EXHIBIT 99.2



Management’s
Responsibility for the Consolidated Financial Statements



The accompanying consolidated financial
statements of Claude Resources Inc. are the responsibility of Management and have been approved by the Board of Directors.



The consolidated financial statements have
been prepared by Management in conformity with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”). The consolidated financial statements include amounts that are based
on estimates and judgments. Financial information used elsewhere in the annual report is consistent with that in the financial
statements.



The Management of the Company, in furtherance
of the integrity and objectivity of data in the financial statements, has developed and maintains a system of internal accounting
controls. These internal accounting controls provide reasonable assurance that financial records are reliable, form a proper basis
for preparation of financial statements and that assets are properly accounted for and safeguarded. The internal accounting control
process includes Management’s communication to employees of policies which govern ethical business conduct.



The Board of Directors carries out its
responsibility for the consolidated financial statements in this annual report principally through its audit committee, consisting
of independent directors. The audit committee reviews the Company’s annual consolidated financial statements and recommends
their approval to the Board of Directors. The shareholders’ auditors have full access to the audit committee, with and without
Management being present.



These consolidated financial statements
have been examined by the shareholders’ auditors, KPMG LLP, Chartered Accountants, in accordance with Canadian generally
accepted auditing standards and the Public Company Accounting Oversight Board (United States).



|/s/ Neil McMillan       | /s/ Rick Johnson, C.A.    
|----------------------- | --------------------------
|Neil McMillan           | Rick Johnson, C.A.        
|President and           | Vice President Finance and
|Chief Executive Officer | Chief Financial Officer   



Saskatoon, Canada

March 30, 2012















| | KPMG LLP                     |  | Telephone | (306) 934-6200
| | ---------------------------- |  | --------- | --------------
| | Chartered Accountants        |  | Fax       | (306) 934-6233
| | 600-128 4th Avenue South     |  | Internet  | www.kpmg.ca   
| | SaskatoonSaskatchewanS7K 1M8 |  |           |               
| | Canada                       |  |           |               



Report of
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders of Claude Resources Inc.



We have audited the accompanying consolidated financial statements
of Claude Resources Inc., which comprise the consolidated statements of financial position as at December 31, 2011, December 31,
2010 and January 1, 2010, the consolidated statements of income, comprehensive income, shareholders’ equity and cash flows
for the years ended December 31, 2011 and December 31, 2010, and notes, comprising a summary of significant accounting policies
and other explanatory information.



Management’s
responsibility for the consolidated financial statements



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



Auditors’
responsibility



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



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



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



Opinion



In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position of Claude Resources Inc. as at December 31, 2011, December
31, 2010 and January 1, 2010, and its consolidated financial performance and its consolidated cash flows for the years ended December
31, 2011 and December 31, 2010 in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board.



KPMG LLP, is a Canadian limited liability partnership
and a member firm of the KPMG

network of independent member firms affiliated with
KPMG International Cooperative

(“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.



Page 2







Other Matter



We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Claude Resources Inc.’s internal control over financial reporting
as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 30, 2012 expressed an unqualified
opinion on the effectiveness of Claude Resources Inc.’s internal control over financial reporting.





Chartered Accountants



Saskatoon, Canada

March 30, 2012





Page 3









Consolidated Statements of Financial Position

(In Thousands of Canadian Dollars)



|                                              |  |      |    |  | DECEMBER 31 |   |         | DECEMBER 31 |  |   | JANUARY 1 |  
|--------------------------------------------- |  | ---- | -- |  | ----------- | - | ------- | ----------- |  | - | --------- | -
|                                              |  |      |    |  | 2011        |   |         | 2010        |  |   | 2010      |  
|                                              |  | Note |    |  |             |   |         | (Note 26)   |  |   | (Note 26) |  
|Assets                                        |  |      |    |  |             |   |         |             |  |   |           |  
|Cash and cash equivalents                     |  |      |    |  |             | $ | 2,529   |             |  | $ | 6,401     |  
|Restricted cash                               |  |      | 5  |  |             |   | -       |             |  |   | 4,389     |  
|Short-term investments                        |  |      | 6  |  |             |   | 33,168  |             |  |   | -         |  
|Accounts receivable                           |  |      |    |  |             |   | 2,714   |             |  |   | 2,716     |  
|Inventories                                   |  |      | 7  |  |             |   | 13,366  |             |  |   | 9,283     |  
|Prepaid expenses and deposits                 |  |      |    |  |             |   | 227     |             |  |   | 496       |  
|Assets related to discontinued operation      |  |      | 9  |  |             |   | -       |             |  |   | -         |  
|Current assets                                |  |      |    |  |             |   | 52,004  |             |  |   | 23,285    |  
|                                              |  |      |    |  |             |   |         |             |  |   |           |  
|Mineral properties                            |  |      | 8  |  |             |   | 149,794 |             |  |   | 106,479   |  
|Deferred income tax asset                     |  |      | 20 |  |             |   | 998     |             |  |   | -         |  
|Investments                                   |  |      | 10 |  |             |   | 2,854   |             |  |   | 4,328     |  
|Deposits for reclamation costs                |  |      | 11 |  |             |   | 2,237   |             |  |   | 2,277     |  
|Non-current assets                            |  |      |    |  |             |   | 155,883 |             |  |   | 113,084   |  
|Total assets                                  |  |      |    |  |             | $ | 207,887 |             |  | $ | 136,369   |  
|                                              |  |      |    |  |             |   |         |             |  |   |           |  
|Liabilities                                   |  |      |    |  |             |   |         |             |  |   |           |  
|Accounts payable and accrued liabilities      |  |      |    |  |             | $ | 5,737   |             |  | $ | 4,779     |  
|Loans and borrowings                          |  |      | 13 |  |             |   | 3,015   |             |  |   | 13,441    |  
|Liabilities related to discontinued operation |  |      | 9  |  |             |   | -       |             |  |   | -         |  
|Net royalty obligation                        |  |      | 12 |  |             |   | 854     |             |  |   | 815       |  
|Current liabilities                           |  |      |    |  |             |   | 9,606   |             |  |   | 19,035    |  
|                                              |  |      |    |  |             |   |         |             |  |   |           |  
|Loans and borrowings                          |  |      | 13 |  |             |   | 11,238  |             |  |   | 873       |  
|Net royalty obligation                        |  |      | 12 |  |             |   | 4,435   |             |  |   | 5,583     |  
|Decommissioning and reclamation               |  |      | 11 |  |             |   | 9,713   |             |  |   | 4,810     |  
|Non-current liabilities                       |  |      |    |  |             |   | 25,386  |             |  |   | 11,266    |  
|                                              |  |      |    |  |             |   |         |             |  |   |           |  
|Shareholders’ equity                          |  |      |    |  |             |   |         |             |  |   |           |  
|Share capital                                 |  |      | 14 |  |             |   | 180,531 |             |  |   | 122,751   |  
|Contributed surplus                           |  |      |    |  |             |   | 4,796   |             |  |   | 3,089     |  
|Accumulated deficit                           |  |      |    |  |             |   | (13,071 | )           |  |   | (22,525   | )
|Accumulated other comprehensive income        |  |      |    |  |             |   | 639     |             |  |   | 2,753     |  
|Total shareholders’ equity                    |  |      |    |  |             |   | 172,895 |             |  |   | 106,068   |  
|Total liabilities and shareholders’ equity    |  |      |    |  |             | $ | 207,887 |             |  | $ | 136,369   |  
|                                              |  |      |    |  |             |   |         |             |  |   |           |  
|Subsequent event                              |  |      | 25 |  |             |   |         |             |  |   |           |  



|                                                             |  |                          
|------------------------------------------------------------ |  | -------------------------
|See accompanying notes to consolidated financial statements. |  |                          
|                                                             |  |                          
|On behalf of the Board:                                      |  |                          
|                                                             |  |                          
|/s/ Ted J. Nieman                                            |  | /s/ Ronald J. Hicks, CA  
|Ted J. Nieman                                                |  | Ronald J. Hicks, CA      
|Chairman                                                     |  | Chairman, Audit Committee



Page 4









Consolidated Statements of Income

(In Thousands of Canadian Dollars, except per share amounts)



|                                                    |  |      |    |  | DECEMBER 31 |  
|--------------------------------------------------- |  | ---- | -- |  | ----------- | -
|                                                    |  |      |    |  | 2011        |  
|                                                    |  | Note |    |  |             |  
|                                                    |  |      |    |  |             |  
|Revenue                                             |  |      |    |  |             | $
|                                                    |  |      |    |  |             |  
|Mine Operating:                                     |  |      |    |  |             |  
|Production costs                                    |  |      |    |  |             |  
|Depreciation and depletion                          |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|Profit from mining operations                       |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|General and administrative                          |  |      |    |  |             |  
|Finance expense                                     |  |      | 15 |  |             |  
|Finance and other income                            |  |      | 16 |  |             |  
|Write-down of exploration property                  |  |      | 8  |  |             |  
|(Gain) on sale of exploration property              |  |      | 10 |  |             |  
|(Gain) loss on investments                          |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|Profit from continuing operations before income tax |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|Deferred income tax expense (recovery)              |  |      | 20 |  |             |  
|                                                    |  |      |    |  |             |  
|Profit from continuing operations                   |  |      |    |  |             |  
|                                                    |  |      |    |  |             |  
|Profit from discontinued operation                  |  |      | 9  |  |             |  
|                                                    |  |      |    |  |             |  
|Net profit                                          |  |      |    |  |             | $
|                                                    |  |      |    |  |             |  
|Net earnings per share                              |  |      | 21 |  |             |  
|Basic and diluted                                   |  |      |    |  |             |  
|From continuing operations                          |  |      |    |  |             | $
|Net earnings                                        |  |      |    |  |             | $
|                                                    |  |      |    |  |             |  
|Basic                                               |  |      |    |  |             |  
|Diluted                                             |  |      |    |  |             |  



See accompanying notes to consolidated financial statements.



Consolidated Statements of Comprehensive Income

(In Thousands of Canadian Dollars)



|                                                                               |  |  |    |  | DECEMBER 31 |  
|------------------------------------------------------------------------------ |  |  | -- |  | ----------- | -
|                                                                               |  |  |    |  | 2011        |  
|                                                                               |  |  |    |  |             |  
|                                                                               |  |  |    |  |             |  
|Net profit                                                                     |  |  |    |  |             | $
|                                                                               |  |  |    |  |             |  
|Other comprehensive income (loss)                                              |  |  |    |  |             |  
|Loss (gain) on available-for-sale securities transferred to profit, net of tax |  |  | 20 |  |             |  
|Unrealized gain (loss) on available-for-sale securities, net of tax            |  |  | 20 |  |             |  
|Other comprehensive income (loss)                                              |  |  |    |  |             |  
|Total comprehensive income                                                     |  |  |    |  |             | $



See accompanying notes to consolidated financial statements.



Page 5









Consolidated Statements of Shareholders' Equity

(In Thousands of Canadian Dollars)



|                                              |  | DECEMBER 31 |        
|--------------------------------------------- |  | ----------- | -------
|                                              |  | 2011        |        
|                                              |  |             |        
|                                              |  |             |        
|Share Capital                                 |  |             |        
|Balance, beginning of year                    |  | $           | 122,751
|Common shares and warrants issued             |  |             | 57,496 
|Transfers from contributed surplus            |  |             | 284    
|Balance, end of year                          |  | $           | 180,531
|                                              |  |             |        
|Contributed Surplus                           |  |             |        
|Balance, beginning of year                    |  | $           | 3,089  
|Stock-based compensation                      |  |             | 1,991  
|Transfers to share capital                    |  |             | (284   
|Balance, end of year                          |  | $           | 4,796  
|                                              |  |             |        
|Accumulated Deficit                           |  |             |        
|Balance, beginning of year                    |  | $           | (22,525
|Net profit                                    |  |             | 9,454  
|Balance, end of year                          |  | $           | (13,071
|                                              |  |             |        
|Accumulated Other Comprehensive Income (Loss) |  |             |        
|Balance, beginning of year                    |  | $           | 2,753  
|Other comprehensive income (loss)             |  |             | (2,114 
|Balance, end of year                          |  | $           | 639    
|                                              |  |             |        
|Shareholders' equity, end of year             |  | $           | 172,895



See accompanying notes to consolidated financial statements.



Page 6









Consolidated Statements of Cash Flows

(In Thousands of Canadian Dollars)



|                                                                      |  |      |    |  | DECEMBER 31 |  
|--------------------------------------------------------------------- |  | ---- | -- |  | ----------- | -
|                                                                      |  |      |    |  | 2011        |  
|                                                                      |  | Note |    |  |             |  
|                                                                      |  |      |    |  |             |  
|Cash flows from (used in) operating activities                        |  |      |    |  |             |  
|                                                                      |  |      |    |  |             |  
|Net profit                                                            |  |      |    |  |             | $
|                                                                      |  |      |    |  |             |  
|Adjustments for non-cash items:                                       |  |      |    |  |             |  
|Depreciation and depletion                                            |  |      |    |  |             |  
|Finance expense                                                       |  |      |    |  |             |  
|Finance and other income                                              |  |      |    |  |             |  
|(Gain) loss on investments                                            |  |      | 10 |  |             |  
|Stock-based compensation                                              |  |      |    |  |             |  
|Write-down of exploration property                                    |  |      | 8  |  |             |  
|Gain on sale of exploration property                                  |  |      | 10 |  |             |  
|Gain on sale of discontinued operation                                |  |      | 9  |  |             |  
|Deferred income tax expense (recovery)                                |  |      | 20 |  |             |  
|                                                                      |  |      |    |  |             |  
|Net changes in non-cash operating working capital:                    |  |      |    |  |             |  
|Accounts receivable                                                   |  |      |    |  |             |  
|Inventories                                                           |  |      |    |  |             |  
|Prepaid expenses and deposits                                         |  |      |    |  |             |  
|Accounts payable and accrued liabilities                              |  |      |    |  |             |  
|Cash provided by operating activities                                 |  |      |    |  |             |  
|                                                                      |  |      |    |  |             |  
|Cash flows from investing activities:                                 |  |      |    |  |             |  
|Additions to mineral properties                                       |  |      |    |  |             |  
|Proceeds on disposition of discontinued operation                     |  |      |    |  |             |  
|Additions to discontinued operation                                   |  |      |    |  |             |  
|Reclamation deposits                                                  |  |      |    |  |             |  
|Restricted cash                                                       |  |      |    |  |             |  
|Increase in investments                                               |  |      |    |  |             |  
|Cash used in investing activities                                     |  |      |    |  |             |  
|                                                                      |  |      |    |  |             |  
|Cash flows from financing activities:                                 |  |      |    |  |             |  
|Proceeds from issue of common shares and warrants, net of issue costs |  |      |    |  |             |  
|Debenture redemption                                                  |  |      |    |  |             |  
|Demand loan repayments                                                |  |      |    |  |             |  
|Obligations under finance leases:                                     |  |      |    |  |             |  
|Proceeds                                                              |  |      |    |  |             |  
|Repayments                                                            |  |      |    |  |             |  
|Cash from financing activities                                        |  |      |    |  |             |  
|                                                                      |  |      |    |  |             |  
|Decrease in cash and cash equivalents                                 |  |      |    |  |             |  
|Cash and cash equivalents, beginning of year                          |  |      |    |  |             |  
|Cash and cash equivalents, end of year                                |  |      |    |  |             | $



See accompanying notes to consolidated financial statements.



Page 7











| | 1. | Corporate Information:
| | -- | ----------------------



Claude Resources Inc. (“Claude”
or the “Company”) is a company domiciled in Canada. The address of the Company’s registered office is at 1500,
410 – 22nd Street East, Saskatoon, Saskatchewan, S7K 5T6. Its principal office is located at 200, 224 –
4th Avenue South, Saskatoon, Saskatchewan, S7K 5M5.



Claude Resources Inc. is a gold producer
whose shares are listed on both the Toronto Stock Exchange (TSX-CRJ) and the NYSE Amex (NYSE Amex-CGR). The Company is also engaged
in the exploration and development of gold mineral reserves and mineral resources. The Company’s entire asset base is located
in Canada. Its main revenue generating asset is the 100 percent owned Seabee Gold Operation, located in northern Saskatchewan.
Claude also owns 100 percent of the 10,000 acre Madsen Property in the Red Lake gold camp of northwestern Ontario and has a 65
percent interest in the Amisk Gold Project in northeastern Saskatchewan as at December 31, 2011, which increased to a 100 percent
interest on February 1, 2012 (See Note 25).



| | 2. | Basis of Preparation:
| | -- | ---------------------



STATEMENT OF COMPLIANCE



These consolidated financial statements
for the year ended December 31, 2011 have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board. These consolidated financial statements are the Company’s first
annual financial statements prepared under IFRS and IFRS 1, First-time Adoption of International Financial Reporting Standards
(“IFRS 1") with a transition date to IFRS of January 1, 2010. Consequently, the comparative figures for 2010 and
the Company’s statement of financial position as at January 1, 2010 have been restated from Canadian Generally Accepted Accounting
Principles (“Canadian GAAP”) to comply with IFRS. The reconciliations to IFRS from the previously published Canadian
GAAP financial statements are summarized in Note 26.



These consolidated financial statements
were authorized for issue by the Company’s Board of Directors on March 30, 2012.



BASIS OF MEASUREMENT



These consolidated financial statements
have been prepared on the historical cost basis except for derivative financial instruments and available-for-sale financial assets,
which are measured at fair value.



FUNCTIONAL CURRENCY



These consolidated financial statements
are presented in Canadian dollars, which is the Company’s functional currency. All financial information presented in Canadian
dollars has been rounded to the nearest thousand, except per share amounts or as otherwise noted.



USE OF ESTIMATES AND JUDGMENTS



The preparation of the Company’s
consolidated financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements. Significant judgments, estimates and
assumptions are related to the useful lives and recoverability of mineral properties and deferred income tax assets, valuation
of inventory, provisions for decommissioning and reclamation, financial instruments and mineral reserves.



Although these estimates are based on Management’s
best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates.



Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised
and in any future periods affected.



Accounting judgments, estimates and assumptions,
and their application to accounting policies, that have the most significant effect on the amounts recognized in the consolidated
financial statements are described below:



Page 8







Decommissioning and Reclamation



The Company’s mining and exploration
activities are subject to various environmental laws and regulations. The Company estimates environmental obligations based on
the current legal and constructive requirements. The Company provides for the closure, reclamation and decommissioning of its operating
and development sites based on the estimated future costs using information available at the reporting date. Provision is made,
based on net present values, for decommissioning and land restoration costs as soon as the obligation arises.



Ore Reserve and Resource Estimates



Ore reserves are estimates of the amount
of ore that can be economically extracted from the Company’s mining properties. Estimating the quantities and grades of the
reserves and resources requires the size, shape and depth of the ore bodies to be determined by analyzing geological data such
as the logging and assaying of drill samples. This process may require complex and difficult geological judgments and calculations
to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates,
commodity prices, future capital requirements and production costs along with geological assumptions and judgments made in estimating
the size and grade of the ore body.



Because the economic assumptions used to
estimate the gold mineral reserves and resources change from year to year, and because additional geological data is generated
during the course of operations, estimates of the mineral reserves and resources may change from year to year. Changes in the reserve
or resource estimates may impact upon the carrying value of exploration and evaluation assets, mine properties, property, plant
and equipment, decommissioning and reclamation, recognition of deferred tax balances and depreciation and amortization charges.



At the end of each financial year, the
Company updates its estimate of proven and probable gold mineral reserves and resources. Depreciation of the Company’s mining
assets, included within the Mineral properties line item on the Statement of Financial Position, is prospectively adjusted, based
on these changes. The Company also monitors the accuracy of the estimate during the periods between annual updates for significant
changes to economic assumptions and geological data that could require an interim update to the estimate.



Exploration and Evaluation Expenditures



The application of the Company’s
accounting policy for exploration and evaluation expenditures requires judgment in determining whether future economic benefits
are likely either from future extraction or sale or where activities have not reached a stage which permits a reasonable assessment
of the existence of mineral reserves. The determination of a mineral resource is itself an estimation process that requires varying
degrees of uncertainty depending on sub-classification and these estimates directly impact the decision to continue the deferral
of exploration and evaluation expenditures. The accounting policy requires management to make certain estimates and assumptions
about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates
and assumptions made may change if new information becomes available. If, after an expenditure is capitalized, information becomes
available suggesting that the recovery of this expenditure is unlikely, the amount capitalized is written off in the statement
of comprehensive income in the period when the new information becomes available.



Impairment



At the end of each reporting period, the
Company assesses whether any indication of impairment exist. Where an indicator of impairment exists, an estimate of the recoverable
amount is made. Determining the recoverable amount requires the use of estimates and assumptions such as long-term commodity prices,
discount rates, future capital requirements, exploration potential and operating performance. Changes in circumstances may affect
these estimates and the recoverable amount.



Fair value for mineral properties is generally
determined as the present value of estimated future cash flows arising from the continued use of the assets, which includes estimates
such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant would
take into account. Cash flows are discounted to their present value using a post-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.



Page 9







Production Start Date



The Company assesses the stage of each
mine under construction to determine when a mine moves into commercial production. The criteria used to assess the start date of
commercial production are based on the unique nature of each mine construction project, such as the complexity of the geology and
its location. The Company considers various relevant criteria to assess when the mine construction phase is substantially complete
and the mine is ready for its intended use. At this point, deferred costs are reclassified from “Mines under construction”
to “Producing mines” and “Property, plant and equipment”. Some of the criteria will include, but are not
limited, to the following:



| | · | Completion of a reasonable period of testing of the mine plant and equipment;
| | - | -----------------------------------------------------------------------------

| | · | Ability to produce precious metal in saleable form;
| | - | ---------------------------------------------------

| | · | Ability to sustain certain levels of ongoing production of precious metals; and
| | - | -------------------------------------------------------------------------------

| | · | Production attaining a reasonable percentage of Mine Plan for a specified period of time.
| | - | -----------------------------------------------------------------------------------------



When a mine enters the production stage,
the capitalization of certain construction costs ceases and costs are either regarded as inventory or operating expense, except
for new capital costs which are capitalized. Depreciation and depletion commences at this time.



Taxation



Estimation of deferred taxes includes judgments
based on expected performance of the Company. Various factors are considered to assess taxes, including past operating results,
operational plan, expiration of tax losses and tax pools carried forward and tax planning strategies.



| | 3. | Significant Accounting Policies:
| | -- | --------------------------------



This summary of significant accounting
policies is a description of the accounting methods and practices that have been used in the preparation of these consolidated
financial statements. The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements and in preparing the opening IFRS statement of financial position at January 1, 2010 for the purposes of the
transition to IFRS, unless otherwise indicated.



The accounting policies have been applied
consistently by the Company and its wholly owned subsidiaries.



CONSOLIDATION PRINCIPLES



The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. These consolidated financial statements include the Company’s
proportionate share of joint ventures. Intercompany transactions have been eliminated on consolidation. The financial statements
of the subsidiaries are prepared using the same reporting dates as the Company.



INTERESTS IN JOINT VENTURES



A joint venture can take the form of a jointly controlled entity,
jointly controlled operation or jointly controlled asset. All joint ventures involve a contractual arrangement that establishes
joint control.



Reimbursement of the joint venture operator’s
costs



When Claude, acting as an operator, receives
reimbursement of direct costs charged to the joint venture, such charges represent reimbursement of costs that the operator incurred
as agent for the joint venture and therefore have no effect on the Statement of Income.



Jointly controlled assets



A jointly controlled asset involves joint
control and offers joint ownership by the Company and other venturers of assets contributed to or acquired for the purpose of the
joint venture, without the formation of a corporation, partnership or other entity.



Page 10







Where the Company’s activities are
conducted through jointly controlled assets, the Company recognizes its share of the jointly controlled assets and liabilities
it has incurred and related revenue and operating costs in the financial statements.



FOREIGN CURRENCY TRANSLATION



The Company’s functional and presentation
currency is the Canadian dollar. Transactions denominated in foreign currencies are translated to Canadian dollars at the rate
of exchange prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated
to Canadian dollars at the rate of exchange in effect at the date of the Statement of Financial Position. Non-monetary items are
translated at the rate in effect at the date of the transaction. Exchange gains and losses on these transactions are included in
profit (loss).



FINANCIAL INSTRUMENTS



Non-derivative Financial Assets



The Company initially recognizes loans
and receivables and deposits on the date they originate. All other financial assets (including assets designated at fair value
through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions
of the instrument.



The Company derecognizes a financial asset
when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash
flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred.



Financial assets and liabilities are offset
and a net asset amount is presented in the Statement of Financial Position when, and only when, the Company has a legal right to
offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.



The Company’s non-derivative financial
assets include: held-to-maturity financial assets; loans and receivables; and available-for-sale financial assets.



Held-to-maturity financial assets



If the Company has the positive intent
and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity
financial assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment
losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity
would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying
investment securities as held-to-maturity for the current and the following two fiscal years.



The Company’s held-to-maturity financial
assets are deposits for reclamation costs.



Loans and receivables



Loans and receivables are financial assets
with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized
cost using the effective interest method, less any impairment losses.



The Company’s loans and receivables
are comprised of: cash and cash equivalents; accounts receivable; and short-term investments.



Cash and cash equivalents comprise cash
balances and deposits with original maturities of three months or less. Bank overdrafts, if utilized, are repayable on demand,
form an integral part of the Company’s cash management and are included as a component of cash and cash equivalents for the
purpose of the Statement of Cash Flows.



Page 11







Available-for-sale financial assets



Available-for-sale financial assets are
non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.
The Company’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial
recognition, these assets are measured at fair value and changes therein, other than impairment losses, are recognized in other
comprehensive income and presented within equity. When an investment is derecognized either through sale or impairment that is
other than temporary, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.



Non-derivative Financial Liabilities



The Company initially recognizes debt securities
issued and subordinated liabilities on the date that they originate. All other financial liabilities (including liabilities designated
at fair value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual
provisions of the instrument.



The Company derecognizes a financial liability
when its contractual obligations are discharged, cancelled or expire.



The Company has the following non-derivative
financial liabilities: loans and borrowings; bank overdrafts in the form of a line of credit; accounts payable and accrued liabilities;
and the Company’s debenture.



Such financial liabilities are recognized
initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities
are measured at amortized cost using the effective interest method.



Share Capital



Common shares



Common shares are classified as equity.
Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax
effects.



Flow-through shares



From time to time, the Company may finance
a portion of its exploration activities through the issue of flow-through shares. The premium paid for flow through shares in excess
of the market value of the shares without the flow-through features at the time of issue is credited to other liabilities and included
in income at the time the qualifying expenditures are made.



Debenture



The Company’s debenture was issued
with common share purchase warrants. The debenture and common share purchase warrants are presented separately on the Company’s
Statement of Financial Position. Transaction costs incurred with the completion of this debenture have been netted against the
proceeds received. The liability portion of the debenture has been designated as an other financial liability and was initially
recognized at fair value. Subsequent to initial recognition, the debenture is measured at amortized cost using the effective interest
method. The common share purchase warrants are not remeasured subsequent to initial recognition.



Derivative and Other Financial Instruments



Derivative financial instruments, which
include foreign exchange and gold derivative contracts, are not designated as hedges. These instruments are recorded using the
mark-to-market method of accounting whereby instruments are recorded in the consolidated Statement of Financial Position at their
fair value as either an asset or liability with changes in fair value recognized in profit or loss. Transaction costs are expensed
as incurred.



Effective Interest Rate Method



The Company utilizes the effective interest
rate method when accounting for certain of its financial instruments. The effective interest rate method is a method of calculating
the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of
allocating the interest income or interest expense over the relevant period.  The effective interest rate is the rate that
discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate,
a shorter period to the net carrying amount of the financial asset or financial liability.  When calculating the effective
interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument.



Page 12







INVENTORIES



Inventories are comprised of broken ore,
gold in-circuit and consumable materials and supplies. Broken ore represents material that, at the time of extraction, the Company
expects to process into a saleable form and sell at a profit. Ore is recorded as an asset that is classified within inventory as
material is extracted from underground mines. Ore contained in stockpiles is initially measured by estimating the number of tonnes
added and removed from the stockpile, and then converted to estimated ounces of gold contained therein based on assay data and
applying estimated metallurgical recovery rates (based on the expected processing method). Stockpiled ore tonnages are verified
by periodic surveys. Costs are allocated to ore stockpiles based on quantities of material stockpiled (measured in ounces) using
current mining costs incurred up to the point of stockpiling the ore and include allocations of overheads, depreciation, depletion
and amortization relating to mining operations. As ore is processed, costs are removed based on recoverable quantities of gold
and each stockpile’s average cost per unit.



Ore is accumulated in stockpiles which
are subsequently processed into gold dore in a saleable form under a mine plan that takes into consideration optimal scheduling
of production of the Company’s reserves, present plant capacity and the market price of gold. Gold contained in the milling
circuit represents gold that the Company counts as production but is not yet in a saleable form. Gold inventory, which includes
gold contained in the milling circuit and in stockpiled ore on surface, is valued at the lower of cost and net realizable value.
Costs include labour, equipment costs and operating overhead.



Material and supplies inventory is valued
at the lower of cost and net realizable value. Any provision for obsolescence is determined by reference to specific stock items
identified as obsolete.



MINERAL PROPERTIES



The Company holds various positions in
mining interests, including exploration rights, mineral claims, mining leases, unpatented mining leases and options to acquire
mining claims or leases. All of these positions are classified as mineral properties for financial statement purposes.



Recognition and Measurement



All costs related to the acquisition, exploration
and development of mineral properties and the development of milling assets are capitalized on a property by property basis. Costs
include expenditure that is directly attributable to the acquisition of the asset. Development costs on producing properties include
only expenditures incurred to develop reserves or for delineation of existing reserves. Interest on debt directly related to the
acquisition and development of mineral properties is capitalized until commencement of commercial production. Expenditures for
maintenance and repairs are charged to operating expenses as incurred. The cost of self-constructed assets includes the cost of
materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended
use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying
assets. Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.



The decision to develop a mine property
within a project area is based on an assessment of the commercial viability of the property and the availability of financing.
Once the decision to proceed to development is made, development and other expenditures relating to the project area are reclassified
and disclosed as part of mineral properties with the intention that these will be depreciated by charges against earnings from
future mining operations. No depreciation is charged against the property until commercial production commences. After a mine property
has been brought into commercial production, costs of additional work on that property are expensed as incurred, except for new
capital costs which are capitalized.



When material components of property, plant
and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment
and depreciated separately.



Gains and losses on disposal of an item
of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant
and equipment, and are recognized within other income in profit or loss.



Page 13







Subsequent Costs



The cost of replacing a part of an item
of property, plant and equipment is added to the carrying amount of the item if it is probable that the future economic benefits
embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part
is removed. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.



Depreciation and Depletion



Depreciation and depletion is calculated
using the depreciable amount, which is the cost of an asset, less its residual value using either the straight-line method or the
units of production method. Depreciation and depletion is calculated over the net book value of the asset using the units of production
method. Land is shown at cost and not depreciated or depleted.



Upon commencement of commercial production,
the cost of mine development, mine buildings, plant and equipment directly used in production are amortized against future income
using the shorter of the unit of production method over estimated recoverable ore reserves or the useful life of the asset. Estimated
recoverable ore reserves include proven and probable mineral reserves. Costs which are not considered economically recoverable
through mining operations or through sale of reserves, or are related to properties which are allowed to lapse, are expensed.



Mobile equipment and other general assets
not directly related to production are depreciated using the straight-line method over the estimated useful lives of 2 to 10 years.



Depreciation methods, useful lives and
residual values are reviewed at each financial year end and adjusted if appropriate.



EXPLORATION AND EVALUATION EXPENDITURES



Exploration and evaluation expenditures
are those expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources before
the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.



Exploration and evaluation expenditures
are capitalized as incurred. When the technical feasibility and commercial viability of extracting a gold resource are demonstrable,
capitalized exploration and evaluation assets are tested for impairment and then reclassified to mining assets.



LEASED ASSETS



Leases in terms of which the Company assumes
substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset
is measured at an amount equal to the lower of its cost or the present value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating
leases and the leased assets are not recognized in the Company’s statement of financial position.



DECOMMISSIONING AND RECLAMATION



The mining, extraction and processing activities
of the Company normally give rise to legal or constructive obligations for site closure or environmental restoration. Closure and
restoration can include property decommissioning and dismantling, removal or treatment of waste materials, as well as site and
land restoration. The Company provides for the closure, reclamation and decommissioning of its operating and development sites
based on the estimated future costs using information available at the reporting date. Costs included in the provision comprise
all closure and restoration activity expected to occur gradually over the life of the operation and at the time of closure. Routine
operating costs that may impact the ultimate closure and restoration activities, such as waste material handling conducted as a
normal part of a mining or production process, are not included in the provision.



The amount of the provision recognized
is estimated based on the risk adjusted costs required to settle the present obligation, discounted using a pre-tax risk-free discount
rate consistent with the probability weighted expected cash flows.



When the provision is initially recorded,
a corresponding asset is recognized. At each reporting date the restoration and rehabilitation provisions are remeasured in line
with changes in discount rates and timing or amounts of the costs to be incurred.



Page 14







Changes in the provision relating to mine
rehabilitation and restoration obligations, which are not the result of the current production of inventory, are added to or deducted
from the related asset, other than the unwinding of the discount which is recognized as a finance cost in the Statements of Income.
Changes to the provision for reclamation and remediation obligations related to operating mines, which are not the result of current
production of inventory, are recorded with an offsetting change to the related asset. For properties where mining activities have
ceased or are in reclamation, changes are charged directly to earnings.



IMPAIRMENT



Financial Assets



A financial asset not carried at fair value
through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired.
A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the
asset and that the loss event will have a negative effect on the estimated future cash flows of that asset.



Objective evidence that financial assets
(including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the
Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the
disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged
decline in its fair value below its cost is objective evidence of impairment.



At the end of each reporting period, the
Company assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. With respect
to available-for-sale securities, for which unrealized gains and losses are generally recognized in Other Comprehensive income
(“OCI), a significant or prolonged decline in the fair value of the investment below its cost may be evidence that the assets
are impaired. If objective evidence of impairment were to exist, the impaired amount (i.e. the unrealized loss) would be recognized
in profit (loss); any subsequent reversals would be recognized in OCI and would not flow back into profit (loss).



Impairment losses on available-for-sale
investment securities are recognized by transferring the cumulative loss that has been recognized in other comprehensive income,
and presented in unrealized gains/losses on available-for-sale financial assets in equity, to profit or loss. The cumulative loss
that is removed from other comprehensive income and recognized in profit or loss is the difference between the acquisition cost,
net of any principal repayment and amortization, and the current fair value, less any impairment loss previously recognized in
profit or loss.



If, in a subsequent period, the fair value
of an impaired available-for-sale investment security increases and the increase can be related objectively to an event occurring
after the impairment loss was recognized in profit or loss, then the impairment loss is reversed, with the amount of the reversal
recognized in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security
is recognized in other comprehensive income.



Non-Financial Assets



The carrying amounts of the Company’s
non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.



The recoverable amount of an asset or cash-generating
unit (“CGU”) is the greater of its value in use and its fair value less costs to sell.



Fair value less cost to sell is determined
as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and
willing parties. Fair value for mineral assets is generally determined as the present value of the estimated future cash flows
expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions
that an independent market participant would take into account. These cash flows are discounted by an appropriate discount rate
to arrive at a net present value of the asset.



Page 15







Value in use is determined as the present
value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual
disposal. Value in use is determined by applying assumptions specific to the Company’s continued use and cannot take into
account future development. These assumptions are different than those used in calculating fair value and consequently the value
in use calculation is likely to give a different result (usually lower) than a fair value calculation. The estimated future cash
flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.



For the purpose of impairment testing,
assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets.



An impairment loss is recognized if the
carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognized in profit (loss). Impairment
losses recognized in respect of CGUs are allocated first to reduce the carrying amount of goodwill, if any, allocated to the units,
and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.



Impairment losses recognized in prior periods
are assessed at each reporting date whenever events or changes in circumstances indicate that the impairment may have reversed.
If the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is recognized
immediately in profit (loss).



ASSETS RELATED TO DISCONTINUED OPERATION



Non-current assets that are expected to
be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification
as held for sale, the assets are re-measured in accordance with the Company’s accounting policies. Thereafter, generally,
the assets are measured at the lower of their carrying amount and fair value less cost to sell.



A discontinued operation is a component
of the Company’s business that represents a separate major line of business that has been disposed of or is held for sale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held
for sale. When an operation is classified as a discontinued operation, the comparative Statement of Income is restated as if the
operation had been discontinued from the start of the comparative period.



PROVISIONS



A provision is recognized if, as a result
of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable
that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance cost.



REVENUE RECOGNITION



Revenue from the sale of precious metals
is recognized when the significant risks and rewards of ownership have passed to the customer. This is when persuasive evidence
of an arrangement exists, title and insurance risk passes to the customer, collection is reasonably assured and the price is reasonably
determinable.



LEASE PAYMENTS



Payments made under operating leases are
recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an
integral part of the total lease expense, over the term of the lease.



Minimum lease payments made under finance
leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated
to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.



Page 16







INCOME TAXES



Income tax expense is comprised of current
and deferred taxes. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business
combination, or items recognized directly in equity or in other comprehensive income.



Current tax is the expected tax payable
or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date,
and any adjustments to tax payable in respect of previous years.



Deferred tax is recognized in respect of
temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.



A deferred tax asset is recognized for
unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits
will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.



EARNINGS PER SHARE



The Company presents basic and diluted
earnings per share (“EPS”) data for its common shares. Basic per share amounts are calculated using the weighted average
number of shares outstanding during the period. Diluted per share amounts are calculated based on the treasury-stock method, which
assumes that any proceeds obtained on exercise of options and warrants, along with any unrecognized stock-based compensation, would
be used by the Company to repurchase common shares at the average market price during the period. The weighted average number of
shares outstanding is then adjusted by the net change.



SHARE-BASED PAYMENTS



The Company has two stock-based compensation
plans which are described further in Note 14(a) and 14(b).



Stock Option Plan



The Company accounts for all stock option
awards using the fair-value method of accounting. Under this method, the Company recognizes compensation expense for the stock
options granted based on their grant date fair value, which is determined using the Black-Scholes option pricing model. The fair
value of the option is expensed over the vesting period with a corresponding amount recorded as contributed surplus. Consideration
received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share
capital.



Employee Share Purchase Plan



Under the Employee Share Purchase Plan
(“ESPP”), compensation expense is recognized as the fair value of the shares granted under the plan and is recognized
over the one year vesting period pursuant to the ESPP. Consideration received from the ESPP is recorded as share capital and amounts
recorded in contributed surplus related to the fair value of the shares granted under the plan are transferred to share capital
upon the issuance of shares. Shares issued pursuant to the ESPP are valued using the Black-Scholes option pricing model.



Page 17







| | 4. | Accounting Standards:
| | -- | ---------------------



Future Changes in Accounting Policies



Financial Instruments



IFRS 9, Financial Instruments (“IFRS
9”), was issued by the International Accounting Standards Board (“IASB”) on November 12, 2009 and will replace
IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in
IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash
flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the
multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. The Company
is currently evaluating the impact of IFRS 9 on its financial statements.



Consolidated Financial Statements



In May 2011, the IASB issued IFRS 10, Consolidated
Financial Statements. This new standard defines the principle of control and establishes control as the basis for determining
which entities are included in consolidated financial statements. The principle of control is based on three criteria: power over
the investee; exposure to variable returns from involvement in the investee; and the ability of the investor to use its power to
affect the amount of its returns. The standard requires control of an investee to be reassessed when the facts and circumstances
indicate that there have been changes to one or more of the criteria for determining control. This new standard supersedes the
requirements relating to consolidated financial statements in IAS 27, Consolidated and Separate Financial Statements (as
amended in 2009) and SIC-12, Consolidation – Special Purpose Entities. IFRS 10 is effective for the Company beginning
on January 1, 2013, with early adoption permitted. The Company does not expect the adoption of this standard to have a material
impact on its financial statements.



Joint Arrangements



IFRS 11, Joint Arrangements, was
issued by the IASB in May 2011 and is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted.
Under IFRS 11, joint arrangements are classified as either joint operations or joint ventures. Parties to a joint operation retain
the rights and obligations to individual assets and liabilities of the operation, while parties to a joint venture have rights
to the net assets of the venture. Any arrangement which is not structured through a separate entity or is structured through a
separate entity but such separation is ineffective such that the parties to the arrangement have rights to the assets and obligations
for the liabilities will be classified as a joint operation. Joint operations shall be accounted for in a manner consistent with
jointly controlled assets and operations whereby the Company’s contractual share of the arrangement’s assets, liabilities,
revenues and expenses are included in the consolidated financial statements. Any arrangement structured through a separate vehicle
that does effectively result in separation between the Company and the arrangement shall be classified as a joint venture and accounted
for using the equity method of accounting. Under the existing IFRS standard, the Company has the option to account for any interests
it has in joint ventures using proportionate consolidation or equity accounting. The extent of the impact of adoption of IFRS 11
has not yet been determined by the Company.



Disclosure of Interests in Other Entities



In May 2011, the IASB issued IFRS 12, Disclosure
of Interests in Other Entities. This new standard requires enhanced disclosures about an entity’s interest in subsidiaries,
joint arrangements, associates and unconsolidated structured entities. IFRS 12 contains new disclosure requirements for interests
the Company has in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Required disclosures aim
to provide readers of the financial statements with information to evaluate the nature of and risks associated with the Company’s
interests in other entities and the effects of those interests on the Company’s financial statements. IFRS 12 is effective
for the Company beginning on January 1, 2013. It is expected that IFRS 12 will increase the current level of disclosure related
to the Company’s interests in other entities upon adoption.



Fair Value Measurement



In May 2011, the IASB published IFRS 13,
Fair Value Measurement, which is effective prospectively for annual periods beginning on or after January 1, 2013. IFRS
13 replaces fair value measurement guidance contained in individual IFRSs, providing a single source of fair value measurement
guidance. The standard provides a framework for measuring fair value and establishes new disclosure requirements to enable readers
to assess the methods and inputs used to develop fair value measurements and for recurring valuations that are subject to measurement
uncertainty, the effect of those measurements on the financial statements. The Company intends to adopt IFRS 13 prospectively in
its financial statements for the annual period beginning on January 1, 2013. The extent of the impact of adoption of IFRS 13 has
not yet been determined.



Page 18







Presentation of Financial Statements



In June 2011, the International Accounting
Standards Board (“IASB”) issued IAS 1, Presentation of Items of OCI: Amendments to IAS 1 Presentation of Financial
Statements. The amendments stipulate the presentation of net profit and OCI and also require the Company to group items within
OCI based on whether the items may be subsequently reclassified to profit or loss. Amendments to IAS 1 are effective for the Company
beginning on January 1, 2012 with retrospective application and early adoption permitted. The Company does not expect the adoption
of the amendments to this standard to have a material impact on its financial statements.



Investments in Associates and Joint
Ventures



In May 2011, the IASB issued amendments
to IAS 28, Investments in Associates and Joint Ventures, which are effective for annual periods beginning on or after January
1, 2013 with early adoption permitted. Amendments to IAS 28 provide additional guidance applicable to accounting for interests
in joint ventures or associates when a portion of an interest is classified as held for sale or when the Company ceases to have
joint control or significant influence over an associate or joint venture. When joint control or significant influence over an
associate or joint venture ceases, the Company will no longer be required to re-measure the investment at that date. When a portion
of an interest in a joint venture or associate is classified as held for sale, the portion not classified as held for sale shall
be accounted for using the equity method of accounting until the sale is completed at which time the interest is reassessed for
prospective accounting treatment. The Company does not expect the amendments to IAS 28 to have a material impact on the financial
statements.



Offsetting Financial Assets and Liabilities



In December
2011, the IASB published Offsetting Financial Assets and Financial Liabilitiesand issued new disclosure requirements in
IFRS 7 Financial Instruments: Disclosures.The amendments to IAS 32 clarify that an entity currently has a legally
enforceable right to set-off if that right is not contingent on a future event, and enforceable both in the normal course of business
and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments
to IAS 32 also clarify when a settlement mechanism provides for net settlement or gross settlement that is equivalent to net settlement.
The amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that areoffset in the
statement of financial position, or subject to master netting arrangements or similar arrangements. The
effective date for the amendments to IAS 32 is annual periods beginning on or after January 1, 2014. The effective date for the
amendments to IFRS 7 is annual periods beginning on or after January 1, 2013. These amendments are to be applied retrospectively.The Company does not expect the amendments to IAS 32 to have a material impact on the financial statements.



| | 5. | Cash and Cash Equivalents:
| | -- | --------------------------



The Company only deposits cash surpluses
with major banks of high quality credit standing. Cash on hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements
of the Company, and earn interest at the respective short-term deposit rates.



Restricted Cash:



|                |  | DEC 31 |   |  | DEC 31 |   |       | JAN 1 | 
|--------------- |  | ------ | - |  | ------ | - | ----- | ----- | 
|                |  | 2011   |   |  | 2010   |   |       | 2010  | 
|Restricted cash |  | $      | - |  |        | $ | 4,389 |       | 



During 2010, the Company completed the
disposal of its oil and natural gas assets. Pursuant to the Company’s debenture agreement, the disposition triggered an offer
to repay its outstanding debentures. The net proceeds from that sale were placed in trust until January 14, 2011 to fund possible
debenture repayments. On January 14, 2011, $0.1 million of debentures were redeemed by debenture holders. Once paid, the balance
held in trust was released and deposited into the Company’s operating account.



| | 6. | Short-term Investments:
| | -- | -----------------------



Short-term investments are denominated
in Canadian dollars, are comprised of instruments with terms to maturity between three and 12 months and have stated interest rates
varying between 0.77 percent and 0.87 percent. Short-term investments are classified as loans and receivables.



Page 19







| | 7. | Inventories and Stockpiled Ore:
| | -- | -------------------------------



Details of the Company’s inventories and stockpiled ore
are as follows:



|                               |  |      |  |  | DEC 31 |   |        | DEC 31 |  |   | JAN 1 | 
|------------------------------ |  | ---- |  |  | ------ | - | ------ | ------ |  | - | ----- | 
|                               |  | Note |  |  | 2011   |   |        | 2010   |  |   | 2010  | 
|                               |  |      |  |  |        |   |        |        |  |   |       | 
|Gold in-circuit (1) (2)        |  |      |  |  |        | $ | 3,128  |        |  | $ | 1,471 | 
|Stockpiled ore (1) (2)         |  |      |  |  |        |   | 265    |        |  |   | 329   | 
|Materials and supplies (3)     |  |      |  |  |        |   | 9,973  |        |  |   | 7,483 | 
|Inventories and Stockpiled Ore |  |      |  |  |        | $ | 13,366 |        |  | $ | 9,283 | 



| | (1) | Depreciation and depletion of $0.7 million (December 31, 2010 - $0.4 million; January 1, 2010 -
$1.2 million) is included in the above noted balances.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | For the year ended December 31, 2011, the Company wrote-down $0.5 million of gold inventory (December
31, 2010 - $nil; January 1, 2010 - $nil).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | For the year ended December 31, 2011, the Company wrote-down $0.2 million of materials and supplies
inventory (December 31, 2010 - $0.3 million; January 1, 2010 - $nil).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8. | Mineral Properties:
| | -- | -------------------



Details of the Company’s property, plant and equipment
included in mineral properties are as follows:



Cost





|                                     |  |      |       |  | Property    |   |         |            |  |   | Exploration |   |  |       |        
|------------------------------------ |  | ---- | ----- |  | ----------- | - | ------- | ---------- |  | - | ----------- | - |  | ----- | -------
|                                     |  |      |       |  | acquisition |   |         | Buildings, |  |   | And         |   |  |       |        
|                                     |  |      |       |  | and mine    |   |         | plant and  |  |   | Evaluations |   |  |       |        
|                                     |  | Note |       |  | development |   |         | equipment  |  |   | assets      |   |  | Total |        
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Balance at January 1, 2010           |  |      | 26(c) |  |             | $ | 111,592 |            |  | $ | 94,387      |   |  | $     | 54,685 
|Additions                            |  |      |       |  |             |   | 11,897  |            |  |   | 10,354      |   |  |       | 14,284 
|Disposals                            |  |      |       |  |             |   | (2,642  | )          |  |   | (439        | ) |  |       | (1,513 
|Balance at December 31, 2010         |  |      |       |  |             | $ | 120,847 |            |  | $ | 104,302     |   |  | $     | 67,456 
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Balance at January 1, 2011           |  |      |       |  |             | $ | 120,847 |            |  | $ | 104,302     |   |  | $     | 67,456 
|Additions                            |  |      |       |  |             |   | 25,548  |            |  |   | 16,767      |   |  |       | 13,593 
|Transfers between groups             |  |      |       |  |             |   | 15,757  |            |  |   | -           |   |  |       | (15,757
|Balance at December 31, 2011         |  |      |       |  |             | $ | 162,152 |            |  | $ | 121,069     |   |  | $     | 65,292 
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Depreciation and impairment losses   |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Balance at January 1, 2010           |  |      | 26(c) |  |             | $ | 96,167  |            |  | $ | 76,270      |   |  | $     | 7,054  
|Depreciation                         |  |      |       |  |             |   | 4,509   |            |  |   | 5,644       |   |  |       | -      
|Disposals                            |  |      |       |  |             |   | (2,642  | )          |  |   | (317        | ) |  |       | (577   
|Write-down of exploration properties |  |      |       |  |             |   | -       |            |  |   | -           |   |  |       | 18     
|Balance at December 31, 2010         |  |      |       |  |             | $ | 98,034  |            |  | $ | 81,597      |   |  | $     | 6,495  
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Balance at January 1, 2011           |  |      |       |  |             | $ | 98,034  |            |  | $ | 81,597      |   |  | $     | 6,495  
|Depreciation for the period          |  |      |       |  |             |   | 5,482   |            |  |   | 6,260       |   |  |       | -      
|Write-down of exploration properties |  |      |       |  |             |   | -       |            |  |   | -           |   |  |       | 851    
|Balance at December 31, 2011         |  |      |       |  |             | $ | 103,516 |            |  | $ | 87,857      |   |  | $     | 7,346  
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|Carrying amounts                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|At January 1, 2010                   |  |      | 26(c) |  |             | $ | 15,425  |            |  | $ | 18,117      |   |  | $     | 47,631 
|At December 31, 2010                 |  |      |       |  |             | $ | 22,813  |            |  | $ | 22,705      |   |  | $     | 60,961 
|                                     |  |      |       |  |             |   |         |            |  |   |             |   |  |       |        
|At December 31, 2011                 |  |      |       |  |             | $ | 58,636  |            |  | $ | 33,212      |   |  | $     | 57,946 





Page 20







Exploration properties



Amounts reflected for exploration properties
not in commercial production represent costs incurred to date, net of write-downs, and are not intended to reflect present or future
values. The recoverability of these costs is dependent upon the discovery of economically recoverable ore reserves and the ability
to obtain necessary financing for the development of future profitable production from the properties or realization of sufficient
proceeds from the disposition of the properties.



During 2011, the Company reclassified exploration
and evaluations assets related to the Santoy 8 to mine development costs upon the property achieving technical feasibility and
economic viability.  In accordance with IFRS, the Company tested these costs for impairment upon transfer to mine development
and determined that no impairment charge was required.  Fair value less costs to sell was used to assess impairment and was
determined using a discounted cash flow approach that incorporated marketplace participant assumptions.  The cash flows were
discounted over an 8 year period at a post-tax rate of 11.3 percent.



Impairment loss



Upon transition to IFRS as at January
1, 2010, the Company tested its Seabee Gold Mine for impairment. The carrying value of the asset was compared against the
fair value less cost to sell. Fair value less cost to sell was determined using a discounted cash flow approach that
incorporated marketplace participant assumptions. The cash flows were discounted over a seven year period at a post-tax rate
of 11.3 percent. The Company determined that the carrying value of the Company’s CGU, the Seabee Gold Operation (which,
at January 1, 2010, consisted of the Seabee Mine, as the Santoy 8 Project had not achieved technical feasibility and
commercial viability), was in excess of its associated recoverable amount and an impairment of $13.1 million was calculated
and charged directly to retained earnings on transition to IFRS.



During the year ended December 31, 2010,
the Company tested its CGU, the Seabee Mine, and determined that the fair value less cost to sell of the asset was greater than
the carrying value; as such, an impairment charge was not required. Fair value less cost to sell was determined using a discounted
cash flow approach that incorporated marketplace participant assumptions. The cash flows were discounted over an eight year period
at a post-tax rate of 11.3 percent.



During the year ended December 31, 2011,
the Company tested its CGUs for indicators of impairment and determined that the fair value less cost to sell of the Company’s
Seabee Gold Mine CGU was greater than the carrying value; as such, an impairment charge was not required. Fair value less cost
to sell was determined using a discounted cash flow approach that incorporated marketplace participant assumptions. The cash flows
for the Seabee Mine were discounted over an eleven year period discounted at a post-tax rate of 10.0 percent.



Leased machinery



The Company leases production equipment
under a number of finance lease agreements. Some leases provide the Company with the option to purchase the equipment at a beneficial
price. Some leases are for specialized equipment and in these leases the Company can cancel the leases at its option, but is responsible
for reimbursing the lessor for any losses incurred. The leased equipment secures lease obligations (see Note 13). At December 31,
2011 the carrying amount of assets under finance leases included in buildings, plant and equipment was $7.9 (December 31, 2010:
$3.6 million; January 1, 2010: $4.0 million).



Security



The Company’s demand loans (Note
13) are secured by a general security agreement covering all of the Company’s assets. The Company’s debenture (Note
13) is secured by a general security agreement covering all of the Company's assets, except those subordinated to bank debt.



Page 21







Capitalized interest



Cumulative debenture interest costs of
$2.4 million at December 31, 2011 (December 31, 2010: $2.0 million; January 1, 2010: $1.4 million) relating to the Madsen project
have been capitalized in accordance with the Company’s accounting policy.



Mine Operating Costs by Function



|                                       |  | DEC 31 |        |   | DEC 31 |  
|-------------------------------------- |  | ------ | ------ | - | ------ | -
|                                       |  | 2011   |        |   | 2010   |  
|                                       |  |        |        |   |        |  
|Production costs                       |  | $      | 40,542 |   |        | $
|Depreciation and depletion             |  |        | 11,407 |   |        |  
|Write-down of exploration property     |  |        | 851    |   |        |  
|(Gain) on sale of exploration property |  |        | (1,131 | ) |        |  
|                                       |  | $      | 51,669 |   |        | $



| | 9. | Discontinued Operation:
| | -- | -----------------------



During 2010, the Company sold its remaining
oil and natural gas assets. As such, there were no Assets held for sale or related liabilities at December 31, 2011 or December
31, 2010 nor were there any results or cash flows from operations for the year ended December 31, 2011.



|                                         |  | DEC 31 |   |  | DEC 31 |   |   | JAN 1 | 
|---------------------------------------- |  | ------ | - |  | ------ | - | - | ----- | 
|                                         |  | 2011   |   |  | 2010   |   |   | 2010  | 
|                                         |  |        |   |  |        |   |   |       | 
|Assets                                   |  |        |   |  |        |   |   |       | 
|Accounts receivable                      |  | $      | - |  |        | $ | - |       | 
|Oil and natural gas properties           |  |        | - |  |        |   | - |       | 
|                                         |  | $      | - |  |        | $ | - |       | 
|                                         |  |        |   |  |        |   |   |       | 
|Liabilities                              |  |        |   |  |        |   |   |       | 
|Accounts payable and accrued liabilities |  | $      | - |  |        | $ | - |       | 
|Asset retirement obligations             |  |        | - |  |        |   | - |       | 
|                                         |  | $      | - |  |        | $ | - |       | 



The results of the discontinued operation were as follows:



|                                       |  | DEC 31 |   |  | DEC 31 |  
|-------------------------------------- |  | ------ | - |  | ------ | -
|                                       |  | 2011   |   |  | 2010   |  
|                                       |  |        |   |  |        |  
|Revenue                                |  |        |   |  |        |  
|Oil and natural gas (net of royalties) |  | $      | - |  |        | $
|                                       |  |        |   |  |        |  
|Expenses                               |  |        |   |  |        |  
|Operating                              |  |        | - |  |        |  
|Accretion                              |  |        | - |  |        |  
|                                       |  |        | - |  |        |  
|                                       |  |        |   |  |        |  
|Earnings from discontinued operation   |  | $      | - |  |        | $
|                                       |  |        |   |  |        |  
|Other income                           |  |        |   |  |        |  
|Gain on sale of assets                 |  |        | - |  |        |  
|Profit from discontinued operation     |  | $      | - |  |        | $



Page 22







The cash flows provided by the discontinued
operation were as follows:



|                                                              |  | DEC 31 |   |  | DEC 31 |  
|------------------------------------------------------------- |  | ------ | - |  | ------ | -
|                                                              |  | 2011   |   |  | 2010   |  
|                                                              |  |        |   |  |        |  
|Profit from discontinued operation                            |  | $      | - |  |        | $
|Adjustments for:                                              |  |        |   |  |        |  
|Accretion                                                     |  |        | - |  |        |  
|Gain on sale of assets                                        |  |        | - |  |        |  
|Decrease in Accounts receivable                               |  |        | - |  |        |  
|Decrease in Accounts payable and accrued liabilities          |  |        | - |  |        |  
|Cash flows from operations provided by discontinued operation |  | $      | - |  |        | $



| | 10. | Investments:
| | --- | ------------



|                                                        |  | DEC 31 |        |   | DEC 31 |   |       | JAN 1 | 
|------------------------------------------------------- |  | ------ | ------ | - | ------ | - | ----- | ----- | 
|                                                        |  | 2011   |        |   | 2010   |   |       | 2010  | 
|                                                        |  |        |        |   |        |   |       |       | 
|Available-for-sale securities, beginning of year        |  | $      | 4,328  |   |        | $ | 643   |       | 
|Disposition of available-for-sale securities            |  |        | (197   | ) |        |   | -     |       | 
|Acquisition of available-for-sale securities (1)        |  |        | 1,131  |   |        |   | 749   |       | 
|Permanent write-down of available-for-sale securities   |  |        | (74    | ) |        |   | (207  | )     | 
|Unrealized gain (loss) on available-for-sale securities |  |        | (2,334 | ) |        |   | 3,143 |       | 
|Available-for-sale securities, end of year              |  | $      | 2,854  |   |        | $ | 4,328 |       | 



| | (1) | Acquisition in 2011 relates to shares in a public company received as settlement for Claude’s
disposition of a mineral property interest. Acquisition of $749,000 in 2010 includes $698,000 worth of shares in a public company
received as settlement for Claude’s disposition of a mineral property interest.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the year ended December 31, 2011,
the Company disposed of certain of its available for sale securities, resulting in a gain on sale of $0.1 million (December 31,
2010 - $nil; January 1, 2010 - $nil). This amount was reclassified to profit from Other comprehensive income.



At December 31, 2011, the Company reviewed
its portfolio of available-for-sale securities in order to assess whether there was objective evidence of impairment. Factors considered
in the Company’s assessment included the length of time and extent which to fair value was below cost and current conditions
specific to the investment. At December 31, 2011, the Company concluded that objective evidence of impairment existed for one of
its available-for-sale investments. The fair value of the investment, recorded in the Consolidated Statement of Financial Position,
was $0.1 million compared to the cost of $0.2 million; as a result, the unrealized loss of $0.1 million, which was included in
Other comprehensive income, was charged against profit.



By holding these investments, the Company
is exposed to various risk factors including market price risk and liquidity risk (Note 22).



| | 11. | Decommissioning and reclamation:
| | --- | --------------------------------



The Company’s decommissioning and
reclamation costs consists of reclamation and closure costs. Mineral property obligations were determined using discount rates
ranging from 1.94 to 3.35 percent. Expected undiscounted payments of future obligations are $11.2 million over the next 7 to 16
years. An accretion expense component of $0.2 million has been charged in 2011, augmented by revisions made to the decommissioning
and reclamation costs, resulting in an increase in the overall carrying amount of the provision. Changes to the provision during
the year are as follows:





Page 23







|                                                             |  | DEC 31 |       |  | DEC 31 |   |       | JAN 1 | 
|------------------------------------------------------------ |  | ------ | ----- |  | ------ | - | ----- | ----- | 
|                                                             |  | 2011   |       |  | 2010   |   |       | 2010  | 
|                                                             |  |        |       |  |        |   |       |       | 
|Decommissioning and reclamation provision, beginning of year |  | $      | 4,810 |  |        | $ | 3,534 |       | 
|Accretion                                                    |  |        | 166   |  |        |   | 108   |       | 
|Discontinued operation                                       |  |        | -     |  |        |   | 162   |       | 
|Revisions due to change in estimates and discount rate       |  |        | 4,737 |  |        |   | 1,533 |       | 
|Revisions due to sale of properties                          |  |        | -     |  |        |   | (527  | )     | 
|Decommissioning and reclamation provision, end of year       |  | $      | 9,713 |  |        | $ | 4,810 |       | 



As required by regulatory authorities,
the Company has provided letters of credit as security for reclamation related to the Madsen and Seabee properties in the amounts
of $0.7 million (December 31, 2010 - $0.7 million; January 1, 2010: $0.7 million) and $1.5 million (2010 - $1.6 million; January
1, 2010: $1.6 million), respectively. As security for these letters of credit, the Company has provided investment certificates
in the amount of $2.2 million (2010 - $2.3 million; January 1, 2010: $2.3 million).



| | 12. | Net Royalty Obligation:
| | --- | -----------------------



(a) Royalty Agreements



During each of 2004, 2005, 2006 and 2007,
the Company entered into separate Royalty Agreements (“Agreements”) whereby it sold a basic royalty on a portion of
the gold production at its Seabee Gold Operation. The Company received cash consideration consisting of royalty income, indemnity
fee income and interest income.



Under the terms of the Agreements, the
Company is required to make royalty payments at fixed amounts per ounce of gold produced; these amounts vary over the term of the
respective Agreements. A portion of the cash received at the inception of the respective agreements was placed with a financial
institution; in return, the Company received a restricted promissory note. Interest earned from the restricted promissory notes
and a portion of the principal must be used to fund the expected basic royalty payments during the first ten years of each agreement.
Over the life of the royalty agreements, interest earned and principal from the restricted promissory notes will be sufficient
to fund the expected basic royalty payments.



The Company and all of the counterparties
have the legal right of offset and the intention to settle on a net basis. As such, the Company has presented these transactions
on a net basis on the Statements of Financial Position.



|                                            |  | Note |     |  | 2004
    Agreement |  |                                                                         | 2005
    Agreement |  |  | 2006
    Agreement                                                        |  |  | 2007
    Agreement |                                                                          
|------------------------------------------- |  | ---- | --- |  | ------------------ |  | ----------------------------------------------------------------------- | ------------------ |  |  | ------------------------------------------------------------------------- |  |  | ------------------ | -------------------------------------------------------------------------
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Restricted Promissory Notes                 |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Principal Balance (1)                       |  |      | (b) |  |                    |  | 6,924                                                                   |                    |  |  | 14,594                                                                    |  |  |                    | 36,701                                                                   
|Interest receivable (1)                     |  |      |     |  |                    |  | 363                                                                     |                    |  |  | 766                                                                       |  |  |                    | 2,245                                                                    
|Interest Rate                               |  |      |     |  |                    |  | 6 percent                                                               |                    |  |  | 6 percent                                                                 |  |  |                    | 7 percent                                                                
|Maturity                                    |  |      |     |  |                    |  | DEC 10, 2014                                                            |                    |  |  | FEB 15, 2015                                                              |  |  |                    | FEB 15, 2016                                                             
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Royalty Payments                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Royalty Rate per ounce of gold produced (2) |  |      |     |  |                    |  | $13.29 to
                                                   $24.53     |                    |  |  | $23.15 to
                                                   $112.45      |  |  |                    | $61.59 to
                                                   $198.95     
|Royalty payable (current) (1)               |  |      | (b) |  |                    |  | 328                                                                     |                    |  |  | 690                                                                       |  |  |                    | 2,232                                                                    
|Royalty obligation payable (long-term) (1)  |  |      | (b) |  |                    |  | 7,165                                                                   |                    |  |  | 14,961                                                                    |  |  |                    | 36,783                                                                   
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Net Profit Interest                         |  |      | (c) |  |                    |  | -                                                                       |                    |  |  | -                                                                         |  |  |                    | -                                                                        
|                                            |  |      |     |  |                    |  |                                                                         |                    |  |  |                                                                           |  |  |                    |                                                                          
|Applicable years                            |  |      |     |  |                    |  | 2010-2014                                                               |                    |  |  | 2011-2015                                                                 |  |  |                    | 2012-2016                                                                
|Percent                                     |  |      |     |  |                    |  | 2.50, 3.00
                                                   or 4.00   |                    |  |  | 1.00, 2.00
                                                   or 3.00     |  |  |                    | 3.75, 4.00
                                                   or 4.25    
|Price of gold thresholds                    |  |      |     |  |                    |  | $800, $900
                                                   or $1,200 |                    |  |  | $875, $1,075
                                                   or $1,275 |  |  |                    | $975, $1,175
                                                   or $1,375



Page 24







| | (1) | At December 31, 2011.
| | --- | ---------------------

| | (2) | Over the remaining life of the respective agreements.
| | --- | -----------------------------------------------------

(b) Net Royalty Obligation



The following schedule outlines the different
components of the transaction that are presented net on the Company’s consolidated Statements of Financial Position:



|                                                   |  | DEC 31 |        |   | DEC 31 |   |        | JAN 1 | 
|-------------------------------------------------- |  | ------ | ------ | - | ------ | - | ------ | ----- | 
|                                                   |  | 2011   |        |   | 2010   |   |        | 2010  | 
|                                                   |  |        |        |   |        |   |        |       | 
|Current portion                                    |  |        |        |   |        |   |        |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Assets                                             |  |        |        |   |        |   |        |       | 
|Interest receivable on Restricted promissory notes |  | $      | 4,953  |   |        | $ | 4,904  |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Liabilities                                        |  |        |        |   |        |   |        |       | 
|Current portion of deferred revenue                |  |        | 996    |   |        |   | 949    |       | 
|Interest payable on royalty obligations            |  |        | 4,811  |   |        |   | 4,770  |       | 
|                                                   |  | $      | 5,807  |   |        | $ | 5,719  |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Net royalty obligation (current)                   |  |        | (854   | ) |        |   | (815   | )     | 
|                                                   |  |        |        |   |        |   |        |       | 
|Long-term portion                                  |  |        |        |   |        |   |        |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Assets                                             |  |        |        |   |        |   |        |       | 
|Restricted promissory notes                        |  | $      | 84,037 |   |        | $ | 83,219 |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Liabilities                                        |  |        |        |   |        |   |        |       | 
|Deferred revenue                                   |  |        | 3,586  |   |        |   | 4,582  |       | 
|Royalty obligation                                 |  |        | 84,886 |   |        |   | 84,220 |       | 
|                                                   |  | $      | 88,472 |   |        | $ | 88,802 |       | 
|                                                   |  |        |        |   |        |   |        |       | 
|Net royalty obligation (long-term)                 |  |        | (4,435 | ) |        |   | (5,583 | )     | 
|                                                   |  |        |        |   |        |   |        |       | 
|Net royalty obligation                             |  | $      | (5,289 | ) |        | $ | (6,398 | )     | 



The interest income and the indemnity fees
received by the Company are being amortized into income over the prepayment period and the life of the respective agreements. The
interest income and the indemnity fees are netted against interest expense and are reflected in “Financing expense”
on the consolidated statement of income.



(c) NPI Payment



In addition to the royalty, the Company
granted a net profit interest (“NPI”) of varying percentages, payable only if gold prices exceed a pre-determined threshold.
Prior to any NPI payment, the Company is entitled to first recover the NPI expenditures (including capital expenditures), working
capital, operating losses, interest charges and asset retirement obligations relating to the production of ore at the Seabee Operation.
These expenditures are calculated on a cumulative basis from the commencement of the individual agreements. At December 31, 2011,
the cumulative carry forward amounts remained in a deficiency position under each of the agreements and no payments are expected
during 2012.



(d) Call and Put



Under certain circumstances, a 100 percent
owned subsidiary of Claude will have the right to purchase (“Call”) the equity of the holder of the royalties or right
to receive the royalties at an amount no greater than the fair market value thereof at the time of the Call. The Call price will
be paid from the balance owing to the Company under the promissory notes. Under certain circumstances, the purchaser of the royalties
will have the right to sell (“Put”) their interest in the royalty to the Company at an amount no greater than the fair
market value thereof at the time of the Put. However, such right is subject to the subsidiary of Claude’s pre-emptive right
to exercise the Call in advance of any Put being exercised and completed.

Page 25









| | 13. | Loans and Borrowings:
| | --- | ---------------------



This note provides information about the
contractual terms of the Company’s interest-bearing loans and borrowings, which are measured at amortized cost. For more
information about the Company’s exposure to interest rate and liquidity risk, see Note 22.



|                                             |  |  |     |  | DEC 31 |   |        | DEC 31 |  |   | JAN 1  | 
|-------------------------------------------- |  |  | --- |  | ------ | - | ------ | ------ |  | - | ------ | 
|                                             |  |  |     |  | 2011   |   |        | 2010   |  |   | 2010   | 
|                                             |  |  |     |  |        |   |        |        |  |   |        | 
|Current liabilities                          |  |  |     |  |        |   |        |        |  |   |        | 
|Demand loans                                 |  |  | (a) |  |        | $ | 896    |        |  | $ | 2,499  | 
|Current portion of finance lease liabilities |  |  | (b) |  |        |   | 2,119  |        |  |   | 1,598  | 
|Current portion of debenture                 |  |  | (c) |  |        |   | -      |        |  |   | 9,344  | 
|                                             |  |  |     |  |        | $ | 3,015  |        |  | $ | 13,441 | 
|                                             |  |  |     |  |        |   |        |        |  |   |        | 
|Non-current liabilities                      |  |  |     |  |        |   |        |        |  |   |        | 
|Finance lease liabilities                    |  |  | (b) |  |        | $ | 1,786  |        |  | $ | 873    | 
|Debenture                                    |  |  | (c) |  |        |   | 9,452  |        |  |   | -      | 
|                                             |  |  |     |  |        | $ | 11,238 |        |  | $ | 873    | 



(a) Demand Loans



Terms and conditions of the Company’s
outstanding demand loans are as follows:



|                                                                                                                  |  | DEC 31 |     |  | DEC 31 |   |       | JAN 1 | 
|----------------------------------------------------------------------------------------------------------------- |  | ------ | --- |  | ------ | - | ----- | ----- | 
|                                                                                                                  |  | 2011   |     |  | 2010   |   |       | 2010  | 
|                                                                                                                  |  |        |     |  |        |   |       |       | 
|Demand loan, repayable in monthly payments of  $83,333 plus interest at prime plus 1.50 percent,  due August 2011 |  | $      | -   |  |        | $ | 667   |       | 
|Demand loan, repayable in monthly payments of  $96,514 including interest at 5.99 percent, due  February 2010     |  |        | -   |  |        |   | -     |       | 
|Demand loan, repayable in monthly payments of  $83,371 including interest at 4.575 percent, due  November 2012    |  |        | 896 |  |        |   | 1,832 |       | 
|                                                                                                                  |  | $      | 896 |  |        | $ | 2,499 |       | 



The demand loans are secured by a general security agreement
covering all assets of the Company. The scheduled repayments are disclosed in Note 22.



(b) Finance Lease Liabilities



Obligations under finance leases bear interest
between 5.4 percent and 8.0 percent per annum, are due from 2012 to 2014 and are secured by the leased equipment. The estimated
principal repayments on the leases are as follows: 2012 - $2,119; 2013 - $1,495; and 2014 - $291.



|                           |  | Present Value of |       |  |          |   |     | Future Value of | 
|-------------------------- |  | ---------------- | ----- |  | -------- | - | --- | --------------- | 
|                           |  | Minimum Lease    |       |  |          |   |     | Minimum Lease   | 
|                           |  | Payments         |       |  | Interest |   |     | Payments        | 
|                           |  | DEC 31           |       |  | DEC 31   |   |     | DEC 31          | 
|                           |  | 2011             |       |  | 2011     |   |     | 2011            | 
|                           |  |                  |       |  |          |   |     |                 | 
|Less than one year         |  | $                | 2,119 |  |          | $ | 154 |                 | 
|Between one and five years |  |                  | 1,786 |  |          |   | 58  |                 | 
|More than five years       |  |                  | -     |  |          |   | -   |                 | 
|                           |  | $                | 3,905 |  |          | $ | 212 |                 | 



Page 26







|                           |  | Present Value of |       |  |          |   |     | Future Value of | 
|-------------------------- |  | ---------------- | ----- |  | -------- | - | --- | --------------- | 
|                           |  | Minimum Lease    |       |  |          |   |     | Minimum Lease   | 
|                           |  | Payments         |       |  | Interest |   |     | Payments        | 
|                           |  | DEC 31           |       |  | DEC 31   |   |     | DEC 31          | 
|                           |  | 2010             |       |  | 2010     |   |     | 2010            | 
|                           |  |                  |       |  |          |   |     |                 | 
|Less than one year         |  | $                | 1,598 |  |          | $ | 99  |                 | 
|Between one and five years |  |                  | 873   |  |          |   | 29  |                 | 
|More than five years       |  |                  | -     |  |          |   | -   |                 | 
|                           |  | $                | 2,471 |  |          | $ | 128 |                 | 



The Company’s finance leases are secured by a general
security agreement.



(c) Debenture



The debenture bears a 12 percent annual
interest rate, is due May 23, 2013 and requires monthly interest only payments. Upon entering into the debenture indenture agreement,
debenture holders received warrants in the amount of 10 percent of the debenture purchase (Note 14(g)). Each warrant entitles the
holder to acquire one common share of the Company at an exercise price of $1.60 per common share until May 23, 2013. The value
of the warrants associated with the debenture on the date of issuance was $0.6 million.



During 2009, the Company repaid $8.3 million
of the outstanding debentures, representing principal plus unpaid interest thereon up to the repayment date. During 2011, the Company
repaid $0.1 million of the outstanding debentures, representing principal plus unpaid interest thereon up to the repayment date.
A total of $9.8 million in face value of debentures remain outstanding at December 31, 2011.



The balance of the debentures outstanding
is amortized using the effective interest rate method at an effective rate of 14.7 percent over the remaining term of the debentures.



|                                       |  | DEC 31 |       |   | DEC 31 |  
|-------------------------------------- |  | ------ | ----- | - | ------ | -
|                                       |  | 2011   |       |   | 2010   |  
|                                       |  |        |       |   |        |  
|Debenture payable, beginning of year   |  | $      | 9,344 |   |        | $
|Amortized cost of debenture redemption |  |        | (87   | ) |        |  
|Amortization of debt issue costs       |  |        | 195   |   |        |  
|Debenture payable, end of year         |  |        | 9,452 |   |        |  
|Current portion                        |  |        | -     |   |        |  
|Debenture payable, long-term portion   |  | $      | 9,452 |   |        | $



The debenture is secured by a general security
agreement covering all of the Company's assets, except those subordinated to bank debt.



(d)
Other



At December 31, 2011, the Company had no
undrawn borrowing facilities. At December 31, 2010, the Company had available $5.0 million of undrawn committed borrowing facilities
relating to the Company’s offer to repay its outstanding debentures. During the first quarter of 2011, this facility expired
concurrently with the completion of the Company’s offer to repay its debenture outstanding.



The Company has a $5.0 million operating
line of credit which bears interest at prime plus 1.125 percent; the prime rate at December 31, 2011 was 3 percent. These funds
are available for general corporate purposes. At December 31, 2011, December 31, 2010 and January 1, 2010, the Company had not
drawn on the line of credit.





Page 27







| | 14. | Share Capital:
| | --- | --------------



AUTHORIZED



The authorized share capital of the Company
consists of an unlimited number of common shares and two classes of unlimited preferred shares issuable in series.

The first preferred shares are issuable
in series and rank ahead of the second preferred shares and the common shares in respect of dividend payment, dissolution or any
other distribution of assets. The other rights, privileges, restrictions and conditions attached to each series of the first preferred
shares are fixed by the Board of Directors at the time of creation of such series.



The second preferred shares are issuable
in series and rank ahead of the common shares in respect of dividend payment, dissolution or any other distribution of assets.
The other rights, privileges, restrictions and conditions attached to each series of the second preferred shares are fixed by the
Board of Directors at the time of creation of such series.



The common shares of the Company are entitled
to vote at all meetings of the shareholders and, upon dissolution or any other distribution of assets, to receive such assets of
the Company as are distributable to the holders of the common shares.



|                                    |  |        |             |  | DEC 31 |  |         |        |  |  | DEC 31      | 
|----------------------------------- |  | ------ | ----------- |  | ------ |  | ------- | ------ |  |  | ----------- | 
|                                    |  |        |             |  | 2011   |  |         |        |  |  | 2010        | 
|                                    |  | Shares |             |  | Amount |  |         | Shares |  |  | Amount      | 
|                                    |  |        |             |  |        |  |         |        |  |  |             | 
|Common shares:                      |  |        |             |  |        |  |         |        |  |  |             | 
|                                    |  |        |             |  |        |  |         |        |  |  |             | 
|Outstanding, beginning of year      |  |        | 138,913,329 |  |        |  | 118,279 |        |  |  | 118,478,686 | 
|ESPP (a)                            |  |        | 235,614     |  |        |  | 324     |        |  |  | 430,395     | 
|Exercise of stock options (b)       |  |        | 648,667     |  |        |  | 642     |        |  |  | 422,414     | 
|Equity issue (c)                    |  |        | 23,000,000  |  |        |  | 57,500  |        |  |  | -           | 
|Equity issue (d)                    |  |        | -           |  |        |  | -       |        |  |  | 12,000,000  | 
|Equity issue (e)                    |  |        | -           |  |        |  | -       |        |  |  | 325,000     | 
|Warrant exercise (f)                |  |        | -           |  |        |  | -       |        |  |  | 4,299,550   | 
|Broker warrant exercise (f)         |  |        | 139,321     |  |        |  | 162     |        |  |  | 557,284     | 
|Warrant exercise (g)                |  |        | 1,577,000   |  |        |  | 2,271   |        |  |  | 2,400,000   | 
|Warrant exercise (g)                |  |        | 116,300     |  |        |  | 223     |        |  |  | -           | 
|Issue costs, net of income taxes    |  |        | -           |  |        |  | (2,407  | )      |  |  | -           | 
|Outstanding, end of year            |  |        | 164,630,231 |  |        |  | 176,994 |        |  |  | 138,913,329 | 
|                                    |  |        |             |  |        |  |         |        |  |  |             | 
|Warrants and other equity:          |  |        |             |  |        |  |         |        |  |  |             | 
|                                    |  |        |             |  |        |  |         |        |  |  |             | 
|Common share purchase warrants (d)  |  |        |             |  |        |  | 2,700   |        |  |  |             | 
|Tax adjusted cumulative issue costs |  |        |             |  |        |  | (228    | )      |  |  |             | 
|Broker purchase warrants (f)        |  |        |             |  |        |  | -       |        |  |  |             | 
|Common share purchase warrants (g)  |  |        |             |  |        |  | 552     |        |  |  |             | 
|Debenture purchase warrants (g)     |  |        |             |  |        |  | 513     |        |  |  |             | 
|                                    |  |        | 164,630,231 |  |        |  | 180,531 |        |  |  | 138,913,329 | 





(a) EMPLOYEE SHARE PURCHASE PLAN



The ESPP was established to encourage employees
to purchase Company common shares. Under the plan, eligible employees may contribute up to five percent of their basic annual salary
and the Company shall contribute common shares in an amount equal to 50 percent of the employee’s contribution. Shares of
the Company are issued to employees based on a weighted average market price over a specific period. During 2011, the Company issued
235,614 common shares (2010 – 430,395) for $0.3 million (2010 - $0.3 million) pursuant to this plan. The maximum number of
common shares of the Company available for issue under this ESPP is five percent of the Company’s common shares outstanding.



The weighted average fair value of ESPP
options granted during 2011 was $0.90 (2010 - $0.55) and was estimated using the Black-Scholes option pricing model with assumptions
of a 1.00 year weighted average expected option life, a 15 percent expected forfeiture rate, 53 percent volatility (2010 –
78 percent) and an interest rate of 1.3 percent (2010 – 0.7 percent). This compensation expense has been included in general
and administrative expenses in the Consolidated Statements of Income.



Page 28







(b) STOCK OPTION PLAN



The Company has established a stock option
plan under which options may be granted to directors, officers and key employees. The maximum number of common shares available
for option under the stock option plan is nine percent of the Company’s common shares outstanding. Options granted have an
exercise price of the Company’s prior day’s closing price quoted on the TSX for the common shares Claude. All options
are settled by physical delivery of shares. Vesting periods of options granted under the Company’s stock option plan vary
on a grant by grant basis, at the discretion of the Company’s Board of Directors. Grants to Employees have a term to expiry
of 10 years and typically have a vesting term of 3 to 5 years. Grants to Directors have a term to expiry of 10 years and vest immediately.



Options outstanding under this plan at
December 31, 2011 and 2010 and their weighted average exercise prices are as follows:



|                  |  |         |           |   | Weighted |   |      |         |  |  | Weighted  |  
|----------------- |  | ------- | --------- | - | -------- | - | ---- | ------- |  |  | --------- | -
|                  |  |         |           |   | Average  |   |      |         |  |  | Average   |  
|                  |  | 2011    |           |   | Exercise |   |      | 2010    |  |  | Exercise  |  
|                  |  | Options |           |   | Price    |   |      | Options |  |  | Price     |  
|                  |  |         |           |   |          |   |      |         |  |  |           |  
|Beginning of year |  |         | 3,916,737 |   |          | $ | 1.15 |         |  |  | 3,259,028 |  
|Options granted   |  |         | 2,478,768 |   |          |   | 2.06 |         |  |  | 1,166,546 |  
|Options exercised |  |         | (648,667  | ) |          |   | 0.75 |         |  |  | (422,414  | )
|Options forfeited |  |         | (241,876  | ) |          |   | 1.86 |         |  |  | (79,756   | )
|Options expired   |  |         | (20,712   | ) |          |   | 1.04 |         |  |  | (6,667    | )
|End of year       |  |         | 5,484,250 |   |          | $ | 1.57 |         |  |  | 3,916,737 |  



The weighted average share price at the
date of exercise for share options exercised during 2011 was $1.84 (2010: $1.34).



For director and employee options outstanding
at December 31, 2011, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual
life are as follows:



|                       |  | Options Outstanding |           |  | Options Exercisable             | 
|---------------------- |  | ------------------- | --------- |  | ------------------------------- | 
|Option Price Per Share |  | Quantity            |           |  | Weighted Average Remaining Life | 
|$0.50 - $0.99          |  |                     | 690,247   |  |                                 | 
|$1.00 - $1.50          |  |                     | 1,552,442 |  |                                 | 
|$1.51 - $2.00          |  |                     | 2,593,000 |  |                                 | 
|$2.01 - $2.38          |  |                     | 648,561   |  |                                 | 
|                       |  |                     | 5,484,250 |  |                                 | 



The foregoing options have expiry dates
ranging from May 17, 2012 to December 8, 2021.



The weighted average fair value of stock
options granted during the year of 2011 was $1.37 and was estimated using the Black-Scholes option pricing model with assumptions
of a 7.11 year weighted average expected option life, a two percent expected forfeiture rate, 68 percent to 75 percent volatility
(2010 – 63 percent to 73 percent) and interest rates ranging from 1.3 percent to 3.1 percent (2010 – 2.2 percent to
3.2 percent). In 2011, the compensation expense recognized in respect of stock options was $1.7 million (2010 - $0.6 million).
This compensation expense has been included in general and administrative expenses in the Consolidated Statements of Income.



The expected volatility used in the Black-Scholes
option pricing model is based on the historical volatility of the Company’s shares.



(c) EQUITY ISSUE



During 2011, the Company completed a short
form prospectus offering. The Offering consisted of the issuance of 20,000,000 common shares of the Company, on a bought deal basis,
at a price of $2.50 per share, as well as the issuance of 3,000,000 shares of the Company, at a price of $2.50 per share, to the
Underwriters pursuant to the over-allotment option, for aggregate gross proceeds of $57,500,000.



Page 29







(d) SPECIAL WARRANTS



In December 2009, the Company completed
a private placement offering consisting of the issuance of 12,000,000 special warrants at a price of $1.15 per Special Warrant
for aggregate gross proceeds of $13,800,000. Each Special Warrant entitled its holder to acquire upon exercise, or upon deemed
exercise immediately prior to the expiry date, without payment of any additional consideration, one unit. Each unit was comprised
of one common share of Claude and one-half of one common share purchase warrant; all of these Special Warrants were exercised on
February 2, 2010. Each whole share purchase warrant entitled the holder to subscribe for one common share for a period up to and
including December 30, 2011 at an exercise price of $1.75. All of these share purchase warrants expired as at December 30, 2011.



The fair value of $0.45 per warrant granted
was estimated using the Black-Scholes option pricing model with assumptions of a two year weighted average expected life, no forfeitures,
87 percent volatility and an interest rate of 2.25 percent.



(e) EQUITY ISSUE



During 2010, the Company issued 325,000
common shares at a price of $1.11 per share to purchase a net profit interest located on a portion of the Seabee property. In order
to arrive at the number of shares issued, the Company calculated a valuation based on expected future cash payments pursuant to
the NPI agreement.



(f) EQUITY ISSUE



During 2009, the Company completed a private
placement offering consisting of two parts. The first involved the issuance of a total of 8,599,100 units, at a price of $0.75
per unit, for gross proceeds of $6,449,325. Each unit consisted of one common share of Claude and one-half of one transferable
common share purchase warrant. Each whole warrant entitled the holder, upon exercise at any time up to and including October 9,
2010 and upon payment of $0.90, to subscribe for one common share. The second part of the offering involved the issuance of a total
of 5,333,000 flow-through shares at a price of $0.80 per Flow-Through Share, for gross proceeds of $4,266,400. As compensation
for this offering, Claude paid to the Underwriters a commission equal to five percent of the gross proceeds of the offering and
an aggregate of 696,605 broker warrants. Each whole broker warrant entitles the holder to subscribe for one common share for a
period up to and including April 9, 2011 at an exercise price of $0.83. At December 31, 2011, all common share purchase warrants
and all broker warrants had been exercised.



(g) SCHEDULE OF WARRANTS OUTSTANDING



At December 31, 2011, there were 2.7 million
common share purchase warrants outstanding. Each common share purchase warrant entitles the holder to acquire one common share
of the Company at prices determined at the time of issue. The range of exercise prices and dates of expiration of the common share
purchase warrants outstanding are as follows:



|      |      |  |             |                   | Number            |  |            |           |  |  |           |  |  | Number            |          
|----- | ---- |  | ----------- | ----------------- | ----------------- |  | ---------- | --------- |  |  | --------- |  |  | ----------------- | ---------
|      |      |  |             |                   | Outstanding at    |  |            |           |  |  |           |  |  | Outstanding at    |          
|Price |      |  | Expiry Date |                   | December 31, 2010 |  |            | Exercised |  |  | Expired   |  |  | December 31, 2011 |          
|$     | 1.60 |  |             | May 22, 2013      |                   |  | 1,809,500  |           |  |  | 116,300   |  |  |                   | -        
|$     | 0.83 |  |             | April 9, 2011     |                   |  | 139,321    |           |  |  | 139,321   |  |  |                   | -        
|$     | 0.90 |  |             | November 16, 2012 |                   |  | 2,600,000  |           |  |  | 1,577,000 |  |  |                   | -        
|$     | 1.75 |  |             | December 30, 2011 |                   |  | 6,000,000  |           |  |  | -         |  |  |                   | 6,000,000
|      |      |  |             |                   |                   |  | 10,548,821 |           |  |  | 1,832,621 |  |  |                   | 6,000,000



The range of exercise prices and dates of expiration of the
common share purchase warrants outstanding at December 31, 2010 were as follows:



|      |      |  |             |                   | Number            |  |            |        |  |  |           |  |  | Number            |          
|----- | ---- |  | ----------- | ----------------- | ----------------- |  | ---------- | ------ |  |  | --------- |  |  | ----------------- | ---------
|      |      |  |             |                   | Outstanding at    |  |            |        |  |  |           |  |  | Outstanding at    |          
|Price |      |  | Expiry Date |                   | December 31, 2009 |  |            | Issued |  |  | Exercised |  |  | December 31, 2010 |          
|$     | 1.60 |  |             | May 22, 2013      |                   |  | 1,809,500  |        |  |  | -         |  |  |                   | -        
|$     | 0.90 |  |             | October 9, 2010   |                   |  | 4,299,550  |        |  |  | -         |  |  |                   | 4,299,550
|$     | 0.83 |  |             | April 9, 2011     |                   |  | 696,605    |        |  |  | -         |  |  |                   | 557,284  
|$     | 0.90 |  |             | November 16, 2012 |                   |  | 5,000,000  |        |  |  | -         |  |  |                   | 2,400,000
|$     | 1.75 |  |             | December 30, 2011 |                   |  | -          |        |  |  | 6,000,000 |  |  |                   | -        
|      |      |  |             |                   |                   |  | 11,805,655 |        |  |  | 6,000,000 |  |  |                   | 7,256,834





Page 30







| | 15. | Finance Expense:
| | --- | ----------------



|                                           |  | DEC 31 |       |   | DEC 31 |  
|------------------------------------------ |  | ------ | ----- | - | ------ | -
|                                           |  | 2011   |       |   | 2010   |  
|                                           |  |        |       |   |        |  
|Interest expense on loans and borrowings   |  | $      | 1,321 |   |        | $
|Interest capitalized to mineral properties |  |        | (542  | ) |        |  
|Derivative loss                            |  |        | 1,911 |   |        |  
|Debenture amortization                     |  |        | 195   |   |        |  
|Accretion expense                          |  |        | 166   |   |        |  
|                                           |  | $      | 3,051 |   |        | $



Finance expense paid for the year ended December 31, 2011 was
$3.2 million (December 31, 2010 - $1.9 million).



| | 16. | Finance and Other Income:
| | --- | -------------------------



|                   |  | DEC 31 |        |   | DEC 31 |  
|------------------ |  | ------ | ------ | - | ------ | -
|                   |  | 2011   |        |   | 2010   |  
|                   |  |        |        |   |        |  
|Net royalty income |  | $      | (1,109 | ) |        | $
|Other income       |  |        | (200   | ) |        |  
|Interest income    |  |        | (314   | ) |        |  
|                   |  | $      | (1,623 | ) |        | $



Finance and other income received during the year ended December
31, 2011 was $0.5 million (December 31, 2010 - $0.3 million).



| | 17. | Personnel Expenses:
| | --- | -------------------



|                                               |  | DEC 31 |        |  | DEC 31 |  
|---------------------------------------------- |  | ------ | ------ |  | ------ | -
|                                               |  | 2011   |        |  | 2010   |  
|                                               |  |        |        |  |        |  
|Wages and salaries                             |  | $      | 32,201 |  |        | $
|Canadian Pension Plan (CPP) and EI remittances |  |        | 1,249  |  |        |  
|                                               |  | $      | 33,450 |  |        | $



| | 18. | Joint Venture Interest:
| | --- | -----------------------



Amisk Gold Project



The Company conducts a portion of its business
through joint ventures. The Company records its proportionate share of assets, liabilities, revenue and operating costs of the
joint ventures.



At December 31, 2011, the Company owned
a 65 percent interest in the Amisk Gold Project joint venture, which owns the Amisk Property, located in northeastern Saskatchewan.
Under the joint venture agreement between the Company and St. Eugene Mining Corporation Limited (“St. Eugene”), the
Company is the operator.



The Management Committee of the joint venture
represents the joint venture partners, authorizes annual programs and budgets and approves major transactions prior to execution
by site management. The joint venture owners are obliged to make their pro-rata share of contributions as requested.



As per Company policy, all costs related
to the acquisition, exploration and development of mineral properties and the development of milling assets are capitalized on
a property by property basis. The Company reflects its proportionate interest in the assets and liabilities of the Amisk Gold Project
as follows:



Page 31







|                  |  | DEC 31 |       |  | DEC 31 |   |       | JAN 1 | 
|----------------- |  | ------ | ----- |  | ------ | - | ----- | ----- | 
|                  |  | 2011   |       |  | 2010   |   |       | 2010  | 
|                  |  |        |       |  |        |   |       |       | 
|Total assets      |  | $      | 2,986 |  |        | $ | 1,250 |       | 
|                  |  |        |       |  |        |   |       |       | 
|Total liabilities |  | $      | -     |  |        | $ | -     |       | 



Subsequent to December 31, 2011, the Company
completed the acquisition of all of the outstanding shares of St. Eugene that it did not already own (Note 25). Upon closing the
transaction on February 1, 2012, Claude now owns 100 percent of the Amisk Gold Project.



| | 19. | Related Party Transactions:
| | --- | ---------------------------



Key Management Personnel



Compensation of key management personnel of the Company:



|                                                                       |  | DEC 31 |       |  | DEC 31 |  
|---------------------------------------------------------------------- |  | ------ | ----- |  | ------ | -
|                                                                       |  | 2011   |       |  | 2010   |  
|                                                                       |  |        |       |  |        |  
|Cash compensation – Salaries, short-term incentives and other Benefits |  | $      | 1,819 |  |        | $
|Long term incentives, including share-based payments                   |  |        | 517   |  |        |  
|Total compensation paid to key management personnel                    |  | $      | 2,336 |  |        | $



The Company’s Executive Leadership Team (consisting of
the Chief Executive Officer, Chief Financial Officer, Senior Vice President Mining Operations and Vice President Exploration) are
considered to be Key Management Personnel. In addition, members of the Company’s Board of Directors are included in this
definition, as defined by IAS 24, Related Party Disclosures.



| | 20. | Income Taxes:
| | --- | -------------



(a) Income tax expense



|                                                  |  | DEC 31 |        |   | DEC 31 |  
|------------------------------------------------- |  | ------ | ------ | - | ------ | -
|Income tax expense                                |  | 2011   |        |   | 2010   |  
|                                                  |  |        |        |   |        |  
|Current Income tax expense (recovery):            |  | $      | -      |   |        | $
|                                                  |  |        |        |   |        |  
|Deferred income tax expense (recovery):           |  |        |        |   |        |  
|Origination and reversal of temporary differences |  |        | 4,378  |   |        |  
|Write-down of mineral properties                  |  |        | (230   | ) |        |  
|Change in unrecognized deferred tax assets        |  |        | (3,784 | ) |        |  
|                                                  |  |        | 364    |   |        |  
|Income tax expense (recovery)                     |  | $      | 364    |   |        | $



(b) Income tax recognized directly in
Other comprehensive income (loss)



Other comprehensive income included on
the consolidated statements of comprehensive income is presented net of income taxes. The following income tax amounts are included
in each component of other comprehensive income (loss):



Page 32













For the year ended December 31, 2010:



|                                                            |  |            |       |  | Income tax |  |      |            | 
|----------------------------------------------------------- |  | ---------- | ----- |  | ---------- |  | ---- | ---------- | 
|                                                            |  | Before tax |       |  | recovery   |  |      | Net of tax | 
|                                                            |  |            |       |  |            |  |      |            | 
|Other comprehensive income (loss)                           |  |            |       |  |            |  |      |            | 
|                                                            |  |            |       |  |            |  |      |            | 
|Loss on available for sale securities transferred to profit |  |            | 207   |  |            |  | (28  | )          | 
|Unrealized gain on available for sale securities            |  |            | 2,936 |  |            |  | (396 | )          | 
|                                                            |  |            | 3,143 |  |            |  | (424 | )          | 



For the year ended December 31, 2011:



|                                                            |  |            |        |   | Income tax |  |     |            | 
|----------------------------------------------------------- |  | ---------- | ------ | - | ---------- |  | --- | ---------- | 
|                                                            |  | Before tax |        |   | expense    |  |     | Net of tax | 
|                                                            |  |            |        |   |            |  |     |            | 
|Other comprehensive income (loss)                           |  |            |        |   |            |  |     |            | 
|                                                            |  |            |        |   |            |  |     |            | 
|Gain on available for sale securities transferred to profit |  |            | (35    | ) |            |  | 5   |            | 
|Unrealized loss on available for sale securities            |  |            | (2,409 | ) |            |  | 325 |            | 
|                                                            |  |            | (2,444 | ) |            |  | 330 |            | 



(c) Effective tax rate reconciliation



The provision for income tax, both current
and deferred, differs from the amount calculated by applying the combined expected federal and provincial income tax rate to profit
before income tax. The reasons for these differences are as follows:



|                                                          |  | DEC 31 |        |   | DEC 31 |  
|--------------------------------------------------------- |  | ------ | ------ | - | ------ | -
|                                                          |  | 2011   |        |   | 2010   |  
|                                                          |  |        |        |   |        |  
|Profit before income taxes                                |  | $      | 9,818  |   |        | $
|Federal and Provincial statutory income tax rate          |  |        | 28.5   | % |        |  
|Expected tax expense                                      |  |        | 2,798  |   |        |  
|                                                          |  |        |        |   |        |  
|Permanent differences                                     |  |        | 571    |   |        |  
|Effect of change in effective tax rates                   |  |        | (168   | ) |        |  
|Flow-through share renunciations                          |  |        | -      |   |        |  
|Loss of deferred tax assets on sale of mineral properties |  |        | -      |   |        |  
|Decrease in tax assets related to royalty payable         |  |        | 947    |   |        |  
|Benefit of previously unrecognized tax assets             |  |        | (3,784 | ) |        |  
|Income tax expense (recovery)                             |  | $      | 364    |   |        | $



(d) Significant components of recognized
and unrecognized Deferred tax assets and liabilities



The significant components of deferred income tax assets/liabilities
are as follows:



|                                               |  |       |         |   |            |  |        |            |  |  | Recognized in |   |  |        |     
|---------------------------------------------- |  | ----- | ------- | - | ---------- |  | ------ | ---------- |  |  | ------------- | - |  | ------ | ----
|                                               |  |       |         |   | Recognized |  |        | Recognized |  |  | other         |   |  |        |     
|                                               |  | JAN 1 |         |   | in         |  |        | directly   |  |  | comprehensive |   |  | DEC 31 |     
|                                               |  | 2010  |         |   | Net profit |  |        | to equity  |  |  | Income        |   |  | 2010   |     
|                                               |  |       |         |   |            |  |        |            |  |  |               |   |  |        |     
|Deferred income tax assets (liabilities)       |  |       |         |   |            |  |        |            |  |  |               |   |  |        |     
|Share issue costs                              |  |       | 814     |   |            |  | (310   | )          |  |  | 60            |   |  |        | -   
|Decommissioning and reclamation                |  |       | 998     |   |            |  | 301    |            |  |  | -             |   |  |        | -   
|Net royalty obligation                         |  |       | 3,641   |   |            |  | 277    |            |  |  | -             |   |  |        | -   
|Investments                                    |  |       | 75      |   |            |  | 26     |            |  |  | -             |   |  |        | (424
|Mineral properties                             |  |       | 7,843   |   |            |  | (9,458 | )          |  |  | -             |   |  |        | -   
|Other                                          |  |       | -       |   |            |  | 44     |            |  |  | -             |   |  |        | -   
|Total Deferred income tax assets (liabilities) |  |       | 13,371  |   |            |  | (9,120 | )          |  |  | 60            |   |  |        | (424
|Recognized (unrecognized) deferred tax assets  |  |       | (13,371 | ) |            |  | 9,544  |            |  |  | (60           | ) |  |        | -   
|                                               |  |       | -       |   |            |  | 424    |            |  |  | -             |   |  |        | (424



Page 33







Deferred tax assets were not recognized
in 2010 as it was not probable that future taxable profit would be available against which the company could utilize the benefits.



|                                               |  |       |        |   |            |  |        |            |  |  | Recognized in |  |  |        |    
|---------------------------------------------- |  | ----- | ------ | - | ---------- |  | ------ | ---------- |  |  | ------------- |  |  | ------ | ---
|                                               |  |       |        |   | Recognized |  |        | Recognized |  |  | other         |  |  |        |    
|                                               |  | JAN 1 |        |   | in         |  |        | directly   |  |  | comprehensive |  |  | DEC 31 |    
|                                               |  | 2011  |        |   | Net profit |  |        | to equity  |  |  | Income        |  |  | 2011   |    
|                                               |  |       |        |   |            |  |        |            |  |  |               |  |  |        |    
|Deferred income tax assets (liabilities)       |  |       |        |   |            |  |        |            |  |  |               |  |  |        |    
|Share issue costs                              |  |       | 564    |   |            |  | (461   | )          |  |  | 929           |  |  |        | -  
|Decommissioning and reclamation                |  |       | 1,299  |   |            |  | 1,324  |            |  |  | -             |  |  |        | -  
|Net royalty obligation                         |  |       | 3,918  |   |            |  | (1,024 | )          |  |  | -             |  |  |        | -  
|Investments                                    |  |       | (323   | ) |            |  | 10     |            |  |  | -             |  |  |        | 330
|Mineral properties                             |  |       | (1,615 | ) |            |  | (3,960 | )          |  |  | -             |  |  |        | -  
|Other                                          |  |       | 44     |   |            |  | (37    | )          |  |  | -             |  |  |        | -  
|Total Deferred income tax assets (liabilities) |  |       | 3,887  |   |            |  | (4,148 | )          |  |  | 929           |  |  |        | 330
|Recognized (unrecognized) deferred tax assets  |  |       | (3,887 | ) |            |  | 3,784  |            |  |  | 103           |  |  |        | -  
|                                               |  |       | -      |   |            |  | (364   | )          |  |  | 1,032         |  |  |        | 330



(e) Unrecognized Income Tax Credits



The company has $2.2 million (2010 - $1.4
million) of unused income tax credits that can be applied against future taxes payable. No deferred tax asset or income tax credit
receivable has been recognized as it is not probable that future taxable profits will be available to utilize the credits. The
income tax credit will expire, if unused, as follows:



|     |  | 2011 |      
|---- |  | ---- | -----
|     |  |      |      
|2026 |  | $    | 61   
|2027 |  |      | 533  
|2028 |  |      | 285  
|2029 |  |      | 239  
|2030 |  |      | 273  
|2031 |  |      | 827  
|     |  | $    | 2,218



Page 34







| | 21. | Earnings Per Share:
| | --- | -------------------



Basic earnings per share:



|                                                     |  | DEC 31 |         |  | DEC 31 |  
|---------------------------------------------------- |  | ------ | ------- |  | ------ | -
|                                                     |  | 2011   |         |  | 2010   |  
|                                                     |  |        |         |  |        |  
|Basic earnings per share:                            |  |        |         |  |        |  
|Net profit attributable to common Shareholders       |  | $      | 9,454   |  |        | $
|Weighted average number of common Shares outstanding |  |        | 156,062 |  |        |  
|Basic net earnings per share                         |  | $      | 0.06    |  |        | $



Diluted earnings per share:



|                                                     |  | DEC 31 |         |  | DEC 31 |  
|---------------------------------------------------- |  | ------ | ------- |  | ------ | -
|                                                     |  | 2011   |         |  | 2010   |  
|                                                     |  |        |         |  |        |  
|Diluted earnings per share:                          |  |        |         |  |        |  
|Net earnings attributable to common Shareholders     |  | $      | 9,454   |  |        | $
|Weighted average number of common Shares outstanding |  |        | 156,062 |  |        |  
|Dilutive effect of stock options                     |  |        | 1,385   |  |        |  
|Dilutive effect of warrants                          |  |        | 963     |  |        |  
|Weighted average number of common Shares outstanding |  |        | 158,410 |  |        |  
|Diluted net earnings per share                       |  | $      | 0.06    |  |        | $



Excluded from the computation of diluted
earnings per share at December 31, 2011 were options outstanding on 648,561 common shares with an average exercise price greater
than the average market price of the Company’s common shares.



Excluded from the computation of diluted
earnings per share at December 31, 2010 were:



| | (i) | options outstanding on 1,005,000 common shares with an average exercise price greater than the
average market price of the Company’s common shares; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | 7,809,500 warrants with an average exercise price greater than the average market price of the
Company’s common shares.
| | ---- | -----------------------------------------------------------------------------------------------------------------------



| | 22. | Financial Instruments:
| | --- | ----------------------



The Company is exposed in varying degrees
to a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses
on preservation of capital and protecting current and future Company assets and cash flows by reducing exposure to risks posed
by the uncertainties and volatilities of financial markets.



The Company’s Board of Directors
has responsibility to ensure that an adequate financial risk management policy is established and to approve the policy.



The Company’s Audit Committee oversees
Management’s compliance with the Company’s financial risk management policy, approves financial risk management programs,
and receives and reviews reports on management compliance with the policy.



Page 35







The types of risk exposures and the
way in which such exposures are managed are as follows:



Credit Risk – The Company’s
credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents, receivables, and commodity
and currency instruments. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash and
cash equivalents and reclamation deposits with high-credit quality financial institutions. Sales of
precious metals are to entities considered to be credit worthy, as evaluated through the Company’s risk management program,
which includes an evaluation of new and existing customers and quarterly monitoring.



Liquidity Risk – The
Company ensures that there is sufficient capital in order to meet short term business requirements, after taking into account cash
flows from operations and the Company’s holdings of cash and cash equivalents. The Company believes operating cash flows
will be sufficient to fund the continued exploration at Madsen and Amisk and ongoing capital improvements at the Seabee properties
for the next twelve months. The Company’s cash is invested in business accounts with quality financial institutions and is
available on demand.



|                           |  | Payments/Commitments due by period |       
|-------------------------- |  | ---------------------------------- | ------
|                           |  | Total                              |       
|Contractual Obligation     |  |                                    |       
|                           |  |                                    |       
|Demand loans               |  |                                    | 896   
|Interest on demand loans   |  |                                    | 21    
|Debenture                  |  |                                    | 9,751 
|Debenture interest         |  |                                    | 1,629 
|Capital lease obligations  |  |                                    | 3,905 
|Interest on capital leases |  |                                    | 212   
|Office lease               |  |                                    | 311   
|                           |  |                                    | 16,725



Market Risk – Market
risk is the potential for loss from adverse changes in the market value of financial instruments. The level of market risk that
the Company is exposed to varies depending on the composition of its derivative instrument portfolio, as well as current and expected
market conditions. The significant market risk exposures to which the Company is exposed are Foreign exchange risk, Commodity price
and Interest rate risk. These are discussed further below:



Foreign exchange risk –
The results of the Company’s operations are subject to currency risks. The Company’s revenues from the production and
sale of gold are denominated in U.S. dollars. However, the Company’s operating expenses are primarily incurred in Canadian
dollars and its liabilities are primarily denominated in Canadian dollars. The Company is not exposed to material foreign exchange
risk on its financial instruments.



Interest rate risk –
In respect to the Company’s financial assets, the interest rate risk mainly arises from the interest rate impact on our cash
and cash equivalents, reclamation deposits and debt. In respect to financial liabilities, one of the Company’s demand loans
carries a floating interest rate with the balance of Company debt at fixed interest rates. When possible, the Company will fix
its interest costs to avoid variations in cash flows. Due to the greater proportion of fixed rate debt, a one percent change in
interest rates would not materially impact earnings or cash flows.



Commodity price risk –
The value of the Company’s mineral resources is related to the price of gold and the outlook for this mineral. Gold and precious
metal prices historically have fluctuated widely and are affected by numerous factors outside of the Company’s control, including,
but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide
production, short-term changes in supply and demand because of speculative hedging activities and certain other factors related
specifically to gold. The profitability of the Company’s operations is highly correlated to the market price of gold. If
the gold price declines below the cost of production at the Company’s operations, for a prolonged period of time, it may
not be economically feasible to continue production. The Company is not exposed to material commodity price risk on its financial
instruments.



For a $10 US$ movement in gold price per
ounce, earnings and cash flow will have a corresponding movement of CDN $0.4 million, or $0.00 per share.



Fair Value- The Company
has various financial instruments comprised of cash and cash equivalents, receivables, short and long-term investments, restricted
promissory notes, reclamation deposits, demand loans, accounts payable and accrued liabilities, long-term debt, and royalty obligations.



Page 36







For disclosure purposes, all financial
instruments measured at fair value are categorized into one of three hierarchy levels, described below. Each level is based on
the transparency of the inputs used to measure the fair values of assets and liabilities:



Level 1 – Values
based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.



Level 2 – Values
based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially
the full term of the asset or liability.



Level 3 – Values
based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value
measurement.



The fair values of financial assets
and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows:



|                                    |  | December 31    |        |  | December 31          |  
|----------------------------------- |  | -------------- | ------ |  | -------------------- | -
|                                    |  | 2011           |        |  | 2010                 |  
|                                    |  | Carrying Value |        |  | Estimated Fair Value |  
|                                    |  |                |        |  |                      |  
|Loans and receivables               |  |                |        |  |                      |  
|Cash and cash equivalents           |  | $              | 2,529  |  |                      | $
|Restricted cash                     |  |                | -      |  |                      |  
|Short-term investments (1)          |  |                | 33,168 |  |                      |  
|Accounts receivable (3)             |  |                | 2,714  |  |                      |  
|Available-for-sale financial assets |  |                |        |  |                      |  
|Investments (1)                     |  |                | 2,854  |  |                      |  
|Held-to-maturity                    |  |                |        |  |                      |  
|Deposits for reclamation costs      |  |                | 2,237  |  |                      |  
|Other financial liabilities         |  |                |        |  |                      |  
|Demand loans                        |  |                | 896    |  |                      |  
|Accounts payable                    |  |                | 5,737  |  |                      |  
|Net royalty obligations             |  |                | 5,289  |  |                      |  
|Debenture (1)                       |  |                | 9,452  |  |                      |  
|Gold forward contract (2)           |  |                | -      |  |                      |  



| | (1) | Based on quoted market prices – Level 1
| | --- | ---------------------------------------

| | (2) | Based on models with observable inputs – Level 2
| | --- | ------------------------------------------------

| | (3) | At December 31, 2011, there were no receivables that were past due or considered impaired.
| | --- | ------------------------------------------------------------------------------------------



| | 23. | Capital Management:
| | --- | -------------------



The Company’s objective when managing
its capital is to safeguard its ability to continue as a going concern so that it can provide adequate returns to shareholders
and benefits to other stakeholders. The Company defines capital that it manages as the aggregate of its equity attributable to
owners of the Company, which is comprised of issued capital, contributed surplus, accumulated deficit and accumulated other comprehensive
income (loss).



The Company manages the capital structure
and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets and
the Company’s working capital requirements. In order to maintain or adjust the capital structure, the Company (upon approval
from its Board of Directors, as required) may issue new shares through private placements, sell assets or incur debt. The Board
of Directors reviews and approves any material transaction out of the ordinary course of business, including proposals on acquisitions,
major investments, as well as annual capital and operating budgets. The Company is not subject to externally imposed capital requirements.



The Company utilizes a combination of short-term
and long term debt and equity to finance its operations and exploration.



Page 37







|Capital Structure    |  |          |              |   |          |  |          | DEC 31 |  |   | DEC 31  |   |  | JAN 1 |        
|-------------------- |  | -------- | ------------ | - | -------- |  | -------- | ------ |  | - | ------- | - |  | ----- | -------
|                     |  | Interest |              |   | Maturity |  |          | 2011   |  |   | 2010    |   |  | 2010  |        
|                     |  |          |              |   |          |  |          |        |  |   |         |   |  |       |        
|Demand loan # 1      |  |          | Prime + 1.50 | % |          |  | Aug/2011 |        |  | $ | -       |   |  | $     | 667    
|Demand loan # 2      |  |          | 4.575        | % |          |  | Nov/2012 |        |  |   | 896     |   |  |       | 1,832  
|Demand loan # 3      |  |          | 5.99         | % |          |  | Feb/2010 |        |  |   | -       |   |  |       | -      
|Debenture            |  |          | 12.00        | % |          |  | May/2013 |        |  |   | 9,452   |   |  |       | 9,344  
|Total debt           |  |          |              |   |          |  |          |        |  | $ | 10,348  |   |  | $     | 11,843 
|                     |  |          |              |   |          |  |          |        |  |   |         |   |  |       |        
|Shareholders’ equity |  |          |              |   |          |  |          |        |  |   | 172,895 |   |  |       | 106,068
|                     |  |          |              |   |          |  |          |        |  |   |         |   |  |       |        
|Debt to equity       |  |          |              |   |          |  |          |        |  |   | 5.99    | % |  |       | 11.17  



The Company is bound by and has met all
covenants on these credit facilities.



| | 24. | Determination of Fair Values:
| | --- | -----------------------------



A number of the Company’s accounting
policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.
Fair values have been determined for measurement and or disclosure purposes based on the methods described below. When applicable,
further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.



Derivatives



The fair value of the Company’s forward
exchange contracts are estimated based on appropriate price modeling commonly used by market participants. Such modeling uses discounted
cash flow analysis with observable market inputs including future interest rates, implied volatilities and the credit risk of the
Company or the counterparties as appropriate, with resulting valuations periodically validated through third-party or counterparty
quotes.



Share-based payment transactions



The fair value of the employee share purchase
plan and the fair value of the stock options is measured using the Black-Scholes option pricing model. Measurement inputs include
share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility
adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based
on historical experience and general option holder behavior) and the risk-free interest rate (based on government bonds). Service
conditions attached to the transactions are not taken into account in determining fair value.



| | 25. | Subsequent Event:
| | --- | -----------------



Subsequent to December 31, 2011, the Company
closed the transaction whereby Claude would acquire all of the outstanding shares of St. Eugene Mining Corporation Limited (TSXV:
SEM) ("St. Eugene") that it did not already own. The transaction was accomplished pursuant to the terms of a court approved
plan of arrangement completed under the Business Corporations Act (British Columbia) (the “Arrangement”). Under the
Arrangement, Claude acquired all of the outstanding common shares of St. Eugene in exchange for the issuance of approximately 8.7
million common shares of Claude, representing proceeds of approximately $13.0 million. In addition to Claude Shares, former
shareholders of St. Eugene also received 0.25 of a common share of Satori Resources Inc. (“Satori”).



As part of the Arrangement, Claude also
exchanged all outstanding warrants of St. Eugene for warrants of Claude and reduced its existing net smelter return royalty on
the Tartan Lake Project from a sliding scale to two percent. The net smelter return royalty can also be repurchased at any time
by Satori for $1.0 million for each one percent.



On closing, Claude now owns 100 percent
of the Amisk Gold Project. The transaction will be accounted for as an asset acquisition as St. Eugene did not meet the definition
of business, as defined in IFRS 3, Business Combinations. The approximate purchase price of the transaction was $13.0 million,
which will be recorded as an increase to mineral properties and share capital.



Page 38







| | 26. | Explanation of Transition to IFRS:
| | --- | ----------------------------------



These consolidated financial statements
for the year ended December 31, 2011 are the Company’s first annual financial statements prepared under IFRS. For all accounting
periods prior to December 31, 2011, the Company prepared its financial statements in accordance with Canadian GAAP (“previous
GAAP”). In accordance with IFRS 1, First time adoption of IFRS, certain disclosures relating to the transition to
IFRS are given in this note. These disclosures are prepared under IFRS as set out in the basis of preparation in Note 2.



IFRS 1 generally requires that first-time
adopters retrospectively apply all effective IFRS standards and interpretations in effect at the reporting date. However, IFRS
1 allows first time adopters to IFRS to take advantage of a number of voluntary exemptions from the general principal of retrospective
restatement. The IFRS 1 exemptions and exceptions utilized by the Company in its conversion from Canadian GAAP to IFRS are as follows:



IFRS 3 Business Combinations



This standard has not been applied to acquisitions
of subsidiaries that occurred before January 1, 2010, the Company’s transition date



IFRS 2 Share-based Payments



A first-time adopter is encouraged, but
not required, to apply IFRS 2 Share-based Payments(“IFRS 2”) to equity instruments that were granted on or
before November 7, 2002, or were granted after November 7, 2002 and vested before the entity’s IFRS transition date. The
Company has only applied IFRS 2 to all equity instruments granted after November 7, 2002 that had not vested as of January 1, 2010,
and to all liabilities arising from share-based payment transactions that existed at January 1, 2010.



IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities



The Company has elected to apply the available
exemption from full retrospective application of decommissioning and reclamation provisions, as allowed under IFRS 1, and has therefore
adopted IFRIC 1 prospectively at the Company’s transition date of January 1, 2010.



Mandatory Exceptions to Retrospective
Applications



IFRS 1 provides specific guidelines that
a first-time adopter must adhere to under certain circumstances. The guideline pertaining to estimates applies to the Company,
which prohibits the use of hindsight to create or revise estimates. Accordingly, the estimates previously made by the Company under
its previous GAAP are consistent with their application under IFRS.



Material Adjustments to the Statement
of Cash Flows for 2010



In addition the changes required to adjust
for the accounting policy differences described in the following notes, interest paid and income taxes paid have been moved into
the body of the consolidated statement of cash flows as part of operating activities, whereas they were previously disclosed as
supplementary information. There are no other material differences between the statement of cash flows presented under IFRS and
the statement of cash flows presented under previous GAAP.



Page 39







26. Explanation of Transition to IFRS
(continued):



Reconciliation of equity



IFRS has many similarities with the Company’s
previous GAAP as it is based on a similar conceptual framework. However, there are important differences with respect to recognition,
measurement and disclosure. The reconciling items between Canadian GAAP presentation and IFRS presentation have no net effect on
the cash flows generated. However, adoption of IFRS resulted in changes to Claude’s Statement of Financial Position, Statement
of Income (Loss) and Statement of Changes in Equity as set out below:



|                                                       |  |       |        |  |                     |  |         | Presentation          |  |  |            |   |  |      |         |   |          |  |         | Presentation |  |  |            |  |  |      |        
|------------------------------------------------------ |  | ----- | ------ |  | ------------------- |  | ------- | --------------------- |  |  | ---------- | - |  | ---- | ------- | - | -------- |  | ------- | ------------ |  |  | ---------- |  |  | ---- | -------
|                                                       |  |       |        |  | Previous            |  |         | and Other             |  |  | Effect of  |   |  |      |         |   | Previous |  |         | and Other    |  |  | Effect of  |  |  |      |        
|                                                       |  |       |        |  | Canadian            |  |         | Adjustments           |  |  | Transition |   |  |      |         |   | Canadian |  |         | Adjustments  |  |  | Transition |  |  |      |        
|                                                       |  |       |        |  | GAAP                |  |         | Note (k)              |  |  | To IFRS    |   |  | IFRS |         |   | GAAP     |  |         | Note (k)     |  |  | To IFRS    |  |  | IFRS |        
|                                                       |  | Notes |        |  | January
    1, 2010 |  |         | December
    31, 2010 | 
|                                                       |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Assets                                                 |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Cash and cash equivalents                              |  |       |        |  |                     |  | 11,948  |                       |  |  | -          |   |  |      | -       |   |          |  | 11,948  |              |  |  | 6,401      |  |  |      | -      
|Restricted cash                                        |  |       |        |  |                     |  | -       |                       |  |  | -          |   |  |      | -       |   |          |  | -       |              |  |  | 4,389      |  |  |      | -      
|Accounts receivable                                    |  |       |        |  |                     |  | 4,806   |                       |  |  | -          |   |  |      | -       |   |          |  | 4,806   |              |  |  | 2,716      |  |  |      | -      
|Interest receivable on restricted promissory
    notes |  |       |        |  |                     |  | 4,866   |                       |  |  | (4,866     | ) |  |      | -       |   |          |  | -       |              |  |  | 4,904      |  |  |      | (4,904 
|Inventories                                            |  |       | (a)    |  |                     |  | 11,448  |                       |  |  | -          |   |  |      | -       |   |          |  | 11,448  |              |  |  | 9,241      |  |  |      | -      
|Shrinkage stope platform costs                         |  |       | (a)    |  |                     |  | 11,293  |                       |  |  | -          |   |  |      | (11,293 | ) |          |  | -       |              |  |  | 11,199     |  |  |      | -      
|Prepaid expenses and deposits                          |  |       |        |  |                     |  | 327     |                       |  |  | -          |   |  |      | -       |   |          |  | 327     |              |  |  | 496        |  |  |      | -      
|Assets related to discontinued
    operation           |  |       | (b)(d) |  |                     |  | 570     |                       |  |  | -          |   |  |      | 4,398   |   |          |  | 4,968   |              |  |  | -          |  |  |      | -      
|Current assets                                         |  |       |        |  |                     |  | 45,258  |                       |  |  | (4,866     | ) |  |      | (6,895  | ) |          |  | 33,497  |              |  |  | 39,346     |  |  |      | (4,904 
|                                                       |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Mineral properties                                     |  |       | (c)(d) |  |                     |  | 94,277  |                       |  |  | -          |   |  |      | (13,104 | ) |          |  | 81,173  |              |  |  | 116,336    |  |  |      | -      
|Assets related to discontinued operation               |  |       | (b)    |  |                     |  | 4,398   |                       |  |  | -          |   |  |      | (4,398  | ) |          |  | -       |              |  |  | -          |  |  |      | -      
|Investments                                            |  |       |        |  |                     |  | 643     |                       |  |  | -          |   |  |      | -       |   |          |  | 643     |              |  |  | 4,328      |  |  |      | -      
|Deposits for reclamation costs                         |  |       |        |  |                     |  | 2,277   |                       |  |  | -          |   |  |      | -       |   |          |  | 2,277   |              |  |  | 2,277      |  |  |      | -      
|Restricted promissory notes                            |  |       |        |  |                     |  | 82,568  |                       |  |  | (82,568    | ) |  |      | -       |   |          |  | -       |              |  |  | 83,219     |  |  |      | (83,219
|Non-current assets                                     |  |       |        |  |                     |  | 184,163 |                       |  |  | (82,568    | ) |  |      | (17,502 | ) |          |  | 84,093  |              |  |  | 206,160    |  |  |      | (83,219
|Total assets                                           |  |       |        |  |                     |  | 229,421 |                       |  |  | (87,434    | ) |  |      | (24,397 | ) |          |  | 117,590 |              |  |  | 245,506    |  |  |      | (88,123



Page 40







26. Explanation of Transition to IFRS
(continued):



Reconciliation of equity (continued)



|                                               |  |       |        |  |                     |  |         | Presentation          |  |  |            |   |  |      |         |   |          |  |         | Presentation |  |  |            |  |  |      |        
|---------------------------------------------- |  | ----- | ------ |  | ------------------- |  | ------- | --------------------- |  |  | ---------- | - |  | ---- | ------- | - | -------- |  | ------- | ------------ |  |  | ---------- |  |  | ---- | -------
|                                               |  |       |        |  | Previous            |  |         | and Other             |  |  | Effect of  |   |  |      |         |   | Previous |  |         | and Other    |  |  | Effect of  |  |  |      |        
|                                               |  |       |        |  | Canadian            |  |         | Adjustments           |  |  | Transition |   |  |      |         |   | Canadian |  |         | Adjustments  |  |  | Transition |  |  |      |        
|                                               |  |       |        |  | GAAP                |  |         | Note (k)              |  |  | To IFRS    |   |  | IFRS |         |   | GAAP     |  |         | Note (k)     |  |  | To IFRS    |  |  | IFRS |        
|                                               |  | Notes |        |  | January
    1, 2010 |  |         | December
    31, 2010 | 
|                                               |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Liabilities                                    |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Accounts payable and accrued liabilities       |  |       | (e)(f) |  |                     |  | 4,100   |                       |  |  | (498       | ) |  |      | 326     |   |          |  | 3,928   |              |  |  | 5,537      |  |  |      | (758   
|Interest payable on royalty obligations        |  |       |        |  |                     |  | 4,729   |                       |  |  | (4,729     | ) |  |      | -       |   |          |  | -       |              |  |  | 4,770      |  |  |      | (4,770 
|Loans and borrowings                           |  |       |        |  |                     |  | -       |                       |  |  | 6,625      |   |  |      | -       |   |          |  | 6,625   |              |  |  | -          |  |  |      | 13,441 
|Demand loans                                   |  |       |        |  |                     |  | 4,586   |                       |  |  | (4,586     | ) |  |      | -       |   |          |  | -       |              |  |  | 2,499      |  |  |      | (2,499 
|Liabilities related to discontinued operation  |  |       | (b)(d) |  |                     |  | 370     |                       |  |  | -          |   |  |      | 162     |   |          |  | 532     |              |  |  | -          |  |  |      | -      
|Net royalty obligation                         |  |       |        |  |                     |  | -       |                       |  |  | 766        |   |  |      | -       |   |          |  | 766     |              |  |  | -          |  |  |      | 815    
|Other liabilities                              |  |       |        |  |                     |  | 2,942   |                       |  |  | (2,942     | ) |  |      | -       |   |          |  | -       |              |  |  | 2,634      |  |  |      | (2,634 
|Current liabilities                            |  |       |        |  |                     |  | 16,727  |                       |  |  | (5,364     | ) |  |      | 488     |   |          |  | 11,851  |              |  |  | 15,440     |  |  |      | 3,595  
|                                               |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Obligations under capital lease                |  |       |        |  |                     |  | 1,240   |                       |  |  | (1,240     | ) |  |      | -       |   |          |  | -       |              |  |  | 873        |  |  |      | (873   
|Loans and borrowings                           |  |       |        |  |                     |  | -       |                       |  |  | 10,432     |   |  |      | -       |   |          |  | 10,432  |              |  |  | -          |  |  |      | 873    
|Debenture                                      |  |       |        |  |                     |  | 9,192   |                       |  |  | (9,192     | ) |  |      | -       |   |          |  | -       |              |  |  | 9,257      |  |  |      | (9,257 
|Royalty obligations                            |  |       |        |  |                     |  | 83,554  |                       |  |  | (83,554    | ) |  |      | -       |   |          |  | -       |              |  |  | 84,220     |  |  |      | (84,220
|Deferred revenue                               |  |       |        |  |                     |  | 5,531   |                       |  |  | (5,531     | ) |  |      | -       |   |          |  | -       |              |  |  | 4,582      |  |  |      | (4,582 
|Liabilities related to discontinued operation  |  |       | (b)    |  |                     |  | 117     |                       |  |  | -          |   |  |      | (117    | ) |          |  | -       |              |  |  | -          |  |  |      | -      
|Net royalty obligation                         |  |       |        |  |                     |  | -       |                       |  |  | 6,517      |   |  |      | -       |   |          |  | 6,517   |              |  |  | -          |  |  |      | 5,583  
|Decommissioning and reclamation                |  |       | (d)    |  |                     |  | 2,965   |                       |  |  | -          |   |  |      | 569     |   |          |  | 3,534   |              |  |  | 4,221      |  |  |      | -      
|Deferred tax liability                         |  |       | (g)    |  |                     |  | -       |                       |  |  | -          |   |  |      | -       |   |          |  | -       |              |  |  | 1,975      |  |  |      | -      
|Non-current liabilities                        |  |       |        |  |                     |  | 102,599 |                       |  |  | (82,568    | ) |  |      | 452     |   |          |  | 20,483  |              |  |  | 105,128    |  |  |      | (92,476
|                                               |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Shareholders’ equity                           |  |       |        |  |                     |  |         |                       |  |  |            |   |  |      |         |   |          |  |         |              |  |  |            |  |  |      |        
|Share capital                                  |  |       | (e)(g) |  |                     |  | 111,957 |                       |  |  | -          |   |  |      | 3,502   |   |          |  | 115,459 |              |  |  | 117,974    |  |  |      | (276   
|Contributed surplus                            |  |       | (f)    |  |                     |  | 2,465   |                       |  |  | (204       | ) |  |      | 340     |   |          |  | 2,601   |              |  |  | 2,754      |  |  |      | (65    
|Retained earnings (deficit)                    |  |       | (i)    |  |                     |  | (4,361  | )                     |  |  | 702        |   |  |      | (29,179 | ) |          |  | (32,838 | )            |  |  | 1,457      |  |  |      | 1,099  
|Accumulated other comprehensive
    income     |  |       | (g)    |  |                     |  | 34      |                       |  |  | -          |   |  |      | -       |   |          |  | 34      |              |  |  | 2,753      |  |  |      | -      
|Total shareholders’
    equity                 |  |       |        |  |                     |  | 110,095 |                       |  |  | 498        |   |  |      | (25,337 | ) |          |  | 85,256  |              |  |  | 124,938    |  |  |      | 758    
|Total liabilities and
    shareholders’ equity |  |       |        |  |                     |  | 229,421 |                       |  |  | (87,434    | ) |  |      | (24,397 | ) |          |  | 117,590 |              |  |  | 245,506    |  |  |      | (88,123



Page 41







26. Explanation of Transition to IFRS
(continued):



Reconciliation of income for the year
ended December 31, 2010



|                                             |  |       |           |  |          |  |        | Presentation |  |  |            |   |  |      |       
|-------------------------------------------- |  | ----- | --------- |  | -------- |  | ------ | ------------ |  |  | ---------- | - |  | ---- | ------
|                                             |  |       |           |  | Previous |  |        | And Other    |  |  | Effect of  |   |  |      |       
|                                             |  |       |           |  | Canadian |  |        | Adjustments  |  |  | Transition |   |  |      |       
|                                             |  | Notes |           |  | GAAP     |  |        | Note (k)     |  |  | To IFRS    |   |  | IFRS |       
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Revenue                                      |  |       |           |  |          |  | 55,998 |              |  |  | -          |   |  |      | -     
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Mine Operating:                              |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Production costs                             |  |       | (a)       |  |          |  | 31,364 |              |  |  | -          |   |  |      | (147  
|Depreciation and depletion                   |  |       | (c)(h)    |  |          |  | 14,617 |              |  |  | -          |   |  |      | (3,288
|                                             |  |       |           |  |          |  | 45,981 |              |  |  | -          |   |  |      | (3,435
|Profit from mining operations                |  |       |           |  |          |  | 10,017 |              |  |  |            |   |  |      | 3,435 
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|General and administrative                   |  |       |           |  |          |  | 5,213  |              |  |  | (384       | ) |  |      | 46    
|Finance expense                              |  |       | (d)(h)    |  |          |  | -      |              |  |  | -          |   |  |      | 1,611 
|Finance and other income                     |  |       | (d)(e)(h) |  |          |  | 285    |              |  |  | -          |   |  |      | (1,864
|Loss on investments                          |  |       |           |  |          |  | 207    |              |  |  | -          |   |  |      | -     
|                                             |  |       |           |  |          |  | 5,705  |              |  |  | (384       | ) |  |      | (207  
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Profit from continuing operations before tax |  |       |           |  |          |  | 4,312  |              |  |  | 384        |   |  |      | 3,642 
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Deferred income tax recovery                 |  |       |           |  |          |  | -      |              |  |  | -          |   |  |      | (424  
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Profit from continuing operations            |  |       |           |  |          |  | 4,312  |              |  |  | 384        |   |  |      | 4,066 
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Profit from discontinued operation           |  |       | (d)       |  |          |  | 1,506  |              |  |  | -          |   |  |      | 45    
|                                             |  |       |           |  |          |  |        |              |  |  |            |   |  |      |       
|Net profit                                   |  |       |           |  |          |  | 5,818  |              |  |  | 384        |   |  |      | 4,111 



Reconciliation of comprehensive income
for the year ended December 31, 2010



|                                                            |  |          |       |  | Presentation |  |     |            |  |  |       |  
|----------------------------------------------------------- |  | -------- | ----- |  | ------------ |  | --- | ---------- |  |  | ----- | -
|                                                            |  | Previous |       |  | and Other    |  |     | Effect of  |  |  |       |  
|                                                            |  | Canadian |       |  | Adjustments  |  |     | Transition |  |  |       |  
|                                                            |  | GAAP     |       |  | Note (k)     |  |     | To IFRS    |  |  | IFRS  |  
|                                                            |  |          |       |  |              |  |     |            |  |  |       |  
|Net profit                                                  |  |          | 5,818 |  |              |  | 384 |            |  |  | 4,111 |  
|                                                            |  |          |       |  |              |  |     |            |  |  |       |  
|Other comprehensive income                                  |  |          |       |  |              |  |     |            |  |  |       |  
|Loss on available-for-sale securities transferred to profit |  |          | 176   |  |              |  | -   |            |  |  | 3     |  
|Unrealized gain (loss) on available-for-sale securities     |  |          | 2,543 |  |              |  | -   |            |  |  | (3    | )
|Other comprehensive income                                  |  |          | 2,719 |  |              |  | -   |            |  |  | -     |  
|Total comprehensive income                                  |  |          | 8,537 |  |              |  | 384 |            |  |  | 4,111 |  



Page 42







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes to the reconciliations



| | (a) | Shrinkage Stope Platform Costs
| | --- | ------------------------------



The Company utilizes the shrinkage
stope and long-hole mining methods to mine its ore body at the Seabee Gold Operation. Under its previous GAAP, the Company deferred
these costs (which included labour, equipment and overhead) until the related ore was transferred to the mine surface. Once the
ore was transported to the surface, the costs were reclassified to inventory and charged to operating costs upon sale. Under IFRS,
the Company is accounting for these costs as variable production costs that are directly attributable to the conversion of gold
ore. The impact of applying this policy is as follows:



Consolidated Statement of Financial
Position:



|                                           |  | JAN 1 |         |   | DEC 31 | 
|------------------------------------------ |  | ----- | ------- | - | ------ | 
|                                           |  | 2010  |         |   | 2010   | 
|                                           |  |       |         |   |        | 
|Increase in Inventories                    |  |       | -       |   |        | 
|Decrease in Shrinkage stope platform costs |  |       | (11,293 | ) |        | 
|Decrease in Retained earnings              |  |       | (11,293 | ) |        | 



Consolidated Statement of Income:



|                             |  | DEC 31 |     
|---------------------------- |  | ------ | ----
|                             |  | 2010   |     
|                             |  |        |     
|Decrease in Production costs |  | $      | (147



| | (b) | Discontinued operation
| | --- | ----------------------



Under the Company’s previous
GAAP, long-lived assets classified as held for sale were classified in separate current and long term portions. Under IFRS, non-current
assets and liabilities of disposal groups classified as held for sale are classified as current in the statement of financial position
as they are expected to be realized within 12 months of the date of classification as held for sale or distribution. This difference
has resulted in the reclassification of non-current assets and liabilities related to the Company’s discontinued operation
from non-current to current, with no income or retained earnings impact.



| | (c) | Impairment of Non-Financial Assets
| | --- | ----------------------------------



Under the Company’s previous
GAAP, impairment of long-lived assets was assessed on the basis of an asset’s estimated undiscounted future cash flows compared
with the asset’s carrying amount and if impairment is indicated, discounted cash flows are prepared to quantify the amount
of the impairment. Under IFRS, impairment is assessed based on discounted cash flows compared with the asset’s carrying amount
to determine the recoverable amount and measure the amount of the impairment.



Upon transition to IFRS, the
Company tested its Seabee Gold Mine for impairment using the one-step approach prescribed by International Accounting Standard
36 (“IAS 36”), Impairment of Assets. The carrying value of the asset was compared
against the fair value less cost to sell. Fair value less cost to sell was determined using a discounted cash flow approach that
incorporated marketplace participant assumptions.The cash flows were discounted over a seven year period at a post-tax
rate of 11.3 percent. As a result, an impairment of $13.1 million was calculated and charged directly to retained earnings as
a transition difference. This asset was not considered impaired under the Company’s previous GAAP because the estimated
cash flow projects on an undiscounted basis exceeded the carrying value.





Page 43







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes
to the reconciliations (continued)



The impact of this change decreased retained earnings as follows:



Consolidated Statements of Financial
Position:



|                               |  | JAN 1 |         |   | DEC 31 |  
|------------------------------ |  | ----- | ------- | - | ------ | -
|                               |  | 2010  |         |   | 2010   |  
|                               |  |       |         |   |        |  
|Decrease in Mineral properties |  | $     | (13,104 | ) |        | $
|Decrease in Retained earnings  |  | $     | (13,104 | ) |        | $



Consolidated Statement of Income:



|                                       |  | DEC 31 |       
|-------------------------------------- |  | ------ | ------
|                                       |  | 2010   |       
|                                       |  |        |       
|Decrease in Depreciation and depletion |  | $      | (3,089



| | (d) | Decommissioning and reclamation
| | --- | -------------------------------



Under its previous GAAP, the
fair value of the liability relating to the Company’s Decommissioning and reclamation was recorded in the period in which
it was incurred, discounted to its present value using the Company’s credit adjusted risk-free interest rate and the corresponding
amount was recognized by increasing the carrying amount of the related long-lived asset. The liability was then accreted and the
capitalized cost depreciated over the useful life of the related asset.



Under IFRS, the Company must
recognize a liability at the time when it becomes legally or constructively obligated to rehabilitate a disturbance resulting from
mining activities; IFRS also requires re-measurement of the liability at each reporting date. In addition, IAS 37, Provisions,
Contingent Liabilities and Contingent Assets (“IAS 37”), requires the re-measurement of the provision for reclamation
and rehabilitation if there is a change in the current market-based discount rate. Under IFRS, discount rates used should reflect
the risks specific to the decommissioning provision; a risk-free rate is used when the estimated future costs take into consideration
related risks.



Under IFRS 1, Claude elected
not to retrospectively recalculate the effect of each change in its reclamation provision prior to January 1, 2010. Instead, the
liability and related assets and depreciation were measured at the date of transition.



Upon transition to IFRS, the
Company recalculated its decommissioning and reclamation provision utilizing the guidance of IAS 37. A transition difference of
$0.6 million was booked to the Company’s asset retirement obligation and retained earnings accounts.



Consolidated Statements of Financial
Position:



|                                                      |  | JAN 1 |     |  | DEC 31 |  
|----------------------------------------------------- |  | ----- | --- |  | ------ | -
|                                                      |  | 2010  |     |  | 2010   |  
|                                                      |  |       |     |  |        |  
|Increase in decommissioning and reclamation provision |  |       |     |  |        |  
|Gold operation                                        |  | $     | 569 |  |        | $
|Discontinued operation                                |  |       | 45  |  |        |  
|Decrease in Retained earnings                         |  | $     | 614 |  |        | $



Page 44







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes
to the reconciliations (continued)



|                               |  | JAN 1 |   |  | DEC 31 |  
|------------------------------ |  | ----- | - |  | ------ | -
|                               |  | 2010  |   |  | 2010   |  
|                               |  |       |   |  |        |  
|Increase in Mineral properties |  | $     | - |  |        | $
|Increase in Retained earnings  |  | $     | - |  |        | $



Consolidated Statement of Income:



|                                               |  | DEC 31 |     
|---------------------------------------------- |  | ------ | ----
|                                               |  | 2010   |     
|                                               |  |        |     
|Decrease in Finance expense                    |  | $      | (90 
|Increase in Finance and other income           |  |        | (36 
|Increase in Profit from Discontinued operation |  |        | (45 
|                                               |  | $      | (171



| | (e) | Share Capital
| | --- | -------------



Flow-through shares



The Company, from time to time,
finances a portion of its exploration activities through the issue of flow-through shares. Flow-through shares are a unique Canadian
tax incentive which is the subject of specific guidance under the Company’s previous GAAP; however, there is no equivalent
guidance under IFRS. Flow-through securities are securities of the Company which meet certain criteria and qualify for flow-through
tax treatment for the purposes of the Income Tax Act (Canada) (“ITA”). Qualification as a “flow-through share”
enables the Company to renounce certain eligible resource expenditures incurred by the Company for the benefit of any investor
who is a Canadian taxpayer. Once issued, the shares are common shares of the Company and are not differentiated from shares which
were not flow-through shares.



Under the ITA, companies are
permitted to issue flow-through shares pursuant to a written agreement under which the issuer agrees to incur certain eligible
Canadian exploration expenses within the time frame specified in the agreement (generally 12 to 24 months) and to flow-through
or “renounce” the related tax deduction to the investor. The proceeds from the issuance of flow-through shares must
be expended on “qualifying expenditures,” which are related to mineral exploration in Canada and the Company recorded
the future tax liability associated with the issuance of flow-through shares as a reduction in share capital at the time of renouncement
of the related tax deduction.



Under its previous GAAP, the
Company recorded the tax cost of expenditures renounced to subscribers on the date the deductions were renounced to the subscribers
provided there was reasonable assurance that the expenditures would be made. Under this treatment, share capital was reduced and
future income tax liabilities were increased by the tax cost of expenditures renounced to the subscribers and the Company had unrecorded
tax benefits on loss carryforwards and tax pools in excess of book values available for deduction against which a valuation allowance
had been provided. In these circumstances, the future tax liability reduced the valuation allowance and that reduction was recognized
in earnings.



The premium paid for flow through
shares in excess of the market value of the shares without the flow-through features at the time of issue was credited to other
liabilities and included in income at the time the qualifying expenditures are made.



In accordance with IFRS interpretations,
the premium of proceeds received on Flow-through Shares in excess of the market value of the shares on the date of issue represents
the value of the liability relating to the transfer of income tax credits foregone and owing to investors upon renunciation. As
the Company fulfills its obligations by incurring the eligible expenditures, the premium from the proceeds received will be recorded
as other income and the related deferred tax liability and expense recognized.



Page 45







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes
to the reconciliations (continued)



Under IFRS, the proceeds from
the issuance of flow-through shares should be allocated between the offering of shares and the sale of tax benefits.  The
allocation is based on the difference between the issue price of flow-through shares and the fair value of the shares at the date
of issuance.  A liability is recorded for this difference and is reversed when expenditures are incurred.

Upon transition to IFRS at January
1, 2010, the difference between these two approaches resulted in a $3.5 million increase to share capital and a corresponding decrease
in retained earnings.



Consolidated Statements of Financial
Position:



|                              |  | JAN 1 |     |  | DEC 31 |  
|----------------------------- |  | ----- | --- |  | ------ | -
|                              |  | 2010  |     |  | 2010   |  
|                              |  |       |     |  |        |  
|Increase in Accounts payable  |  | $     | 326 |  |        | $
|Decrease in Retained earnings |  | $     | 326 |  |        | $



|                                                                |  | JAN 1 |        |   | DEC 31 |  
|--------------------------------------------------------------- |  | ----- | ------ | - | ------ | -
|                                                                |  | 2010  |        |   | 2010   |  
|                                                                |  |       |        |   |        |  
|Increase in Share capital                                       |  |       |        |   |        |  
|Adjustment for flow-through shares                              |  | $     | 7,964  |   |        | $
|Adjustment for flow-through share premiums                      |  |       | (4,462 | ) |        |  
|Reversal of renunciation of income taxes on flow-through shares |  |       | -      |   |        |  
|Decrease in Retained earnings                                   |  | $     | 3,502  |   |        | $



Consolidated Statements of Income:



|                                     |  | DEC 31 |     
|------------------------------------ |  | ------ | ----
|                                     |  | 2010   |     
|                                     |  |        |     
|Increase in Finance and other income |  | $      | (326



| | (f) | Share-based Compensation
| | --- | ------------------------



The Company has applied IFRS
2 to all equity instruments granted after November 7, 2002 that had not vested as of January 1, 2010, and to all liabilities arising
from share-based payment transactions that existed at January 1, 2010.



Under IFRS, the Company accrues
the cost of share-based payments over the vesting period using the graded method of amortization with each installment accounted
for as a separate arrangement. Under the Company’s previous GAAP, the Company elected to treat the share-based payments as
a pool and determine the fair value using an average life of the instruments, provided that compensation was recognized on a straight-line
basis, subject to at least the value of the vested portion of the award being recognized at each reporting date.

Under the Company’s previous
GAAP, the cost associated with the grant of these options was recorded in the period in which the options were granted. Under IFRS,
the service date is considered to be the date the employee becomes eligible to participate in the bonus plan (i.e. January 1 of
each year), rather than the grant date. This accounting treatment is a difference between the Company’s previous GAAP and
IFRS.



Consequently, an adjustment of
$0.3 million was recorded to decrease contributed surplus with offset to opening retained earnings.



Page 46







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes
to the reconciliations (continued)



|                                |  | JAN 1 |     |  | DEC 31 |  
|------------------------------- |  | ----- | --- |  | ------ | -
|                                |  | 2010  |     |  | 2010   |  
|                                |  |       |     |  |        |  
|Decrease in Contributed surplus |  | $     | 340 |  |        | $
|Increase in Retained earnings   |  | $     | 340 |  |        | $



| | (g) | Deferred Tax Liability
| | --- | ----------------------



The following changes decreased
the deferred tax liability due to other changes under IFRS.



Consolidated Statements of Financial
Position:



|                                       |  |       |     |  | JAN 1 |   |   | DEC 31 | 
|-------------------------------------- |  | ----- | --- |  | ----- | - | - | ------ | 
|                                       |  | Notes |     |  | 2010  |   |   | 2010   | 
|                                       |  |       |     |  |       |   |   |        | 
|Decrease in Share capital              |  |       |     |  |       | $ | - |        | 
|Increase in Other comprehensive income |  |       |     |  |       |   | - |        | 
|Increase in Share capital              |  |       | (e) |  |       |   | - |        | 
|Decrease in Deferred tax liability     |  |       |     |  |       | $ | - |        | 



| | (h) | Presentation changes
| | --- | --------------------



The transition to IFRS resulted
in numerous financial statement presentation changes, most noticeably on the statements of income. These reclassifications have
been identified in the reconciliations contained within this note and have no impact on the final equity position of the Company.
The changes are listed below:



Consolidated Statement of Income:



|                                       |  | DEC 31 |       
|-------------------------------------- |  | ------ | ------
|                                       |  | 2010   |       
|                                       |  |        |       
|Increase in Finance expense            |  | $      | 1,701 
|Decrease in Depreciation and depletion |  |        | (199  
|Increase in Finance and other income   |  |        | (1,502
|                                       |  | $      | -     



Under the Company’s prior
GAAP, accretion was included as a component of Depreciation and depletion and Interest expense was grouped with Other income. Under
IFRS, Finance income and expense are presented as separate line items. As such, the above-noted increase in finance expense relates
to accretion being removed from depreciation and depletion and interest expense being removed from being grouped within Other income.



Consolidated Statement of Financial
Position:



As disclosed in note 5, in 2010,
the Company made an offer to repay all of its outstanding debentures. Under the Company’s prior GAAP, the current portion
of the debentures of $87 as at December 31, 2010 was determined by the amount of debentures repaid by the Company subsequent to
December 31, 2010. Under IFRS, the Company’s offer to repay all of the debentures prior to December 31, 2010 requires the
entire carrying amount of the debentures to be classified as a current liability as at December 31, 2010. Accordingly, the long-term
portion of the Company’s debentures was reclassified from long-term liabilities to current liabilities as at December 31,
2010.



Page 47







| | 26. | Explanation of Transition to IFRS (continued):
| | --- | ----------------------------------------------



Notes to the reconciliations
(continued)



| | (i) | Retained Earnings (Deficit) Adjustments
| | --- | ---------------------------------------



The above changes decreased (increased)
retained earnings as follows:



|                                                          |  |       |     |  | JAN 1 |  |         | DEC 31 | 
|--------------------------------------------------------- |  | ----- | --- |  | ----- |  | ------- | ------ | 
|                                                          |  | Notes |     |  | 2010  |  |         | 2010   | 
|                                                          |  |       |     |  |       |  |         |        | 
|Inventories                                               |  |       |     |  |       |  | -       |        | 
|Shrinkage stope platform costs                            |  |       | (a) |  |       |  | (11,293 | )      | 
|Mineral properties                                        |  |       | (b) |  |       |  | (13,104 | )      | 
|Accounts payable and accrued liabilities                  |  |       | (e) |  |       |  | (326    | )      | 
|Decommissioning and reclamation                           |  |       | (d) |  |       |  | (614    | )      | 
|Deferred tax liability                                    |  |       |     |  |       |  | -       |        | 
|Income tax recovery                                       |  |       |     |  |       |  | -       |        | 
|Share capital                                             |  |       | (e) |  |       |  | (3,502  | )      | 
|Stock compensation                                        |  |       | (f) |  |       |  | (340    | )      | 
|Total Adjustment under IFRS - Retained earnings (deficit) |  |       |     |  |       |  | (29,179 | )      | 



| | (j) | Reclassifications
| | --- | -----------------



Certain prior period amounts
have been reclassified to conform to the current year’s financial statement presentation.



| | (k) | Presentation and Other Adjustments
| | --- | ----------------------------------



ESPP and Stock Compensation
Expense



Certain prior period amounts
have been adjusted due to the correction of immaterial errors in the application of the Company’s previous GAAP that were
identified during the Company’s transition to IFRS. As a result, at January 1, 2010 and December 31, 2010 Accounts payable
was reduced by $0.6 million and $0.5 million, respectively, Share capital was reduced by nil and $0.3 million, respectively, Contributed
surplus was reduced by $0.2 million and $0.2 million, respectively, and Retained earnings was increased by $0.8 million and $1.0
million, respectively. In addition, in the year ended December 31, 2010, general and administrative expense was reduced by $0.4
million.



Royalty Obligation



As disclosed in Note 12, during
each of 2004, 2005, 2006 and 2007, the Company entered into separate Royalty Agreements whereby it sold a basic royalty on a portion
of the gold production at its Seabee Gold Operation. The Company received cash consideration consisting of royalty income, indemnity
fee income and interest income. Amounts relating to these Royalty Agreements were presented on a gross basis on the Statement of
Financial Position under the Company’s Previous GAAP. These amounts have been reclassified on a net basis, as the Company
and all counterparties have a legal right of offset and the intention to settle on a net basis.



Page 48