent accounting firm a list of preapproved
services. If officers of Richmont Mines request such firm to perform other
services on behalf of the Company, the independent accounting firm must have the
approval of the audit committee president before accepting the mandate, which
request must also be formally approved by the audit committee at the next audit
committee meeting. The list of services provided to the Companys principal
independent accounting firm is subject to revision every year by the audit
committee and can be modified by the audit committee at any time by sending
written notice to the Companys principal independent accounting firm.

The following tables show the total fees billed for each of the
two past fiscal years by the Companys principal independent accounting firm.

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Audit Fees

The aggregate fees billed by Companys principal independent
accounting firm for the audit of the Companys annual financial statements or
services that are normally provided by such firm in connection with statutory
and regulatory filings for each of the last two fiscal years are the following:

2008
    2007Audit services*
    $168,500
    $219,900


* Includes the audit of the internal controls and financial
reporting as required by the Sarbanes-Oxley Act of 2002.

Audit Related Fees

The aggregate fees billed for each of the last two fiscal years
for assurance and related services provided by the Companys principal
independent accounting firm that are reasonably related to the performance of
the audit or review of the Companys financial statements and are not reported
in the above table are described in the following table:

Nature of
      services
    2008
    2007Traveling expenses
    -
    $11,314Special work
    $69,650
    $23,400


Taxation Fees

The aggregate fees billed for each of the last two fiscal years
for the professional services provided by the Companys principal independent
accounting firm with regards to tax compliance, tax advice and tax planning are
described in the following table:

Nature of
      services
    2008
    2007Review quarterly
      estimates
    $6,600
    $5,700Planning and tax
      advice
    $9,450
    $15,400


All Other Fees

The aggregate fees billed for each of the last two fiscal years
for the products and services provided by the Companys principal independent
accounting firm, other than the services previously stated, are described in the
following table:

Nature of
      services
    2008
    2007Other
      consultations
    $28,000
    $10,500Other expenses
    $2,982
    $19,051


100% of all Audit Related Fees, Tax Fees and All Other Fees
reported above were approved by the Companys audit committee.

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ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

The Company did not rely on any exemption from the listing
standards for audit committees.

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS

Period
    Total Number of
      Shares Purchased
    Average Price Paid
      per Share
    Total Number of
      Shares Purchased as Part of Publicly Announced
      Plans or Programs
    Maximum Number of
      Shares that May Yet be Purchased Under the
      Plans or ProgramsJanuary 1-31, 2008
    300
    $3.02
    300
    1,199,700February 1-28, 2008
    Nil
    Nil
    Nil
    1,199,700March 1-31, 2008
    10,900
    $3.62
    10,900
    1,188,800April 1-30, 2008
    9,500
    $3.52
    9,500
    1,179,300May 1-31, 2008
    40,300
    $3.28
    40,300
    1,139,000June 1-30, 2008
    19,700
    $2.95
    19,700
    1,119,300July 1-31, 2008
    57,000
    $2.88
    57,000
    1,062,300August 1-31, 2008
    56,800
    $2.64
    56,800
    1,005,500September 1-30, 2008
    48,900
    $2.13
    48,900
    956,600October 1-31, 2008
    8,600
    $1.91
    8,600
    948,000November 1-30, 2008
    33,700
    $1.48
    33,700
    914,300December 1-31, 2008
    10,500
    $1.83
    10,500
    903,800TOTAL
    296,200


Only one Richmont Mines share repurchase program was in effect
in 2008. On December 3, 2007, Richmont Mines publicly announced a Normal Course
Issuer bid commencing December 5, 2007 and expiring December 4, 2008 for up to
1,200,000 shares of its common stock. On December 3, 2008, Richmont Mines
publicly announced a Normal Course Issuer bid commencing December 5, 2008 and
expiring December 4, 2009 for up to 1,188,000 shares of its common stock.

ITEM 16.F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16.G. CORPORATE GOVERNANCE

NYSE Amex Corporate Governance Matters

The Companys common shares are listed on NYSE Amex. Section
110 of the NYSE Amex Company Guide permits the NYSE Amex to consider the laws,
customs and practices of the foreign issuers country of domicile in relaxing
certain NYSE Amex listing criteria, and to grant exemptions from NYSE Amex
listing criteria based on these considerations. A company seeking relief under
these provisions is required to provide written certification from independent
local counsel that the non-complying practice is not prohibited by home country
law. A description of the significant ways in which the Companys governance
practices differ from those followed by domestic companies pursuant to NYSE Amex
standards is as follows:

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- Shareholder Meeting Quorum
Requirement: The NYSE Amex minimum quorum requirement for a shareholder
meeting is one-third of the outstanding common shares. In addition, a
corporation listed on NYSE Amex is required to state its quorum requirement in
its bylaws. The Companys quorum requirement as set forth in its bylaws is two
shareholders with at least 10% of the issued and outstanding common shares
entitled to vote at a meeting of shareholders whether present in person or
represented by proxy.
- Proxy Delivery Requirement:
NYSE Amex requires the solicitation of proxies and delivery of proxy statements
for all shareholder meetings, and requires that these proxies shall be solicited
pursuant to a proxy statement that conforms to SEC proxy rules. The Company is a
foreign private issuer as defined in Rule 3b-4 under the Exchange Act and Rule
405 under the Securities Act and the equity securities of the Company are
accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b),
14(c) and 14(f) of the Exchange Act. The Company solicits proxies in accordance
with applicable rules and regulations in Canada.
- Shareholder Approval Requirement:The Company will follow the Canadian securities regulatory authorities and
Toronto Stock Exchange rules for shareholder approval of new issuances of its
common shares. Following securities and exchange rules, shareholder approval is
required for certain issuances of shares that: (i) materially affect control of
the Company; or (ii) provide consideration to insiders in aggregate of 10% or
greater of the market capitalization of the listed issuer and have not been
negotiated at arms length. Shareholder approval is also required, pursuant to
Toronto Stock Exchange rules, in the case of most private placements: (x) for an
aggregate number of listed securities issuable greater than 25% of the number of
securities of the listed issuer which are outstanding, on a non-diluted basis,
prior to the date of closing of the transaction if the price per security is
less than the market price; or (y) that during any six month period are to
insiders for listed securities or options, rights or other entitlements to
listed securities greater than 10% of the number of securities of the listed
issuer which are outstanding, on a non-diluted basis, prior to the date of the
closing of the first private placement to an insider during the six month
period.

The foregoing are consistent with the
laws, customs and practices in Canada.

In addition, the Company may from time-to-time seek relief from
NYSE Amex corporate governance requirements on specific transactions under
Section 110 of the NYSE Amex Company Guide by providing written certification
from independent local counsel that the non-complying practice is not prohibited
by the Companys home country law.

93

---

PART III

ITEM 17. CONSOLIDATED FINANCIAL STATEMENTS

The audited consolidated financial statements referred to below
are included herein and found immediately following the text of this Annual
Report. The reports of the Independent Registered Public Accounting Firm on such
consolidated financial statements are included herein immediately preceding such
audited consolidated financial statements.

Audited Consolidated Financial Statements

Report of the Independent Registered Public Accounting Firm on
Internal Control dated February 9, 2009.

Report of the Independent Registered Public Accounting Firm
dated February 9, 2009 on the Consolidated Balance Sheets as at December 31,
2008 and 2007, Consolidated Statements of Earnings, Comprehensive Income,
Deficit, Accumulated other Comprehensive Income and Cash Flows for the two-year
period then ended.

Comments by Auditors for American Readers on Canada  US
Reporting differences dated February 9, 2009.

Report of the Independent Registered Public Accounting Firm
dated February 2, 2007 on the Consolidated Statements of Earnings, Comprehensive
Income, Accumulated other Comprehensive Income, Deficit and Cash Flows for the
year ended December 31, 2006.

Consolidated Balance Sheets at December 31, 2008 and December
31, 2007.

Consolidated Statements of Earnings for the Years ended
December 31, 2008, December 31, 2007 and December 31, 2006.

Consolidated Statements of Comprehensive Income and Deficit for
the Years ended December 31, 2008, December 31, 2007 and December 31, 2006.

Consolidated Statements of Cash Flow for the Years ended
December 31, 2008, December 31, 2007 and December 31, 2006.

Notes to Consolidated Financial Statements.

ITEM 18. CONSOLIDATED FINANCIAL STATEMENTS

The Company has elected to provide consolidated financial
statements pursuant to Item 17 of Form 20-F.

94

---

ITEM 19. EXHIBITS

|Exhibit |                                                                                                                                                                                                         
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Exhibit                                                                                                                                                                                                 
|1.1     | Articles of Incorporation of
      the Company, including all amendments thereto(1)                                                                                                                     
|1.2     | Bylaws of the Company, including all amendments
      thereto(1)                                                                                                                                        
|2.1     | Shareholder Rights
      Plan(2)                                                                                                                                                                        
|5.1     | Option/Joint Venture Agreement for the Island
      Gold project between Patricia Mining Corp. and Richmont Mines Inc. dated
      August 28, 2003(3)                                                   
|5.3     | Beaufor Mine Purchase Agreement
      dated April 5, 2001 between Richmont Mines Inc. and Aurizon Mines Ltd., as
      amended by a letter agreement dated August 15, 2002 between the
      parties.(2)
|5.4     | Asset Purchase Agreement dated June 29, 2007
      between the Company and Osisko Exploration Ltd.(4)                                                                                                   
|5.5     | Letter Agreement dated December
      21, 2007 between the Company and LKA International, Inc.(4)                                                                                                       
|5.6     | Letter Agreement dated February 5, 2009 between
      the Company and Mountain Lake Resources Inc.                                                                                                     
|5.7     | Addendum dated March 9, 2009 to
      the Letter Agreement dated February 5, 2009 between the Company and
      Mountain Lake Resources Inc.                                                           
|8.1     | List of Subsidiaries                                                                                                                                                                                   
|12.1    | Rule 13a-14(a)/15d-14(a)
      Certifications                                                                                                                                                          
|13.1    | Certification of periodic financial report
      pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, 18
      U.S.C. Section 1350                                                                
|15.1    | Audit Committee Charter(5)                                                                                                                                                                             

 Filed herewith.

|(1) | Incorporated by reference to Exhibit No. 1 to the
      Companys Registration Statement on Form 20-F dated September 25, 1996
      filed with the Securities and Exchange Commission.                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to the identically numbered
      exhibit to the Companys Annual Report on Form 20-F for the fiscal year
      ended December 31, 2006 filed with the Securities and Exchange Commission
      on May 10, 2007.            
|(3) | Incorporated by reference to the identically numbered
      exhibit to the Companys Annual Report on Form 20-F for the fiscal year
      ended December 31, 2003 filed with the Securities and Exchange Commission
      on June 29, 2004.           
|(4) | Incorporated by reference to the identically numbered
      exhibit to the Companys Annual Report on Amended Form 20-F for the fiscal
      year ended December 31, 2007 filed with the Securities and Exchange
      Commission on October 17, 2008.
|(5) | The Audit Committee Charter have been modified on
      February 24, 2009 by the Board of Director.                                                                                                                                                   

95

---

SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

RICHMONT MINES INC.Registrant

|Dated: May 6, 2009 | By: (/s/) Nicole Veilleux
|------------------ | -------------------------
|                   | Nicole Veilleux          
|                   | Financial Director       







---







Consolidated Financial Statements of

RICHMONT MINES INC.

Years ended December 31, 2008, 2007 and 2006









---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING




To the Shareholders of Richmont Mines Inc.

We have audited Richmont Mines Inc.s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Richmont Mines Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on Richmont Mines Inc.s internal control over financial reporting based on our audit.

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

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Richmont Mines Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Richmont Mines Inc. as of December 31,
2008 and 2007 and the consolidated statements of earnings, comprehensive income and deficit and cash flows for the years ended December 31, 2008 and 2007 and our report dated February 9, 2009 expressed an unqualified opinion thereon.

Chartered Accountants

Montreal, Canada 
February 9, 2009_____________________________________________
1Chartered accountant auditor permit no. 22865



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Shareholders of Richmont Mines Inc.

We have audited the consolidated balance sheets of Richmont Mines Inc. as at December 31, 2008 and 2007 and the consolidated statements of earnings, comprehensive income, deficit, accumulated other comprehensive income and cash flows for the years
ended December 31, 2008 and 2007. 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 audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.

The consolidated financial statements as at December 31, 2006 and for the year then ended were audited by other auditors who expressed an opinion without reservation on those consolidated financial statements in their report dated February 2, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Richmont Mines Inc.s internal control over financial reporting as at December 31, 2008, based on
criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 9, 2009 expressed an unqualified opinion thereon.

Chartered Accountants

Montreal, Canada 
February 9, 2009_____________________________________________
1Chartered accountant auditor permit no. 22865



COMMENTS BY AUDITORS FOR AMERICAN READERS ON CANADA  US REPORTING DIFFERENCES


In the United States of America, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of
the Companys financial statements, such as the changes described in Note 2(b) to the consolidated financial statements. Our report to the shareholders dated February 9, 2009 is expressed in accordance with Canadian reporting standards, which
do not require a reference to such change in accounting principles in the auditors report when the change is properly accounted for and adequately disclosed in the consolidated financial statements.

Chartered Accountants

Montreal, Canada 
February 9, 2009_____________________________________________
1Chartered accountant auditor permit no. 22865





---






We have audited the consolidated statements of earnings,
comprehensive income, accumulated other comprehensive income, deficit and cash
flow of Richmont Mines Inc. and its subsidiaries for the year ended December 31,
2006. 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 audit.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements
present fairly, in all material respects, the results of operations and the cash
flow of the Company and its subsidiaries for the year ended December 31, 2006 in
conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Information relating to the nature and effect of
such differences is presented in Note 19 to the financial statements.



Chartered Accountants 
Montreal, Canada 
February 2, 2007*CA Auditor permit no 18146



---

RICHMONT MINES INC.



|Consolidated
    Financial Statements                           |  
|--------------------------------------------------------------- | -
|                                                                |  
|                                                                |  
|Consolidated Statements of Earnings                             | 1
|                                                                |  
|Consolidated
    Statements of Comprehensive Income and Deficit | 2
|                                                                |  
|Consolidated Balance Sheets                                     | 3
|                                                                |  
|Consolidated
    Statements of Cash Flow                        | 4
|                                                                |  
|Notes to Consolidated Financial Statements                      | 5



---

CONSOLIDATED STATEMENTS OF EARNINGS


Years ended December 31 (in thousands of Canadian dollars)



|                                                                                         |  | 2008   |  |  | 2007   |   |  | 2006   |  
|---------------------------------------------------------------------------------------- |  | ------ |  |  | ------ | - |  | ------ | -
|                                                                                         |  | $      |  |  | $      |   |  | $      |  
|                                                                                         |  |        |  |  |        |   |  |        |  
|REVENUE                                                                                  |  |        |  |  |        |   |  |        |  
|Precious metals                                                                          |  | 66,237 |  |  | 34,691 |   |  | 30,539 |  
|Other (note 4)                                                                           |  | 4,354  |  |  | 3,380  |   |  | 2,350  |  
|                                                                                         |  | 70,591 |  |  | 38,071 |   |  | 32,889 |  
|                                                                                         |  |        |  |  |        |   |  |        |  
|EXPENSES                                                                                 |  |        |  |  |        |   |  |        |  
|Operating costs                                                                          |  | 42,998 |  |  | 24,199 |   |  | 27,169 |  
|Royalties                                                                                |  | 1,591  |  |  | 565    |   |  | 189    |  
|Custom milling                                                                           |  | 1,785  |  |  | 1,023  |   |  | 591    |  
|Administration                                                                           |  | 3,665  |  |  | 3,315  |   |  | 2,957  |  
|Exploration and project
      evaluation (note 5)                                        |  | 10,547 |  |  | 3,288  |   |  | 2,080  |  
|Accretion expense - asset retirement
      obligations (note 6)                          |  | 182    |  |  | 178    |   |  | 214    |  
|Depreciation and depletion                                                               |  | 5,687  |  |  | 5,628  |   |  | 3,146  |  
|Loss (gain) on disposal of mining assets
      (note 7)                                  |  | 29     |  |  | (8,066 | ) |  | (3,235 | )
|                                                                                         |  | 66,484 |  |  | 30,130 |   |  | 33,111 |  
|EARNINGS (LOSS) BEFORE OTHER ITEMS                                                       |  | 4,107  |  |  | 7,941  |   |  | (222   | )
|MINING AND INCOME TAXES (note 8)                                                         |  | 437    |  |  | 1,306  |   |  | (2,686 | )
|                                                                                         |  | 3,670  |  |  | 6,635  |   |  | 2,464  |  
|MINORITY INTEREST                                                                        |  | 2,035  |  |  | (36    | ) |  | (730   | )
|NET EARNINGS                                                                             |  | 1,635  |  |  | 6,671  |   |  | 3,194  |  
|                                                                                         |  |        |  |  |        |   |  |        |  
|NET EARNINGS PER SHARE                                                                   |  |        |  |  |        |   |  |        |  
|basic and diluted                                                                        |  | 0.07   |  |  | 0.28   |   |  | 0.14   |  
|BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
      OF COMMON SHARES OUTSTANDING (thousands) |  | 24,047 |  |  | 24,159 |   |  | 22,904 |  

The accompanying notes are an integral part of the consolidated
financial statements.

1

---

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND DEFICIT


Years ended December 31 (in thousands of Canadian dollars)



|                                                                                                                                                                       |  | 2008   |   |  | 2007    |   |  | 2006    |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | - |  | ------- | - |  | ------- | -
|                                                                                                                                                                       |  | $      |   |  | $       |   |  | $       |  
|COMPREHENSIVE INCOME                                                                                                                                                   |  |        |   |  |         |   |  |         |  
|Net earnings                                                                                                                                                           |  | 1,635  |   |  | 6,671   |   |  | 3,194   |  
|Comprehensive income, net of income taxes:                                                                                                                             |  |        |   |  |         |   |  |         |  
|Change in unrealized gain (loss) on available-for-sale
      investments                                                                                               |  | (599   | ) |  | 473     |   |  | -       |  
|Realized loss (gains) on sale of
      available-for-sale investments included in earnings                                                                             |  | 11     |   |  | (444    | ) |  | -       |  
|                                                                                                                                                                       |  | (588   | ) |  | 29      |   |  | -       |  
|Comprehensive income                                                                                                                                                   |  | 1,047  |   |  | 6,700   |   |  | 3,194   |  
|                                                                                                                                                                       |  |        |   |  |         |   |  |         |  
|DEFICIT                                                                                                                                                                |  |        |   |  |         |   |  |         |  
|BALANCE, BEGINNING OF YEAR                                                                                                                                             |  | (4,647 | ) |  | (11,241 | ) |  | (14,410 | )
|Net earnings                                                                                                                                                           |  | 1,635  |   |  | 6,671   |   |  | 3,194   |  
|Redemption of shares (note 11)                                                                                                                                         |  | (84    | ) |  | (77     | ) |  | (25     | )
|BALANCE, END OF YEAR                                                                                                                                                   |  | (3,096 | ) |  | (4,647  | ) |  | (11,241 | )
|                                                                                                                                                                       |  |        |   |  |         |   |  |         |  
|ACCUMULATED OTHER COMPREHENSIVE
      INCOME                                                                                                                           |  |        |   |  |         |   |  |         |  
|BALANCE, BEGINNING OF YEAR                                                                                                                                             |  | 352    |   |  | -       |   |  |         |  
|Adjustment due to the adoption of CICA
      Handbook Section 3855 for the cumulative unrealized gain on available-for-
      sale investments as at January 1st, 2007 |  | -      |   |  | 323     |   |  |         |  
|Changes in other comprehensive income for the year                                                                                                                     |  | (588   | ) |  | 29      |   |  |         |  
|BALANCE, END OF YEAR                                                                                                                                                   |  | (236   | ) |  | 352     |   |  |         |  

The accompanying notes are an integral part of the consolidated
financial statements.

2

---

CONSOLIDATED BALANCE SHEETS


Years ended December 31 (in thousands of Canadian dollars)



|                                              |  | 2008   |   |  | 2007   |  
|--------------------------------------------- |  | ------ | - |  | ------ | -
|                                              |  | $      |   |  | $      |  
|ASSETS                                        |  |        |   |  |        |  
|CURRENT ASSETS                                |  |        |   |  |        |  
|Cash and cash equivalents                     |  | 26,021 |   |  | 27,291 |  
|Restricted cash                               |  | 116    |   |  | -      |  
|Short-term investments                        |  | 121    |   |  | 1,826  |  
|Accounts receivable                           |  | 986    |   |  | 2,859  |  
|Mining and income taxes
      receivable      |  | 1,586  |   |  | 1,677  |  
|Inventories (note 9)                          |  | 6,012  |   |  | 5,438  |  
|                                              |  | 34,842 |   |  | 39,091 |  
|ADVANCE TO A MINORITY PARTNER (note 3)        |  | -      |   |  | 1,875  |  
|PROPERTY, PLANT AND EQUIPMENT (note
      10) |  | 48,039 |   |  | 45,010 |  
|                                              |  | 82,881 |   |  | 85,976 |  
|LIABILITIES                                   |  |        |   |  |        |  
|CURRENT LIABILITIES                           |  |        |   |  |        |  
|Accounts payable and accrued
      charges    |  | 6,912  |   |  | 5,005  |  
|Mining and income taxes payable               |  | 1,177  |   |  | 116    |  
|                                              |  | 8,089  |   |  | 5,121  |  
|ASSET RETIREMENT OBLIGATIONS (note 6)         |  | 4,664  |   |  | 3,358  |  
|MINORITY INTEREST (note 3)                    |  | 2,024  |   |  | 14,238 |  
|FUTURE MINING AND INCOME TAXES (note 8)       |  | 1,086  |   |  | 1,446  |  
|                                              |  | 15,863 |   |  | 24,163 |  
|SHAREHOLDERS EQUITY                          |  |        |   |  |        |  
|Capital stock (note 11)                       |  | 64,672 |   |  | 61,016 |  
|Contributed surplus (note 12)                 |  | 5,678  |   |  | 5,092  |  
|Deficit                                       |  | (3,096 | ) |  | (4,647 | )
|Accumulated other comprehensive income        |  | (236   | ) |  | 352    |  
|                                              |  | 67,018 |   |  | 61,813 |  
|                                              |  | 82,881 |   |  | 85,976 |  

Commitments and subsequent events (note 15)

The accompanying notes are an integral part of the consolidated
financial statements.

On behalf of the Board:

|             |         
|------------ | --------
|Denis Arcand |         
|Director     | Director

3

---

CONSOLIDATED STATEMENTS OF CASH FLOW


Years ended December 31 (in thousands of Canadian dollars)



|                                                             |  | 2008    |   |  | 2007   |   |  | 2006    |  
|------------------------------------------------------------ |  | ------- | - |  | ------ | - |  | ------- | -
|                                                             |  | $       |   |  | $      |   |  | $       |  
|                                                             |  |         |   |  |        |   |  |         |  
|CASH FLOW FROM OPERATING ACTIVITIES                          |  |         |   |  |        |   |  |         |  
|Net earnings                                                 |  | 1,635   |   |  | 6,671  |   |  | 3,194   |  
|Adjustments for:                                             |  |         |   |  |        |   |  |         |  
|Depreciation and depletion                                   |  | 5,687   |   |  | 5,628  |   |  | 3,146   |  
|Stock-based
      compensation                               |  | 526     |   |  | 575    |   |  | 393     |  
|Accretion expense - asset
      retirement obligations       |  | 182     |   |  | 178    |   |  | 214     |  
|Loss (gain) on
      disposal of mining assets               |  | 29      |   |  | (8,042 | ) |  | (3,270  | )
|Loss (gain) on disposal of
      short-term investments      |  | 11      |   |  | (444   | ) |  | (425    | )
|Minority
      interest                                      |  | 2,035   |   |  | (36    | ) |  | (730    | )
|Future mining and income taxes                               |  | (359    | ) |  | (334   | ) |  | (1,801  | )
|                                                             |  | 9,746   |   |  | 4,196  |   |  | 721     |  
|Net change in non-cash
      working capital items (note 13) |  | 2,371   |   |  | 1,803  |   |  | 927     |  
|                                                             |  | 12,117  |   |  | 5,999  |   |  | 1,648   |  
|                                                             |  |         |   |  |        |   |  |         |  
|CASH FLOW FROM (USED IN) INVESTING
      ACTIVITIES          |  |         |   |  |        |   |  |         |  
|Acquisition of Patricia Mining
      Corp. (note 3)          |  | (6,984  | ) |  | -      |   |  | -       |  
|Acquisition of short-term
      investments                  |  | (23     | ) |  | (642   | ) |  | (565    | )
|Disposal of short-term
      investments                     |  | 712     |   |  | 6,454  |   |  | 1,346   |  
|Disposal of mining assets                                    |  | 91      |   |  | 3,435  |   |  | 2,685   |  
|Property, plant and equipment
      - Island Gold Mine       |  | (3,079  | ) |  | (4,495 | ) |  | (21,934 | )
|Property, plant and equipment
      - Beaufor Mine           |  | (127    | ) |  | (1,060 | ) |  | (1,706  | )
|Property, plant and equipment
      - East Amphi Mine        |  | -       |   |  | (34    | ) |  | (822    | )
|Other property, plant and
      equipment                    |  | (1,987  | ) |  | (582   | ) |  | (597    | )
|Cash received from an advance
      to a minority partner    |  | 750     |   |  | 1,125  |   |  | 1,300   |  
|Redemption of shares held by
      minority interests        |  | -       |   |  | -      |   |  | (13     | )
|                                                             |  | (10,647 | ) |  | 4,201  |   |  | (20,306 | )
|                                                             |  |         |   |  |        |   |  |         |  
|CASH FLOW FROM (USED IN) FINANCING
      ACTIVITIES          |  |         |   |  |        |   |  |         |  
|Issue of common shares                                       |  | 25      |   |  | 183    |   |  | 15,524  |  
|Redemption of common shares                                  |  | (768    | ) |  | (658   | ) |  | (171    | )
|Contribution from
      (distribution to) a minority partner |  | (47     | ) |  | 1,440  |   |  | 6,165   |  
|Repayment of the long-term
      debt                        |  | (1,950  | ) |  | -      |   |  | -       |  
|Common share issue costs                                     |  | -       |   |  | -      |   |  | (1,413  | )
|                                                             |  |         |   |  |        |   |  |         |  
|                                                             |  | (2,740  | ) |  | 965    |   |  | 20,105  |  
|Net increase (decrease) in cash and
      cash equivalents   |  | (1,270  | ) |  | 11,165 |   |  | 1,447   |  
|Cash and cash equivalents, beginning of
      year           |  | 27,291  |   |  | 16,126 |   |  | 14,679  |  
|Cash and cash equivalents, end of year
      (note 17c))     |  | 26,021  |   |  | 27,291 |   |  | 16,126  |  

The accompanying notes are an integral part of the consolidated
financial statements.

4

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

Richmont Mines Inc. (the Company), incorporated under Part 1A
of the Quebec Companies Act, is engaged in mining, exploration and development
of mining properties, principally gold.

|1. | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The consolidated financial statements are prepared in
      accordance with Canadian generally accepted accounting principles. As
      described in note 19, these principles differ in certain material respects
      from the principles that the Company would have followed had its
      consolidated financial statements been prepared in accordance with
      generally accepted accounting principles in the United States. The
      significant accounting policies followed by the Company are as follows:                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|a) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | These consolidated financial statements reflect the
      accounts of the Company and of its subsidiaries: Camflo Mill Inc. (100%),
      Louvem Mines Inc. (approximately 70%) and Patricia Mining Corp. (100%).                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | All inter-company transactions have been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Companys 55% interest in the Island Gold Mine is
      consolidated until December 15, 2008 (note 3) using the principles
      outlined in AcG-15, on the consolidation of variable interest entities due
      to an agreement for the financing of the interest held by the other
      participant of the development costs of the project.                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|b) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Precious metals revenue, based on spot metal prices, is
      recorded at delivery when rights and obligations related to ownership are
      transferred to the purchaser and reasonable assurance regarding
      collectibility of the consideration exists. Milling revenue is recorded
      when the service of ore processing is rendered and reasonable assurance
      regarding collectibility of the consideration exists.                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|c) | Financial assets and liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | All financial assets and liabilities are initially
      estimated and recorded at fair value. Subsequently, all financial
      instruments are classified in one of the following five categories:
      held-for-trading financial assets, held-to-maturity investments, loans and
      receivables, available-for-sale financial assets or other financial
      liabilities. Subsequently, all financial instruments are recorded on the
      consolidated balance sheet and are measured at fair value with the
      exception of loans and receivables, held-to-maturity investments and other
      financial liabilities, which are measured at amortized cost.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Available-for-sale financial assets are measured at fair
      value with revaluation gains and losses included in other comprehensive
      income until the asset is removed from the balance sheet either by sale or
      when a permanent decline in value is recognized.                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Cash and cash equivalents and restricted cash are
      classified as assets held-for-trading. Short-term investments are
      classified as available-for-sale financial assets, accounts receivable and
      the advance to a minority partner are classified as loans and receivables,
      and accounts payable and accrued charges are classified as other financial
      liabilities.                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|d) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Cash and cash equivalents comprise cash and short-term
      investments with original maturity dates of less than 90 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|e) | Short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Short-term investments include investments in shares of
      publicly-traded companies and are recorded at market value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|f) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Supply inventories, ore and precious metals inventories
      are valued at the lower of cost and net realizable value. The cost of
      inventories is determined using the weighted average cost formula. The
      cost of inventories recognized as an expense is included in consolidated
      statement of earnings operating cost expenses.                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|g) | Exploration properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The acquisition costs of exploration properties are
      capitalized as property, plant and equipment. Mining exploration
      expenditures are expensed as incurred until the date when the property is
      identified as having a development potential.                                                                                                                                                                                                                                                                                                                                                                                                             

5

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|1. | Significant accounting policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|h) | Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Property, plant and equipment are recorded at cost, net of related government assistance. Expenditures incurred on properties identified as having development potential are capitalized as property, plant and equipment. Costs
include interest on funds borrowed during a construction period and future costs of asset retirement. Upon commencement of commercial production, construction costs are transferred to the various categories of property, plant and equipment.
Property, plant and equipment at mine sites are depreciated in accordance with the number of ounces sold on cost basis less residual values. The depreciation rate is calculated according to the units-of-production method, using proven and probable
reserves. The estimated period of depreciation is from 3 to 5 years according to the reserves of each production site. Depreciation of corporate assets is calculated using the straight-line method based on their anticipated useful lives which vary
from 2 to 10 years.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company periodically reviews the carrying amount of its property, plant and equipment. When the net carrying value of an asset exceeds the sum of the undiscounted estimated future cash flows expected to result from its use and
eventual disposal, a write-down is recorded to reflect fair value and an impairment loss is recorded in the results of operations. The fair value is based on the present value of the estimated future cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Net estimated future cash flows, on an undiscounted basis from each mine and exploration properties are calculated based on anticipated future metal production (proven and probable reserves), estimated future realized metal
prices, operating, capital and site restoration expenses and estimated future foreign exchange rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|i) | Future mining and income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company accounts for mining and income taxes using the asset and liability method. Under this method, future tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted rates expected to be applied in the years in which these temporary differences are expected to be
recovered or settled. The impact on future tax assets and liabilities of a change in tax rates is recognized in the statement of earnings in the year in which the revised tax rate comes into effect. The Company records a valuation allowance against
future tax assets if according to the available information, it is more likely than not that some or all of future tax assets will not be realized.                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company renounces to tax deductions relating to resource expenditures that are financed by the issuance of flow-through shares to the benefit of its shareholders, in accordance with current tax legislation. Future income taxes
related to the temporary differences resulting from this renouncement are recorded, at the time of the renunciation with a corresponding reduction of capital stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|j) | Environmental costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company is subject to environmental laws and regulations enacted by federal and provincial authorities. Environmental expenditures that will benefit the Company in future years are recorded at cost and capitalized as part of
property, plant and equipment. Depreciation and depletion are charged to earnings over the estimated future benefit period of the assets. Environmental expenditures, that are not expected to provide a benefit to the Company in future periods, are
accrued and expensed to earnings, on a site-by-site basis, when a requirement to remedy an environmental exposure is probable and a cost can be reasonably estimated.                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|k) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Total estimated cash flow required to settle obligations arising from environmentally acceptable closure plans are discounted using a credit-adjusted risk-free interest rate and are recorded as a liability with a corresponding
increase to property, plant and equipment and, thereafter, depreciated in accordance with the units-of-production method using proven and probable reserves. The asset retirement obligations are adjusted for accumulated accretion in accordance with
the expected timing of payment of the cash flow required to settle these obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                     

6

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|1. | Significant accounting policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|l) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Transactions in the statement of earnings are translated
      at the rate of exchange prevailing at the date of the transaction.
      Monetary assets and liabilities resulting from these transactions are
      translated at the rate of exchange in effect at the balance sheet date.
      Exchange gains or losses are included in earnings of the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|m) | Exploration tax credits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Exploration tax credits are recorded as a reduction of
      exploration expenses or as a reduction of property, plant and equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|n) | Net earnings (loss) per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Basic net earnings (loss) per share are the result of net
      earnings (loss) divided by the weighted average number of shares
      outstanding during the year. Diluted earnings per share are determined by
      taking into account the dilutive effect of arrangements to issue common
      shares as if they were exercised at the beginning of the year or at the
      grant date when the grant date occurs after the beginning of the year. The
      treasury-stock method is used to determine the dilutive effect of stock
      options. This method assumes that the proceeds from the exercise of stock
      options are used to redeem common shares at the average trade price during
      the year.                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|o) | Guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | A guarantee is a contract or an indemnification agreement
      that contingently requires the Company to make payments (either in cash,
      financial instruments, other assets, the issuance of shares or providing
      services) to the other party, following, i) changes to an interest rate, a
      foreign exchange rate, a stock price, the price of a commodity, an index,
      a fair value or another element that is related to an asset, a liability
      or an equity security of the other party, ii) a third party failure to
      perform under an obligation agreement or iii) the default by a third party
      to reimburse its debt when it becomes due. In managements opinion, the
      Company does not have significant guarantees, other than those disclosed
      in note 6 c).                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|p) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company uses the fair value method based on the
      Black-Scholes pricing model to record the compensation cost related to the
      issue of stock options to its employees, its directors and its officers
      over the vesting period with a corresponding credit to contributed
      surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|q) | Pension plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company maintains a defined contribution plan
      covering all of its employees. The plan is funded by Company contributions
      based on a percentage of employee salaries. The Company does not offer any
      other post-retirement benefits to its employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|r) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The preparation of financial statements in accordance
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities, disclosure of contingent assets and liabilities and the
      reported amounts of related revenue and expenses. Significant areas
      requiring the use of management estimates relate to the useful life of
      assets for amortization and depletion purposes and for the evaluation of
      their residual value and net recoverable amount, the calculation of the
      asset retirement obligations, the calculation of stock-based compensation
      and mining and income taxes. Accordingly, actual results could differ from
      these estimates.                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | Accounting changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|a) | 2008 Accounting changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On January 1, 2008, in accordance with the applicable
      transitional dispositions, the Company adopted the Canadian Institute of
      Chartered Accountants (CICA) Handbook Sections 3031, Inventories,
      which replaces Section 3030 carrying the same title and harmonizes the
      Canadian standards related to inventories with International Financial
      Reporting Standards (IFRS). This Section provides changes to the
      measurement and more extensive guidance on the determination of cost,
      including allocation of overhead; it reduces the number of methods
      available to determine cost; it requires impairment testing; and it
      expands the disclosure requirements to increase transparency. The adoption
      of this standard did not have a significant impact neither on the
      consolidated financial statements nor on comparative data.

7

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|2. | Accounting changes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|a) | 2008 Accounting changes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Capital disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On January 1, 2008, in accordance with the applicable transitional dispositions, the Company adopted Section 1535 of the CICA Handbook, Capital disclosures. This section establishes standards for disclosing information
about a Companys capital and how it is managed; i) qualitative information about the Companys objectives, policies and processes for managing capital, ii) quantitative data about what the Company regards as capital, iii) the fact that
the Company has complied with any externally capital requirements, and iv) if it has not complied, the consequences of such non-compliance. As a result of the adoption of this standard, note 16 has been added to consolidated financial statements.
The adoption of this standard did not have a significant impact neither on the consolidated financial statements nor on comparative data.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Financial instruments  disclosures and presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On January 1, 2008, in accordance with the applicable transitional dispositions, the Company adopted two new CICA Handbook sections: Section 3862, Financial instruments  disclosures and Section 3863,
Financial instruments  presentation. Together, these two sections replace Handbook Section 3861, Financial instruments  disclosures and presentation. These Sections require additional disclosure, particularly
regarding the documentation of risks to which the Company is exposed and how it manages those risks. The results of the application of these new standards are included in note 17 and their application did not have a significant impact on the
Companys consolidated financial statements.                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|b) | 2007 Accounting changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On January 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Sections 1530, Comprehensive Income, 3251, Equity, 3855, Financial Instruments
 Recognition and Measurement and 3861, Financial Instruments  Disclosure and Presentation. These new Handbook Sections provide comprehensive requirements for the recognition, the measurement and the disclosure of
financial instruments. Handbook Section 1530 establishes standards for reporting comprehensive income.                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Comprehensive income is defined as the change in the Companys net assets that results from transactions from sources other than the Companys shareholders and includes items that would not normally be included in net
earnings. Other comprehensive income refers to items recognized in comprehensive income but that are excluded from net earnings calculated in accordance with generally accepted accounting principles.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The adoption of sections 1530 and 3855 as at January 1st, 2007 had the impact of adjusting the opening balance of accumulated other comprehensive income by an amount of $323 to reflect the cumulative unrealized
gains on available-for-sale investments at that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On January 1, 2007, the Company adopted the recommendations of Section 1506 of the CICA Handbook, Accounting changes. The revised section establishes criteria for changing accounting policies, together with the accounting
treatment and disclosure of changes in accounting policies, changes in accounting estimates and correction of errors. The adoption of these recommendations did not have any impact on the financial statements of the Company.                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|c) | Future accounting changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | International Financial Reporting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In February 2008, the Accounting Standards Board (AcSB) announced that accounting standards in Canada are to converge with IFRS and that public companies will be required to present their financial statements, with
comparative data, under these standards for fiscal years beginning on or after January 1st, 2011. IFRS will require the disclosure of additional information in the consolidated financial statements and, despite the similar conceptual framework of
Canadian GAAP and IFRS, the Company will have to take into account the differences between accounting principles. The Company is currently evaluating the impact of these requirements on its consolidated financial statements.                                                                                                                                                          

8

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|3. | Acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On December 16, 2008, the Company acquired 42,929,581
      common shares of Patricia Mining Corp.s, a development stage Company
      engaged in mining and exploration (Patricia Mining), (representing
      approximately 98.2% of Patricia Minings outstanding common shares), in
      exchange for CAN$0.15 in cash and 0.055 common share of Richmont for each
      common share of Patricia Mining. Patricia Minings principal activity is
      its 45% participation in the Island Gold Mine, the other 55% being held by
      the Company. Following this transaction, Richmont now wholly-owns Patricia
      Mining and 100% interest in Island Gold Mine. The purchase price has been
      determinated to be $11,372, including transaction costs, in exchange for a
      net cash consideration of $6,997 and 2,347,003 common shares valued at
      $4,375 or $1.86 per share. The value of the common shares issued by the
      Company has been determinated based on the average closure share price two
      days before and after the announced date of the acquisition agreement, on
      October 27, 2008. Richmont recorded this acquisition using the purchase
      method. Before the acquisition, the Company consolidated Island Gold
      Mines assets, liabilities, revenues and expenses in accordance with
      AcG-15 (note 1a)), Patricia Minings share being considered as minority
      interest. Following this transaction, on December 16, 2008, the advance to
      a minority partner which amounted to $1,742 and the $12,336 minority
      interest have been cancelled. The allocation of the purchase price based
      on the fair values of the assets acquired less the liabilities assumed by
      the Company is as follows:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                         |  |        |  
| | ------------------------------------------------------- |  | ------ | -
| |                                                         |  | $      |  
| |                                                         |  |        |  
| | Assets acquired                                         |  |        |  
| | Cash and cash equivalents                               |  | 13     |  
| | Restricted cash                                         |  | 116    |  
| | Accounts receivable                                     |  | 16     |  
| | Inventories                                             |  | 448    |  
| | Future tax asset                                        |  | 4,504  |  
| | Future tax asset on mining
      taxes                  |  | 1,236  |  
| | Valuation of future tax asset                           |  | (5,740 | )
| | Property, plant and equipment                           |  | 3,447  |  
| |                                                         |  | 4,040  |  
| |                                                         |  |        |  
| | Liabilities assumed                                     |  |        |  
| | Accounts payable                                        |  | 935    |  
| | Asset retirement obligations                            |  | (40    | )
| | Long-term debt                                          |  | 1,950  |  
| |                                                         |  | 2,845  |  
| | Net value of assets acquired                            |  | 1,195  |  
| |                                                         |  |        |  
| |                                                         |  |        |  
| | Cancelled minority interest                             |  | 12,336 |  
| | Short-term investment already held in
      the Company |  | (417   | )
| | Cancelled due to Richmont Mines                         |  | (1,742 | )
| |                                                         |  |        |  
| | Purchase price, including transaction costs             |  | 11,372 |  
| |                                                         |  |        |  
| | Shares issued by the Company                            |  | (4,375 | )
| | Cash and cash equivalents acquired                      |  | (13    | )
| | Net effect on cash                                      |  | 6,984  |  

|   |                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | Other revenue                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                         
|   | Other revenue includes interest income on cash, variation
      on fair value on cash equivalents of $661 ($706 in 2007), gain on disposal
      of short-term investments, foreign exchange gain of $859 (foreign exchange
      loss of $74 in 2007 and $3 in 2006) and revenue from custom
  milling.

9

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|5. | Exploration and project
  evaluation
|-- | ------------------------------------
|   |                                     

2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Beaufor Mine
    
    2,921
    
    
    1,874
    
    
    1,342Island Gold Mine
    
    2,293
    
    
    505
    
    
    264Francoeur / Wasamac properties
    
    184
    
    
    142
    
    
    200Valentine Lake property
    
    347
    
    
    1,017
    
    
    67Camflo Northwest property
    
    -
    
    
    112
    
    
    4Golden Wonder property
    
    4,202
    
    
    665
    
    
    -Other properties
    
    20
    
    
    49
    
    
    412Project evaluation
    
    373
    
    
    124
    
    
    58310,340
    
    
    4,488
    
    
    2,872Exploration tax credits
    
    (643
    )
    
    (1,200
    )
    
    (792
    )Reversal of exploration tax credits
      recorded in 2007 a)
    
    850
    
    
    -
    
    
    -10,547
    
    
    3,288
    
    
    2,080


a)
    When the Company filed its 2007 income tax returns, the
      Company reduced its current taxes by using carried forward fiscal expenses
      instead of using exploration tax credit, as it planned and recorded in
      2007.


|6. | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Companys production and exploration activities are
      subject to various federal and provincial laws and regulations governing
      the protection of the environment. These laws and regulations are
      continually changing and are generally becoming more restrictive. The
      Company conducts its operations so as to protect public health and the
      environment. The Company has therefore recorded the asset retirement
      obligations of its mining sites based on managements best estimate of the
      future costs. Such estimates are, however, subject to change based on
      modifications to laws and regulations or as new information becomes
      available.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|a) | Information used in the calculation of obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The following table sets forth the assumptions used in
      the calculation of the asset retirement obligations for the year ended
      December 31, 2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Total amount 
    of the estimated 
    cash flow
    
    
    Cash flow
    payment
    schedule
    
    
    Credit-adjusted 
    risk-free rate$
    
    
    
    
    %Beaufor Mine
    
    391
    
    
    2012
    
    
    5.5Camflo Mill
    
    3,121
    
    
    2012
    
    
    5.5Island Gold Mine
    
    945
    
    
    2013
    
    
    5.5Francoeur property
    
    193
    
    
    2012
    
    
    5.54,650


In 2008, cash payment schedules were revised from 2011 to 2012
for the Beaufor Mine, from 2010 to 2012 for the Camflo Mill and Francoeur
property and from 2010 to 2013 for the Island Gold Mine.

10

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|6. | Asset retirement obligations (continued)                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                   
|b) | Changes in obligations                                                                                                                            
|   |                                                                                                                                                   
|   | The following table sets forth the evolution of
      the asset retirement obligations for the years ended December 31, 2008,
      2007 and 2006:
|   |                                                                                                                                                   

| |                                                                                |  | 2008  |   |  | 2007  |   |  | 2006  |  
| | ------------------------------------------------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | -
| |                                                                                |  | $     |   |  | $     |   |  | $     |  
| |                                                                                |  |       |   |  |       |   |  |       |  
| | Balance, beginning of year                                                     |  | 3,358 |   |  | 3,333 |   |  | 3,789 |  
| | Accretion expense                                                              |  | 182   |   |  | 178   |   |  | 214   |  
| | Changes to estimated cash flow and payment
      schedules                     |  | 1,164 |   |  | -     |   |  | 39    |  
| | Changes in liability related to the acquisition of Patricia
      Mining Corp. |  | (40   | ) |  | -     |   |  | -     |  
| | Decrease related to the disposal of
      properties                           |  | -     |   |  | (153  | ) |  | (709  | )
| | Balance, end of year                                                           |  | 4,664 |   |  | 3,358 |   |  | 3,333 |  

|   |                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c) | Letters of credit                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   | As at December 31, 2008, a credit facility is available
      the Company in the amount of $3,000 for the issuance of letters of credit
      as guarantees for the settlement of asset retirement obligations. The
      credit facility has a fixed fee of 0.75%. The following table provides the
      allocation of these letters of credit issued as at December 31,
    2008:
|   |                                                                                                                                                                                                                                                                                                                                                                                     

| |                    |  | 2008  |  |  | Date of          | 
| | ------------------ |  | ----- |  |  | ---------------- | 
| |                    |  | $     |  |  | renewal          | 
| |                    |  |       |  |  |                  | 
| | Camflo Mill        |  | 1,332 |  |  | July 20, 2009    | 
| | Beaufor Mine       |  | 52    |  |  | August 11, 2009  | 
| | Francoeur property |  | 54    |  |  | August 12, 2009  | 
| | Island Gold Mine   |  | 101   |  |  | October 27, 2009 | 
| |                    |  | 1,539 |  |  |                  | 

|   |                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | As at December 31, 2007, the Company had guaranteed the
      restoration of its mining sites by the pledge of letters of credit
      amounting to $1,308.             
|   |                                                                                                                                                                         
|   | As at December 31, 2007 and 2008, the Island Gold
      property has been pledged to the Ontario Ministry of Northern Development
      and Mines in the amount of $578.
|   |                                                                                                                                                                         
|7. | Gain (loss) on disposal of mining assets                                                                                                                                
|   |                                                                                                                                                                         
|   | The gain (loss) on disposal of mining assets includes the
      following items:                                                                                        
|   |                                                                                                                                                                         

| |                         |  | **2008** |   |  | 2007  |  |  | 2006  | 
| | ----------------------- |  | -------- | - |  | ----- |  |  | ----- | 
| |                         |  | $        |   |  | $     |  |  | $     | 
| |                         |  |          |   |  |       |  |  |       | 
| | East Amphi property a)  |  | -        |   |  | 7,439 |  |  | -     | 
| | Nugget Pond property b) |  | -        |   |  | -     |  |  | 3,224 | 
| | Other mining equipment  |  | (29      | ) |  | 627   |  |  | 11    | 
| |                         |  | (29      | ) |  | 8,066 |  |  | 3,235 | 

a)
    The mining operation at the East Amphi Mine ceased at the
      end of June 2007, following the depletion of its reserves. Work required
      for the closure of mining activities was completed in August 2007. In
      2007, the Company generated precious metal revenue from the milling of ore
      extracted until the end of June 2007 and assumed the closing
  costs.


11

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|7. | Gain (loss) on disposal of mining assets  (continued)
|-- | -----------------------------------------------------
|   |                                                      

On June 29, 2007, the Company concluded the sale of its
      East Amphi property in Quebec (including some service buildings, the
      rights, the mining concession and the exploration and drilling data) to
      Osisko Exploration Ltd. (Osisko) in exchange for a cash payment of
      $2,450 and a total of 1,109,000 common shares of Osisko valued at $6,086
      of which all have been sold for a net amount of $6,139. The Company
      retains a net smelter return royalty of 2% on a specified portion of the
      future production of the East Amphi property and a similar royalty on
      future production of up to 300,000 ounces of gold on another portion of
      the property.The gain on disposal of the East Amphi property was
      calculated net of transaction costs and the book value of the assets
      sold.b)
    In October 2006, the Company sold the Nugget Pond
      property and gold mill located in Newfoundland for a cash consideration of
      $2,250 and $300 in shares of a public company. Following this sale, the
      Company wrote-down the asset retirement obligations relating to this
      property in the amount of $709. The transaction costs were taken into
      account in the calculation of the gain on disposal of this
  property.


|   |                                                                                                                                                                                                                                                                                                                           | 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|8. | Mining and income taxes                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                           | 
|   | The income tax expense (recovery) attributable to
      earnings (loss) differs from the amounts computed by applying the combined
      federal and provincial income tax rate of 32.23% (33.39% in 2007 and
      32.27% in 2006) to earnings (loss) before mining and income taxes as a
      result of the following:
|   |                                                                                                                                                                                                                                                                                                                          

2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Earnings (loss) before mining and income
      taxes
    
    4,107
    
    
    7,941
    
    
    (222
    )Tax expense (recovery) at combined
      statutory rate
    
    1,324
    
    
    2,651
    
    
    (72
    )Increase (decrease) in mining and income taxes resulting from:Resource allowance deduction
    
    (204
    )
    
    -
    
    
    32Deductible
      mining taxes
    
    (601
    )
    
    (558
    )
    
    -Change in the valuation
      allowance
    
    (931
    )
    
    (1,130
    )
    
    (2,293
    )Impact of the
      change in tax rates
    
    98
    
    
    80
    
    
    625Prior years future income taxes
      adjustment
    
    123
    
    
    (197
    )
    
    (784
    )Other
    
    (288
    )
    
    101
    
    
    (125
    )Income taxes
    
    (479
    )
    
    947
    
    
    (2,617
    )Large corporation tax
    
    -
    
    
    -
    
    
    39Mining duties
    
    916
    
    
    359
    
    
    (108
    )Total mining and income tax expense
      (recovery)
    
    437
    
    
    1,306
    
    
    (2,686
    )


Mining and income tax expense (recovery) attributable to
earnings consist of:

2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Current tax
    
    796
    
    
    1,640
    
    
    (885
    )Future tax
    
    (359
    )
    
    (334
    )
    
    (1,801
    )437
    
    
    1,306
    
    
    (2,686
    )


12

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|8. | Mining and income taxes (continued)                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                      
|   | The tax effect of temporary differences, that give rise
      to significant portions of the future tax assets and future tax
      liabilities at December 31, 2008 and 2007, are presented
  below:
|   |                                                                                                                                                                                                      

| |                                                    |  | 2008    |   |  | 2007   |  
| | -------------------------------------------------- |  | ------- | - |  | ------ | -
| |                                                    |  | $       |   |  | $      |  
| |                                                    |  |         |   |  |        |  
| | Long-term future tax asset:                        |  |         |   |  |        |  
| | Property, plant and equipment                      |  | 7,348   |   |  | 4,283  |  
| | Asset retirement obligations                       |  | 1,311   |   |  | 1,066  |  
| | Harmonization of Ontarios fiscal credits          |  | 982     |   |  | -      |  
| | Share issue costs                                  |  | 329     |   |  | 494    |  
| | Losses carried forward                             |  | 1,273   |   |  | 821    |  
| | Deductible future mining taxes                     |  | 239     |   |  | 353    |  
| | Future tax asset                                   |  | 11,482  |   |  | 7,017  |  
| | Less valuation allowance                           |  | (11,332 | ) |  | (6,522 | )
| |                                                    |  | 150     |   |  | 495    |  
| |                                                    |  |         |   |  |        |  
| | Long-term future tax liability:                    |  |         |   |  |        |  
| | Property, plant and equipment                      |  | (1,236  | ) |  | (1,941 | )
| | Net long-term future tax liability                 |  | (1,086  | ) |  | (1,446 | )
| |                                                    |  |         |   |  |        |  
| |                                                    |  |         |   |  |        |  
| | As presented on consolidated balance
      sheets: |  |         |   |  |        |  
| | Future mining and income tax asset                 |  | -       |   |  | -      |  
| | Future mining and income tax
      liability       |  | (1,086  | ) |  | (1,446 | )
| |                                                    |  | (1,086  | ) |  | (1,446 | )

|   |                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Non-refundable provincial tax credits of $4,583 and
      non-refundable federal tax credits of $3,207, which may be used within the
      next ten to twenty years to reduce income taxes otherwise payable, have
      not been accounted for by the Company.
|   |                                                                                                                                                                                                                                                                
|   | At December 31, 2008, the Company has net operating
      federal, Quebec and Ontario losses carry forwards of approximately $3,797,
      $3,606 and $1,878 respectively, which expire at various dates through
      2028.                                   
|   |                                                                                                                                                                                                                                                                
|9. | Inventories                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                

| |                 |  | 2008  |  |  | 2007  | 
| | --------------- |  | ----- |  |  | ----- | 
| |                 |  | $     |  |  | $     | 
| |                 |  |       |  |  |       | 
| | Precious metals |  | 2,157 |  |  | 210   | 
| | Ore             |  | 1,846 |  |  | 3,663 | 
| | Supplies        |  | 2,009 |  |  | 1,565 | 
| |                 |  | 6,012 |  |  | 5,438 | 

There was no write-down of inventories recognized as an expense
and no reversal of write-down during the year ended December 31, 2008.

13

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|10. | Property, plant and
equipment
|--- | -----------------------------
|    |                              

| |                                            |  |        |  |                                            |        |  |                | 2008   |  |      |        |                                                          |  |        |                     |  | 2007   | 
| | ------------------------------------------ |  | ------ |  | ------------------------------------------ | ------ |  | -------------- | ------ |  | ---- | ------ | -------------------------------------------------------- |  | ------ | ------------------- |  | ------ | 
| |                                            |  | Cost   |  | Accumulated depreciation and
    depletion |        |  | Net book value |        |  | Cost |        | Accumulated
    
    depreciation 
    and
    depletion |  |        | Net book 
    value | 
| |                                            |  | $      |  |                                            | $      |  |                | $      |  |      | $      |                                                          |  | $      |                     |  | $      | 
| |                                            |  |        |  |                                            |        |  |                |        |  |      |        |                                                          |  |        |                     |  |        | 
| | Mine sites                                 |  |        |  |                                            |        |  |                |        |  |      |        |                                                          |  |        |                     |  |        | 
| | Mining properties                          |  | 1,564  |  |                                            | 860    |  |                | 704    |  |      | 1,442  |                                                          |  | 818    |                     |  | 624    | 
| | Development costs
      a)                 |  | 42,859 |  |                                            | 10,936 |  |                | 31,923 |  |      | 42,033 |                                                          |  | 6,965  |                     |  | 35 068 | 
| | Buildings                                  |  | 5,955  |  |                                            | 2,131  |  |                | 3,824  |  |      | 4,766  |                                                          |  | 1,707  |                     |  | 3,059  | 
| | Equipment                                  |  | 12,518 |  |                                            | 3,959  |  |                | 8,559  |  |      | 8,426  |                                                          |  | 3,604  |                     |  | 4,822  | 
| | Asset retirement costs                     |  | 2,493  |  |                                            | 651    |  |                | 1,842  |  |      | 1,930  |                                                          |  | 1,207  |                     |  | 723    | 
| |                                            |  | 65,389 |  |                                            | 18,537 |  |                | 46,852 |  |      | 58,597 |                                                          |  | 14,301 |                     |  | 44,296 | 
| |                                            |  |        |  |                                            |        |  |                |        |  |      |        |                                                          |  |        |                     |  |        | 
| | Corporate office                           |  |        |  |                                            |        |  |                |        |  |      |        |                                                          |  |        |                     |  |        | 
| | Buildings and leasehold
      improvements |  | 1,476  |  |                                            | 550    |  |                | 926    |  |      | 986    |                                                          |  | 516    |                     |  | 470    | 
| | Equipment and rolling stock                |  | 736    |  |                                            | 475    |  |                | 261    |  |      | 618    |                                                          |  | 374    |                     |  | 244    | 
| |                                            |  | 2,212  |  |                                            | 1,025  |  |                | 1,187  |  |      | 1,604  |                                                          |  | 890    |                     |  | 714    | 
| | Total                                      |  | 67,601 |  |                                            | 19,562 |  |                | 48,039 |  |      | 60,201 |                                                          |  | 15,191 |                     |  | 45,010 | 

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | In 2008, the development costs had increased by $350
      following the cancellation of exploration tax credits which had been
      applied against these costs in 2007. A distribution of $742 from a
      minority partner was applied as a reduction of development costs in 2008
      and proceeds from precious metal sales from development activities of the
      Island Gold Property of $16,775 were applied as a reduction of development
      costs in 2007.

During the year ended December 31,
2008, the Beaufor Mines average depreciation rate was $41 per ounce sold ($122
in 2007 and $48 in 2006), the Island Gold Mines average depreciation rate was
$100 per ounce sold ($105 for the three-month period ended December 31, 2007)
while that of East Amphi Mines settled at $64 per ounce sold in 2007 ($79 in
2006). Camflo Mill has an average depreciation rate of $1.25 per processed
tonnes for the year ended December 31, 2008 ($2.67 in 2007 and $0.87 in 2006).

As at October 1, 2007, the Island Gold
Project entered into commercial production. All project under development costs,
which totalled $37,177 at that date, were transferred to the applicable
categories of property, plant and equipment.

14

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|11. | Capital stock                                                        
|--- | ---------------------------------------------------------------------
|    |                                                                      
|    | Authorized: Unlimited number of common shares with no par
      value
|    |                                                                      

| |                                        |  | Number      |   |  | 2008   |   |  | Number      |   |  | 2007   |   |  | Number      |   |  | 2006   |  
| | -------------------------------------- |  | ----------- | - |  | ------ | - |  | ----------- | - |  | ------ | - |  | ----------- | - |  | ------ | -
| |                                        |  | of shares   |   |  | Amount |   |  | of shares   |   |  | Amount |   |  | of shares   |   |  | Amount |  
| |                                        |  | (thousands) |   |  | $      |   |  | (thousands) |   |  | $      |   |  | (thousands) |   |  | $      |  
| |                                        |  |             |   |  |        |   |  |             |   |  |        |   |  |             |   |  |        |  
| | Issued and paid:                       |  |             |   |  |        |   |  |             |   |  |        |   |  |             |   |  |        |  
| | Common shares                          |  |             |   |  |        |   |  |             |   |  |        |   |  |             |   |  |        |  
| | Balance, beginning of year             |  | 24,053      |   |  | 61,016 |   |  | 24,180      |   |  | 61,340 |   |  | 20,994      |   |  | 50,600 |  
| | Issue of shares related to             |  |             |   |  |        |   |  |             |   |  |        |   |  |             |   |  |        |  
| | Patricia Minings acquisition (note 3) |  | 2,347       |   |  | 4,375  |   |  | -           |   |  | -      |   |  | -           |   |  | -      |  
| | Issue of shares for cash a)            |  |             |   |  |        |   |  |             |   |  |        |   |  |             |   |  |        |  
| | Common                                 |  | -           |   |  | -      |   |  | -           |   |  | -      |   |  | 3,100       |   |  | 15,190 |  
| | Exercise of stock options              |  | 9           |   |  | 34     |   |  | 102         |   |  | 257    |   |  | 143         |   |  | 409    |  
| | Common share issue costs a)            |  | -           |   |  | -      |   |  | -           |   |  | -      |   |  | -           |   |  | (1,413 | )
| | Renouncement of tax deductions b)      |  | -           |   |  | -      |   |  | -           |   |  | -      |   |  | -           |   |  | (3,300 | )
| | Redemption of shares c)                |  | (296        | ) |  | (753   | ) |  | (229        | ) |  | (581   | ) |  | (57         | ) |  | (146   | )
| | Balance, end of year                   |  | 26,113      |   |  | 64,672 |   |  | 24,053      |   |  | 61,016 |   |  | 24,180      |   |  | 61,340 |  

|   |                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) | Issue of shares                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2008, the Company issued 9,000 common shares following
      the exercise of stock options and received cash proceeds in the amount of
      $25. Contributed surplus was reduced by $9 which represents the fair value
      of the exercised stock options.                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2007, the Company issued 102,000 common shares
      following the exercise of stock options and received cash proceeds in the
      amount of $183. Contributed surplus was reduced by $74 which represents
      the fair value of the exercised stock options.                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2006, the Company issued 143,300 common shares
      following the exercise of stock options and received cash proceeds in the
      amount of $334. Contributed surplus was reduced by $75 which represents
      the fair value of the exercised stock options.                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2006, the Company issued, through a public offering,
      3,100,000 common shares. The Company received cash proceeds of $15,190. An
      amount of $1,413 was incurred as share issue costs.                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                  
|b) | Renouncement of tax deductions                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In accordance with the 2005 flow-through share agreements
      of $7,500, the Company has renounced the related tax deductions in the
      amount of $3,300 with a corresponding amount presented as future income
      tax liabilities.                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                  
|c) | Redemption of shares                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In December 2008, the Company made a normal course issuer
      bid to purchase its outstanding common shares. The Company may purchase
      between December 5, 2008 and December 4, 2009, up to 1,188,000 common
      shares, representing approximately 5% of the 23,776,653 common shares of
      the Company issued and outstanding on November 21, 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2008, the Company redeemed and cancelled 296,200
      common shares for $768 in cash. This transaction increased the deficit by
      $84 and increased the contributed surplus by $69.                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2007, the Company redeemed and cancelled 229,000
      common shares for $658 in cash. This transaction increased the deficit by
      $77.                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                  
|   | In 2006, the Company redeemed and cancelled 57,500 common
      shares for $171 in cash. This transaction increased the deficit by
    $25.                                                                                                                                                                                                                      

15

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|11. | Capital stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|d)  | Stock Option Purchase Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has a Stock Option Purchase Plan under which
      options to acquire common shares may be granted to its directors,
      officers, employees and non-employees. According to this plan, established
      in 1995 and amended in 1997, 2002, 2003 and 2007, the Company may grant
      options for up to 4,444,400 common shares. The exercise price of each
      option is the market price of the Companys stock on the date of grant and
      the maximum term of the options granted is 10 years. The options are
      vested to 20% at the date of grant and vesting cumulatively thereafter at
      every anniversary date for a total length of four years.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | A summary of the status, in 2008 and 2007, of the
      Companys Stock Option Purchase Plan, and changes during the years then
      ended, is presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                              |  |             |   |  | 2008           |  |  |             |   |  | 2007           | 
| | -------------------------------------------- |  | ----------- | - |  | -------------- |  |  | ----------- | - |  | -------------- | 
| |                                              |  | Number      |   |  | Weighted       |  |  | Number      |   |  | Weighted       | 
| |                                              |  | of options  |   |  | average        |  |  | of options  |   |  | average        | 
| |                                              |  | (thousands) |   |  | exercise price |  |  | (thousands) |   |  | exercise price | 
| |                                              |  |             |   |  | $              |  |  |             |   |  | $              | 
| |                                              |  |             |   |  |                |  |  |             |   |  |                | 
| | Options outstanding, beginning
      of year |  | 2,023       |   |  | 4.22           |  |  | 2,118       |   |  | 4.50           | 
| | Granted                                      |  | 445         |   |  | 2.19           |  |  | 620         |   |  | 3.00           | 
| | Exercised                                    |  | (9          | ) |  | 2.74           |  |  | (102        | ) |  | 1.80           | 
| | Cancelled                                    |  | (126        | ) |  | 3.92           |  |  | (133        | ) |  | 4.76           | 
| | Expired                                      |  | (25         | ) |  | 5.16           |  |  | (480        | ) |  | 4.26           | 
| | Options outstanding, end of
      year       |  | 2,308       |   |  | 3.84           |  |  | 2,023       |   |  | 4.22           | 
| | Exercisable
      options, end of year       |  | 1,339       |   |  | 4.43           |  |  | 1,020       |   |  | 4.82           | 

The following table summarizes
information about the Stock Option Purchase Plan at December 31, 2008:

| | Exercise 
    price  |                                             | Options outstanding
      at December 31, 2008 |  |                                                                   | Exercisable options
      at December 31,
    2008 | 
| | -------------------- | ------------------------------------------- | ---------------------------------------------- |  | ----------------------------------------------------------------- | -------------------------------------------------- | 
| |                      |                                             |                                                | 
| |                      | Number
    
    of options 
    (thousands) |                                                |  | Weighted average
    
    remaining contractual 
    life (years) |                                                    | 
| |                      |                                             |                                                |  |                                                                   |                                                    | 
| |                      |                                             |                                                |  |                                                                   |                                                    | 
| |                      |                                             |                                                |  |                                                                   |                                                    | 
| | $1.80 to $1.95       |                                             | 310                                            |  |                                                                   | 4.9                                                | 
| | $2.74 to $3.20       |                                             | 920                                            |  |                                                                   | 3.5                                                | 
| | $4.04 to $4.39       |                                             | 313                                            |  |                                                                   | 2.2                                                | 
| | $4.97
      to $6.60 |                                             | 765                                            |  |                                                                   | 1.2                                                | 
| |                      |                                             | 2,308                                          |  |                                                                   | 2.8                                                | 

During 2008, the Company granted
445,000 stock options (620,000 in 2007) to senior executives and management. The
weighted average fair value of these stock options at the grant date, calculated
using the Black- Scholes option pricing model, is $0.76 ($1.06 in 2007 and $1.42
in 2006).

The compensation costs were calculated
using the Black-Scholes option pricing model with the following assumptions:

| |                         |  | 2008    |  |  | 2007    |  |  | 2006    | 
| | ----------------------- |  | ------- |  |  | ------- |  |  | ------- | 
| |                         |  |         |  |  |         |  |  |         | 
| | Risk-free interest rate |  | 3.2%    |  |  | 4.0%    |  |  | 4.0%    | 
| | Expected life           |  | 4 years |  |  | 4 years |  |  | 4 years | 
| | Expected volatility     |  | 39%     |  |  | 38%     |  |  | 43%     | 
| | Expected dividend yield |  | 0.0%    |  |  | 0.0%    |  |  | 0.0%    | 

In 2008, the stock-based compensation
costs charged to earnings amount to $526 ($575 in 2007 and $393 in 2006). The
contributed surplus was increased by the same amounts.

16

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|12. | Contributed surplus
|--- | -------------------
|    |                    

| |                            |  | 2008  |   |  | 2007  |  
| | -------------------------- |  | ----- | - |  | ----- | -
| |                            |  | $     |   |  | $     |  
| |                            |  |       |   |  |       |  
| | Balance, beginning of year |  | 5,092 |   |  | 4,591 |  
| |                            |  |       |   |  |       |  
| | Stock-based compensation   |  | 526   |   |  | 575   |  
| | Options exercised          |  | (9    | ) |  | (74   | )
| | Redemption of shares       |  | 69    |   |  | -     |  
| | Balance, end of year       |  | 5,678 |   |  | 5,092 |  

|    |                                       
|--- | --------------------------------------
|13. | Consolidated statements of cash
  flow
|    |                                       

| |                                                                                                                   |  | 2008  |   |  | 2007  |   |  | 2006   |  
| | ----------------------------------------------------------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ------ | -
| |                                                                                                                   |  | **$** |   |  | $     |   |  | $      |  
| |                                                                                                                   |  |       |   |  |       |   |  |        |  
| | Change in non-cash working capital items                                                                          |  |       |   |  |       |   |  |        |  
| |                                                                                                                   |  |       |   |  |       |   |  |        |  
| | Accounts receivable                                                                                               |  | 151   |   |  | 205   |   |  | (364   | )
| | Mining and income taxes receivable (payable)                                                                      |  | 1,152 |   |  | 588   |   |  | 3,272  |  
| | Inventories                                                                                                       |  | (126  | ) |  | (45   | ) |  | (2,025 | )
| | Accounts payable and accrued charges                                                                              |  | 1,194 |   |  | 1,055 |   |  | 44     |  
| |                                                                                                                   |  | 2,371 |   |  | 1,803 |   |  | 927    |  
| |                                                                                                                   |  |       |   |  |       |   |  |        |  
| | Supplemental information                                                                                          |  |       |   |  |       |   |  |        |  
| | Cash received (paid) during the year:                                                                             |  |       |   |  |       |   |  |        |  
| | Interest                                                                                                          |  | 1,188 |   |  | 1,450 |   |  | 982    |  
| | Mining and income taxes                                                                                           |  | (372  | ) |  | 303   |   |  | 4,892  |  
| | Items not affecting cash and
      cash equivalents:                                                              |  |       |   |  |       |   |  |        |  
| | Distribution presented as a reduction of the advance to a
      minority partner                                  |  | 904   |   |  | -     |   |  | -      |  
| | Distribution presented as a reduction of
      contribution from a minority partner                               |  | 90    |   |  | -     |   |  | -      |  
| | Distribution presented as a
      reduction of accounts receivable                                                |  | 129   |   |  | -     |   |  | -      |  
| | Advances to a minority partner presented as
      an increase to minority interest                                |  | -     |   |  | -     |   |  | 4,121  |  
| | Asset retirement obligation transferred to accounts payable
      and accrued charges                             |  | -     |   |  | 129   |   |  | -      |  
| | Common shares of public company received as
      consideration from disposal of mining assets (note 7)           |  | -     |   |  | 6,086 |   |  | 300    |  
| | Accounts payable and accrued charges related to development
      projects an other property, plant and equipment |  | 255   |   |  | 477   |   |  | 2,533  |  
| |                                                                                                                   |  |       |   |  |       |   |  |        |  

|14. | Pension plan                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                               
|    | The Company contributes a percentage of its Canadian
      payroll expense to a defined contribution plan. The expense in 2008 was
      $357 ($289 in 2007 and $162 in 2006).

17

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|15. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company is subject to pay royalties on 50% of the
      production of the Beaufor Mine at the rate of $30 per ounce produced, a 3%
      royalty per ounce produced at the Island Gold Mine, and on other
      properties if such other properties are brought into commercial
      production.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On February 11, 2009, the Company entered into an
      agreement with Mountain Lake Resources Inc. (Mountain Lake) in which it
      granted Mountain Lake an option to purchase Richmonts 70% interest in the
      Valentine Lake Property located in Central Newfoundland. Mountain Lake
      currently owns a 30% interest in the Property. Mountain Lake has agreed to
      pay an option fee to Richmont of 2,500,000 common shares of Mountain Lake
      at a deemed value of $625, or $0.25 per share.                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Mountain Lake may exercise the option over a five-year
      period by making option payments to Richmont for an additional $3,000 and
      by incurring $1,000 in exploration and development expenditures on the
      Property within that timeframe. The option payments may be in cash, or 50%
      in cash and 50% in Mountain Lake common shares, at the sole election of
      Mountain Lake. The option payments can be made in instalments by the
      second, third, and fourth years of the five-year period. Moreover, $500 of
      the exploration and development expenditures must be incurred by the end
      of the second year and the remaining $500 must be incurred by the end of
      the fifth year.                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|16. | Capital disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Companys objectives when managing its capital are to
      safeguard the Companys ability to continue as a going concern in order to
      support ongoing exploration programs and the development of its mining
      assets, to provide sufficient working capital to meet its ongoing
      obligations and to pursue potential investments.                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In the management of capital, the Company includes the
      components of shareholders equity, less cash and cash equivalents as well
      as short-term investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company manages its capital structure and makes
      adjustments to it in accordance with the aforementioned objectives, as
      well as in light of changes in economic conditions and the risk
      characteristics of the underlying assets. In order to maintain or adjust
      its capital structure, the Company may purchase some of its shares for
      cancellation pursuant to normal course issuer bids, issue new shares,
      issue new debt, acquire or dispose of assets or adjust the amount of cash
      and cash equivalents and short-term investments. The Company is not
      subject to externally imposed capital requirements. The Companys
      management of capital remained unchanged since the previous year.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|17. | Financial instruments and risk management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|a)  | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company has classified its cash and cash equivalents
      and restricted cash as assets held-for-trading, its short- term
      investments as available-for-sale financial assets, its accounts
      receivable and the advance to a minority partner as loans and receivables,
      and its accounts payable and accrued charges as other financial
      liabilities as defined by the CICA Handbook Section 3855, Financial
      Instruments  Recognition and Measurement.                                                                                                                                                                                                                                                                 

18

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|17. | Financial instruments and risk management
      (continued)                                                    
|--- | ---------------------------------------------------------------------------------------------------------------
|    |                                                                                                                
|a)  | Fair value of financial instruments
      (continued)                                                          
|    |                                                                                                                
|    | The following table presents the carrying
      amounts and fair values of each financial instruments category:
|    |                                                                                                                

| |                                               |  | December 31,
      2008 |  |  | December 31, 2007 | 
| | --------------------------------------------- |  | ----------------------- |  |  | ----------------- | 
| |                                               |  | Book                    |  |  | Fair              | 
| |                                               |  | value                   |  |  | value             | 
| |                                               |  | $                       |  |  | $                 | 
| |                                               |  |                         |  |  |                   | 
| | Held-for-trading financial
      assets       |  |                         |  |  |                   | 
| | Cash and cash equivalents a)                  |  | 26,021                  |  |  | 26,021            | 
| | Restricted
      cash a)                      |  | 116                     |  |  | 116               | 
| |                                               |  | 26,137                  |  |  | 26,137            | 
| |                                               |  |                         |  |  |                   | 
| | Available-for-sale financial assets           |  |                         |  |  |                   | 
| | Short-term investments b)                     |  | 121                     |  |  | 121               | 
| |                                               |  |                         |  |  |                   | 
| | Loans and receivables                         |  |                         |  |  |                   | 
| | Accounts receivable a)                        |  | 183                     |  |  | 183               | 
| | Advance to a minority partner
      c)        |  | -                       |  |  | -                 | 
| |                                               |  | 183                     |  |  | 183               | 
| |                                               |  |                         |  |  |                   | 
| | Other financial liabilities                   |  |                         |  |  |                   | 
| | Accounts payable and accrued
      charges a) |  | 6,912                   |  |  | 6,912             | 

a)
    The Company owns and assumes financial assets and
      liabilities such as cash and cash equivalents, restricted cash, accounts
      receivable, as well as accounts payable and accrued charges. The fair
      value of these financial assets and liabilities approximates their book
      value as these items will be realized or paid in the short term.b)
    The fair value of short-term investments in
      publicly-traded companies is the bid price and for the options issued by
      publicly-traded companies, the fair value is calculated using the
      Black-Scholes option pricing model with the following assumptions:
      risk-free interest rate of 2.24% (3.78% in 2007), expected life of 4
      months and 7 months (14 months and 19 months in 2007), expected volatility
      of 100% (100% in 2007) and no expected dividend yield.c)
    In 2007, the fair value of the advance to a minority
      partner approximates its book value as it bears interest at a variable
      rate.


|   | The fair value variation on cash equivalents is $661
      ($706 in 2007 and $403 in 2006) and interest income from the advance to a
      minority partner is $245 ($411 in 2007 and $311 in 2006).                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|b) | Market risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company is exposed to gold price fluctuations and to
      fluctuations of the US dollar compared to the Canadian dollar. The Company
      manages its exposure to these risks through the occasional use of
      derivative financial instruments and gold commodity contracts. The Company
      is also exposed to share price fluctuations of the shares that it holds in
      short-term investments and to fluctuations of interest rates for its cash
      equivalents. The risks and the management of those risks were unchanged
      compared to previous years.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Board of Directors approves all policies concerning
      the use of derivative financial instruments and gold sales contracts. The
      Company holds no financial instrument or derivative financial instrument
      for trading or speculative purposes.                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The price of gold is established in US dollars; to manage
      its exposure due to the fluctuation of the US dollar, the Company can
      occasionally enter into various types of foreign exchange contracts.
      During the years 2008, 2007 and 2006, the Company did not enter into any
      forward exchange contracts.                                                                                                                                                                                                                                                  

19

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|17. | Financial instruments and risk management
      (continued)
|--- | -----------------------------------------------------------

The risk which the Company was exposed
as at December 31, 2008 is established as:

| |                                      |  | December 31, |  |  | December 31, | 
| | ------------------------------------ |  | ------------ |  |  | ------------ | 
| |                                      |  | 2008         |  |  | 2007         | 
| |                                      |  | US$          |  |  | US$          | 
| |                                      |  |              |  |  |              | 
| | Cash and cash equivalents            |  | 217          |  |  | 3,604        | 
| | Accounts receivable                  |  | -            |  |  | -            | 
| | Accounts payable and accrued charges |  | 28           |  |  | -            | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Based on the above net exposures as at December 31, 2008,
      and assuming that all other variables remain constant, a 10% variation of
      the Canadian dollar against US dollar would result in a variation of $19
      of the foreign exchange gain related to cash in US dollars.                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Commodity price risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | For its gold production, the Company can reduce its risk
      of a decrease in the price of gold through the occasional use of forward
      sales contracts and put and call options. The risk of gold price is the
      same as the previous years. In 2008, 2007 and 2006, the Company did not
      enter into hedging contracts for its gold production.                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The cash equivalents carry interest and therefore, the
      Company is exposed to a variation of their interest rate at their renewal.
      Based on the exposures as at December 31, 2008, and assuming that all
      other variables remain constant, an increase or decrease of 25 basis point
      of the interest rate would result in an increase or decrease of $46 in net
      earnings.                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|c) | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial instruments that expose the Company to market
      risk and concentration of credit risk consist primarily of cash and cash
      equivalents and accounts receivable. The Company invests its cash and cash
      equivalents in high-quality securities issued by government agencies,
      financial institutions and major corporations, and limits the amount of
      credit exposure by diversifying its holdings. At December 31, 2008, 56% of
      the Companys cash and cash equivalents are held through two financial
      institutions.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The following table presents the composition of cash and
      cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                     |  | 2008   |  |  | 2007   |  |  | 2006   | 
| | ------------------- |  | ------ |  |  | ------ |  |  | ------ | 
| |                     |  | **$**  |  |  | $      |  |  | $      | 
| |                     |  |        |  |  |        |  |  |        | 
| | Cash                |  | 7,722  |  |  | 6,942  |  |  | 6,714  | 
| | Cash equivalents a) |  | 18,299 |  |  | 20,349 |  |  | 9,412  | 
| |                     |  | 26,021 |  |  | 27,291 |  |  | 16,126 | 

| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | Cash equivalents are composed of investments that will
      mature in January, February and March 2009 with effective rate varying
      from 1.55% to 3.10%.

The Company is exposed to credit risk
in the event of non-performance by counterparties in connection with, when
applicable, its currency and gold forward option contracts and its hedging. The
Company does not obtain any security to support financial instruments subject to
credit risk but mitigates this risk by dealing only with a diverse group of
financially sound counterparties and, accordingly, does not anticipate any loss
for non-performance. The credit risk and its management are the same as those of
the previous years.

20

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|17. | Financial instruments and risk management
      (continued)                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|d)  | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The management of liquidity risk aims to hold
      enough cash and cash equivalents in order to make sure that the Company
      has necessary funds to meet its obligations.                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Accounts payable and accrued charges are due in
      the next financial year.                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|18. | Segmented information                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company operates gold mines at different
      sites in Quebec and Ontario. These operating sites are managed separately
      given their different locations. The Company assesses the performance of
      each segment based on earnings (loss) before other items. Accounting
      policies for each segment are the same as those used for the preparation
      of the consolidated financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      

| | 2008                                                      |  |        |   |  |         |   |  | Exploration, |   |  |        |  
| | --------------------------------------------------------- |  | ------ | - |  | ------- | - |  | ------------ | - |  | ------ | -
| |                                                           |  |        |   |  |         |   |  | corporate    |   |  |        |  
| |                                                           |  | Quebec |   |  | Ontario |   |  | and others   |   |  | Total  |  
| |                                                           |  | $      |   |  | $       |   |  | $            |   |  | $      |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| | Revenue                                                   |  | 33,452 |   |  | 35,183  |   |  | 1,956        |   |  | 70,591 |  
| | Mine operating costs and others                           |  | 20,327 |   |  | 26,771  |   |  | 3,123        |   |  | 50,221 |  
| | Exploration and project
      evaluation                  |  | 2,821  |   |  | 2,313   |   |  | 5,413        |   |  | 10,547 |  
| | Depreciation and depletion                                |  | 1,589  |   |  | 3,794   |   |  | 304          |   |  | 5,687  |  
| | Gain (loss) on disposal of
      mining assets            |  | 8      |   |  | 23      |   |  | (2           | ) |  | 29     |  
| | Earnings (loss) before other
      items                  |  | 8,707  |   |  | 2,282   |   |  | (6,882       | ) |  | 4,107  |  
| | Acquisition of property, plant and equipment              |  | 613    |   |  | 6,120   |   |  | 763          |   |  | 7,496  |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| | Current assets                                            |  | 10,260 |   |  | 4,067   |   |  | 20,515       |   |  | 34,842 |  
| | Property, plant and equipment                             |  | 5,137  |   |  | 40,644  |   |  | 2,258        |   |  | 48,039 |  
| | Total assets                                              |  | 15,397 |   |  | 44,711  |   |  | 22,773       |   |  | 82,881 |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| | 2007                                                      |  |        |   |  |         |   |  | Exploration, |   |  |        |  
| |                                                           |  |        |   |  |         |   |  | corporate    |   |  |        |  
| |                                                           |  | Quebec |   |  | Ontario |   |  | and others   |   |  | Total  |  
| |                                                           |  | $      |   |  | $       |   |  | $            |   |  | $      |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| | Revenue                                                   |  | 30,363 |   |  | 5,743   |   |  | 1,965        |   |  | 38,071 |  
| | Mine operating costs and
      others                     |  | 21,290 |   |  | 4,912   |   |  | 3,078        |   |  | 29,280 |  
| | Exploration and project evaluation                        |  | 1,578  |   |  | 506     |   |  | 1,204        |   |  | 3,288  |  
| | Depreciation and depletion                                |  | 4,683  |   |  | 763     |   |  | 182          |   |  | 5,628  |  
| | Gain on disposal of mining assets                         |  | (8,044 | ) |  | -       |   |  | (22          | ) |  | (8,066 | )
| | Earnings (loss)
      before other items                  |  | 10,856 |   |  | (438    | ) |  | (2,477       | ) |  | 7,941  |  
| | Acquisition
      (sale) of property, plant and equipment |  | (908   | ) |  | 2,308   |   |  | 1,237        |   |  | 2,637  |  
| |                                                           |  |        |   |  |         |   |  |              |   |  |        |  
| | Current assets                                            |  | 5,741  |   |  | 2,341   |   |  | 31,009       |   |  | 39,091 |  
| | Advance to a minority partner                             |  | -      |   |  | -       |   |  | 1,875        |   |  | 1,875  |  
| | Property, plant and equipment                             |  | 4,969  |   |  | 38,242  |   |  | 1,799        |   |  | 45,010 |  
| | Total assets                                              |  | 10,710 |   |  | 40,583  |   |  | 34,683       |   |  | 85,976 |  

21

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|18. | Segmented information (continued)
|--- | ---------------------------------
|    |                                  

| | 2006                                         |  |        |   |  |         |   |  | Exploration, |   |  |        |  
| | -------------------------------------------- |  | ------ | - |  | ------- | - |  | ------------ | - |  | ------ | -
| |                                              |  |        |   |  |         |   |  | corporate    |   |  |        |  
| |                                              |  | Quebec |   |  | Ontario |   |  | and others   |   |  | Total  |  
| |                                              |  | $      |   |  | $       |   |  | $            |   |  | $      |  
| |                                              |  |        |   |  |         |   |  |              |   |  |        |  
| | Revenue                                      |  | 31,449 |   |  | 73      |   |  | 1,367        |   |  | 32,889 |  
| | Mine operating costs and others              |  | 28,374 |   |  | 38      |   |  | 2,708        |   |  | 31,120 |  
| | Exploration and project
      evaluation     |  | 1,528  |   |  | 272     |   |  | 280          |   |  | 2,080  |  
| | Depreciation and depletion                   |  | 3,050  |   |  | -       |   |  | 96           |   |  | 3,146  |  
| | Gain on disposal of mining
      assets      |  | -      |   |  | -       |   |  | (3,235       | ) |  | (3,235 | )
| | Earnings (loss) before other
      items     |  | (1,503 | ) |  | (237    | ) |  | 1,518        |   |  | (222   | )
| | Acquisition of property, plant and equipment |  | 2,026  |   |  | 23,391  |   |  | 377          |   |  | 25,794 |  
| |                                              |  |        |   |  |         |   |  |              |   |  |        |  
| | Current assets                               |  | 6,633  |   |  | 2,058   |   |  | 18,376       |   |  | 27,067 |  
| | Advance to a minority partner                |  | -      |   |  | -       |   |  | 3,375        |   |  | 3,375  |  
| | Property, plant and equipment                |  | 10,560 |   |  | 36,697  |   |  | 744          |   |  | 48,001 |  
| | Future mining and income taxes               |  | 55     |   |  | -       |   |  | -            |   |  | 55     |  
| | Total assets                                 |  | 17,248 |   |  | 38,755  |   |  | 22,495       |   |  | 78,498 |  

22

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|19. | Effect of applying United States generally accepted
      accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | These consolidated financial statements have been
      prepared in accordance with Canadian generally accepted accounting
      principles (Canadian GAAP). Had these consolidated financial statements
      been prepared in accordance with United States generally accepted
      accounting principles (US GAAP), the effect on net earnings (loss),
      property, plant and equipment, minority interest, accumulated other
      comprehensive income, shareholders equity and on consolidated statements
      of cash flow would have been as follows:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                                                          |  | 2008    |   |  | 2007    |   |  | 2006    |  
| | ------------------------------------------------------------------------ |  | ------- | - |  | ------- | - |  | ------- | -
| |                                                                          |  | **$**   |   |  | $       |   |  | $       |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Net earnings reported under Canadian
      GAAP                          |  | 1,635   |   |  | 6,671   |   |  | 3,194   |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Add (deduct):                                                            |  |         |   |  |         |   |  |         |  
| | Difference in accounting related to
      investments a)                 |  | (1      | ) |  | (412    | ) |  | (394    | )
| | Difference in accounting related to
      stock-based compensation b)    |  | 58      |   |  | 57      |   |  | -       |  
| | Exploration and development costs related to mining
      properties c)  |  | 393     |   |  | (509    | ) |  | (20,593 | )
| | Depreciation and depletion d)                                            |  | 2,712   |   |  | 75      |   |  | (405    | )
| | Minority interest e)                                                     |  | (1,221  | ) |  | 353     |   |  | 9,204   |  
| | Flow-through shares f)                                                   |  | -       |   |  | -       |   |  | (2,070  | )
| | Net earnings (loss) reported under US GAAP                               |  | 3,576   |   |  | 6,235   |   |  | (11,064 | )
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Net earnings (loss) per share reported under US GAAP                     |  |         |   |  |         |   |  |         |  
| | Basic and diluted                                                        |  | 0.15    |   |  | 0.26    |   |  | (0.48   | )
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Property, plant and equipment reported
      under Canadian GAAP         |  | 48,039  |   |  | 45,010  |   |  | 48,001  |  
| | Exploration and development costs related to mining
      properties c)  |  | (30,865 | ) |  | (31,258 | ) |  | (30,749 | )
| | Company acquisition                                                      |  | 9,645   |   |  | -       |   |  | -       |  
| | Cumulative depreciation and depletion d)                                 |  | 1,280   |   |  | (1,432  | ) |  | (1,507  | )
| | Property, plant and equipment reported under US
      GAAP               |  | 28,099  |   |  | 12,320  |   |  | 15,745  |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Minority interest under Canadian
      GAAP                              |  | 2,024   |   |  | 14,238  |   |  | 12,745  |  
| | Minority interest e)                                                     |  | -       |   |  | (10,866 | ) |  | (10,513 | )
| | Minority interest under US GAAP                                          |  | 2,024   |   |  | 3,372   |   |  | 2,232   |  
| | Accumulated other comprehensive income under Canadian
      GAAP         |  | (236    | ) |  | 352     |   |  | -       |  
| | Difference in accounting related to
      investments a)                 |  | 90      |   |  | 88      |   |  | -       |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Accumulated other comprehensive
      income under US GAAP               |  | (146    | ) |  | 440     |   |  | -       |  
| |                                                                          |  |         |   |  |         |   |  |         |  
| | Shareholders equity reported under
      Canadian GAAP                  |  | 67,018  |   |  | 61,813  |   |  | 54,690  |  
| | Difference in accounting related to
      exploration costs c)           |  | (30,865 | ) |  | (31,258 | ) |  | (30,749 | )
| | Depreciation and depletion d)                                            |  | 1,280   |   |  | (1,432  | ) |  | (1,507  | )
| | Difference in accounting related to
      investments a)                 |  | -       |   |  | -       |   |  | 323     |  
| | Difference in accounting related to share
      of a minority partner e) |  | 9,645   |   |  | 10,866  |   |  | 10,513  |  
| | Shareholders equity reported under US GAAP                              |  | 47,078  |   |  | 39,989  |   |  | 33,270  |  

23

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|19. | Effect of applying United States generally accepted
      accounting principles  (continued)
|--- | --------------------------------------------------------------------------------------------
|    |                                                                                             

| |                                                                       |  | 2008    |   |  | 2007  |   |  | 2006    |  
| | --------------------------------------------------------------------- |  | ------- | - |  | ----- | - |  | ------- | -
| |                                                                       |  | **$**   |   |  | $     |   |  | $       |  
| |                                                                       |  |         |   |  |       |   |  |         |  
| | Cash flow from operating activities under Canadian GAAP               |  | 12,117  |   |  | 5,999 |   |  | 1,648   |  
| | Exploration and development costs related
    to mining properties c) |  | 393     |   |  | (509  | ) |  | (20,593 | )
| | Flow-through shares f)                                                |  | -       |   |  | -     |   |  | (2,070  | )
| | Cash flow from (used in) operating activities under US GAAP           |  | 12,510  |   |  | 5,490 |   |  | (21,015 | )
| | Cash flow from (used in) investing activities under Canadian GAAP     |  | (10,647 | ) |  | 4,201 |   |  | (20,306 | )
| | Exploration and development costs related
    to mining properties c) |  | (393    | ) |  | 509   |   |  | 20,593  |  
| | Cash flow from (used in) investing activities under US GAAP           |  | (11,040 | ) |  | 4,710 |   |  | 287     |  
| | Cash flow from (used in) financing activities under Canadian GAAP     |  | (2,740  | ) |  | 965   |   |  | 20,105  |  
| | Flow-through shares f)                                                |  | -       |   |  | -     |   |  | 2,070   |  
| | Cash flow from (used in) financing activities under US GAAP           |  | (2,740  | ) |  | 965   |   |  | 22,175  |  

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | Short-term investments acquired before December 31, 2006
      were classified as held-for-trading and were recorded at fair value and
      changes in value were accounted for in earnings under SFAS-115. Following
      the adoption of Section 3855 of the CICA Handbook, on January 1, 2007, the
      Company classified the short-term investments acquired in 2007 and 2008 as
      available-for-sale. These investments must be recorded at fair value and
      changes to their value must be included in other comprehensive
    income.                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | Under US GAAP, the cost of stock based compensation must
      take into account a factor for employee turnover, related to employees
      having received such stock options, and reduce the cost
  accordingly.                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c) | Under Canadian GAAP, exploration and development costs
      incurred, subsequent to the date of establishing that a property has
      mineral resources which have the potential of being economically
      recoverable are capitalized to property, plant and equipment. Under United
      States Securities and Exchange Commission (SEC) guidelines, all costs
      incurred before a commercially mineable deposit is established, generally
      by completing a bankable feasibility study, must be charged to earnings as
      incurred.                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | d) | Depreciation calculated under US GAAP is different than
      the amount calculated under Canadian GAAP as buildings and equipment
      relating to mining properties, which commercial viability has yet to be
      determined, are depreciated using the straight-line method based on their
      anticipated useful life. Under Canadian GAAP, this expense is capitalized.
      Following the start of commercial production, capitalized development
      costs are depreciated according to the units-of-production method, using
      proven and probable reserves.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | e) | Amounts represent the impact on the share of a minority
      interest to the adjustments described in c) and d) related to expenses
      attributable to the Island Gold project.                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | f) | Under US GAAP, the premium paid on flow-through shares
      issued must be recognized as a liability when these shares are issued;
      under GAAP in Canada, the tax effect of the renouncement of the
      deductibility of exploration expenses by the Company is deducted from
      shareholders equity on the date of such
renouncement.                                                                                                                                                                                                                              

24

---

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Years ended December 31, 2008, 2007 and 2006 (in thousands of
Canadian dollars)

|19. | Effect of applying United States generally accepted accounting principles (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | New Accounting Pronouncement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In September 2006, the FASB issued FAS Statement No 157, Fair Value Measurements (FAS 157). FAS 157 provides guidance on how to use fair values to measure assets and liabilities and applies whenever other
standards require or permit assets or liabilities to be measured at fair value. Expanded disclosures about the use of fair value to measure assets and liabilities are also required. The adoption of FAS 157, on January 1, 2008, had no material impact
on the consolidated financial statements of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In February 2007, the FASB issued FAS No. 159 The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159). This Statement permits entities to choose to evaluate many financial instruments
and certain other items at fair value. The provisions of FAS 159 were adopted January 1, 2008. The Company did not elect the Fair Value Option for any additional items.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (FAS 141R), which replaces FAS 141 and SFAS no. 160, Non-controlling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51 (FAS 160). FAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any controlling interest; 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. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. FAS 141R and FAS 160 shall be applied
prospectively on or after an entitys fiscal year that begins on or after December 15, 2008. The Company is currently assessing the impact that FAS 141R and FAS 160 will have on its consolidated financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, which identifies the sources of accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented in conformity with GAAP. SFAS No. 162 will become effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section
411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS No. 162 is not expected to have a material impact on our consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In March 2008, the FASB issued SFAS No. 161 Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161), to enhance the current disclosure
framework in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. SFAS No. 161 amends and expands the disclosures required by SFAS No. 133 so that they provide an enhanced understanding of i) how and
why an entity uses derivative instruments, ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and iii) how derivative instruments affect an entitys financial position,
financial performance, and cash flows. SFAS No. 161 is effective for both interim and annual reporting periods beginning after November 15, 2008. We are currently evaluating the potential impact of this statement on our consolidated financial
statements and at this time we do not anticipate a material effect.                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|20. | Comparative figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Certain comparative figures provided for fiscal years 2007 and 2006 have been reclassified to conform with the presentation adopted for the fiscal year ended December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

25

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