U.S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 40-F


o

REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934.





þ

ANNUAL REPORT PURSUANT TO SECTION 13(a) OF THE SECURITIES EXCHANGE ACT OF 1934






For the fiscal year ended: December 31, 2012      Commission File Number: 001-35393




PRETIUM RESOURCES INC.


(Exact name of Registrant as specified in its charter)





British Columbia, Canada


(Province or other jurisdiction of incorporation or organization)


1040

None(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)




570 Granville Street, Suite 1600


Vancouver, British Columbia, Canada V6C 3P1


(604) 558-1784


(Address and telephone number of Registrant’s principal executive offices)





CT Corporation System


111 Eighth Avenue


New York, New York 10011


(212) 894-8940


(Name, address (including zip code) and telephone number (including area code)


of agent for service in the United States)




Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class

Name of each exchange on which registeredCommon Shares

New York Stock Exchange




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




None  (Title of Class)




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




None  (Title of Class)




For Annual Reports indicate by check mark the information filed with this Form:







þ Annual information form      þ Audited annual financial statements






1






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




There were 94,827,636 Common Shares, of no par value, outstanding as of December 31, 2012.




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




Yes þ No o




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




Yes o No o




This Annual Report on Form 40-F shall be incorporated by reference into or as an exhibit to, as applicable, the registrant’s Registration Statement on Form F-10 (File No. 333-179726) under the Securities Act of 1933, as amended.



































2








PRINCIPAL DOCUMENTS







The following documents have been filed as part of this Annual Report on Form 40-F as Appendices hereto:





A.
Annual Information Form




The Annual Information Form of Pretium Resources Inc. (the “Company” or “Registrant”) for the year ended December 31, 2012 is included as Appendix A of this Annual Report on Form 40-F.





B.
Audited Annual Financial Statements




The Company’s audited consolidated financial statements for the fiscal years ended December 31, 2012 and December 31, 2011, including the auditor’s report with respect thereto, are included as Appendix B of this Annual Report on Form 40-F.





C.
Management’s Discussion and Analysis




The Company’s Management’s Discussion and Analysis for the year ended December 31, 2012 is included as Appendix C of this Annual Report on Form 40-F.








CERTIFICATIONS AND DISCLOSURE REGARDING CONTROLS AND PROCEDURES




Certifications. See Exhibits 99.5, 99.6, 99.7 and 99.8 to this Annual Report on Form 40-F.




Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures and internal control over financial reporting designed to ensure that information required to be disclosed in the Registrant’s filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). The Registrant’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), after having evaluated the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, have concluded that, as of such date, the Registrant’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Registrant in reports that the Registrant files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, as recommended by the SEC in its adopting release for the rules governing the disclosure and control procedures discussed above, the Registrant will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.




The Registrant’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as indicated in the preceding paragraph, the CEO and CFO believe that the Registrant’s disclosure controls and procedures are effective at that reasonable assurance level, although the CEO and CFO do not expect that the disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.




Management’s Annual Report on Internal Control Over Financial Reporting. The required disclosure is included under the heading “Management’s Report on Internal Control over Financial Reporting” in the Registrant’s Consolidated Financial Statements for the fiscal years ended December 31, 2012 and December 31, 2011, filed as part of this Annual Report on Form 40-F in Appendix B.




Attestation Report of the Registered Public Accounting Firm. The required disclosure is included under the heading “Independent Auditor’s Report” in the Registrant’s Consolidated Financial Statements for the fiscal years ended December 31, 2012 and December 31, 2011, filed as part of this Annual Report on Form 40-F in Appendix B.




Changes in Internal Control Over Financial Reporting. During the fiscal year ended December 31, 2012, there were no changes in the Registrant’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.







NOTICES PURSUANT TO REGULATION BTR




None.











3







IDENTIFICATION OF THE AUDIT COMMITTEE





The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are: Messrs. Ross Mitchell, Christopher Noel Dunn and Tom S.Q. Yip.





AUDIT COMMITTEE FINANCIAL EXPERT





The board of directors of the Registrant has determined that each of Messrs. Ross Mitchell, Christopher Noel Dunn and Tom S.Q. Yip, members of the Registrant’s audit committee, qualify as audit committee financial experts for purposes of paragraph (8) of General Instruction B to Form 40-F. The board of directors has further determined that each of Messrs. Ross Mitchell, Christopher Noel Dunn and Tom S.Q. Yip is also independent, as that term is defined in the Corporate Governance Listing Standards of the New York Stock Exchange. The Commission has indicated that the designation of each Ross Mitchell, Christopher Noel Dunn and Tom S.Q. Yip as an audit committee financial expert does not make any of them an “expert” for any purpose, impose any duties, obligations or liabilities on them that are greater than those imposed on members of the audit committee and the board of directors who do not carry this designation or affect the duties, obligations or liabilities of any other member of the audit committee or the board of directors.





ADDITIONAL DISCLOSURE





Code of Ethics.





The Registrant has adopted a “code of ethics” (as that term is defined in Form 40-F), entitled the “Code of Business Conduct and Ethics”, that applies to all of its directors, officers, employees, and consultants including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.  In 2012, there were no waivers, including implicit waivers, or amendments granted from any provision of the Code of Business Conduct and Ethics.





The Code of Business Conduct and Ethics is available for viewing on the Registrant’s website at www.pretivm.com.





Corporate Governance Practices.





Our corporate governance practices are consistent with all applicable current Canadian regulatory guidelines and standards. We are classified as a foreign private issuer in connection with our listing on the New York Stock Exchange (the "NYSE") and are not required to comply with most of the NYSE's corporate governance standards (the "NYSE Rules") and instead may comply with Canadian corporate governance practices. However, our corporate governance practices incorporate many best practices derived from the NYSE Rules and there are no significant differences between our corporate governance practices and the NYSE Rules.





Principal Accountant Fees and Services.





The required disclosure is included under the heading “Audit Committee Information—External Auditor Service Fees” at page 19 of the Registrant’s Annual Information Form for the fiscal year ended December 31, 2012, filed as part of this Annual Report on Form 40-F in Appendix A.





Pre-Approval Policies and Procedures.





The Audit Committee pre-approves all audit services to be provided to us by our independent auditors.  The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee.  All non-audit services performed by our auditors for the fiscal year ended December 31, 2012 have been pre-approved by our Audit Committee.





Off-Balance Sheet Arrangements.





The Registrant has no off-balance sheet arrangements as defined under Form 40-F.





Tabular Disclosure of Contractual Obligations.




We have no material long term debt, capital lease obligations, operating leases or any other long term obligations, other than payments related to the acquisition of certain mineral claims and a commitment for offices lease and operating costs that require minimum payments in the aggregate as follows:


Commitment
Fiscal

2013
Fiscal

2014
Fiscal 2015

and after
TotalOffice lease and operating costs
$223,000
$18,600
$ nil
$241,600Mineral claims acquisition
400,000
nil
nil
400,000Total
$623,000
$18,600
$ nil
$640,600








4








Mine Safety Disclosure.





Not applicable.





UNDERTAKING




Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.




CONSENT TO SERVICE OF PROCESS




Form F-X signed by the Registrant and its agent for service of process has been filed with the Commission together with Registrant’s Registration Statement on Form 40-F (001-35393)  in connection with its securities registered on such form.





Any changes to the name or address of the agent for service of process of the Registrant shall be communicated promptly to the Commission by an amendment to the Form F-X referencing the file number of the Registrant.





































5













SIGNATURES






Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date:  March 18, 2013
Pretium Resources Inc.By:
/s/ROBERT A. QUARTERMAINName:   Robert A. QuartermainTitle:     President, Chief Executive Officer & Director

















6







EXHIBIT INDEX











Exhibit

Description99.1

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accountant99.2

Consents of Ivor W.O. Jones, M.Sc., CP, FAusIMM, of Snowden Mining Industry Consultants and Snowden Mining Industry Consultants99.3

Consent of Ian I Chang M.A.Sc., P.Eng.99.4

Consent of Kenneth C. McNaughton, M.A.Sc., P.Eng.99.5

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200299.6

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200299.7

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200299.8

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002






























7


APPENDIX A
  PRETIUM RESOURCES INC. ANNUAL INFORMATION FORM FOR THE FISCAL YEAR
  ENDED DECEMBER 31, 2012










































































ANNUAL INFORMATION FORM




(“AIF”)




of




PRETIUM RESOURCES INC.


(the “Company” or “Pretivm”)


1600 – 570 Granville Street


Vancouver, British Columbia


V6C 3P1




Telephone:  604-558-1784


Facsimile:  604-558-4784


Website:  www.pretivm.com


E-mail:  invest@pretivm.com





For the Year Ended December 31, 2012





Dated:  March 18, 2013














TABLE OF CONTENTS




PRELIMINARY NOTES
A-1Effective Date of Information
A-1Currency
A-1Note Regarding Forward Looking Statements
A-1Technical and Scientific Disclosure
A-2National Instrument 43-101 Definitions
A-3Cautionary Note to US Investors
A-4CORPORATE STRUCTURE
A-5Name, Address and Incorporation
A-5Intercorporate Relationships
A-5GENERAL DEVELOPMENT OF THE BUSINESS
A-5Overview
A-5Strategy and Objectives
A-5Acquisition of the Combined Project Assets
A-5NARRATIVE DESCRIPTION OF THE BUSINESS
A-6Details of the Brucejack Project
A-6DIVIDENDS
A-13DESCRIPTION OF CAPITAL STRUCTURE
A-13TRADING PRICE AND VOLUME
A-14PRIOR SALES
A-14DIRECTORS AND OFFICERS
A-14Name and Occupation
A-14Shareholdings of Directors and Senior Officers
A-16Cease Trade Orders, Bankruptcies, Penalties or Sanctions
A-16Conflicts of Interest
A-17AUDIT COMMITTEE INFORMATION
A-17RISK FACTORS
A-19LEGAL PROCEEDINGS AND REGULATORY ACTIONS
A-31INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
A-32AUDITORS, TRANSFER AGENT AND REGISTRAR
A-32MATERIAL CONTRACTS
A-32INTEREST OF EXPERTS
A-32ADDITIONAL INFORMATION
A-33APPENDIX I AUDIT COMMITTEE CHARTER
AA-1

















PRELIMINARY NOTES






Effective Date of Information




This AIF is dated March 18, 2013, and unless otherwise indicated, the information contained herein is current as of such date, other than certain financial information which is current as of December 31, 2012, being the date of the Company’s most recently audited financial year end.




Currency




All dollar amounts are expressed in Canadian dollars unless otherwise indicated.




Note Regarding Forward Looking Statements




This AIF contains “forward-looking information” and “forward looking statements” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred to as “forward-looking statements”), including the “safe harbour” provisions of provincial securities legislation and the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. Forward-looking information may include, but is not limited to, information with respect to our planned exploration and development activities, the adequacy of our financial resources, the estimation of mineral resources, realization of mineral resource estimates, timing of development of the Brucejack Project (as defined below), costs and timing of future exploration, results of future exploration and drilling, production and processing estimates, capital and operating cost estimates, timelines and similar statements relating to the economic viability of the Brucejack Project, timing and receipt of approvals, consents and permits under applicable legislation, our executive compensation approach and practice, and adequacy of financial resources.  Wherever possible, words such as “plans”, “expects”, “projects”, “assumes”, “budgeted”, “strategy”, “scheduled”, “estimates”, “forecasts”, “anticipates”, “believes”, “intends” “modelled” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking statements and information.




Statements concerning mineral resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking information, including, without limitation, risks related to:




•
the exploration, development and operation of a mine or mine property, including the potential for undisclosed liabilities on our mineral projects;


•
the fact that we are a relatively new company with no mineral properties in production or development and no history of production or revenue;


•
development of the Brucejack Project;


•
our ability to obtain adequate financing for our planned exploration and development activities and to complete further exploration programs;


•
dependency on the Brucejack Project for our future operating revenue;


•
our mineral resource estimates, including accuracy thereof and our ability to upgrade such mineral resource estimates and establish mineral reserve estimates;


•
uncertainties relating to the interpretation of drill results and the geology, grade and continuity of our mineral deposits;


•
commodity price fluctuations, including gold price volatility;


•
market events and general economic conditions;


•
availability of suitable, or damage to, existing infrastructure;


•
governmental regulations, including environmental regulations;


A-1




PRELIMINARY NOTES - continued


•
delay in obtaining or failure to obtain required permits, or non-compliance with permits that are obtained;


•
increased costs and restrictions on operations due to compliance with environmental laws and regulations;


•
compliance with emerging climate change regulation;


•
adequate internal control over financial reporting;


•
increased costs of complying with the Dodd-Frank Act;


•
potential opposition from non-governmental organizations;


•
uncertainty regarding unsettled First Nations rights and title in British Columbia;


•
land reclamation requirements;


•
uncertainties related to title to our mineral properties and surface rights;


•
currency fluctuations;


•
increased costs affecting the mining industry;


•
increased competition in the mining industry for properties, qualified personnel and management;


•
our ability to attract and retain qualified management;


•
some of our directors’ and officers’ involvement with other natural resource companies;


•
potential inability to attract development partners or our ability to indentify attractive acquisitions;


•
Silver Standard Resources Inc.’s (“Silver Standard”) share ownership, ability to influence our governance and possible market overhang;


•
uncertainty as to the outcome of potential legal proceedings;


•
future sales or issuances of our equity securities; and


•
our being treated as a passive foreign investment company for U.S. Federal income tax purposes.




This list is not exhaustive of the factors that may affect any of our forward-looking information. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking information involves statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this AIF under the heading “Risk Factors” and elsewhere in this AIF. Our forward-looking information is based on the beliefs, expectations and opinions of management on the date the statements are made.  In connection with the forward-looking statements contained in this AIF, we have made certain assumptions about our business, including about our planned exploration and development activities; the accuracy of our mineral resource estimates; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Project; timing and receipt of approvals, consents and permits under applicable legislation; and the adequacy of our financial resources.  We have also assumed that no significant events will occur outside of our normal course of business. Although we believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this AIF, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.  We do not assume any obligation to update forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward-looking information.




Technical and Scientific Disclosure




Certain technical information relating to the Brucejack Project contained in this AIF is derived from, and in some instances is an extract from, the report entitled “Mineral Resources Update Technical Report” (the “Brucejack Report”) dated November 20, 2012, which was prepared and verified by Ivor W.O. Jones, M.Sc., CP, FAusIMM, Senior Principal Consultant, Snowden Mining Industry Consultants (“Snowden”) in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). The Brucejack Report is the only current NI 43-101 compliant technical report with respect to the Brucejack Project and supersedes all previous technical reports.




A-2








PRELIMINARY NOTES - continued


Technical information in this AIF not contained in the Brucejack Report has been approved by Mr. Kenneth C. McNaughton, M.A.Sc., P.Eng., Pretivm’s Vice President and Chief Exploration Officer and Ian I. Chang M.A.Sc., P.Eng., Pretivm’s Vice President, Project Development, each of whom is a “qualified person” as defined in NI 43-101 and has reviewed and verified the disclosure of such information.




Reference should be made to the full text of the Brucejack Report, which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review under the Company’s profile on SEDAR at www.sedar.com. Alternatively, copies of the Brucejack Report may be inspected during normal business hours at the Company’s head office.




National Instrument 43-101 Definitions




Canadian reporting requirements for disclosure of mineral properties are governed by NI 43-101.  The definitions given in NI 43-101 are adopted from those given by the Canadian Institute of Mining Metallurgy and Petroleum.





Mineral Resource
The term “mineral resource” refers to a concentration or occurrence of diamonds, natural, solid, inorganic or fossilized organic material including base and precious metals, coal and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.  The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.Measured Mineral Resource
The term “measured mineral resource” refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.Indicated Mineral Resource
The term “indicated mineral resource” refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.Inferred Mineral Resource
The term “inferred mineral resource” refers to that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.  The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.Qualified Person
The term “qualified person” refers to an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of a self-regulating organization.










A-3








PRELIMINARY NOTES - continued





Cautionary Note to US Investors




Technical disclosure in this AIF has not been prepared in accordance with the requirements of United States securities laws and uses terms that comply with reporting standards in Canada with certain estimates prepared in accordance with NI 43-101.  NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.  Unless otherwise indicated, all mineral reserve and mineral resource estimates contained in this AIF have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Classification System.




Canadian standards, including NI 43-101, differ significantly from the requirements of the Securities and Exchange Commission (“SEC”), and mineral reserve and resource information contained or incorporated by reference in this AIF may not be comparable to similar information disclosed by U.S. companies.  In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “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 produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. Accordingly, mineral reserves estimates included in this AIF may not qualify as “reserves” under SEC standards. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category.  Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases.  Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable.  Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures.  In addition, the definitions of “proven mineral reserves” and “probable mineral reserves” under reporting standards in Canada differ in certain respects from the standards of the SEC. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.



































A-4





CORPORATE STRUCTURE




Name, Address and Incorporation




The Company was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on October 22, 2010. Our head office is located at 1600 – 570 Granville Street, Vancouver, British Columbia, V6C 3P1 and our registered office is at 2900 – 550 Burrard Street, Vancouver, British Columbia, V6C 0A3.




Intercorporate Relationships




We currently have two wholly-owned subsidiaries, Pretium Exploration Inc. and 0890696 B.C. Ltd, which hold our interests in the Brucejack Project and the assets related thereto, both of which were incorporated under the BCBCA.




GENERAL DEVELOPMENT OF THE BUSINESS




Overview




We are an exploration and development company that was formed for the acquisition, exploration and development of precious metal resource properties in the Americas. Our only material mineral project for the purposes of NI 43-101 is the Brucejack Project (the “Brucejack Project”), an advanced stage exploration project located in north-western British Columbia. We intend to focus our exploration and development efforts on the Brucejack Project and, in particular, on expanding, and increasing the quality of mineral resources and on advancing engineering studies on the higher grade underground opportunities at the Brucejack Project. We also have a 100% interest in the Snowfield Project (the “Snowfield Project”), which is also located in north-western British Columbia. We are not actively developing the Snowfield Project at this time, and we consider it to be non-material to our business and for the purposes of NI 43-101.




As at November 20, 2012, indicated mineral resources at the Brucejack Project’s Valley of the Kings were estimated at approximately 8.5 million ounces of gold, and inferred mineral resources at the Valley of the Kings were estimated at approximately 2.9 million ounces of gold. All resource figures are at a cut-off grade of 5.0 grams/tonne (“g/t”) gold equivalent (“AuEq”). See “Details of the Brucejack Project — Mineral Resource Estimates”.




Strategy and Objectives




Our strategy is to grow our business through the exploration and acquisition of quality precious metals projects. The Brucejack Project is our initial material project. We intend to continue exploration of this project with a focus on expanding and increasing the quality of resources and advancing engineering studies on the higher grade underground opportunity at the Brucejack Project.




A feasibility study has been commissioned on the high-grade gold opportunity at the Brucejack Project.




Acquisition of the Combined Project Assets




We acquired the Brucejack Project, along with the Snowfield Project and other associated assets (together, the “Project Assets”), pursuant to an acquisition agreement dated October 28, 2010, as amended, with Silver Standard (the “Acquisition Agreement”), for an aggregate acquisition price of $450 million, consisting of a cash payment of $233,020,000 and the issuance of a total of 36,163,333 common shares (the “Common Shares”) in the capital of Pretivm (the “Acquisition”).  We financed the cash portion of the Acquisition with part of the proceeds from our initial public offering, which closed concurrently with the acquisition of the Project Assets in December 2010.




We entered into an investor rights agreement dated December 21, 2010 (the “Investor Rights Agreement”) with Silver Standard that provides that, as long as Silver Standard and its affiliates hold at least 10% of the issued and outstanding Common Shares:


A-5






GENERAL DEVELOPMENT OF THE BUSINESS - continued


•
Silver Standard is entitled to nominate to serve as members of our board of directors (the “Board”) the number of nominees equal to the lesser of (i) one less than the number which constitutes a majority of the Board and (ii) the percentage of issued and outstanding Common Shares and securities convertible or exchangeable into Common Shares held by Silver Standard multiplied by the number of directors comprising the Board (rounded to the nearest whole number);




•
Silver Standard and its affiliates have the right to maintain their proportionate ownership of our Common Shares by participating pro rata in issuances of Common Shares (save in respect of equity compensation plans); and




•
Silver Standard and its affiliates have the right to sell Common Shares by participating pro rata in prospectus offerings by us (to a maximum of 20% of any such offering).




We also entered into a transition services agreement dated December 21, 2010 (the “Transition Services Agreement”) with Silver Standard pursuant to which Silver Standard provided certain administrative services for the purpose of transitioning the ownership of the Project Assets. The Transition Services Agreement terminated according to its terms on December 21, 2011.




NARRATIVE DESCRIPTION OF THE BUSINESS




Details of the Brucejack Project




Project Description and Location




The Brucejack Project (also known as the “Property” in the Brucejack Report) consists of six mineral claims totalling 3,199.28 hectares and all claims are in good standing until January 31, 2022.  Pretivm acquired its 100% outright interest in the Brucejack Project in December 2010, pursuant to the Acquisition Agreement with Silver Standard.  The Brucejack Project is subject to a 1.2% net smelter returns royalty in favour of Black Hawk Mining Inc. (“Black Hawk”) on production in excess of 503,386 ounces of gold and 17,907,080 ounces of silver.




The majority of the Brucejack Project falls within the boundaries of the Cassiar-Iskut-Stikine Land and Resource Management Plan (the “LRMP”) area of northwestern British Columbia, with only a minor south-eastern segment of Mineral Claim No. 509506 falling outside this area.  All claims located within the boundaries of the LRMP are considered as areas of general management direction, with none of the claims falling inside any protected or special management areas.  At present, the land claims in the area are in review and subject to ongoing discussions between various First Nations and the Government of British Columbia.




The Brucejack Project is centred at approximately latitude 56°28’20”N by longitude 130°11’31”W, approximately 950 kilometres northwest of Vancouver, 65 kilometres north-northwest of Stewart, and 21 kilometres south-southeast of the Eskay Creek Mine.




The Brucejack Project is located in the Boundary Range of the Coast Mountain Physiographic Belt along the western margin of the Intermontane Tectonic Belt.  The terrain is generally steep with local reliefs of 1000 metres from valleys occupied by receding glaciers, to ridges at elevations of 1200 metres above sea-level.  Elevations within the Brucejack Project area range from 1366 metres along Brucejack Lake to 1650 metres at the Bridge Zone.  However, within several areas, the relief is relatively low to moderate.




The climate is typical of north-western British Columbia with cool, wet summers, and relatively moderate but wet winters.  Annual temperatures range from +20°C to -20°C.  Precipitation is high with heavy snowfall accumulations ranging from 10 metres to 15 metres at higher elevations and 2 metres to 3 metres along the lower river valleys.  Snow packs cover the higher elevations from October to May.  The optimum field season is from late June to mid-October.




The area is easily accessible by helicopter from the town of Stewart, or seasonally from the settlement of Bell II.  The flight time from Stewart is approximately 30 minutes.  Pretivm has started construction on reopening the Newhawk Gold Mines Ltd. (“Newhawk”) access road. Originally, the Newhawk access was by barge over Bowser Lake, then by truck to camp. Pretivm is rehabilitating the old road along the Bowser River and up the Knipple Glacier, and is in the process of building a new stretch of road, working up Scott Creek from the Bowser River and up Wildfire Creek from Highway 37.  The exploration road was completed in December 2012.










A-6






NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  There are no local resources other than abundant water for drilling.  The nearest infrastructure is the town of Stewart, approximately 65 kilometres to the south, which has limited supplies and personnel.  The towns of Terrace and Smithers are also located in the same general region as the Brucejack Project.  Both are directly accessible by daily air service from Vancouver.




The nearest railway is the Canadian National Railway Yellowhead route, which is located approximately 220 kilometres to the southeast.  This line runs east-west and terminates at the deep water port of Prince Rupert on the west coast of British Columbia.  The most northerly ice-free shipping port in North America, in Stewart, is accessible to store and ship concentrates.




A high voltage 138-kV power line currently services Stewart, BC and has sufficient capacity to provide power to the Brucejack Project. Also, a high voltage power line running parallel with Highway 37 is planned for construction (www.highway37.com). The plan calls for the new 287-kV line to extend from the community of Terrace to the beginning of the Galore Creek access road at Bob Quinn Lake providing access for the Property to the BC Hydro electric grid. The final capacity of this transmission line has yet to be determined and may be increased due to demand.




History




The exploration history of the area dates back to the 1880s when placer gold was located at Sulphurets and Mitchell Creeks.  Placer mining was intermittently undertaken throughout the early 1900s and remained the main focus of prospecting until the mid-1930s.




In 1935, prospectors discovered copper-molybdenum mineralization on the Sulphurets property in the vicinity of the Main Copper zone, approximately six kilometres northwest of Brucejack Lake; however, these claims were not staked until 1960.  From 1935 to 1959, the area was relatively inactive with respect to prospecting; however, it was intermittently evaluated by a number of different parties and several small copper and gold-silver occurrences were discovered in the Sulphurets-Mitchell Creek area.




In 1960, Granduc and Alaskan prospectors staked the main claim group covering the known copper and gold-silver occurrences, which collectively became known as the Sulphurets property, starting the era of modern exploration.  Various operators explored the area, and an underground program was completed on the West Zone between 1986 and 1991 by the Newcana Joint Venture among Granduc, Newhawk and Lacana Mining Corporation.




In 1999, Silver Standard acquired Newhawk and with it, Newhawk's 60% interest and control of the Brucejack Project.  In 2001, Silver Standard acquired Black Hawk’s 40% direct interest in the Brucejack Project, resulting in 100% interest in the Brucejack Project.




Silver Standard began initial work on the Brucejack Project in 2009 with a large diamond drilling campaign and a resampling program on historical core.  A total of 17,846 metres of diamond drilling were completed in 37 holes during the 2009 field season.  In 2010, a total of 33,400 metres of diamond drilling was completed in 72 holes.  The West Zone ramp was partially dewatered in late 2011 and early 2012. A geotechnical mapping program and updated survey was completed on the dewatered portion of the mine.




Geological Setting




The Sulphurets Mining Camp, which includes the Snowfield and Brucejack Properties, is located on the eastern limb of the broad McTagg anticlinorium, a major north-trending mid-Cretaceous structural culmination in the western SFB. Sedimentary and volcanic rocks of the Upper Triassic Stuhini Group form the core of the anticlinorium, and are successively replaced outwards towards the west, north, and east of the core by progressively younger rocks of the Lower to Middle Jurassic dominantly volcanic and lesser sedimentary rocks of the Hazelton Group followed by dominantly sedimentary rocks of the Bowser Lake Group.










A-7
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  Geology on the Brucejack Property can generally be characterized as a northerly-trending, broadly arcuate, concave-westward structural-stratigraphic belt of variably altered rocks. This belt is bisected on the western side of the Property by a prominent topographic lineament, the Brucejack Fault. This belt is characterised by a broad band of variably but generally intensely quartz-sericite-pyrite altered rocks of up to several hundred metres or more across, and approximately five kilometres in strike extent. The quartz-sericite-pyrite alteration typically contains between two and 20% pyrite, and, depending on the alteration intensity, can preclude protolith recognition. Most of the defined mineral resources on the Property are located within the intensely altered zone.




Mineralization




High grade gold (± silver) mineralization is predominantly located within this alteration band and is generally associated with vein-stockwork systems of varying intensity. These stockwork systems display good continuity along-strike (several tens of metres to several hundreds of metres) and are characterized by the presence of mesothermal to epithermal veins of quartz, quartz-carbonate, quartz-adularia, and pyrite that are typically on the order of millimetres to tens of centimetres in thickness and which form intense crosscutting networks within the stockworks. In rare cases, the veins may range up to nearly ten metres in thickness. Most high grade zones are either on the margins of, or contained within, a zone of bulk mineralization. Bulk low grade mineralization zones (locally up to several grams per tonne gold) tend to be associated with disseminated anhedral pyrite.  Zones and veins of euhedral pyrite are barren.




The hypothesis for the formation of the mineralization on the Brucejack Property at the time of this report is that it represents a deformed transitional meso- to epithermal porphyry-associated quartz stockwork in pervasively altered lower Hazelton Group rocks. It is thought that the bulk mineralization may have been formed shortly after consolidation of the volcanic pile due to reactions between these rocks and seawater.  Progressive development and telescoping of the porphyry system in rocks of the volcanic pile would then have resulted in widespread and zoned porphyry-style alteration and mineralization, with the high grade gold and gold-silver mineralization generated in a transitional meso- to epithermal environment slightly more distal (i.e., down temperature) from the intrusive stock/dyke/sill body than the KSM and Snowfield deposits.




Mineralized Zones




The current resources as presented in this AIF are comprised of two different zones on the Brucejack Project, being the Valley of the Kings and the West Zone.




Valley of the Kings




Exploration drilling by Silver Standard (2009, 2010) and Pretivm (2011 to present), as well as recent surface mapping, has been successful in outlining a series of corridors of high grade mineralization associated with deformed quartz stockworks and intense quartz-sericite-pyrite alteration in an east-west trending and east-southeast plunging tight syncline developed in almost the full sequence of lower Hazelton Group rocks.




The Valley of the Kings mineralized zone trends approximately west-northwest to east-southeast. Its orientation mirrors that of Electrum Ridge, a pronounced topographic feature near the southern margin of the zone, and drilling to date has extended its strike to over 800 metres. The zone is up to 150 metres wide and was originally thought to be bound to the west by the Brucejack Fault. Recent drilling in the current 2012 drill program, together with the presence of significant intervals of gold mineralization, in the Waterloo Zone, indicates that the Valley of the Kings continues west across the fault, thereby making the zone open to the west, as well as to the east and at depth.




High-grade gold and silver mineralization within the Valley of the Kings occurs as electrum, which is generally hosted in deformed quartz-carbonate and quartz-adularia veins and vein stockworks. While quartz veining and stockworks are common throughout the zone, the majority of gold intersections are confined to corridors within a 75 metres to 100 metres wide zone on the southern limb of the syncline. The orientation of these corridors is subparallel to the fold axis. Gold to silver ratios within the Valley of the Kings are typically 2:1 or higher.  Variations in this ratio, which could be a function of thermal gradients developed at the time of mineralization, are suggested by a visible increase in the proportion of silvery electrum (at the expense of more gold-coloured electrum) with a concomitant increase in the proportion of vein-hosted adularia towards the eastern parts of the zone. Additional precious metals-bearing minerals found in the Valley of the Kings, typically in trace quantities, include silver sulphides, acanthite, pyrargyrite and tetrahedrite, and associated with base metal-bearing sulphides include sphalerite and galena.










A-8
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  Low grade bulk tonnage mineralization, associated with disseminated anhedral pyrite, forms a halo within the altered rocks, surrounding the high grade mineralization corridors.




West Zone




The West Zone gold-silver deposit is hosted by a northwesterly trending band of intensely altered Lower Jurassic latitic to trachyandesitic volcanic and subordinate sedimentary rocks, as much as 400 metres to 500 metres thick, which passes between two more competent bodies of hornblende plagioclase hornblende phyric flows. The stratified rocks dip moderately to steeply to the northeast and are intensely altered, particularly in the immediate area of the precious metals mineralization. The West Zone appears to form the northern limb of an anticline that links up with the Valley of the Kings to the south, and the southern limb of a syncline that extends further to the north.




The West Zone deposit itself comprises at least 10 quartz veins and mineralized quartz stockwork ore shoots, the longest of which has a strike length of approximately 250 metres and a maximum thickness of about around 6 metres. Most mineralized shoots have vertical extents that are greater than their strike lengths. Veins and stockworks in this zone display clear evidence of post-mineral ductile and brittle deformation. The West Zone is open along strike to the southeast, and at depth to the northeast.




In terms of hydrothermal alteration, the West Zone is marked by a central silicified zone that passes outwards to a zone of sericite ± quartz ± carbonate and then an outer zone of chlorite ± sericite ± carbonate. The combined thickness of the alteration zones across the central part of the deposit is between 100 metres and 150 metres.




Gold in the West Zone occurs principally as electrum in quartz veins and is associated with, in decreasing order of abundance, pyrite, sphalerite, chalcopyrite, and galena. Besides being found with gold in electrum, silver occurs in tetrahedrite, pyrargyrite, polybasite and, rarely, stephanite and acanthite. Gangue mineralogy of the veins is dominated by quartz, with accessory adularia, albite, sericite, and minor carbonate and barite. The increased abundance of silver in the West Zone may suggest that this zone was formed down temperature gradient from the Valley of the Kings.




Drilling




The total input database for the Brucejack Property comprises 1,417 drillholes including 439 underground drillholes at West Zone (24,704 metres), 400 historical surface drillholes (35,745 metres) and 578 surface drillholes completed since 2009 (224,402 metres). Of the new drilling, 116 drillholes (47,462 metres) have been completed since the Mineral Resource estimate announced on September 7, 2012.




The database used for the Valley of the Kings estimate (between 6257520 mN and 6258440 mN) comprises 490 drillholes for 174,182 metres including 114 of the holes drilled since the September 2012 Mineral Resource (46,944 metres). The database used for the West Zone estimate comprises 756 drillholes (62,208 metres) including 439 underground drillholes (24,688 metres), 269 historical surface drillholes (21,321 metres) and 48 surface drillholes (17,199 metres) completed since 2009.




Historical drill core sizes for surface drillholes were NQ (47.6 millimetre diameter) and BQ (36.5 millimetre diameter). Core size for drillholes collared from an underground exploration ramp at West Zone was AQ (27 millimetre diameter).




A-9
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  Core sizes for Pretivm’s surface collared drillholes are PQ (85 millimetre diameter), HQ (63.5 millimetre diameter) and NQ (47.6 millimetre diameter). Approximately 50% to 60% of the Pretivm core is HQ size. For drillholes less than 600 metres length, core size is commenced at HQ and is reduced to NQ when conditions require. For drillholes greater than 600 metres length the commencing core size is PQ which is run down to approximately between 200 metres and 300 metres in order to minimise drill path deviation.




The drill collars were surveyed by McElhanney Surveying from Terrace, BC. McElhanney Surveying used a total station instrument and permanent ground control stations for reference and have completed all the surveying on the project since 2009.




Drillhole paths are surveyed at a nominal 50 metre interval using a Reflex EZ single shot instrument. There is no apparent drilling or recovery factor that would materially impact the accuracy and reliability of the drilling results.




Sampling, Analysis, Data Verification and Security




Split PQ samples weigh approximately 10 kilograms. HQ samples are around 6 kilograms, and NQ are 3 kilograms to 4 kilograms. These weights assume a nominal 1.5 metre sample length. In general, the average sample size submitted to the analytical laboratory, ALS Chemex (“ALS”) was 6.5 kilograms.




Samples at ALS were crushed to 70% passing 2 millimetres, (-10 mesh). Samples were riffle split and 500 g were pulverized to 85% passing 75 μm (-200 mesh). The remaining coarse reject material was returned to Pretivm for storage in our Smithers warehouse for possible future use.




Gold was determined using fire assay on a 30 g aliquot with an atomic absorption finish. In addition, a 33 element package was completed using a four acid digest and ICP-AES analysis, which included the silver. Density determinations were done by ALS using the pycnometer method on pulps from the drilling program.




Procedures undertaken by Pretivm have been under the supervision and security of the issuer’s staff, as far as drill core sampling prior to dispatch. Laboratory sample reduction and analytical procedures have been conducted by independent accredited companies with acceptable practices.




Pretivm ensures quality control is monitored through the insertion of blanks, certified reference materials and duplicates. In the opinion of Ivor W.O. Jones, M.Sc., CP, FAusIMM, author of the Brucejack Report, the sample preparation, security, and analytical procedures are satisfactory and the data is suitable for use in Mineral Resource estimates.




Mineral Resource Estimates




Snowden, in November 2012, completed a Mineral Resource estimate for Valley of the Kings within the Brucejack Project. The West Zone estimate remains unchanged from the Mineral Resource estimate announced April 3, 2012. The new estimate is reported at a high-grade cut-off for potential underground extraction.




A threshold grade of 0.3 g/t Au was found to generally identify the broad zones of mineralization in the drill cores at West Zone and Valley of the Kings. At Valley of the Kings, a 1 g/t Au to 3 g/t Au threshold grade was used together with Pretivm’s interpretation of the lithological domains, to interpret high grade corridors within the broader mineralized zones, and define a series of mineralized domains for estimation.




At VOK, the mineralization was found to form a series of pods within the core Jurassic rocks, with the pods being associated, at least in part, with intensely silicified zones resulting from local silica flooding and over pressure caprock formation mainly in polylithic conglomerate, and to a lesser extent the fragmental pyroclastic rocks in the lower Hazelton Group. Within the bounding Triassic and porphyry rocks, the mineralization forms a series of sub-vertical domains.




All data was composited to the dominant sample length of 1.5 metres prior to analysis and estimation. Statistical analysis of the gold and silver data was carried out by lithological domain (at Valley of the Kings) and mineralized domain. Review of the statistics indicated that the grade distributions for the mineralization within the Triassic and porphyry lithologies are very similar and as a result these were combined for analysis. All domains exhibit a strong positive skewness with high coefficient of variation and extreme outliers.






A-10
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  Because of the extreme positive skew in the histograms of the gold and silver grades within the high grade domains, Snowden elected to use an indicator approach whereby the proportion of high grade in a block was modelled, as was the grade of the high grade portion, and the grade of the low grade portion.




The high grade population which contains a significant number of samples with extreme grades required indicator kriging methods for grade estimation. The low grade estimation was estimated with ordinary kriging combined with topcut data.




Density was estimated using simple kriging of specific gravity measurements provided by ALS. As part of the 2012 drilling program, Pretivm selected a portion of the samples (207 samples) to undergo core density measurements as well as the pulp specific gravity measurements in order to determine whether there is any impact on the density as a result of porosity. The results of the comparison indicate that the core density is on average 6% lower than the pulp specific gravity within the siliceous zone and 9% lower on average in all other rock types. As a result, the pulp specific gravity measurements, which are used to estimate density in the model, were factored by 6% (siliceous zone) or 9% (other rock types) prior to statistical analysis and estimation.




Grade estimates and models were validated by undertaking global grade comparisons with the input drillhole composites, visual validation of block model cross sections and by grade trend plots.




The author of the technical report, Ivor W.O. Jones, M.Sc., CP, FAusIMM,is not aware of any permitting, legal, title, taxation, socio-economic, marketing or political issues that could material affect the Mineral Resource estimates.




The resource classification definitions (Measured, Indicated, Inferred) used for this estimate are those published by the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) in their document “CIM Definition Standards”.




In order to identify those blocks in the block model that could reasonably be considered as a Mineral Resource, the block model was filtered by a cut-off grade of 5 g/t AuEq. The gold-equivalent calculation used is: AuEq = Au + (Ag/53). These blocks were then classified as Measured, Indicated or Inferred and reported (Table 1.1 and Table 1.2).




Classification was applied based on geological confidence, data quality and grade variability. Areas classified as Measured Resources were those within the well informed portion of West Zone where the resource is informed by 5 metres by 5 metres or 5 metres by 10 metres spaced drilling. Areas classified as Indicated Resources are informed by 20 metres by 20 metres to 20 metres by 40 metres drilling within West Zone and VOK. The remainder of the Mineral Resource is classified as Inferred Resource where there is some drilling information and the blocks lie within the mineralized interpretation. Areas where there is no informing data and/or the lower grade material is outside of the mineralized interpretation are not classified as a part of the Mineral Resource.






















A-11
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued


Table 1

Valley of the Kings Mineral Resource estimate based on a cut-off grade of 5 g/t AuEq – November 2012(1)(4)(5)Category
Tonnes (millions)
Gold

(g/t)
Silver

(g/t)
Contained(3)Gold (million oz)
Silver (million oz)Indicated
16.1
16.4
14.1
8.5
7.3Inferred (2)
5.4
17.0
15.7
2.9
2.7


Notes:


(1)
Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. The Mineral Resources in this AIF were estimated using the CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.


(2)
The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an Indicated or Measured mineral resources and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.


(3)
Contained metal and tonnes figures in totals may differ due to rounding.


(4)
The Mineral Resource estimate stated in Table 1 and Table 2 is defined using 5 metres by 5 by 5 metres blocks in the well drilled portion of West Zone (5 metres by 10 metres drilling or better) and 10 metres by 10 metres by 10 metres blocks in the remainder of West Zone and in Valley of the Kings.


(5)
The gold equivalent value is defined as AuEq = Au + Ag/53 based upon prices of US$1,590/oz and US$30/oz for gold and silver, respectively.  Recoveries of gold and silver are assumed to be similar.




Table 2

West Zone Mineral Resource estimate based on a cut-off grade of 5 g/t AuEq – April 2012(1)(4)(5)Category
Tonnes (millions)
Gold

(g/t)
Silver

(g/t)
Contained(3)Gold (million oz)
Silver (million oz)Measured
2.4
5.85
347
0.5
26.8Indicated
2.5
5.86
190
0.5
15.1Measured + Indicated
4.9
5.85
267
0.9
41.9Inferred(2)
4.0
6.44
82
0.8
10.6


Notes:


(1)
Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. The Mineral Resources in this AIF were estimated using the CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.


(2)
The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an Indicated or Measured mineral resources and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.


(3)
Contained metal and tonnes figures in totals may differ due to rounding.


(4)
The Mineral Resource estimate stated in Table 1 and Table 2 is defined using 5 metres by 5 by 5 metres blocks in the well drilled portion of West Zone (5 metres by 10 metres drilling or better) and 10 metres by 10 metres by 10 metres blocks in the remainder of West Zone and in Valley of the Kings.


(5)
The gold equivalent value is defined as AuEq = Au + Ag/53 based upon prices of US$1,590/oz and US$30/oz for gold and silver, respectively.  Recoveries of gold and silver are assumed to be similar.




Mining Operations




On February 23, 2012, we announced positive results from a National Instrument 43-101 compliant Preliminary Economic Assessment (“PEA”) for the high-grade gold and silver resources identified at our Brucejack Project, which was based on our Mineral Resource estimate announced on November 28, 2011.  The PEA was filed on www.sedar.com on February 22, 2012.  The Mineral Resource estimate announced on November 28, 2011 is no longer current and, accordingly, the PEA is also no longer current.






A-12
   NARRATIVE DESCRIPTION OF THE BUSINESS - continued
  A feasibility study examining the economics of the development of a high-grade gold, underground mine at the Brucejack Project at an assumed production rate of 2,700 tonnes per day is currently underway.  The feasibility study is expected to be completed in the second quarter of 2013.




Exploration and Development




In August 2012, we mobilized an underground contractor to site to initiate our underground exploration program, which was designed to, amongst other things, access the Valley of the Kings deposit underground, excavate a 10,000 tonne underground bulk sample and demonstrate continuity of the high-grade gold mineralization. The initial phase of the underground program involved widening a portion of the historical West Zone underground workings to five metres by five metres so that the historical West Zone portal and underground workings can be used for access to the Valley of the Kings with production sized mining equipment.  In late December 2012, the widening of the historical West Zone underground workings was completed and excavation commenced of the access ramp from the West Zone workings to the Valley of the Kings.




The access ramp to the Valley of the Kings from the West Zone is planned to total 546 metres in length, and is targeting the 1345 metre level at the 426600 cross-section of the Valley of the Kings.  At the date of this AIF, approximately 275 metres of the access ramp have been excavated since the turn towards the Valley of the Kings from the West Zone was initiated late last year.  The ramp is expected to access the Valley of the Kings in the second quarter of this year.




In addition to targeting an area of mineralization for the bulk sample, the current ramp alignment will allow acceleration of production development as it will be used to provide initial access to the Valley of the Kings and multiple headings for excavation of the planned production declines.  A channel sampling program along the ramp will be conducted as work progresses, as the area is untested.  Further underground sampling and drilling is planned after Valley of the Kings has been reached.




DIVIDENDS




We have not, since the date of incorporation, declared or paid any dividends on our common shares, and do not currently have a policy with respect to the payment of dividends. For the foreseeable future, we anticipatethat we will retain future earnings and other cash resources for the operation and development of our business.The payment of dividends in the future will depend on the earnings, if any, and our financial condition and such other factors as our directors consider appropriate.




DESCRIPTION OF CAPITAL STRUCTURE




Our authorized share capital consists of an unlimited number of Common Shares, without par value, and an unlimited number of Preferred Shares, without par value, issuable in series.  96,476,186 Common Shares and no Preferred Shares were issued and outstanding as at the date of this AIF.




All of the Common Shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of the Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each Common Share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, the holders of the Common Shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of Common Shares are entitled to receive any dividends declared by the Company in respect of the Common Shares, subject to the rights of holders of other classes ranking in priority to the Common Shares with respect to the payment of dividends, on a pro rata basis.  Any alteration of the rights attached to the Common Shares must be approved by at least two-thirds of the Common Shares voted at a meeting of our shareholders.









A-13




TRADING PRICE AND VOLUME




Our Common Shares trade on the TSX and the NYSE under the symbol “PVG”.  Our Common Shares commenced trading on the NYSE on January 12, 2012.  The following table sets out the price ranges (high, low and close) and trading volume of our Common Shares as quoted on the TSX for each month our most recently completed financial year:




TSXPeriod
High

($)
Low

($)
Close

($)
Volume

(Shares)December 2012
14.10
12.67
13.11
4,409,800November 2012
14.34
12.40
13.45
3,526,900October 2012
13.93
12.47
13.45
4,813,400September 2012
12.98
12.13
12.88
9,002,400August 2012
15.77
13.51
14.59
4,338,200July 2012
15.05
12.89
14.66
5,972,400June 2012
16.37
13.26
14.12
7,690,300May 2012
16.74
10.94
13.50
10,957,800April 2012
16.69
14.00
16.69
7,670,900March 2012
18.15
13.03
14.26
18,565,400February 2012
17.90
15.25
17.75
10,569,500January 2012
16.53
12.60
16.40
7,885,500




The closing price of the Common Shares on the TSX and the NYSE on March 15, 2013, the last trading day before the date hereof, was $8.16 and US$7.97 per Common Share, respectively.




PRIOR SALES




Except with respect to stock options issued under the Company’s stock option plan as set out in the table below, the Company did not issue any securities in our most recent financial year that are of a class that is not listed or quoted for trading on a marketplace.


Date Granted

Number


Exercise PriceJanuary 24, 2012


115,000


$
16.40March 8, 2012


10,000


$
17.46April 6, 2012


20,000


$
14.67May 10, 2012


10,000


$
13.50May 14, 2012


75,000


$
14.71July 20, 2012


100,000


$
13.54December 12, 2012


1,345,000


$
13.70




DIRECTORS AND OFFICERS




Name and Occupation




The following table sets forth the name of each of our directors and executive officers, their province or state and country of residence, their position(s) with the Company, their principal occupation during the preceding five years and the date they first became a director of the Company and the number of Common Shares held or controlled, directly or indirectly by such officer or director as of the date of this AIF.  Each director’s term will expire immediately prior to the next annual meeting of shareholders.








A-14






DIRECTORS AND OFFICERS - continued


Name and Residence
Position(s) with

the Company
Principal Occupation

During Past Five Years
Director Since
Number of Common SharesRobert A. Quartermain

British Columbia, Canada
President and Chief Executive Officer and Director
President and Chief Executive Officer of the Company October 2010 – present

Retired – January 2010 to October 2010

Chief Executive Officer, Silver Standard – January 1985 – January 2010.
October 22, 2010
2,853,353

Common SharesPeter J.A. de Visser

British Columbia, Canada
Chief Financial Officer
Chief Financial Officer of the Company October 2010 to present

Partner of DeVisser Gray LLP Chartered Accountants 1987 to December 2011
N/A
56,000

Common SharesJoseph J. Ovsenek

British Columbia, Canada
Vice President, Chief Development Officer and Director
Vice President, Chief Development Officer of the Company, January 2011 – present

Senior Vice President, Corporate Development, Silver Standard, September 2009 – January 2011.

Senior Vice President, Corporate, Silver Standard, February 2003 – September 2009.
December 21, 2010
125,575

Common SharesKenneth McNaughton

British Columbia, Canada
Vice President, Chief Exploration Officer
Vice President, Chief Exploration Officer of the Company  – January 2011 to Present

Vice President, Exploration, Silver Standard, July 1991 – January 2011.
N/A
510,500

Common SharesJohn Smith(2)

British Columbia, Canada
Director
Chief Executive Officer, Silver Standard – August 2010 – present.

Vice President, Resourcing and Development, BHP Billiton – January 2009 to June 2010.

President, Iron Ore Integration, BHP Billiton – September 2008 to December 2008.

CEO, BHP Billiton Mitsubishi Alliance – April 2005 to August 2008.
December 21, 2010
47,500

Common Shares      A-15
   DIRECTORS AND OFFICERS - continued
 Name and Residence
Position(s) with

the Company
Principal Occupation

During Past Five Years
Director Since
Number of Common Shares Christopher Noel Dunn(1)(2)

Massachusetts, USA
Director
Managing Director of Liberty Mining & Metals, a subsidiary of Liberty Mutual Investments September 2011 – present.

Partner – Niantic Advisors LLC, April 2009 – October 2011.

Managing Director, JP Morgan, May 2008 – February 2009.

Senior Managing Director, Bear Stearns, May 2001 to May 2008.
October 22, 2010
100,000

Common SharesRoss Mitchell(1)(2)

British Columbia, Canada
Director
Retired, July, 2007 – present

Vice President, Finance, Silver Standard January 1996 - July 2007
October 22, 2010
102,500

Common SharesTom S.Q. Yip(1)

Colorado, USA
Director
Chief Financial Officer of International Tower Hill Mines Ltd. since September 2011.

Vice President, Finance and Chief Financial Officer, Silver Standard July 2007 – August 2011.

Vice President and Chief Financial Officer at Asarco LLC May 2006 to June 2007.
February 15, 2011
40,000

Common SharesIan I. Chang

British Columbia, Canada
Vice President,

Project Development
Vice President, Project Development for the Company, from April 2011 – present.

Project Director and Head of Project Management for Fluor Canada Limited, February 2008 to April 2011.
N/A
1,720

Common Shares


Notes:


(1)
Member of the Audit Committee.


(2)
Member of the Compensation and Corporate Governance Committee.




Shareholdings of Directors and Senior Officers




Our directors and executive officers, as a group, beneficially own, control or direct, directly or indirectly, 3,837,148 Common Shares representing approximately 3.98% of the issued and outstanding Common Shares and hold options to acquire an additional 6,510,000 Common Shares, representing approximately 9.85% of the Common Shares on a fully-diluted basis.




Cease Trade Orders, Bankruptcies, Penalties or Sanctions




None of our directors or executive officers is, as at the date hereof, or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that (a) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant issuer access to any exemption under securities legislation, that was in effect for a period or more than 30 consecutive days (a “Cease Trade Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer of such issuer, or (b) was subject to a Cease Trade Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.










A-16
   DIRECTORS AND OFFICERS - continued
  None of our directors or executive officers, nor, to our knowledge, any shareholder holding a sufficient number of our securities to affect materially the control of the Company (a) is, as at the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including ours) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such director, executive officer or shareholder.




None of our directors or executive officers, nor, to our knowledge, any shareholder holding a sufficient number of our securities to affect materially the control of the Company, has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.




Conflicts of Interest




To the best of our knowledge, there are no known existing or potential conflicts of interest between the Company and any of our directors or officers as a result of such individual’s outside business interests at the date hereof. However, certain of our directors and officers are, or may become, directors or officers of other companies, including, in particular, Silver Standard, with businesses which may conflict with the our business.  Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on behalf of the Company. Pursuant to the BCBCA, directors are required to act honestly and in good faith with a view to the best interests of the Company. As required under the BCBCA and our Articles:




A director or executive officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or executive officer of the Company, must promptly disclose the nature and extent of that conflict.




A director who holds a disclosable interest (as that term is used in the BCBCA) in a contract or transaction into which the Company has entered or proposes to enter may generally not vote on any directors’ resolution to approve the contract or transaction.




Generally, as a matter of practice, directors or executive officers who have disclosed a material interest in any transaction or agreement that our Board is considering will not take part in any Board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will abstain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, we will establish a special committee of independent directors to review a matter in which directors, or management, may have a conflict.




AUDIT COMMITTEE INFORMATION




Under National Instrument 52-110 (“NI 52-110”) companies are required to provide disclosure with respect to their audit committee including the text of the audit committee’s charter, the composition of the audit committee and the fees paid to the external auditor.  The text of the Company’s audit committee’s charter is attached as Appendix 1 to this AIF.











A-17






AUDIT COMMITTEE INFORMATION - continued
  The Company’s current audit committee is comprised of Ross Mitchell (Chair), Christopher Noel Dunn and Tom S.Q. Yip, all of whom are independent and financially literate as such terms are defined in NI 52-110.




The education and experience of each Audit Committee member that is relevant to the performance of his responsibilities as a member of the Audit Committee are as follows:




Ross Mitchell is a Chartered Accountant who has over thirty years of experience holding senior finance positions in both mining and mineral exploration companies. He was Vice President, Finance of Westmin Resources Inc. from 1989 to 1995. In 1996, he became Vice President, Finance of Silver Standard and held this position until his retirement in 2007.  He earned a Bachelor of Commerce degree from the University of British Columbia in 1971 and a Chartered Accountant designation from the Institute of Chartered Accountants of British Columbia in 1973.




Christopher Noel Dunn is currently a Managing Director of Liberty Mining & Metals, a subsidiary of Liberty Mutual Investments, focused on investing in early stage mining companies.  He is a limited partner of Niantic Partners LLC, a private equity partnership investing in commercial real estate.  Prior to these posts, Mr. Dunn was at JP Morgan from May 2008 to February 2009 and at Bear Stearns from May 2001 to May 2008, as a leader of their respective investment banking practices in mining and metals.  From September 1988 to May 1999, Mr. Dunn was a Managing Director of Goldman Sachs, managing a capital underwriting business in London. Mr. Dunn holds a Master of Arts degree from the University of Edinburgh and a Master of Science degree from the University of Durham.




Tom S.Q. Yip has over 25 years of experience in all aspects of financial management with both private and publicly traded resource companies.  Mr Yip is currently the Chief Financial Officer of International Tower Hill Mines Ltd.  From 2007 to 2011, Mr. Yip served as the Chief Financial Officer for Silver Standard.  Prior to that, he served as the Chief Financial Officer of Asarco, LLC, a copper mining, smelting and refining company, from 2006 to 2007.  He began his career in the mining industry with Echo Bay Mines Ltd., where he worked for 20 years holding various financial roles of increasing responsibility, including Principal Accounting Officer and then Chief Financial Officer.  Mr. Yip is a Chartered Accountant and holds a Bachelor of Commerce degree in Business Administration from the University of Alberta.




Pre-approval Policy




The Audit Committee meets with the CEO and CFO of the Company and the independent auditors to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls and procedures and the audit procedures and audit plans. The Audit Committee also recommends to the Board the auditors to be appointed, subject to shareholder approval. In addition, the Audit Committee reviews and recommends to the Board for approval the annual financial statements, the annual report and certain other documents required by regulatory authorities.




The chair of the Audit Committee is generally responsible for overseeing the Audit Committee in its responsibilities as outlined in the Audit Committee Charter. The chair’s duties and responsibilities include presiding at each meeting of the Audit Committee, referring specific matters to the Board in the case of a deadlock on any matter or vote, receiving and responding to all requests for information from the Company or the independent auditors, leading the Audit Committee in discharging its tasks and reporting to the Board on the activities of the Audit Committee.










A-18
   AUDIT COMMITTEE INFORMATION - continued
  External Auditor Service Fees




The aggregate fees billed by the Company’s external auditors in respect of the last two financial years are as follows:




2011
2012Audit Fees(1)
$30,000
$87,500Audit-Related Fees(2)
$44,625
$109,500Tax Fees(3)
Nil
NilAll Other Fees
Nil
Nil


Notes:


(1)
Audits of the Company’s consolidated financial statements, meetings with the Audit Committee and management with respect to quarterly filings, consulting and accounting standards and transactions, issuance of consent in connection with Canadian and United States securities filings.


(2)
Audit-related fees were paid for assurance and related services by the auditors that were reasonably related to the performance of the audit or the review of the Company’s financial statements that are not included in Audit Fees.


(3)
Tax compliance, taxation advice and tax planning.




RISK FACTORS




Investing in the securities is speculative and involves a high degree of risk due to the nature of our business and the present stage of exploration of our mineral properties. The following risk factors, as well as risks currently unknown to us, could materially adversely affect our future business, operations and financial condition and could cause them to differ materially from the estimates described in forward-looking information relating to the Company, or its business, property or financial results, each of which could cause purchasers of securities to lose part or all of their investment. You should carefully consider the following risk factors along with other risk factors included elsewhere in the AIF.




Risks Related to the Business of the Company




We have no mineral properties in production or under development and even if the development of any of our properties is found to be economically feasible, we will be subject to all of the risks associated with establishing new mining operations.




We do not currently have mineral properties under development. Even if the future development of any of our properties is found to be economically feasible, and the development of which is approved by the Board, such development will require the construction and operation of mines, processing plants and related infrastructure. As a result, we are and will continue to be subject to all of the risks associated with establishing new mining operations, including:




•
the timing and cost, which can be considerable, of the construction of mining and processing facilities;


•
the availability and cost of skilled labour, mining equipment and principal supplies needed for operations;


•
the availability and cost of appropriate smelting and refining arrangements;


•
the need to obtain necessary environmental and other governmental approvals and permits and the timing of the receipt of those approvals and permits;


•
the availability of funds to finance construction and development activities;


•
potential opposition from non-governmental organizations, First Nations, environmental groups, local groups or other stakeholders which may delay or prevent development activities; and


•
potential increases in construction and operating costs due to changes in the cost of fuel, power, materials and supplies.




The costs, timing and complexities of developing our projects may be greater than anticipated because the majority of such property interests are not located in developed areas, and, as a result, our property interests may not be served by appropriate road access, water and power supply and other support infrastructure. Cost estimates may increase as more detailed engineering work is completed on a project. It is common in new mining operations to experience unexpected costs, problems and delays during construction, development and mine start up. Accordingly, we cannot provide assurance that our activities will result in profitable mining operations at our mineral properties.








A-19






RISK FACTORS - continued
  We are an exploration stage company that has no history of production and no revenue from operations. We cannot provide assurance that we will generate any operating revenues at our mineral properties in the future.




We are an exploration company and all of our properties are in the exploration stage. We have a very limited history of operations and to date have generated no revenue from operations. As such, we are subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. We have not defined or delineated any proven or probable mineral reserves on any of our exploration stage properties. Mineral exploration involves significant risk, since few properties that are explored contain bodies of ore that would be commercially economic to develop into producing mines.




We anticipate that we will continue to incur exploration and development costs without realizing any revenues for the foreseeable future. We expect to continue to incur losses unless and until such time as one or more of our mineral properties enters into commercial production and generates sufficient revenues to fund our continuing operations. If we are unable to generate significant revenues at the Brucejack Project, we will not be able to earn profits or continue operations. We cannot provide investors with any assurance that we will ever develop a mine at the Brucejack Project.




We may not have sufficient funds to develop our mineral properties or to complete further exploration programs.




We are an exploration company with limited financial resources. We currently generate no operating revenue, and must primarily finance exploration activity and the development of mineral properties by other means. In the future, our ability to continue exploration, and development and production activities, if any, will depend on our ability to obtain additional external financing. Any unexpected costs, problems or delays could severely impact our ability to continue exploration and development activities.




The sources of external financing that we may use for these purposes include project or bank financing, or public or private offerings of equity and debt. In addition, we may enter into one or more strategic alliances or joint ventures, decide to sell certain property interests, or utilize one or a combination of all of these alternatives. The financing alternative we choose may not be available on acceptable terms, or at all. If additional financing is not available, we may have to postpone the further exploration or development of, or sell, one or more of our principal properties. Furthermore, even if we raise sufficient additional capital, there can be no assurance that we will achieve profitability or positive cash flow. In addition, any future equity offering will further dilute your equity interest in us and any future debt financing will require us to dedicate a portion of our cash flow to payments on indebtedness and will limit our flexibility in planning for or reacting to changes in our business.




We are dependent on the Brucejack Project for our future operating revenue.




Our only material property for the purposes of NI 43-101 is the Brucejack Project, which has a limited life based on mineral resource estimates. There are no established mineral reserve estimates with respect to the Brucejack Project. Mineral resources are not mineral reserves and do not have demonstrated economic viability.  In order to be able to develop a mine and commence production, we will be required to replace and expand our mineral resources and obtain mineral reserves. In the absence of additional mineral projects, the Company will be solely dependent upon the Brucejack Project for its revenue and profits, if any. In addition, development costs are difficult to predict and may render the development of the Brucejack Project financially unfeasible.  Should the development of the Brucejack Project turn out to be not possible or practicable, for political, engineering, technical, economic, legal or other reasons, our business and financial position will be significantly and adversely affected.













A-20
   RISK FACTORS - continued
  Mineral resource and reserve calculations are only estimates.




Any figures presented for mineral resources in this AIF, any figures for mineral resources which may be presented in the future or any figures for mineral reserves that may be presented by us in the future are and will only be estimates. There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources. Until mineral reserve estimates or mineral resource estimates are actually mined and processed, the quantity of metal and grades must be considered as estimates only and no assurances can be given that the indicated levels of metals will be produced. In making determinations about whether to advance any of our projects to development, we must rely upon estimated calculations as to the mineral resources and grades of mineralization on our properties.




The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment of the persons preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral resource estimates are imprecise and depend, to a certain extent, upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate.




Estimated mineral reserves or mineral resources may have to be recalculated based on changes in mineral prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral reserve or resource estimates. The extent to which resources may ultimately be reclassified as proven or probable mineral reserves is dependent upon the demonstration of their profitable recovery. Any material changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. We cannot provide assurance that mineralization can be mined or processed profitably.




Our mineral resource estimates have been determined and valued based on assumed future metal prices, cut-off grades, operating costs and other assumptions that may prove to be inaccurate. Extended declines in market prices for gold and silver may render portions of our mineralization uneconomic and result in reduced reported mineral resources, which in turn could have a material adverse effect on our results of operations or financial condition.  We cannot provide assurance that mineral recovery rates achieved in small scale tests will be duplicated in large scale tests under on-site conditions or in production scale. In addition, if our projects produce concentrate for which there is no market, specifically, with respect to concentrate containing rhenium, this may have an impact on the economic model for the Brucejack Project. A reduction in any resources that may be estimated by us in the future could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.




No assurances can be given that any mineral resource estimates for the Brucejack Project will ultimately be reclassified as proven or probable mineral reserves. The failure to establish proven and probable mineral reserves could restrict our ability to successfully implement our strategies for long-term growth and may impact future cash flows, earnings, results of operation and financial condition.




Uncertainty exists related to mineral resources.




There is a risk that inferred mineral resources referred to in this AIF cannot be converted into measured or indicated mineral resources as there may be limited ability to assess geological continuity. In addition, there is no assurance that any mineral resources will, as a result of continued exploration, be determined to have sufficient geological continuity so as to be upgraded to constitute proven and probable mineral reserves.




Changes in the market price of gold and other metals, which in the past have fluctuated widely, may materially and adversely affect our revenues and the value of our mineral properties.




Our profitability and long-term viability will depend, in large part, on the market price of gold and silver. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:






A-21
   RISK FACTORS - continued
  •
global or regional consumption patterns;


•
the supply of, and demand for, these metals;


•
speculative activities;


•
the availability and costs of metal substitutes;


•
expectations for inflation; and


•
political and economic conditions, including interest rates and currency values.




We cannot predict the effect of these factors on metal prices. A decrease in the market price of gold and other metals could affect our ability to finance the exploration and development of any of our mineral properties. The market price of gold and other metals may not remain at current levels. In particular, an increase in worldwide supply, and consequent downward pressure on prices, may result over the longer term from increased gold production from mines developed or expanded as a result of current metal price levels. A sustained period of declining gold and other metal prices would adversely affect our financial performance, financial position and results of operations.




We may incur losses for the foreseeable future.




We expect to incur losses unless and until such time as our mineral projects generate sufficient revenues to fund continuing operations. The exploration and development of our mineral properties will require the commitment of substantial financial resources that may not be available. The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property interests, some of which are beyond our control. We cannot provide assurance that we will ever achieve profitability.




General market events and conditions may adversely affect our business and industry.




In 2007 and into 2008, the U.S. credit markets began to experience serious disruption due to a deterioration in residential property values, defaults and delinquencies in the residential mortgage market (particularly, sub-prime and non-prime mortgages) and a decline in the credit quality of mortgage-backed securities. These problems led to a slow-down in residential housing market transactions, declining housing prices, delinquencies in non-mortgage consumer credit and a general decline in consumer confidence. These conditions continued and worsened in 2008 and early 2009, causing a loss of confidence in the U.S. and global credit and financial markets and resulting in the collapse of, and government intervention in, major banks and other financial institutions and insurers, and creating a climate of greater volatility, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses and tighter credit conditions. Notwithstanding various actions by the U.S. and other governments, concerns about the general condition of the capital markets, financial instruments, banks, investment banks, insurers and other financial institutions caused the broader credit markets to further deteriorate and stock markets to decline substantially. Since such time, there has been no broad and consistent improvement in general economic indicators, including employment levels, announced corporate earnings, economic growth and consumer confidence. Recent economic events have created further uncertainty in global financial and equity markets. If the current crisis persists or worsens, it could lead to increased political uncertainty and financial turmoil. Any or all of these market events and conditions may adversely affect our business and industry.




General economic conditions may adversely affect our growth, profitability and ability to obtain financing.




The unprecedented events in global financial markets in the past several years have had a profound impact on the global economy. Many industries, including the gold mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market confidence and liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our growth and profitability. A number of issues related to economic conditions could have a material adverse effect on our financial condition and results of operations, specifically:






A-22
   RISK FACTORS - continued


•
the global credit/liquidity crisis could impact the cost and availability of financing and our overall liquidity;


•
the volatility of gold and other metal prices would impact our revenues, profits, losses and cash flow;


•
continued recessionary pressures could adversely impact demand for our production;


•
volatile energy, commodity and consumables prices and currency exchange rates would impact our production costs; and


•
the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities.




Mining is inherently risky and subject to conditions or events beyond our control.




The development and operation of a mine or mine property is inherently dangerous and involves many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome, including:




•
unusual or unexpected geological formations;


•
metallurgical and other processing problems;


•
metal losses;


•
environmental hazards;


•
power outages;


•
labour disruptions;


•
industrial accidents;


•
periodic interruptions due to inclement or hazardous weather conditions;


•
flooding, explosions, fire, rockbursts, cave-ins and landslides;


•
mechanical equipment and facility performance problems;


•
avalanches; and


•
the availability of materials and equipment.




These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties, personal injury or death, including to our employees, environmental damage, delays in mining, increased production costs, asset write downs, monetary losses and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums, or at all. Insurance against certain environmental risks, including potential liability for pollution and other hazards as a result of the disposal of waste products occurring from production, is not generally available to companies within the mining industry.  We may suffer a material adverse impact on our business if we incur losses related to any significant events that are not covered by our insurance policies.




We cannot provide assurance that we currently hold or will successfully acquire commercially mineable mineral rights.




Exploration for and development of gold properties involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate.  While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish mineral reserves by drilling, constructing mining and processing facilities at a site, developing metallurgical processes and extracting gold from ore.  We cannot ensure that our current exploration and development programs will result in profitable commercial mining operations.




The economic feasibility of development projects is based upon many factors, including the accuracy of mineral resource and mineral reserve estimates; metallurgical recoveries; capital and operating costs; government regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting and environmental management and protection; and gold prices, which are highly volatile. Development projects are also subject to the successful completion of feasibility studies, issuance of necessary governmental permits and availability of adequate financing.






A-23
   RISK FACTORS - continued
  Most exploration projects do not result in the discovery of commercially mineable ore deposits, and no assurance can be given that any anticipated level of recovery of ore reserves, if any, will be realized or that any identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited. Estimates of mineral reserves, mineral resources, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual or unexpected geological formations and work interruptions. If current exploration programs do not result in the discovery of commercial ore, we may need to write-off part or all of our investment in existing exploration stage properties.




Material changes in ore reserves, if any, grades, stripping ratios or recovery rates may affect the economic viability of any project. Our future growth and productivity will depend, in part, on our ability to develop commercially mineable mineral rights at our existing properties or identify and acquire other commercially mineable mineral rights, and on the costs and results of continued exploration and potential development programs. Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:




•
establish ore reserves through drilling and metallurgical and other testing techniques;


•
determine metal content and metallurgical recovery processes to extract metal from the ore; and


•
construct, renovate or expand mining and processing facilities.




In addition, if we discover ore, it would take several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change. As a result of these uncertainties, there can be no assurance that we currently hold or will successfully acquire commercially mineable (or viable) mineral rights.




Suitable infrastructure may not be available or damage to existing infrastructure may occur.




Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure.  Reliable roads, bridges, power sources and water supply are important determinants for capital and operating costs.  The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploitation or development of our projects.  If adequate infrastructure is not available in a timely manner, we cannot assure you that the exploitation or development of our projects will be commenced or completed on a timely basis, or at all, or that the resulting operations will achieve the anticipated production volume, or that the construction costs and operating costs associated with the exploitation and/or development of our projects will not be higher than anticipated.  In addition, unusual weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect our operations and profitability.




We are subject to significant governmental regulations.




Our exploration activities are subject to extensive federal, provincial and local laws, regulations and policies governing various matters, including:




•
environmental protection;


•
the management and use of toxic substances and explosives;


•
management of tailings and other wastes;


•
the management of natural resources and land;


•
the exploration and development of mineral properties;


•
mine construction;


•
mine production and post-closure reclamation;


•
exports;


•
price controls;


•
taxation and mining royalties;


•
labour standards and occupational health and safety, including mine safety; and


•
historic and cultural preservation.






A-24
   RISK FACTORS - continued
  Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause us to incur additional expense or capital expenditure restrictions or suspensions of our activities and delays in the exploration and development of our properties.




We require further rights and permits in order to conduct current and anticipated future operations, and delays in obtaining or failure to obtain such rights and permits, or a failure to comply with the terms of any such permits that we have obtained, could adversely affect our business.




Our current and anticipated future operations, including further exploration, development and commencement of production on our mineral properties, require permits from various governmental authorities. Obtaining or renewing governmental permits is a complex and time-consuming process. The duration and success of efforts to obtain and renew permits are contingent upon many variables not within our control. Shortages of personnel in various levels of government could result in delays or inefficiencies. Backlog within permitting agencies affected by the number of other large-scale projects currently in a more advanced stage of development could slow down the review process and adversely effect the permitting timeline of our projects. Negative public and stakeholder opinion is another factor that could affect the permitting timeline. As well, the specific permitting requirements that will ultimately apply to any project are difficult to correctly assess at the exploration and development stage. In addition, our future development plans may require us to obtain the necessary surface rights from the owners of such rights in order to complete the development of our projects.




We cannot provide assurance that all rights and permits that we require for our operations, including any for construction of mining facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. In particular, we will require environmental assessments under federal and provincial legislation and specific permits and authorizations, including for the disposal of tailings from the Brucejack Project into Brucejack Lake. Delays or a failure to obtain such required permits, or the expiry, revocation or failure to comply with the terms of any such permits that we have obtained, would adversely affect our business.




Our activities are subject to environmental laws and regulations that may increase our costs and restrict our operations.




All of our exploration, development and production activities are subject to regulation by governmental agencies under various environmental laws. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving and the general trend has been towards stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on our behalf and may cause material changes or delays in our intended activities. Future changes in these laws or regulations could have a significant adverse impact on some portion of our business, requiring us to re-evaluate those activities at that time.




Environmental hazards may exist on our properties that are unknown to us at the present time and have been caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such damage.




Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or be curtailed. Such enforcement actions may include the imposition of corrective measures requiring capital expenditure, installation of new equipment or remedial action.






A-25
   RISK FACTORS - continued
  Compliance with emerging climate change regulations could result in significant costs and the effects of climate change may present physical risks to our operations.




Climate change refers to any changes in climate over time that is directly or indirectly attributable to human activity.  This includes changes in weather patterns, frequency of extreme weather events, temperatures, sea levels and water availability.  We recognize that climate change is an international and community concern which may affect our business and operations directly or indirectly as described below.




Governments at all levels may be moving towards enacting legislation to address climate change concerns, such as requirements to reduce emission levels and increase energy efficiency.  Where legislation has already been enacted, such regulations may become more stringent, which may result in increased costs of compliance.  There is no assurance that compliance with such regulations will not have an adverse effect on our results of operations and financial condition.




Extreme weather events (such as increased periods of snow and increased frequency and intensity of storms) have the potential to disrupt our exploration and development plans.  Where appropriate, our facilities have developed emergency plans for managing extreme weather conditions; however, extended disruptions could have adverse effects on our results of operations and financial condition.






We may fail to maintain adequate internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act.




During our most recent fiscal year, we documented and tested our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act (“SOX”).  SOX requires an annual assessment by management of the effectiveness of our internal control over financial reporting and, for fiscal years commencing with our fiscal year ended December 31, 2012, an attestation report by our independent auditors addressing the effectiveness of internal control over financial reporting.  We may fail to maintain the adequacy of our internal control over financial reporting as such standards are modified, supplemented or amended from time to time, and we may not be able to conclude, on an ongoing basis, that we have effective internal control over financial reporting in accordance with Section 404 of SOX.  Our failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price or the market value of our securities.  In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.  Future acquisitions of companies, if any, may provide us with challenges in implementing the required processes, procedures and controls in our acquired operations. No evaluation can provide complete assurance that our internal control over financial reporting will detect or uncover all failures of persons within our Company to disclose material information otherwise required to be reported.  The effectiveness of our processes, procedures and controls could also be limited by simple errors or faulty judgments.  In addition, as we continue to expand, the challenges involved in implementing appropriate internal control over financial reporting will increase and will require that we continue to monitor our internal control over financial reporting.  Although we intend to expend substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, we cannot be certain that we will be successful in complying with Section 404 of SOX.




We are subject to increased regulatory compliance costs relating to the Dodd-Frank Act.




In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted, representing an overhaul of the framework for regulation of U.S. financial markets.  The Dodd-Frank Act calls for various regulatory agencies, including the SEC and the Commodities Futures Trading Commission, to establish regulations for implementation of many of the provisions of the Dodd-Frank Act.  If we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed.  Dodd-Frank also requires companies in the mining industry to disclose in their periodic reports filed with the SEC substantial additional information about safety issues relating to their mining operations.  In December 2011, the SEC approved amendments to its rules implementing the mine safety disclosure requirements contained in the Dodd-Frank Act.  This heightened scrutiny could generate negative publicity for the mining industry, increase the cost of compliance with mining regulations or result in the passage of new laws and regulations, any of which could negatively affect our business results.  We may also need to incur additional costs and invest additional resources, including management’s time, in order to comply with new regulations and additional reporting and disclosure obligations.






A-26
   RISK FACTORS - continued
  We face potential opposition from non-governmental organizations.




In recent years communities and non-governmental organizations (“NGOs”) have become more vocal and active with respect to mining activities at or near their communities.  These communities and NGOs have taken such actions as road closures, work stoppages, and law suits for damages.  These actions relate not only to current activities but often in respect of decades old mining activities by prior owners of mining properties.  Such actions by communities and NGOs may have a material adverse effect on our results of operations or financial condition.




There is uncertainty related to unsettled First Nations rights and title in British Columbia and this may create delays in project approval or interruptions in project progress.




The nature and extent of First Nations rights and title remains the subject of active debate, claims and litigation in British Columbia. First Nations in British Columbia have made claims of aboriginal rights and title to substantial portions of land and water in the province, including areas where the Company’s operations are situated, creating uncertainty as to the status of competing property rights. The Supreme Court of Canada has held that aboriginal groups may have a spectrum of aboriginal rights in lands that have been traditionally used or occupied by their ancestors. Such aboriginal rights and title are not absolute and may be infringed by government in furtherance of a legislative objective, subject to meeting a justification test. However, decisions of the Supreme Court of Canada and the British Columbia Supreme Court cast doubt on the provincial government’s ability to justify infringements of treaty rights and aboriginal title, respectively. The effect of such claims on any particular area of land will not be determinable until the exact nature of historical use, occupancy and rights to such property have been clarified by a decision of the Courts or definition in a treaty. First Nations in the province are seeking settlements including compensation from governments with respect to these claims, and the effect of these claims cannot be estimated at this time. The federal and provincial governments have been seeking to negotiate settlements with aboriginal groups throughout British Columbia in order to resolve many of these claims. Any settlements that may result from these negotiations may involve a combination of cash, resources, grants of conditional rights to undertake traditional pursuits (like hunting, gathering, trapping and fishing) on public lands, and some rights of self-government. The issues surrounding aboriginal title and rights are not likely to be resolved in the near future.




In a landmark decision in 2004, the Supreme Court of Canada determined that there is a duty on government to consult with and, where appropriate, accommodate First Nations where government decisions may impact on claimed, but as yet unproven, aboriginal rights or title. This decision also provided much needed clarification of the duties of consultation and accommodation. This decision was re-enforced in a 2010 decision of the Supreme Court of Canada, in which the Court re-affirmed and re-stated the test for determining when the duty to consult arises. The Court has made clear that third parties are not responsible for consultation or accommodation of aboriginal interests and that this responsibility lies with government. However, government permits, including environmental and mine permits, will not be granted by provincial and federal agencies unless they are satisfied that the duty to consult and accommodate has been fully met. In 2005, the Supreme Court of Canada confirmed that this duty exists with respect to claimed treaty rights.




A portion of the Brucejack Project lies within traditional First Nation territory and in the Nass Area, as defined in the final Agreement between the Nisga’a First Nation and the federal and provincial governments, which came into effect on May 11, 2000 (the “Final Agreement”). However, there may be overlapping claims by other First Nations. Given the unsettled nature of land claims and treaty rights in British Columbia, as well as the rights of the Nisga’a under the Nisga’a Final Agreement, there can be no guarantee that there will not be delays in project approval, unexpected interruptions in project progress, or additional costs to advance the Company’s projects.








A-27
   RISK FACTORS - continued
  In order to facilitate mine permitting, construction and the commencement of mining activities, the Company may deem it necessary and prudent to try to obtain the cooperation and approval of the local First Nations groups. Any cooperation and approval may be predicated on our committing to take measures to limit the adverse impacts on local First Nations groups and ensuring that some of the economic benefits of the construction and mining activity will be enjoyed by the local First Nations groups. There can be no guarantee that any of our efforts to secure such cooperation or approval would be successful or that the assertion of First Nations rights and title, or claims of insufficient consultation or accommodation, will not create delays in project approval or unexpected interruptions in project progress, or result in additional costs to advance our projects.




Our properties may be subject to uncertain title.




We cannot provide assurance that title to our properties will not be challenged. We hold mineral claims which constitute our property holdings. We may not have, or may not be able to obtain, all necessary surface rights to develop a mineral property. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained a secure claim to individual mining properties may be severely constrained. We have not conducted surveys of all of the claims in which we hold direct or indirect interests. A successful claim contesting our title to a property could cause us to lose our rights to explore and, if warranted, develop that property or undertake or continue production thereon. This could also result in our not being compensated for our prior expenditures relating to such property.




Land reclamation requirements for our exploration properties may be burdensome.




Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance. Reclamation may include requirements to treat ground and surface water to drinking water standards, control dispersion of potentially deleterious effluent and reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on us in connection with exploration, development and production activities, we must allocate financial resources that might otherwise be spent on further exploration and development programs. The actual costs of reclamation and mine closure are uncertain and planned expenditures may differ from the actual expenditures required. Therefore, the amount that we are required to spend may be materially higher than our estimates. Any additional amounts we are required to spend on reclamation and mine closure may have a material adverse effect on our financial performance, financial condition and results of operations.




We may fail to identify attractive acquisition candidates or may fail to successfully integrate acquired material properties.




We may actively pursue the acquisition of exploration, development and production assets consistent with our acquisition and growth strategy. The identification of attractive candidates and integration of acquired properties, assets or entities involve inherent risks, including but not limited to:




•
accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;


•
ability to achieve identified and anticipated operating and financial synergies;


•
unanticipated costs;


•
diversion of management attention from existing business;


•
potential loss of our key employees or key employees of any business acquired;


•
unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition; and


•
decline in the value of acquired properties, companies or securities.




Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies, and could have a material adverse effect on our financial condition.






A-28
   RISK FACTORS - continued
  In connection with any future acquisitions, we may incur indebtedness or issue equity securities, resulting in increased interest expense or dilution of the percentage ownership of existing shareholders. Acquisition costs, additional indebtedness or issuances of securities in connection with such acquisitions, may adversely affect the price of our common stock and negatively affect our results of operations.




We may be adversely affected by future fluctuations in foreign exchange rates.




Our potential profitability is exposed to the financial risk related to the fluctuation of foreign exchange rates. The minerals that could be produced from our projects are priced in U.S. dollars but, since our only projects are located in Canada, the majority of our estimated expenditures are in Canadian dollars. A significant change in the currency exchange rates between the Canadian dollar relative to the U.S. dollar will have an effect on the potential profitability of our projects and therefore our ability to continue to finance our operations. To the extent that the actual Canadian dollar to U.S. dollar exchange rate is less than or more than the rate estimated in any future development plans, the profitability of our projects will be affected. Accordingly, our prospects may suffer due to adverse currency fluctuations.




High metal prices in recent years have encouraged increased mining exploration, development and construction activity, which has increased demand for, and cost of, exploration, development and construction services and equipment.




The relative strength of metal prices over the past five years has encouraged increases in mining exploration, development and construction activities around the world, which has resulted in increased demand for, and cost of, exploration, development and construction services and equipment. While recent market conditions have had a moderating effect on the costs of such services and equipment, increases in such costs may continue with the resumption of an upward trend in metal prices. Increased demand for services and equipment could result in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and may cause scheduling difficulties due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development and/or construction costs.




The mining industry is very competitive.




We compete with other exploration and producing companies, many of which are better capitalized, have greater financial resources, operational experience and technical capabilities or are further advanced in their development or are significantly larger and have access to greater mineral reserves, for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. If we require and are unsuccessful in acquiring additional mineral properties or qualified personnel, we will not be able to grow at the rate we desire, or at all.




Our competitors may be able to devote greater resources to the expansion and efficiency of their operations or respond more quickly to new laws and regulations or emerging technologies than we can. We may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on our business, financial condition or results of operations.




We may experience difficulty attracting and retaining qualified management to grow our business.




We are dependent on the services of key executives and other highly skilled and experienced personnel to advance our corporate objectives as well as the identification of new opportunities for growth and funding.  Robert A. Quartermain, Joseph J. Ovsenek, Kenneth McNaughton and Peter de Visser are currently our key executives. It will be necessary for us to recruit additional skilled and experienced management and personnel. Our inability to do so, or the loss of Mr. Quartermain, or any of our key executives, or our inability to attract and retain suitable replacements for such executives or the additional highly skilled employees required for our activities, would have a material adverse effect on our business and financial condition.




A-29
   RISK FACTORS - continued
  Some of our directors and officers have conflicts of interest as a result of their involvement with other natural resource companies.




Certain of our directors and officers also serve as directors or officers, or have significant shareholdings in, other companies involved in natural resource exploration and development or mining-related activities, including, in particular, Silver Standard. To the extent that such other companies may participate in ventures that we may also participate in, or in ventures that we may seek to participate in, our directors and officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In all cases where our directors and officers have an interest in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Such conflicts of our directors and officers may result in a material and adverse effect on our profitability, results of operation and financial condition. As a result of these conflicts of interest, we may miss the opportunity to participate in certain transactions, which may have a material adverse effect on our financial position.




We may be unable to attract development partners.




The Company may seek to develop some or all of its projects in partnership with one or more third parties in a corporate or contractual joint venture, or otherwise, or to dispose of some part or of its project to another party, retaining a royalty interest therein. The Company may be unable to find such partners or to negotiate satisfactory terms therewith, in which case the Company will be obliged to either postpone development of such project or proceed alone with the costs of further development.




We may be subject to claims and legal proceedings that could materially adversely impact our financial position, financial performance and results of operations.




We may be subject to claims or legal proceedings covering a wide range of matters that arise in the ordinary course of business activities. These matters may result in litigation or unfavorable resolution which could materially adversely impact our financial performance, financial position and results of operations.




Risks Related to the Acquisition




Potential liabilities associated with the Acquisition.




We conducted due diligence with respect to the Brucejack Project and the other Project Assets prior to our acquisition of such assets in December 2010; however, there is no certainty that our due diligence procedures revealed all of the risks and liabilities associated with the Acquisition. Silver Standard provided limited representations in the Acquisition Agreement with respect to the Brucejack Project and other Project Assets and those representations were further limited by time and by the knowledge of the persons giving such representations. Also, under the Acquisition Agreement the Company agreed to assume all environmental liabilities with respect to the Brucejack Project and other Project Assets. There may be material environmental or other material liabilities that we are not aware of and, accordingly, the potential monetary cost of such liabilities is also unknown.




Risks Related to our Securities




Silver Standard owns a significant number of Common Shares and is in a position to influence our governance and operations.




To the best of our knowledge, Silver Standard holds approximately 19.68% of the Company’s outstanding Common Shares.  For as long as Silver Standard maintains a significant interest in the Company, it may be in a position to affect our governance and operations. Pursuant to the Investor Rights Agreement, Silver Standard is entitled to nominate to serve as members of our Board such number of nominees as is equal to the lesser of (i) one less than the number which constitutes a majority of the Board and (ii) the percentage of the Common Shares held by Silver Standard and securities convertible or exchangeable into Common Shares multiplied by the number of directors comprising the Board (rounded to the nearest whole number of nominees). In addition, Silver Standard may have significant influence over the passage of any resolution of our shareholders (such as would be required, to amend our constating documents or take certain other corporate actions) and may, for all practical purposes, be able to ensure the passages of any such resolution by voting for it or prevent the passage of any such resolution by voting against it. The effect of this influence by Silver Standard may be to limit the price that investors are willing to pay for our Common Shares. In addition, the potential that Silver Standard may sell its Common Shares in the public market (commonly referred to as “market overhang”), as well as any actual sales of such Common Shares in the public market, could adversely affect the market price of the Common Shares.






A-30
   RISK FACTORS - continued
  Future sales or issuances of equity securities could decrease the value of any existing Common Shares, dilute investors’ voting power and reduce our earnings per share.




We may sell additional equity securities in subsequent offerings (including through the sale of securities convertible into Common Shares) to finance our operations, exploration, development, acquisitions or other projects. We cannot predict the size of future sales and issuances of equity securities or the effect, if any, that future sales and issuances of equity securities will have on the market price of the Common Shares. Sales, including any possible sales by Silver Standard, or issuances of a substantial number of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in the Company’s earnings per share.




We do not intend to pay any cash dividends in the foreseeable future.




We have not declared or paid any dividends on our Common Shares. We intend to retain future earnings, if any, to finance the growth and development of our business and do not intend to pay cash dividends on the Common Shares in the foreseeable future. Any return on an investment in the securities will come from the appreciation, if any, in the value of the Common Shares. The payment of future cash dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors. See “Dividend Policy”.




We may be treated as a “passive foreign investment company” under the U.S. Internal Revenue Code, which could result in adverse tax consequences for investors in the United States.




Generally unfavourable U.S. federal income tax rules apply to U.S. persons owning stock of a passive foreign investment company (a “PFIC”). A foreign corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is passive income, or (ii) 50% or more of the average value (or, if elected, the adjusted tax basis) of its assets are considered “passive assets” (generally, assets that generate passive income). The Company believes that it was a PFIC in 2012. We may be treated as a PFIC for U.S. federal income tax purposes in some or all subsequent years. If we were classified as a PFIC for any taxable year during which you hold our equity securities, any gain recognized on the sale of securities and any excess distributions paid on the securities must be rateably allocated to each day in a U.S. taxpayer’s holding period for the securities and any excess distributions paid on the securities must be rateably allocated to each day in a U.S. taxpayer’s holding period for the securities. The amounts allocated to the taxable year of disposition and to years before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate applicable to ordinary income in effect for that taxable year for individuals or corporations, as appropriate, and an interest charge would be imposed on the tax attributable to the allocated amount, calculated as if such tax liability had been due in each such prior year.  Investors should consult their own tax advisors as to the tax consequences of an investment in our securities.




LEGAL PROCEEDINGS AND REGULATORY ACTIONS




We are not aware of any material legal proceedings to which we are a party or to which our property is subject, nor are we aware that any such proceedings are contemplated. During the last financial year, we have not been subject to any penalties or sanctions imposed by a regulatory body in respect of securities legislation or regulatory requirements or any penalty or sanction that would likely to be considered important to a reasonable investor in making an investment decision. We have not entered into any settlement agreement in respect of securities legislation or regulatory requirements.










A-31







INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS




Other than disclosed elsewhere in this AIF, no director, executive officer or shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued Common Shares, or any of their respective associates or affiliates of such persons, has any material interest, direct or indirect, in any transaction which has materially affected or is reasonably expected to materially affect the Company within the three most recent financial years preceding the date of this AIF.




AUDITORS, TRANSFER AGENT AND REGISTRAR




Our auditors are PricewaterhouseCoopers LLP, Chartered Accountants, having an address at 250 Howe Street, Suite 700, Vancouver, British Columbia, Canada V6C 3S7.




The transfer agent and registrar for the Common Shares in Canada is Computershare Investor Services Inc., at its principal offices in Vancouver, British Columbia and Toronto, Ontario.  The transfer agent and registrar for the Common Shares in the United States is Computershare Trust Company, N.A, at its principal offices in Golden, Colorado.




MATERIAL CONTRACTS




Except for contracts entered into in the ordinary course of business, as of date of this AIF, the only material contracts which the Company has entered into are set out below.  Copies of such agreements are available under the Company’s profile on SEDAR at www.sedar.com.




1.
the Acquisition Agreement; and




2.
the Investor Rights Agreement.




INTEREST OF EXPERTS




None of the following companies, partnerships or persons, each of whom are named in this AIF as having prepared reports or having been responsible for reporting exploration results relating to our mineral properties and whose profession or business gives authority to such reports, or any director, officer, partner, or employee thereof, as applicable, received or has received a direct or indirect interest in our property or of any of our associates or affiliates. As at the date hereof, and except as noted below, such persons, and the directors, officers, partners and employees, as applicable, of each of the following companies and partnerships beneficially own, directly or indirectly, in the aggregate, less than one percent of the securities of the Company:




1.
Ivor W.O. Jones, M.Sc., CP, FAusIMM




2.
Ian I. Chang M.A.Sc., P.Eng.; and




3.
Kenneth C. McNaughton, M.A.Sc., P.Eng.




None of such persons, or any director, officer or employee, as applicable, of any such companies or partnerships,  has any interest in any securities or other property of the Company or any of our associates or affiliates or is currently expected to be elected, appointed or employed as a director, officer or employee of the Company or of any of our associates or affiliates, except for Kenneth C. McNaughton, who is our Vice President and Chief Exploration Officer and who holds 510,500 Common Shares and 1,300,000 options to purchase Common Shares, and Ian I. Chang, who is our Vice President Project Developmentand who holds 1,720 Common Shares and 355,000 options.




Our auditors, PricewaterhouseCoopers LLP, report that they are independent of the Company in accordance with the rules of professional conduct of the Institute of Chartered Accountants of British Columbia and with the rules and regulations of the SEC as at the date of their audit report.


A-32




ADDITIONAL INFORMATION




Additional information relating to the Company is available on SEDAR at www.sedar.com. Additional information with respect to directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the management information circular for our most recent meeting of shareholders.  Additional financial information is provided in the Company's financial statements and MD&A for its most recently completed financial year, also filed on SEDAR.  In addition, copies of these documents may be obtained from the Company by contacting the Company at 1600 – 570 Granville Street, Vancouver, British Columbia V6C 3P1, telephone: (604) 558-1784, fax: (604) 558-4784.























































A-33


APPENDIX 1






PRETIVM RESOURCES INC.


AUDIT COMMITTEE CHARTER






As Adopted by the Board of Directors on December 9, 2010




I.           Purpose of Audit Committee of Pretivm Resources Inc. (the “Company”)




The purpose of the Audit Committee (the “Committee”) is to:




1
Assist the Board of Directors of the Company (the “Board”) in fulfilling its oversight responsibilities relating to:




(a)
the quality and integrity of the Company’s financial statements, financial reporting process and systems of internal controls and disclosure controls regarding risk management, finance, accounting, and legal and regulatory compliance;




(b)
the independence and qualifications of the Company’s independent accountants and review of the audit efforts of the Company’s independent accountants; and




(c)
the development and implementation of policies and processes regarding corporate governance matters.




2
Provide an open avenue of communication between the independent accountants, the Company’s financial and senior management and the Board.




3
Prepare any reports required to be prepared by the Committee pursuant to the rules of any stock exchange on which the Company’s shares are listed and pursuant to the rules of any securities commission or other regulatory authority having jurisdiction, whether for inclusion in the Company’s annual proxy statement or otherwise.




The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section VII below of this Charter.




While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate or are in accordance with generally accepted accounting principles, accounting standards, or applicable laws and regulations. This is the responsibility of management of the Company and the Company’s independent accountants, as well as any advisors employed by the Committee. Because the primary function of the Committee is oversight, the Committee shall be entitled to rely on the expertise, skills and knowledge of management and the Company’s independent accountants and the integrity and accuracy of information provided to the Committee by such persons in carrying out its oversight responsibilities. Nothing in this Charter is intended to change the responsibilities of management and the independent accountants.




II.           Composition




The Committee shall be composed of at least three directors, each of whom the Board has determined has no material relationship with the Company which could, in the view of the Board, be reasonably expected to interfere with the exercise of such director’s independent judgement, and who otherwise satisfies the definition of “independent” as set forth by National Instrument 52-110 – Audit Committees (“NI 52-110”) and any other applicable securities laws, rules or requirements of any stock exchange upon which the Company’s securities are listed as in effect from time to time.




All members of the Committee must be financially literate, meaning that he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements or must become.  A director committee who is not financially literate may be appointed to the committee provided that such director becomes financially literate within a reasonable period of time following such appointment.


AA-1




If any member of the Committee ceases to be “independent”, as defined by the applicable securities laws and exchange requirements, including NI 52-110, for reasons outside that member’s reasonable control, that person may remain an audit committee member until the earlier of the next annual meeting of the shareholders or the date that is six months from the occurrence of the event that caused the member to no longer be independent.




III.           Authority




The Committee shall have the authority to (i) retain (at the Company’s expense) its own legal counsel, accountants and other advisors that the Committee believes, in its sole discretion, are needed to carry out its duties and responsibilities; (ii) conduct investigations that it believes, in its sole discretion, are necessary to carry out its responsibilities; and (iii) take whatever actions that it deems appropriate to foster an internal culture that is committed to maintaining quality financial reporting, sound business risk practices and ethical behaviour within the Company. In addition, the Committee shall have the authority to request any officer, director, employee or consultant of the Company, the Company’s outside legal counsel and the independent accountants to meet with the Committee and any of its advisors and to respond to their inquiries. The Committee shall have full access to the books, records and facilities of the Company in carrying out its responsibilities. Finally, the Board shall adopt resolutions which provide for appropriate funding, as determined by the Committee, for (i) services provided by the independent accountants in rendering or issuing an audit report, (ii) services provided by any adviser employed by the Committee which it believes, in its sole discretion, are needed to carry out its duties and responsibilities, or (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties and responsibilities.




The Committee shall be responsible for establishing procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and (ii) the confidential, anonymous submissions by employees of the Company regarding questionable accounting or auditing matters.




The Committee shall review the reports of the Chief Executive Officer and Chief Financial Officer (in connection with their required certifications for the Company’s filings with the Securities and Exchange Commission) regarding any significant deficiencies or material weaknesses in the design of operation of internal controls and any fraud that involves management or other employees of the Company who have a significant role in managing or implementing the Company’s internal controls. During this review, the Committee should evaluate whether the internal control structure, as created and as implemented, provides reasonable assurances that transactions are recorded as necessary to permit the Company’s external auditors to reconcile the Company’s financial statements in accordance with applicable securities laws.




The Committee, in its capacity as a committee of the Board, is directly responsible for the appointment, compensation, retention and oversight of the work of the independent accountants engaged (including resolution of disagreements between the Company’s management and the independent accountants regarding financial reporting) for the purpose of preparing and issuing an audit report or performing other audit, review or attest services for the Company.




The independent accountants shall submit to the Audit Committee annually a formal written statement delineating all relationships between the independent accountants and the Company and its subsidiaries, addressing the non-audit services provided to the Company or its subsidiaries and the matters set forth in or required by the rules and regulations of all relevant regulatory authorities.




The independent accountants shall submit to the Audit Committee annually a formal written statement of the fees billed for each of the following categories of services rendered by the independent accountants: (i) the audit of the Company’s annual financial statements for the most recent fiscal year and any reviews of the financial statements; (ii) information technology consulting services for the most recent fiscal year, in the aggregate and by each service (and separately identifying fees for such services relating to financial information systems design and implementation); and (iii) all other services rendered by the independent accountants for the most recent fiscal years, in the aggregate and by each service.




IV.           Appointing Members




The members of the Committee shall be appointed or re-appointed by the Board on an annual basis. Each member of the Committee shall continue to be a member thereof until such member’s successor is appointed, unless such member shall resign or be removed by the Board or such member shall cease to be a director of the Company. Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board and shall be filled by the Board if the membership of the Committee is less than three directors as a result of the vacancy or the Committee no longer has a member who is an “audit committee financial expert” as a result of the vacancy.








AA-2






V.           Chairperson




The Board, or in the event of its failure to do so, the members of the Committee, must appoint a Chairperson from the members of the Committee. If the Chairperson of the Committee is not present at any meeting of the Committee, an acting Chairperson for the meeting shall be chosen by majority vote of the Committee from among the members present. In the case of a deadlock on any matter or vote, the Chairperson shall refer the matter to the Board. All requests for information from the Company or the independent accountants shall be made through the Chairperson.




VI.           Meetings




The time and place of meetings of the Committee and the procedure at such meetings shall be determined from time to time by the members thereof provided that:




1
A quorum for meetings shall be two members, present in person or by telephone or other telecommunication device that permit all persons participating in the meeting to speak and hear each other;




2
The Committee shall meet at least quarterly (or more frequently as circumstances dictate); and




3
Notice of the time and place of every meeting shall be given in writing or facsimile communication to each member of the Committee and the external auditors of the Company at least 48 hours prior to the time of such meeting.




While the Committee is expected to communicate regularly with management, the Committee shall exercise a high degree of independence in establishing its meeting agenda and in carrying out its responsibilities. The Committee shall submit the minutes of all meetings of the Committee to, or discuss the matters discussed at each Committee meeting with, the Board.




VII.           Specific Duties




In meeting its responsibilities, the Committee is expected to:




1
Select and recommend to the Board the independent accountants for the Company, considering independence and effectiveness, approve all audit and non-audit services in advance of the provision of such services and the fees and other compensation to be paid to the independent accountants, and oversee the services rendered by the independent accountants (including the resolution of disagreements between management and the independent accountants regarding preparation of financial statements) for the purpose of preparing or issuing an audit report or related work, and the independent accountants shall report directly to the Committee;




2
To pre-approve any non-audit services to be provided to the Company by the external auditor and the fees for those services;




3
Review the performance of the independent accountants, including the lead partner of the independent accountants, and, in its sole discretion, approve any proposed discharge of the independent accountants when circumstances warrant, and appoint any new independent accountants;




4
Periodically review and discuss with the independent accountants all significant relationships the independent accountants have with the Company to determine the independence of the independent accountants, including a review of service fees for audit and non-audit services;




5
Review and approve the issuer’s hiring policies from time to time regarding partners, employees and former partners and employees of the present and former external auditor of the issuer;




6
Inquire of management and the independent accountants and evaluate the effectiveness of the Company’s process for assessing significant risks or exposures and the steps management has taken to monitor, control and minimize such risks to the Company. Obtain annually, in writing, the letters of the independent accountants as to the adequacy of such controls;


AA-3






7
Consider, in consultation with the independent accountants, the audit scope and plan of the independent accountants;




8
Review with the independent accountants the coordination of audit effort to assure completeness of coverage, and the effective use of audit resources;




9
Consider and review with the independent accountants, out of the presence of management:




(a)
the adequacy of the Company’s internal controls and disclosure controls including the adequacy of computerized information systems and security;




(b)
the truthfulness and accuracy of the Company’s financial statements; and




(c)
any related significant findings and recommendations of the independent accountants together with management’s responses thereto;




10
Following completion of the annual audit, review with management and the independent accountants:




(a)
the Company’s annual financial statements and related footnotes;




(b)
the independent accountants’ audit of the financial statements and the report thereon;




(c)
any significant changes required in the independent accountants’ audit plan; and




(d)
other matters related to the conduct of the audit which are to be communicated to the committee under generally accepted auditing standards;




11
Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information;




12
Establish regular and separate systems of reporting to the Committee by each of management and the independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments;




13
In consultation with the independent accountants, review any significant disagreement among management and the independent accountants in connection with the preparation of the financial statements, including management’s responses;




14
Consider and review with management:




(a)
significant findings during the year and management’s responses thereto; and




(b)
any changes required in the planned scope of their audit plan;




15
Review, prior to publication, all filings with regulatory authorities and any other publicly disclosed information containing the Company’s financial statements, including Management’s Discussion & Analysis, any certification, report, opinion or review rendered by the independent accountants, any press releases announcing earnings (especially the use of “pro forma” or “adjusted” information not prepared in compliance with generally accepted accounting principles) and all financial information and earnings guidance intended to be provided to analysts and the public or to rating agencies, and consider whether the information contained in these documents is consistent with the information contained in the financial statements;




16
Facilitate the preparation and inclusion of any report from the Committee or other disclosures as required by applicable laws and regulations in the Company’s annual proxy statement or other filings of all regulatory authorities having jurisdiction;


AA-4




17
Review with management the adequacy of the insurance and fidelity bond coverages, reported contingent liabilities, and management’s assessment of contingency planning. Review management’s plans regarding any changes in accounting practices or policies and the financial impact of such changes, any major areas in management’s judgment that have a significant effect upon the financial statements of the Company, and any litigation or claim, including tax assessments, that could have a material effect upon the financial position or operating results of the Company;




18
Review with management and the independent accountants each annual, quarterly and other periodic report prior to its filing with the relevant regulators or prior to the release of earnings;




19
Review policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the independent accountants;




20
Review, with the Company’s counsel, any legal, tax or regulatory matter that may have a material impact on the Company’s financial statements, operations, related Company compliance policies, and programs and reports received from regulators;




21
Evaluate and review with management the Company’s guidelines and policies governing the process of risk assessment and risk management;




22
Meet with the independent accountants and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee;




23
Report Committee actions to the Board with such recommendations as the Committee may deem appropriate;




24
Maintain, review and update the procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, as set forth in Annex A attached to this Charter;




25
Review, assess and update this Charter on an annual basis and recommend any proposed changes to the Board for approval, in accordance with the requirements of the all applicable laws; and




26
Perform such other functions consistent with this Charter, the Company’s Articles and governing law, as the Committee deems necessary or appropriate.























AA-5







ANNEX A




PROCEDURES FOR THE SUBMISSION OF


COMPLAINTS AND CONCERNS REGARDING


ACCOUNTING, INTERNAL ACCOUNTING CONTROLS OR


AUDITING MATTERS




1
Pretivm Resources Inc. (the “Company”) has designated its Audit Committee of its Board of Directors (the “Committee”) to be responsible for administering these procedures for the receipt, retention, and treatment of complaints received by the Company or the Committee directly regarding accounting, internal accounting controls, or auditing matters.




2
Any employee or consultant of the Company may on a confidential and anonymous basis submit concerns regarding questionable accounting controls or auditing matters to the Committee by setting forth such concerns in a letter addressed directly to the Committee with a legend on the envelope such as “Confidential” or “To be opened by Committee only”. If an employee or consultant would like to discuss the matter directly with a member of the Committee, the employee or consultant should include a return telephone number in his or her submission to the Committee at which he or she can be contacted. All submissions by letter to the Committee can be sent to:




Pretivm Resources Inc.


c/o Audit Committee


Attn:  Chair


Ross Mitchell




3
Any complaints received by the Company that are submitted as set forth herein will be forwarded directly to the Committee and will be treated as confidential if so indicated.




4
At each meeting of the Committee, or any special meetings called by the Chairperson of the Committee, the members of the Committee will review and consider any complaints or concerns submitted by employees as set forth herein and take any action it deems necessary in order to respond thereto.





5
All complaints and concerns submitted as set forth herein will be retained by the Committee for a period of seven (7) years.
























AA-6







APPENDIX B
  FINANCIAL STATEMENTS OF PRETIUM RESOURCES INC., INCLUDING MANAGEMENT’S REPORT TO SHAREHOLDERS AND THE AUDITORS’ REPORTS


PRETIUM RESOURCES INC.
 
 
 
 
 
 CONSOLIDATED FINANCIAL STATEMENTS
 YEAR ENDED DECEMBER 31, 2012
 (Expressed in Canadian Dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1600 - 570 Granville Street
 Vancouver, BC V6C 3P1
 
 Phone: 604-558-1784
 Email: invest@pretivm.com
  
 
 
 
 Management’s Responsibility for Financial Reporting
 
 The accompanying consolidated financial statements of the Company have been prepared by management in accordance with International Financial Reporting Standards, and within the framework of the summary of significant accounting policies in these consolidated financial statements.
 
 A system of internal accounting control is maintained in order to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management’s authorization.  This system includes established policies and procedures, the selection and training of qualified personnel and an organization providing for appropriate delegation of authority and segregation of responsibilities.
 
 The Audit Committee of the Board of Directors meets periodically with management and the Company’s independent auditors to review the scope and results of their annual audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval.
 
 The consolidated financial statements have been audited by PricewaterhouseCoopers LLP on behalf of the shareholders and their report follows.
 
 
 “Robert A. Quartermain”

“Peter de Visser”Robert A. Quartermain

Peter de VisserChief Executive Officer

Chief Financial Officer
 
 March 5, 2013
 
 
 
 
 
 
 Management’s Report on Internal Control over Financial Reporting
 
 Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting under Rule 13a-15(f) and 15d-15(f).  The Securities Exchange Act of 1934 defines this as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
 
 ·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 ·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
 ·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that may have a material effect on the consolidated financial statements.
 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012.  In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework.
 
 Based upon our assessment and those criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2012.
 
 PricewaterhouseCoopers LLP, our independent auditors, has issued an audit report on internal control over financial reporting for the Company as of December 31, 2012, which is included herein.
 
 
 “Robert A. Quartermain”

“Peter de Visser”Robert A. Quartermain

Peter de VisserChief Executive Officer

Chief Financial Officer
 
 March 5, 2013
 
 
 
 
 
  Independent Auditor’s Report
 
 To the Shareholders of
 Pretium Resources Inc.
 
 We have completed integrated audits of the 2012 and 2011 consolidated financial statements of Pretium Resources Inc. (the “Company”) and an audit of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2012. Our opinions, based on our audits, are presented below.
 
 Report on the consolidated financial statements
 
 We have audited the accompanying consolidated financial statements of Pretium Resources Inc., which comprise the consolidated statements of financial position as at December 31, 2012 and 2011 and the consolidated statements of loss and comprehensive loss, cash flows and changes in equity for the years ended December 31, 2012 and 2011, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.
 
 Management’s responsibility for the consolidated financial statements
 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditor’s responsibility
 Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits as at December 31, 2012 and 2011 and for the years then ended in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
 
 An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also
 includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
 
 We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
  Opinion
 In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Pretium Resources Inc. as at December 31, 2012 and 2011 and the Company’s financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
      
  
 Report on internal control over financial reporting
 
 We have also audited Pretium Resources Inc.’s internal control over financial reporting as at December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
 Management’s responsibility for internal control over financial reporting
 Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Controls Over Financial Reporting.
 
 Auditor’s responsibility
 Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
 
 An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
 such other procedures as we consider necessary in the circumstances.
 
 We believe that our audit provides a reasonable basis for our audit opinion on the Company’s internal control over financial reporting.
 
 Definition of internal control over financial reporting
 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
 Inherent limitations
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
  Opinion
  In our opinion, Pretium Resources Inc. maintained, in all material respects, effective internal control over financial reporting as at December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by COSO.
 
 (signed) PricewaterhouseCoopers LLP
 
 Chartered Accountants
 
 Vancouver, British Columbia
 March 5, 2013
 
 
 PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 (Expressed in Canadian Dollars)
 Year ended December 31,Notes


2012


2011ASSETSCurrent assetsCash and cash equivalents




$
28,991,606


$
16,447,223Receivables


13



16,229,242



6,790,658Deposits and prepaid expenses






282,277



373,346Due from Silver Standard Resources Inc.


8



-



501,989Total current assets






45,503,125



24,113,216Non-current assetsRestricted cash


6



1,139,000



378,755Property, plant and equipment


10



4,670,846



2,775,871Mineral interests


6



596,158,842



490,762,469Total non-current assets






601,968,688



493,917,095Total Assets





$
647,471,813


$
518,030,311LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities





$
15,037,434


$
5,414,233Property payment


6



400,000



-Total current liabilities






15,437,434



5,414,233Non-current liabilitiesDecommissioning and restoration provision


11



1,179,537



174,127Property payment


6



-



400,000Deferred income tax liability


14



9,600,910



1,533,472Total liabilities






26,217,881



7,521,832EQUITYShare capital


7



623,469,609



511,262,747Share based payment reserve


7



44,529,084



30,747,469Deficit






(46,744,761
)


(31,501,737
)Total equity






621,253,932



510,508,479Total Equity and Liabilities





$
647,471,813


$
518,030,311Subsequent event


15
 
 
 These consolidated financial statements were authorized for issue by the Board of Directors on March 5, 2013.
 
 On behalf of the Board:“Ross A. Mitchell”

“C. Noel Dunn”Ross A. Mitchell

(Chairman of Audit Committee)

C. Noel Dunn

(Director)
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 B-1
 
 
 PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
 (Expressed in Canadian Dollars)
 Year ended December 31,Notes


2012


2011EXPENSESAmortization




$
223,112


$
97,765Consulting





90,995



219,237General and administrative





775,731



429,059Insurance





308,225



93,296Investor relations





917,160



876,926Listing fees





763,784



186,160Professional fees





494,804



480,197Salaries





2,034,312



2,791,963Share-based compensation

7



7,106,725



12,558,810Travel and accommodation





236,025



122,788Operating loss





12,950,873



17,856,201OTHER ITEMSAccretion of decommissioning andrestoration provision

11



15,305



1,193Interest income





(589,806
)


(400,730
)Other income

8



-



(250,000
)Loss before taxes





12,376,372



17,206,664Deferred income tax expense

14



2,866,652



165,057Net loss and comprehensive loss for the year




$
15,243,024


$
17,371,721Basic and diluted loss per common share




$
0.17


$
0.20Weighted average number of common shares outstanding





91,944,956



85,746,508
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 B-2
 
 
 PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Canadian Dollars)
 Year ended December 31,Notes


2012


2011CASH FLOWS FROM OPERATING ACTIVITIESNet loss for the year




$
(15,243,024
)

$
(17,371,721
)Items not affecting cash:Accretion of asset retirement obligation


11



15,305



1,193Amortization






223,112



97,765Deferred income tax expense


14



2,866,652



165,057Share-based compensation


7



7,106,725



12,558,810Changes in non-cash working capital items:Receivables






(39,456
)


(3,378,492
)Prepaid expenses






91,069



(266,941
)Due from Silver Standard Resources Inc.


8



501,989



98,011Accounts payable and accrued liabilities






(782,148
)


534,680Net cash used in operating activities






(5,259,776
)


(7,561,638
)CASH FLOWS FROM FINANCING ACTIVITIESCommon shares issued, net


7



117,216,301



14,139,832Proceeds from exercise of stock options


7



128,641



-Underwriters’ exercise of over allotment option


9



-



18,000,000Settlement of convertible promissory note


9



-



(18,000,000
)Net cash generated by financing activities






117,344,942



14,139,832CASH FLOWS FROM INVESTING ACTIVITIESRestricted cash


6



(760,245
)


(378,755
)Expenditures on mineral interests


6



(95,880,953
)


(35,130,360
)Purchase of property, plant and equipment


10



(2,899,585
)


(3,155,622
)Net cash used in investing activities






(99,540,783
)


(38,664,737
)Change in cash and cash equivalents for the year






12,544,383



(32,086,543
)Cash and cash equivalents, beginning of year






16,447,223



48,533,766Cash and cash equivalents, end of year





$
28,991,606


$
16,447,223
 
 See also Note 12.
 
 
 
 
 
 
 
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 B-3
 
 
 PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 (Expressed in Canadian Dollars)
 Note


Number of

common shares


Amount


Share-based

payments

reserve


Deficit


TotalBalance – December 31, 2010





78,844,586


$
458,738,330


$
13,779,108


$
(14,130,016
)

$
458,387,422Underwriters’ exercise of over allotment option

9



3,000,000



18,000,000



-



-



18,000,000Shares issued on conversion of promissory note

9



3,625,500



21,753,000



-



-



21,753,000Value assigned to options granted





-



-



16,968,361



-



16,968,361Shares issued underFlow-through Agreement

7



1,390,000



12,788,000



-



-



12,788,000Share issue costs

7



-



(941,668
)


-



-



(941,668
)Deferred income tax on share issuance costs





-



925,085



-



-



925,085Net loss and comprehensive loss





-



-



-



(17,371,721
)


(17,371,721
)Balance – December 31, 2011





86,860,086


$
511,262,747


$
30,747,469


$
(31,501,737
)

$
510,508,479Shares issued under flow-through agreement

7



2,400,000



36,837,000



-



-



36,837,000Shares issued under prospectus

7



5,554,500



80,540,250



-



-



80,540,250Share issue costs

7



-



(7,148,948
)


-



-



(7,148,948
)Value assigned to options granted





-







13,844,321



-



13,844,321Shares issued upon exercise of options, for cash

7



13,050



128,641



-



-



128,641Transfer from contributed surplus on exercise of options





-



62,706



(62,706
)


-



-Deferred income tax on share issuance costs





-



1,787,213



-



-



1,787,213Net loss and comprehensive loss





-



-



-



(15,243,024
)


(15,243,024
)Balance – December 31, 2012





94,827,636



623,469,609



44,529,084



(46,744,761
)


621,253,932
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 B-4
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 1.           NATURE OF OPERATIONS
 
 Pretium Resources Inc. (the "Company") was incorporated under the laws of the Province of British Columbia, Canada on October 22, 2010.  The address of the Company’s registered office is 1600 – 570 Granville St., Vancouver, BC, V6C 3P1.
 
 The Company owns the Snowfield and Brucejack Projects (the “Projects”) located in Northwest British Columbia, Canada.  The Company is in the process of exploring the Projects and has not yet determined whether they contain economically recoverable mineral reserves.  The Company’s continuing operations and the underlying value and recoverability of the amount shown for the mineral interests are entirely dependent upon the existence of economically recoverable mineral reserves and resources, the ability of the Company to obtain the necessary financing to complete the exploration and development of the Projects, obtaining the necessary permits to mine, and on future profitable production or from the proceeds from the disposition of the Projects.
 
 2.           BASIS OF PREPARATION
 
 These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
 
 These consolidated financial statements have been prepared on the historical cost basis and include the accounts of the Company and its wholly owned subsidiaries (note 8).  Inter-company balances and transactions are eliminated on consolidation. The presentation and functional currency of the Company is the Canadian dollar.
 
 3.           SIGNIFICANT ACCOUNTING POLICIES
 
 Cash and cash equivalents
 
 Cash and cash equivalents comprise cash holdings in business and savings accounts held at major financial institutions with an original maturity date of three months or less.
 
 Financial instruments
 
 Financial assets
 
 All financial assets are recognized or derecognized on the trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs. Financial assets held are cash and cash equivalents, receivables and amounts due from Silver Standard Resources Inc. (“Silver Standard”). These are receivables that have fixed or determinable payments that are not quoted in an active market and accordingly are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Interest income is recognized by applying the effective interest rate, except for short-term receivables, when the recognition of interest would be immaterial.
 
 B-5
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 3.           SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Financial liabilities
 
 The Company has the following financial liabilities: accounts payable and accrued liabilities. Such financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are amortized at cost using the effective interest method.
 
 Impairment of financial assets
 
 Financial assets are assessed for indicators of impairment at the end of each reporting year. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been adversely impacted.
 
 For all financial assets objective evidence of impairment could include:
 ·
significant financial difficulty of the issuer or counterparty; or
 ·
default of delinquency in interest or principal payments; or
 ·
it becoming probable that the borrower will enter bankruptcy or financial re-organization.
 
 Property, plant and equipment
 
 Property, plant and equipment are carried at cost, less accumulated amortization and accumulated impairment losses. Cost comprises the fair value of consideration given to acquire an asset and includes the direct charges associated with bringing the asset to the location and condition necessary for putting it into use along with the future cost of dismantling and removing the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
 
 Plant and equipment are amortized over the estimated useful life of the assets using the declining balance method at rates of 4% to 55% per annum, as appropriate. The Company reviews residual value amortization methods and useful lives annually.  Any changes in estimates that arise from this review are accounted for prospectively.
 
 Exploration and evaluation expenditures
 
 Exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired. Exploration and evaluation expenditures are capitalized. Mineral property acquisition costs are capitalized. Exploration and evaluation costs incurred before the Company has obtained the legal rights to explore an area are expensed.
 
 
 
 
 
 
 
 B-6
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 3.           SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Impairment of non-financial assets
 
 At the end of each reporting year, and when relevant triggering events and circumstances occur, the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and the value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the year. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. A cash-generating unit is determined as the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
 
 Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
 
 Share capital
 
 Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.
 
 Income taxes
 
 Any income tax on profit or loss for the years presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
 
 Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates at the end of the reporting year applicable to the year of expected realization.
 
 A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
 
 Mineral exploration tax credits
 
 Mineral exploration tax credits on eligible mineral exploration expenditures incurred are treated as a reduction of the capitalized exploration costs of the mineral properties.  The credits are recorded when the amount is reliably measurable and it is considered probable that the tax credit will be recovered.
 
 
 B-7
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 3.           SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Decommissioning and restoration provision
 
 An obligation to incur decommissioning and environmental costs arises when environmental disturbance is caused by the exploration or development of a mineral property interest. Such costs are discounted to their net present value and capitalized to the carrying amount of the related asset along with the recording of a corresponding liability, as soon as the obligation to incur such costs arises.  Discount rates using a pre-tax rate that reflect risks specific to the asset are used to calculate the net present value.  The liability is adjusted each year for the unwinding of the discount rate, changes to the current market-based discount rate, and for the amount or timing of the underlying cash flows needed to settle the obligation.
 
 Loss per share
 
 The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares.
 
 Flow-through shares
 
 The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sale of such shares being transferred to the purchasers of the shares. Under IFRS, on the issuance of such shares, the Company bifurcates the flow-through shares into: a flow-through share premium, equal to the estimated premium that investors pay for the flow-through feature, which is recognized as a liability, and share capital. As the related exploration expenditures are incurred, the Company derecognizes the liability and recognizes a related income tax recovery.
 
 Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period.
 
 Share-based payment transactions
 
 The Company’s share purchase option plan allows employees and consultants to acquire shares of the Company. The fair value of share purchase options granted is recognized as an expense with a corresponding increase in equity settled share-based payments reserve in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.
 
 Equity-settled share-based payment transactions with non-employees are measured at the fair value of the goods or services received. However, if the fair value cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity instruments granted at the date the non-employee receives the goods or the services.
 
 
 B-8
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 4.           CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
 
 Critical accounting estimates and judgments
 
 The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future.  Estimates and other judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances.  The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the financial statements that could result in a material effect in the next financial year on the carrying amounts of assets and liabilities:
 
 ·
Impairment
 
 The Company considers both external and internal sources of information in assessing whether there are any indicators that mineral interests are impaired.  External sources of information include changes in the market, and the economic and legal environment in which the Company operates.  Internal sources of information include the manner in which mineral interests are being used or are expected to be used.  Management has assessed impairment indicators on the Company’s mineral interests and has concluded that no impairment indicators existed as of December 31, 2012.
 
 ·
Decommissioning and Restoration Provision
 
 The decommissioning and restoration provision is based on future cost estimates using information available at the balance sheet date.  The decommissioning and restoration provision is adjusted at each reporting period for changes to factors such as the expected amount of cash flows required to discharge the liability, the timing of such cash flows and the discount rate.  The decommissioning and restoration provision requires other significant estimates and assumptions such as requirements of the relevant legal and regulatory framework and the timing, extent and costs of required decommissioning and restoration activities.  To the extent the actual costs differ from these estimates, adjustments will be recorded and the income statement may be impacted.
 
 5.           NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
 
 New standards, amendments and interpretations to existing standards not adopted by the Company
 
 The following revised standard is effective for annual years beginning on or after January 1, 2013 with earlier application permitted.  The Company has assessed the impact of this standard and has determined that it would not have a material impact on the Company.
 
 ·
IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  IFRS 10 replaces SIC 12, Consolidation – Special Purpose Entitiesand parts of IAS 27, Consolidated and Separate Financial Statements.
 
 There are no other IFRS’s or IFRIC interpretations that are not yet effective that are expected to have a material impact on the Company.
 
 
 B-9
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 6.           MINERAL INTERESTS
 
 The Company’s mineral interests consist of gold/copper/silver exploration projects located in northwest British Columbia.
 
 Expenditures on the Company’s mineral interests are summarized as follows:
 
 Year ended December 31, 2012Brucejack


Snowfield


TotalAcquisitionBalance, beginning of year

$
142,888,167


$
309,064,110


$
451,952,277Additions in the year


61,152



3,528



64,680Balance, end of year

$
142,949,319


$
309,067,638


$
452,016,957ExplorationBalance, beginning of year

$
38,531,290


$
278,902


$
38,810,192Costs incurred in the yearProject


73,499,033



-



73,499,033Feasibility


8,472,876



270,381



8,743,257Road infrastructure


22,214,796



-



22,214,796Other


9,778,833



(10,226
)


9,768,607Recoveries


(8,894,000
)


-



(8,894,000
)Balance, end of year

$
143,602,828


$
539,057


$
144,141,885Balance, December 31, 2012

$
286,552,147


$
309,606,695


$
596,158,842
 
 Year ended December 31, 2011Brucejack


Snowfield


TotalAcquisitionBalance, beginning of year

$
140,935,890


$
309,064,110


$
450,000,000Additions in the year


1,952,277



-



1,952,277Balance, end of year

$
142,888,167


$
309,064,110


$
451,952,277ExplorationBalance, beginning of year

$
-


$
-


$
-Costs incurred in the yearProject


32,859,119



5,741



32,864,860Feasibility


2,075,579



224,730



2,300,309Road infrastructure


2,029,748



-



2,029,748Other


4,946,844



48,431



4,995,275Recoveries


(3,380,000
)


-



(3,380,000
)Balance, end of year

$
38,531,290


$
278,902


$
38,810,192Balance, December 31, 2011

$
181,419,457


$
309,343,012


$
490,762,469
 
 Recoveries consist entirely of BC Mineral Exploration Tax Credits receivable from the Government of Canada.  See also Note 13.
 
 B-10
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 6.           MINERAL INTERESTS(Cont’d)
 
 Snowfield and Brucejack Projects
 
 During the year ended December 31, 2011, the Company entered into a purchase agreement to acquire certain mineral claims in Northwest British Columbia, adjacent to the Company’s claims that include the Brucejack and Snowfield Projects, for $750,000.  The Company paid cash of $150,000 upon closing of the acquisition, $200,000 on the first anniversary of closing and is committed to paying $400,000 on the second anniversary of closing.
 
 In relation to the Brucejack Project, the Company has $1,139,000 of restricted cash comprised of $889,000 in the form of Guaranteed Investment Certificates as security deposits with various government agencies in relation to close down and restoration provisions for the Projects and $250,000 in the form of a letter of credit which represents the cash collateral to a vendor in respect of high purchasing volume.
 
 The Brucejack Project is subject to a 1.2% net smelter returns royalty on production in excess of 503,386 ounces of gold and 17,907,080 ounces of silver.
 
 7.           CAPITAL AND RESERVES
 
 Authorized Share Capital
 
 At December 31, 2012, the authorized share capital consisted of an unlimited number of common shares without par value and an unlimited number of preferred shares with no par value.
 
 On July 15, 2011, the Company closed a private placement of 1,390,000 flow-through common shares at a price of $10.85 per flow-through share for aggregate gross proceeds of $15,081,500.  The Company bifurcated the gross proceeds between share capital of $12,788,000 (before share issue costs of $941,668) and flow-through share premium of $2,293,500.  The Company subsequently recognized an income tax recovery of $2,293,500 upon the flow-through expenditures being incurred.
 
 On February 17, 2012, the Company closed a private placement of 1,250,000 flow-through common shares at a price of $18.50 per flow-through share for aggregate gross proceeds of $23,125,000.  The Company bifurcated the gross proceeds between share capital of $19,437,500 (before share issue costs of $1,222,326) and flow-through share premium of $3,687,500.  The Company subsequently recognized an income tax recovery of $3,687,500 upon the flow-through expenditures being incurred.
 
 On March 19, 2012, the Company filed a final short form base shelf prospectus that will allow for an offering of up to an aggregate principal amount of $180 million of securities, which includes up to $36 million in common shares owned by Silver Standard that may be offered by way of a secondary offering under the prospectus.
 
 On May 9, 2012, the Company completed a prospectus offering of 5,554,500 common shares at a price of $14.50 per share for aggregate gross proceeds of $80,540,250.  After deducting share issuance costs of $4,391,916, net proceeds were $76,148,334.
 
 On August 24, 2012, the Company closed a private placement of 1,150,000 flow-through common shares at a price of $18.00 per flow-through share for aggregate gross proceeds of $20,700,000. The Company bifurcated the gross proceeds between share capital of $17,399,500 (before share issue costs of $1,534,706) and flow-through share premium of $3,300,500.  The Company subsequently recognized an income tax recovery of $3,300,500 upon the flow-through expenditures being incurred.
 
 See also Note 15.
 
 B-11
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 7.           CAPITAL AND RESERVES(Cont’d)
 
 Share Option Plan
 
 The Company has adopted an incentive stock option plan which provides that the Board of Directors of the Company may from time to time, in their discretion, and in accordance with Toronto Stock Exchange requirements, grant to its directors, officers, employees and consultants of the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issue does not exceed 10% of the number of then outstanding common shares.  Such options can be exercisable for a maximum of ten years from the date of grant.  The exercise price of each share option is set by the Board of Directors at the time of grant but cannot be less than the market price. Vesting of share options is at the discretion of the Board of Directors at the time the options are granted.
 
 Continuity of share purchase options for the year ended December 31, 2012 is as follows:
 
 Expiry date

Exercise price ($)


December 31, 2011


Granted


Exercised /Forfeited


December 31, 2012


ExercisableDecember 21, 2015


6.00



2,725,000



-



-



2,725,000



2,725,000January 28, 2016


6.10



1,575,000



-



-



1,575,000



1,575,000February 10, 2016


8.73



100,000



-



-



100,000



100,000March 16, 2016


11.01



645,000



-



-



645,000



645,000August 11, 2016


9.55



125,000



-



(11,250
)


113,750



82,500November 2, 2016


9.73



275,000



-



-



275,000



206,250December 15, 2016


11.78



1,435,000



-



(1,800
)


1,433,200



1,074,450January 24, 2017


16.40



-



115,000



-



115,000



57,500March 8, 2017


17.46



-



10,000



-



10,000



5,000April 6, 2017


14.67



-



20,000



-



20,000



10,000May 10, 2012


13.50



-



10,000



-



10,000



5,000May 14, 2012


14.71



-



75,000



-



75,000



37,500July 19, 2017


13.54



-



100,000



-



100,000



25,000December 12, 2017


13.70



-



1,345,000



-



1,345,000



336,2506,880,000



1,675,000



(13,050
)


8,541,950



6,884,450Weighted average exercise price





$
7.95


$
13.95


$
9.86


$
9.13


$
8.15Weighted average remaining contractual life (years)


















3.58
 Continuity of share purchase options for the year ended December 31, 2011 is as follows:
 
 Expiry date

Exercise price ($)


December

31, 2010


Granted


Exercised /Forfeited


December 31, 2011


ExercisableDecember 21, 2015


6.00



2,725,000






-



2,725,000



2,043,750January 28, 2016


6.10



-



1,575,000



-



1,575,000



787,500February 10, 2016


8.73



-



100,000



-



100,000



50,000March 16, 2016


11.01



-



655,000



(10,000
)


645,000



322,500August 11, 2016


9.55



-



125,000



-



125,000



31,250November 2, 2016


9.73



-



275,000



-



275,000



68,750December 15, 2016


11.78



-



1,435,000



-



1,435,000



358,7502,725,000



4,165,000



(10,000
)


6,880,000



3,662,500Weighted average exercise price





$
6.00


$
9.24


$
11.01


$
7.95


$
7.17Weighted average remaining contractual life (years)


















4.28
 
 B-12
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
  7.           CAPITAL AND RESERVES(Cont’d)
 
 The total stock option expense for the year ended December 31, 2012 was $13,844,321(2011 - $16,968,361) of which $7,106,725 (2011 - $12,558,810) has been expensed in the statement of loss and $6,737,596 (2011 - $4,409,551) has been capitalized to mineral interests.
 
 The following are the weighted average assumptions employed to estimate the fair value of options granted for the year ended December 31, 2012 and year ended December 31, 2011 using the Black-Scholes option pricing model:
 
 
 2012
2011Risk-free interest rate
1.25%
1.87%Expected volatility
66.5%
56.1%Expected life
5 years
5 yearsExpected dividend yield
Nil
Nil
 
 Option pricing models require the input of subjective assumptions including the expected price volatility, and expected option life. Changes in these assumptions may have a significant impact on the fair value calculation.
 
 8.
RELATED PARTIES
 
 Transactions with directors and key management personnel
 
 Directors and key management compensation:
 For the year ended

December 31, 2012


For the year ended

December 31, 2011Salaries and management fees

$
2,156,691


$
3,211,650Share-based compensation


7,641,539



12,110,945Total Management Compensation

$
9,798,230


$
15,322,595
 
 Receivable from Silver Standard Resources Inc.
 
 The Company and Silver Standard had an agreement to share certain share issuance costs related to the Company’s IPO and subsequent sales of the Company’s shares by Silver Standard (the “Secondary Offering”).  During the year ended December 31, 2011, the Company had recorded a receivable of $501,989 due from Silver Standard with a corresponding offset to share issuance costs.  The Company also received $250,000 from Silver Standard as a fee for arranging the Secondary Offering.  During the year ended December 31, 2012, the receivable was fully collected.
 
 Employment agreements
 
 The Company has entered into employment agreements with each of its President and CEO (the “CEO”), Chief Development Officer and Vice President (the “CDO”) and Chief Exploration Officer and Vice President (the “CExO”).  Under the employment agreements, the CEO receives a base salary of $400,000 per year, benefits and an annual performance bonus of 0.25% of the annual increase in the market capitalization of the Company, provided the increase in market capitalization is 10% or more.  The CDO and CExO each receive a base salary of $300,000 per year, benefits and an annual bonus determined at the discretion of the Board.  The CEO, CDO and CExO are also entitled to twenty-four months’ salary and two years annual performance bonus as a termination benefit without cause.
 
 
 
 
 B-13
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 8.           RELATED PARTIES(Cont’d)
 
 Subsidiaries
 
 Name of Subsidiary
Place of Incorporation
Proportion of Ownership Interest
Principal ActivityPretium Exploration Inc.
British Columbia, Canada
100%
Holds interest in the Brucejack and Snowfield projects0890696 BC Ltd.
British Columbia,Canada
100%
Holds real estate in Stewart, British Columbia
 
 9.
CONVERTIBLE PROMISORY NOTE
 
 As part of the Snowfield and Brucejack acquisition,the Company had issued to Silver Standard a convertible promissory note in the amount of $39,753,000. During the year ended December 31, 2011, $18,000,000, being the proceeds from the over allotment option on the Company’s Initial Public Offering, was paid to Silver Standard to reduce the note to $21,753,000. The remainder was converted and settled through the issuance of 3,625,500 common shares of the Company.
 
 10.           PROPERTY, PLANT AND EQUIPMENT
 
 December 31, 2012Accumulated


Net BookCost


Amortization


ValueBuilding

$
297,297


$
14,570


$
282,727Camp infrastructure


358,903



31,932



326,971Computer hardware


179,705



97,297



82,408Computer software


430,174



290,947



139,227Exploration equipment


4,693,501



921,405



3,772,096Office equipment


95,627



28,210



67,417Total

$
6,055,207


$
1,384,361


$
4,670,846
 
 During the year ended December 31, 2012, $206,077 of amortization was recognized in the statement of loss and $798,533 was capitalized within mineral interests.
 
 December 31, 2011Accumulated


Net BookCost


Amortization


ValueBuilding

$
297,297


$
2,973


$
294,324Camp infrastructure


250,000



2,083



247,917Computer hardware


129,829



42,394



87,435Computer software


207,728



115,398



92,330Exploration equipment


2,175,141



204,047



1,971,094Office equipment


95,627



12,856



82,771Total

$
3,155,622


$
379,751


$
2,775,871
 
 During the year ended December 31, 2011, $80,471 of amortization was recognized in the statement of loss and $299,280 was capitalized within mineral interests.
 
 
 
 B-14
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
  11.
DECOMMISSIONING AND RESTORATION PROVISION
 
 The Company’s decommissioning and restoration provision relates to various governmental regulations associated with site restoration and clean-up costs.  The Company assesses cost estimates and other assumptions used in the valuation of decommissioning and restoration provisions (DRP’s) to reflect events, changes in circumstances and new information available.
 
 The following table summarizes the changes in the Company’s decommissioning and restoration provision:
 DRP – December 31, 2010

$
-DRP’s arising in the year


172,934Accretion during the year


1,193DRP – December 31, 2011


174,127DRP’s arising in the year


990,105Accretion during the year


15,305DRP – December 31, 2012

$
1,179,537
 
 The following are the assumptions used to estimate the decommissioning and restoration provision:
 
 
 2012



2011Total undiscounted value of payments

$
1,152,850


$
185,350Discount rate


1.87
%


2.76
%Expected life

10 years


10 years
 
  12.
SUPPLEMENTAL CASH FLOW INFORMATION
  
 Year ended

December 31, 2012


Year ended

December 31, 2011Net change in non-cash working capital items and otherTaxes receivable

$
(9,399,128
)

$
(6,780,369
)Trade accounts payable


10,805,349



4,155,639$
1,406,221


$
(2,624,730
)
 
 13.
FINANCIAL RISK MANAGEMENT
 
 (a)      Overview
 
 The Company has exposure to credit risk, liquidity risk and market risk from its use of financial instruments.
 
 This note presents information about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.
 
 The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.
 
 
 B-15
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 13.           FINANCIAL RISK MANAGEMENT(Cont’d)
 
 (b)           Credit risk
 
 Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations.  The Company's credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents, restricted cash and other receivables. The Company limits its exposure to credit risk on financial assets through investing its cash and cash equivalents with high-credit quality financial institutions. Other receivables consist primarily of Harmonized Sales Tax (HST) and BC Mineral Exploration Tax Credits receivable from the Government of Canada.
 
 The carrying value of the Company’s cash and cash equivalents, restricted cash and other receivables represent the maximum exposure to credit risk.
 
 Carrying Amount as at December 31, 2012


Carrying Amount as at December 31, 2011ReceivablesHarmonized Sales Tax

$
3,955,242


$
3,410,658BC Mineral Exploration Tax Credit


12,274,000



3,380,00016,229,242



6,790,658Due from Silver Standard Resources Inc.


-



501,989Cash and cash equivalents


28,991,606



16,447,223$
45,220,848


$
23,739,870
 
 (c)      Liquidity risk
 
 Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.  The Company ensures that there is sufficient capital in order to meet short term business requirements, after taking into account cash flows from operations and the Company's holdings of cash and cash equivalents. The Company's cash and cash equivalents are currently invested in business and savings accounts with high-credit quality financial institutions which are available on demand by the Company for its programs.
 
 (d)      Interest rate risk
 
 The Company is subject to interest rate risk with respect to its investments in cash and cash equivalents. The Company’s current policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash and cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates when cash and cash equivalents mature impact interest income earned.
 
 If the average interest rate for the years ended December 31, 2012 and December 31, 2011 had increased/decreased by 1%, the effect on the Company would have been immaterial.
 
 
 B-16
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
 
 13.           FINANCIAL RISK MANAGEMENT(Cont’d)
 
 (e)      Capital management
 
 The Company’sobjectives in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued share capital, contributed surplus, accumulated comprehensive income and accumulated deficit.
 
 The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. As at December 31, 2012 and December 31 2011, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements. The Companyhas sufficient funds to meet its current operating and exploration and development obligations.
 
 (f)      Fair value
 
 The carrying value of the Company’s financial assets and liabilities approximate their fair value.
 
  14.
TAXATION
  (a)      Deferred income tax liability
   The tax effects of temporary differences between amounts recorded in the Company’s accounts and the corresponding amounts as computed for income tax purposes gives rise to deferred tax assets (liabilities) as follows:
 
 December 31, 2012


December 31, 2011Tax loss carry forwards

$
3,193,230


$
1,654,560Financing costs


1,980,289



735,534Other


434,132



(39,461
)Mineral interests


(15,208,561
)


(3,884,105
)Deferred income tax liability

$
(9,600,910
)

$
(1,533,472
)
 
 The Company has tax losses in Canada of approximately $12,640,000 (2011 - $6,618,000) expiring in various amounts from 2030 to 2032.  The Company also has investment tax credits totaling approximately $5,841,000 (2011 - $1,790,000).
 
  (b)      Income tax expense
  The Company’s tax expense is comprised of the following:
 Year ended

December 31, 2012


Year ended

December 31, 2011Current tax expense

$
-


$
-Deferred tax expense


2,866,652



165,057Deferred income tax expense

$
2,866,652


$
165,057
 
 B-17
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2012 and 2011
 (Expressed in Canadian Dollars)
  14.
TAXATION(Cont’d)
 
 The provision for income taxes differs from the amount calculated using the Canadian federal and provincial statutory income tax rates of 25% (2011 – 26.5%) as follows:
  Year ended

December 31, 2012


Year ended

December 31, 2011Expected tax recovery

$
(3,094,093
)

$
(4,559,766
)Share-based compensation and other items


1,992,495



4,087,843Flow-through shares


10,956,250



3,770,375Flow-through share premium


(6,988,000
)


(2,293,500
)Recognition of previously unrecognized tax assets


-



(839,895
)Income tax expense

$
2,866,652


$
165,057
 
  15.
SUBSEQUENT EVENT
 
 On February 15, 2013, the Company closed a private placement of 361,300 Investment Tax Credit flow-through common shares at a price of $13.84 per flow-through share and 1,287,250 Canadian Exploration Expense flow-through common shares at a price of $12.43 per flow-through share for aggregate proceeds of $21,000,910.  After deducting share issuance costs of $1,365,058, net proceeds were $19,635,852.






B-18









APPENDIX C
  MANAGEMENT’S DISCUSSION AND ANALYSIS

















































PRETIUM RESOURCES INC.
 MANAGEMENT’S DISCUSSION AND ANALYSIS
 FOR THE YEAR ENDED DECEMBER 31, 2012
 
 
 This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated financial statements of Pretium Resources Inc. (“Pretivm”, “we” or “us”) for the year ended December 31, 2012 as publicly filed on the System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com. All dollar amounts are expressed in Canadian Dollars unless otherwise specified.
 
 We report in accordance with International Financial Reporting Standards (“IFRS”). This MD&A is prepared as of March 5, 2013 and includes certain statements that may be deemed “forward-looking statements”.  We direct investors to the section “Risks and Uncertainties” and “Statement Regarding Forward-Looking Information” included within this MD&A.
 
 Additional information relating to us, including our Annual Information Form and Form 40-F, is available free of charge on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC website at www.sec.gov.
 
 Our Business
 
 We were incorporated on October 22, 2010 under the laws of the Province of British Columbia for the acquisition, exploration and development of precious metal resource properties in the Americas.  Our initial projects are the Brucejack Project and the Snowfield Project (together, the “Projects”), which are advanced stage exploration projects located in northwestern British Columbia.  We intend to continue exploration of the Projects with a focus on expanding and increasing the quality of resources and advancing engineering studies on the higher grade underground opportunity at the Brucejack Project.
  4th Quarter Highlights and Significant Events
  ·
On October 25, 2012, we announced, among other things, that the feasibility study for the underground mine at our high-grade gold Brucejack Project in northern British Columbia is being advanced with an operating rate of 2,700 tonnes per day and that the feasibility study for the Brucejack Project is expected to be completed in the second quarter of 2013.
  ·
On November 20, 2012, we announced an updated Valley of the Kings Mineral Resource estimate for our wholly-owned Brucejack project, completed by Snowden Mining Industry Consultants (“Snowden”) independent Qualified Persons.   High-grade gold resources in the Valley of the Kings (5.0 g/t gold-equivalent cut-off) now total:
  ·
8.5 million ounces of gold in the Indicated Mineral Resource category (16.1 million tonnes grading 16.4 grams of gold per tonne); and
  ·
2.9 million ounces of gold in the Inferred Mineral Resource category (5.4 million tonnes grading 17.0 grams of gold per tonne)
  
 C-1
 
 4th Quarter Highlights and Significant Events - continued
  ·
On December 11, 2012, we reported that we had been selected to receive the Bill Dennis Award from the Prospectors & Developers Association of Canada (“PDAC”) for advancing the Valley of the Kings at our high-grade gold Brucejack Project. The 2013 PDAC Bill Dennis Award, which recognizes a Canadian discovery or prospecting success, was awarded to Pretivm at the PDAC Annual Awards banquet on March 4, 2013 during the PDAC convention in Toronto.
  ·
During the fourth quarter, we completed thewidening of a portion of the historical West Zone underground workings to five-by-five meters and commenced excavation of the ramp to access the Valley of the Kings underground from the historical West Zone underground workings (see our news release of January 9, 2013).
  ·
On February 15, 2013, we announced the closing of a private placement, announced on January 24, 2013, with a syndicate of underwriters for 361,300 Investment Tax Credit flow-through common shares of Pretivm at a price of $13.84 per share and 1,287,250 Canadian Exploration Expense flow-through common shares of Pretivm at a price of $12.43 per share for aggregate gross proceeds of $21 million.
  Operations
  Brucejack Project
  The Brucejack Project is located approximately 950 km northwest of Vancouver, British Columbia and 65 km north-northwest of Stewart, British Columbia and is comprised of six mineral claims totaling 3,199.28 hectares in area.  The Brucejack Project forms part of our contiguous claims package that comprises over 90,000 hectares.
  2012 Exploration Programs
  Surface Exploration Program
  In late February 2012, we began mobilizing drills to our Brucejack Project to commence the 2012 Brucejack Surface Exploration Program.  By the end of the first quarter of 2012, six drills had been mobilized to site with a seventh drill mobilized to site in April 2012.  Continued drilling success at the Valley of the Kings resulted in two additional drills mobilized to site in August 2012.  In early-October 2012, we completed our 2012 exploration drill program with 306 holes completed totaling 105,769 meters of drilling.
  The 2012 Brucejack Surface Exploration Program was focused on definition drilling in the Valley of the Kings as well as testing extensions of the Valley of the Kings and other high-grade zones.  With our success in defining and extending the strike length of the Valley of the Kings throughout the 2012 drill program, the Valley of the Kings continued to be the center of our exploration efforts with 99,632 meters of the 105,769 meter 2012 drill program drilled in the Valley of the Kings.  The other high-grade zones remain to be tested and will be the focus of future exploration programs.
  Drilling over the course of the 2012 Brucejack Surface Exploration Program successfully demonstrated the continuity and projection of high-grade gold mineralization in Brucejack’s
  
 C-2
  Operations - continued
 
 Valley of the Kings.  The Valley of the Kings now extends for over 1,000 meters along strike and remains open to the east and west along strike and at depth.  In addition to nearly doubling the strike length of the Valley of the Kings, the 2012 drill program encountered 852 gold intersections grading greater than 5 grams of gold per tonne, including 41 gold intersections grading greater than 1,000 grams of gold per tonne.
  Underground Exploration Program
  In August 2012, we mobilized an underground contractor to site to initiate our underground exploration program, which was designed to, amongst other things, access the Valley of the Kings deposit underground, excavate a 10,000 tonne underground bulk sample and demonstrate continuity of the high-grade gold mineralization within the gold stockwork corridors. The initial phase of the underground program involved widening a portion of the historical West Zone underground workings to five-by-five meters so that the historical West Zone portal and underground workings can be used for access to the Valley of the Kings with production sized mining equipment.  In late December 2012, the widening of the historical West Zone underground workings was completed and excavation commenced of the access ramp from the West Zone workings to the Valley of the Kings.
  The access ramp to the Valley of the Kings from the West Zone is planned to total 546 meters in length, and is targeting the 1345 meter level at the 426600 cross-section of the Valley of the Kings.  Approximately 250 meters of the access ramp have been excavated since the turn towards the Valley of the Kings from the West Zone was initiated late last year.  The ramp is expected to access the Valley of the Kings in the second quarter of 2013.
  In addition to targeting an area of mineralization for the bulk sample, the current ramp alignment will allow acceleration of production development as it will be used to provide initial access to the Valley of the Kings and multiple headings for excavation of the planned production declines.  A channel sampling program along the ramp will be conducted as work progresses, as the area is untested.  Further underground sampling and drilling is planned after Valley of the Kings has been reached.
  Bulk Sample
  Strathcona Mineral Services Ltd. of Toronto has been engaged as the independent Qualified Person to oversee and report on the 10,000-tonne bulk sample from the Valley of the Kings.  Excavation of the bulk sample is scheduled to begin in the second quarter of 2013.  Planning is continuing with Strathcona on the work required to be completed prior to excavating the bulk sample, the procedures for excavating the bulk sample and the sampling protocols.
  
 C-3
 
 
 Operations - continued
 
 Resource Estimate
  On November 20, 2012, we announced an updated high-grade Mineral Resource estimate for the Valley of the Kings (see our news release of November 20, 2012).  The resource estimate, which incorporated all drilling completed to date at the Valley of the Kings, including all drilling from the 2012 exploration program, was completed by Snowden as part of the feasibility study now underway for the Brucejack Project (see the Brucejack Project Mineral Resources Update Technical Report dated November 20, 2012 and filed on SEDAR on November 22, 2012).  High-grade gold resources in the Valley of the Kings (5.0 g/t gold-equivalent cut-off) now total:
  ·
8.5 million ounces of gold in the Indicated Mineral Resource category (16.1 million tonnes grading 16.4 grams of gold per tonne); and
  ·
2.9 million ounces of gold in the Inferred Mineral Resource category (5.4 million tonnes grading 17.0 grams of gold per tonne)
  Preliminary Economic Assessment
  On February 23, 2012, we announced positive results from a National Instrument 43-101 compliant Preliminary Economic Assessment (“PEA”) for the high-grade gold and silver resources identified at our Brucejack Project (see news release dated February 23, 2012), which was based on our Mineral Resource estimate announced on November 28, 2011 (see news release dated November 28, 2011).  The PEA was filed on www.sedar.com on February 22, 2012.  The Mineral Resource estimate announced on November 28, 2011 is no longer current and, accordingly, the preliminary economic assessment is also no longer current.
  Feasibility Study and Resource Model
  We retained Wardrop, a Tetra Tech Company, to prepare a feasibility study on the high-grade gold opportunity at Brucejack.  As part of the feasibility study, we also retained Snowden to prepare the high-grade Mineral Resource estimate for the high-grade gold and silver resources identified to date in the Valley of the Kings.
  On November 20, 2012, we announced an updated high-grade Mineral Resource estimate for the Valley of the Kings prepared by Snowden, which incorporated all drilling completed to date at the Valley of the Kings, including all drilling from the 2012 exploration program.  Mine planning is now well underway based on the November 20, 2012 Mineral Resource estimate.
  We have decided to advance the feasibility study with an operating rate of 2,700 tonnes per day, with long-hole stoping and cemented paste backfill chosen for the mining method.  Stopes will be mined using a combination of longitudinal and transverse mining, depending on zone width and orientation. Cemented paste tailings will be prepared in a paste plant located on surface near the mill and then pumped underground for distribution to the stopes.
  The initial studies examining the economics of the high-grade gold and silver resources at the Brucejack Project (see news releases dated June 2, 2011 and February 22, 2012) contemplated the production of gravity and flotation concentrates, which were then refined to produce gold-silver doré.  In advancing the feasibility study, a trade-off study has been completed examining the benefits of selling the flotation concentrate to third parties rather than refining the concentrate to produce doré on site. Based on the results of the trade-off study, we have decided to advance the feasibility study on the basis that the flotation concentrate will be sold to third parties rather than refined to produce doré on site.
  
 C-4
 
 Operations - continued
 
 As part of the ongoing feasibility study, we have completed locked cycle metallurgical testwork.  The average locked cycle recoveries for combined gravity and flotation for the Valley of the Kings composites were 98.3% for gold and 92.5% for silver.
  The feasibility study for the Brucejack Project is expected to be completed in the second quarter of 2013.
  Project Permitting
  We submitted the project description for the Brucejack Project to the British Columbia Environmental Assessment Office and the Canadian Environmental Assessment Agency.  The filings initiated the permitting process for the proposed 2,700 tonnes per day high-grade underground gold mine at the Brucejack Project.
  Snowfield Project
  The Snowfield Project borders the Brucejack Project to the north and is comprised of one mineral claim with an area of 1,267.43 hectares.  We have not carried out any activities at the Snowfield Project since we acquired it in December 2010, other than environmental studies in conjunction with the Brucejack Project.  During 2011, we focused on completing an updated mineral resource estimate for the project (see news release dated February 23, 2011), examining alternatives for advancing the project and negotiating cooperation agreements with Seabridge Gold Inc. (“Seabridge”) (see news release dated May 9, 2011).
  Joint Snowfield/ KSM Engineering Studies
  We have entered into a confidentiality and cooperation agreement with Seabridge that, amongst other things, provides for the completion of an engineering study examining the economics of combining our Snowfield Project and Seabridge’s KSM Project as a single operation.  The internal engineering study was finalized during the first quarter of 2012 and indicates that developing the KSM and Snowfield deposits together could produce better economics than developing KSM as a stand-alone project, although no property acquisition costs or allocation of initial KSM capital have been considered.
  We have also entered into a mutual access agreement with Seabridge that (a) gives Seabridge access to our Snowfield Project and us access to Seabridge’s KSM Project for the stripping of overburden and (b) provides us with road access to the Brucejack and Snowfield Projects over Seabridge’s KSM Project lands.
 
 Snowfield represents a longer term gold opportunity for our shareholders.  We do not have to expend further funds on the project until 2023, and we will be opportunistic to realize value for Snowfield as we focus our corporate resources on advancing the high-grade opportunity at our Brucejack Project.
 
 C-5
 Operations - continued
 
 Additional Claims
  Our contiguous claims, including the claims comprising the Brucejack and Snowfield Projects, total over 90,000 hectares (222,000 acres), providing further exploration potential to supplement the value we are creating at Brucejack.  A claim boundary map is available on our website.
  Selected Financial Information
 
 Basis of Presentation
 
 The following financial data has been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretation Committee (“IFRIC”) and are expressed in Canadian dollars unless otherwise stated. We adopted IFRS since inception. Our significant accounting policies are outlined in Note 3 in the notes to our audited consolidated financial statements for the year ended December 31, 2012. We have chosen to capitalize all exploration and evaluation costs relating to the Projects. We have followed these accounting policies consistently throughout the year.
 
 Results of Operations
 
 Our operations and business are not driven by seasonal trends, but rather the achievement of project milestones such as the achievement of various technical, environmental, socio-economic and legal objectives, including obtaining the necessary permits, completion of a final feasibility study, preparation of engineering designs, as well as receipt of financings to fund these objectives.
 
 We expect that the expenditures will be consistent in future periods, other than bonuses which are determined annually by the Board of Directors, subject to any material changes in exploration and development activities.
 
 Selected Financial Information
 
 Annual information
 
 Selected consolidated annual financial information for the years ended December 31, 2012 and 2011 are as follows (in $000’s):
 
 2012


2011


2010Total revenue

$
Nil


$



$
NilLoss per share – basic and diluted

$
0.17


$
0.20


$
1.25Loss and comprehensive loss

$
15,243


$
17,372


$
14,130Total assets

$
647,472


$
518,030


$
499,272Long-term liabilities

$
10,780


$
2,108


$
NilCash dividends

$
Nil


$
Nil


$
NilCash and cash equivalents

$
28,992


$
16,447


$
48,534Mineral interests

$
596,159


$
490,762


$
450,000
   
 C-6
 Selected Financial Information - continued
 
 Quarterly information
 
 Selected consolidated financial information for this quarter and the preceding eight quarters is as follows (in $000’s):
 
 2012

Q4



2012

Q3



2012

Q2



2012

Q1



2011

Q4



2011

Q3



2011

Q2



2011

Q1Total revenue

Nil


Nil


Nil


Nil


Nil


Nil


Nil


NilLoss per share – basic and diluted

$
0.05


$
0.03


$
0.04


$
0.05


$
0.07


$
0.01


$
0.04


$
0.08Loss and comprehensive. Loss

$
4,095


$
3,213


$
3,437


$
4,498


$
7,192


$
361


$
3,742


$
6,076Total assets

$
647,472


$
638,810


$
618,965


$
542,001


$
518,030


$
514,104


$
500,529


$
498,381Long-term liabilities

$
10,780


$
9,586


$
6,163


$
4,570


$
2,108


$
400


$
Nil


$
NilCash dividends

$
Nil


$
Nil


$
Nil


$
Nil


$
Nil


$
Nil


$
Nil


$
NilCash and cash equivalents

$
28,992


$
52,859


$
73,868


$
25,710


$
16,447


$
31,793


$
35,947


$
44,138Mineral interests

$
596,159


$
565,522


$
531,924


$
507,364


$
490,762


$
476,769


$
460,036


$
451,691
 
 Loss before taxes for the year ended December 31, 2012 was $12,376,372 compared to $17,206,664 as at December 31, 2011.  The decrease is largely attributed to the decrease in stock option expense to $7,106,725 in 2012 compared to $12,558,810 in 2011 which is affected by the reduced number of options granted in 2012 and by the timing of stock option grants valued by the Black Scholes model.  We hire individuals with the required skills to advance our business and stock options were granted to these employees and consultants as part of their overall compensation.  Depending on the nature of the awarded recipient’s role, we expense or capitalize to mineral interests the fair value of these stock option issuances over the vesting period.  Salaries expense for the year ended December 31, 2012 was $2,034,312 compared to $2,791,963 for the year ended December 31, 2011.  The decrease relates primarily to the decrease in the bonus accrued to the Chief Executive Officer under his management agreement.  Total bonuses paid or accrued in the fourth quarter of 2012 was $1,640,337 ($781,691 was expensed in salaries and $858,646 was capitalized in mineral interests) and was inclusive of $455,691 accrued to the Chief Executive Officer under his management agreement.  During the fourth quarter of 2011, total bonuses paid or accrued was $2,180,000 ($1,825,000 was expense in salaries and $355,000 was capitalized to mineral interests) and was inclusive of $1,505,650 accrued to the Chief Executive Officer.
 
 Investor relations and shareholder communication costs for the year ended December 31, 2012 were $917,160 and remained consistent with the costs incurred for the year ended December 31, 2011 of $876,926.  Investor relations and shareholder communication costs were mainly due to marketing and communication activities conducted by the Company to increase the awareness of the Company within the investment community.
         C-7
  Selected Financial Information - continued
  During the year ended December 31, 2012, listing fees were $763,784 compared to $186,160 for the year ended December 31, 2011.  This was due primarily to our listing on the New York Stock Exchange in the first quarter of 2012.
 
 As the Project advances, our overhead also increases.  As such, general and administrative expenses totaled $775,731 for the year ended December 31, 2012 compared to $429,059 for the year ended December 31, 2011 as we have staffed up for development and permitting.  Much of the increase is due to employee set up costs, as the number of individuals working for us has increased significantly, as well as information technology costs.
 
 On February 17, 2012, we closed a private placement of 1,250,000 flow-through common shares at a price of $18.50 per flow-through share for aggregate gross proceeds of $23,125,000.  After deducting share issuance costs of $941,668, net proceeds were $22,183,332.
 
 On March 19, 2012, we filed a final short form base shelf prospectus that allowed for an offering of up to an aggregate principal amount of $180 million of securities, which included up to $36 million in common shares owned by Silver Standard that could have been offered by way of a secondary offering under the prospectus.
 
 On May 9, 2012, we completed a prospectus offering of 5,554,500 common shares at a price of $14.50 per share for aggregate gross proceeds of $80,540,250. After deducting share issuance costs of $4,391,916, net proceeds were $76,148,334.
 
 On August 24, 2012, we closed a private placement of 1,150,000 flow-through common shares at a price of $18.00 per flow-through share for aggregate gross proceeds of $20,700,000.  After deducting share issuance costs of $1,534,706, net proceeds were $19,165,294.
 
 The gross proceeds of the Offerings were used to accelerate and expand the exploration program at our Brucejack Project. In carrying out exploration at our Brucejack Project, the gross proceeds of the flow-through offering were to be used during the 2012 exploration program to incur eligible Canadian Exploration Expenses (“CEE”) that qualify as “flow through mining expenditures”, as defined in subsection 127(9) of the Income Tax Act (Canada), and “BC flow-through mining expenditures”, as defined in the Income Tax Act (British Columbia), (the “Qualifying Expenditures”), which were required to be renounced to the subscribers with an effective date no later than December 31, 2012. The gross proceeds of the Offering were (a) used to incur Qualifying Expenditures on our Brucejack Project during the year ended December 31, 2012 and (b) renounced to the subscribers with an effective date of December 31, 2012. A feasibility study on the high-grade opportunity at our Brucejack Project has been initiated and is expected to be completed in the second quarter of 2013.
 
 February 2012 Flow-Through Offering
Use of Proceeds

Amount of ProceedsDisclosed February 17, 2012
Brucejack Project

$
23,125,000Qualifying ExpendituresActual to December 31, 2012
Brucejack Project

$
23,125,000Qualifying ExpendituresVariance
Nil

Nil
   
 C-8
 
  Selected Financial Information - continued
 August 2012 Flow-Through Offering
Use of Proceeds

Amount of ProceedsDisclosed August 24, 2012
Brucejack Project

$
20,700,000Qualifying ExpendituresActual to December 31, 2012
Brucejack Project

$
20,700,000Qualifying ExpendituresVariance
Nil

Nil
 
 Liquidity and Capital Resources
 
 Our cash and cash equivalents as at December 31, 2012 totaled $28,991,606 increasing $12,544,383 from $16,447,223 at December 31, 2011. To date, our source of funding has been the issuance of equity securities for cash.
 
 Our working capital as at December 31, 2012 was $30,065,691 compared to $18,698,983 as at December 31, 2011. Working capital items other than cash and cash equivalents consisted of receivables of $16,229,242, comprised of $3,955,242 of Harmonized Sales Tax refunds ($3,025,889 of which has subsequently been received) and $12,274,000 accrued for Mineral Exploration Tax Credits receivable from the Government of Canada, deposits and prepaid expenses of $282,277, accounts payable and accrued liabilities of $15,037,434 and a property payment due of $400,000. The increase in accounts payable and accrued liabilities is attributable to the heightened exploration activity with the Brucejack project over the prior year.
 
 During the year, we completed two private placements of flow-through shares.  The first private placement was for 1,250,000 flow-through common shares at a price of $18.50 per share for aggregate gross proceeds of $23,125,000. The second private placement was for 1,150,000 flow-through common shares at a price of $18.00 per share for aggregate gross proceeds of $20,700,000.  The Company also raised $80,540,250 by the issuance of 5,554,500 common shares at $14.50 under a prospectus. Subsequent to year end, we completed a private placement of 361,300 Investment Tax Credit flow-through shares at a price of $13.84 per share and 1,287,250 Canadian Exploration Expense flow-through shares at a price of $12.43 per share for aggregate gross proceeds of $21,000,910.  With the current planned expenditures on our Brucejack Project, we believe we have sufficient working capital to fund our planned activities through completion of the feasibility study and the extraction of the bulk sample as we advance the Valley of the Kings and West Zone to production.
 
 Cash used in investing activities in the year ended December 31, 2012 was $99,540,783, which was incurred mainly in respect of exploration activities at the Projects described under Operations above in the amount of $95,880,953.  Exploration activities consisted primarily of $22,214,796 in road and bridge infrastructure, $17,449,255 for fuel, equipment rental and transportation, $14,931,851 in drilling costs, and $8,472,876 in feasibility study costs. With the completion of the exploration road, transportation and fuel costs are expected to drop significantly as helicopter support has been replaced with ground transport. During the previous year, the Company had entered into a purchase agreement to acquire certain mineral claims adjacent to the Company’s claims that include the Brucejack and Snowfield Projects with a payment of $150,000 paid during 2011 and another $200,000 paid on September 28, 2012 and $400,000 payable on September 28, 2013.  Other investing activities included $2,786,674 to acquire exploration machinery.
 
 
 C-9
 
 Liquidity and Capital Resources - continued
 
 Development of any of our mineral properties will require additional equity and possibly debt financing. As we are an exploration stage company, we do not have revenues from operations and, except for interest income from our cash and cash equivalents, we rely on equity funding for our continuing financial liquidity. Our access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
 
 Commitments, Contingencies and Off-Balance Sheet Arrangements
 
 We have no material long term debt, capital lease obligations, operating leases or any other long term obligations, other than payments related to the acquisition of certain mineral claims and a commitment for office lease and operating costs that require minimum payments.
 
 Related Party Transactions
 
 Our acquisition of the Projects from Silver Standard and the completion of the subsequent financings resulted in Silver Standard owning 20.0% of our issued shares at December 31, 2012, and 19.7% subsequent to year-end after the flow through share offering.
 
 We have entered into employment agreements with each of our President and CEO (the (“CEO”), Chief Development Officer and Vice President (the “CDO”) and Chief Exploration Officer and Vice President (the “CExO”).  Under the employment agreements: our CEO receives a base salary of $400,000 per year, benefits and an annual performance bonus of 0.25% of the annual increase in our market capitalization, provided the increase in market capitalization is 10% or more; and our CDO and CExO each receive a base salary of $300,000 per year, benefits and an annual bonus determined at the discretion of our Board.  Our CEO, CDO and CExO are also entitled, on termination without cause, to twenty-four months’ salary and two years’ annual performance bonus as a termination benefit.
 
 During the year the CEO’s performance bonus was $455,691 and other officers received a total of $500,000.
 
 Critical Accounting Estimates
 
 Our significant accounting policies are presented in Note 3 to the consolidated financial statements for the year ended December 31, 2012. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which an estimate is revised and future periods if the revision affects both current and future periods.
 
 
 C-10
 
 Critical Accounting Estimates - continued
 
 Significant assumptions about the future and other sources of estimation uncertainty at the financial position reporting date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made include, but are not limited to, the following:
 
 i)
the carrying value of the investment in the Projects and the recoverability of the carrying value;
 ii)
inputs used in measuring the decommissioning and restoration provision.
 
 1) Mineral resources and reserves, and the carrying values of our investment in the Projects
 
 Mineral resources and reserves are estimated by professional geologists and engineers in accordance with recognized industry, professional and regulatory standards. These estimates require inputs such as future metals prices, future operating costs, and various technical geological, engineering, and construction parameters. Changes in any of these inputs could cause a significant change in the resources and reserves estimates which in turn could have a material effect on the carrying value of our investment in the Projects.
 
 2) Impairment analysis of assets
 
 At each financial reporting date, the carrying amounts of our assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
 
 Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective assets.
 
 Changes in any of the assumptions used to determine impairment testing could materially affect the results of the analysis.
 
 At December 31, 2012, we reviewed the carrying value of our assets and determined that there were no indicators of impairment.
   C-11
   Critical Accounting Estimates - continued
 
 3) Decommissioning liabilities
 
 An obligation to incur decommissioning and environmental costs arises when environmental disturbance is caused by the exploration or development of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalized at the start of each project to the carrying amount of the asset, along with a corresponding liability as soon as the obligation to incur such costs arises. The timing of the actual decommissioning expenditure is dependent on a number of factors such as the life and nature of the asset, the operating license conditions, and when applicable, the environment in which the mine operates.  Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value.
 
 Our operations may in the future be, affected from time to time in varying degree by changes in environmental regulations or changes in estimates used in determining decommissioning obligations. Both the likelihood of new regulations or degree of changes in estimates and their overall effect upon us are not predictable.
 
 At December 31, 2012, we had recognized an amount for decommissioning obligations.  However, the amount is immaterial as the disturbance to date is minimal.
 
 Changes in Accounting Policies
 
 New Accounting Standards and Recent Pronouncements
 
 The following standard is effective for annual years beginning on or after January 1, 2013 with earlier application permitted.  We have assessed the impact of this standard and have determined that it would not have a material impact on our statements.
  o
IFRS 10, Consolidated Financial Statements
 
 Financial Instruments and Other Instruments
 
 Financial assets:
 
 We have the following financial assets: cash and cash equivalents and amounts receivable.
 
 Such financial assets have fixed or determinable payments that are not quoted in an active market.  Accordingly, they are measured at amortized cost using the effective interest method less any impairment losses.
 
 Financial liabilities:
 
 We have the following financial liabilities: amounts payable and other liabilities.
 
 Such financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
   C-12
   Financial Instruments and Other Instruments - continued
  Financial Risk Management
 
 We are exposed in varying degrees to a variety of financial instrument related risks.  Our Board approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
 
 Credit Risk
 
 Credit risk is our risk of potential loss if the counterparty to a financial instrument fails to meet its contractual obligations.  Our credit risk is primarily attributable to our liquid financial assets including cash and cash equivalents and amounts receivable. We limit our exposure to credit risk on financial assets by investing our cash and cash equivalents with high-credit quality financial institutions. Amounts receivable consist primarily of Harmonized Sales Tax (HST) and BC Mineral Exploration Tax Credits receivable from the Government of Canada.
 
 The carrying value of our cash and cash equivalents and amounts receivable represent our maximum exposure to credit risk.
 
 Liquidity Risk
 
 Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due.  We ensure that there is sufficient capital in order to meet short term business requirements, after taking into account cash flows from operations and our holdings of cash and cash equivalents. Our cash and cash equivalents are currently invested in business and savings accounts with high-credit quality financial institutions which are available on demand by us for our programs.
 
 Interest Rate Risk
 
 We are subject to interest rate risk with respect to our investments in cash and cash equivalents. Our current policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash and cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates when cash and cash equivalents mature impact interest income earned.
 
 Capital Management
 
 Our objectives in the managing of the liquidity and capital are to safeguard our ability to continue as a going concern and provide financial capacity to meet our strategic objectives. Our capital structure consists of equity attributable to common shareholders, comprised of issued share capital, contributed surplus, accumulated comprehensive loss and accumulated deficit.
 We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, we may attempt to issue new shares, issue new debt, and acquire or dispose of assets to facilitate the management of our capital requirements. We prepare annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. As at December 31, 2012, we do not have any long-term debt and are not subject to any externally imposed capital requirements. We have sufficient funds to meet our current operating and exploration and development obligations.
   C-13
 
 
 Outstanding Share Data
 
 At March 5, 2013, we had the following common shares and share purchase options outstanding.
 
 Number

of securities


Exercise price

($)


Weighted Average Remaining Life

(years)Common shares


96,476,186Share purchase options


8,526,950


$
6.00 - $17.46



3.58Fully diluted


105,003,136
 
 Risks and Uncertainties
 
 Natural resources exploration and development involves a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include, without limitation, the risks discussed elsewhere in this MD&A and those identified in the prospectus supplement to the short form base shelf prospectus dated March 19, 2012 filed on the SEDAR website at www.sedar.com, which are incorporated by reference in this MD&A.
 
 Internal Control over Financial Reporting and Disclosure Controls and Procedures
 
 Management has established disclosure controls and procedures to ensure that information disclosed in this MD&A and the related financial statements filed or submitted by us under U.S. and Canadian securities legislation is properly recorded, processed, summarized and reported to our Board and Audit Committee. Management has evaluated the effectiveness of disclosure controls and procedures as at December 31, 2012 and has concluded, based on its evaluation, that these controls and procedures were effective.
 
 Management is also responsible for establishing and maintaining adequate internal controls over financial reporting using criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Based on this assessment, management has concluded that as at December 31, 2012, internal control over financial reporting was effective.
 
 The effectiveness of the Company’s internal control over financial reporting has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm that has expressed its opinion in its report included with our annual consolidated financial statements.
 
 
  C-14
 
 
 Statement Regarding Forward-Looking Information
 
 In connection with the forward-looking statements contained in this MD&A, we have made certain assumptions about our business, including about our planned exploration and development activities; the accuracy of our mineral resource estimates; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Project; timing and receipt of approvals, consents and permits under applicable legislation; and the adequacy of our financial resources.  We have also assumed that no significant events occur outside of our normal course of business. Although we believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this MD&A, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.
 
 This MD&A contains ‘‘forward-looking information’’ and ‘‘forward looking statements’’ within the meaning of applicable Canadian and United States securities legislation. Forward-looking information may include, but is not limited to, information with respect to our planned exploration and development activities, the adequacy of our financial resources, the estimation of mineral resources, realization of mineral resource estimates, timing of development of the Brucejack Project, costs and timing of future exploration, results of future exploration and drilling, production and processing estimates, capital and operating cost estimates, timelines and similar statements relating to the economic viability of the Brucejack Project, timing and receipt of approvals, consents and permits under applicable legislation, our executive compensation approach and practice, and adequacy of financial resources. Wherever possible, words such as ‘‘plans’’, ‘‘expects’’, ‘‘projects’’, ‘‘assumes’’, ‘‘budget’’, ‘‘strategy’’, ‘‘scheduled’’, ‘‘estimates’’, ‘‘forecasts’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘intends’’ and similar expressions or statements that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’, ‘‘might’’ or ‘‘will’’ be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking statements and information.
 
 Statements concerning mineral resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking information, including, without limitation, risks related to:
 
 ·
the exploration, development and operation of a mine or mine property, including the potential for undisclosed liabilities on our mineral projects;
  ·
the fact that we are a relatively new company with no mineral properties in production or development and no history of production or revenue;
  ·
development of our Brucejack Project;
    C-15
  Statement Regarding Forward-Looking Information - continued
  ·
our ability to obtain adequate financing for our planned exploration and development activities and to complete further exploration programs;
  ·
dependency on our Brucejack Project for our future operating revenue;
  ·
our mineral resource estimates, including accuracy thereof and our ability to upgrade such mineral resource estimates and establish mineral reserve estimates;
  ·
uncertainties relating to the interpretation of drill results and the geology, grade and continuity of our mineral deposits;
  ·
commodity price fluctuations, including gold price volatility;
  ·
market events and general economic conditions;
  ·
governmental regulations, including environmental regulations;
  ·
delay in obtaining or failure to obtain required permits, or non-compliance with permits that are obtained;
  ·
increased costs and restrictions on operations due to compliance with environmental laws and regulations;
  ·
uncertainty regarding unsettled First Nations rights and title in British Columbia;
  ·
land reclamation requirements;
  ·
uncertainties related to title to our mineral properties and surface rights;
  ·
currency fluctuations;
  ·
increased costs affecting the mining industry;
  ·
increased competition in the mining industry for properties, qualified personnel and management;
  ·
our ability to attract and retain qualified management;
  ·
some of our directors’ and officers’ involvement with other natural resource companies;
  ·
potential inability to attract development partners or our ability to identify attractive acquisitions;
  ·
Silver Standard’s share ownership, ability to influence our governance and possible market overhang; and
  ·
uncertainty as to the outcome of potential legal proceedings.
  This list is not exhaustive of the factors that may affect any of our forward-looking information. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking information involves statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in the prospectus supplement to the short form base shelf prospectus dated March 19, 2012 filed on the SEDAR website at www.sedar.com. Our forward-looking information is based on the beliefs, expectations and opinions of management on the date the statements are made and we do not assume any obligation to update forward looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward looking information.
  C-16