Exhibit 99.3









Management’s Discussion and Analysis





The following discussion is a review of the financial performance and position of Claude Resources Inc. (“Claude” or the “Company”) for the years ended December 31, 2009 and 2008. This discussion is the responsibility of Management and the information within this Management discussion and
analysis is current to March 26, 2010.  The Board of Directors approved the disclosure presented herein.  The discussion should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto. All amounts are expressed in Canadian dollars, except where otherwise indicated.





Note To Investors





For ease of reference, the following factors for converting metric measurements into imperial equivalents are provided:





To Convert from Metric
To Imperial
Multiply byMetres
Feet (ft.)
3.281Kilometres (km)
Miles
0.621Tonnes
Tons (2,000 pounds)
1.102Grams
Troy Ounces
0.032Hectares
Acres
2.471





Overview





Claude Resources Inc. is a gold producer with shares 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 prolific Red Lake gold camp of northwestern Ontario.




mission and vision





The Company’s mission is to create significant shareholder value through gold exploration and mining.  Its vision is to be valued by all stakeholders for its ability to discover, develop and produce gold in a safe, environmentally responsible and profitable manner.





goals and key performance drivers





The Company’s goals and key performance drivers include:





•
Increasing its resource base through aggressive exploration programs;


•
Improving operating margins at the Seabee Operation;


•
Strengthening the Balance Sheet and maintaining liquidity in order to reduce financial risk;


•
Consider strategically attractive opportunities and accretive transactions; and


•
Ensuring that the Company’s share price reflects underlying value.





Measuring the Company’s Results





Increasing Claude’s Resource Base Through Aggressive Exploration Programs





During 2009, the Company achieved its objective of increasing its resource base.  In conjunction with SRK Consulting (Canada) Inc. (“SRK”), the Company filed a National Instrument 43-101 mineral resource evaluation for the Madsen Mine during the fourth quarter of 2009.  The statement outlined Indicated
Resources of 928,000 ounces of gold at 0.26 ounces per ton or 8.93 grams per tonne and Inferred Resources of 297,000 ounces of gold at 0.34 ounces per ton or 11.74 grams per tonne.  The National Instrument 43-101 Technical Report was filed on January 20, 2010.


Page 1





Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





At the Madsen Property, Claude’s objective is to fully assess the potential for high grade gold mineralization while continuing to de-water the Madsen shaft to provide additional underground exploration access.  Phase I underground drilling of the 8 Zone program, from the 10th level,
has confirmed high grade mineralization 450 feet(1) down plunge of the historic mine infrastructure as well as identifying the potential for the development of parallel footwall lenses.  In preparation for Phase II of the underground drill program from the 16th level in 2010, shaft dewatering and remediation continued.





(1)   Historically, Madsen results have been reported in ounces per ton and feet (imperial).





The 2010 drill program at Madsen plans to continue with Phase II underground drilling on the 8 Zone plunge and strike extensions as well as surface drilling on the Austin Tuff Extension, Starratt Olsen Footwall, Russett Lake and the 8 Zone up-plunge targets.





At the Seabee Operation, the Company focused its gold exploration efforts on drilling at Seabee Deep and on continued development of satellite ore bodies.  This includes the Santoy 8 Project which is expected to commence commercial production during the fourth quarter of 2010 and will provide supplemental feed for the Seabee
Mill.  Recently released drill results at Seabee Deep included 10.16 grams of gold per tonne over 1.6 metres true width, 20.13 grams of gold per tonne over 1.3 metres true width, 8.68 grams of gold per tonne over 4.5 metres true width and 10.71 grams of gold per tonne over 2.9 metres true width. These intercepts demonstrate grade above the historical average and are in close proximity to existing development and infrastructure.





Improving Operating Margins at the Seabee Operation





During 2009, the Company improved operating and profit margins at the Seabee Operation.  Total cash cost per ounce decreased four percent to CDN $699 (U.S. $613) per ounce this year from CDN $729 (U.S. $683) in 2008.  Furthermore, for the year ended December 31, 2009, earnings before interest, taxes, depreciation
and amortization (EBITDA)(1) was $11.7 million versus $3.5 million in 2008.





(1)
For an explanation of non-GAAP performance measures refer to “Non-GAAP Performance Measures”.





Building on the 2008 resource upgrade at Santoy 8, Claude has continued to move the Santoy 8 Project toward commercial production.  The Company has submitted the environmental studies and permitting required for the Santoy 8 Project.  Pre-construction approval was received during the fourth quarter of 2009 for
portal development and settling pond construction.  The Company will continue to focus on the profitability of the Seabee Operation.  This will be accomplished through a combination of improved grade control, cost controls and developing the production profile at lower cost satellite ore bodies including Santoy 8.





Financial Capacity





During 2009, the Company strengthened its balance sheet and improved liquidity by aggressively repaying outstanding debt while building its cash reserves.  During the second quarter of 2009, Claude completed its offer to purchase a portion of the outstanding 12 percent senior secured debentures of the Company.  A
total of $8.3 million of debentures were purchased, representing approximately 46 percent of the total outstanding debentures.  As a result of this repurchase, the Company will realize interest savings of $1.0 million annually over the remaining term of the outstanding debentures.





In 2009, Claude completed three separate private placements and raised gross proceeds of $29.8 million.  Also, during the fourth quarter, Claude sold its working interest in its Gainsborough oil assets located in southern Saskatchewan for gross proceeds of $0.5 million.







Page 2




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)








These transactions have helped to ensure continued funding of exploration efforts and expansion of mining projects.  During 2010, Claude will remain focused on further improving its Balance Sheet, maintaining significant unencumbered cash on hand and will continue to maintain access to financial markets.  In addition,
the Company’s remaining oil and natural gas assets in Alberta remain held for sale and are expected to be fully divested in 2010.





Strategically Attractive and Accretive Transactions





In January 2010, the Company completed a reorganization of its working interest in the Amisk property.  After acquiring the balance of the interests held by Cameco and Husky, the Company is in final stages of negotiations to vend a 35 percent interest in the property to St. Eugene Mining Corporation Ltd. The acquisition
of controlling interest in the Amisk Lake property is consistent with Claude's strategy to focus on exploration and developing gold assets in mining friendly jurisdictions.





Shareholder Value





During 2009, the Company’s shares experienced a recovery after the unprecedented and historic lows experienced during 2008.  Since December 31, 2008, shareholders of CRJ on the TSX have observed an increase of 195 percent in the value of their investment; on the AMEX, shares of CGR have appreciated in value 269 percent.  At
December 9, 2009, shares of Claude traded on the TSX experienced a one year high at $1.46 and at December 31, 2009 closed at $1.24 (December 31, 2008 - $0.42); on the NYSE-AMEX, Claude’s shares closed at $1.18 US$ (December 31, 2008 - $0.32 US$).  Despite this improvement, Management remains focused on ensuring that the underlying value of the Company’s assets is appropriately reflected in its share price during 2010 and beyond.





The Company is continuing with its strategy of becoming a pure gold play through the continued divestitures of its non-core oil and natural gas assets, all the while remaining open to potentially accretive transactions in the gold industry that will further increase shareholder value.  Production at the Company’s
Seabee Operation has increased and costs have stabilized.  Furthermore, the Company’s strengthened Balance Sheet has helped to ensure the continuation of the Madsen exploration program.





With the support of a major rise in gold price, strong working capital, improving economics at our Seabee Operation and a significantly expanded resource base at Madsen, Claude is well positioned to further execute its strategy of discovering, developing and producing gold in established Canadian mining and exploration districts
adjacent to existing infrastructure.





Exploration Results




Claude Resources continued its aggressive exploration and development strategy during 2009, focusing at Madsen on the completion of Phase I of the 8 Zone drill program and continued surface evaluation of the Madsen Mine and 8 Zone trends.  Underground drilling confirmed high grade mineralization 450 feetdown
plunge of historic mine infrastructure as well as the potential for the development of parallel footwall lenses.  In preparation for Phase II of the underground program in late 2010, shaft dewatering and rehabilitation continued, surpassing the 15th level. In late 2009, SRK finalized an independent National Instrument 43-101 mineral resource evaluation for the Madsen Mine. As noted in Table 2 below, the evaluation outlined
Indicated Resources of 928,000 ounces of gold at 0.26 ounces per ton or 8.93 grams per tonne and Inferred Resources of 297,000 ounces of gold at 0.34 ounces per ton or 11.74 grams per tonne.





Exploration on the Seabee Operation during 2009 focused on permitting and developing satellite ore bodies to be used as supplemental feed for the Seabee mill.  A 33,000 tonne bulk sample was completed at Porky West.  The Company continued to move Santoy 8 towards commercial production by preparing an Environmental
Impact Statement and initiating surface construction.  Combined with anticipated production from Santoy 8, the Company is continuing to demonstrate its capacity to effectively grow the Seabee Operation from discovery, to development and then to production.




All exploration activities were carried out under the direction of Qualified Persons, Brian Skanderbeg, P. Geo., Vice President Exploration and Philip Ng, P. Eng., Vice President Mining Operations.







Page 3


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Madsen Project





The Madsen Project comprises over 10,000 acres (4,000 hectares) and, having produced in excess of 2.4 million ounces, is the third largest gold producer in the Red Lake camp in Ontario, Canada.  Infrastructure includes a fully functional 500 ton per day mill, 4,000 foot deep shaft and permitted tailings facility.





During 2009, exploration drilling focused on Phase I of the 8 Zone underground drill program.  Initiated from the 10th level in December of 2008, the directional-drilling program included testing of the plunge extension of the 8 Zone as well
as conceptual targets along the 8 Zone shear system.  Results from Phase I deep drilling of the 8 Zone Trend demonstrated down plunge continuity to 450 feet below the 27th level with multiple holes returning strong visible gold associated with intensely silicified, biotite-altered basalt. Historic high grade drill results were verified with the return of 0.75 ounces per ton over 25.92 feet (including 4.14 ounces per ton over
3.12 feet) and 3.71 ounces per ton over 2.46 feet.  See Table 1 for highlights of the Phase I 8 Zone drill program.  Step-out drilling to the east and west confirmed the development of favorable 8 Zone structure and stratigraphy. The system remains open down plunge and along strike to the east and west.





Table 1: Highlights from Phase I 8 Zone drill program at the Madsen Mine, Ontario.








Hole ID
From
(m)
To
(m)
Au
(g/t)
Length
(m)
Au
(oz/ton)
Length
(ft)
Visible
Gold
NotedMUG-08-01
883.00
883.75
127.12
0.75
3.71
2.46
üMUG-09-02b
891.25
891.70
21.52
0.45
0.63
1.48
üMUG-09-03 (incl)
915.40
917.89
33.39
58.18
2.49
1.25
0.97
1.70
8.17
4.10
ü
üMUG-09-04
(incl)
909.55
917.45
25.77
141.80
7.90
0.95
0.75
4.14
25.92
3.12
ü
üMUG-09-05
(incl)
943.51
946.90
24.30
62.09
3.39
1.22
0.71
1.81
11.45
4.00
ü
ü





In addition to the Phase I 8 Zone underground drill program, surface exploration also continued to test the Austin Tuff and Fork Zone targets. The Apple target consists of an extension of the Austin and McVeigh Tuff horizons northeast of the Madsen shaft.  The Fork Zone is located mid-way between the Starratt-Olsen and
Madsen mines.  The target comprises two sub-parallel, moderately, southeast-dipping shear systems that host southwest plunging ore-shoots.  The mineralized shear system has been intercepted over a strike length in excess of 450 metres and remains open along strike and at depth.  Assay results from the 2009 programs are being integrated with historic results, with further surface testing planned for 2010.







Page 4


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)








Figure 1: Madsen Mine Cross Section




Following 20 months of compilation of historic data, SRK finalized an independent National Instrument 43-101 mineral resource evaluation for the Madsen Mine. This mineral resource evaluation was based on historical exploration and mining data, Phase I underground drilling as at September 27, 2009 and geological and resource modeling.  The
resource evaluation was undertaken on the four separate zones, Austin, South Austin, McVeigh and 8 Zone that comprise the Madsen Gold Mine.  The National Instrument 43-101 Technical Report was filed on January 20, 2010.




Table 2: Consolidated Mineral Resource Statement(1) for the Madsen Mine, Ontario.Resource Class
Zone

Tonnes
Grade (g/tonne)
Grade
(oz/ton)
Contained Gold (oz)Indicated
Austin

1,677,000
7.92
0.23
427,000South Austin

850,000
9.32
0.27
254,000McVeigh

374,000
9.59
0.28
115,000Zone 8

335,000
12.21
0.36
132,000Total
3,236,000
8.93
0.26
928,000Inferred
Austin

108,000
6.30
0.18
22,000South Austin

259,000
8.45
0.25
70,000McVeigh

104,000
6.11
0.18
20,000Zone 8

317,000
18.14
0.53
185,000Total
788,000
11.74
0.34
297,000





(1)
Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures have been rounded to reflect the relative accuracy of the estimates. Reported at a cut-off grade of 5.0 g/t gold based on U.S.$1,000 per troy ounce of gold and gold metallurgical recoveries of 94 percent.







Page 5


Management’s Discussion and Analysis
(in millions of CDN dollars, except as otherwise noted)


During 2009, the Company achieved several important objectives at the Madsen Project with the National Instrument 43-101 mineral resource evaluation, completion of the Phase I 8 Zone drill program and continued drilling at the Fork Zone and Austin targets.  Moving forward, the 2010 drill program plans to continue with Phase
II underground drilling on the 8 Zone plunge and strike extensions as well as surface drilling on the Apple, Starratt-Olsen footwall, Russett Lake and the 8 Zone up-plunge targets.










Figure 2: Madsen Regional View





The Company’s Madsen shaft de-watering and rehabilitation program is ongoing.  A new pump station on the 12th level was completed during the third quarter.  However, the dewatering program experienced a delay during the fourth
quarter due to a catch pit failure below 200 level of the shaft. Currently, inspections, rehabilitation and upgrades of the Madsen shaft are being undertaken prior to the recommencement of the de-watering program.  The Phase II underground drill program on the 8 Zone Trend at Madsen will continue once the 16th level is de-watered and drill chambers have been established.





Seabee Operation





The Seabee Operation includes 14,400 hectares and is comprised of 4 mineral leases and extensive surface infrastructure. During 2009, exploration efforts focused on advancing the Santoy 8 project, continued bulk sampling of the Porky West deposit and continued exploration of the Seabee North region.







Page 6


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Figure  3: Seabee Operation





Santoy 8





The Santoy 8 Project is located approximately 14 kilometres east of the Seabee Mill and accessed via an all-weather road.  Gold mineralization is hosted in siliceous, skarnified, shear structures with sulfide-chlorite-quartz veins and in silicified granitoid sills.  The mineralized lenses dip moderately to steeply
eastward and are interpreted to be amenable to bulk mining techniques.  Gold mineralization of the Santoy 8 ore lens occurs over a strike length of 600 metres, a depth of 350 metres and remains open along strike and down plunge to the north.  The Santoy 8E ore lens has been intercepted over a strike length of 200 metres, depth of 250 metres and remains open along strike and down plunge to the north.  True thickness of the Santoy 8 deposits vary from 1.5 metres to 30 metres.





During 2009, Claude updated its mineral resource calculation for the Santoy 8 Project.  As at December 31, 2009, the mineral reserves at Santoy 8 are 177,300 tonnes at 7.02 grams of gold per tonne (40,000 ounces), measured and indicated mineral resources consist of 545,600 tonnes at 8.98 grams of gold per tonne (157,500
ounces) and inferred mineral resources are 391,500 tonnes at 8.08 grams of gold per tonne (102,000 ounces). The upgrading of the resource model was the Company's first step in the transition from exploration through bulk sampling to commercial production at the Santoy 8 deposits.





The Santoy 8 Power Line Project continued during 2009.  During the fourth quarter, the Company installed and commissioned the main transformer, which marked the completion of the final phase of the project and has tied this property to the Provincial power grid.  Further to the production discussions with Federal and
Provincial regulatory agencies reported during the second quarter regarding the proposed Santoy 8 Project, the Company is pleased to report that it has received pre-construction approval from the Saskatchewan Ministry of Environment for the mine portal and approximately 150 metres of decline.  Portal construction and surface infrastructure for the planned development of the Santoy 8 deposit were initiated in late 2009. Claude views the Santoy 8 project as a key driver in the expansion of the Seabee
Operation and in lowering operating costs over the next three years.  The Company has completed the environmental studies.  Late in the first quarter of 2010, Claude received Ministerial approval for the development of the Santoy 8 satellite deposit.  The Company is now in the position to apply for the regulatory approvals including the License to Operate a Pollutant Control Facility and anticipates receiving the permits required for commercial mining of the Santoy 8 and 8E deposits
early in the second quarter of 2010.







Page 7


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Seabee North





Claude wholly owns the Porky Lake structural zones located approximately three kilometres northwest of its Seabee Mill.  The Seabee North region includes the Porky Lake West and Porky Lake East (“Pigeon Lake”) gold zones as well as strike continuity of the system to the north.  The gold-bearing horizon
has been traced intermittently over 7.5 kilometres from the western extent of the Porky West zone to the north of the Pigeon Lake zone in the east.  Drill testing from 2002 to 2006 successfully discovered two structural zones of significant mineralization, Porky Main and Porky West.  The extensive mineralized horizon in the Porky Lake Region will continue to be explored by surface prospecting and geochemical surveys and further drill testing.  Drilling is expected to begin in February
2010.





In late 2009, Claude completed a bulk sample of the Porky West deposit.  Ore was extracted via a decline from two levels.  During 2009, 33,068 tonnes at a grade of 3.34 grams of gold per tonne were processed from Porky West.  Based on the low grade, the Company will re-evaluate the economics of the  Porky
West deposit in 2010.  At December 31, 2009, the Measured and Indicated Mineral Resource at Porky West was 112,908 tonnes at 3.06 grams of gold per tonne (11,108 ounces) while the Inferred Mineral Resource at Porky West was 138,314 tonnes at 6.03 grams of gold per tonne (26,792 ounces). At Porky Main, the Measured and Indicated Mineral Resources consisted of 160,000 tonnes at 7.50 grams of gold per tonne (38,600 ounces) and the Inferred Mineral Resource was 70,000 tonnes at 10.43 grams of gold per tonne
(23,500 ounces).





Amisk Lake Property





The property is host to the Laurel Lake gold-silver deposit, the past-producing Monarch Mine as well as a large number of gold occurrences and prospects. Extensive historic exploration, inclusive of significant surface and underground drilling and bulk sampling, was completed by Saskatchewan Mining Development Corporation (SMDC),
Hudson Bay Mining and Smelting, Husky Oil and Claude Resources.





The Amisk Lake Property comprises 13,600 hectares and is located southwest of the town of Flin Flon in the Flin Flon-Snow Lake Greenstone Belt. The property is host to a significant historic gold-silver +/- zinc-copper resource within the Laurel Lake Deposit. Initially,
the Company plans to focus on evaluating the historic resources in light of current gold prices and advances in bulk mining techniques.




Claude has acquired a 65 percent interest in the property from Cameco and Husky Oil and is in the final stages of negotiating a Purchase and Sale Agreement with St. Eugene Mining Corporation Ltd.





Quality Assurance and Quality Control Procedures





Rigorous quality assurance and quality control procedures have been implemented including the use of blanks, standards and duplicates.  Geochemical analyses were submitted to TSL Laboratory in Saskatoon, Saskatchewan, Accurassay Laboratories at Thunder Bay, Ontario, and or the Seabee minesite lab.  The former
two laboratories are ISO approved. Core samples were analyzed by a 30 gram gold fire assay with an atomic absorption and gravimetric and/or screen fire finish. Intercepts are reported as drilled widths and range from 65 percent to 90 percent of true widths.  Composite intervals were calculated using a 3.00 grams per tonne cut-off and may include internal dilution.





2009 Mining Operations Results





Seabee Operation





For the year ending December 31, 2009, the Seabee Operation consisted of feedstock from the Seabee Mine, Santoy 7 Mine and Porky exploration project.  Additional details are provided in Table 3 below.







Page 8


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Table 3: Seabee Operation Gold Production Results (2009 versus 2008):Q1



Q2



Q3



Q4


Total


Seabee


Santoy 7


PorkyTonnes Milled - 2009


54,190



51,284



70,700



71,467



247,641



183,474



31,099



33,068Tonnes Milled - 2008


51,111



57,984



57,799



61,533



228,427



179,437



43,209



5,781Grade - 2009
(grams of gold per tonne)


6.36



4.92



6.53



6.56



6.17



6.24



8.74



3.34Grade - 2008
(grams of gold per tonne)


5.37



6.45



6.77



7.09



6.46



6.44



6.94



3.59Milled Ounces - 2009


11,085



8,111



14,839



15,084



49,119



36,829



8,740



3,550Milled Ounces - 2008


8,831



12,026



12,585



14,021



47,463



37,157



9,638



668Gold Recovery % - 2009


95.75
%


95.37
%


95.56
%


94.79
%


95.33
%


95.36
%


95.38
%


94.97
%Gold Recovery % - 2008


95.38
%


95.88
%


94.98
%


96.66
%


95.79
%


95.80
%


95.73
%


96.41
%2009 Produced Ounces


10,613



7,735



14,180



14,299



46,827



35,121



8,335



3,3712008 Produced Ounces


8,422



11,531



11,962



13,551



45,466



35,595



9,227



644





Total mine operating costs decreased five percent to $30.5 million from $32.2 million last year.  This result was in line with Management expectations and was attributable to stabilization of labour, material and service costs.  2010 operating costs are forecast to be similar to those of 2009.





Table 4: Annual Seabee Production and Costs Statistics





Dec 31


Dec 312009


2008Tonnes Milled


247,641



228,427Head Grade (grams per tonne)


6.17



6.46Recovery (%)


95.3%



95.8%Gold Produced (ounces) (1)


46,827



45,466Gold Sold (ounces)(2)


43,631



44,099Operating Expenses (CDN$ million)

$
30.5


$
32.2Cash Operating Costs (CDN$/oz)(3)

$
699


$
729Cash Operating Costs (US$/oz)(3)

$
613


$
683





(1)
Includes ounces produced from Santoy 7 and Porky West bulk samples.


(2)
Excludes 3,379 ounces (2008 - 640 ounces) sold from Porky West bulk sample.


(3)
For an explanation non-GAAP performance measures, refer to “Non-GAAP Performance Measures”.




Page 9


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)







Figure 4: Seabee Operation Annual Production and 2010 Forecast Production





Seabee Mineral Reserves and Mineral Resources





During 2009, Claude completed approximately 50,000 metres of surface and underground diamond drilling at the Seabee Operation.  Drilling evaluated down plunge extensions of the Seabee ore shoots, hanging wall mineralization, as well as targets east of the present mining areas.  Highlights from 2009 drill program
at Seabee Deep include:





•
30.60 grams of gold per tonne over 2.5 metres true width (hole U09-605);


•
14.98 grams of gold per tonne over 4.7 metres true width (hole U09-630);


•
23.39 grams of gold per tonne over 1.0 metres true width (hole U09-637);


•
14.07 grams of gold per tonne over 3.2 metres true width (hole U09-639);


•
19.36 grams of gold per tonne over 3.3 metres true width (hole U09-655);


•
10.16 grams of gold per tonne over 1.6 metres true width (hole U09-660);


•
20.13 grams of gold per tonne over 1.3 metres true width (hole U09-665);


•
8.68 grams of gold per tonne over 4.5 metres true width (hole U09-666); and


•
28.05 grams of gold per tonne over 1.6 metres true width (hole U09-671).





Drill intercepts from Seabee Deep continue to better define higher grade ore shoots out of the 2b and 2c zones.  As these ore shoots are in close proximity to existing development and infrastructure, the Company has been able to positively impact the head grade delivered to its central milling facility over the short and
medium term.





At December 31, 2009, proven and probable reserves in the Seabee Operation were 949,608 tonnes, grading 6.82 grams per tonne or 208,162 ounces of gold.  Compared to December 31, 2008, this represents a five percent decrease in reserve tonnage and reserve ounces.  This decrease is attributed to the reclassification
of the Porky West Deposit to a Mineral Resource as well as the completion of mining at the Santoy 7 satellite deposit.





The Company’s mineral resources at its Seabee Operation included measured and indicated mineral resources of 207,208 ounces and inferred mineral resources totalled 320,055 ounces.  Compared to December 31, 2008, this represents a ten percent decrease in contained gold within our mineral resources.








Page 10




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Table 5: Seabee Operation Mineral Reserves and Mineral Resources




Claude Resources Inc. - Mineral Reserves and Mineral ResourcesProven and Probable ReservesProjects
December 31, 2009
December 31, 2008Tonnes
Grade (g/t)
Ozs
Tonnes
Grade (g/t)
OzsSeabee
772,309
6.77
168,163
685,700
6.98
154,000Santoy 7
-
-
-
54,000
7.95
13,800Santoy 8
177,328
7.02
40,015
177,328
7.02
40,015Porky West
-
-
-
81,400
4.29
11,200Totals
949,637
6.82
208,178
998,428
6.82
219,015Measured and Indicated Mineral ResourcesProjects
December 31, 2009
December 31, 2008Tonnes
Grade (g/t)
Ozs
Tonnes
Grade (g/t)
OzsSantoy 8
545,625
8.98
157,529
545,625
8.98
157,529Porky Main
160,000
7.50
38,581
160,000
7.50
38,581Porky West
112,908
3.06
11,104
-
-
-Totals
818,533
7.87
207,214
705,625
8.64
196,110Inferred Mineral ResourcesProjects
December 31, 2009
December 31, 2008Tonnes
Grade (g/t)
Ozs
Tonnes
Grade (g/t)
OzsSeabee
651,168
8.01
167,763
950,000
8.19
250,000Santoy 7
-
-
-
-
-
-Santoy 8
391,500
8.10
101,955
391,500
8.10
101,955Porky Main
70,000
10.43
23,473
70,000
10.43
23,473Porky West
138,314
6.03
26,792
76,000
6.39
15,600Totals
1,250,982
7.96
319,983
1,487,500
8.17
391,028




Claude is planning in excess of 40,000 metres of underground drilling to replace 2010 production. The Mineral Reserves and Mineral Resources estimates are conducted under the direction of Qualified Persons, Philip Ng, P.Eng., Vice President Mining Operations and Brian Skanderbeg, P.Geo., Vice President Exploration.





Health, Safety and the Environment





In 2009, Management focused on strengthening its operational team and management systems to improve performance in matters related to health, safety and the environment.  To this end, the Company has identified appropriate training developed by experienced professionals in these fields.  Loss control, a safety training
program, commenced at the end of June and is expected to continue in 2010.  In addition, to mitigate potential inadvertent discharges to the environment, the Company has retained professionals to conduct external reviews of its facilities, operating processes, procedures and systems.





Claude continued with planned improvements to lessen its impact on the environment identified through its enterprise risk management program.  During 2009, the Company continued to upgrade its storage facilities for hazardous materials at site.  In 2010, the Company plans to invest nearly $1.0 million of advanced
filtration and effluent processing systems at its Seabee Operation for the betterment of the local environment.  Management’s focus will remain on strengthening its operational team and management systems to improve performance in matters related to health, safety and the environment.




Page 11


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Financial Results of Operations





The Company reports its results of operations based on Canadian Generally Accepted Accounting Principles (“GAAP”).





Financial





For the year ended December 31, 2009, the Company recorded a net loss of $6.3 million, or $0.06 per share.  This compares to net earnings of $0.4 million in 2008, or $0.00 per share, after a gain of $6.5 million arising from the sale of certain of the Company’s natural gas assets and after a $2.2 million non-cash
recovery related to income tax benefits arising from the issuance of flow through shares.





Revenue





The Company’s Porky Lake bulk sample has not been declared to be in commercial production.  As such, gold revenues, net of expenditures, from this project have not been included in earnings; rather, these amounts have been offset against the carrying value of the asset.





Gold revenue from the Company’s Seabee Operation for the year ended 2009 increased 18 percent to $48.5 million from $41.0 million reported for the year ended 2008.  The increase was a result of a 20 percent improvement in Canadian dollar gold prices realized (2009 - $1,112 (U.S. $975); 2008 - $930 (U.S. $871)) offset
by a modest decrease in gold sales volume (2009 - 43,631 ounces; 2008 - 44,099 ounces).





Figure 5: Average Gold Price (London PM Fix - US$)





Expenditures





For the year ended December 31, 2009, the Company reported mine operating costs of $30.5 million, a five percent decrease from the $32.2 million recorded in 2008.  This decrease was largely attributable to stabilized labour, material and service costs.  Total Canadian dollar cash cost per ounce decreased four
percent to CDN $699 (U.S. $613) per ounce this year from CDN $729 (U.S. $683) in 2008.  This result was due to a combination of lower operating costs offset by slightly lower gold sales volume.





Table 6: Total Cash Costs per Gold Ounce Sold(1)





Years ended

Dec 31


Dec 312009


2008Operating expenses (CDN $ thousands)

$
30,491


$
32,166Divided by ounces sold  (2)


43,631



44,099Total cash costs per ounce (CDN$)

$
699


$
729CDN $ Exchange Rate


1.1409



1.0673Total cash costs per ounce (US$)

$
613


$
683





(1)
Cash cost per gold ounce sold is a non-GAAP performance measure.   For an explanation non-GAAP performance measures, refer to “Non-GAAP Performance Measures”.


(2)
Excludes ounces sold from Porky Lake bulk samples.




Page 12


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


The above noted increase in revenues and reduction of operating expenses has had a positive impact on the Company’s gross margin.





Depreciation, Depletion and Accretion





For the year ended December 31, 2009, depreciation, depletion and accretion reported was $19.6 million, a 57 percent increase over the $12.5 million reported in 2008.  These results were due to a higher asset base, increased broken tonnes and fewer reserve tonnes at the Seabee and Santoy Operations.





General and Administrative Expense





General and administrative expense in 2009 was $4.6 million, relatively unchanged from the $4.7 million reported in 2008.




Interest and Other





For the year ended December 31, 2009, interest and other income was $0.5 million, a decrease of $1.8 million from the interest and other expense of $1.3 million for the same period in 2008.  This was primarily due to a slight increase in interest expense on long term debt offset by derivative income.





Write Down of Available for Sale Securities





The Company has an equity portfolio of publicly listed companies that are classified as available-for-sale.  During the year, the Company wrote down the value of one of these companies which experienced a decline in market value that was other-than-temporary.  Previously, this unrealized loss was recorded in Other
Comprehensive Income.  As a result of the decline, the unrealized loss within Other Comprehensive Income was transferred to the Income Statement.





Write Down of Mineral and Exploration Properties





The write down of mineral and exploration properties of $1.1 million in 2009, compared to $0.9 million in 2008, related to a reduction in carrying values of certain exploration properties in Saskatchewan and the Tartan Lake Mine in Manitoba.





Income Taxes





The income tax recovery of $2.2 million noted in the first quarter of 2008 was the income tax benefit arising from the issuance of flow-through shares during 2007.  As there were no flow-through shares issued in 2008, there is no similar benefit for 2009.





Liquidity and Financial Resources





The Company had working capital of $28.5 million (2008 - $19.2 million).  The working capital improvement was largely the result of increases to cash and cash equivalents, receivables related to gold sales, inventories, and decreases in payables.  Earnings before interest, taxes, depreciation and amortization
(EBITDA)(1) was $11.7 million (2008 - $3.5 million).





(1) For an explanation of non-GAAP performance measures, refer to “Non-GAAP Performance Measures”.








Page 13


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Table 7: Working Capital and Current Ratios





In thousands of CDN dollars







Percent Increase
(Decrease)2009


2008


2009


2008Current assets


45,258



36,719



23



30Current liabilities


16,727



17,511



(4
)


7Working capital


28,531



19,208



49



62Current ratio


2.7



2.1



29



24





The Company’s typical cash requirement over the first and second quarters of each year is significant because of the Seabee Operation’s winter ice road resupply, which includes restocking diesel, propane and other large consumables as well as the continued upgrading of the mining fleet and mine infrastructure.





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 $13.8 million.  The net proceeds of the Offering will be used to fund the continued exploration of the Madsen Project and
for general corporate purposes.





Investing





Mineral property expenditures during the year were $25.3 million, a $1.3 million decrease from 2008. Year to date, expenditures were comprised of the following: Seabee Mine development of $9.2 million (2008 - $8.9 million); exploration costs, focusing on the Madsen, Santoy 8 and Porky exploration projects, of $13.3 million; and buildings,
plant and equipment additions of $2.8 million. Property, plant and equipment additions include mining equipment, camp infrastructure and tailings management facility expansion.





In 2009 and 2008, no reclamation and decommissioning deposits were required for the Company’s Seabee Operation nor for its Madsen exploration project.





Financing





Financing activities during 2009 included the following:





(i) a private placement offering whereby a total of 12,000,000 special warrants were issued at a price of $1.15 per special warrant for an aggregate gross proceeds of $13.8 million. Each special warrant will entitle 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 will be comprised of one common share of Claude and one-half of a common share purchase warrant. Each whole purchase warrant will entitle its holder to acquire one common share at a price of $1.75 for a period of 24 months following the date hereof.  The special warrants will be exercisable at any time following the closing date and shall be deemed automatically exercised, if not already exercised by their holders, on the expiry date.  On
February 2, 2010 all special warrants were deemed exercised.





(ii) a private placement offering whereby a total of 8,599,100 units and 5,333,000 flow-through shares were issued at a price of $0.75 and $0.80, respectively.  Gross proceeds from the offering were $10.7 million.  The units issued included one common share of Claude and one-half of one transferable common share
purchase warrant.  Each whole warrant entitles the holder to acquire one common share of the Company at a price of $0.90 for a period of 18 months subsequent to the completion of the offering.





(iii) a private placement financing whereby a total of 5,000,000 units and 2,000,000 flow-through shares were issued at prices of $0.72 and $0.85, respectively.  The aggregate gross proceeds from the offering were $5.3 million.  The units issued included one transferable common share purchase warrant which entitles
the holder to acquire one common share of the Company at a price of $0.90 for a period of 36 months subsequent to the completion of the offering.





Page 14


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Other financing activities included the issuance of 421,056 common shares (2008 - 114,633 common shares) pursuant to the Company’s Employee Share Purchase Plan.





During the year, the Company repaid $2.2 million of its demand loans outstanding.  The Company’s $2.8 million short-term credit facility, which had interest only payments and was due in December 2009, was renegotiated during the fourth quarter.  The proceeds and repayments of capital lease obligations relate
primarily to production equipment.





Capital Structure





The Company’s objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide adequate returns to shareholders and benefits to other stakeholders.  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.  In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, sell assets or incur debt.  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.





The Capital structure is as follows:





Capital Structure





December 31


December 31in thousands of CDN dollars

Interest

Maturity

2009


2008Demand loan # 1


5.99
%
Feb/2010

$
192


$
1,302Demand loan # 2

Prime + 1.50
%
Aug/2011


1,667



2,667Demand loan # 3 (1)


4.55
%
Nov/2010


2,727



-Debenture


12.00
%
May/2013


9,192



16,575Total debt






$
13,778


$
20,544Less: cash and cash equivalents







11,948



8,390Net debt







1,830



12,154Shareholders’ equity






$
110,844


$
87,072Total debt to capital







.02



.14





(1)
During the fourth quarter of 2009, the Company renegotiated the terms of this Demand loan.





Short-term debt facilities include access to a $3.5 million operating line of credit which had not been drawn on at year-end.




Derivative Instruments and Hedging Activities





To mitigate the effects of price fluctuations in revenue, Claude may undertake hedging transactions, from time to time, in respect of the price of gold and foreign exchange rates. At December 31, 2009, the Company had outstanding foreign exchange contracts to sell U.S.$7.5 million at an average exchange rate of 1.0870 CDN$/US$ with
a market value gain inherent in these contracts of $0.3 million. At December 31, 2009, the Company had outstanding forward gold contracts related to 2010 production of 5,000 ounces at an average price of U.S.$1,081 per ounce with a market value loss inherent in these contracts of $0.1 million.








Page 15


Management’s Discussion and Analysis
(in millions of CDN dollars, except as otherwise noted)


Contractual Obligations





The Company’s contractual and other obligations as at December 31, 2009 are summarized as follows:





Payments/Commitments due by period
(in thousands of Canadian dollars)Total


Less than
1 year


2-3
years


4-5
Years


More than
5 yearsContractual ObligationDemand loans


4,586



3,919



667



-



-Interest on demand loans


294



277



17



-



-Debenture


9,838



-



-



9,838



-Debenture interest


4,003



1,181



2,361



461



-Capital lease obligations


3,279



2,039



1,240



-



-Interest on capital leases


192



142



50



-



-Office lease


513



97



219



197



-Flow-through expenditures


3,599



3,599



-



-



-Royalty payments(1)


47,770



5,591



11,985



13,574



16,620Royalty obligations(1)


83,554



-



-



21,112



62,442157,628



16,845



16,539



45,182



79,062





(1)
Funds are available from the Restricted promissory notes, and interest thereon, to pay the Royalty payment and Royalty obligations.





Accounting Estimates





Claude’s significant accounting policies are contained in Note 2 to the consolidated financial statements. The following is a discussion of the accounting estimates that are critical in determining the Company’s financial results.





Reserves





Estimation of reserves involves the exercise of judgment. Forecasts are based on geological, geophysical, engineering and economic data, all of which are subject to many uncertainties and interpretations. The Company expects that, over time, reserve estimates may be revised upward or downward based on updated information. Such information
may include revisions to geological data or assumptions, a change in economic data, and the results of drilling and exploration activities. Reserve estimates can have a significant impact on net earnings, as they are a key component in the calculation of depreciation and depletion. In addition, changes in reserve estimates, commodity prices and future operating and capital costs can have a significant impact on the impairment assessments of the assets.





Valuation of Properties





Claude assesses the carrying values of its properties annually or more frequently if warranted by a change in circumstances.  If it is determined that carrying values of assets cannot be recovered, the unrecoverable amounts are written off against current earnings.  Recoverability is dependent upon assumptions
and judgments regarding future prices, costs of production, sustaining capital requirements and economically recoverable ore reserves.  A change in assumptions may materially impact the potential impairment of these assets.








Page 16


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Asset Retirement Obligations





Claude’s mining, exploration and development activities are subject to various levels of federal and provincial law as well as environmental regulations, including requirements for closure and reclamation. Management judgment and estimates are used when estimating reclamation and closure costs. In some cases, these costs will
be incurred many years from the date of estimate. Estimates may be revised as a result of changes in government regulations or assumptions.





Shrinkage Stope Platform Costs





The Company utilizes shrinkage stoping and long-hole mining as its primary mining methods to mine the Seabee orebody. Under the shrinkage stoping method, the ore is used as a working platform to access and mine further ore and is valued at the lower of cost and net realizable value. Under the long-hole mining method, costs incurred
to access the long-hole stope are inventoried and also valued at the lower of cost and net realizable value.  Both amounts are recorded as shrinkage stope platform costs on the balance sheet. Broken ore from the shrinkage stope is reclassified to inventory once removed from the stope and taken to surface. This ore is expected to be processed in the following 12 months. If actual tonnage and grade vary significantly from estimates, or if the price of gold declines, there could be a material impact on
the profitability of mining operations.





Business Risk





The profitability and operating cash flow of the Company is dependent on several factors: the quantity of gold produced, related gold prices, foreign exchange, operating costs, capital expenditures, exploration levels and environmental, health and safety regulations.  These and other risk factors listed below relate to
the mining industry in general while others are specific to Claude.  Whenever possible, the Company seeks to mitigate these risk factors.





Inherent Exploration and Mining Risks





The exploration for and development of mineral deposits involves significant risks, which even the combination of careful evaluation, experience and knowledge may not eliminate. It is impossible to guarantee that current or future exploration programs on existing mineral properties will establish reserves.





The level of profitability of the Company in future years will depend mainly on gold prices, the cost of production at the Seabee Operation and whether any of the Company’s exploration stage properties can be brought into production. Whether an ore body will continue to be commercially viable depends on a number of factors,
some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices, which cannot be predicted and which have been highly volatile in the past, mining costs, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, environmental protection and reclamation and closure obligations.  The effect of these factors cannot be accurately predicted, but
the combination of these factors may cause a mineral deposit that has been mined profitably in the past, such as the Seabee Mine, to become unprofitable.  The Company is subject to the risks normally encountered in the mining industry, such as unusual or unexpected geological formations, cave-ins or flooding.  The Company may become subject to liability for pollution, cave-ins or other hazards against which it cannot insure or against which it may elect not to insure.





The development of gold and other mineral properties is affected by many factors, including the cost of operations, variations in the grade of ore, fluctuations in commodity markets, costs of processing equipment and other factors such as government regulations, including regulations relating to royalties, fluctuations in the U.S.
dollar versus Canadian dollar exchange rate, allowable production, importing and exporting of minerals and environmental protection.




Page 17


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Gold Price Volatility





The economics of developing gold properties is affected by many factors, including the cost of operations, variations in the grade of ore mined and the price of gold. Depending on the price of gold, the Company may determine that it is impractical to commence or continue commercial production. The price of gold has fluctuated in
recent years. During the year ended December 31, 2009, the market price for gold ranged from a low of U.S. $810 to a high of U.S. $1,213, with an average price of U.S. $972.





Any significant drop in the price of gold adversely impacts Claude’s revenues, profitability and cash flows. Also, sustained low gold prices can:





1.
Reduce production revenues as a result of cutbacks caused by the cessation of mining operations involving deposits or portions of deposits that have become uneconomic at the prevailing price of gold;


2.
Cause the cessation or deferral of new mining projects;


3.
Decrease the amount of capital available for exploration activities;


4.
Reduce existing reserves by removing ore from reserves that cannot be economically mined at prevailing prices; or,


5.
Cause the write-off of an asset whose value is impaired by the low price of gold.





Gold prices may fluctuate widely and are affected by numerous industry factors, such as demand for precious metals, forward selling by producers and central bank sales and purchases of gold. Moreover, gold prices are also affected by macro-economic factors such as expectations for inflation, interest rates, currency exchange rates
and global or regional political and economic situations.  The current demand for and supply of gold affects gold prices, but not necessarily in the same manner as current demand and supply affects the price of other commodities.  The potential supply of gold consists of new mine production plus existing stocks of bullion and fabricated gold held by governments, financial institutions, industrial organizations and individuals. If gold prices remain at low market levels for a sustained period,
the Company could determine that it is not economically feasible to continue mining operations or exploration activities.





There can be no assurance that the price of gold will remain stable or that such price will be at a level that will prove feasible to continue the Company’s exploration activities, or if applicable, begin development of its properties, or commence or, if commenced, continue commercial production.





Foreign Exchange Risk





The price of gold and oil and natural gas is denominated in U.S. dollars and, accordingly, Claude’s revenue from operations are denominated and received in U.S. dollars. As a result, fluctuations in the U.S. dollar against the Canadian dollar could result in unanticipated changes in the Company’s financial results, which
are reported in Canadian dollars. During the year ended December 31, 2009, CDN$/US$ exchange rate ranged from a low of $1.0259 to a high of $1.2991, with an average of $1.1420.





Ore Reserves and Ore Grade Estimates





Claude has assessed its mineral reserves and mineral resources, and while the Company believes that the calculation methods used are appropriate, such calculations are estimates. As well, estimates of mineral reserves and mineral resources are inherently imprecise and depend to some extent on statistical inferences drawn from limited
drilling, which may prove unreliable. The indicated level for the recovery of gold or other minerals may not be realized. Market price fluctuations of commodities may render reserves and deposits containing relatively lower grades of mineralization uneconomic. Moreover, short-term operating factors related to the mineral reserves, such as the need for orderly development of the deposits or the processing of new or different grades, may cause mining operations to be unprofitable in any particular period.







Page 18


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Access to Funding





Claude’s ability to continue or expand its production, exploration and development activities depends in part on its ability to generate revenue from its operations or to obtain financing through joint ventures, debt financing, equity financing, production sharing arrangements or other means.





The failure of the Company to meet its ongoing obligations on a timely basis could result in the loss or substantial dilution of its interest (as existing or as proposed to be acquired) in its properties.  In addition, management estimates that more than $10.0 million is the minimum annual expenditure required to fulfill
the Company’s intended exploration and dewatering programs in 2010.





At current gold prices and forecast production, Management believes operating cash flows will not be sufficient to fund the continued exploration at Madsen and winter ice road resupply requirements at the Seabee Operation.   Accordingly, the Company completed a private placement offering on December 30, 2009.  The
$13.8 million in gross proceeds will be used to fund the continued exploration of the Madsen Property and for general corporate purposes As well, the Company intends to divest of its remaining non core assets, the proceeds of which should decrease the need for additional capital to be raised.





Current Global Financial Condition





Recent global financial conditions have been characterized by increased volatility and several financial institutions have either gone into bankruptcy or have had to be rescued by governmental authorities. The fallout from the current global financial crisis has resulted in the following conditions, which may have an impact on the
operations and cash flows of the Company:





•
Volatility in commodity prices and foreign exchange rates,


•
Tightening of credit markets,


•
Increased counterparty risk, and


•
Volatility in the prices of publicly traded entities.





Although the tightening of credit markets has restricted the ability of certain companies to access capital, to date this has not had an impact on the Company’s liquidity. During 2009, the Company has raised gross proceeds of approximately $29.8 million from public offerings and also recently re-negotiated one of its credit
facilities and has additional availability under its line of credit facility of $3.5 million. However, continued tightening of credit markets may impact the ability of the Company to obtain equity or debt financing in the future on terms favourable to the Company.





To date, Claude has not experienced any difficulties with respect to any significant counterparties it transacts with. The counterparties continue to be highly rated and, as noted above, the Company has employed measures to reduce the impact of counterparty risk.





The Company has an equity portfolio of publicly listed companies that are classified as available-for-sale.  By holding these investments, the Company is exposed to various risk factors including market price risk and liquidity risk.  Continued volatility in equity markets may have an impact on the value of publicly
listed companies in Claude’s equity portfolio. Should declines in the equity values continue and are deemed to be other than temporary, impairment losses may result.





Environmental, Health and Safety Risk





In connection with is operational properties, Claude expends significant financial and managerial resources to comply with a complex set of environmental, health and safety laws, regulations, guidelines and permitting requirements (for the purpose of this paragraph, “laws”) drawn from a number of different jurisdictions.  The
Company believes it is generally in compliance with these laws. Claude anticipates that it will be required to continue to do so in the future as the historical trend toward stricter laws is likely to continue. The possibility of more stringent laws or more rigorous enforcement of existing laws exists in the areas of worker health and safety, the disposition of wastes, the decommissioning and reclamation of mining sites, restriction of areas where exploration, development and mining activities may take place
and other environmental matters, each of which could have a material adverse effect on Claude’s exploration, operations and the cost or the viability of a particular project.





Page 19


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


The Company’s facilities operate under various permits, licenses and approvals that contain conditions that must be met and Claude’s right to continue operating its facilities is, in a number of instances, dependent upon compliance with these conditions.  Failure to meet certain of these conditions could result
in interruption or closure of exploration, development or mining operations or material fines or penalties, all of which could have an adverse impact on Claude’s future cash flows, earnings, results of operations and financial condition. Claude is unable to quantify the costs of such a failure.




Unfavourable Government Regulatory Changes





Claude’s exploration activities and mining operations are affected to varying degrees by government regulations that relate to mining operations, the acquisition of land, pollution control, environmental protection, safety, production and expropriation of property. Changes in these regulations or in their application are beyond
the control of the Company and may adversely affect its operations, business and results of operations. Failure to comply with conditions set out in any permit or failure to comply with applicable statutes and regulations may result in orders to cease or curtail operations or to install additional equipment. The Company may be required to compensate those suffering loss or damage by reason of its operating or exploration activities.





Currently, all of the Company’s properties are subject to the federal laws of Canada and, depending upon the location of the Company’s properties, may be subject to the provincial laws of Manitoba, Saskatchewan, Alberta or Ontario as well as local municipal laws.  Mineral exploration and mining may be affected
in varying degrees by government regulations relating to the mining industry.  Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business.





Operations may also be affected by government regulations with respect to restrictions on production, price controls, export controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine safety.





Non-Operator Status of Oil and Natural Gas Properties





All of Claude’s oil and natural gas properties in Alberta are operated by others.  As such, the Company has little or no control over the operation of these assets.  The Company relies on the operators to ensure they are following best industry practices and thereby mitigating potential risks.  The
risk factors found in the Company’s oil and natural gas operations are similar to those found in its gold operations.  These include but are not limited to, inherent exploration and operating risks, volatility of crude oil and natural gas prices, fluctuations in the U.S. dollar versus Canadian dollar exchange rate, environmental regulation and risk, uncertainty of reserve and resource estimates, governmental regulations, competition and insurance risks.





Industry Competition





Claude’s business is intensely competitive. The Company competes with other mining companies, some of which have greater resources and experience. Competition in the precious metals mining industry is primarily for mineral-rich properties that can be developed and produced economically. There is also competition for the technical
expertise to find, develop and produce such properties; the labour to operate them; and the capital to finance their development.





If the Company is unable to compete with other mining companies for these mineral deposits, it could have a material adverse effect on Claude’s results of operations and business.





Page 20


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Personnel Risk





Many of the projects undertaken by the Company rely on the availability of skilled labour and the capital outlays required to employ such labour. The Company employs full-time and part-time employees, contractors and consultants to assist in executing operations and providing technical guidance.  In the event of a skilled
labour shortage, various projects of the Company may not become operational due to increased capital outlays associated with labour.  Further, a skilled labour shortage could result in operational issues such as production shortfalls and higher mining costs.





Flow Through Securities





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.





The Company has financed certain mining exploration activities primarily through the issuance of equity, including flow-through shares. As a result of flow-through share agreements entered into during 2009, the Company was required to expend $6.0 million in qualifying Canadian Exploration Expenses, as defined by the ITA, prior to
December 31, 2010.  At December 31, 2009, $3.6 million remains to be expended.





In the event that the Company is unable to expend the funds on qualifying expenditures, the investor may be subject to reassessment for any related tax deduction taken by the investor and the Company could be liable to the investor for damages in an action for breach of contract.  However, there is no right of rescission
of the subscription contract that would result in a reversal of the share issuance.  The investor may be entitled to damages (based on a breach of contract claim), which may include amounts related to the increased tax liability that the shareholder experienced resulting from the failure of the Company to renounce the contracted qualifying expenditures.  In addition, the Company could be required to pay a penalty and interest to the Government of Canada for failure to make and renounce such
qualifying expenditures, within prescribed time limits.





Although the Company believes it will make the qualifying expenditures and renounce the related tax deduction for the benefit of the purchasers of its flow-through shares, there can be no assurance that the Company will be able to make the qualifying expenditures or renounce such deductions in a timely manner.  The failure
to make the qualifying expenditures or to renounce such deductions in a timely manner could have a material adverse effect on the Company’s business or its ability to raise additional financing through the issuance of flow-through shares.





Conflicts of Interest





Certain of the directors of the Company are also directors and officers of other companies engaged in mineral exploration and development and mineral property acquisitions.  As such, situations may arise where such directors are in a conflict of interest with the Company.  The Company will resolve any actual conflicts
of interest if and when the same arise in accordance with the Company’s Conflict of Interest Policies.





Page 21





Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Extreme and Persistent Weather Conditions





The Seabee Operation, certain of the Company’s oil and natural gas properties and the Company’s exploration properties are all located in the northern portions of Saskatchewan, Ontario, Manitoba and Alberta. Access to these properties and the ability to conduct work on them can be affected by adverse weather conditions.
Adverse weather conditions can also increase the costs of both access and work on the Company’s properties.





Shareholder Dilution





As of December 31, 2009, there were directors, officers, key employees and consultant stock options outstanding to purchase 3,259,028 common shares and 29,805,655 share purchase warrants.  These options and warrants, if fully exercised, would constitute approximately 21.8 percent of the Company’s resulting share capital.
The exercise of such options and the subsequent resale of such shares in the public market could adversely affect the prevailing share market price and the Company’s ability to raise equity capital in the future at a time and price which it deems appropriate.  The Company may also enter into commitments in the future which would require the issuance of additional common shares and the Company may grant additional share purchase warrants and stock options.  Any share issuances from the
Company’s treasury could result in immediate dilution to existing shareholders.





Title to Company Properties





Acquisition of title to mineral properties is a very detailed and time-consuming process. Claude has investigated title to all of its mineral properties and has obtained title opinions with respect to its most significant properties. To the best of the Company’s knowledge, titles to all such properties are in good standing.
For the Madsen properties, Claude has searched title records for any and all encumbrances. For the Seabee properties, the Company has examined property search abstracts from Saskatchewan Energy and Resources as well as made inquiries and reviewed lease files from the Ministry.  It has also received confirmation of title from Saskatchewan Environment.





The title to the Company’s properties could be challenged or impugned. The properties may have been acquired in error from parties who did not possess transferable title, may be subject to prior unregistered agreements or transfers, and title may be affected by undetected defects.





Due to the Company’s Canadian Jurisdiction, United States (“U.S.”) Investors may be Deterred from Trading Company Stock as it may be Difficult for U.S. Investors to Effect Service of Process Against the Company





The Company is incorporated under the laws of Canada.  All of the Company’s directors and officers are residents of Canada and all of the Company’s assets and its subsidiaries are located outside of the U.S.  Consequently, it may be difficult for U.S. investors to affect service of process in the U.S.
upon the Company’s directors or officers or to realize in the U.S. upon judgments of U.S. courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended.  A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action
could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.





Insurance





In the course of exploration, development and production of mineral properties, certain risks may occur, in particular, unexpected or unusual operating conditions such as rock bursts, cave-ins, fire, flooding and earthquakes. It is not always possible to fully insure against such risks and Claude may decide not to insure as a result
of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increased costs and a decline in the value of the Company.




Page 22




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Outlook





For 2010, the Company will continue to focus on the following:





i)
Advancement of surface and underground exploration drill programs at the Company’s 100 percent owned Madsen Exploration Project with a continuation of the shaft dewatering program;


ii)
Further development of satellite deposits and improvement of operating margins at the Seabee Operation by moving Santoy 8 towards commercial production, pending environment approval and permits;


iii)
At the Seabee Operation, continue Seabee Deep exploration and development to increase or sustain reserves and resources; and


iv)
Investment in capital projects and equipment to increase both production and productivity at the Seabee Operation.





For 2010, forecasted gold production at the Seabee Operation is estimated to range from 46,000 to 50,000 ounces of gold.   Cash operating costs for 2010 are estimated to be similar to 2009.





Capital is expected to remain at current year levels as a result of continued investment at Madsen and expected upgrades at the Seabee Operation.





At current gold prices and forecast production, Management believes operating cash flows will not be sufficient to fund the continued exploration at Madsen and winter ice road resupply requirements at the Seabee Operation.  Accordingly, the Company completed a private placement offering on December 30, 2009.  The
$13.8 million in gross proceeds will be used to fund the continued exploration of the Madsen Property and for general corporate purposes. As well, the Company intends to divest of its remaining non core assets, the proceeds of which should decrease the need for additional capital to be raised.





Key Sensitivities





Earnings from Claude’s gold operation are sensitive to fluctuations in both commodity and currency prices. The key factors and their approximate effect on earnings, earnings per share and cash flow, based on assumptions comparable to 2009 actuals, are as follows:





Gold





For a U.S. $10 movement in gold price per ounce, earnings and cash flow will have a corresponding movement of CDN $0.5 million, or $0.00 per share. For a $0.01 movement in the US$/CDN$ exchange rate, earnings and cash flow will have a corresponding movement of $0.5 million, or $0.00 per share.





Fourth quarter Results and Selected Financial Information





For the quarter ended December 31, 2009, the Company recorded a net loss of $0.9 million, or $0.01 per share, compared to net earnings of $2.4 million, or $0.03 per share, for the comparable period in 2008.    For the three months ended December 31, 2009, EBITDA was $3.1 million, or $0.03 per share, compared to
$1.5 million, or $0.02 per share, for the comparable period last year.





Gold revenue generated during the fourth quarter was $15.2 million, a 26 percent increase over the $12.1 million reported for the same period in 2008.  This was a result of slightly higher gold sales volume compared to 2008 (Q4 2009 - 13,023 ounces; Q4 2008 - 12,226 ounces) as well as improved Canadian dollar gold prices
realized Q4 2009 - $1,167 (U.S. $1,105); Q4 2008 - $990 (U.S. $816).





For the three months ended December 31, 2009, total mine operating costs remained relatively unchanged period over period.  More tonnes and ounces sold resulted in a five percent decrease in Canadian dollar cash operating cost per ounce:  Q4 2009 - CDN $650 (U.S. $615); Q4 2008 - CDN $683 (U.S. $564).





Page 23


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


During the fourth quarter of 2009, depreciation, depletion and accretion of the Company’s gold assets of $4.6 million represented a 15 percent increase compared to the $4.0 reported during the comparable period in 2008.  These results are attributable to a higher asset base as well as fewer reserve tonnes at the Seabee
Mine.





For the fourth quarter of 2009, general and administrative costs were 43 percent higher, increasing to $2.0 million from $1.4 million in 2008.





Interest and other decreased $1.7 million period over period.  This was due primarily to derivative income offset by higher amortization expense costs on the debenture.





The write down of mineral and exploration properties of $1.1 million related to reduction in carrying values of certain properties in Saskatchewan and Manitoba.





Quarterly Information





The following table provides summary financial and operating data for the Company’s last eight quarters:





Dec 31


Sept 30


Jun 30


Mar 31


Dec 31


Sept 30


Jun 30


Mar 31Unaudited

2009


2009


2009


2009


2008


2008


2008


2008Gold sales ($ millions)


15.2



12.7



9.1



11.5



12.1



10.9



9.8



8.1Net earnings (loss) ($ millions)


(0.9
)


(0.4
)


(3.9
)


(1.0
)


2.4



(1.7
)


(0.8
)


0.4Net earnings (loss) per share(1)


(0.01
)


(0.00
)


(0.04
)


(0.01
)


0.03



(0.02
)


(0.01
)


0.00Average realized gold price (CDN$ per ounce)


1,167



1,051



1,075



1,146



990



888



915



922Average realized gold price (US$ per ounce)


1,105



958



921



920



816



853



906



918Ounces sold(2)


13,000



12,100



8,500



10,100



12,200



12,300



10,800



8,800Tonnes milled(3)


71,500



70,700



51,300



54,200



61,500



57,800



58,000



51,100Ounces produced(3)


14,300



14,200



7,700



10,600



13,600



12,000



11,500



8,400Grade processed (grams per tonne)


6.56



6.53



4.92



6.36



7.09



6.77



6.45



5.37Cash cost per ounce(4) (CDN$ per ounce)


650



614



813



768



683



757



750



729Cash cost per ounce(4) (US$ per ounce)


615



560



696



618



564



727



743



725EBITDA (4)($ millions)


4.8



4.5



1.3



2.8



2.4



0.7



0.5



0.6EBITDA (4) per share


0.04



0.04



0.01



0.03



0.02



0.01



0.01



0.01Weighted average shares outstanding


114,897



111,465



110,087



97,341



97,112



97,112



97,112



97,063CDN$/US$ Exchange


1.0563



1.0974



1.1672



1.2453



1.2124



1.0418



1.0100



1.0042





(1)  Basic and diluted, calculated based on the number of shares issued and outstanding during the quarter.


(2)  Excludes ounces sold from Porky West 2009 and 2008 bulk samples.


(3)Includes ounces produced and tonnes milled from Porky West 2009 and 2008 bulk samples.


(4)For an explanation of non-GAAP performance measures, refer to “Non-GAAP Performance Measures”.





The financial results for the last eight quarters reflect the following general trends: improving gold revenue over the period; improvement in average realized gold prices; improving gold production notwithstanding a poor second quarter of 2009 and first quarter of 2008; steadying cash costs per ounce - a result of mine operating
costs being contained and higher gold sales volume notwithstanding the second quarter of 2009.





Page 24


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Dec 31


Dec 31


Dec 31In thousands of CDN dollars

2009


2008


2007Gold revenue


48,525



40,999



29,922Net earnings (loss)


(6,257
)


383



(6,967
)Net earnings (loss) per share, basic and diluted


(0.06
)


0.00



(0.08
)Total assets


229,421



215,436



199,434Total long-term liabilities(1)


102,599



110,853



94,889





(1)
Includes an $83.6 million (2008 - $83.1 million) Royalty obligation which is funded by a Promissory note receivable.





Balance Sheet





The Company’s total assets were $229.4 million at December 31, 2009, compared to $215.4 million at December 31, 2008.  The $14.0 million increase was comprised largely of the following: $3.6 million in Cash and cash equivalents; $4.5 million in accounts receivable associated with the timing and receipt of gold sales;
$1.4 million in Inventories and stockpiled ore; $5.1 million in Mineral properties, largely comprised of exploration and mine dewatering costs at the Madsen Property; and a $0.6 million increase in the Company’s Restricted promissory notes.  These increases were offset by decreases of $0.8 million in Shrinkage stope platform costs and of $0.7 million in Assets held for sale.




Total liabilities were $119.3 million at December 31, 2009, compared to $128.4 million at December 31, 2008.  The $9.1 million decrease was comprised largely of the following: $1.7 million of Accounts payable and accrued liabilities; $0.4 in Obligations under capital lease; $7.4 million attributable to the Company’s
debenture, associated with the partial redemption that was completed during the second quarter; $0.6 in liabilities related to assets held for sale; and $0.9 in deferred revenue.  These decreases were offset by increases of $0.6 million in the Company’s Demand loans payable; $0.6 million in Other liabilities; $0.4 in Royalty obligations; and $0.2 in Asset retirement obligations.





Shareholders’ equity increased by $23.0 million to $110.1 million at the end of 2009, from $87.1 million at December 31, 2008. This is largely attributable to an increase in Share capital of $28.0 million, an increase in contributed surplus of $0.7 million and an increase of $0.6 million in Accumulated other comprehensive income.  These
were offset by a $6.3 million decrease in Retained earnings (deficit).





Assets Held For Sale and Related Operations





During the third quarter of 2008, the Company announced plans to divest of its oil and natural gas assets.  As required by the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3475 (Disposal of Long-Lived Assets and Discontinued Operations),
the related oil and natural gas assets and liabilities have been reported as Assets held for sale and Liabilities related to assets held for sale in separate captions in the consolidated balance sheets and the related results of operations have been presented as operations held for sale in the consolidated statements of earnings (loss) and cash flows for all periods presented.





Provided below is Management’s discussion and analysis as it relates to the Company’s oil and natural gas operations.





Claude produces crude oil, natural gas and natural gas liquids (ngls) from properties in Alberta.  The Company’s oil producing property in Saskatchewan was sold during the fourth quarter of 2009.  The Company intends to further its strategy of monetizing non-core assets by selling its remaining interests
during 2010.





The Company has various non-operated working interests in oil, ngls and natural gas in Alberta. During 2009, the Alberta properties provided 90 percent of the total production for oil and ngls and 100 percent of the production of natural gas.  The Company sold its working interest in its Saskatchewan Property. The Company’s
most significant property in Albert is a 1.82002 percent interest in the Nipisi Gilwood Unit No. 1 (the "Nipisi Unit") located northwest of Edmonton, Alberta. The Nipisi Unit is a 139 well unitized oil field operated by Canadian Natural Resources Ltd. and its reserves represent approximately 95 percent of the Company’s proved oil and ngls reserves as at December 31, 2009.  In addition to this property, the Company has interests in producing oil and natural gas wells at a number of other Alberta
locations.





Page 25


Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Net oil, ngls and natural gas revenue for the year ended December 31, 2009 decreased 54 percent to $2.1 million from $4.6 million reported for 2008. This result was attributable to the sale of the Company’s Edson assets, which produced ngls and natural gas, and the transfer of one-third of its working interest in its Alberta
oil and natural gas assets during 2008.





Oil and ngls sales volume for 2009 was 33,800 barrels, 27 percent lower than the 46,000 barrels sold during 2008. The decrease is largely attributable to normal production declines, the Company’s transfer of one-third of its working interest in its Alberta oil and natural gas assets and to the Company’s September 1, 2008
sale of its Edson assets.  During 2009, the average realized price per barrel of oil and ngls in Canadian dollars was $60.84 (U.S. $53.30), a decrease of 46 percent from the December 31, 2008 average realized price in Canadian dollar terms of $111.81 (U.S. $104.78).





Natural gas sales volume, also impacted by the Company’s transfer of one-third of its working interests in its Alberta oil and natural gas assets and the Edson sale in 2008, decreased to 17 MMCF for the twelve months of 2009 from 282 MMCF during the similar period in 2008. The average realized price in Canadian dollars decreased
58 percent to CDN $4.46 (U.S. $3.91) from CDN $10.54 (U.S. $9.88).





Operating costs were $1.1 million during 2009, a 48 percent decrease from the $2.1 million reported during the comparable period of 2008.  This reduction is attributable to normal production declines and the sales of the Company’s oil and natural gas assets described above.





Each year the Company has its proven and probable oil, ngls and natural gas reserves evaluated independently.  Crude oil and ngls proved and probable reserves decreased by 12 percent to 575,000 barrels at the end of 2009 from 652,000 barrels at the end of 2008.  The decrease noted in the Company’s oil and
ngls reserves year over year is attributable to normal production declines and the sale of the Company’s working interest in its Saskatchewan oil assets during the fourth quarter.  Natural gas reserves decreased nominally to 321 MMCF in 2009 from 329 MMCF in 2008; this decrease was also attributable to normal production declines.





Table 8: Schedule of Oil, ngls and Natural Gas Reserves





Reserves (1)

Dec 31


Dec 312009


2008Crude oil and ngls (mbbl)ProvedAlberta


427



416Saskatchewan (2)


-



45427



461ProbableAlberta


148



182Saskatchewan (2)


-



9148



191Total


575



652Natural gas (MMCF)ProvedAlberta


244



231ProbableAlberta


77



98Total


321



329Barrels of oil equivalent (MBOE) (3)Proved


468



500Probable


161



207Total


629



707





(1)
Reserves at December 31, 2009 reviewed by Sproule Associates Limited.


(2)
The Company sold its interest in its Saskatchewan oil producing property during the fourth quarter of 2009.


(3)
Conversion:  6 mcf = 1 boe





Page 26




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Outstanding Share Data





At December 31, 2009, there were 118,478,686 common shares outstanding.   This compares to 97,112,030 common shares outstanding at December 31, 2008.  During the first quarter of 2009, Claude issued 421,056 common shares pursuant to the Company’s Employee Share Purchase Program.  During the
second quarter of 2009, the Company issued 8,599,100 common shares pursuant to the private placement completed on April 9, 2009.  An additional 5,333,000 flow-through shares were issued in this same transaction.  In the fourth quarter, the Company completed a private placement consisting of the issuance of 5,000,000 units (consisting one common share and one common share purchase warrant) and 2,000,000 common shares of Claude issued on a "flow-through" basis.  An additional 13,500
common shares were issued during the fourth quarter due to the exercise of stock options pursuant to the Company’s Stock Option Plan.





Subsequent to the balance sheet date, Claude issued 430,395 common shares pursuant to the Company’s Employee Share Purchase Program and the Company completed and filed a short form prospectus dated January 28, 2010.  The prospectus qualified the distribution of 12,000,000 units issuable upon exercise or deemed exercise
of the 12,000,000 special warrants that were issued on December 30, 2009. Each unit is comprised of one common share of Claude and one-half of a common share purchase warrant. Each whole purchase warrant entitles its holder to acquire one common share of Claude at a price of $1.75 until December 30, 2011.  An additional 10,000 common shares were issued due to the exercise of stock options pursuant to the Company’s Stock Option Program.  At March 26, 2010, there were 130,919,081 common
shares of the Company issued and outstanding.





Outstanding Stock Options and Warrants





At December 31, 2009, there were 3.3 million director, officer, key employee and consultant stock options outstanding with exercise prices ranging from $0.34 to $2.10 per share.  This compares to 3.5 million director, officer, key employee and consultant stock options outstanding at December 31, 2008 with exercise prices
ranging from $0.34 to $2.10 per share.





Table 9: Schedule of Outstanding Stock Options and Average Exercise Price





December 31, 2009


December 31, 2008Number


Average Price


Number


Average PriceBeginning of year


3,541,335


$
1.19



3,636,667


$
1.27Options granted


701,828



0.80



583,000



0.92Options exercised


(13,500
)


0.37



-



-Options lapsed


(970,635
)


1.30



(678,332
)


1.38End of year


3,259,028


$
1.08



3,541,335


$
1.19





For options outstanding at December 31, 2009, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life are as follows:




Weighted AverageOption Price
Outstanding
Number
Per Share
RemainingPer Share
Number
Vested
Exercise Price
Life$0.34-$1.02
1,710,995
1,552,661
$0.71
6.61 years$1.11-$1.47
658,033
641,366
1.21
6.67 years$1.54-$2.10
890,000
890,000
1.69
7.16 years3,259,028
3,084,027
$ 1.08
6.77 years







Page 27


Management’s Discussion and Analysis
(in millions of CDN dollars, except as otherwise noted)




There were 11.8 million common share purchase warrants outstanding as at December 31, 2009 entitling 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 warrants outstanding are as follows:





Table 10: Schedule of Warrants Outstanding





December 31, 2009
December 31, 2008Number

Price
Expiry Date
Number

Price
Expiry DateBeginning of year
1,809,500



-

-
--
$
-
-
1,809,500
$
1.60
May 22, 20134,299,550
$
0.90
October 9, 2010
-

-
-696,605
$
0.83
April 9, 2011
-

-
-5,000,000
$
0.90
November 16, 2012
-

-
-End of year
11,805,655

-
-
1,809,500

-
-





In addition to the above noted common share purchase warrants outstanding as at December 31, 2009, the Company also had a total of 12,000,000 Special Warrants outstanding at a price of $1.15 per Special Warrant.





Disclosure Controls and Internal Controls over Financial Reporting





As of December 31, 2009, we evaluated our disclosure controls and procedures as defined in the rules of the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators.  This evaluation was carried out under the supervision and participation of Management, including the President
and Chief Executive Officer and the Chief Financial Officer.  Based on that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.





Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting, no matter how well designed, has inherent limitations and can only provide reasonable assurance with respect to the preparation and fair presentation of published financial
statements.  Under the supervision and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that internal control over financial reporting is effective
as at December 31, 2009, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes.  No significant changes were made in our internal controls over financial reporting during the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Recent Accounting Pronouncements





Please refer to Note 3 to the audited consolidated financial statements for information pertaining to accounting changes effective January 1, 2009.  Note 3to the audited consolidated financial statements also contains information on accounting pronouncements
that will be effective in future periods.





The following summarizes future accounting policy changes that will be relevant to the Company’s consolidated financial statements subsequent to December 31, 2009:







Page 28





Management’s Discussion and Analysis
(in millions of CDN dollars, except as otherwise noted)





Business Combinations, Consolidated Financial Statements and Non-Controlling


Interest





The AcSB has issued a series of new standards, CICA Handbook Section 1582, Business Combinations, CICA Handbook Section 1601, Consolidated Financial Statements, and CICA Handbook Section 1602, Non-Controlling
Interests, with the objective of harmonizing Canadian accounting for business combinations with U.S. and International Financial Reporting Standards (“IFRS”). These standards need to be implemented concurrently and become effective January 1, 2011.  In the event of a business combination, the Company will assess whether to early adopt the new accounting standards in order to minimize the amount of retroactive application when the Company adopts IFRS.




International Financial Reporting Standards





The AcSB requires that Canadian publicly accountable enterprises adopt IFRS effective January 1, 2011.





Although IFRS employs a conceptual framework that is similar to Canadian GAAP, there are significant differences in recognition, measurement and disclosure.





In order to plan for and to achieve a smooth transition to IFRS, Claude has established a project team to assess the potential impacts of the transition to IFRS.  The project team has developed a three-phase implementation plan to ensure compliance with the new standards and a smooth transition.  Regular progress
reports on the status of Claude’s IFRS implementation project are provided to Senior Management and to the Audit Committee.





The Company’s implementation project consists of three primary phases:





Phase 1: Preliminary Study and Diagnostic - completed in Q4 2008





During this phase, the Company:





•
performed a high-level impact assessment to identify key areas that may be affected by the adoption of IFRS;


•
prioritized areas to be evaluated in Phase 2 of the project plan;


•
used information obtained from the assessment to develop a detailed plan for convergence and implementation; and


•
performed an analysis to assess whether information technology systems used to collect and report financial data required modification in order to meet new reporting requirements under IFRS.





Phase 2: Detailed Component Evaluation -in progress (see detailed discussion below)





During this phase, the Company is:





•
completing further evaluation of the financial statement areas impacted by IFRS in order to assess the impact of the adoption of IFRS on results of operations, financial position and financial statement disclosures;


•
developing a more detailed, systematic gap analysis of accounting and disclosure differences between Canadian GAAP and IFRS in order to facilitate final decisions around accounting policies and overall conversion strategy; and


•
specifying changes required to existing business processes and procedures.







Page 29




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Phase 3: Implementation and Review -in progress (see detailed discussion below)





During this phase, the Company will:





•
execute changes to business processes and procedures impacted by Claude’s transition to IFRS;


•
obtain formal approval from Claude’s Audit Committee on recommended accounting policy changes;


•
complete necessary IFRS training for our Audit Committee, Board of Directors and staff;


•
collect financial information necessary to compile 2010 and 2011 IFRS compliant financial statements;


•
work with its external auditors to facilitate the verification and audit of the Company’s opening 2010 IFRS financial statements; and


•
obtain approval from the Audit Committee and Board of Directors for Claude’s IFRS financial statements.





Progress Update





As noted previously, the Company completed its preliminary study and diagnostic phase during the fourth quarter of 2008.  Currently, the Company is now in either the component evaluation phase or the implementation and review phase, depending on the area of IFRS.  Furthermore, the Company is still evaluating some
key accounting policy alternatives and implementation decisions; as such, the full accounting effects of adopting IFRS have not yet been determined.  Additional key activities, milestones and their status are outlined below:





Accounting policies and procedures





•
Management has completed a number of IFRS accounting policies.  A revised accounting policy manual will be in place by the changeover date of January 1, 2011.


•
Senior Management and the Audit Committee will approve the accounting policies.





Financial statement preparation





•
Management will prepare 2010 IFRS compliant financial statements in anticipation of changeover on January 1, 2011.  The Company’s external auditors will complete an audit of these statements late in the third quarter or early in the fourth quarter of 2010.


•
Format of IFRS financial statements to be developed.





Training and communication





•
Management began attending IFRS training sessions in 2008.  In addition, external advisors have assisted Management in focusing on accounting issues most relevant to Claude.  Sessions will continue throughout 2010.


•
Communication to the Company’s external stakeholders has been ongoing within our MD&A.  Further detail will be provided as key accounting policy and implementation decisions are made.


•
During the second quarter of 2010, the Company is holding an IFRS information session with members of the Board of Directors (including Audit Committee members).  During this session, Management and the Company’s external auditors will provide the Board with a review of implications of IFRS standards to Claude’s operations and an overview of the impact on the financial statements.







Page 30




Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Control environment





•
As the review of accounting policies is completed, appropriate changes will be made to ensure the integrity of internal control over financial reporting and disclosure controls and procedures.  Changes in accounting policies or business processes may require the implementation of additional controls or procedures to ensure the integrity of the Company’s financial disclosures.  The
Company plans to design and test the effectiveness of any new controls during 2010.


•
Expected areas of significance are further discussed below.


•
The Company will also ensure that its key stakeholders are informed about the anticipated effects of the IFRS transition.





First-Time Adoption of IFRS





IFRS 1, First-Time Adoption of International Financial Reporting Standards, generally requires an entity to apply the new IFRS standards retrospectively at the end of its first IFRS reporting period.  However, IFRS 1 does provide the Company with a number of optional
exemptions and mandatory exceptions to the general requirement for full retrospective application of IFRS.





The Company is analyzing the options available; the most significant exemptions under IFRS 1 that are expected to apply to the Company upon adoption are summarized below.  Note, this is a summary of the changes expected to be the most significant when Claude transitions to IFRS. The Company continues to analyze the accounting
policies that are available.  At this stage, the Company cannot readily quantify any expected impacts of these differences on our consolidated financial statements.  The following IFRS are expected to have the most significant impact on the Company’s consolidated financial statements:





•
Business Combinations;


•
Property, Plant and Equipment;


•
Share-Based Payments;


•
Borrowing Costs; and


•
Decommissioning Liabilities.





Non-Gaap Performance Measures





The Company utilizes non-GAAP financial measures as supplemental indicators of operating performance and financial position.  These non-GAAP financial measures are used internally by the Company for comparing actual results from one period to another.  The Company believes that, in addition to conventional measures
prepared in accordance with GAAP, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow.  Accordingly, such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.





Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)





The Company uses EBITDA as a supplemental financial measure of its operational performance.   Management believes EBITDA to be an important measure of its capacity to generate cash flow from operations as it excludes the effects of items which primarily reflect the impact of long-term investment decisions and finance
strategies, rather than the performance of the Company’s day-to-day operations.  The Company measures EBITDA as net earnings before operations held for sale, plus income taxes, interest expense, and depreciation, depletion and accretion.





The Company believes that this measurement is useful in measuring the Company’s ability to service debt, meet other payment obligations and as a valuation measurement. The following table provides a reconciliation of the Company’s calculation of EBITDA:







Page 31





Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)


Dec 31


Dec 31In thousands of CDN dollars

2009


2008Earnings (loss) from continuing operations


(7,461
)


(8,129
)Income taxes


-



(2,240
)Interest and other


(458
)


1,325Depreciation, depletion and accretion


19,593



12,524EBITDA


11,674



3,480





As compared to net earnings (loss) according to GAAP, EBITDA is limited in that it does not reflect the periodic costs of certain capitalized assets used in generating revenues, or the non-cash charges associated with impairments and shutdown-related costs, income taxes, gain on sale of long-term investments or interest and other.
Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities.





Cash Operating Cost Per Ounce





The Company reports its cash operating costs on a per-ounce basis, based on uniform standards developed by the Gold Institute, an independent researcher and evaluator of the gold market and gold industry. Management uses this measure to analyze the profitability, compared to average realized gold prices, of the Seabee Operation.
Investors are cautioned that the above measures may not be comparable to similarly titled measures of other companies, should these companies not follow Gold Institute standards.





Cautionary note to U.S. investors concerning resource estimates





Resource Estimates





The resource estimates in this Management’s Discussion and Analysis were prepared in accordance with National Instrument 43-101, adopted by the Canadian Securities Administrators. The requirements of National Instrument 43-101 differ significantly from the requirements of the SEC. In this Management’s Discussion and Analysis,
we use certain terms such as “measured,” “indicated” and “inferred” resources. Although these terms are recognized and required in Canada, the SEC does not recognize them. The SEC permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that constitute “reserves.” Under U.S. standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically
and legally extracted at the time the determination is made. U.S. investors should not assume that all or any portion of a measured or indicated resource will ever be converted into “reserves.” Further, “inferred resources” have a great amount of uncertainty as to their existence and whether they can be mined economically or legally, and U.S. investors should not assume that “inferred resources” exist or can be legally or economically mined, or that they will ever be upgraded
to a more certain category.





Compliance with Canadian Securities Regulations





This annual report is intended to comply with the requirements of the Toronto Stock Exchange and applicable Canadian securities legislation, which differ in certain respects from the rules and regulations promulgated under the United States Securities Exchange Act of 1934, as amended (“Exchange Act”), as promulgated by
the SEC.





U.S. investors are urged to consider the disclosure in our Annual Report on Form 40-F, File No. 001-14598, as filed with the SEC under the Exchange Act, which may be obtained from the Company (without cost) or from the SEC’s Web site: http://sec.gov/edgar.shtml.





Page 32





Management’s Discussion and Analysis
 (in millions of CDN dollars, except as otherwise noted)





Caution Regarding Forward-Looking Information





This MD&A may contain ‘forward-looking’ statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business activities and operating performance of the Company.  The words “may”, “would”, “could”,
“will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company, or its management, are intended to identify such forward-looking statements.  Investors are cautioned that any such forward-looking statements are not guarantees of future business activities or performance and involve risks and uncertainties, and that the Company’s future business activities
may differ materially from those in the forward-looking statements as a result of various factors.  Such risks, uncertainties and factors are described in the periodic filings with the Canadian securities regulatory authorities, including the Company’s Annual Information Form and quarterly and annual Management’s Discussion & Analysis, which may be viewed on SEDAR at www.sedar.com.  Should one or more of these risks or uncertainties materialize, or should assumptions underlying
the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.  Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not anticipated, estimated or intended.  The Company does not intend, and does not assume any obligation, to update these forward-looking
statements.





Additional Information





Additional information related to the Company, including its Annual Information Form (Form 40-F in the U.S.), is available on Canadian (www.sedar.com) and U.S. (www.sec.gov) securities regulatory authorities’ websites.  Certain documents are also available on the Company’s website at www.clauderesources.com.






Page 33