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| INDEX                                       |   |
|---------------------------------------------|--------|
|                                        |   |
| EXECUTIVE SUMMARY                           | 2      |
| FINANCIAL AND OPERATING HIGHLIGHTS          | 3      |
| FINANCIAL HIGHLIGHTS                        | 4      |
| OPERATIONAL HIGHLIGHTS                      | 5      |
| DEVELOPMENT AND EXPLORATION HIGHLIGHTS      | 6      |
| CORPORATE DEVELOPMENTS                      | 7      |
| OUTLOOK FOR 2012                            | 9      |
| BUSINESS OVERVIEW AND STRATEGY              | 11     |
| NEW GOLD’S BUSINESS                   | 11     |
| NEW GOLD’S STRATEGY                   | 14     |
| ABILITY TO EXECUTE ON STRATEGY              | 15     |
| KEY PERFORMANCE DRIVERS                     | 17     |
| ECONOMIC OUTLOOK                            | 20     |
| CORPORATE RESPONSIBILITY                    | 20     |
| FINANCIAL AND OPERATING RESULTS             | 22     |
| SUMMARY OF ANNUAL FINANCIAL RESULTS         | 22     |
| SUMMARY OF QUARTERLY FINANCIAL RESULTS      | 26     |
| REVIEW OF OPERATING MINES                   | 31     |
| DEVELOPMENT AND EXPLORATION REVIEW          | 40     |
| MINERAL RESERVES AND RESOURCES UPDATE       | 44     |
| FINANCIAL CONDITION REVIEW                  | 46     |
| BALANCE SHEET REVIEW                        | 46     |
| LIQUIDITY AND CASH FLOW                     | 49     |
| COMMITMENTS                                 | 50     |
| CONTINGENCIES                               | 50     |
| CONTRACTUAL OBLIGATIONS                     | 51     |
| RELATED PARTY TRANSACTIONS                  | 52     |
| OFF-BALANCE SHEET ARRANGEMENTS              | 52     |
| SUBSEQUENT EVENTS                           | 52     |
| OUTSTANDING SHARES                          | 52     |
| NON-GAAP FINANCIAL PERFORMANCE MEASURES     | 52     |
| ENTERPRISE RISK MANAGEMENT                  | 56     |
| GENERAL RISKS                               | 56     |
| FINANCIAL RISK MANAGEMENT                   | 57     |
| CRITICAL ACCOUNTING POLICIES AND ESTIMATES  | 64     |
| INTERNATIONAL FINANCIAL REPORTING STANDARDS | 72     |
| CONTROLS AND PROCEDURES                     | 79     |
| CAUTIONARY NOTES                            | 81     |

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| FINANCIAL AND OPERATING HIGHLIGHTS                          |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |
|-------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars, except where noted)            |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |
|                                                        |                                                                                                                                                                        |                                                                                                                                                                        | For the three months ended December 31                                                                                                                                      |                                                                                                                                                                        | For the years ended December 31                                                                                                                                             |
|                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        | 2011                                                                                                                                                                        | 2010                                                                                                                                                                        |                                                                                                                                                                        | 2011 | 2010 | 2009 |
| Operating Information:                                      |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |
| Gold (ounces):                                              |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |
|    Produced                                  |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                   100,671                                                         |                   124,445                                                         |                                                                                                                                                                        |                   387,155 |                   382,911 |                   301,773 |
|    Sold                                           |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                      99,612                                        |                   116,964                                                         |                                                                                                                                                                        |                   391,890 |                   369,077 |                   292,407 |
| Silver (ounces):                                            |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |
|    Produced                                       |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                   453,024                                                         |                   700,988                                                         |                                                                                                                                                                        |               1,989,333 |               2,188,235 |               1,496,958 |
|    Sold                                           |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                   440,024                                                         |                   696,161                                                         |                                                                                                                                                                        |               2,007,801 |               2,143,721 |               1,475,317 |
| Copper (thousands of pounds):                               |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |
|    Produced                                       |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                         3,297                       |                         4,236                       |                                                                                                                                                                        |                      12,715 |                      15,340 |                      15,613 |
|    Sold                                           |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                         2,917                       |                         4,709                       |                                                                                                                                                                        |                      15,316 |                      14,050 |                      13,901 |
| Average realized price (1):                                 |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |
|    Gold ($/ounce)                                 |                                                                                                                                                                        |                                                                                                                                                                        |                         1,549                       |                         1,316                       |                                                                                                                                                                        |                         1,460                       |                         1,194 |                             987 |
|    Silver ($/ounce)                               |                                                                                                                                                                        |                                                                                                                                                                        |                         31.26                       |                         26.91                       |                                                                                                                                                                        |                         35.15                       |                         21.40 |                         14.48 |
|    Copper ($/pound)                               |                                                                                                                                                                        |                                                                                                                                                                        |                            3.56      |                            3.89      |                                                                                                                                                                        |                            3.78      |                            3.48 |                            2.54 |
| Total cash costs per gold ounce sold (1)(2)(3)              |                             553 |                             343 |                                                                                                                                                                        |                             446 |                             418 |                             465 |
| Average realized margin (1) ($/ounce)                       |                                                                                                                                                                        |                             996 |                             973 |                                                                                                                                                                        |                         1,014                       |                             776 |                             522 |
| Measured and Indicated Resources, inclusive of Reserves (4) |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |
|    Gold (thousand ounces)                         |                                                                                                                                                                        |                                                                                                                                                                        |                      18,797                                        |                      13,060                                        |                                                                                                                                                                        |                      18,797                                        |                      13,060 |                      13,536 |
|    Silver (thousand ounces)                       |                                                                                                                                                                        |                                                                                                                                                                        |                   115,268                                                         |                      83,514                                        |                                                                                                                                                                        |                   115,268                                                         |                      83,514 |                      84,597 |
|    Copper (million pounds)                        |                                                                                                                                                                        |                                                                                                                                                                        |                         3,946                       |                         3,538                       |                                                                                                                                                                        |                         3,946                       |                         3,538 |                         3,680 |
|                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |   |
| Financial Information (5):                                  |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |
| Revenues                                                    |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                   177,590                                                         |                   189,355                                                         |                                                                                                                                                                        |                   695,939 |                   530,450 |                   323,780 |
| Earnings from mine operations                               |                                                                                                                                                                        |                      75,208                                        |                      83,932                                        |                                                                                                                                                                        |                   315,226                                                         |                   204,303                                                         |                      88,621 |
| Net earnings from continuing operations                     |                                                                                                                                                                        |                      34,998                                        |                      25,557                                        |                                                                                                                                                                        |                   179,028                                                         |                      57,347                                        |                (183,434) |
| Net earnings                                                |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                      34,998                                        |                      25,557                                        |                                                                                                                                                                        |                   179,028 |                      47,461 |                (194,316) |
| Adjusted net earnings(1)                                    |                                                                                                                                                                        |                                                                                                                                                                        |                      42,199                                        |                      57,011                                        |                                                                                                                                                                        |                   187,782                                                         |                   115,723 |                      35,531 |
| Cash generated from operations                              |                                                                                                                                                                        |                      87,161                                        |                   102,412                                                         |                                                                                                                                                                        |                   327,921                                                         |                   228,357                                                         |                      87,271 |
| Net cash generated from continuing operations               |                      65,886                                        |                      88,663                                        |                                                                                                                                                                        |                   229,530                                                         |                   186,502                                                         |                      78,981                                        |
| Capital expenditures                                        |                                                                                                                                                                        |                                                                                                                                                                        |                   158,526                                                         |                      51,468                                        |                                                                                                                                                                        |                   413,620                                                         |                   134,089 |                   111,522 |
| Total assets                                                |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |               3,221,402                                                                               |               2,429,189                                                                               |                                                                                                                                                                        |               3,221,402 |               2,429,189 |               2,488,259 |
| Cash and cash equivalents                                   |                                                                                                                                                                        |                                                                                                                                                                        |                   309,406                                                         |                   490,754                                                         |                                                                                                                                                                        |                   309,406                                                         |                   490,754 |                   262,325 |
| Long-term debt                                              |                                                                                                                                                                        |                                                                                                                                                                        |                   251,664                                                         |                   229,884                                                         |                                                                                                                                                                        |                   251,664                                                         |                   229,884 |                   225,456 |
|                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |   |
| Share Data:                                                 |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |   |   |   |
| Earnings per share from continuing operations:              |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |
|    Basic                                          |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                            0.08      |                            0.07      |                                                                                                                                                                        |                            0.42 |                            0.15 |                         (0.60) |
|    Diluted                                        |                                                                                                                                                                        |                                                                                                                                                                        |                                                                                                                                                                        |                            0.07      |                            0.06      |                                                                                                                                                                        |                            0.40 |                            0.15 |                         (0.60) |
| Adjusted net earnings per basic share (1)                   |                                                                                                                                                                        |                            0.09      |                            0.15      |                                                                                                                                                                        |                            0.44      |                            0.30      |                            0.12 |
| Share price as at December 31 (TSX - Canadian dollars)      |                         10.28                       |                            9.68      |                                                                                                                                                                        |                         10.28                       |                            9.68      |                            3.80      |
| Outstanding shares (basic) at December 31 (millions)        |                             461 |                             399 |                                                                                                                                                                        |                             461 |                             399 |                             389 |

| 1.   | We use certain non-GAAP financial performance measures throughout our MD&A. Total cash costs per gold ounce sold, average realized price, average realized margin, operating margin, adjusted net earnings and adjusted net earnings per share are non-GAAP financial performance measures with no standard meaning under IFRS. For further information and a detailed reconciliation, please refer to the ‘Non-GAAP Performance Measures’ section of this MD&A. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The calculation of total cash costs per gold ounce sold is net of by-product silver and copper revenues. If silver and copper revenues were treated as co-products, co-product total cash costs for the year ended December 31, 2011 would be $618 per ounce of gold (2010 - $541), $14.85 per ounce of silver (2010 - $9.67); and $2.19 per pound of copper (2010 - $2.11).  For the three months ended December 31, 2011, co-product total cash costs  would be $676 per ounce of gold (2010 - $518),  $13.71  per ounce of silver (2010 - $10.56); and $2.19 per pound of copper (2010 - $2.11). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The 2010 comparative cash costs per ounce have been adjusted to be consistent with the 2011 methodology which capitalizes significant property, plant and equipment components in accordance with IFRS. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For a breakdown of Reserves and Resources by category and additional information relating to Reserves and Resources and related key assumptions and parameters, see our Mineral Reserve and Resource Statement in our news release New Gold Announces Record Gold Production in 2011, 25% Increase in Gold Resources per Share and 2012 Guidance with Production Growth at Lower Costs, filed on and dated February 2, 2012 on www.sedar.com. The scientific and technical information in this MD&A has been prepared under the supervision of Mark Petersen, a Qualified Person under National Instrument 43-101 and an employee of the Company. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | The 2011 and 2010 figures have been prepared in accordance with IFRS, while the 2009 figures have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“CGAAP”). Results for 2010 have been restated to comply with IFRS which was adopted January 1, 2010. The 2010 comparatives include results for the Amapari Mine which was presented as a discontinued operation for financial reporting purposes. The 2009 and 2010 figures are presented for comparative purposes only. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | Revenues were $695.9 million for the full year of 2011, up  31% from $530.5 million for 2010. The increase in revenues in the year was a result of the increase in the average realized price of gold sold from $1,194 to $1,460 per ounce, as well as increased gold ounces and copper pounds sold.  Revenues were $177.6 million for the fourth quarter of 2011 compared to $189.4 million in the same period in 2010. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   |  Earnings from mine operations were up 54% from $204.3 million to $315.2 million for the full year 2011.  The increase in earnings from mine operations is attributed primarily to higher realized commodity prices and increased gold production and related sales.  This was partly offset by higher operating costs which were impacted by both input cost pressures and foreign exchange, particularly the strengthening of the Australian dollar.  Earnings from mine operations were $75.2 million in the fourth quarter of 2011 relative to $83.9 million in the same prior year period. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Adjusted net earnings from continuing operations for the full year 2011 of $187.8 million or $0.44 per basic share, which increased from $115.7 million or $0.30basic share in the prior year period.  When adjusted for other gains and losses, net earnings increased  from the prior year, reflecting increased earnings from mine operations.  During the fourth quarter of 2011, adjusted net earnings were $42.2 million or $0.09 per basic share compared to  $57.0 million or  $0.15 per basic share in the same period in 2010. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Cash generated from operations, excluding income taxes paid, increased in the year by  44% to $327.9 million from $228.4 million in 2010. The significant increase in cash flow is a direct result of strong operating performance during the year in combination with higher realized commodity prices. For the fourth quarter of 2011, cash flow was $87.2 million relative to $102.4 million in the same period in 2010. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net cash generated from operations, including income taxes paid, was $229.5 million compared to $186.5 million in 2010. Income taxes paid in 2011 were $98.4 million relative to $41.9 million in the same period in 2010.  A key factor contributing to this increase is that final payments relating to the 2010 tax year of $20.0 million were made in the second quarter of 2011.  Additionally, higher tax installment payments are being made during 2011 reflecting increased earnings.  For the fourth quarter of 2011, income taxes paid were  $21.3 million compared to  $13.7 million for the same period in 2010. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| § | Cash and cash equivalents totaled $309.4 million at December 31, 2011 compared to $490.8 million at December 31, 2010. |
|--------|------------------------------------------------------------------------------------------------------------------------|

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| §   | Gold production increased by 4,244 ounces to 387,155 in 2011, representing the Company’s highest ever annual production. The annual production was within the guidance range of 380,000 to 400,000 ounces.  Production for the quarter was 100,671 ounces compared to 124,445 ounces in the same period in 2010.  Consistent with mine schedule, the Mesquite Mine was in a particularly high grade cycle in the fourth quarter of 2010 causing the higher consolidated production compared to the same period in 2011. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Gold sales were 391,890 ounces during the year 2011, up 6% compared to 369,077 ounces in the same prior year period.  Fourth quarter sales were 99,612 ounces, down 15% from 116,964 ounces in the same period in 2010, resulting from the decreased production from the Mesquite Mine. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Total cash costs per ounce sold, net of by-product sales, were $446 per ounce for the year 2011 relative to $418 per ounce in 2010.  The cash costs were positively impacted by price and volume of by-product revenues.  However, a strengthening of the Australian dollar, in combination with inflationary pressures on cost inputs caused the cash costs per ounce sold to increase slightly.  At  $446 per ounce, New Gold has been able to maintain its costs below the industry averages.  For the fourth quarter of 2011, total cash costs per ounce sold were $553 per ounce relative to  $343 per ounce in the same period in 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Average realized margin for the year 2011 was $1,014 per ounce, up 30% from the prior period average realized margin of $776 per ounce. The average realized margin was $996 per ounce for the fourth quarter of 2011, up from $973 in the same prior year period. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Measured and Indicated Resources (inclusive of Reserves) increased by 44% when compared to 2010. |
|--------------------|--------------------------------------------------------------------------------------------------|

| §   | In August 2011, the Mexican environmental agency approved a new Environmental Impact Statement (“EIS”) for the Cerro San Pedro Mine (“Cerro San Pedro”). The EIS included the land use regulation which officially designated Cerro San Pedro as a mining area which was approved by the local municipality earlier in 2011. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | New Gold closed its acquisition of Richfield Ventures Corp. (“Richfield”) on June 1, 2011. Since then, significant exploration and development advances have been made at the Blackwater project (“Blackwater”).  The construction of a 150 person camp at site has been completed in conjunction with the installation of an all season drill water supply system.  Additionally, the number of drills on site has increased from four in June 2011 to nine at the end of 2011.  A tenth drill has been added following year-end.  As of the date of this MD&A, New Gold also completed exploration participation agreements with the two local First Nations bands. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | New Gold closed its acquisitions of Geo Minerals Ltd. (“Geo Minerals”) and Silver Quest Resources Ltd. (“Silver Quest”) on December 21st and 23rd, 2011, respectively. These acquisitions consolidated New Gold’s ownership to 100% of the Blackwater project and added to New Gold’s already significant landholdings in the area surrounding the current Blackwater mineral resource. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Updated NI 43-101 compliant resource estimate for the Blackwater project reflecting increased indicated and inferred gold resources.  The indicated gold resource is now 164 million tonnes at an average grade of 1.03 grams per tonne containing 5.42 million ounces.  The inferred gold resource is 69 million tonnes at an average grade of 0.84 grams per tonne containing 1.86 million ounces.  The resource has grown substantially since New Gold’s initial June acquisition through a combination of additional drilling and the Silver Quest acquisition. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | New Afton is on schedule for a June 2012 production start with commercial production beginning in August 2012. Once in full production, the 11,000 tonne per day underground block cave mine and concentrator is expected to produce an annual estimated average of 85,000 ounces of gold and 75 million pounds of copper at low operating costs. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Subsequent to year-end, in January 2012, commencement of construction at the El Morro copper-gold project (“El Morro”) was officially approved by Goldcorp’s board of directors.  Pre-construction commenced on February 1, 2012. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 2012 PRODUCTION AND COST GUIDANCE |                 |                                                                                                                                                                                                                                                                                                    |                |
|-----------------------------------|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|
|                              |                 |                                                                                                                                                                                                                                                                                                    |                |   |
|                              | Gold                 | Silver                                                                                                                                                                                                                                                                                                  | Copper              | Total cash cost |
|                              | (thousand of ounces) | (thousand of ounces)                                                                                                                                                                                                                                                                                    | (million of pounds) | per ounce/pound |
| Mesquite                          |  140-150        |                                                  - | -                   |  $710 - $730 |
| Cerro San Pedro                   |  140-150        |  1,900-2,100                                                                                                                                                                                                                                                                                       | -                   |  $250 - $270 |
| Peak Mines                        |  90-100         |                                                  - | 12-14               |  $640 - $6600 |
| New Afton                         |  35-45          |                                                  - | 30-35               |  ($1,200) - ($1,300) |
| Total                             |  405-445        |  1,900-2,100                                                                                                                                                                                                                                                                                       | 42-49               |  $410 - $430 |

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| (1)   | Represents New Gold’s attributable share of Reserves and Resources. |
|-----------------|---------------------------------------------------------------------------|

| (2)   | Proven and Probable Reserves and Measured, Indicated and Inferred Resources above are calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For a breakdown of Reserves and Resources by category and additional information relating to Reserves and Resources and related key assumptions and parameters, see our Mineral Reserve and Resource Statement in our news release “New Gold Announces Record Gold Production in 2011, 25% Increase in Gold Resources per Share and 2012 Guidance with Production Growth at Lower Costs, filed on and dated February 2, 2012 on www.sedar.com. The scientific and technical information in this MD&A has been prepared under the supervision of Mark Petersen, a Qualified Person under National Instrument 43-101 and an employee of the Company. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Disciplined growth |
|--------------------|

| Operational execution |
|-----------------------|

1

| Maintaining a strong financial position |
|-----------------------------------------|

| Enhancing value |
|-----------------|

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| Experienced management team with a proven industry track record |
|-----------------------------------------------------------------|

| Leading mid-tier producer with track record of delivering on expectations |
|---------------------------------------------------------------------------|

| Geographically diverse operations in favourable jurisdictions |
|---------------------------------------------------------------|

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| Pipeline of world-class development projects |
|----------------------------------------------|

| Strong financial performance with a solid balance sheet |
|---------------------------------------------------------|

| Commitment to corporate social responsibility |
|-----------------------------------------------|

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| QUARTERLY FINANCIAL AND OPERATING INFORMATION                          |
|------------------------------------------------------------------------|
| (in thousands of US dollars, except per share amounts and where noted) |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |
|                                                                   | Q4 2011 | Q3 2011 | Q2 2011 | Q1 2011 | Q4 2010 | Q3 2010 | Q2 2010 | Q1 2010 |
| Gold sales (ounces)                                                    |        99,612 |       93,028 |       95,039 |       104,211 |      116,964 |       89,692 |        82,401 |       80,020 |
|                                                                   |   |   |   |   |   |   |   |   |
| Revenues                                                               |     177,590 |      175,501 |      171,635 |       171,213 |     189,355 |       127,116 |      112,359 |      101,620 |
|                                                                   |   |   |   |   |   |   |   |   |
| Net earnings (loss) from continuing operations                         |       34,998 |       40,709 |       78,602 |        24,719 |       25,557 |       44,754 |     (26,006) |        13,042 |
| Per share:                                                             |   |   |   |   |   |   |   |   |
|    Basic                                                     |             0.08 |             0.09 |              0.19 |             0.06 |             0.07 |               0.11 |           (0.07) |             0.03 |
|    Diluted                                                   |             0.07 |             0.09 |              0.16 |             0.06 |             0.06 |               0.11 |           (0.07) |             0.03 |
|                                                                   |   |   |   |   |   |   |   |   |
| Net earnings (loss)                                                    |       34,998 |       40,709 |       78,602 |        24,719 |       25,557 |       44,754 |     (26,006) |        13,042 |
| Per share:                                                             |   |   |   |   |   |   |   |   |
|    Basic                                                     |             0.08 |             0.09 |              0.19 |             0.06 |              0.15 |               0.11 |           (0.07) |             0.03 |
|    Diluted                                                   |             0.07 |             0.09 |              0.16 |             0.06 |              0.15 |               0.11 |           (0.07) |             0.03 |
|                                                                   |   |   |   |   |   |   |   |   |
| Adjusted net earnings (loss)                                           |        42,199 |       49,465 |       49,772 |       47,897 |         57,011 |       29,340 |       96,555 |        17,890 |
| Per share:                                                             |   |   |   |   |   |   |   |   |
|    Basic                                                     |             0.09 |               0.11 |              0.12 |              0.12 |              0.15 |             0.07 |             0.24 |             0.05 |
|    Diluted                                                   |             0.09 |               0.11 |              0.12 |              0.12 |              0.14 |             0.07 |             0.24 |             0.04 |

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| MESQUITE MINE OPERATIONS REVIEW                  |
|--------------------------------------------------|
| (in thousands of US dollars, except where noted) |   |   |   |   |
|                                             |   |   |   |   |   |   |
|                                             | Three months ended December 31 | Years ended December 31 |
|                                             |   | 2011 | 2010 | 2011 | 2010 | 2009 |
|                                             |   |   |   |   |   |   |
| Operating Information:                           |   |   |   |   |   |   |
| Tonnes of ore mined (000's)                      |   |                 3,870 |                 3,301 |               11,733 |               11,327 |               13,084 |
| Tonnes of waste mined (000's)                    |   |                 5,350 |                 8,052 |               34,240 |               35,990 |               40,857 |
| Ratio of waste to ore                            |   |                   1.38 |                   2.44 |                   2.92 |                   3.18 |                   3.12 |
| Tonnes of ore to leach pad (000's)               |   |                 3,870 |                 3,301 |               11,733 |               11,327 |               13,084 |
| Average grade:                                   |   |   |   |   |   |   |
|    Gold (grams/tonne)                  |   |                   0.50 |                   0.94 |                   0.57 |                   0.62 |                   0.51 |
| Gold (ounces):                                   |   |   |   |   |   |   |
|    Produced (2)                        |   |               43,630 |               55,990 |            158,004 |            169,023 |            150,002 |
|    Sold                                |   |               43,717 |               50,393 |            161,214 |            169,571 |            143,509 |
| Average realized price (3):                      |   |   |   |   |   |   |
|    Gold ($/ounce) (4)                  |   |                 1,398 |                 1,234 |                 1,297 |                 1,117 |                    955 |
| Total cash costs per gold ounce sold (3)         |   |  $                691 |  $                518 |  $                645 |  $                575 |  $                596 |
|                                             |   |   |   |   |   |   |
| Financial Information (1):                       |   |   |   |   |   |   |
| Revenues                                         |   |  $           61,119 |  $           62,208 |  $        209,070 |  $        189,361 |  $        136,004 |
| Earnings from mine operations                    |   |  $           21,973 |  $           26,822 |  $           79,656 |  $           61,133 |  $           29,948 |
| Capital expenditures                             |   |  $             9,326 |  $             1,238 |  $           18,544 |  $             9,034 |  $             1,341 |

| 1.   | The 2011 and 2010 figures have been prepared in accordance with IFRS, while the 2009 figures have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“CGAAP”). The 2010 figures are presented for comparative purposes only, and have been restated to comply with IFRS which was adopted January 1, 2010. The 2010 comparative cash costs per ounce have been adjusted to be consistent with the 2011 methodology which capitalizes significant property, plant and equipment components in accordance with IFRS. The 2009 figures are also presented for comparative purposes only, as New Gold acquired the Mesquite operations on May 27, 2009. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Tonnes of ore processed each period does not necessarily correspond to ounces produced during the period, as there is a time delay between placing tonnes on the leach pad and pouring ounces of gold. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | We use certain non-GAAP financial performance measures throughout our MD&A. Total cash costs per gold ounce sold, average realized price, average realized margin, operating margin, adjusted net earnings and adjusted net earnings per share are non-GAAP financial performance measures with no standard meaning under IFRS. For further information and a detailed reconciliation, please refer to the ‘Non-GAAP Performance Measures’ section of this MD&A. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Average realized price per gold ounce for the Mesquite Mine includes realized gains and losses from gold hedge settlements. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------|

----

----

| CERRO SAN PEDRO MINE OPERATIONS REVIEW           |
|--------------------------------------------------|
| (in thousands of US dollars, except where noted) |   |   |   |   |
|                                             |   |   |   |   |   |   |
|                                             | Three months ended December 31 | Years ended December 31 |
|                                             |   | 2011 | 2010 | 2011 | 2010 | 2009 |
|                                             |   |   |   |   |   |   |
| Operating Information:                           |   |   |   |   |   |   |
| Tonnes of ore mined (000's)                      |   |                 4,435 |                 2,952 |              16,763 |              10,790 |              11,899 |
| Tonnes of waste mined (000's)                    |   |                 4,449 |                 5,243 |              16,513 |              16,580 |              16,768 |
| Ratio of waste to ore                            |   |                   1.00 |                   1.78 |                   0.99 |                   1.54 |                   1.41 |
| Tonnes of ore processed (000's)                  |   |                 4,435 |                 2,952 |              16,763 |              10,790 |              11,899 |
| Average grade:                                   |   |   |   |   |   |   |
|    Gold (grams/tonne)                  |   |                   0.43 |                   0.58 |                   0.48 |                   0.62 |                   0.45 |
|    Silver (grams/tonne)                |   |                 25.38 |                 30.66 |                 24.24 |                 37.84 |                 30.68 |
| Gold (ounces):                                   |   |   |   |   |   |   |
|    Produced (2)                        |   |              34,145 |              38,874 |            143,747 |            118,708 |              95,502 |
|    Sold                                |   |              33,284 |              38,666 |            142,985 |            114,713 |              93,312 |
| Silver (ounces):                                 |   |   |   |   |   |   |
|    Produced (2)                        |   |            453,024 |            700,988 |         1,989,333 |         2,188,235 |         1,496,958 |
|    Sold                                |   |            440,024 |            696,161 |         2,007,801 |         2,143,721 |         1,475,317 |
| Average realized price (3):                      |   |   |   |   |   |   |
|    Gold ($/ounce)                      |   |                 1,673 |                 1,373 |                 1,564 |                 1,262 |                    978 |
|    Silver ($/ounce)                    |   |                 31.26 |                 26.91 |                 35.15 |                 21.40 |                 14.48 |
| Total cash costs per gold ounce sold (3)(4)      |   |  $                253 |  $                138 |  $                115 |  $                230 |  $                407 |
|                                             |   |   |   |   |   |   |
| Financial Information (1):                       |   |   |   |   |   |   |
| Revenues                                         |   |  $          69,441 |  $          71,831 |  $        294,271 |  $        190,459 |  $        112,642 |
| Earnings from mine operations                    |   |  $          37,555 |  $          36,155 |  $        172,723 |  $          83,559 |  $          28,124 |
| Capital expenditures                             |   |  $             1,762 |  $             1,855 |  $             7,417 |  $             9,653 |  $             3,164 |

| 1.   | The 2011 and 2010 figures have been prepared in accordance with IFRS, while the 2009 figures have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“CGAAP”). The 2010 figures are presented for comparative purposes only, and have been restated to comply with IFRS which was adopted January 1, 2010. The 2009 figures are also presented for comparative purposes only. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Tonnes of ore processed each period does not necessarily correspond to ounces produced during the period, as there is a time delay between placing tonnes on the leach pad and pouring ounces of gold. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | We use certain non-GAAP financial performance measures throughout our MD&A. Total cash costs per gold ounce sold, average realized price, average realized margin, operating margin, adjusted net earnings and adjusted net earnings per share are non-GAAP financial performance measures with no standard meaning under IFRS. For further information and a detailed reconciliation, please refer to the ‘Non-GAAP Performance Measures’ section of this MD&A. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The calculation of total cash costs per ounce of gold is net of by-product silver revenue.  If the silver revenues were treated as a co-product, average total cash costs at Cerro San Pedro Mine for the year ended December 31, 2011 would be $463 per ounce of gold (2010 - $478) and $10.40 per ounce of silver (2010 - $8.08). For the three months ended December 31, 2011, the average total cash costs at Cerro San Pedro Mine would be $534 per ounce of gold (2010 - $460) and $9.98 per ounce of silver (2010 - $9.01). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

| PEAK MINE OPERATIONS REVIEW                      |
|--------------------------------------------------|
| (in thousands of US dollars, except where noted) |
|                                             |   |   |   |   |   |   |
|                                             | Three months ended December 31 | Years ended December 31 |
|                                             |   | 2011 | 2010 | 2011 | 2010 | 2009 |
|                                             |   |   |   |   |   |   |
| Operating Information:                           |   |   |   |   |   |   |
| Tonnes of ore mined (000's)                      |   |                             191 |                             160 |                             755 |                             740 |                             801 |
| Tonnes of ore processed (000's) (2)              |   |                             215 |                             200 |                             783 |                             775 |                             794 |
| Average grade:                                   |   |   |   |   |   |   |
|    Gold (grams/tonne)                  |   |                            4.12 |                            5.18 |                            3.94 |                            4.23 |                            4.05 |
|    Copper (%)                          |   |                            0.92 |                            1.11 |                            0.93 |                            1.01 |                            1.00 |
| Recovery rate (%):                               |   |   |   |   |   |   |
|    Gold                                |   |                         90.80 |                         89.20 |                         88.80 |                         90.40 |   |
|    Copper                              |   |                         85.10 |                         86.90 |                         82.00 |                         88.80 |   |
| Gold (ounces):                                   |   |   |   |   |   |   |
|    Produced                            |   |                      22,896 |                      29,581 |                      85,404 |                      95,180 |                      93,247 |
|    Sold                                |   |                      22,611 |                      27,905 |                      87,691 |                      84,793 |                      87,812 |
| Copper (thousands of pounds):                    |   |   |   |   |   |   |
|    Produced                            |   |                         3,297 |                         4,236 |                      12,715 |                      15,340 |                      15,613 |
|    Sold                                |   |                         2,917 |                         4,709 |                      15,316 |                      14,050 |                      13,901 |
| Average realized price (3):                      |   |   |   |   |   |   |
|    Gold ($/ounce)                      |   |                         1,656 |                         1,385 |                         1,591 |                         1,257 |                             994 |
|    Copper ($/pound)                    |   |                            3.56 |                            3.89 |                            3.78 |                            3.48 |                            2.54 |
| Total cash costs per gold ounce sold (3)(4)      |   |  $                        726 |  $                        312 |  $                        618 |  $                        361 |  $                        334 |
|                                             |   |   |   |   |   |   |
| Financial Information (1):                       |   |   |   |   |   |   |
| Revenues                                         |   |  $                 47,030 |  $                 55,316 |  $              192,598 |  $              150,630 |  $              116,631 |
| Earnings from mine operations                    |   |  $                 15,680 |  $                 20,955 |  $                 62,847 |  $                 59,611 |  $                 41,811 |
| Capital expenditures                             |   |  $                 15,107 |  $                 11,097 |  $                 50,263 |  $                 29,123 |  $                 28,581 |

| 1.   | The 2011 and 2010 figures have been prepared in accordance with IFRS, while the 2009 figures have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“CGAAP”). The 2010 figures are presented for comparative purposes only, and have been restated to comply with IFRS which was adopted January 1, 2010. The 2009 figures are also presented for comparative purposes only. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Tonnes of ore processed each period does not necessarily correspond to ounces produced during the period, as there is a time delay between placing tonnes on the leach pad and pouring ounces of gold. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | We use certain non-GAAP financial performance measures throughout our MD&A. Total cash costs per gold ounce sold, average realized price, average realized margin, adjusted net earnings and adjusted net earnings per share are non-GAAP financial performance measures with no standard meaning under IFRS. For further information and a detailed reconciliation, please refer to the ‘Non-GAAP Performance Measures’ section of this MD&A. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The calculation of total cash costs per ounce of gold is net of by-product silver revenue.  If the copper revenues were treated as a co-product, average total cash costs at Peak Mines for the year ended December 31, 2011 would be $847 per ounce of gold (2010 - $594) and $2.48 per pound of copper (2010 - $2.05). For the three months ended December 31, 2011, the average total cash costs at Peak Mines would be  $881 per ounce of gold (2010 - $606) and $2.53 per pound of copper (2010 - $2.14). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

| §   | Underground development advanced a record total of 2,284 metres during the fourth quarter of 2011, compared to an advance of 2,210 metres during the third quarter of the year. The total 2011 advance was 8,240 metres excavated representing 102% of budget. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Cave construction crews constructed and blasted 7 draw bells during the quarter, for a total of 8 draw bells completed in 2011. Cave drilling, blasting, and mucking continue in the undercut and extraction levels. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The underground crushing and conveying system was brought to mechanical completion and into the pre-commissioning phase. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| §   | Substantial completion of permanent power distribution underground. |
|--------------------|---------------------------------------------------------------------|

| §   | Construction and commissioning of a 60-person permanent underground refuge chamber and lunchroom was completed. |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| §   | The on-going mill concrete and internal structural steel both made good progress allowing the mechanical, piping and electrical contracts to proceed. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Completion of installation of all major mill equipment with piping and cabling in progress. |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | All surface buried services including water and sewage treatment fully commissioned. |
|--------------------|--------------------------------------------------------------------------------------|

| §   | Production and development ore continues to be stockpiled on the surface near the mill with a total of approximately 300,000 tonnes stockpiled by year-end. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | 100% hiring of key personnel. |
|--------------------|-------------------------------|

----

| §   | March – Completion of mill services and offices. |
|--------------------|--------------------------------------------------------|

| §   | April – Complete excavation of underground gyratory crusher.  SAG and ball mill “dry commissioning” to commence. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| §   | June – First ore through the entire mill circuit.  26 drawbells complete. |
|--------------------|-------------------------------------------------------------------------------------------|

| §   | July – First production run and concentrate shipment. |
|--------------------|-------------------------------------------------------------|

| §   | August – Commercial production. |
|--------------------|---------------------------------------|

| §   | Completed the construction of a 105 person camp at site. |
|--------------------|----------------------------------------------------------|

| §   | Completed the installation of an all season drill water supply system. |
|--------------------|------------------------------------------------------------------------|

| §   | Upgraded 17 kilometer access road. |
|--------------------|------------------------------------|

| §   | Continued environmental baseline studies and scoping of key parameters related to the Preliminary Economic Assessment (“PEA”). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Increased the number of drills from four in June to nine at the end of 2011.  A tenth drill was added subsequent to year-end. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| §   | Completed the first of two exploration participation agreements with local First Nations, with second agreement finalized subsequent to year-end. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Drilling at the Blackwater project during the fourth quarter totaled 24,319 meters in 67 holes.  Total drilling for 2011 is 64,897 meters in 184 holes. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | Camp extension to 230 people. |
|--------------------|-------------------------------|

| §   | Expansion of core logging facilities. |
|--------------------|---------------------------------------|

| §   | Establishment of site office in Vanderhoof. |
|--------------------|---------------------------------------------|

| §   | Installation of permanent communication system. |
|--------------------|-------------------------------------------------|

| §   | Completion of process trade off study and PEA selection. |
|--------------------|----------------------------------------------------------|

| §   | Completion of key environmental baseline programs. |
|--------------------|----------------------------------------------------|

| §   | Completion of approximately 210,000 metres of drilling. |
|--------------------|---------------------------------------------------------|

| §   | First Quarter – Anticipated receipt of the Multi-Year Area Based Permit which would allow for exploration drilling in the Blackwater project area for multiple years. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Second Quarter – Scheduled announcement of the PEA resource update.  This will incorporate drilling through the end of January 2012. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Third Quarter – Targeted completion of the PEA. |
|--------------------|-------------------------------------------------------|

| §   | Third/Fourth Quarter – Planned submission of the project Description. |
|--------------------|-----------------------------------------------------------------------------|

----

----

----

----

| (1)   | Proven and Probable Reserves and Measured, Indicated and Inferred Resources are calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. For a breakdown of Reserves and Resources by category and additional information relating to Reserves and Resources and related key assumptions and parameters, see our Mineral Reserve and Resource Statement in our news release New Gold Announces Record Gold Production in 2011, 25% Increase in Gold Resources per Share and 2012 Guidance with Production Growth at Lower Costs, filed on and dated February 2, 2012 on www.sedar.com. The scientific and technical information in this MD&A has been prepared under the supervision of Mark Petersen, a Qualified Person under National Instrument 43-101 and an employee of the Company. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                                 | Financial covenant                                              |
|------------------------------------------------------|-----------------------------------------------------------------|
| Minimum tangible net worth                           | $1.38 billion  + 25% of positive quarterly net income |
| Minimum interest coverage ratio (EBITDA to interest) | >4.0:1.0                                                     |
| Maximum leverage ratio (debt to EBITDA)              | <3.0:1.0                                                     |

----

----

| §   | Strong cash flows from gold sales at the Company’s Mesquite, Peak Mines and Cerro San Pedro operating mines which benefited from prevailing average market gold and silver prices of $1,568 and $35.10 per ounce respectively during the year; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Project spending at the New Afton project for the year ended December 31, 2011 of $290.6 million; |
|--------------------|---------------------------------------------------------------------------------------------------|

----

----

| CONTRACTUAL OBLIGATIONS                |
|----------------------------------------|
| (in thousands of US dollars)           |
|                                   |   |   |   |   |
|                                   | Payments due by period |   |   |   |
|                                   | Less than 1 year | 2-3 years | 4-5 years | After 5 years | Total |
| Long-term debt                         |                                        - |                          54,082 |                                        - |                       183,877 |                       237,959 |
| Interest payable on long-term debt     |                          21,092 |                          40,806 |                          36,775 |                             9,194 |                       107,867 |
| Operating leases and other commitments |                       150,506 |                          14,697 |                          14,639 |                          14,613 |                       194,455 |
| Asset retirement obligations           |                             4,406 |                             3,299 |                             6,248 |                          57,241 |                          71,194 |
| Total contractual obligations          |                       176,004 |                       112,884 |                          57,662 |                       264,925 |                       611,475 |

----

----

----

| TOTAL CASH COSTS PER OUNCE RECONCILIATION                    |
|--------------------------------------------------------------|
| (in thousands of US dollars, except where per ounce amounts) |
|                                                         |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |
|                                                         | For the three months ended December 31 |   | For the years ended December 31 |
|                                                         |   | 2011 | 2010 |   |   | 2011 | 2010 |
| Operating expenses from continuing operations                |                    78,569 |               79,840 |   |   |            303,778 |            247,773 |
| Operating expenses from discontinued operations              |                               - |                          - |   |   |                          - |                          - |
| Treatment and refining charges on concentrate sales          |                      1,855 |                 2,708 |   |   |                 8,981 |                 7,477 |
| By-product copper and silver sales                           |   |                  (25,184) |            (38,097) |   |   |          (132,644) |            (97,273) |
| Non-cash adjustments                                         |   |                       (196) |               (4,332) |   |   |               (5,464) |               (3,533) |
| Total cash costs                                             |   |                    55,044 |               40,119 |   |   |            174,651 |            154,444 |
| Ounces of gold sold                                          |   |                    99,612 |            116,964 |   |   |            391,890 |            369,077 |
| Total cash costs per ounce of gold sold                      |   |                         553 |                    343 |   |   |                    446 |                    418 |

| §   | Impairment losses; |
|--------------------|--------------------|

| §   | Fair value changes of embedded derivative in Senior secured notes; |
|--------------------|--------------------------------------------------------------------|

| §   | Gains (loss) on Fair Value Through Profit and Loss financial assets; |
|--------------------|----------------------------------------------------------------------|

| §   | Ineffectiveness of hedging instruments; |
|--------------------|-----------------------------------------|

| §   | Fair value changes of non-hedged derivatives such as share purchase warrants and the prepayment option on our convertible debt; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| §   | Fair value changes of asset backed commercial paper; |
|--------------------|------------------------------------------------------|

| §   | Gains (losses) on foreign exchange; and |
|--------------------|-----------------------------------------|

| §   | Other non- recurring items. |
|--------------------|-----------------------------|

----

| ADJUSTED NET EARNINGS RECONCILIATION                   |                                                                                                                                      |                                                                                                                                                                                  |                                                                                                                                                    |   |                                                                                       |                                                                                                                                                    |
|--------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars, except per share amounts) |                                                                                                                                      |                                                                                                                                                                                  |                                                                                                                                                    |   |                                                                                       |
|                                                   |                                                                                                                                      |                                                                                                                                                                                  |                                                                                                                                                    |   |                                                                                       |                                                                                                                                                    |   |
|                                                   |                                                                                                                                      |                                                                                                                                                                                  |                                                                                                                                                    |   |                                                                                       |                                                                                                                                                    |   |
|                                                   | For the three months ended December 31                                                                                                    |                                                                                                                                                                                  | For the years ended December 31                                                                                                                         |
|                                                   |                                                                                                                                      | 2011                                                                                                                                                                                  | 2010                                                                                                                                                    |   |                                                                                       | 2011                                                                                                                                                    | 2010 |
| Net earnings before taxes                              |                                                                                                                                      |                    57,127                                                              |               29,060                                                              |   |                                                                                       |             258,386                                                                         |               75,356 |
| Impairment of exploration assets                       |                                                                                                                                      |                               - |               15,728                                                              |   |                                                                                       |                          - |               15,728 |
| Fair value of embedded derivative in senior notes      |                       (598) |                 3,889                                                                                 |                                                                                                                                                    |   |             (11,118)           |               (7,679)                                                             |
| Gain on FVTPL financial assets                         |                                                                                                                                      |                               - |             (41,820)                                                                        |   |                                                                                       |               (1,349)                                                             |             (48,838) |
| Ineffectiveness on hedging instruments                 |                                                                                                                                      |                       2,444                                             |                          - |   |                                                                                       |                 6,611                                                   |                          - |
| Fair value change of non-hedged derivatives            |                  (10,548)                            |               63,444                                                                                            |                                                                                                                                                    |   |               18,347 |             113,336                                                                         |
| (Gain) Loss on foreign exchange                        |                                                                                                                                      |                    12,907                                                              |                    486                                   |   |                                                                                       |               (7,122)                                                             |                 9,675 |
| Other                                                  |                                                                                                                                      |                            53                  |                 1,301                                                   |   |                                                                                       |                 2,485                                                   |                 3,767 |
| Adjusted net earnings before tax                       |                                                                                                                                      |                    61,385                                                              |               72,088                                                              |   |                                                                                       |             266,240                                                                         |             161,345 |
| Income tax expense                                     |                                                                                                                                      |                  (22,129)                                                                        |               (3,503)                                                             |   |                                                                                       |             (79,358)                                                                        |             (18,009) |
| Tax adjustments                                        |                                                                                                                                      |                       2,943                                             |             (11,574)                                                                        |   |                                                                                       |                    900                                   |             (27,613) |
| Adjusted tax                                           |                                                                                                                                      |                  (19,186)                                                                        |             (15,077)                                                                        |   |                                                                                       |             (78,458)                                                                        |             (45,622) |
| Adjusted net earnings                                  |                                                                                                                                      |                    42,199                                                              |               57,011                                                              |   |                                                                                       |            187,782                                                                               |             115,723 |
| Adjusted EPS                                           |                                                                                                                                      |                         0.09                                  |                    0.15                                  |   |                                                                                       |                   0.44                                        |                    0.30 |
| Adjusted effective tax rate                            |                                                                                                                                      | 31%                                                                                                                                                                                   | 21%                                                                                                                                                     |   |                                                                                       | 29%                                                                                                                                                     | 28% |

----

| §   | excludes from revenues unrealized gains and losses on non-hedge derivative contracts; and, |
|--------------------|--------------------------------------------------------------------------------------------|

| §   | includes revenues from the Amapari Mine which has been presented as a discontinued operation. |
|--------------------|-----------------------------------------------------------------------------------------------|

----

----

----

|                                     |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |  As at December 31, 2011                                                                                                 |
|------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|
|                                     |   |  Loans and                                                                                                                                                                                   |   |  Designated                                                                                                                                                                                  |   |                                                                                                                                                                                              |   |  Financial                                                                                                                                                                                   |   |                                                                                                                          |
|                                     |   |  receivables                                                                                                                                                                                 |   |  as Fair value                                                                                                                                                                               |   |    Available                                                                                                                                                                       |   |  liabilities at                                                                                                                                                                              |   |                                                                                                                          |
|                                     |   |  at amortized                                                                                                                                                                                |   |  through                                                                                                                                                                                     |   |   for sale at                                                                                                                                                                           |   |  amortized                                                                                                                                                                                   |   |                                                                                                                          |
| (in thousands of US dollars)             |   |  cost                                                                                                                                                                                        |   |  profit/loss                                                                                                                                                                                 |   |    fair value                                                                                                                                                                      |   |  cost                                                                                                                                                                                        |   | Total                                                                                                                         |
| Financial Assets                         |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                          |
|    Cash and cash equivalents   |   |                  309,406                                                                                     |   |                                 - |   |                                 - |   |                                 - |   |              309,406                                         |
|    Trade and other receivables |   |                     37,572                                                                    |   |                                 - |   |                                 - |   |                                 - |   |                  37,572                  |
|    Investments                 |   |                                 - |   |                                 - |   |                        1,823                                                   |   |                                 - |   |                     1,823 |
|    Prepayment option           |   |                                 - |   |                     18,797                                                                    |   |                                 - |   |                                 - |   |                  18,797                  |
|    Reclamation deposits        |   |                     10,004                                                                    |   |                                 - |   |                                 - |   |                                 - |   |                  10,004                  |
| Financial Liabilities                    |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                          |
|    Trade and other payables    |   |                                 - |   |                                 - |   |                                 - |   |                  100,437                                                                                     |   |              100,437                                         |
|    Long-term debt              |   |                                 - |   |                                 - |   |                                 - |   |                  251,664                                                                                     |   |              251,664                                         |
|    Gold contracts              |   |                                 - |   |                  141,591                                                                                     |   |                                 - |   |                                 - |   |              141,591                                         |
|    Warrants                    |   |                                 - |   |                  143,627                                                                                     |   |                                 - |   |                                 - |   |              143,627                                         |
|    Conversion option           |   |                                 - |   |                     23,957                                                                    |   |                                 - |   |                                 - |   |                  23,957                  |
|    Share award units           |   |                                 - |   |                        5,334                                                   |   |                                 - |   |                                 - |   |                     5,334 |

|                                     |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |  As at December 31, 2010                                                                                                                   |
|------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |   |   |  Loans and                                                                                                                                                                                   |   | Designated                                                                                                                                                                                        |   |  Financial                                                                                                                                                                                   |   |                                                                                                                                            |
|                                     |   |   |  receivables                                                                                                                                                                                 |   | as Fair value                                                                                                                                                                                     |   |  Liabilities at                                                                                                                                                                              |   |                                                                                                                                            |
|                                     |   |   |  at amortized                                                                                                                                                                                |   | through                                                                                                                                                                                           |   |  amortized                                                                                                                                                                                   |   |                                                                                                                                            |
| (in thousands of US dollars)             |   |   |  cost                                                                                                                                                                                        |   |  profit/loss                                                                                                                                                                                 |   |  cost                                                                                                                                                                                        |   | Total                                                                                                                                           |
| Financial Assets                         |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                            |
|    Cash and cash equivalents   |   |   |                  490,754                                                                                     |   |                                 - |   |                                 - |   |                  490,754                                   |
|    Trade and other receivables |   |   |                     11,929                                                                    |   |                                 - |   |                                 - |   |                     11,929                  |
|    Prepayment option           |   |   |                                 - |   |                        7,679                                                   |   |                                 - |   |                        7,679 |
|    Investments                 |   |   |                                 - |   |                        7,533                                                   |   |                                 - |   |                        7,533 |
|    Reclamation deposits        |   |   |                     17,955                                                                    |   |                                 - |   |                                 - |   |                     17,955                  |
| Financial Liabilities                    |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                            |
|    Trade and other payables    |   |   |                                 - |   |                                 - |   |                     69,245                                                                    |   |                     69,245                  |
|    Long-term debt              |   |   |                                 - |   |                                 - |   |                  229,884                                                                                     |   |                  229,884                                   |
|    Gold contracts              |   |   |                                 - |   |                  153,375                                                                                     |   |                                 - |   |                  153,375                                   |
|    Warrants                    |   |   |                                 - |   |                  125,936                                                                                     |   |                                 - |   |                  125,936                                   |
|    Conversion option           |   |   |                                 - |   |                     29,429                                                                    |   |                                 - |   |                     29,429                  |
|    Share award units           |   |   |                                 - |   |                        3,295                                                   |   |                                 - |   |                        3,295 |

----

|                                     |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |  As at January 1, 2010                                                                                                                                                            |
|------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |   |   |  Loans and                                                                                                                                                                                   |   | Designated                                                                                                                                                                                        |   |  Financial                                                                                                                                                                                   |   |                                                                                                                                                                                   |
|                                     |   |   |  receivables                                                                                                                                                                                 |   | as Fair value                                                                                                                                                                                     |   |  Liabilities at                                                                                                                                                                              |   |                                                                                                                                                                                   |
|                                     |   |   |  at amortized                                                                                                                                                                                |   | through                                                                                                                                                                                           |   |  amortized                                                                                                                                                                                   |   |                                                                                                                                                                                   |
| (in thousands of US dollars)             |   |   |  cost                                                                                                                                                                                        |   |  profit/loss                                                                                                                                                                                 |   |  cost                                                                                                                                                                                        |   | Total                                                                                                                                                                                  |
| Financial Assets                         |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                   |
|    Cash and cash equivalents   |   |   |                  271,526                                                                                     |   |                                 - |   |                                 - |   |                  271,526                                                                          |
|    Trade and other receivables |   |   |                     10,345                                                                    |   |                                 - |   |                                 - |   |                     10,345                                                         |
|    Investments                 |   |   |                                 - |   |                     45,890                                                                    |   |                                 - |   |                     45,890                                                         |
|    Reclamation deposits        |   |   |                     16,047                                                                    |   |                                 - |   |                                 - |   |                     16,047                                                         |
| Financial Liabilities                    |   |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                              |   |                                                                                                                                                                                   |
|    Trade and other payables    |   |   |                                 - |   |                                 - |   |                     37,999                                                                    |   |                     37,999                                                         |
|    Long-term debt              |   |   |                                 - |   |                                 - |   |                  225,456                                                                                     |   |                  225,456                                                                          |
|    Gold contracts              |   |   |                                 - |   |                     95,986                                                                    |   |                                 - |   |                     95,986                                                         |
|    Warrants                    |   |   |                                 - |   |                     29,841                                                                    |   |                                 - |   |                     29,841                                                         |
|    Conversion option           |   |   |                                 - |   |                        7,701                                                   |   |                                 - |   |                        7,701                                        |
|    Share award units           |   |   |                                 - |   |                               99            |   |                                 - |   |                               99 |

|                                               | As at December 31                                                                                                                          |
|----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars)                       | 2011                                                                                                                                       | 2010 | 2009 |
| Cash and cash equivalents                          |                     309,406            |                     490,754 |                     271,526 |
| Trade receivables                                  |                       37,572 |                       11,929 |                       10,345 |
| Reclamation deposits and other                     |                       14,912 |                       23,616 |                       17,646 |
| Total financial instruments subject to credit risk |                     361,890            |                     526,299 |                     299,517 |

----

|                         |                                                                  |   |                                                                                              |   |                                                                                              |   |                                                                                              |   |                                                                                              |   | December 31                                                                                                                                                           |   | December 31                                                                                                                                                               | January 1                                                                                                                                                                 |
|------------------------------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         | 0-30                                                                  |   | 31-60                                                                                             |   | 61-90                                                                                             |   | 91-120                                                                                            |   | Over                                                                                              |   | 2011                                                                                                                                                                  |   | 2010                                                                                                                                                                      | 2010                                                                                                                                                                      |
| (in thousands of US dollars) | days                                                                  |   | days                                                                                              |   | days                                                                                              |   | days                                                                                              |   | 120 days                                                                                          |   | Total                                                                                                                                                                 |   | Total                                                                                                                                                                     | Total                                                                                                                                                                     |
| Mesquite Mine                |            360 |   |                 - |   |                 - |   |                 - |   |                 - |   |                            360 |   |                        442                             |                        273                             |
| Cerro San Pedro Mine         |        3,756                       |   |            (48)                            |   |            267                             |   |            (59)                            |   |            787                             |   |                        4,703                       |   |                    3,798                                                   |                    5,348                                                   |
| Peak Mine                    |        2,464                       |   |        1,883                                                   |   |                 - |   |        1,228                                                   |   |               25            |   |                        5,600                       |   |                    3,176                                                   |                    3,922                                                   |
| New Afton                    |     10,107                                        |   |                 - |   |                 - |   |        6,071                                                   |   |                 - |   |                     16,178                                        |   |                    3,581                                                   |                        632                             |
| Blackwater                   |        6,831                       |   |                 - |   |                 - |   |                 - |   |                 - |   |                        6,831                       |   |                             - |                             - |
| Corporate                    |        3,900                       |   |                 - |   |                 - |   |                 - |   |                 - |   |                        3,900                       |   |                        932                             |                        170                             |
| Total trade receivables      |     27,418                                        |   |        1,835                                                   |   |            267                             |   |        7,240                                                   |   |            812                             |   |                  37,572                                                          |   |                 11,929                                                                    |                 10,345                                                                    |

----

|                               | Payments due by period                                                                                                                                        | December 31                                                                                                                                                   | December 31                                                                                                                                                   | January 1                                                                                                                                                     |
|------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                               | Less than                                                                                                                                                     |                                                                                                                                                          |                                                                                                                                                          | After                                                                                                                                                         | 2011 | 2010 | 2010 |
| (in thousands of US dollars)       | 1 year                                                                                                                                                        | 1-3 years                                                                                                                                                     | 4-5 years                                                                                                                                                     | 5 years                                                                                                                                                       | Total | Total | Total |
| Trade and other payables           |           100,437                                                                                           |                           - |                           - |                           - |                  100,437 |                    69,245 |                    37,999 |
| Long-term debt                     |                           - |                           - |             54,082                                                                                |           183,877                                                                                           |                 237,959 |                 243,307 |                 258,467 |
| Interest payable on long-term debt |              21,092                                                                          |             40,806                                                                                |             36,775                                                                                |                 9,194                                                         |                  107,867 |                   131,857 |                  147,352 |
| Gold contracts                     |              49,184                                                                          |             92,407                                                                                |                           - |                           - |                    141,591 |                  153,375 |                    95,986 |
| Total contractual debt commitments |            170,713                                                                                     |            133,213                                                                                     |             90,857                                                                                |            193,071                                                                                     |        587,854 |                 597,784 |                 539,804 |

| i.   | Transaction exposure |
|----------------|----------------------|

| ii.   | Exposure to currency risk |
|-----------------|---------------------------|

|                                     |                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                            | As at December 31, 2011                                                                                                                                                                                                                                       |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars)             | Canadian dollar                                                                                                                                                                                                                                         | Australian dollar                                                                                                                                                                                                                                                                                                               | Mexican peso                                                                                                                                                                                                                                                  | Chilean peso |
| Cash and cash equivalents                |                                        75,342        |                                        20,794                                                                                |                                2,349                                                               |                                          8 |
| Trade and other receivables              |                                        26,957        |                                            1,226                                                         |                                4,675                                                               |                                           - |
| Prepayment option                        |                                         18,797  |                                                      - |                                           - |                                           - |
| Trade and other payables                 |                                      (46,482)                  |                                      (22,306)                                                                                          |                           (33,862)                                                                                          |                                           - |
| Reclamation and closure cost obligations |                                         (8,634) |                                       (17,080)                                                                                    |                            (15,820)                                                                                    |                                           - |
| Warrants                                 |                                    (143,627)                             |                                                      - |                                           - |                                           - |
| Conversion option on convertible debt    |                                      (23,957)                  |                                                      - |                                           - |                                           - |
| Share award units                        |                                         (5,334) |                                                      - |                                           - |                                           - |
| Long-term debt                           |                                    (221,483)                             |                                                      - |                                           - |                                           - |
| Gross balance exposure                   |                     (328,421)                                                                                                                       |                       (17,366)                                                                                                                                                                                    |               (42,658)                                                                                                                                                                  |                           8 |

----

|                                     |                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                            | As at December 31, 2010                                                                                                                                                                                                                                       |
|------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars)             | Canadian dollar                                                                                                                                                                                                                                                   | Australian dollar                                                                                                                                                                                                                                                                                                               | Mexican peso                                                                                                                                                                                                                                                  | Chilean peso |
| Cash and cash equivalents                |                                      331,948                             |                                         41,254                                                                          |                                5,224                                                               |                                         11 |
| Investments                              |                                           7,533 |                                                      - |                                           - |                                           - |
| Trade and other receivables              |                                           4,556 |                                            3,176                                                         |                                3,063                                                               |                                       39 |
| Reclamation deposit                      |                                           8,043 |                                                      - |                                           - |                                           - |
| Prepayment option                        |                                           7,679 |                                                      - |                                           - |                                           - |
| Trade and other payables                 |                                      (24,458)                            |                                       (24,415)                                                                                    |                           (34,003)                                                                                          |                                           - |
| Reclamation and closure cost obligations |                                         (3,655)           |                                        (13,618)                                                                              |                               (8,421)                                                                   |                                           - |
| Warrants                                 |                                    (125,936)                                       |                                                      - |                                           - |                                           - |
| Conversion option on convertible debt    |                                      (29,429)                            |                                                      - |                                           - |                                           - |
| Share award units                        |                                         (3,294)           |                                                      - |                                           - |                                           - |
| Long-term debt                           |                                    (221,832)                                       |                                                      - |                                           - |                                           - |
| Gross balance exposure                   |                       (48,845)                                                                                                                      |                           6,397                                                                                                                                                               |                (34,137)                                                                                                                                                            |                         50 |

|                                     |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                            | As at January 1, 2010                                                                                                                                                                                                                                         |
|------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars)             | Canadian dollar                                                                                                                                                                                                                                                                                      | Australian dollar                                                                                                                                                                                                                                                                                                               | Mexican peso                                                                                                                                                                                                                                                  | Chilean peso |
| Cash and cash equivalents                |                                       165,147                                                          |                                        32,008                                                                                |                                2,670                                                               |                                        18 |
| Investments                              |                                        45,890                                                     |                                                      - |                                           - |                                           - |
| Trade and other receivables              |                                                549        |                                           3,922                                                               |                                5,674                                                               |                                     (94) |
| Reclamation deposit                      |                                             6,211                        |                                                      - |                                           - |                                           - |
| Trade and other payables                 |                                         (6,529)                                              |                                        (11,566)                                                                              |                              (8,806)                                                                         |                                           - |
| Reclamation and closure cost obligations |                                          (1,849)                                        |                                         (8,330)                                                                         |                               (4,314)                                                                   |                                           - |
| Warrants                                 |                                       (29,841)                                                         |                                                      - |                                           - |                                           - |
| Conversion option on convertible debt    |                                          (7,701)                                        |                                                      - |                                           - |                                           - |
| Share award units                        |                                                 (99) |                                                      - |                                           - |                                           - |
| Long-term debt                           |                                   (206,653)                                                                                |                                                      - |                                           - |                                           - |
| Gross balance exposure                   |                       (34,875)                                                                                                                                                         |                         16,034                                                                                                                                                                          |                 (4,776)                                                                                                                                                       |                       (76) |

| iii.   | Translation exposure |
|------------------|----------------------|

|                            | December 31                                                                                                                                                                                                                                                                           | December 31                                                                                                                                                                                                                                                                           | January 1                                                                                                                                                                                                                                                             |
|---------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands of US dollars)    | 2011                                                                                                                                                                                                                                                                                  | 2010                                                                                                                                                                                                                                                                                  | 2010                                                                                                                                                                                                                                                                  |
| Canadian dollar                 |                               (32,842)                                                                                          |                                  (4,885)                                                                         |                                  (3,488)                                                         |
| Australian dollar               |                                  (1,737)                                                                         |                                         640                                   |                                     1,603                                         |
| Mexican peso                    |                                  (4,266)                                                                         |                                  (3,414)                                                                         |                                      (478)                                   |
| Chilean peso                    |                                               1 |                                               5 |                                            (8) |
| Total translation risk exposure |                            (38,844)                                                                                                            |                                  (7,654)                                                                         |                                  (2,371)                                                         |

----

| §   | the strength of the U.S. economy and the economies of other industrialized and developing nations; |
|--------------------|----------------------------------------------------------------------------------------------------|

| §   | global or regional political or economic crises; |
|--------------------|--------------------------------------------------|

| §   | the relative strength of the U.S. dollar and other currencies; |
|--------------------|----------------------------------------------------------------|

| §   | expectations with respect to the rate of inflation; |
|--------------------|-----------------------------------------------------|

| §   | interest rates; |
|--------------------|-----------------|

| §   | purchases and sales of gold by central banks and other holders; |
|--------------------|-----------------------------------------------------------------|

| §   | demand for jewelry containing gold; and |
|--------------------|-----------------------------------------|

| §   | investment activity, including speculation, in gold as a commodity. |
|--------------------|---------------------------------------------------------------------|

----

|                                  | Year ended December 31                                                                                                                                                                        |
|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  | 2011                                                                                                                                                                                          |   | 2011 |   | 2010 |   | 2010 |
| (in thousands of US dollars)          | Net earnings                                                                                                                                                                                  |   | Other Comprehensive Income |   | Net earnings |   | Other Comprehensive Income |
| Gold price                            |                         57,228                                        |   |                         28,400 |   |                         44,076 |   |                          33,201 |
| Silver price                          |                            5,794                       |   |                                       - |   |                            4,889 |   |                                       - |
| Copper price                          |                            7,058                       |   |                                       - |   |                            4,588 |   |                                       - |
| Fuel price                            |                            4,927                       |   |                                       - |   |                            3,624 |   |                                       - |
| Warrants                              |                          14,363                                  |   |                                       - |   |                          12,594 |   |                                       - |
| Conversion option on convertible debt |                             4,414                 |   |                                       - |   |                            4,464 |   |                                       - |
| Share award units                     |                                470 |   |                                       - |   |                                329 |   |                                       - |
| Total price risk exposure             |              94,254                                                                                                          |   |              28,400 |   |                         74,564 |   |                          33,201 |

----

----

----

| §   | The Company controls access to the benefit; |
|--------------------|---------------------------------------------|

| §   | Internal project economics are beneficial to the Company; |
|--------------------|-----------------------------------------------------------|

| §   | The project is technically feasible; and |
|--------------------|------------------------------------------|

| §   | Costs can be reliably measured. |
|--------------------|---------------------------------|

----

|                | Average life |
|---------------------|--------------|
| Building            | 15-50        |
| Plant and machinery | 3-20         |
| Office equipment    | 5-10         |
| Vehicles            | 5-7          |
| Computer equipment  | 3-5          |

| §   | All major capital expenditures to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management have been completed; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The completion of a reasonable period of testing of the mine plant and equipment; |
|--------------------|-----------------------------------------------------------------------------------|

| §   | The mine or mill has reached a pre-determined percentage of design capacity; and |
|--------------------|----------------------------------------------------------------------------------|

| §   | The ability to sustain ongoing production of ore. |
|--------------------|---------------------------------------------------|

----

----

----

| §   | The main influences of sales prices for goods and the country whose competitive forces and regulations mainly determine the sales price; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The currency that mainly influences labour, material and other costs of providing goods; |
|--------------------|------------------------------------------------------------------------------------------|

| §   | The currency in which funds from financing activities are generated; and |
|--------------------|--------------------------------------------------------------------------|

| §   | The currency in which receipts from operating activities are usually retained. |
|--------------------|--------------------------------------------------------------------------------|

----

| §   | the Company has transferred to the buyer the significant risks and rewards of ownership; |
|--------------------|------------------------------------------------------------------------------------------|

| §   | the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the amount of revenue can be measured reliably; |
|--------------------|-------------------------------------------------|

| §   | it is probable that the economic benefits associated with the transaction will flow to the entity; and |
|--------------------|--------------------------------------------------------------------------------------------------------|

| §   | the costs incurred or to be incurred in respect of the transaction can be measured reliably |
|--------------------|---------------------------------------------------------------------------------------------|

----

----

----

----

----

|                          |   |
|-------------------------------|--------|
|                          | Note   |
| Deferred taxes                | a      |
| Fair value deemed cost        | b      |
| Convertible debentures        | c      |
| Foreign currency translation  | d      |
| Decommissioning liabilities   | e      |
| Property, plant and equipment | f      |
| Reversal of impairment loss   | g      |
| Share purchase warrants       | h      |

|             |                |  Assets                                                                                                              |                                                                                                                                        |  Liabilities                                                                     |               |  Equity                                                                                      |                                                                                                                                  |  Total                                                   |
|------------------|---------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|--------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|
|             |                |  Current                                                                                                             |  Non-current                                                                                                                           |  Total                                                                           |               |  Current                                                                                     |  Non-current                                                                                                                     |  Total                                                   |   |  Components of equity |  Deficit |  Total |   |  Liabilities and equity |
|             |                |                                                                                                                      |                                                                                                                                        |                                                                                  |               |                                                                                              |                                                                                                                                  |                                                          |   |   |   |   |   |   |
| Previous CGAAP   |   394,955 |  2,093,304                                                                                                           |  2,488,259                                                                                                                             |                                                                                  |   93,418 |    663,796                                                                         |  757,214                                                                                                                         |                                                          |  2,036,904 |   (305,859) |  1,731,045 |   |  2,488,259 |
|             |                |                                                                                                                      |                                                                                                                                        |                                                                                  |               |                                                                                              |                                                                                                                                  |                                                          |   |   |   |   |   |   |
| IFRS adjustments |                |                                                                                                                      |                                                                                                                                        |                                                                                  |               |                                                                                              |                                                                                                                                  |                                                          |   |   |   |   |   |
| a                |                |            (8,848)                                                 |                 8,848                                       |               - |               |                 - |              13,653                                                  |    13,653                                      |   |                         - |            (13,653) |           (13,653) |   |               - |
| b                |                |                     - |          (327,606)                                                                             |   (327,606)                                                                 |               |                 - |            (81,245)                                                            |  (81,245)                                                |   |                         - |          (246,361) |         (246,361) |   |    (327,606) |
| c                |                |                     - |                        - |               - |               |                 - |               10,301                                            |     10,301                                |   |              (21,604) |               11,303 |            (10,301) |   |               - |
| d                |                |                     - |                 8,743                                       |         8,743                                 |               |                 - |                2,186                                       |      2,186                           |   |                  1,566 |                 4,991 |               6,557 |   |         8,743 |
| e                |                |                     - |                   4,311                           |          4,311                           |               |                 - |               4,875                                             |     4,875                                 |   |                         - |                 (564) |                (564) |   |           4,311 |
| f                |                |                     - |                (2,513)                                           |        (2,513)                                     |               |                 - |                 (754)                                 |       (754)                     |   |                         - |               (1,759) |              (1,759) |   |        (2,513) |
| g                |                |                     - |               51,909                                                  |        51,909                                      |               |                 - |                       - |           - |   |                         - |              51,909 |             51,909 |   |        51,909 |
| h                |                |                     - |                        - |               - |               |                 - |              41,754                                                  |    41,754                                      |   |           (139,632) |             97,878 |           (41,754) |   |               - |
| i                |                |                     - |                        - |               - |               |                 - |                       - |           - |   |                         - |                       - |                      - |   |               - |
| j                |                |                     - |              (18,810)                                                      |       (18,810)                                          |               |                 - |             (18,810)                                                      |   (18,810)                                          |   |                         - |                       - |                      - |   |       (18,810) |
| IFRS             |                |    386,107                                                                                                 |    1,818,186                                                                                                                 |  2,204,293                                                                       |               |   93,418                                                                                |    635,756                                                                                                             |  729,174                                                 |   |   1,877,234 |    (402,115) |   1,475,119 |   |  2,204,293 |

----

|             |                |  Assets                                                                                                              |                                                                                                                            |  Liabilities                                                               |                |  Equity                                                                                                        |                                                                                                                |  Total                                                         |
|------------------|---------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|
|             |                |  Current                                                                                                             |  Non-current                                                                                                               |  Total                                                                     |                |  Current                                                                                                       |  Non-current                                                                                                   |  Total                                                         |   |  Components of equity |  Deficit |  Total |   |  Liabilities and equity |
|             |                |                                                                                                                      |                                                                                                                            |                                                                            |                |                                                                                                                |                                                                                                                |                                                                |   |   |   |   |   |   |
| Previous CGAAP   |   625,460 |  2,113,454                                                                                                           |  2,738,914                                                                                                                 |                                                                            |   140,709 |   705,014                                                                                                 |  845,723                                                                                                       |                                                                |   2,022,096 |    (128,905) |    1,893,191 |   |   2,738,914 |
|             |                |                                                                                                                      |                                                                                                                            |                                                                            |                |                                                                                                                |                                                                                                                |                                                                |   |   |   |   |   |   |
| IFRS adjustments |                |                                                                                                                      |                                                                                                                            |                                                                            |                |                                                                                                                |                                                                                                                |                                                                |   |   |   |   |   |
| a                |                |            (9,127)                                                 |               9,127                                       |              - |                |                    - |              4,491                                 |       4,491                           |   |                          - |                (4,491) |                (4,491) |   |               - |
| b                |                |                     - |       (327,606)                                                                                   |   (327,606)                                                           |                |                    - |        (85,522)                                                                  |   (85,522)                                                |   |                          - |          (242,084) |          (242,084) |   |    (327,606) |
| c                |                |                     - |                      - |              - |                |                    - |          29,429                                                        |    29,429                                            |   |               (21,604) |               (7,825) |             (29,429) |   |               - |
| d                |                |                     - |            33,052                                                        |       33,052                                      |                |                    - |              2,186                                 |       2,186                           |   |                 15,900 |                14,966 |               30,866 |   |       33,052 |
| e                |                |                 347                       |              5,637                                             |         5,984                           |                |                                                                                                                |             8,452                                       |      8,452                                 |   |                          - |               (2,468) |               (2,468) |   |         5,984 |
| f                |                |            (3,617)                                                 |               1,272                                       |       (2,345)                                     |                |                    - |              (448)                                 |        (448)                     |   |                          - |                (1,897) |                (1,897) |   |        (2,345) |
| g                |                |                     - |                      - |              - |                |                    - |                    - |            - |   |                          - |                         - |                         - |   |               - |
| h                |                |                     - |                      - |              - |                |                    - |         125,962                                                             |   125,962                                                 |   |             (139,632) |                13,670 |           (125,962) |   |               - |
| i                |                |                     - |                      - |              - |                |                    - |                    - |            - |   |                    (1,611) |                    1,611 |                         - |   |               - |
| j                |                |                     - |            (18,810)                                                      |      (18,810)                                          |                |                    - |         (21,579)                                                            |   (21,579)                                                |   |                          - |                 2,769 |                 2,769 |   |       (18,810) |
| IFRS             |                |   613,063                                                                                                       |  1,816,126                                                                                                                 |  2,429,189                                                                 |                |   140,709                                                                                                 |  767,985                                                                                                       |  908,694                                                       |   |     1,875,149 |    (354,654) |   1,520,495 |   |   2,429,189 |

----

|                                                               | Notes                            | Previous CGAAP                                                                                                                                          | Effect of IFRS transition                                                                                                                               | IFRS                                                                    |
|--------------------------------------------------------------------|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|
| Revenues                                                           |                             |     530,450                                                                                                                         |                          - |      530,450                                   |
| Operating expenses                                                 | e                                |     250,338                                                                                                                         |                       962                 |      247,773                                   |
|                                                               | f                                |                                                                                                                                                    |                 (3,527)                                                 |                                                                    |
| Depreciation and depletion                                         | e                                |       77,016                                                                                                              |                 (1,117)                                                 |         78,374                  |
|                                                               | f                                |                                                                                                                                                    |                   2,475                                       |                                                                    |
| Earnings from mine operations                                      |                             |     203,096                                                                                                                         |                 (1,207)                                                 |      204,303                                   |
|                                                               |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
| Corporation administration expenses                                |                             |       24,134                                                                                                              |                          - |         24,134                  |
| Share-based payments                                               | i                                |          8,488                                                                                             |                 (1,611)                                                 |           6,877       |
| Exploration                                                        |                             |       12,834                                                                                                              |                          - |         12,834                  |
| Impairment charge of exploration assets                            |                             |       15,728                                                                                                              |                          - |         15,728                  |
|                                                               |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
| Earnings from operations                                           |                             |     141,912                                                                                                                         |                 (2,818)                                                 |      144,730                                   |
| Finance income                                                     |                             |          3,258                                                                                             |                                                                                                                                                    |           3,258       |
| Finance costs                                                      | e                                |           (947)                                                                                       |                 (1,424)                                                 |         (2,371)                 |
| Realized and unrealized gain on investments                        |                             |          9,128                                                                                             |                          - |           9,128       |
| Unrealized gain on prepayment option                               |                             |          7,679                                                                                             |                          - |           7,679       |
| Gain on sale of investment                                         |                             |       39,710                                                                                                              |                          - |         39,710                  |
| Other expense                                                      | f                                |       (2,883)                                                                                                             |                    (884)                                 |         (3,767)                 |
| Loss on foreign exchange                                           | c                                |     (21,816)                                                                                                                        |                    (941)                                 |         (9,675)                 |
|                                                               | d                                |                                                                                                                                                    |                 13,857                                                  |                                                                    |
|                                                               | h                                |                                                                                                                                                    |                 (3,544)                                                 |                                                                    |
|                                                               | j                                |                                                                                                                                                    |                   2,769                                       |                                                                    |
| Unrealized loss on non-hedged derivatives                          | c                                |                 -                                                       |               (20,785)                                                            |    (113,336)                                             |
|                                                               | h                                |                                                                                                                                                    |               (92,551)                                                            |                                                                    |
| Earnings (loss) before taxes                                       |                             |     176,041                                                                                                                         |            (100,685)                                                                             |         75,356                  |
| Income tax expense                                                 | a                                |     (41,110)                                                                                                                        |                   8,920                                       |      (18,009)                                  |
|                                                               | c                                |                                                                                                                                                    |                   2,600                                       |                                                                    |
|                                                               | f                                |                                                                                                                                                    |                    (306)                                 |                                                                    |
|                                                               | h                                |                                                                                                                                                    |                 11,887                                                  |                                                                    |
| Net earnings (loss) from continuing operations                     |                             |     134,931                                                                                                                         |               (77,584)                                                            |         57,347                  |
| Earnings (loss) from discontinued operations, net of taxes         | g                                |       42,023                                                                                                              |               (51,909)                                                            |         (9,886)                 |
| Net earnings                                                       |                             |     176,954                                                                                                                         |            (129,493)                                                                             |         47,461                  |
|                                                               |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
|                                                               | Notes                            | Previous CGAAP                                                                                                                                          | Effect of IFRS transition                                                                                                                               | IFRS                                                                    |
|                                                               |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
| Net earnings                                                       |                             |     176,954                                                                                                                         |            (129,493)                                                                             |         47,461                  |
|                                                               |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
| Other comprehensive income (loss)                                  |                             |                                                                                                                                                    |                                                                                                                                                    |                                                                    |
|    Unrealized losses on mark-to-market of gold contracts |     (85,849) |                          - |      (85,849)                                                                                                                  |
|    Realized losses on mark-to-market of gold contracts   |                             |       20,035                                                                                                              |                          - |         20,035                  |
|    Unrealized gains on mark-to-market of fuel contracts  |                             |           (366)                                                                                       |                          - |            (366) |
|    Currency translation adjustment                       | d                                |                 -                                                       |                 14,334                                                  |         14,334                  |
| Deferred income tax                                                |                             |       27,572                                                                                                              |                          - |         27,572                  |
| Total other comprehensive loss                                     |                             |     (38,608)                                                                                                                        |                 14,334                                                  |      (24,274)                                  |
| Total comprehensive income                                         |                             |     138,346                                                                                                                         |            (115,159)                                                                             |         23,187                  |

----

|                   |                                                | Operating                                                                                                                 |                                                                                                          | Investing                                                                                                                       |                                                                                                                            | Financing                                                                                                     |                                                                                                                      | Cash and cash equivalents                                                                                                 |
|------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                   |                                                | Continuing                                                                                                                | Discontinued                                                                                                  |                                                                                                                            | Continuing                                                                                                                      | Discontinued                                                                                                  |                                                                                                                      | Continuing                                                                                                                | Discontinued |   | Impact of exchange rate changes | Increase (decrease) | Beginning of year | End of year |
|                   |                                                |                                                                                                                      |                                                                                                          |                                                                                                                            |                                                                                                                            |                                                                                                          |                                                                                                                      |                                                                                                                      |   |   |   |   |   |   |
|  Previous CGAAP   |    182,260                           |    (1,696)                                                                                                 |                                                                                                          |   (451,363)                                                                                                           |    34,410                                                                                                        |                                                                                                          |    447,189                                                                                                 |           -                                                             |   |   16,803 |   227,603 |    263,151 |    490,754 |
|                   |                                                |                                                                                                                      |                                                                                                          |                                                                                                                            |                                                                                                                            |                                                                                                          |                                                                                                                      |                                                                                                                      |   |   |   |   |   |   |
|  IFRS adjustments |                                                |                                                                                                                      |                                                                                                          |                                                                                                                            |                                                                                                                            |                                                                                                          |                                                                                                                      |                                                                                                                      |   |   |   |   |
| Per income statement   |        (129,493) |                   -             |                                                                                                          |                      - |                   -                   |                                                                                                          |                     - |                   -             |   |                 - |        (129,493) |                     - |                      - |
| a                      |                                                |            (8,920)                                                 |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |            (8,920) |                     - |                      - |
| b                      |                                                |                     - |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |                     - |                     - |                      - |
| c                      |                                                |             19,128                                            |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |             19,128 |                     - |                      - |
| d                      |                                                |          (17,262)                                                            |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |          (17,262) |                     - |                      - |
| e                      |                                                |                 634                       |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |                 634 |                     - |                      - |
| f                      |                                                |              3,972                                       |                   - |                                                                                                                            |             15,076                                                  |                   - |                                                                                                                      |                     - |                   - |   |                 - |            19,048 |                     - |                      - |
| g                      |                                                |            51,909                                                  |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |            51,909 |                     - |                      - |
| h                      |                                                |           84,208                                                        |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |           84,208 |                     - |                      - |
| i                      |                                                |               (1,611)                               |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |               (1,611) |                     - |                      - |
| j                      |                                                |                     - |                   - |                                                                                                                            |                      - |                   - |                                                                                                                      |                     - |                   - |   |                 - |                     - |                     - |                      - |
| k                      |                                                |               1,677                                 |                   - |                                                                                                                            |           (28,519)                                                            |                   - |                                                                                                                      |                     - |                   - |   |                 - |         (26,842) |              9,201 |                      - |
|  IFRS             |                                                |    186,502                                                                                                 |    (1,696)                                                                                     |                                                                                                                            |  (464,806)                                                                                                                 |    34,410                                                                                      |                                                                                                                      |    447,189                                                                                                 |           - |   |   16,803 |    218,402 |   272,352 |    490,754 |

| (a)   | Deferred tax |
|-----------------|--------------|

| (b)   | Fair value as deemed cost |
|-----------------|---------------------------|

| (c)   | Convertible debentures |
|-----------------|------------------------|

----

| (d)   | Foreign currency translation |
|-----------------|------------------------------|

| (e)   | Decommissioning liabilities (Reclamation and closure cost obligations) |
|-----------------|------------------------------------------------------------------------|

| (f)   | Property, plant and equipment |
|-----------------|-------------------------------|

| (g)   | Reversal of impairment loss |
|-----------------|-----------------------------|

----

| (h)   | Share purchase warrants |
|-----------------|-------------------------|

| (i)   | Share-based payments |
|-----------------|----------------------|

| (j)   | Other |
|-----------------|-------|

| (k)   | Consolidated statement of cash flows |
|-----------------|--------------------------------------|

----

----

| §   | 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 detections of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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