Document:

EX-4.8

 Exhibit 4.8 
 

 
 (Based on International Financial Reporting Standards (“IFRS”) and stated in thousands of United States
dollars, unless otherwise indicated) 
 INDEX 
 Management’s responsibility for financial reporting 
 Independent Auditors’ report

 Consolidated Financial Statements 
  

	•	 	 Consolidated Statements of Financial Position 

  

	•	 	 Consolidated Statements of Comprehensive Income 

  

	•	 	 Consolidated Statements of Changes in Equity 

  

	•	 	 Consolidated Statements of Cash Flows 

  

	•	 	 Notes to Consolidated Financial Statements 

					
		 	 

	 	2012 FINANCIAL REPORT

  

 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING 

The consolidated financial statements of Alamos Gold Inc. have been prepared by, and are the responsibility of the Company’s management. 

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the
International Accounting Standards Board (“IASB”) and reflect management’s best estimates and judgments based on information currently available. In the opinion of management, the accounting practices utilized are appropriate in the
circumstances and the consolidated financial statements fairly reflect the financial position and results of operations of the Company within reasonable limits of materiality. 
 Management has developed and maintains a system of internal controls to obtain reasonable assurance that the Company’s assets are safeguarded, transactions are authorized, and financial information
is reliable. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls, and therefore, can provide only reasonable assurance as to financial statement reliability and the
safeguarding of assets. 
 The Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit Committee
meets with the Company’s management and external auditors to discuss the results of the audits and to review the consolidated financial statements prior to the Audit Committee’s submission to the Board of Directors for approval. The Audit
Committee also reviews the quarterly financial statements and recommends them for approval to the Board of Directors, reviews with management the Company’s systems of internal control, and approves the scope of the external auditors’ audit
and non-audit work. The Audit Committee is composed entirely of directors not involved in the daily operations of the Company who are thus considered to be free from any relationship that could interfere with their exercise of independent judgment
as a Committee member. 
 The consolidated financial statements have been audited by Ernst & Young LLP, Chartered Accountants and their
report outlines the scope of their examination and gives their opinion on the consolidated financial statements. 
 February 19, 2013

  
 

 
 John A. McCluskey 
 President and Chief Executive Officer 
  
 

 
 James R. Porter, CA 
 Chief Financial Officer 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 INDEPENDENT AUDITORS’ REPORT 
 To the Shareholders of 
 ALAMOS GOLD INC. 

We have audited the accompanying consolidated financial statements of Alamos Gold Inc., which comprise the consolidated statements of financial position
as at December 31, 2012 and 2011, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

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

 AUDITORS’ RESPONSIBILITY 

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 

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

OPINION 
 In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of Alamos Gold Inc. as at December 31, 2012 and 2011, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board. 
  
 

 
 Chartered Accountants 
 Licensed Public Accountants 
 Toronto, Canada 

February 19, 2013 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Financial Position 
 (Stated in thousands of United States
dollars) 
  

									
	 	  	December 31,	 	 	December 31,	 
	 	  	2012	 	 	2011	 
	 ASSETS
	  				 			
	 Current Assets
	  				 			
	 Cash and cash equivalents
	  	$	306,056	  	 	$	169,471	  
	 Short-term investments
	  	 	47,654	  	 	 	53,088	  
	 Amounts receivable (note 5)
	  	 	7,647	  	 	 	6,147	  
	 Advances and prepaid expenses
	  	 	3,207	  	 	 	2,117	  
	 Available-for-sale securities (note 4)
	  	 	10,340	  	 	 	10,355	  
	 Other financial assets (note 4)
	  	 	1,118	  	 	 	244	  
	 Inventory (note 6)
	  	 	42,046	  	 	 	33,220	  
		  	  
	  
	 	 	  
	  
	 
	 Total Current Assets
	  	 	418,068	  	 	 	274,642	  
	 Non-Current Assets
	  				 			
	 Other non-current assets (note 6)
	  	 	1,058	  	 	 	—  	  
	 Exploration and evaluation assets (note 7)
	  	 	127,015	  	 	 	108,454	  
	 Mineral property, plant and equipment (note 8)
	  	 	207,715	  	 	 	216,128	  
		  	  
	  
	 	 	  
	  
	 
	 Total Assets
	  	$	753,856	  	 	$	599,224	  
		  	  
	  
	 	 	  
	  
	 
	 LIABILITIES
	  				 			
	 Current Liabilities
	  				 			
	 Accounts payable and accrued liabilities (note 9)
	  	$	24,874	  	 	$	17,024	  
	 Income taxes payable (note 13)
	  	 	15,497	  	 	 	6,125	  
		  	  
	  
	 	 	  
	  
	 
	 Total Current Liabilities
	  	 	40,371	  	 	 	23,149	  
	 Non-Current Liabilities
	  				 			
	 Deferred income taxes (note 13)
	  	 	38,365	  	 	 	35,008	  
	 Decommissioning liability (note 11)
	  	 	13,934	  	 	 	6,680	  
	 Other liabilities
	  	 	714	  	 	 	837	  
		  	  
	  
	 	 	  
	  
	 
	 Total Liabilities
	  	 	93,384	  	 	 	65,674	  
		  	  
	  
	 	 	  
	  
	 
	 EQUITY
	  				 			
	 Share capital (note 12 a)
	  	$	393,752	  	 	$	355,524	  
	 Contributed surplus
	  	 	22,606	  	 	 	27,861	  
	 Accumulated other comprehensive loss
	  	 	(1,064	) 	 	 	(1,080	) 
	 Retained earnings
	  	 	245,178	  	 	 	151,245	  
		  	  
	  
	 	 	  
	  
	 
	 Total Equity
	  	 	660,472	  	 	 	533,550	  
		  	  
	  
	 	 	  
	  
	 
	 Total Liabilities and Equity
	  	$	753,856	  	 	$	599,224	  
		  	  
	  
	 	 	  
	  
	 
	 Commitments and Contingencies (note 15)
	  				 			
	 Subsequent events (note 18)
	  				 			

 The accompanying notes form an integral part of these consolidated financial statements. 

On behalf of the Board 
  

			
	 

 John A. McCluskey
 President and Chief Executive Officer
	  	 

 Paul Murphy

Director

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Comprehensive Income 
 For the years ended December 31,
2012 and 2011 
 (Stated in thousands of United States dollars, except per share amounts) 

 

									
	 	  	2012	 	 	2011	 
	 OPERATING REVENUES
	  	$	329,372	  	 	$	227,364	  
		  	  
	  
	 	 	  
	  
	 
	 MINE OPERATING COSTS
	  				 			
	 Mining and processing
	  	 	70,168	  	 	 	53,868	  
	 Royalties (note 15 a)
	  	 	16,411	  	 	 	11,157	  
	 Amortization
	  	 	50,678	  	 	 	23,423	  
		  	  
	  
	 	 	  
	  
	 
		  	 	137,257	  	 	 	88,448	  
		  	  
	  
	 	 	  
	  
	 
	 EARNINGS FROM MINE OPERATIONS
	  	 	192,115	  	 	 	138,916	  
	 EXPENSES
	  				 			
	 Exploration
	  	 	6,488	  	 	 	9,540	  
	 Corporate and administrative
	  	 	14,177	  	 	 	9,613	  
	 Share-based compensation (notes 12b and 12 c)
	  	 	7,634	  	 	 	13,525	  
		  	  
	  
	 	 	  
	  
	 
		  	 	28,299	  	 	 	32,678	  
		  	  
	  
	 	 	  
	  
	 
	 EARNINGS FROM OPERATIONS
	  	 	163,816	  	 	 	106,238	  
	 OTHER INCOME (EXPENSES)
	  				 			
	 Finance income
	  	 	3,133	  	 	 	1,717	  
	 Financing expense
	  	 	(536	) 	 	 	(598	) 
	 Foreign exchange gain (loss)
	  	 	14	  	 	 	(3,688	) 
	 Other income (loss)
	  	 	498	  	 	 	(1,234	) 
		  	  
	  
	 	 	  
	  
	 
	 EARNINGS BEFORE INCOME TAXES
	  	 	166,925	  	 	 	102,435	  
	 INCOME TAXES
	  				 			
	 Current tax expense
	  	 	(45,612	) 	 	 	(34,194	) 
	 Deferred tax expense
	  	 	(3,357	) 	 	 	(8,160	) 
		  	  
	  
	 	 	  
	  
	 
	 EARNINGS
	  	$	117,956	  	 	$	60,081	  
	 Other comprehensive income (loss)
	  				 			
	 - Unrealized (loss) on securities
	  	 	(2,350	) 	 	 	(1,089	) 
	 - Reclassification of realized gains (losses) on available-for-sale securities included in earnings
	  	 	2,366	  	 	 	(280	) 
	 - Impairment of available-for-sale securities
	  	 	—  	  	 	 	1,621	  
		  	  
	  
	 	 	  
	  
	 
	 COMPREHENSIVE INCOME
	  	$	117,972	  	 	$	60,333	  
		  	  
	  
	 	 	  
	  
	 
	 EARNINGS PER SHARE (note 12 d)
	  				 			
	 – basic
	  	$	0.98	  	 	$	0.51	  
	 – diluted
	  	$	0.98	  	 	$	0.51	  
		  	  
	  
	 	 	  
	  
	 
	 Weighted average number of common shares outstanding
	  				 			
	 - basic
	  	 	119,861,000	  	 	 	117,375,000	  
	 - diluted
	  	 	120,904,000	  	 	 	118,669,000	  
		  	  
	  
	 	 	  
	  
	 

 The accompanying notes form an integral part of these consolidated financial statements. 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Changes in Equity 
 For the years ended December 31, 2012
and 2011 
 (Stated in thousands of United States dollars) 
  

																									
	 	  	Number of
shares
outstanding	 	  	Share
capital	 	  	Contributed
surplus	 	 	Accumulated
other
comprehensive
loss	 	 	Retained
earnings	 	 	Total Equity	 
	 Balance at January 1, 2011
	  	 	116,340,008	  	  	$	325,867	  	  	$	 23,316	  	 	$	(1,332	) 	 	$	105,278	  	 	$	453,129	  
	 Share-based compensation
	  	 	—  	  	  	 	—  	  	  	 	11,935	  	 	 	—  	  	 	 	—  	  	 	 	11,935	  
	 Shares issued on exercise of options
	  	 	2,043,000	  	  	 	29,657	  	  	 	(7,390	) 	 	 	—  	  	 	 	—  	  	 	 	22,267	  
	 Dividends
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(14,114	) 	 	 	(14,114	) 
	 Earnings
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	60,081	  	 	 	60,081	  
	 Other comprehensive income (tax impact; nil)
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	252	  	 	 	—  	  	 	 	252	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance at December 31, 2011
	  	 	118,383,008	  	  	$	355,524	  	  	$	27,861	  	 	$	(1,080	) 	 	$	151,245	  	 	$	533,550	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
							
	 	  	Number of
shares
outstanding	 	  	Share
capital	 	  	Contributed
surplus	 	 	Accumulated
other
comprehensive
loss	 	 	Retained
earnings	 	 	Total Equity	 
	 Balance at January 1, 2012
	  	 	118,383,008	  	  	$	355,524	  	  	$	27,861	  	 	$	(1,080	) 	 	$	151,245	  	 	$	533,550	  
	 Share-based compensation
	  	 	—  	  	  	 	—  	  	  	 	4,795	  	 	 	—  	  	 	 	—  	  	 	 	4,795	  
	 Shares issued on exercise of options
	  	 	2,488,400	  	  	 	38,228	  	  	 	(10,050	) 	 	 	—  	  	 	 	—  	  	 	 	28,178	  
	 Dividends
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(24,023	) 	 	 	(24,023	) 
	 Earnings
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	117,956	  	 	 	117,956	  
	 Other comprehensive income (tax impact; nil)
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	16	  	 	 	—  	  	 	 	16	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance at December 31, 2012
	  	 	120,871,408	  	  	$	393,752	  	  	$	22,606	  	 	$	(1,064	) 	 	$	245,178	  	 	$	660,472	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 The accompanying notes form an integral part of these consolidated financial statements. 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Cash Flows 
 For the years ended December 31, 2012 and
2011 
 (Stated in thousands of United States dollars) 
  

									
	 	  	2012	 	 	2011	 
	 CASH PROVIDED BY (USED IN):
	  				 			
	 OPERATING ACTIVITIES
	  				 			
	 Earnings
	  	$	117,956	  	 	$	60,081	  
	 Adjustments for items not involving cash:
	  				 			
	 Amortization
	  	 	50,678	  	 	 	23,423	  
	 Financing expense
	  	 	536	  	 	 	598	  
	 Unrealized foreign exchange gain
	  	 	(1,352	) 	 	 	(353	) 
	 Deferred tax expense
	  	 	3,357	  	 	 	8,160	  
	 Share-based compensation
	  	 	7,634	  	 	 	13,525	  
	 Loss (gain) on sale of securities
	  	 	460	  	 	 	(783	) 
	 Impairment of securities
	  	 	—  	  	 	 	1,621	  
	 Other
	  	 	(735	) 	 	 	954	  
	 Changes in non-cash working capital:
	  				 			
	 Fair value of forward contracts
	  	 	—  	  	 	 	(715	) 
	 Amounts receivable
	  	 	(18,865	) 	 	 	(18,218	) 
	 Inventory
	  	 	(5,655	) 	 	 	(6,572	) 
	 Advances and prepaid expenses
	  	 	(1,090	) 	 	 	1,019	  
	 Accounts payable and accrued liabilities, and income taxes payable
	  	 	31,672	  	 	 	23,794	  
		  	  
	  
	 	 	  
	  
	 
		  	 	184,596	  	 	 	106,534	  
		  	  
	  
	 	 	  
	  
	 
	 INVESTING ACTIVITIES
	  				 			
	 Purchases of securities
	  	 	(11,450	) 	 	 	(2,213	) 
	 Sales of securities
	  	 	11,265	  	 	 	—  	  
	 Short-term investments (net)
	  	 	5,434	  	 	 	(11,242	) 
	 Proceeds on sale of equipment
	  	 	—  	  	 	 	889	  
	 Decommissioning liability
	  	 	(1,172	) 	 	 	(145	) 
	 Exploration and evaluation assets
	  	 	(18,561	) 	 	 	(8,687	) 
	 Mineral property, plant and equipment
	  	 	(38,815	) 	 	 	(68,352	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	(53,299	) 	 	 	(89,750	) 
		  	  
	  
	 	 	  
	  
	 
	 FINANCING ACTIVITIES
	  				 			
	 Common shares issued
	  	 	28,178	  	 	 	22,267	  
	 Dividends paid
	  	 	(24,023	) 	 	 	(14,114	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	4,155	  	 	 	8,153	  
		  	  
	  
	 	 	  
	  
	 
	 Effect of exchange rates on cash and cash equivalents
	  	 	1,133	  	 	 	(1,800	) 
		  	  
	  
	 	 	  
	  
	 
	 Net increase in cash and cash equivalents
	  	 	136,585	  	 	 	23,137	  
	 Cash and cash equivalents—beginning of year
	  	 	169,471	  	 	 	146,334	  
		  	  
	  
	 	 	  
	  
	 
	 CASH AND CASH EQUIVALENTS—END OF YEAR
	  	$	306,056	  	 	$	169,471	  
		  	  
	  
	 	 	  
	  
	 
	 Supplemental information:
	  				 			
	 Interest paid
	  	$	—   	  	 	$	 —  	  
	 Interest received
	  	$	3,050	  	 	$	1,380	  
	 Income taxes paid
	  	$	20,700	  	 	$	12,825	  

 The accompanying notes form an integral part of these consolidated financial statements. 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Notes to Consolidated Financial Statements 
 December 31, 2012 and 2011

 (Unaudited—stated in United States dollars, unless otherwise indicated) 
 1. NATURE OF OPERATIONS 
  

 
 Alamos Gold Inc., a resident Canadian company, and its wholly-owned subsidiaries
(collectively the “Company”) are engaged in the acquisition, exploration, development and extraction of precious metals in Mexico and Turkey. The Company owns and operates the Mulatos mine and holds the mineral rights to the Salamandra
group of concessions in the State of Sonora, Mexico, which includes several known satellite gold occurrences. In addition, the Company owns the Aği Daği, Kirazli and Çamyurt gold development projects in Turkey. 

2. BASIS OF PREPARATION 
  

 
 Statement of Compliance 

These consolidated financial statements, including comparative figures, have been prepared using accounting policies in compliance with International
Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). 

The consolidated financial statements were authorized for issue by the Board of Directors on February 19, 2013. 

Use of estimates and judgments 
 The
preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 
 The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review
affects both current and future periods. Accounts which require management to make material estimates and significant assumptions in determining amounts recorded include: recoverable reserves, inventory recoveries, share-based payments,
decommissioning liabilities, units of production amortization, and provisions and contingencies. 
 Judgments made by management in the
application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the current and following fiscal years include: impairment of tangible and intangible assets,
determination of functional currency, amortization methods, uncertain tax positions and recovery of deferred tax assets. 
  

	 	i.	Impairment: 

 The Company assesses its mineral
property, plant and equipment and exploration and evaluation assets annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered
to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and
operating performance. 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

	 	ii.	Recoverable reserves: 

 Ore reserves are
estimates of the amount of ore that can be economically and legally extracted from the Company’s mining properties. The Company estimates its recoverable reserves based on information compiled by appropriately qualified persons relating to the
geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of, commodity prices, production costs,
future capital requirements, and foreign exchange rates, along with geological assumptions and judgments made in estimating the size and grade of the ore body, and metallurgical assumptions made in estimating recovery of the ore body. Changes in the
reserve or resource estimates may impact the carrying value of exploration and evaluation assets, mineral property, plant and equipment, decommissioning liabilities, and amortization expense. 

 

	 	iii.	Units-of-production (“UOP”) amortization: 

 Estimated recoverable reserves are used in determining the amortization of certain mineral property, plant and equipment. This results in an amortization charge proportional to the depletion of the
anticipated remaining mine life. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves. The Company has adopted a methodology based on estimated recoverable reserves over the life of mine.

  

	 	iv.	Inventory (note 6): 

 The Company accounts for
its ore stockpiles and in-process precious metals inventory using a process flow for applicable costs appropriate to the physical transformation of ore through the mining, crushing, leaching and gold recovery process. The Company is required to
estimate the ultimate recovery based on laboratory tests and ongoing analysis of leach pad kinetics in order to determine the recoverable metals from the leach pad at the end of each accounting period. If the Company determines at any time that the
ultimate recovery should be adjusted downward, then the Company will adjust the average carrying value of a unit of metal content in the in-process inventory and adjust upward on a prospective basis the unit cost of subsequent production. Should an
upward adjustment in the average carrying value of a unit of metal result in the carrying value exceeding the realizable value of the metal, the Company would write down the carrying value to the realizable value. 

 

	 	v.	Share based payments (note 12 b and c): 

 The
computed amount of share based compensation is not based on historical cost, but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including
estimates of: the average future hold period of issued stock options or stock appreciation rights before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility
as a reference); and the appropriate risk-free rate of interest. Share-based compensation incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture
rates, and is adjusted if the actual forfeiture rate differs from the expected rate. 
 The resulting value calculated is not necessarily the
value that the holder of the instrument could receive in an arm’s length transaction, given that there is no market for these instruments and they are not transferable. It is management’s view that the value derived is highly subjective
and dependent upon the input assumptions made. 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

	 	vi.	Decommissioning liabilities (note 11): 

 The
Company is required to determine the expected value of the estimated costs of decommissioning liabilities and to recognize this value as a liability when reasonably determinable. Key assumptions in determining the amount of the liability are: total
undiscounted cash outflows, expected timing of payment of the cash outflows and appropriate inflation and discount rates to apply to the timing of cash outflows. Because the liability is recorded on a discounted basis, it is increased over the
passage of time with an offsetting charge to financing expense in the statement of comprehensive income. The Company calculated its estimated mine site closure costs based on a mine closure and reclamation plan prepared by management and reviewed by
an independent third party. The majority of the expenditures associated with reclamation and mine closure will be incurred at the end of the mine life, expected to be in approximately 9 years based on expected proven and probable reserves and the
current rate of production. 
  

	 	vii.	Recovery of deferred tax assets (note 13): 

Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require
management to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of
existing tax laws in each jurisdiction. 
 Functional and presentation currency 
 These consolidated financial statements are presented in United States dollars (“USD”), which is the functional currency of the Company and all its subsidiaries. 

Basis of measurement 
 These consolidated
financial statements have been prepared on a historical cost basis, except for certain derivative and available-for-sale financial instruments which are measured at fair value. The Company prepares its consolidated financial statements, except for
cash flow information, using the accrual basis of accounting. 
 3. SIGNIFICANT ACCOUNTING POLICIES 

 
  
 Summarized below are those policies considered significant to the Company. All accounting policies have been applied consistently to all periods presented in these consolidated financial statements,,
unless otherwise indicated. 
 Basis of consolidation 
 The consolidated financial statements include the financial statements of the Company and the entities controlled by the Company (its subsidiaries). The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control ceases. All inter-company balances and transactions have been eliminated. 

  

					
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	 	2012 FINANCIAL REPORT

  

 The consolidated financial statements include the financial statements of the parent company, Alamos
Gold Inc., and its subsidiaries as listed below: 
  

													
	 	  	Country of
Incorporation	 	  	Equity Interest	 
	 	  	 	 	  	2012	 	 	2011	 
	 Alamos Gold Inc.
	  	 	Canada	  	  	 	—  	  	 	 	—  	  
	 Minas de Oro Nacional, S.A. de C.V.
	  	 	Mexico	  	  	 	100	% 	 	 	100	% 
	 Servicios Administrativos y Operativos S.A. de C.V.
	  	 	Mexico	  	  	 	100	% 	 	 	100	% 
	 Minera Bienvenidos S.A. de C.V.
	  	 	Mexico	  	  	 	100	% 	 	 	100	% 
	 Kuzey Biga Madencilik Sanayi Ticaret AS
	  	 	Turkey	  	  	 	100	% 	 	 	100	% 
	 Dogu Biga Madencilik Sanayi Ticaret AS
	  	 	Turkey	  	  	 	100	% 	 	 	100	% 
	 Alamos Eurasia Madencilik AS
	  	 	Turkey	  	  	 	100	% 	 	 	100	% 

 Foreign currency transactions 
 Transactions in foreign currencies are converted to the Company’s functional currency at exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities of the Company
which are denominated in foreign currencies are translated into the Company’s functional currency at the exchange rate prevailing at the date of the Consolidated Statements of Financial Position. Non-monetary assets and liabilities are
translated at historical exchange rates prevailing at each transaction date. Non-monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. Revenues and
expenses are translated at exchange rates prevailing on the date of the transactions, with the exception of inventory transfers and amortization which are translated at historical exchange rates. All exchange gains and losses are included in the
determination of earnings. 
 Revenue recognition 
 Revenue is earned from the sale of gold and is recognized when dore or refined metal is delivered to a purchaser pursuant to a purchase agreement that fixes the quantity and price of the metal for each
delivery. Revenue is measured at the fair value of the consideration received or receivable. 
 Costs incurred or premium income related to
forward sales or option contracts are recognized in revenue when the related contract is settled. Changes in the fair value of outstanding forward sales or option contracts are recognized in earnings. 

Inventory 
 Inventory which includes
gold-in-process, dore, ore in stockpiles, and parts and supplies, is stated at the lower of cost or net realizable value. 
  

	 	i.	Dore represents a bar containing predominantly gold by value which is generally refined off-site to return saleable metals. Dore inventory is valued at the lower of
average cost to produce the dore and net realizable value. 

  

	 	ii.	 In-process inventory represents costs that are incurred in the process of converting mineralized ores into partially refined precious metals, or dore.
Ore represents material that, at the time of extraction, is expected to be processed into a saleable form. The recovery of gold from ore is achieved through the heap leaching process and through a gravity mill. Under the heap leaching process, ore
is crushed and placed on leach pads where it is treated with a chemical solution, which dissolves the gold contained in the ore. The resulting “pregnant” solution is further processed in a plant where the gold is recovered. Under the
milling process, ore is crushed finer than the leaching process prior to gravity separation. The ore separated through the gravity circuit is then accumulated into a concentrate solution. The concentrate is then leached in a intensive leach reactor
followed by processing in the plant. 

  

					
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	 	2012 FINANCIAL REPORT

  

	 	
Cost of in-process inventory includes operating costs incurred to that stage of the process plus amortization of mineral property, plant and equipment relating to that stage of the process. Costs
capitalized to in-process inventory include direct and indirect materials and consumables; direct labour; repairs and maintenance; utilities; amortization of mineral property, plant and equipment; and local mine administrative expenses. Costs are
removed from in-process inventory and transferred to dore inventory as ounces are produced based on the average cost per recoverable ounce on the leach pad. Costs are recorded in mining and processing costs on the sale of refined gold, as well as
the impact of inventory movement reflected through mining and processing costs in the Consolidated Statements of Comprehensive Income. Recoverable gold on the leach pads is estimated based on the quantities of ore placed on the leach pads (based on
measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on estimated ultimate recovery assumptions). The nature of the leaching process inherently limits the ability
to precisely monitor inventory levels; as a result, estimates are refined based on actual results over time. The ultimate recovery of gold from leach pads will not be known until the leaching process is concluded at the end of the mine life.

  

	 	iii.	Stockpile inventory represents unprocessed ore that has been mined and is available for further processing. The unprocessed ore stockpile is measured by estimating the
number of tonnes added and removed from the stockpile, the number of contained ounces (based on assay data) and estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages are verified by periodic
surveys. Costs are allocated to the stockpile based on the current mining cost per tonne incurred up to the point of stockpiling the ore, including applicable overhead, depletion, depreciation and amortization relating to mining operations, and are
removed at the average cost per ounce. As the unprocessed ore stockpile will not be further processed within one year of the date of these consolidated financial statements, the net carrying amount related to the stockpile has been classified as
non-current assets in the consolidated statements of financial position. 

  

	 	iv.	Parts and supplies inventory is valued at the lower of average cost and net realizable value. Provisions are recorded to reflect present intentions for the use of slow
moving and obsolete parts and supplies inventory. 

 Mineral property, plant and equipment 

 

	 	i.	Mineral property acquisition and mine development costs: 

 The Company may hold interests in mineral property in various forms, including prospecting licenses, exploration and exploitation concessions, mineral leases and surface rights. The Company capitalizes
payments made in the process of acquiring legal title to these properties. 
 Property acquisition and mine development costs are recorded at
cost. Pre-production expenditures are capitalized until the commencement of production. Mine development costs incurred to expand operating capacity, develop new orebodies or develop mine areas in advance of current production are capitalized. Mine
development costs related to current period production are charged to operations as incurred. Interest on financing attributable to mine development is capitalized to mine development costs while construction and development activities at the
property are in progress. When the property is placed into production, those capitalized costs are included in the calculation of the amortization of mine development costs. Property acquisition and mine development costs are amortized by the
units-of-production method based on estimated recoverable reserves. 
  

	 	ii.	Exploration and evaluation expenditures: 

Exploration expenditures on non-producing properties, including drilling and related costs, identified as having development potential, as evidenced by a
positive economic analysis of the project, are treated as mine development costs and capitalized. Expenditures incurred on deposits contiguous with a known deposit 

  

					
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	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 
which has undergone a positive economic analysis are treated as mine development costs and capitalized. Exploration and evaluation expenditures on properties prior to the establishment of a
positive economic analysis are charged to operations as incurred. Drilling costs incurred during the production phase for operational ore control are charged to operations as incurred. 

 

	 	iii.	Mining plant and equipment: 

 Plant and equipment
is stated at cost less accumulated amortization and accumulated impairment losses. Cost includes all expenditures that are directly attributable to the acquisition of the asset. Borrowing costs on qualifying assets are capitalized until the asset is
capable of carrying out its intended use. Plant and equipment is amortized on a units-of-production basis over estimated recoverable reserves, or on a straight-line basis over the estimated useful life of the asset, whichever period is lower.

 Estimates of residual values, useful lives and methods of amortization are reviewed each reporting period, and adjusted prospectively if
appropriate. 
  

	 	iv.	Subsequent costs: 

 The cost of replacing part of
an item within mineral property, plant and equipment is recognized when the cost is incurred and it is probable that the future economic benefits will flow to the Company, and the costs can be measured reliably. The carrying amount of the part that
has been replaced is expensed. Routine repairs and maintenance are expensed as incurred. 
  

	 	v.	Impairment: 

 The carrying values of mineral
property, plant and equipment are reviewed for indications of impairment at each reporting date. When impairment indicators exist, then the asset’s recoverable amount is estimated. 
 If it is determined that the estimated recoverable amount is less than the carrying value of an asset, or its cash-generating unit (“CGU”), then a write-down is made with a charge to operations.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets (the CGU). Impairment losses recognized in respect of CGU’s are allocated on a pro rata basis to the assets in the unit. 
 The
recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows of a mine or development property are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Estimated future cash flows include estimates of recoverable ounces of gold based on proven and
probable reserves. To the extent that economic value exists beyond the proven and probable reserves of a mine or development property, this value is included as part of the estimated future cash flows. Estimated future cash flows also involve
estimates regarding gold prices, production levels, capital, reclamation costs and income taxes. Cash flows are subject to risks and uncertainties and changes in the estimates of the cash flows could affect the recoverability of long-lived assets.

  

	 	vi.	Reversal of impairment: 

 An impairment loss is
reversed if there is indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss had been recognized. 

  

					
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 Cash and cash equivalents 
 Cash and cash equivalents, which include cash and highly liquid investments with original maturities of three months or less at the date of acquisition, are recorded at cost, which approximates fair
value. 
 Short-term investments 

Short-term investments, which represent highly liquid investments with original maturities of greater than three months at acquisition, are recorded at
cost, which approximates fair value. 
 Income taxes 
 Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in earnings except to the extent it relates to items recognized directly in equity or in other
comprehensive income. 
 Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. 
 Deferred tax assets and
liabilities are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences do not result in
deferred tax assets or liabilities: 
  

	 	•	 	 the initial recognition of assets or liabilities, not arising in a business combination, that does not affect accounting or taxable profit

  

	 	•	 	 goodwill 

  

	 	•	 	 taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be
controlled by the parent and it is probable that the temporary difference will not reverse in the foreseeable future. 

Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the
liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs except to the extent it relates to items recognized directly in equity or in other
comprehensive income. 
 A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available
against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced to its recoverable amount. 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they
relate to the same taxable entity and income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis. 
 Uncertain Tax Positions 
 Uncertainties exist with respect to the interpretation of complex
tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising
between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for
possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax
regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective subsidiary’s domicile. As the Company
assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognized. 

  

					
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	 	2012 FINANCIAL REPORT

  

 Share-based payments 
 The Company grants stock options to buy common shares of the Company through its stock option plan as described in note 12 b). The Company accounts for share-based payments using the fair value method.
Under this method, compensation expense is measured at fair value on the date of grant using the Black-Scholes option pricing model, and is recognized as an expense or capitalized, depending on the nature of the grant, with a corresponding increase
in equity, over the period that the employees earn the options. The amount recognized is adjusted to reflect the number of share options expected to vest. 
 In addition, the Company grants stock appreciation rights (“SARs”) as described in note 12 c). The fair value of the amount payable to employees in respect of share appreciation rights, which
are settled in cash, is determined using the Black-Scholes option pricing model, and is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The
liability is remeasured using the option pricing model at each reporting date, and at the intrinsic value on the settlement date. Any changes in the fair value of the liability are recognized as an expense in the Consolidated Statements of
Comprehensive Income. 
 Decommissioning liabilities 
 The Company’s mining and exploration activities are subject to various government laws and regulations relating to the protection of the environment. These laws and regulations are continually
changing and are generally becoming more restrictive. The Company has made, and will continue to make expenditures to comply with such laws and regulations. The Company recognizes liabilities for statutory, contractual, constructive or legal
obligations associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development or normal operation of the assets. Decommissioning costs expected to be incurred in the future
are estimated by the Company’s management based on the information available to them. Actual decommissioning costs could be materially different from the current estimates. Any change in cost estimates, discount rates, or other assumptions
should additional information become available would be accounted for on a prospective basis. The Company’s estimates are reviewed annually for changes in planned operations, regulatory requirements, discount rates, effects of inflation and
changes in estimates. 
 The net present value of the future rehabilitation cost estimates arising from decommissioning of property, plant and
equipment is recognized in the period in which it is incurred with an offsetting amount being recognized as an increase in the carrying amount of the corresponding mining asset. This asset is amortized on a UOP basis over the estimated life of the
mine while the corresponding liability accretes to its undiscounted value by the end of the mine’s life. 
 Provisions 

Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle
the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and risks specific to the liability. 
 Financial instruments 

The Company’s financial instruments consist primarily of monetary assets and liabilities, the fair value of which approximate their carrying value
due to the short-term nature of these instruments. 

  

					
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	 	2012 FINANCIAL REPORT

  

 The Company may enter into foreign exchange forward contracts to manage the Company’s exposure to
fluctuations in the Canadian and United States dollar and Mexican peso foreign exchange rates. The Company may also enter into forward gold sale transactions. See note 4. These forward contracts are marked-to-market and recognized in the
consolidated financial statements at their fair value. 
 Financial assets 
 Financial assets are classified into one of four categories: 
  

	 	•	 	 fair value through profit or loss (“FVTPL”); 

 

	 	•	 	 held-to-maturity (“HTM”); 

  

	 	•	 	 available-for-sale (“AFS”); and, 

  

	 	•	 	 loans and receivables. 

The classification is determined at initial recognition and depends on the nature and purpose of the financial asset. 

 

	 	(i)	FVTPL financial assets: 

 Financial assets are
classified as FVTPL when the financial asset is held for trading or it is designated as FVTPL upon initial recognition. A financial asset is classified as held for trading if: 

 

	 	•	 	 it has been acquired principally for the purpose of selling in the near future; 

 

	 	•	 	 it is a part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short-term profit-taking; or

  

	 	•	 	 it is a derivative that is not designated and effective as a hedging instrument. 

Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in earnings. The Company has
classified its cash and cash equivalents, short-term investments and share purchase warrants held in third party companies as FVTPL financial assets, which are included in other financial assets on the statement of financial position. 

 

	 	(ii)	HTM investments: 

 If the Company has the
positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. HTM investments are recognized on a trade-date basis and are initially measured at fair value, including transaction
costs. The Company does not currently have any assets classified as HTM investments. 
  

	 	(iii)	AFS financial assets: 

 Non-derivative financial
assets, including investments in securities, are classified as AFS and are stated at fair value. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange differences
are recognized in other comprehensive income and presented within equity in accumulated other comprehensive income (loss). 
 Impairment losses,
interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, are recognized directly in earnings rather than equity. When an investment is derecognized or is determined to be impaired, the
cumulative gain or loss previously recognized in accumulated other comprehensive income (loss) is included in earnings for the period. 
 The
fair value of AFS monetary assets denominated in a foreign currency is translated at the spot foreign exchange rate at the date of the Conslidated Statement of Financial Position. The change in fair value attributable to translation differences on
the amortized cost of the asset is recognized in earnings, while other changes are recognized in equity. 

  

					
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	 	2012 FINANCIAL REPORT

  

	 	(iv)	Loans and receivables: 

 Trade and other
receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially recognized at the transaction value plus any directly attributable transaction
costs. Subsequently, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. The impairment loss of receivables is based on a review of all outstanding amounts at period end. Bad debts
are written off during the year in which they are identified. 
  

	 	(v)	Impairment: 

 A financial asset, other than those
classified as FVTPL, is assessed at each reporting period date for indicators of impairment. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. 
 Objective evidence that
financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer
will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

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

 

	 	(vi)	Determination of fair value: 

 The Company has
determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. The Company classifies fair value measurements using a fair value
hierarchy that reflects the significance of the inputs used in making the measurements of the fair value of financial assets and liabilities. 
  

	 	•	 	 Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities; 

 

	 	•	 	 Level 2. Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and 

  

	 	•	 	 Level 3. Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 

The Company has determined that AFS instruments, other financial assets and financial liabilities fall within level 1 of the fair value hierarchy, and
all other financial instruments (including derivative contracts) outstanding as at the date of the statement of financial position fall within level 2 of the fair value hierarchy. See note 4. 
 Financial liabilities 
 Other financial liabilities are initially measured at fair value,
net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The Company has classified accounts payable and accrued liabilities,
dividends payable, and property acquisition liabilities as other financial liabilities. 

  

					
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	 	2012 FINANCIAL REPORT

  

 Earnings per share 
 Basic earnings per share is calculated by dividing the net earnings available to common shareholders divided by the weighted average number of common shares outstanding during the year. The diluted
earnings per share is calculated based on the weighted average number of common shares outstanding during the year, plus the effects of the dilutive common share equivalents. This method requires that the dilutive effect of outstanding options and
warrants issued be calculated using the treasury stock method. This method assumes that all common share equivalents have been exercised at the beginning of the year (or at the time of issuance, if later), and that the funds obtained thereby were
used to purchase common shares of the Company at the average trading price of common shares during the year. 
 Comprehensive income (loss)

 Comprehensive income (loss) is the change in the Company’s net assets that results from transactions, events and circumstances from
sources other than the Company’s shareholders and includes items that are not included in net profit such as unrealized gains or losses on available-for-sale investments and gains or losses on certain derivative instruments. The Company’s
comprehensive income (loss), and components of other comprehensive income are presented, net of tax, in the consolidated statements of comprehensive income (loss) and the consolidated statements of changes in equity. 

Adoption of Accounting Policy effective January 1, 2012 
 International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine was issued in October 2011, and is effective
for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRIC 20 provides guidance on the accounting for the costs of stripping activity in the production phase of surface mining when benefits accrue to the
entity from the stripping activity. In addition, IFRIC 20 requires companies to ensure that capitalized costs are amortized over the useful life of the component of the ore body to which access has been improved due to the stripping activity. The
Company adopted the amendments in its financial statements for the annual period beginning on January 1, 2012, with no impact on transition. The Company capitalized $8.7 million of production stripping costs to Mineral property, plant and
equipment for the year ended December 31, 2012. 
 Future accounting policy changes issued but not yet in effect 

The following are new pronouncements approved by the IASB. The following new standards and interpretations are not yet effective and have not been applied
in preparing these financial statements, however, they may impact future periods. 
 (i) IFRS 9 Financial Instruments (Revised) was issued by
the IASB in October 2010. It incorporates revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.
The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases,
the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. IFRS 9 (2010) is effective for annual periods beginning on or after
January 1, 2015. The impact of IFRS 9 on the Company’s financial instruments has not yet been determined. 
 (ii) IFRS 10 Consolidated
Financial Statements is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRS 10 replaces the guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation –
Special Purpose Entities (“SPE’s”). IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that currently are SPEs in the scope of SIC-12. In addition, the consolidation procedures
are carried forward substantially unmodified from IAS 27. Given the nature of the Company’s operations, the Company does not expect the amendments to have a material impact on the financial statements. 

  

					
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	 	2012 FINANCIAL REPORT

  

 (iii) IFRS 12 Disclosure of Interests in Other Entities was released in May 2011 and is effective for
annual periods beginning on or after January 1, 2013, with early adoption permitted. If an entity applies this standard earlier, it does not need to apply IFRS 10, IFRS 11, IAS 27 (2011) and IAS 28 (2011) at the same time. IFRS 12
contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities. Interests are widely defined as contractual
and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. The required disclosures aim to provide information in order to enable users to evaluate the nature of, and the risks
associated with, an entity’s interest in other entities, and the effects of those interests on the entity’s financial position, financial performance and cash flows. The Company intends to adopt IFRS 12 in its financial statements for the
annual period beginning on January 1, 2013. Given the nature of the Company’s interests in other entities, the Company does not expect the amendments to impact the Company’s financial position or performance. 

(iv) IFRS 13 Fair Value Measurement was issued in May 2011 and is effective prospectively for annual periods beginning on or after January 1, 2013.
The disclosure requirements of IFRS 13 need not be applied in comparative information for periods before initial application. IFRS 13 replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value
measurement guidance. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also establishes a framework
for measuring fair value and sets out disclosure requirements for fair value measurements to provide information that enables financial statement users to assess the methods and inputs used to develop fair value measurements and, for recurring fair
value measurements that use significant unobservable inputs (Level 3), the effect of the measurements on earnings or other comprehensive income. IFRS 13 establishes ‘how’ to measure fair value when it is required or permitted by other
IFRSs. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. The Company intends to adopt
IFRS 13 prospectively in its financial statements for the annual period beginning on January 1, 2013. The impact of adoption of IFRS 13 has not yet been determined. 
 (v) Amendments to IAS 1 Presentation of Financial Statements was issued in June 2011 and is effective for annual periods beginning on or after July 1, 2012. IAS 1 should be applied retrospectively,
but early adoption is permitted. The amendments require that an entity present separately the items of OCI that may be reclassified to earnings in the future from those that would never be reclassified to earnings. Consequently an entity that
presents items of OCI before related tax effects will also have to allocate the aggregated tax amount between these categories. The existing option to present the earnings and other comprehensive income in two statements has remained unchanged. The
Company intends to adopt the amendments in its financial statements for the annual period beginning on January 1, 2013. The Company does not expect the amendments to have a material impact on the financial statements. 

  

					
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	 	2012 FINANCIAL REPORT

  

 4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 

 
  
 a) Financial Assets and Liabilities 
 The carrying value of the Company’s financial
instruments is classified into the following categories: 
  

									
	 	  	December 31,	 	 	December 31,	 
	 	  	2012	 	 	2011	 
	 	  	($000)	 	 	($000)	 
	 Fair value through profit or loss (“FVTPL”) (1)
	  	 	353,710	  	 	 	222,559	  
	 Derivative instruments designated as FVTPL (2)
	  	 	1,118	  	 	 	244	  
	 Available-for-sale securities (3)
	  	 	10,340	  	 	 	10,355	  
	 Loans and receivables (note 5)
	  	 	7,647	  	 	 	6,147	  
	 Derivative contracts designated as FVTPL(4)
	  	 	—  	  	 	 	—  	  
	 Other financial liabilities (5)
	  	 	(40,662	) 	 	 	(23,650	) 
		  	  
	  
	 	 	  
	  
	 

  

	(1) 	 Includes cash of $141.4 million (December 31, 2011 - $44.8 million), cash equivalents of $164.6 million (December 31, 2011 – $124.7 million) and
short-term investments of $47.7 million (December 31, 2011 – $53.1 million). 

	(2) 	 Includes the Company’s investment in the warrants of a publicly traded company. During the year ended December 31, 2012, $0.9 million gain
was recorded in other income on the revaluation of the warrants (December 31, 2011 - $0.9 million loss) 

	(3) 	 Includes the Company’s investment in the common shares of publicly traded entities. 

	(4) 	 Includes the Company’s foreign currency forward and option contracts and gold forward contracts which, for accounting purposes, are not designated
as effective hedges. These are classified within accounts payable and accrued liabilities in the consolidated balance sheet. 

	(5) 	 Includes all other accounts payable and accrued liabilities, income taxes payable, and certain other liabilities. 

For all financial assets and liabilities listed above, fair value equals carrying value as at December 31, 2012 and December 31, 2011.

 b) Derivative Financial Instruments 
 The Company may utilize financial instruments to manage the risks associated with fluctuations in the market price of gold and foreign exchange rates. As at December 31, 2012 and 2011 the Company had
no outstanding gold forward contracts. 
 At December 31, 2012, the Company had outstanding contracts to deliver $10 million Canadian
dollars (“CAD”) in exchange for a fixed amount of USD at future dates up to March, 2013, with CAD:USD rates ranging from of 0.99:1 to 1.00:1. The mark-to-market gain associated with these contracts as at December 31, 2012 was nominal
(December 31, 2011 – nil). 
 c) Risk Management 
 The Company’s activities expose it to a variety of financial risks: market risk (including commodity price, foreign exchange and interest rate risk), credit risk and liquidity risk. The
Company’s risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company may use derivative financial instruments to hedge
certain risk exposures. The Company does not purchase derivative financial instruments for speculative investment purposes. 
 Risk management
is the responsibility of the corporate finance function. The Company’s corporate finance function identifies, evaluates and, where appropriate, mitigates financial risks. Material risks are monitored and are regularly discussed with the Audit
Committee of the Board of Directors. 

  

					
	 20  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

	 	i.	Commodity Price Risk 

 The
Company is exposed to commodity price risk associated with the volatility in the market price of gold. Gold prices are affected by factors beyond the Company’s control, including investment and physical demand, central bank purchases and sales,
producer hedging activities, the relative exchange rate of the United States dollar with other major currencies and political and economic conditions. Worldwide gold production levels also affect gold prices, and the price of gold can be subject to
high levels of short-term volatility due to speculative activities. The Company may enter into derivative financial instruments to manage the Company’s exposure to commodity price risk. However, at this time, the Company has elected not to
actively manage its long-term exposure to commodity price risk through the use of derivative financial instruments. 
  

	 	ii.	Foreign Exchange Risk 

Certain of the Company’s financial assets and liabilities are denominated in Canadian dollars, Mexican pesos or Turkish Lira. In addition, the
Company incurs certain operating costs denominated in Canadian dollars, Mexican pesos or Turkish Lira. Accordingly, the Company is exposed to financial gain or loss as a result of foreign exchange movements against the United States dollar, and the
Company’s operating costs are affected by changes in foreign exchange rates in those currencies. 
 The Company has elected to hedge a
portion of its exposure to fluctuations in the Canadian dollar by buying $10 million CAD fixed rate forward contracts. At December 31, 2012, the Company had net Canadian-dollar denominated assets of approximately $17.5 million. At this level of
exposure to fluctuations in the value of the Canadian dollar, a 10% increase/(decrease) in the value of the Canadian dollar compared to the United States dollar could result in a foreign exchange gain/(loss) of approximately $1.7 million.

 In addition, corporate and administrative costs associated with the Company’s head office in Toronto are mainly denominated in Canadian
dollars. A 10% increase/(decrease) in the value of the Canadian dollar compared to the United States dollar could increase/(decrease) the Company’s reported corporate and administrative costs by approximately $1.1 million annually. 

The Company also has exposure to monetary assets and liabilities denominated in Mexican pesos. Significant cash balances, outstanding amounts receivable,
accounts payable or tax liabilities denominated in Mexican pesos could expose the Company to a foreign exchange gain or loss. The Company partially offsets its balance sheet exposure to changes in the Mexican peso/United States dollar exchange rate
by maintaining cash balances in Mexican pesos to offset a portion of its future tax liabilities and taxes payable balances that are denominated in Mexican pesos. As at December 31, 2012, the Company had net Mexican peso-denominated liabilities
of approximately $35.0 million. A 10% increase (decrease) in the value of the Mexican peso compared to the United States dollar could result in a foreign exchange loss/(gain) of approximately $3.5 million. 

In addition, transactional foreign exchange gains and losses may result from the Company’s inability to predict the exact timing of peso cash
receipts and cash outflows. Due to the recent volatility in the value of the Mexican peso, transactional foreign exchange gains and losses can be significant. If the Mexican peso strengthens against the United States dollar, the Company’s
operating costs (as reported in equivalent United States dollars) increase. A 10% decrease (increase) in the value of the Mexican peso compared to the United States dollar could decrease (increase) the Company’s reported mining and processing
costs and increase (decrease) reported earnings before income taxes by approximately $4.0 million annually. 
 Finally, the Company has exposure
to monetary assets and liabilities denominated in Turkish Lira. Cash balances, outstanding amounts receivable, accounts payable or tax liabilities denominated in Turkish Lira could expose the Company to a foreign exchange gain or loss. At
December 31, 2012, the Company had net Turkish Lira-denominated assets of approximately $8.0 million. A 10% increase (decrease) in the value of the Turkish Lira compared to the United States dollar could result in a foreign exchange gain (loss)
of approximately $0.8 million. 
  

	 	iii.	Interest Rate Risk 

 The
Company’s interest rate risk related to interest-bearing debt obligations is not material as the Company has no outstanding debt. As a result of the Company’s minimal exposure to fluctuations in market interest rates, the Company has
elected not to enter into interest rate swaps or other active interest rate management programs at this time. 

  

					
	 21  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

	 	iv.	Credit Risk 

 Credit risk arises from cash and cash equivalents and short-term investments held with banks and financial institutions, derivative financial instruments (including forward gold sales contracts) and
amounts receivable. The maximum exposure to credit risk is equal to the carrying value of the related financial assets. 
 The objective of
managing counter-party credit risk is to prevent losses in financial assets. The Company assesses the quality of its counter-parties, taking into account their creditworthiness and reputation, past experience and other factors. The Company only
enters into forward gold sales contracts with large reputable financial institutions. 
 The carrying value of amounts receivable are reduced
through the use of an allowance account (when applicable) and the amount of any allowance is recognized as a loss and included in operating expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for
amounts receivable. The majority of the Company’s receivable balances consist of Mexican and Turkish value-added tax recoverable claims. The Company is exposed to credit risk in the case that the subject country is unable to reimburse the
recoverable taxes owed. As at December 31, 2012, the Company was owed $3.0 million and $4.0 million from the Mexican and Turkish governments, respectively. 
  

	 	v.	Liquidity Risk 

 Liquidity
risk arises through the excess of financial obligations due over available financial assets at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available cash reserves and credit in order
to meet its liquidity requirements at any point in time. At December 31, 2012, the Company had cash and cash equivalents and short-term investments of $353.7 million, accounts payable and accrued liabilities of $24.9 million and no debt. The
Company expects that planned construction and development projects at its current operations will be financed from existing cash balances and future operating cash flows. The total cost and planned timing of acquisitions and/or other development or
construction projects is not currently determinable and it is not currently known whether the Company will require external financing in future periods. 
 5. AMOUNTS RECEIVABLE 
  

 
  

									
	 	  	December 31,	 	  	December 31,	 
	 	  	2012	 	  	2011	 
	 	  	($000)	 	  	($000)	 
	 Accounts receivable
	  	 	671	  	  	 	215	  
	 Mexican value-added tax (1) 
	  	 	3,024	  	  	 	3,662	  
	 Turkish value-added tax
	  	 	3,952	  	  	 	2,270	  
		  	  
	  
	 	  	  
	  
	 
		  	$	7,647	  	  	$	6,147	  

  

	1) 	 As permitted by Mexican tax law, the Company offset $16.4 million of Mexican value-added tax receivables against its current taxes payable liability in
2012 (December 31, 2011—$16.9 million) which is not reflected in the Consolidated Statements of Cash Flows. 

  

					
	 22  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 6. INVENTORY 

 
  
  

									
	 	  	December 31,
2012	 	 	December 31,
2011	 
	 	  	($000)	 	 	($000)	 
	 Precious metals dore and refined precious metals
	  	 	8,640	  	 	 	5,484	  
	 In-process precious metals
	  	 	14,785	  	 	 	11,894	  
	 Ore in stockpiles
	  	 	1,058	  	 	 	—  	  
	 Parts and supplies
	  	 	18,621	  	 	 	15,842	  
		  	  
	  
	 	 	  
	  
	 
		  	 	43,104	  	 	 	33,220	  
	 Less: Non-current portion
	  	 	(1,058	) 	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 
		  	$	42,046	  	 	$	33,220	  
		  	  
	  
	 	 	  
	  
	 

 The carrying value of inventory is calculated using weighted average cost. The amount of inventory charged to operations
as mining and processing costs during the year ended December 31, 2012 was $72.2 million (December 31, 2011—$55.8 million). The amount of inventory charged to operations as amortization in the year ended December 31, 2012 was $43.8
million (December 31, 2011—$19.1 million). 
 7. EXPLORATION AND EVALUATION ASSETS 

 
  
 The Company classifies the Aği Daği, Kirazli, and Çamyurt Projects in Turkey as exploration and evaluation assets. Exploration and evaluation assets are not subject to amortization.

 The following is a continuity of the Company’s exploration and evaluation assets for the year ended December 31, 2012. 

 

					
	 	  	Total	 
	 	  	($000)	 
	 Cost as at January 1, 2011
	  	 	99,767	  
	 Additions
	  	 	8,687	  
		  	  
	  
	 
	 Cost as at December 31, 2011
	  	 	108,454	  
	 Additions
	  	 	18,561	  
		  	  
	  
	 
	 Cost as at December 31, 2012
	  	 	127,015	  
		  	  
	  
	 

 8. MINERAL PROPERTY, PLANT AND EQUIPMENT 

 
  
 The Company owns 100% of the Salamandra group of concessions in Mexico. Included within the Salamandra group of concessions is the Mulatos mine which began operations in 2005. 

The majority of the Company’s property, plant and equipment in operations is amortized on a units-of-production basis over an estimated nine year
mine life. Certain mining and office equipment is amortized on a straight line basis over periods ranging from two to five years. 

  

					
	 23  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 The following is a continuity of the Company’s mineral property, plant and equipment for the years
ended December 31, 2012 and December 31, 2011. 
  

																									
	 	  	Mining
plant and
equipment	 	  	Office
and
computer
equipment	 	  	Construction
in progress	 	 	Subtotal	 	  	Mineral
property and
deferred
development	 	  	Total	 
	 	  	($000)	 	  	($000)	 	  	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 
	 Cost as at January 1, 2012
	  	$	173,393	  	  	$	2,375	  	  	$	 23,898	  	 	$	199,666	  	  	$	126,660	  	  	$	326,326	  
	 Additions
	  	 	7,110	  	  	 	1,471	  	  	 	12,331	  	 	 	20,912	  	  	 	17,903	  	  	 	38,815	  
	 Changes in decommissioning liability
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	7,933	  	  	 	7,933	  
	 Transfers from construction in progress
	  	 	33,664	  	  	 	—  	  	  	 	(33,664	) 	 	 	—  	  	  	 	—  	  	  	 	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Cost as at December 31, 2012
	  	$	214,167	  	  	$	3,846	  	  	$	2,565	  	 	$	220,578	  	  	$	152,496	  	  	$	373,074	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accumulated amortization and impairment as at January 1, 2012
	  	$	76,579	  	  	$	1,274	  	  	$	—  	  	 	$	77,853	  	  	$	32,345	  	  	$	110,198	  
	 Amortization expense
	  	 	37,566	  	  	 	551	  	  	 	—  	  	 	 	38,117	  	  	 	17,044	  	  	 	55,161	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accumulated amortization and impairment as at December 31, 2012
	  	$	114,145	  	  	$	1,825	  	  	$	—  	  	 	$	115,970	  	  	$	49,389	  	  	$	165,359	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value as at December 31, 2012
	  	$	100,022	  	  	$	2,021	  	  	$	2,565	  	 	$	104,608	  	  	$	103,107	  	  	$	207,715	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

																									
	 	  	Mining
plant and
equipment	 	 	Office
and
computer
equipment	 	  	Construction
in progress	 	 	Subtotal	 	 	Mineral
property and
deferred
development	 	 	Total	 
	 	  	($000)	 	 	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 	 	($000)	 
	 Cost as at January 1, 2011
	  	$	152,606	  	 	$	1,733	  	  	$	 6,236	  	 	$	160,575	  	 	$	 97,697	  	 	$	258,272	  
	 Additions
	  	 	3,696	  	 	 	642	  	  	 	34,984	  	 	 	39,322	  	 	 	30,263	  	 	 	69,585	  
	 Changes in decommissioning liability
	  	 	—  	  	 	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(1,300	) 	 	 	(1,300	) 
	 Disposals
	  	 	(231	) 	 	 	—  	  	  	 	—  	  	 	 	(231	) 	 	 	—  	  	 	 	(231	) 
	 Transfers from construction in progress
	  	 	17,322	  	 	 	—  	  	  	 	(17,322	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Cost as at December 31, 2011
	  	$	173,393	  	 	$	2,375	  	  	$	23,898	  	 	$	199,666	  	 	$	126,660	  	 	$	326,326	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Accumulated amortization and impairment as at January 1, 2011
	  	$	57,943	  	 	$	859	  	  	$	—  	  	 	$	58,802	  	 	$	25,565	  	 	$	84,367	  
	 Amortization expense
	  	 	18,838	  	 	 	415	  	  	 	—  	  	 	 	19,253	  	 	 	6,780	  	 	 	26,033	  
	 Disposals
	  	 	(202	) 	 	 	—  	  	  	 	—  	  	 	 	(202	) 	 	 	—  	  	 	 	(202	) 
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Accumulated amortization and impairment as at December 31, 2011
	  	$	76,579	  	 	$	1,274	  	  	$	—  	  	 	$	77,853	  	 	$	32,345	  	 	$	110,198	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net book value as at December 31, 2011
	  	$	96,814	  	 	$	1,101	  	  	$	23,898	  	 	$	121,813	  	 	$	94,315	  	 	$	216,128	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

					
	 24  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

 
  
  

									
	 	  	December 31,	 	  	December 31,	 
	 	  	2012	 	  	2011	 
	 	  	($000)	 	  	($000)	 
	 Trade accounts payable and accrued liabilities
	  	 	15,820	  	  	 	11,684	  
	 Royalties payable
	  	 	5,254	  	  	 	3,790	  
	 SARs liability (note 12(c))
	  	 	3,800	  	  	 	1,550	  
		  	  
	  
	 	  	  
	  
	 
		  	$	24,874	  	  	$	17,024	  
		  	  
	  
	 	  	  
	  
	 

 10. DIVIDENDS 

 
  
  

									
	 	  	Year ended
December 31,
2012	 	  	Year
ended
December 31,
2011	 
	 	  	($000)	 	  	($000)	 
	 Declared and paid
	  	 	24,023	  	  	 	14,114	  
		  	  
	  
	 	  	  
	  
	 
		  	$	24,013	  	  	$	14,114	  
	 Weighted average number of common shares outstanding
	  	 	119,861,000	  	  	 	117,375,000	  
	 Dividend per share
	  	$	0.20	  	  	$	0.12	  
		  	  
	  
	 	  	  
	  
	 

 11. DECOMMISSIONING LIABILITY 

 
  
 A decommissioning liability is recognized in the period in which it is incurred, on a discounted cash flow basis, if a reasonable estimate can be made. The liability accretes to its full value over time
through charges to earnings. In addition, the discounted value is added to the carrying amount of the Company’s mineral property, plant and equipment, and is amortized on a units-of-production basis over the life of the Mine. 

A continuity of the decommissioning liability is as follows: 
  

									
	 	  	Year
ended
December 31,
2012	 	 	Year
ended
December 31,
2011	 
	 	  	($000)	 	 	($000)	 
	 Obligations at beginning of year
	  	 	6,680	  	 	 	7,559	  
	 Revisions in estimated cash flows and changes in assumptions
	  	 	7,933	  	 	 	(1,300	) 
	 Payments made against the liability
	  	 	(1,172	) 	 	 	(145	) 
	 Accretion of discounted cash flows
	  	 	493	  	 	 	566	  
		  	  
	  
	 	 	  
	  
	 
	 Obligations at end of year
	  	$	13,934	  	 	$	6,680	  
		  	  
	  
	 	 	  
	  
	 

 Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis
upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary
decommissioning works required which will reflect market conditions at the relevant time. 

  

					
	 25  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 The assumptions used in the determination of the decommissioning liability are as follows as at:

  

									
	 	  	December 31,
2012	 	 	December 31,
2011	 
	 Estimated cost ($000)
	  	 	24,840	  	 	 	13,431	  
	 End of mine life
	  	 	2021	  	 	 	2020	  
	 Discount rate
	  	 	6.6	% 	 	 	7.8	% 
		  	  
	  
	 	 	  
	  
	 

 12. SHARE CAPITAL 

 
  
  

	a)	Authorized share capital of the Company consists of an unlimited number of fully paid common shares without par value. 

 

									
	 	  	Number of Shares	 	  	Amount	 
	 	  	 	 	  	($000)	 
	 Outstanding at January 1, 2011
	  	 	116,340,008	  	  	 	325,867	  
	 Exercise of stock options
	  	 	2,043,000	  	  	 	22,267	  
	 Transfer from contributed surplus to share capital for stock options exercised
	  	 	—   	  	  	 	7,390	  
		  	  
	  
	 	  	  
	  
	 
	 Outstanding at December 31, 2011
	  	 	118,383,008	  	  	 	355,524	  
	 Exercise of stock options
	  	 	2,488,400	  	  	 	28,178	  
	 Transfer from contributed surplus to share capital for stock options exercised
	  	 	—   	  	  	 	10,050	  
		  	  
	  
	 	  	  
	  
	 
	 Outstanding at December 31, 2012
	  	 	120,871,408	  	  	$	393,752	  
		  	  
	  
	 	  	  
	  
	 

  

	b)	Stock options 

 The Company has a stock option
plan (the “Plan”), originally approved by the Board of Directors (the “Board”) on April 17, 2003, and amended and ratified on May 25, 2007, May 15, 2008, April 7, 2009, June 2, 2010 and
May 31, 2012, which allows the Company to grant incentive stock options to officers of the Company. Under the Plan, the number of shares reserved for issuance cannot exceed 7% of the total number of shares which are outstanding on the date of
grant. The exercise price, term (not to exceed ten years) and vesting provisions are authorized by the Board at the time of the grant. The plan is subject to shareholder approval and ratification every three years. 

Stock options granted under the Plan are exercisable for a five-year period. Incentive stock options granted vest 1/3 on the first anniversary date, 1/3
on the second anniversary and 1/3 on the third anniversary date. 
 The following is a continuity of the changes in the number of stock options
outstanding for the years ended December 31, 2012 and 2011: 
  

									
	 	  	Number	 	 	Weighted average
exercise 
price ($CAD)	 
	 Outstanding at January 1, 2011
	  	 	6,914,700	  	 	$	11.98	  
	 Granted
	  	 	2,115,000	  	 	 	14.30	  
	 Exercised
	  	 	(2,043,000	) 	 	 	10.64	  
	 Forfeited
	  	 	(581,000	) 	 	 	14.43	  
		  	  
	  
	 	 	  
	  
	 
	 Outstanding at December 31, 2011
	  	 	6,405,700	  	 	$	12.95	  
	 Granted
	  	 	840,000	  	 	 	16.30	  
	 Exercised
	  	 	(2,488,400	) 	 	 	11.29	  
	 Forfeited
	  	 	(97,000	) 	 	 	14.86	  
		  	  
	  
	 	 	  
	  
	 
	 Outstanding at December 31, 2012
	  	 	4,660,300	  	 	$	14.40	  
		  	  
	  
	 	 	  
	  
	 

 The weighted average share price at the date of exercise for stock options exercised in the year ended December 31,
2012 was CAD$18.99 (for the year ended December 31, 2011 – CAD$17.34). 

  

					
	 26  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 For the year ended December 31, 2012, the Company granted 840,000 incentive stock options at
exercise price at CAD$16.30, compared to 2,115,000 stock options granted at an exercise prices ranging from CAD$14.24 per share to CAD$16.39 per share for the year ended December 31, 2011. 

The fair value of stock options granted were estimated using the Black-Scholes option pricing model with the following assumptions: 

 

					
	 For options granted in the year ended:
	  	 December 31,

2012
	  	 December 31,

2011

	 Weighted average share price at grant date
	  	$16.30	  	$14.30
	 Risk-free rate
	  	1.0%-1.2%	  	1.7%-2.3%
	 Expected dividend yield
	  	1.04%	  	0.43%-0.58%
	 Expected stock price volatility (based on historical volatility)
	  	40%-51%	  	42%-58%
	 Expected life, based on terms of the grants (months)
	  	30-60	  	20-60
	 Weighted average per share fair value of stock options granted
	  	$5.48	  	$4.96

 Option pricing models require the input of highly subjective assumptions, particularly as to the expected price
volatility of the stock. Changes in these assumptions can materially affect the fair value estimate, and therefore it is management’s view that the existing models may not provide a single reliable measure of the fair value of the
Company’s stock option grants. 
 As at December 31, 2012, 3,514,300 stock options were exercisable. The remaining 1,146,000
outstanding stock options vest over the following three years. 
 Stock options outstanding and exercisable as at December 31, 2012:

  

																					
	 	  	Outstanding	 	  	Exercisable	 
	 Range of exercise
 prices ($CAD)
	  	Number of
options	 	  	Weighted
average
exercise price
($CAD)	 	  	Weighted
average
remaining
contractual
life (years)	 	  	Number of
options	 	  	Weighted
average
exercise
price
($CAD)	 
	 $6.00 - $8.00
	  	 	30,000	  	  	 	6.76	  	  	 	0.42	  	  	 	30,000	  	  	 	6.76	  
	 $8.01 - $10.00
	  	 	430,000	  	  	 	9.80	  	  	 	1.44	  	  	 	430,000	  	  	 	9.80	  
	 $10.01 - $14.00
	  	 	100,000	  	  	 	13.04	  	  	 	2.13	  	  	 	100,000	  	  	 	13.04	  
	 $14.01 - $15.00
	  	 	3,215,300	  	  	 	14.60	  	  	 	2.59	  	  	 	2,919,300	  	  	 	14.64	  
	 $15.01 - $17.50
	  	 	885,000	  	  	 	16.31	  	  	 	4.39	  	  	 	35,000	  	  	 	16.65	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
		  	 	4,660,300	  	  	$	14.40	  	  	 	2.80	  	  	 	3,514,300	  	  	$	13.96	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	c)	Stock Appreciation Rights (“SARs”) 

In 2011, the Company’s Board approved a cash-settled stock appreciation rights plan (“SARs Plan”) to grant incentive SARs to its
directors, officers, employees and consultants. Under the SARs Plan, the number of units reserved for issuance cannot exceed 8% of the total number of common shares which are outstanding on the date of grant. The exercise price, term (not to exceed
ten years) and vesting provisions are authorized by the Board at the time of the grant. 
 SARs granted to directors, officers, employees and
certain consultants under the SARs Plan are exercisable for a five-year period. SARs granted prior to May 31, 2012 vest 20% on the date of grant, and 20% at each six-month interval following the date of grant. Vesting provisions in the SARs
Plan were amended effective May 31, 2012. All grants subsequent to this amendment are subject to vesting of 1/3 on the first anniversary date, 1/3 on the second anniversary and 1/3 on the third anniversary date. 

SARs are cash-settled liabilities, which are remeasured at each reporting date and at the settlement date. Any changes in the fair value of the liability
are recognized as an expense to share-based compensation in the Statements of Comprehensive Income. As at December 31, 2012, the SARs liability was $3.8 million compared to $1.6 million at December 31, 2011. The SARs liability is recorded
in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position. 

  

					
	 27  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 The following is a continuity of the changes in the number of SARs outstanding for the years period
ended December 31, 2012 and 2011: 
  

									
	 	  	Number	 	 	Weighted
average
exercise price ($CAD)	 
	 Outstanding at January 1, 2011
	  	 	—  	  	 	$	—  	  
	 Granted
	  	 	770,000	  	 	 	16.36	  
		  	  
	  
	 	 	  
	  
	 
	 Outstanding at December 31, 2011
	  	 	770,000	  	 	$	16.36	  
	 Granted
	  	 	830,000	  	 	 	18.48	  
	 Exercised
	  	 	(52,180	) 	 	 	15.49	  
	 Forfeited
	  	 	(17,140	) 	 	 	15.49	  
		  	  
	  
	 	 	  
	  
	 
	 Outstanding at December 31, 2012
	  	 	1,530,680	  	 	$	17.55	  
		  	  
	  
	 	 	  
	  
	 

 The fair value of SARs granted were estimated using the Black-Scholes option pricing model with the following
assumptions: 
  

					
	 For SARS granted in the year ended:
	  	 December 31,

2012
	  	 December 31,

2011

	 Weighted average share price at grant date
	  	$18.48	  	$16.36
	 Risk-free rate
	  	1.0%-1.6%	  	1.1%-1.5%
	 Expected dividend yield
	  	0.65%-1.04%	  	0.70%-0.80%
	 Expected stock price volatility (based on historical volatility)
	  	41%-64%	  	41%-66%
	 Expected life, based on terms of the grants (months)
	  	20-60	  	20-60
	 Weighted average per share fair value of SARs granted
	  	$6.65	  	$5.45

 Stock appreciation rights outstanding and exercisable as at December 31, 2012: 

 

																					
	 	  	Outstanding	 	  	Exercisable	 
	 Range of exercise
 prices ($CAD)
	  	Number of
SARs	 	  	Weighted
average
exercise price
($CAD)	 	  	Weighted
average
remaining
contractual
life (years)	 	  	Number of
SARs	 	  	Weighted
average
exercise price
($CAD)	 
	 $15.00 - $17.00
	  	 	450,680	  	  	 	15.90	  	  	 	2.79	  	  	 	163,200	  	  	 	15.72	  
	 $17.01 - $19.00
	  	 	605,000	  	  	 	17.56	  	  	 	3.86	  	  	 	294,000	  	  	 	17.28	  
	 $19.01 - $20.00
	  	 	475,000	  	  	 	19.11	  	  	 	4.75	  	  	 	0	  	  	 	0	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
		  	 	1,530,680	  	  	$	17.55	  	  	 	3.82	  	  	 	457,200	  	  	$	16.72	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	d)	Earnings per share 

 Basic earnings per share
amounts are calculated by dividing earnings for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding
during the period, plus the effects of the dilutive common share equivalents. 
  

									
	 	  	For the year ended	 
	 	  	December 31,
2012	 	  	December 31,
2011	 
	 Earnings (000)
	  	$	117,956	  	  	$	60,081	  
	 Weighted average number of common shares outstanding
	  	 	119,861,000	  	  	 	117,375,000	  
		  	  
	  
	 	  	  
	  
	 
	 Basic earnings per share
	  	$	0.98	  	  	$	0.51	  
	 Dilutive effect of stock options outstanding
	  	 	1,043,000	  	  	 	1,294,000	  
	 Diluted weighted average number of common shares outstanding
	  	 	120,904,000	  	  	 	118,669,000	  
		  	  
	  
	 	  	  
	  
	 
	 Diluted earnings per share
	  	$	0.98	  	  	$	0.51	  
		  	  
	  
	 	  	  
	  
	 

  

					
	 28  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 13. INCOME TAXES 

 
  
 a) Recent tax changes 
 In 2009, the Mexican government approved tax reform that includes a
2% increase in the income tax rate in Mexico from 28% to 30% for a three-year period starting in 2010. In December 2012, the Mexican government extended the 30% income tax rate for an additional year. The Mexican income tax rate is scheduled to be
30% for 2013, 29% for 2014, and 28% for 2015 onwards. 
 Effective January 1, 2008, the Company became subject to a Single Rate Tax Law
enacted by the Mexican government on September 28, 2007. Under the Single Rate Tax Law, the Company’s Mexican operating subsidiaries are subject to a tax equivalent to 17.5% of the Company’s revenues less certain allowable deductions
(as determined on a cash basis). The single rate tax is payable each year to the extent that it exceeds income tax otherwise payable pursuant to the pre-existing Mexican income tax laws. Any excess single rate tax paid cannot be credited against
income taxes payable in future periods. For the years ended December 31, 2012 and 2011, the application of the new single rate tax did not impact the Company’s tax expense. 
 b) Rate Reconciliation 
 The reconciliation of the expected tax expense at a combined
statutory rate in Canada of 26.5% (2011 –28.25%) and provision for income tax expense is: 
  

									
	 	  	December 31,
2012	 	 	December 31,
2011	 
	 	  	($000)	 	 	($000)	 
	 Earnings before income taxes
	  	 	166,925	  	 	 	102,435	  
		  	  
	  
	 	 	  
	  
	 
	 Expected tax expense at statutory income tax rate
	  	 	44,234	  	 	 	28,944	  
	 (Decrease)/increase resulting from:
	  				 			
	 Difference in foreign tax rates
	  	 	5,750	  	 	 	2,000	  
	 Non-deductible stock-based compensation expense
	  	 	1,980	  	 	 	3,820	  
	 Non-taxable loss (gain)
	  	 	1,615	  	 	 	3,620	  
	 Change in foreign exchange rates
	  	 	(3,630	) 	 	 	4,750	  
	 Inflation net (deductible losses) taxable gains
	  	 	(880	) 	 	 	(1,350	) 
	 Increase (decrease) in Mexican deferred income tax rates
	  	 	(100	) 	 	 	570	  
		  	  
	  
	 	 	  
	  
	 
	 Income tax expense
	  	$	48,969	  	 	$	42,354	  
		  	  
	  
	 	 	  
	  
	 

  

					
	 29  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 c) Deferred tax reconciliation 
 The following information summarizes the principal temporary differences and the related deferred tax effect: 
  

																	
	December 31, 2012	  	Canada	 	  	Mexico	 	 	Turkey	 	  	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	  	($000)	 
	 Deferred tax assets
	  				  				 				  			
	 Asset retirement obligations
	  	 	—  	  	  	 	4,154	  	 	 	—  	  	  	 	4,154	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
		  	 	—  	  	  	 	4,154	  	 	 	—  	  	  	 	4,154	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Deferred tax liabilities
	  				  				 				  			
	 Other short-term
	  	 	—  	  	  	 	(13	) 	 	 	—  	  	  	 	(13	) 
	 Inventory
	  	 	—  	  	  	 	(2,405	) 	 	 	—  	  	  	 	(2,405	) 
	 Mineral property, plant and equipment
	  	 	—  	  	  	 	(40,101	) 	 	 	—  	  	  	 	(40,101	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
		  	 	—  	  	  	 	(42,519	) 	 	 	—  	  	  	 	(42,519	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 
	 Net Deferred tax liabilities
	  	$	—  	  	  	$	(38,365	) 	 	$	—  	  	  	$	(38,365	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	  	  
	  
	 

  

																	
	December 31, 2011	  	Canada	 	  	Mexico	 	 	Turkey	 	 	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 
	 Deferred tax assets
	  				  				 				 			
	 Asset retirement obligations
	  	 	—  	  	  	 	1,950	  	 	 	—  	  	 	 	1,950	  
	 Other short-term
	  	 	—  	  	  	 	120	  	 	 	—  	  	 	 	120	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  	 	—  	  	  	 	2,070	  	 	 	—  	  	 	 	2,070	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Deferred tax liabilities
	  				  				 				 			
	 Inventory
	  	 	—  	  	  	 	(1,220	) 	 	 	—  	  	 	 	(1,220	) 
	 Mineral property, plant and equipment
	  	 	—  	  	  	 	(35,408	) 	 	 	(450	) 	 	 	(35,858	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
		  	 	—  	  	  	 	(36,628	) 	 	 	(450	) 	 	 	(37,078	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net deferred tax liabilities
	  	$	—  	  	  	$	(34,558	) 	 	$	(450	) 	 	$	(35,008	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 d) Loss Carry-forwards and other tax attributes 
 Deferred tax assets are recognized for the carry-forward of unused tax losses and tax credits to the extent that it is probable that taxable profits will be available against which the unused tax losses /
credits can be utilized. The Company has not recognized the benefit of tax loss carry-forwards and other tax attributes in Canada or Turkey as at December 31, 2012 and December 31, 2011. 

Non-capital losses available in Canada to be utilized in subsequent years are approximately $22.6 million expiring between 2014 and 2031. Net capital
losses available in Canada to be utilized in subsequent years are approximately $12.6 million which carryforward indefinitely. In addition, the Company has financing costs of $0.9 million in Canada which will be deducted in future years. 

Non-capital losses available in Turkey to be utilized in subsequent years are approximately $4.4 million expiring between 2013 and 2017. 

e) Unrecognized deferred tax liabilities 

The temporary differences associated with investments in subsidiaries, for which a deferred tax liability has not been recognized, aggregate $270 million
as at December 31, 2012 (December 31, 2011—$320 million). 

  

					
	 30  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 14. SEGMENTED REPORTING 

 
  
 The Company operates in one business segment (the exploration, mine development and extraction of precious metals, primarily gold) in three geographic areas: Canada, Mexico and Turkey. 

 

																																	
	As at	  	December 31, 2012	 	  	December 31, 2011	 
	 	  	Mexico	 	  	Turkey	 	 	Canada	 	 	Total	 	  	Mexico	 	  	Turkey	 	 	Canada	 	 	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 
	 Non-current assets
	  	 	207,581	  	  	 	127,662	  	 	 	545	  	 	 	335,788	  	  	 	215,111	  	  	 	109,007	  	 	 	464	  	 	 	324,582	  
	 Assets
	  	 	414,632	  	  	 	140,126	  	 	 	199,098	  	 	 	753,856	  	  	 	395,313	  	  	 	117,520	  	 	 	86,391	  	 	 	599,224	  
	 Liabilities
	  	 	88,005	  	  	 	719	  	 	 	4,660	  	 	 	93,384	  	  	 	61,874	  	  	 	1,666	  	 	 	2,134	  	 	 	65,674	  
			
	 	  	Year ended
December 31,
2012	 	  	Year ended
December 31,
2011	 
	 	  	Mexico	 	  	Turkey	 	 	Canada	 	 	Total	 	  	Mexico	 	  	Turkey	 	 	Canada	 	 	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 
	 Revenues
	  	 	329,372	  	  	 	—   	  	 	 	—  	  	 	 	329,372	  	  	 	227,364	  	  	 	—   	  	 	 	—   	  	 	 	227,364	  
	 Earnings (loss)
	  	 	139,846	  	  	 	(4,850	) 	 	 	(17,040	) 	 	 	117,956	  	  	 	89,890	  	  	 	(6,135	) 	 	 	(23,674	) 	 	 	60,081	  

 15. COMMITMENTS AND CONTINGENCIES 

 
  
 a) Royalty 
 Production from certain concessions within the Salamandra district, including
the Mulatos Mine, is subject to a production royalty payable at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs. The royalty is calculated based on the daily average London PM Fix
gold market prices, not actual prices realized by the Company. Production to a maximum of two million ounces of gold is subject to royalty. As at December 31, 2012, the royalty was paid or accrued on approximately 1,005,000 ounces of applicable
gold production. Royalty expense for the year ended December 31, 2012 was $16.4 million (year ended December 31, 2011: $11.2 million). 
 In addition, a third party has a 2% Net Smelter Return Royalty on production from the Company’s Aği Daği project. The Company has not recorded an accrual for this royalty at
December 31, 2012 as the project is not in production. The Company is also subject to 2% state royalty on production in Turkey, subject to certain deductions. 
 b) Mulatos Town Relocation 
 The Company commenced the planned relocation of the town of
Mulatos in 2007 and relocation contracts were signed with over half of the families residing in Mulatos at that time. Property owners and possessors were offered a comprehensive benefits package including compensation for their property at a premium
to independent third-party valuations and/or relocation benefits. In certain cases, relocation benefits include deferred monthly payments. Since the start of the Mulatos relocation effort in 2007, the Company has invested approximately $7.3 million
in property acquisition, relocation benefits, legal, and related costs. In addition, the Company has recognized a liability of $0.3 million representing the discounted value of expected future payments for relocation benefits to property owners and
possessors that had signed contracts with the Company as at December 31, 2012. The discounted value of the liability was capitalized to mineral property, plant and equipment. 

  

					
	 31  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 During 2008, the Company, through its wholly-owned subsidiaries, entered into a land purchase agreement
with the Mulatos Ejido, the local landowners. Pursuant to the land purchase agreement, the Company made a payment of $1.3 million in order to secure temporary occupation rights to specified land. An additional payment of approximately $1.0 million
(based on current exchange rates) which has not been accrued as at December 31, 2012, is payable once the land has been vacated and transferred to the Company. The probability and timing of this additional payment is currently uncertain.

 In 2010, the Mulatos Ejido filed a complaint with the Unitary Agrarian Court to nullify the 2008 land purchase agreement. In June 2012, the
Agarian Unitary Court issued a judgement in which it ruled that the Company’s wholly-owned subsidiary has been completely discharged of all claims made against it in this lawsuit. The Court also confirmed the validity of the 2008 land purchase
agreement. In August 2012, the Mulatos Ejido filed an appeal with the Federal Courts. 
 Additional future property acquisition, relocation
benefits, legal and related costs may be material. The Company cannot currently determine the expected timing, outcome of negotiations or costs associated with the relocation of the remaining property owners and possessors and potential land
acquisitions. 
 c) Operating lease commitments 
 The Company has entered into operating lease commitments relating to the corporate office lease. Future minimum lease payments under non-cancellable operating leases as at December 31, 2012 are as
follows: 
  

					
	 	  	As at December 
31,
2012	 
	 	  	($000)	 
	 2013
	  	 	236	  
	 2014
	  	 	238	  
	 2015
	  	 	238	  
	 2016
	  	 	20	  
	 2017 and beyond
	  	 	—  	  
		  	  
	  
	 
	 Total
	  	$	732	  
		  	  
	  
	 

 16. RELATED PARTY TRANSACTIONS 

 
  
 Remuneration of key management (includes the Corporation’s directors and executive team) 
  

									
	 Expense by nature:
	  	2012	 	  	2011	 
	 	  	($000)	 	  	($000)	 
	 Management salaries and benefits
	  	 	3,955	  	  	 	3,418	  
	 Directors fees
	  	 	479	  	  	 	230	  
	 Share based payments1 – Management
	  	 	5,106	  	  	 	5,983	  
	 Share based payments1 – Directors
	  	 	812	  	  	 	3,536	  
		  	  
	  
	 	  	  
	  
	 
		  	$	10,352	  	  	$	13,167	  
		  	  
	  
	 	  	  
	  
	 

  

	1. 	 Represents grant date fair value of stock options and SARs granted during the year 

These transactions are in the normal course of operations and all of the transactions are measured at the exchange amount of consideration established
and agreed to by the parties. 
 17. MANAGEMENT OF CAPITAL 

 
  
 The Company defines capital that it manages as its shareholders equity. The Company’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern so
that it can continue to provide returns for shareholders and benefits for other stakeholders. At December 31, 2012, total managed capital was $660.5 million (December 31, 2011 - $533.6 million). 

  

					
	 32  
	 	 	ALAMOS GOLD INC.	  

					
		 	

	 	2012 FINANCIAL REPORT

  

 The Company’s capital structure reflects the requirements of a company focused on sustaining strong
cash flows from its current mining operations and financing both internal and external growth opportunities and development projects. The Company faces lengthy development lead times as well as risks associated with increasing capital costs and
project completion timing due to the availability of resources, permits and other factors beyond the Company’s control. The Company’s operations are also significantly affected by the volatility of the market price of gold. 

The Company continually assesses its capital structure and makes adjustments to it with reference to changes in economic conditions and risk
characteristics associated with its underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares, pay dividends, sell assets or enter into new debt arrangements. 

The Company manages its capital structure by performing the following: 
  

	 	•	 	 Maintaining a liquidity cushion in order to address any potential operational disruptions or industry downturns 

 

	 	•	 	 Preparing detailed budgets and cash flow forecasts for each of mining operations, exploration, development projects and corporate activities that are
approved by the Board of Directors 

  

	 	•	 	 Regular internal reporting and Board of Directors’ meetings to review actual versus budgeted spending and cash flows 

 

	 	•	 	 Detailed project financial analysis to assess or determine new funding requirements 

There were no changes in the Company’s approach to managing capital during the year. 
 18. SUBSEQUENT EVENTS 
  

 
 On January 14, 2013, the Company announced it commenced an offer to acquire
Aurizon Mines Ltd. (“Aurizon”) for approximately CAD$780 million in cash and shares (the “Offer”). Alamos has also listed its common shares on the New York Stock Exchange under the ticker symbol “AGI”, and commenced
trading on February 13, 2013. 
 Under the terms of the Offer, Alamos proposes to acquire all of the issued and outstanding Aurizon Shares
(“Aurizon Shares”) for consideration of, at the election of each Aurizon shareholder, either (i) 0.2801 common shares of the Company (“Alamos Shares”), or (ii) CAD$4.65 in cash, in each case, subject to pro-ration based
on a maximum cash consideration of CAD$305,000,000 and a maximum number of Alamos Shares issued of 23,500,000. 
 On February 18, 2013, the
Company announced that it was extending the Offer to March 5, 2013, unless further extended or withdrawn. The Offer is conditional upon Alamos acquiring that number of Aurizon shares, which, together with the Aurizon shares already owned by
Alamos, represent not less than 66 2/3 percent of the outstanding Aurizon Shares calculated on a fully-diluted basis, as well as receipt of all necessary governmental or regulatory approvals and other customary unsolicited offer conditions.

 In January 2013, the Company issued 6,584,380 common shares pursuant to share purchase agreements entered into between Alamos and certain
current and former shareholders of Aurizon (the “Vendors”) for the purchase of 23,507,283 common shares of Aurizon. The purchase price payable by Alamos to each of the Vendors was CAD$4.65 per Aurizon Share. The purchase price was
satisfied by the delivery of Alamos Shares at an exchange ratio of 0.2801 of an Alamos Share for each Aurizon Share. 
 19. RECLASSIFICATION

  
  
 The comparative consolidated financial statements have been reclassified to conform to the presentation of the current year consolidated financial statements. 

  

					
	 33  
	 	 	ALAMOS GOLD INC.EX-4.9

 Exhibit 4.9 

 

			
	

 	 	ALAMOS GOLD INC.

 MANAGEMENT’S DISCUSSION AND ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
 This
management’s discussion and analysis (“MD&A”) of the operating results and financial position of Alamos Gold Inc. and its subsidiaries (the “Company”) is for the year ended December 31, 2012 compared to the year
ended December 31, 2011. Together with the consolidated financial statements and related notes, the MD&A provides a detailed account and analysis of the Company’s financial and operating performance for the year. The Company’s
functional and presentation currency is the United States dollar. This MD&A is current to February 19, 2013 and should be read in conjunction with the Company’s Annual Information Form and other public filings available at
www.sedar.com (“SEDAR”) and on EDGAR at www.sec.gov. Management is responsible for the consolidated financial statements referred to in this MD&A, and provides officers disclosure certifications filed with the SEC and Canadian
provincial securities commissions. The Audit Committee reviews the consolidated financial statements and MD&A, and recommends approval to the Company’s Board of Directors. 
 The MD&A should be read in conjunction with the consolidated financial statements of the Company and related notes, which have been prepared in accordance with International Financial Reporting
Standards (“IFRS”). Refer to Note 3 of the December 31, 2012 consolidated financial statements for disclosure of the Company’s significant accounting policies. This discussion addresses matters we consider important for an
understanding of our financial condition and results of operations as at year ending December 31, 2012. 
 Note to U.S. Investors

 All references to mineral reserves and resources contained in this MD&A are determined in accordance with National Instrument 43-101,
Standards of Disclosure for Mineral Projects (“NI 43-101”) of the Canadian Securities Administrators (“CSA”) and Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) standards. While the terms “mineral
resource,” “measured mineral resource,” “indicated mineral resource,” and “inferred mineral resource” are recognized and required by Canadian regulations, they are not defined terms under the Securities and
Exchange Commission (“SEC”) standards in the United States (“U.S.”). As such, information contained in this MD&A concerning descriptions of mineralization and resources under Canadian standards may not be comparable to
similar information made public by U.S. companies subject to the reporting and disclosure requirements of the SEC. “Indicated mineral resource” and “inferred mineral resource” have a great amount of uncertainty as to their
existence and economic and legal feasibility. It cannot be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a higher category of resource. Investors are
cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into proven and probable reserves. 

 Overview 
 Alamos Gold Inc. is a publicly-traded company on the Toronto Stock Exchange (TSX: AGI) and New York Stock Exchange (NYSE: AGI). The Company owns and operates the Mulatos mine (“Mulatos” or the
“Mine”) within the Salamandra group of concessions located in the state of Sonora in northwest Mexico. In addition, the Company owns the Aği Daği, Kirazli and Çamyurt gold development projects, located in the Biga
Peninsula of northwestern Turkey. 
 Mexico 
 The Salamandra group of concessions comprises 30,536 hectares, and contains the producing Mulatos mine as well as several advanced and grassroots exploration projects. The Mine achieved commercial
production in 2006 and produces gold in dore form for shipment to a refinery. Exploration potential includes both mineralized extensions and satellite deposits in close proximity to the existing mining operations. Proven and probable reserves as at
December 31, 2011 were 65.0 million tonnes grading 1.14 grams of gold per tonne of ore (“g/t Au”) for approximately 2.4 million contained ounces of gold, providing a mine life of approximately nine years at current
production levels. 
 Turkey 

In early 2010, the Company acquired the 8,317 hectare Aği Daği and Kirazli gold development projects in Turkey, which contain established
mineral resources and several highly prospective exploration targets. In June 2012, the Company published a positive preliminary feasibility study for the Aği Daği and Kirazli projects, showing total life of mine production of
1.5 million ounces of gold and 4.9 million ounces of silver. In addition, the Company owns the Çamyurt exploration project located approximately three kilometres (“km”) southeast of Aği Daği. In June 2012, the
Company released an initial inferred mineral resource estimate for the Çamyurt project of 24.6 million tonnes grading 0.81 g/t Au and 4.77 g/t Ag for 640,000 ounces of gold and 3.8 million ounces of silver. 

Measured and indicated mineral resources at Aği Daği and Kirazli (reported at a 0.2 g/t Au cut-off) at December 31, 2011 total
110.1 million tonnes grading 0.62 g/t Au and 4.76 g/t silver (“Ag”) for approximately 2.2 million ounces of gold and 16.8 million ounces of silver. Inferred mineral resources total 26.4 million tonnes grading 0.53 g/t
Au and 4.36 g/t Ag, for approximately 0.5 million contained ounces of gold and 3.7 million contained ounces of silver. 
 Fourth
Quarter 2012 Highlights 
 Financial Performance 
  

	 	•	 	 Sold 62,516 ounces of gold for record quarterly revenues of $106.9 million 

 

	 	•	 	 Realized record quarterly earnings of $37.9 million ($0.31 per basic share), a 78% increase compared to the fourth quarter of 2011

  

	 	•	 	 Generated record cash from operating activities before changes in non-cash working capital of $53.5 million ($0.44 per basic share); after changes in
non-cash working capital of $69.2 million ($0.57 per basic share) 

  

	 	•	 	 Increased cash and cash equivalents and short-term investments to $353.7 million at December 31, 2012 

  
 2 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Operational Performance 

 

	 	•	 	 Produced a record 67,800 ounces of gold at a cash operating cost of $377 per ounce of gold sold (total cash costs including royalties were $461 per
ounce of gold sold) 

  

	 	•	 	 Achieved record quarterly average crusher throughput of 17,900 tonnes per day (“tpd”) 

 

	 	•	 	 Continued to improve production from the Escondida high grade zone through higher grades milled, averaging 14.12 g/t Au for the period

 Full Year 2012 Highlights 
 Financial Performance 
  

	 	•	 	 Sold 197,516 ounces of gold at an average realized price of $1,668 per ounce for revenues of $329.4 million 

 

	 	•	 	 Realized earnings of $118.0 million ($0.98 per basic share) compared to earnings of $60.1 million ($0.51 per share) in 2011

  

	 	•	 	 Generated strong cash from operating activities before changes in non-cash working capital of $178.5 million ($1.49 per basic share) compared to $107.2
million ($0.91 per basic share) in 2011 

  

	 	•	 	 Paid a total of $24.0 million in dividends to shareholders ($0.20 per basic share) 

Operational Performance 
  

	 	•	 	 Produced 200,000 ounces of gold at a cash operating cost of $355 per ounce of gold sold (total cash costs including royalties were $438 per ounce of
gold sold), below the Company’s guidance range of $365 to $390 per ounce. 

  

	 	•	 	 Achieved record average crusher throughput of 16,000 tonnes per day 

 

	 	•	 	 Started production from the Escondida high grade zone in the first quarter, and achieved design average throughput of 500 tonnes per day for the year

  

	 	•	 	 Reported a net positive ounce reconciliation of 14% comparing mined blocks from the global Mulatos Pit to the block model 

Subsequent to year-end: 
  

	 	•	 	 Announced an offer to acquire all of the common shares of Aurizon Mines Ltd. 

 

	 	•	 	 Released 2013 production guidance of 180,000 to 200,000 ounces at a cash operating cost per ounce sold of $415 to $435 per ounce (exclusive of the 5%
royalty) 

  

	 	•	 	 Commenced trading on the New York Stock Exchange on February 13, 2013 under the ticker symbol “AGI” 

 

	 	•	 	 Strengthened its management team through the addition of two key hires: Andrew Cormier as Vice President of Construction and Development, and Jason
Dunning as Vice President of Exploration. 

  
 3 

 Results of Operations 
 Gold production of 200,000 ounces in 2012 increased 31% compared to 153,000 ounces in 2011. In the table below, the tonnes of crushed ore stacked on the leach pad exclude mill tailings, which are included
within the number of tonnes of crushed ore milled. The table below outlines key production indicators in 2012 and 2011: 
  

																									
	Production summary	  	 Q1
 2012
	 	 	 Q2
 2012
	 	 	 Q3
 2012
	 	 	 Q4
 2012
	 	 	YTD 2012	 	 	YTD 2011	 
	 Ounces produced (1)
	  	 	40,500	  	 	 	48,200	  	 	 	43,500	  	 	 	67,800	  	 	 	200,000	  	 	 	153,000	  
	 Crushed ore stacked on leach pad (tonnes) (2)
	  	 	1,225,000	  	 	 	1,486,000	  	 	 	1,345,000	  	 	 	1,590,000	  	 	 	5,646,000	  	 	 	5,164,000	  
	 Grade (g/t Au)
	  	 	1.17	  	 	 	1.15	  	 	 	1.25	  	 	 	1.20	  	 	 	1.19	  	 	 	1.31	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Contained ounces stacked
	  	 	45,900	  	 	 	54,900	  	 	 	54,000	  	 	 	61,200	  	 	 	216,000	  	 	 	217,030	  
	 Crushed ore milled (tonnes)
	  	 	25,000	  	 	 	44,600	  	 	 	49,100	  	 	 	57,800	  	 	 	176,500	  	 	 	—  	  
	 Grade (g/t Au)
	  	 	10.17	  	 	 	10.78	  	 	 	13.25	  	 	 	14.12	  	 	 	12.49	  	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Contained ounces milled
	  	 	8,300	  	 	 	15,500	  	 	 	20,900	  	 	 	26,200	  	 	 	70,900	  	 	 	—  	  
	 Ratio of total ounces produced to contained ounces stacked and milled
	  	 	75	% 	 	 	68	% 	 	 	58	% 	 	 	78	% 	 	 	70	% 	 	 	71	% 
	 Total ore mined (tonnes)
	  	 	1,270,000	  	 	 	1,498,000	  	 	 	1,399,000	  	 	 	1,619,000	  	 	 	5,786,000	  	 	 	5,327,000	  
	 Waste mined (tonnes)
	  	 	775,000	  	 	 	1,013,000	  	 	 	750,000	  	 	 	822,000	  	 	 	3,360,000	  	 	 	3,486,000	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total mined (tonnes)
	  	 	2,045,000	  	 	 	2,511,000	  	 	 	2,149,000	  	 	 	2,441,000	  	 	 	9,146,000	  	 	 	8,813,000	  
	 Waste-to-ore ratio
	  	 	0.61	  	 	 	0.68	  	 	 	0.54	  	 	 	0.51	  	 	 	0.58	  	 	 	0.65	  
	 Ore crushed per day (tonnes) – combined
	  	 	13,900	  	 	 	16,800	  	 	 	15,200	  	 	 	17,900	  	 	 	16,000	  	 	 	14,100	  

  

	(1) 	 Reported gold production for Q4 2011 and YTD 2011 has been adjusted to reflect final refinery settlement. Reported gold production for Q4 2012 and YTD
2012 is subject to final refinery settlement and may be adjusted. 

	(2) 	 Excludes mill tailings stacked on the heap leach pad during the period. 

 Fourth Quarter 2012 Highlights 
 In the fourth quarter of 2012, production reached a record
67,800 ounces of gold, 46% higher than production of 46,500 ounces in the fourth quarter of 2011, and 41% higher than the previous quarterly production record of 48,200 ounces. Gold production in the fourth quarter benefited from higher than
budgeted throughput and grade from the gravity mill, which is processing ore from the Escondida high grade zone. 
 Total crusher throughput in
the fourth quarter of 2012 averaged a record 17,900 tpd, above the annual budgeted rate of 17,500 tpd and 12% higher than 16,000 tpd in the same period last year. Higher crusher throughput was achieved through a reduction in downtime resulting from
improved maintenance practices. 

  
 4 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Commissioning of the gravity mill to process ore from the Escondida high-grade zone was completed in
the first quarter of 2012. Mill production from the Escondida high grade zone continued to improve in the fourth quarter of 2012, with daily average throughput of 630 tonnes exceeding budgeted levels. 

The grade of the crushed ore stacked on the leach pad in the fourth quarter of 2012 of 1.20 g/t Au was higher than the full year budgeted grade of 1.00
g/t Au, but below the grade in the fourth quarter of 2011 of 1.33 g/t Au. Applying higher gold price assumptions to the mine model has resulted in material previously classified as waste becoming economic to mine and therefore classified as low
grade ore. This has the effect of lowering the average grade mined. 
 The grade of the Escondida high-grade zone mined and milled rose to 14.12
g/t Au in the fourth quarter, an increase from the grade milled in the third quarter of 13.25 g/t Au. 
 The ratio of ounces produced to
contained ounces stacked or milled (“recovery ratio”) was 78% in the fourth quarter of 2012. The recovery ratio in the fourth quarter benefitted from gold production deferred from the third quarter as a result of dilution on the heap leach
pad during the rainy season. 
 Recoveries from the gravity mill have been continuously improving since mill start-up in the first quarter of
2012; however, they remain below budgeted levels of 90%. While the lower mill recoveries slow the gold recovery process, they do not affect ultimate recoveries of the Escondida high grade ore, as tailings from the milling process are stacked on the
leach pad, where bottle roll testing indicates that over 90% of this gold is recovered. In the fourth quarter, the gravity portion of the mill recovery was approximately 75%. 
 Full Year 2012 
 Higher gold production in 2012 relative to the same period of 2011 was
primarily attributable to production from the gravity mill, which started operation in early 2012. Gold production in the 2012 also benefited from a 13% increase in crushed ore stacked in relative to the same period of 2011, which was partially
offset by a 9% decrease in the grade stacked on the leach pad. 
 Crusher throughput in 2012 averaged 16,000 tpd, 13% higher than 14,100 tpd in
the same period of last year. Crusher throughput increased steadily throughout 2012, reaching 17,900 tpd in the fourth quarter. The Company anticipates crusher throughput in 2013 to average 17,500 tpd. 

The grade of the crushed ore stacked on the leach pad in 2012 of 1.19 g/t Au was 19% higher than the full year budgeted grade of 1.00 g/t Au. The
reconciliation of mined blocks to the block model for the Global Mulatos Pit, including Escondida, for the year ended December 31, 2012 was +7%, +6% and +14% for tonnes, grade and ounces respectively. Since the start of mining activities in
2005, the project-to-date reconciliation is +2%, +7%, +10% for tonnes, grade and ounces, respectively. Positive variances indicate that the Company is mining more gold than was indicated in the reserve model. 

Improvements in ore control practices throughout the year have been reflected in the grade mined and milled as well as the block model reconciliation
results. The grade milled in 2012 was 12.49 g/t Au, and improved every quarter since the start-up of the gravity mill in the first quarter. To-date, the Company has mined and milled a total of 176,000 tonnes from the Escondida high grade zone,
representing approximately 41% of the pit-contained high grade mineral reserve tonnes. 
 The recovery ratio in 2012 was 70%, below the
Company’s budgeted average recovery ratio for the year of 77%. This lower recovery ratio was the result of the deferral of gold production from the gravity mill as a result of lower than budgeted mill recoveries. 

  
 5 

 Operating Costs 
 The following table compares costs per tonne for the periods ended 2012 and 2011: 
  

																									
	Costs per tonne summary(3)	  	 Q1
 2012
	 	  	 Q2
 2012
	 	  	 Q3
 2012
	 	  	 Q4
 2012
	 	  	 YTD
 2012
	 	  	 YTD
 2011
	 
	 Mining cost per tonne of material (ore and waste)
	  	$	2.61	  	  	$	2.51	  	  	$	2.87	  	  	$	3.09	  	  	$	2.77	  	  	$	1.90	  
	 Waste-to-ore ratio
	  	 	0.61	  	  	 	0.68	  	  	 	0.54	  	  	 	0.51	  	  	 	0.58	  	  	 	0.65	  
	 Mining cost per tonne of ore
	  	$	4.21	  	  	$	4.21	  	  	$	4.41	  	  	$	4.65	  	  	$	4.38	  	  	$	3.14	  
	 Crushing/conveying cost per tonne of ore
	  	$	2.42	  	  	$	2.08	  	  	$	2.64	  	  	$	2.20	  	  	$	2.32	  	  	$	2.42	  
	 Processing cost per tonne of ore
	  	$	2.71	  	  	$	3.02	  	  	$	4.80	  	  	$	4.40	  	  	$	3.77	  	  	$	3.02	  
	 Mine administration cost per tonne of ore
	  	$	2.10	  	  	$	1.81	  	  	$	2.03	  	  	$	1.79	  	  	$	1.92	  	  	$	1.91	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total cost per tonne of ore (1), (2)
	  	$	11.44	  	  	$	11.12	  	  	$	13.88	  	  	$	13.04	  	  	$	12.39	  	  	$	10.49	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	(1) 	 Q4 and YTD 2012 cost per tonne reflects total costs related to crushed ore stacked on the leach pad and crushed ore milled on a blended basis

	(2) 	 Q4 and YTD 2011 cost per tonne figures represent costs related crushed ore stacked on the leach pad only 

	(3) 	 Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation
of certain measures presented in this table. 

 Total cost per tonne of ore in 2012 of $12.39 increased 18% compared to the
same period of 2011. The higher total cost per tonne of ore in 2012 is primarily attributable to higher mining costs and processing costs resulting from increases in input costs (including higher salaries and rising cyanide and diesel costs), as
well as costs associated with the gravity mill, which are reflected in the 2012 cost per tonne figures. These inflationary pressures were partially offset by higher crusher throughput, which had the effect of lowering fixed costs on a per tonne
basis. 
 Mining cost per tonne of material was $2.77 in 2012, 46% higher than $1.90 in 2011, as a result of a higher salaries and diesel costs,
as well as costs incurred by contractors utilized in mining operations which were not incurred in the previous year. In addition, mining cost per tonne of ore was $4.38 in 2012, 39% higher than $3.14 per tonne in 2011. 

Crushing and conveying cost per tonne of ore was $2.32 in 2012, 4% lower than 2011. In late 2011, the Company reconfigured the crushing circuit, which
has reduced year-to-date power and maintenance costs on a per tonne basis. 
 Processing costs per tonne of ore in 2012 were $3.77 compared to
$3.02 in 2011, a 25% increase. Higher processing costs in 2012 relative to the same period of 2011 were the result of the operation of the gravity mill in 2012, which has a higher per-tonne cost. In addition, cyanide costs increased on a per-tonne
basis due to inflationary pressures. 
 Mine administration costs per tonne of ore in 2012 were consistent with 2011, as payroll cost increases
were offset by higher throughput, which has the effect of lowering fixed costs on a per-tonne basis. 
 Cash operating cost of $355 per ounce of
gold sold in 2012 was below the low end of the Company’s guidance of $365 per ounce, and 4% lower than $368 per ounce reported in 2011. This decrease is primarily due to the lower cash costs attributable to ounces produced from the

  
 6 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 
Escondida high grade zone in 2012, as well as the weakening Mexican peso versus budget, which had the effect of lowering Mexican peso-denominated costs. These cost reductions were partially
offset by higher input costs, including labour, cyanide and diesel. 
 Cash operating costs include total costs incurred in the period, in
addition to inventory adjustments that recognize the allocation of costs to and from the Company’s in-process leach pad gold inventory in the period. The Company utilizes a gold process flow inventory model that allocates total costs incurred
to mill processing or to the recoverable ounces stacked on the leach pad in that period, and charges each ounce of gold produced on an average cost basis. Accordingly, cash operating costs reflect not only the cash spent in a period, but also an
adjustment to reflect the increase or decrease in the leach pad inventory. 
 A reconciliation of total costs to cash operating costs is
presented below: 
  

									
	Cash operating cost reconciliation (1)	  	2012	 	 	2011	 
	 Total cost per tonne of ore
	  	$	12.39	  	 	$	10.49	  
	 Ore stacked/milled (tonnes)
	  	 	5,823,000	  	 	 	5,164,000	  
		  	  
	  
	 	 	  
	  
	 
	 Total cost
	  	$	72,147,000	  	 	$	54,170,000	  
	 Inventory adjustments to reflect ounces allocated to stockpile inventory
	  	($	941,000	) 	 	 	—  	  
	 Inventory adjustments to reflect additional ounces produced from (allocated to) leach pad inventory and other period
costs
	  	($	1,038,000	) 	 	($	302,000	) 
		  	  
	  
	 	 	  
	  
	 
	 Mining and processing costs allocated to ounces sold as

reported on income statement
	  	$	70,168,000	  	 	$	53,868,000	  
	 Ounces sold
	  	 	197,516	  	 	 	146,390	(2) 
		  	  
	  
	 	 	  
	  
	 
	 Cash operating cost per ounce sold
	  	$	355	  	 	$	368	  
		  	  
	  
	 	 	  
	  
	 

  

	(1) 	 Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation
of certain measures presented in this table. 

	(2) 	 Total ounces sold in 2011 were 151,000, of which 4,610 ounces were estimated to have been derived from ore processed in developing the Escondida zone
and have been accounted for as pre-production ounces with the associated revenues and operating costs offset against capitalized development costs. 

 In 2012, the Company decreased the number of ounces on the leach pad inventory, as the number of ounces produced was higher than the number of recoverable ounces stacked. Leach pad inventory, which
incorporates both cash operating costs and amortization, increased to $14.8 million at December 31, 2012 from $11.9 million at December 31, 2011, reflecting higher costs and amortization per ounce in inventory. 

  
 7 

 Investments in Mineral Property, Plant and Equipment and Acquisitions 

A summary of the cash invested in operating capital and development activities for the period ended December 31, 2012 is presented below: 

 

					
	 	  	 YTD 2012
 ($000)
	 
	 Operating and Expansion Capital – Mexico
	  			
	 Crushing system
	  	$	2,838	  
	 Gravity mill
	  	 	2,024	  
	 Component changes
	  	 	5,722	  
	 Interlift liners
	  	 	1,956	  
	 Construction
	  	 	3,468	  
	 Other
	  	 	4,748	  
		  	  
	  
	 
		  	 	20,756	  
	 Development – Mexico
	  			
	 Escondida/El Salto development
	  	 	10,248	  
	 Capitalized exploration
	  	 	5,868	  
	 Victor / San Carlos permitting
	  	 	990	  
	 Mulatos relocation
	  	 	314	  
		  	  
	  
	 
		  	 	17,420	  
	 Development – Turkey
	  			
	 Development and capitalized exploration
	  	 	18,561	  
	 Equipment
	  	 	364	  
		  	  
	  
	 
		  	 	18,925	  
	 Head office – Toronto
	  			
	 IT infrastructure and furniture
	  	 	274	  
		  	  
	  
	 
	 Cash invested in mineral property, plant and equipment and exploration and evaluation assets
	  	$	57,375	  
		  	  
	  
	 

 Operating and Expansion Capital – Mexico 
 Operating capital spending in Mexico in 2012 included sustaining and expansion capital of $20.8 million, consisting of $1.4 million for construction primarily related to achieving cyanide code
certification, $4.9 million related to completing the gravity mill and crushing circuit in the first quarter, $5.7 million for component changes, $2.0 million for the addition of interlift liners on the leach pad and $6.8 million of other capital.

 Development – Mexico 

Development activities in Mexico in 2012 were focused on continuing development of the El Salto portion of the Mulatos pit as well as additional stripping
activities, pit design and stability work at Escondida. 
 During 2012, the Company invested $1.0 million on permitting activities related to
the San Carlos and El Victor deposits as it continues to seek additional sources of high-grade material as feed for the mill. Metallurgical testing completed in 2011 demonstrated that higher grade ore at San Carlos is amenable to gravity processing,
potentially more than doubling the amount of feed available for the gravity plant. In addition, drill results at El Victor North have intercepts of high-grade material, suggesting the potential for an additional source of future gravity mill feed.
Metallurgical testing and additional exploration work is planned to further delineate these high-grade zones. 

  
 8 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Development – Turkey 
 The Aği Daği and Kirazli gold projects are located on the Biga Peninsula of northwestern Turkey. Aği Daği is located approximately 50 km southeast of Çanakkale and Kirazli is
located approximately 25 km northwest of Aği Daği. Çanakkale is the largest centre on the Biga Peninsula with a population of approximately 97,000. Infrastructure in close proximity to the project is excellent and well-serviced with
paved roads, transmission lines, and electricity generating facilities. 
 In June 2012, the Company published a preliminary feasibility study
summary of the Aği Daği and Kirazli projects. The highlights are summarized below: 
  

	 	•	 	 Total life of mine production of 1.5 million ounces of gold and 4.9 million ounces of silver. 

 

	 	•	 	 Annual combined gold production is expected to peak in 2017 at 237,000 ounces, and will average 166,000 ounces per year over the nine year combined
mine life. 

  

	 	•	 	 First gold production from the Kirazli project in 2014, followed by gold production from Aği Daği in 2016. 

 

	 	•	 	 Mine life of seven years for Aği Daği and five years for Kirazli. 

 

	 	•	 	 Pre-production capital expenditures of $424.4 million. 

 

	 	•	 	 Average life of mine cash operating costs of $544 per ounce sold, total cash costs per ounce sold of $579. 

 

	 	•	 	 At a $1,239 per ounce gold price assumption, after-tax net present value (“NPV”) at a 5% discount rate of $275.6 million and after-tax
internal rate of return (“IRR”) of 22.3%. 

  

	 	•	 	 At a gold price of $1,575 per ounce, after-tax NPV at a 5% discount rate increases to $604.6 million and after-tax IRR of 36.5%.

 In addition, the Company reported an initial inferred mineral resource estimate of 640,000 ounces at Çamyurt.
Inclusion of the Çamyurt resource in a development scenario represents a major opportunity to further enhance the economic potential of the Company’s Turkish projects. The preliminary feasibility study for Aği Daği and Kirazli
incorporates significant capital spending on infrastructure that is expected to benefit the economics of the Çamyurt project. The average grade of the resources at Çamyurt is substantially higher than at the Aği Daği and
Kirazli projects. As a result, once Çamyurt is factored into the Company’s development plan, it is expected to reduce cash costs per ounce on a combined project basis, as well as enhance combined project economics. 

The Company has submitted the final environmental impact assessment (“EIA”) report for Kirazli, and expects a response from the Turkish
Government in the first quarter of 2013. The final Aği Daği EIA report is expected to be submitted in the first quarter of 2013, with a response expected in the second quarter. Permitting and construction activities are expected to take up
to 18 months once the EIAs are approved. 
 In 2012, total expenditures in Turkey were $22.4 million, of which $18.9 million was capitalized.
Investments were focused on exploration, engineering and permitting work. The Company had up to nine drill rigs operating at a cost of $9.1 million in 2012, focused on condemnation, geotechnical and exploration drilling. 

Exploration Summary 
 Total exploration
expenditures in 2012 were $18.0 million. In Mexico, total exploration spending was $8.9 million. This included $5.9 million of drilling costs at East Estrella, San Carlos and El Victor, which were capitalized and $3.0 million of early-stage
exploration and administration costs, which were expensed. Total exploration spending in Turkey was $9.1 million, of which $3.5 million related to drilling at Firetower and Rock Pile was expensed, while $5.6 million related to development work at
Çamyurt, Aği Daği and Kirazli was capitalized. 

  
 9 

 Exploration – Mexico 
 Exploration expenditures in Mexico in 2012 totalled $8.9 million. The Company completed 48,822 metres (“m”) of reverse circulation (“RC”) drilling in 453 holes and 7,174 m of core
drilling in 40 holes in 2012. Exploration activities in the fourth quarter were primarily focused on completing infill and step-out drilling programs at El Victor and East Estrella to upgrade mineral resources to the measured and indicated
categories, and continued deep directional drilling at San Carlos. Three drill rigs were active during the fourth quarter, with two rigs allocated to drilling at San Carlos. 
 El Victor North 
 The El Victor North area contains gold-bearing silica and advanced argillic
alteration contiguous with the El Victor deposit. El Victor North has the potential to expand mineral resources and reserves along the northern boundary of the Gap to El Victor trend. The results of the drill program are expected to extend the El
Victor pit design north and west of the current pit design outline. 
 Total exploration spending at El Victor North was $2.8 million with a
total of 3,124 m in four RC holes, for a total of 2,300 m in 13 core holes and 18,145 m in 120 RC holes drilled in 2012. Ore-grade mineralization has been extended up to 300 m to the north over a strike length of 550 m contiguous with the El Victor
mineral reserve. Wide intervals of low-grade mineralization with local high-grade intercepts have been encountered. The majority of thick low-grade intercepts are hosted by advanced argillic alteration, with local high-grade gold in vuggy silica
zones. The Company completed the infill and step-out drilling program to upgrade the resource to the measured and indicated category. New drill holes at the extreme north edge of the deposit extend the deposit an additional 80 m north of previous
intercepts to a distance 420 m north of the main El Victor deposit axis. 
 Recent highlighted intercepts from drilling include: 

2.040 g/t Au over 76.22 m (12EV242) 
 1.735 g/t
Au over 50.80 m (12EV248) 
 1.304 g/t Au over 27.44 m and 1.725 g/t Au over 30.49 m (12EV289) 

Drilling was completed prior to year end, with results to be included in the 2012 mineral reserve and resource update. 

East Estrella 
 Exploration drilling directly
east of the Mulatos pit southeast wall continued through the quarter. Condemnation drilling completed to investigate a proposed waste dump site east of the Estrella Pit by previous operators encountered a number of near-surface gold intercepts along
with localized high-grade silver mineralization. Drilling earlier in the year confirmed widespread gold-silver-copper mineralization in the area, and the program expanded significantly to develop measured and indicated resources. Mineralization in
the northern part of the project area is gold-dominant, near-surface, and stratiform, and structurally controlled with higher contents of silver and copper to the south. An additional 3,386 m of drilling was completed in 26 RC holes during the
quarter, for a total of 13,165 m in 93 RC and 920 m in seven core holes. 
 Recent highlighted intercepts from drilling conducted to date
include: 
 1.798 g/t Au over 25.55 m (12SX064)
 4.396 g/t Au over 51.65 m, including 9.983 g/t Au over 5.45 m and 7.371 g/t Au over 6.5 m (12SX081)

2.6 g/t Au over 24.60 m (12SX089)

  
 10 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Highlighted silver intercepts from recent drilling include: 

386.2 g/t Ag over 13.10 m (12SX069)
 1,078.4 g/t
Ag over 5.70 m (12SX070)
 403.2 g/t Ag over 9.30 m (12SX077)
 121.1 g/t Ag over 17.80m (12SX081) 
 San Carlos 

Drilling resumed at San Carlos during the fourth quarter, targeted at deep high-grade gold mineralization extending to the east of the San Carlos resource
and reserve. High-grade intercepts have been encountered up to 500 m from the existing pit boundary. An infill and step-out directional drilling program is currently in progress to define the mineralization extents and develop the resource. Drill
progress has been relatively slow at San Carlos due to the directional drilling complexity and deep, deviating drill holes that have to be steered to the target. During the fourth quarter, nine directional holes were completed by RC pilot holes with
core tails, for a total of 3,096 m of drilling. In 2012, a total of 9,386 m of drilling was completed in 25 RC holes, and 1,319 m in three core holes. 
 In 2011, the Company obtained positive results from metallurgical testing conducted on high-grade ore at San Carlos. The results indicated that the high-grade ore at San Carlos is amenable to gravity
separation and capable of providing an additional source of feed for the gravity mill. Ultimate recovery rates (gravity separation followed by leaching the tailings with cyanide) were 78% and 70% for the two large samples processed. The Company has
high-grade proven and probable mineral reserves at San Carlos of 649,000 tonnes grading 7.67 g/t Au for approximately 160,000 contained ounces. The Company continues to evaluate the potential to mine a portion of the San Carlos deposit through
underground mining methods. 
 Highlighted intercepts from recently conducted drilling include: 

7.729 g/t Au over 4.65 m (12SC177) 
 3.839 g/t Au
over 17.55 m, including 10.517 g/t Au over 4.15 m (12SC178) 
 5.154 g/t Au over 17.3 m (12SC178B) 

12.850 g/t Au over 6.09m, including 24.325 g/t Au over 3.04m (12SC183) 
 El Realito 
 Drill hole data from the 2004 to 2006 El Realito drilling programs has been
re-evaluated in light of current gold prices and developed into a new geologic model that will be subject to a preliminary resource estimation. Oxide gold mineralization with local high-grade intervals was delineated during the previous exploration
programs, and mineralization remains open. A 60-hole infill and step-out drilling program is planned for the first half of 2013 to further develop the resource. 
 Exploration – Turkey 
 Exploration expenditures in Turkey totalled $9.1 million in
2012. Up to eight drill rigs were active throughout the fourth quarter, drilling a total of 30,478 m in 165 holes in 2012. Drilling included 22 holes across the project, for engineering purposes. 

Çamyurt 
 Resource infill and expansion
drilling continued through the fourth quarter and is ongoing, with 8,302 m completed in 47 core holes in 2012. The Company published an initial pit-constrained inferred mineral resource estimate of 24.6 million tonnes grading 0.81 g/t Au and
4.7 g/t Ag for 

  
 11 

 
640,000 ounces of gold and 3.8 million ounces of silver at Çamyurt, applying a 0.2 g/t Au cut-off. The Çamyurt project is located approximately three km southeast of the
Company’s development-stage Aği Daği project. Drilling at Çamyurt has defined a mineralized zone that is continuous for at least 1,200 m along strike, with additional potential to extend mineralization to the northeast and at
depth. 
 Gold mineralization is hosted within a tabular, steeply-dipping oxidized zone starting at surface and with a cross-strike width up to
150 m. The average drill spacing is approximately 55 m along strike, and 59 drill holes were used in the estimate. The new inferred mineral resource estimate for Çamyurt represents a significant addition to the Company’s mineral resource
base in Turkey. In addition, the average grade of the mineral resource is substantially higher than at the Aği Daği and Kirazli projects. The Company intends to continue expanding mineral resources at Çamyurt in 2013. 

Recent highlighted intercept from drilling conducted to date include: 
 1.718 g/t Au over 55.1 m (12CYD64) 
 2.708 g/t Au over 17.0 m (12CYD68) 

1.243 g/t Au over 126.2 m (12CYD70) 
 1.035 g/t
Au over 96.7 m (12CYD71) 
 2.900 g/t Au over 23.6 m (12CYD72) 
 Aği Daği 
 The Aği Daği project is comprised of the two principle resource
areas at Baba and Deli, connected by the Firetower zone of advanced argillic and silic alteration. The Baba-Firetower-Deli zone of mineralization extends at least 4.3 kilometers (“km”) along a northeast-southwest trend. During 2012, 42
drill holes were completed at Baba and Firetower, for 10,990 m of drilling. A portion of the Firetower mineral resource area was included in the Company’s year-end 2011 mineral reserve and resource statement as inferred mineral resources.
However, these were not incorporated into the June 2012 preliminary feasibility study as it included only measured and indicated resources. Upgrading these mineral resources to measured and indicated is expected to improve the economics of the
Aği Daği project. 
 Two parallel trends of advanced argillic and silicic alteration occur to the northwest of the Baba-Deli trend.
The Ayi Tepe-Firetower North zone is approximately two km long, defined by relatively wide spaced drilling. Similar alteration occurs along the discontinuous Tavasan-Ihlamur zone, approximately 4.5 km long. Both zones have not been fully defined by
drilling. The Ayi Tepe-Firetower North and Tavasan-Ihlamur zones occur approximately 300 m and one km northwest of the Baba-Deli trend, respectively. Fifteen exploration drill holes were completed in these areas in 2012, for 3,836 m of drilling.

 Highlighted intercepts from drilling include: 
 2.180 g/t Au over 50.3 m (11AD546) 
 1.372 g/t Au over 42.5 m (12AD609) 

Kirazli 
 The 2012 drill program at Kirazli was
completed in the previous quarter, with 19 infill and expansion holes drilled at the Kirazli main zone, and 14 completed at Rockpile. 
 Recent
highlighted intercept from drilling include: 
 5.948 g/t Au over 10.3 m (12KD200) 
 1.620 g/t Au over 32.6 m (12KD205) 
 2.211 g/t Au over 22.6 m (12KD208) 

  
 12 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Financial Highlights 
 A summary of the Company’s financial results for the years ended December 31, 2012, 2011 and 2010 is presented below: 

 

																					
	 	  	 Q4
 2012
	 	  	 Q4
 2011
	 	  	2012	 	  	2011	 	 	2010	 
	 Cash provided by operating

activities before changes

in non-cash working capital (000)(1) (2)
	  	$	53,523	  	  	$	31,801	  	  	$	178,534	  	  	$	107,226	  	 	$	94,796	  
	 Changes in non-cash working capital
	  	$	15,648	  	  	$	5,474	  	  	$	6,062	  	  	($	692	) 	 	($	5,148	) 
	 Cash provided by operating activities (000)
	  	$	69,171	  	  	$	37,275	  	  	$	184,596	  	  	$	106,534	  	 	$	89,648	  
	 Earnings before income taxes (000)
	  	$	51,943	  	  	$	37,138	  	  	$	166,925	  	  	$	105,935	  	 	$	90,468	  
	 Earnings (000)
	  	$	37,906	  	  	$	21,294	  	  	$	117,956	  	  	$	60,081	  	 	$	63,795	  
	 Earnings per share

- basic
 - diluted
	  	$
 $
	0.31
 0.31
	  
   
	  	$
 $
	0.18
 0.18
	  
   
	  	$
 $
	0.98
 0.98
	  
   
	  	$
 $
	0.51
 0.51
	  
   
	 	$
 $
	0.55
 0.55
	  
   

	 Comprehensive income (000)
	  	$	38,812	  	  	$	21,703	  	  	$	117,972	  	  	$	60,333	  	 	$	62,463	  
	 Weighted average number of common shares outstanding

- basic
 - diluted
	  	 
  
	120,796,000
 121,746,000
	  
   
	  	 
  
	118,308,000
 119,563,000
	  
   
	  	 
  
	119,861,000
 120,904,000
	  
   
	  	 
  
	117,375,000
 118,669,000
	  
   
	 	 
  
	115,183,000
 116,907,000
	  
   

	 Assets (000) (3)
	  				  				  	$	753,856	  	  	$	599,224	  	 	$	506,436	  

  

	(1) 	 A non-GAAP measure calculated as cash provided by operating activities as presented on the consolidated statements of cash flows and adding back
changes in non-cash working capital. 

	(2) 	 Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation
of this measure. 

	(3) 	 Assets are shown as at December 31, 2012, December 31, 2011, and December 31, 2010. 

Strong operating margins from higher realized gold prices and continued low cash costs contributed to the Company generating record cash provided by
operating activities and earnings in the fourth quarter of 2012. Cash from operating activities before changes in non-cash working capital in the fourth quarter of 2012 of $53.5 million ($0.44 per basic share) increased 68% relative to the same
period of 2011. 
 Earnings before income taxes in the fourth quarter of 2012 were $51.9 million or $0.43 per basic share, compared to $37.1
million or $0.31 per basic share in the fourth quarter of 2011. On an after-tax basis, earnings in the fourth quarter of 2012 of $37.9 million or $0.31 per basic share increased 78% over the comparable period of 2011 as a result of a higher number
of ounces sold and a lower effective tax rate. 
 On a year-to-date basis, cash flows from operations and earnings increased substantially in
2012 relative to 2011. These increases have been attributable to higher revenues resulting from an increase in the number of ounces of gold sold and a higher realized gold price. 
 Gold Sales 
 Details of gold sales are presented below: 

 

																	
	 	  	 Q4
 2012
	 	  	 Q4
 2011
	 	  	 YTD
 2012
	 	  	 YTD
 2011
	 
	 Gold sales (ounces)
	  	 	62,516	  	  	 	45,224	  	  	 	197,516	  	  	 	151,000	  
	 Operating revenues (000) (1)
	  	$	106,946	  	  	$	71,133	  	  	$	329,372	  	  	$	227,364	  
	 Realized gold price per ounce
	  	$	1,711	  	  	$	1,688	  	  	$	1,668	  	  	$	1,555	  
	 Average gold price for period (London PM Fix)
	  	$	1,722	  	  	$	1,687	  	  	$	1,669	  	  	$	1,572	  

  

	(1)	 Gold sales revenue
for Q4 2011 and YTD 2011 excludes $3.0 million and $5.2 million of pre-production revenue which was offset against capital development costs at Escondida. 

  
 13 

 Operating revenues in the fourth quarter of 2012 of $106.9 million increased 50% over $71.1 million in the
fourth quarter of 2011. This increase is primarily attributable to an increase in the number of ounces of gold sold in the quarter. 
 The
Company generally enters into short-term forward sales contracts in order to match sales contracts with the next expected delivery date. The Company’s objective is to realize a gold sales price consistent with the average London PM Fix spot
gold price. For 2012, the Company achieved a realized gold price per ounce of $1,668, consistent with the average London PM Fix gold price for the year of $1,669. As at December 31, 2012, the Company did not have any derivative activity
outstanding related to gold, and was therefore leveraged to future changes in the price of gold. 
 Assessment of Gold Market 

The market price of gold continues to exhibit significant volatility. The spot market gold price was approximately $1,610 per ounce on February 19,
2013. At this gold price, the Company realizes a mine operating cash margin (before taxes and corporate and administrative costs) in excess of $1,100 per ounce. 
 Operating Expenses and Operating Margins 
 Mine operating costs allocated to ounces sold are
summarized in the following table for the periods indicated: 
  

													
	 	  	 YTD
 2012
	 	  	 YTD
 2011
	 	  	 Change
 %
	 
	 Gold production (ounces) (1)
	  	 	200,000	  	  	 	153,000	  	  	 	31	% 
	 Gold sales (ounces) (2)
	  	 	197,516	  	  	 	151,000	  	  	 	31	% 
	 Cash operating costs (000)(3)
	  	$	70,168	  	  	$	53,868	  	  	 	30	% 
	 - Per ounce sold
	  	$	355	  	  	$	368	  	  	 	(4	%) 
	 Royalties (000)(4)
	  	$	16,411	  	  	$	11,157	  	  	 	47	% 
	 Total cash costs (000)(3)
	  	$	86,579	  	  	$	65,025	  	  	 	33	% 
	 - Per ounce sold
	  	$	438	  	  	$	444	  	  	 	(1	%) 
	 Amortization (000)
	  	$	50,678	  	  	$	23,423	  	  	 	116	% 
	 Total production costs (000)(5)
	  	$	137,257	  	  	$	88,448	  	  	 	55	% 
	 - Per ounce sold
	  	$	695	  	  	$	604	  	  	 	15	% 
	 - Realized gold price per ounce
	  	$	1,668	  	  	$	1,555	  	  	 	7	% 
	 - Operating cash margin per ounce (6)
	  	$	1,230	  	  	$	1,111	  	  	 	11	% 

  

	(1) 	 Reported gold production is subject to final refinery settlement. 

	(2) 	 Gold sales (ounces) for YTD 2011 include 4,610 ounces estimated to have been sold from the Escondida zone during pre-production. These ounces are
excluded for purposes of calculating cash operating costs per ounce sold, total cash costs per ounce sold, total production costs per ounce sold and operating cash margin per ounce. 

	(3) 	 “Cash operating costs” and “Total cash costs” are non-GAAP measures. Refer to “Cautionary non-GAAP Measures and Additional
GAAP Measures” disclosure at the end of this MD&A for a description and calculation of these measures. 

	(4) 	 Royalties are included as of April 1, 2006 at 5% of net precious metals revenues (as determined in accordance with the royalty agreement).

	(5) 	 “Total production costs” is a non-GAAP measure that includes all “total cash costs” and amortization. “Total production
costs” is equivalent to mining and processing costs, royalties and amortization as reported in the Company’s financial statements. 

  
 14 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

	(6) 	 “Operating cash margin per ounce” is a non-GAAP measure that is calculated as the difference between the Company’s gold sales and mining
and processing and royalty expenses (“total cash costs”) as reported in the Company’s financial statements. 

Cash operating costs in 2012 were $355 per ounce of gold sold, below the Company’s revised full year guidance range of $360 per ounce. Cash
operating costs per ounce in 2012 were 4% less than in the same period last year due to lower cost ounces produced from the gravity mill in 2012, as well as the weakening Mexican peso, partially offset by higher input costs. Amortization was $257
per ounce of gold sold in 2012, 61% higher than $160 per ounce in the same period of 2011. Amortization per ounce is higher in 2012 due to production from the Escondida high-grade zone, which contributes a higher amortization per ounce of production
than low-grade ounces produced. 
 Production from certain mining concessions within the Salamandra District is subject to a sliding scale
production royalty. At gold prices above $400, the royalty is calculated at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs. The royalty is calculated based on the daily average
London PM Fix gold market prices, not actual prices realized by the Company. With the achievement of commercial production on April 1, 2006, production to a maximum of two million ounces of gold is subject to royalty. As at December 31,
2012, the royalty was paid or accrued on approximately 1,004,000 ounces of applicable gold production. Royalty expense in 2012 of $16.4 million increased 46% from royalty expense of $11.2 million in 2011, attributable to a higher average market gold
price and higher number of ounces produced. 
 Exploration 
 The Company’s accounting policy for exploration costs requires that exploration expenditures that do not meet the criteria for mine development be expensed as incurred, while costs incurred to expand
operating capacity, develop new ore bodies or develop mine areas in advance of current production are capitalized. 
 Total exploration spending
in 2012 was $18.0 million, of which $6.5 million was expensed. In Mexico, total exploration spending was $8.9 million. This included $5.9 million of drilling costs at East Estrella, San Carlos and El Victor, which were capitalized and $3.0 million
of early-stage exploration and administration costs, which were expensed. Total exploration spending in Turkey was $9.1 million, of which $3.5 million related to drilling at Firetower and Rock Pile was expensed, while $5.6 million related to
development work at Çamyurt, Aği Daği and Kirazli was capitalized. 
 Corporate and Administrative 

Corporate and administrative expenses of $14.2 million in 2012 were 48% higher than $9.6 million incurred in 2011. Higher corporate and administrative
costs were primarily the result of increased costs associated with the Company’s administration office in Turkey, greater salary costs related to new employees in the Toronto head office and costs incurred as part of the Aurizon offer.

 Share-based Compensation 

Share-based compensation expense, related to stock options and cash-settled stock appreciation rights (“SARs”), was $7.6 million in 2012
compared to $13.5 million in the comparable period of 2011. The value of share-based compensation expense related to stock options is added to the contributed surplus account within shareholders’ equity, resulting in no net effect on total
shareholders’ equity. SARs are cash-settled liabilities, which are remeasured at each reporting date and at the settlement date. Any changes in the fair value of the liability are recognized as an expense to share-based compensation in the
Statements of Comprehensive Income. 

  
 15 

 All outstanding stock options and SARs grants are subject to vesting provisions. The vesting provisions
result in the calculated market value of stock option grants being charged to expense in accordance with the vesting terms of the option. 

Share-based compensation expense in 2012 is comprised of $4.8 million related to the Company’s stock option plan, and $2.8 million related to the
Company’s outstanding SARs liability. The Company’s outstanding SARs liability increased from $1.6 million at December 31, 2011 to $3.8 million at December 31, 2012 as a result of the increase in the Company’s share price
during this period as well as new SARs granted during the period. 
 Finance Income 

Finance income in 2012 was $3.1 million compared to $1.7 million in 2011, as a result of higher cash and short-term investment balances and higher average
rates. Interest rates on deposit accounts and short-term investments remain near historically low levels. 
 Financing Expense

 Financing expense includes accretion of the Company’s decommissioning liability and property acquisition obligations. The expense for
the current quarter was comparable to the prior period. 
 Foreign Exchange Gain/(Loss) 

The Company recognized a nominal foreign exchange gain in 2012, compared to a $3.7 million foreign exchange loss in 2011. Throughout 2012, the
Company’s key operating currencies (the Mexican peso (“MXN”) and Turkish Lira (“TL”) and Canadian dollar (“CAD”)) strengthened marginally relative to the USD. 

Significant foreign exchange movements in 2012 included a $0.5 million foreign exchange gain on the Company’s Canadian dollar-denominated net
assets, a $0.6 million foreign exchange gain on revaluation of the Company’s MXN-denominated assets, and a $0.2 million foreign exchange gain on revaluation of the Company’s TL-denominated asset position, offset by a $1.3 million foreign
exchange loss on the settlement of foreign currency forward contacts. The Company classifies the foreign exchange gain or loss on revaluation of its Mexican and Turkish deferred tax liabilities within deferred tax expense rather than within foreign
exchange gain or loss. 
 Income Taxes 
 Tax expense in 2012 was $49.0 million compared to $42.4 million in 2011. The Single Rate Tax Law (minimum tax) that came into effect in Mexico at the start of 2008 did not contribute to a higher tax
expense in 2012, but may in future periods. The Company is cash taxable in Mexico and must calculate and provide for tax instalments on a monthly basis. The Company satisfies its tax liability through periodic instalment payments, as well as by
offsetting refundable value-added tax owed from the Mexican government against its tax payable liability. 
 The statutory income tax rate in
Mexico for 2012 is 30%. In Canada, the combined federal and provincial statutory income tax rate is 26.5% in 2012. The effective tax rate for 2012 (calculated as a percentage of earnings before income tax) was 29%, just below the statutory rate in
Mexico and higher than the statutory rate in Canada. The effective tax rate results from a number of factors, many of which are difficult to forecast. In 2012, a net $3.3 million non-cash deferred tax gain was realized to recognize the impact of
foreign exchange movements, comprising a $5.5 million gain on revaluation of temporary tax differences associated with foreign currency denominated non-monetary assets and liabilities, offset by a $2.2 million loss on revaluation of the
Company’s Mexican peso denominated deferred tax balance. The Company expects the effective tax rate to continue to fluctuate in periods of significant change to Mexican peso and/or Turkish lira foreign exchange rates. 

  
 16 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Summary of Quarterly Results 
 The following table summarizes quarterly results for the past eight quarters. Quarterly gold production has been adjusted to reflect final settlements, where applicable. 

 

																																	
	 	  	Q1
2011	 	  	Q2
2011	 	  	Q3
2011	 	  	Q4
2011	 	  	Q1
2012	 	  	Q2
2012	 	  	Q3
2012	 	  	Q4
2012	 
	 Gold production (ounces)
	  	 	37,500	  	  	 	36,000	  	  	 	33,000	  	  	 	46,500	  	  	 	40,500	  	  	 	48,200	  	  	 	43,500	  	  	 	67,800	  
	 Gold sales (ounces)
	  	 	39,186	  	  	 	37,800	  	  	 	28,790	  	  	 	45,224	  	  	 	41,745	  	  	 	50,000	  	  	 	43,255	  	  	 	62,516	  
	 Operating revenues ($000)
	  	 	54,376	  	  	 	56,864	  	  	 	44,991	  	  	 	71,133	  	  	 	70,256	  	  	 	80,889	  	  	 	71,281	  	  	 	106,946	  
	 Earnings from operations ($000)
	  	 	25,245	  	  	 	25,231	  	  	 	20,038	  	  	 	35,723	  	  	 	37,047	  	  	 	40,447	  	  	 	33,306	  	  	 	53,016	  
	 Earnings ($000)
	  	 	17,857	  	  	 	15,494	  	  	 	5,436	  	  	 	21,294	  	  	 	29,470	  	  	 	24,684	  	  	 	25,895	  	  	 	37,906	  
	 Earnings ($ per share) basic/diluted
	  	 	0.15	  	  	 	0.13	  	  	 	0.05	  	  	 	0.18	  	  	 	0.25/0.24	  	  	 	0.21/0.20	  	  	 	0.22/0.21	  	  	$	0.31	  

 Operating revenues generally trended higher over the past eight quarters as the Company has benefited from rising gold
prices. Higher realized gold prices and gold sales have resulted in generally improved financial results. Gold production in the first and fourth quarters is generally higher than in the second and third quarters of the year, which can be adversely
affected by weather-related production issues. The third quarter rainy season in northwestern Mexico adversely impacted gold production, sales and operating results in 2012 and 2011. Seasonal conditions could continue to impact production and
financial results in future periods if rainfall is significantly above or below seasonal averages. 
 Financial and Other Instruments

 The Company’s financial assets and liabilities consist of cash and cash equivalents, short-term investments, amounts receivable,
available-for-sale and held-for-trading securities, accounts payable and accrued liabilities and deferred tax liabilities, some of which are denominated in CAD, MXN and TL. The Company is exposed to financial gains or losses as a result of foreign
exchange movements against the USD. 
 The Company’s cash and cash equivalents may be invested in short-term liquid deposits or investments
that provide a revised rate of interest upon maturity. At December 31, 2012, the majority of the Company’s reported cash and cash equivalents were held in bank deposit accounts or 60-day to 90-day term deposits. The Company’s
short-term investments are generally term deposits with an initial term-to-maturity on acquisition of greater than 90 days. 
 The majority of
the Company’s cash balances are held in USD; however, the Company does maintain cash and cash equivalents denominated in CAD, MXN and TL. The Company may enter into derivative contracts in order to manage its exposures to fluctuations in
foreign exchange rates to the CAD, MXN, or TL. As at December 31, 2012, the Company had outstanding contracts to deliver $10 million CAD in exchange for a fixed amount of USD at future dates up to March of 2013, with CAD:USD rates of 0.99:1.
The mark-to-market gain associated with these contracts as at December 31, 2012 was nominal. 
 The Company is exposed to monetary assets
and liabilities denominated in CAD. The Company maintains CAD cash and investment balances, which are not fully offset by CAD-denominated liabilities. This resulted in a gain of $0.5 million for the period, given the strengthening of the CAD. This
was offset by a loss of $1.3 million on the settlement of FX forward contracts during the year. 

  
 17 

 The Company also has exposure to monetary assets and liabilities denominated in MXN. Significant cash
balances, outstanding amounts receivable, accounts payable or tax liabilities denominated in MXN expose the Company to foreign exchange gains or losses. The Company maintains cash balances in MXN in order to partially mitigate its balance sheet
exposure to changes in the MXN/USD exchange rate resulting from its MXN-denominated taxes payable and deferred tax liability balances. For the year ended December 31, 2012, the Company’s net MXN-denominated liability position resulted in a
foreign exchange loss of approximately $1.6 million, of which a $0.6 million gain was classified within foreign exchange gain and a $2.2 million loss was recorded in deferred tax expense. 
 At December 31, 2012 the Company’s TL-denominated net monetary assets mainly consisted of TL-denominated cash and short-term investments, in addition to value-added tax (“VAT”)
receivables. This exposure contributed to a $0.2 million foreign exchange gain due to the strengthening of the TL compared to the USD during the year. 
 Liquidity and Capital Resources 
 At December 31, 2012, the Company had $353.7 million
in cash and cash equivalents and short-term investments compared to $222.6 million at December 31, 2011. The increase in total cash and cash equivalents and short-term investments of $131.1 million reflects positive cash flows from operations
and financing activities offset primarily by capital spending in Mexico and Turkey. Significant cash inflows in 2012 included $184.6 million cash provided by operating activities, and $28.2 million cash proceeds on the exercise of stock options.
Significant cash outflows in 2012 included $57.4 million of capital and exploration expenditures in Mexico and Turkey and $24.0 million in dividends paid. The Company’s working capital surplus increased to $377.7 million at December 31,
2012 from $251.1 million at December 31, 2011. 
 The Company has ongoing budgeted capital and exploration expenditures in Mexico and
significant budgeted exploration and development costs in Turkey for 2012. The Company expects to invest in development and construction activities at its projects in Turkey over the next several years and expects to be able to finance these from a
combination of existing cash balances and operating cash flows. The Company declared a semi-annual dividend of $0.10 per share in the third quarter of 2012 and will continue to evaluate its dividend policy in accordance with its financial
performance and strategic objectives. 
 The Company has significant budgeted exploration, development and capital expenditures in both Mexico
and Turkey in 2013. Total operating and development capital spending in Mexico is expected to total $40.7 million in 2013, primarily focused on development of the San Carlos and El Victor areas. Total exploration spending in Mexico for 2013 is
budgeted at $10.6 million. In Turkey, the Company intends to complete project engineering and begin construction of the Kirazli project at a total expected cost of $69.3 million in 2013. Exploration spending in Turkey is forecast to be $11.0
million. Total spending in 2013 as outlined above is expected to be financed from cash flows generated from the Mulatos Mine, without reducing the Company`s cash and short-term investment balances of over $350 million. 

Offer for Aurizon Mines Ltd 
 On
January 14, 2013, the Company announced that it has commenced an offer to acquire Aurizon Mines Ltd. (“Aurizon”) for approximately CAD$780 million in cash and shares (the “Offer”). On February 18, 2013, Alamos and
Aurizon consented to an order by the British Columbia Securities Commission to cease trade the Aurizon Shareholder Rights Plan on March 4, 2013. Accordingly, the Company announced that it was extending the Offer to 5:00 p.m. (local time) on
March 5, 2013, unless further extended or withdrawn. 

  
 18 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 Under the terms of the Offer, Alamos proposes to acquire all of the issued and outstanding Aurizon
Shares (“Aurizon Shares”) for consideration of, at the election of each Aurizon shareholder, either (i) 0.2801 common shares of the Company (“Alamos Shares”), or (ii) CAD$4.65 in cash, in each case, subject to
pro-ration based on a maximum cash consideration of CAD$305 million and a maximum number of Alamos Shares issued of 23,500,000. 
 Prior to
January 14, 2013, Alamos acquired, for the same consideration available to Aurizon shareholders under the Offer, 23,507,283 Aurizon Shares pursuant to share purchase agreements entered into between Alamos and certain shareholders of Aurizon.
After giving effect to the transactions referred to above, Alamos owns or controls 26,507,283 Aurizon Shares, representing over 16% of the issued and outstanding Aurizon Shares. 
 The combination of Alamos and Aurizon will immediately create a new leading intermediate gold mining company with increased diversification, scale and liquidity. The combined entity is anticipated to have
enhanced visibility among the international investor community as well as continued exposure to the North American capital markets through listings on both the TSX and the NYSE. The combined company, with two steady producing, low cost mines located
in stable jurisdictions, will be strongly positioned for growth. The pro forma combined company will have an estimated cash and cash equivalents and short-term investments of approximately $250 million in which to advance projects without any
near-term dilution. 
 The Offer is conditional upon Alamos acquiring that number of Aurizon shares, which, together with the Aurizon shares
already owned by Alamos, represent not less than 66 2/3 percent of the outstanding Aurizon Shares calculated on a fully-diluted basis, as well as receipt of all necessary governmental or regulatory approvals and other customary unsolicited offer
conditions. 

  
 19 

 Internal Control over Financial Reporting 
 Management is responsible for the design and operating effectiveness of internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements in accordance with accounting principles generally accepted in Canada. Based on a review of its internal control procedures at the end of the period covered by this MD&A, management believes its internal
controls and procedures are appropriately designed and operating effectively as at December 31, 2012. 
 Changes in Internal Control
over Financial Reporting 
 There were no significant changes in the Company’s internal control over financial reporting that occurred
during the three months ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

Disclosure Controls 
 Management is also
responsible for the design and effectiveness of disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company’s
certifying officers. The Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the design of the Company’s disclosure controls and procedures as at December 31, 2012 and have concluded that these are
appropriately designed and operating effectively. 
 Limitations of Controls and Procedures 

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that internal controls over financial reporting
and disclosure controls and procedures, no matter how well designed and operated, have inherent limitations. Therefore, even those systems determined to be properly designed and effective can provide only reasonable assurance that the objectives of
the control system are met. 
 Off-Balance Sheet Arrangements 
 The Company does not have any off-balance sheet arrangements. 
 Commitments 

The following table summarizes the Company’s contractual obligations at December 31, 2012: 

Payments due by period ($000) 
  

																					
	 Contractual Obligations
	  	Total	 	  	Less
than 1
year	 	  	2 – 3
years	 	  	4 – 5
years	 	  	More
than 5
years	 
	 Operating lease
	  	 	732	  	  	 	236	  	  	 	238	  	  	 	20	  	  	 	—  	  
	 Accounts payable and accrued liabilities
	  	 	24,874	  	  	 	24,874	  	  	 	—  	  	  	 	—  	  	  	 	—  	  
	 Decommissioning liability
	  	 	24,840	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	24,840	  
	 Property acquisition obligations
	  	 	291	  	  	 	197	  	  	 	94	  	  	 	—  	  	  	 	—  	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
		  	 	50,737	  	  	 	25,307	  	  	 	332	  	  	 	20	  	  	 	24,840	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 Contractual obligations exist with respect to royalties; however gold production subject to royalty cannot be ascertained
with certainty and the royalty rate varies with the gold price. Based on the current gold price and rates of production, royalty expense is expected to be in the range of $5 to $6 million per quarter for 2013. 

  
 20 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 The Company has signed relocation contracts with certain property owners and possessors in the town of
Mulatos. In addition, negotiations for surface rights with respect to the La Yaqui and Cerro Pelon development properties are ongoing. Negotiation efforts are currently focused on resolving differences in price expectations between the Company and
various counterparties. 
 During the second quarter of 2008, the Company entered into a land purchase agreement with certain landowners.
Pursuant to the land purchase agreement, the Company made a payment of $1.3 million in order to secure temporary occupation rights to specified land. An additional payment of $1 million based on current exchange rates is payable once the land has
been vacated and is transferred to the Company, which has not been accrued as at December 31, 2012. The probability and timing of this additional payment is currently unknown to the Company. 

Additional future property acquisition, relocation benefits, legal and related costs may be material. The Company cannot currently determine the expected
timing, outcome of negotiations or costs associated with the relocation of the remaining property owners and possessors and potential land acquisitions. 
 Outstanding Share Data 
 The table below describes the terms associated with the
Company’s outstanding and diluted share capital: 
  

					
	 	  	February 19, 2013	 
	 Common shares
	  			
	 - Common shares outstanding
	  	 	127,455,786	  
	 Stock options
	  			
	 - Average exercise price CAD $14.40; approximately 75% exercisable
	  	 	4,660,300	  
	 Total
	  	 	132,116,086	  

 Outlook 

The Company anticipates producing between 180,000 and 200,000 ounces of gold in 2013 at a cash operating cost of $415 to $435 per ounce of gold sold,
excluding a 5% royalty. If the 5% royalty is included, and assuming a $1,700 gold price, total cash costs are expected to be between $500 and $520 per ounce of gold sold. 
 The 2013 Mulatos capital and development budget is $40.7 million. Operating and expansion capital spending is forecasted to be approximately $21.4 million in 2013, consistent with 2012. Development
spending of $19.4 million in 2013 will be focused on underground development of the San Carlos and Escondida North areas, in order to access high-grade ore to provide additional gravity mill feed. In addition, the Company expects to commence
construction of an access ramp from the Estrella portion of the Mulatos Pit to the El Victor and San Carlos deposit areas. Operating and expansion capital spending is forecasted to be approximately $21.4 million in 2013, consistent with 2012.

  
 21 

 The Company’s mineral reserve and resource update is expected to be released at the end of the first
quarter of 2013. The current focus of exploration at Mulatos is on continuing to delineate high-grade mineral reserves to provide mill feed beyond the life of the Escondida high-grade deposit. 

In Turkey, the Company published an NI 43-101 compliant preliminary feasibility study summary of the Aği Daği and Kirazli projects in June
2012, which demonstrated robust economics and supported the Company’s decision to proceed with permitting and development activities. Total development spending related to the Turkish projects in 2013 is expected to be approximately $69.3
million. 
 In the first quarter of 2013, the Company expects to receive a response from the Turkish government with respect to EIA approval for
the Kirazli project. The final EIA for the Aği Daği project will be submitted in the first quarter of 2013 with approval expected in the second quarter of the year. The Company is also committed to aggressively drilling the Çamyurt
project, which is the next step in fast-tracking the project toward production. 
 The Company continues to strengthen its financial position,
generating over $131 million in free cash flow from the Mulatos Mine in 2012. The Company`s development capital and exploration spending in 2013 is all expected to be financed from cash flow. 
 If the acquistion of Aurizon is successful, the combined Company will have geographic and operational diversity, with producing assets in Canada and Mexico and a strong growth development pipeline in
Turkey. Furthermore, after payment of the CAD$305 million cash portion of the acquisition cost, it is expected that the combined Company would have in excess of $250 million in cash and cash equivalents and short-term investments, providing a strong
financial platform for future organic growth or acquisitions. 
 Adoption of accounting policy effective January 1, 2012 

International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 20 Stripping Costs in the Production Phase of a Surface
Mine was issued in October 2011, and is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRIC 20 sets out the criteria for the capitalization of production stripping costs to non-current
assets, and states that the stripping activity is recognized as a component of the larger asset to which it relates. In addition, IFRIC 20 requires companies to ensure that capitalized costs are amortized over the useful life of the component of the
ore body to which access has been improved due to the stripping activity. The Company adopted the amendments in its financial statements for the period beginning on January 1, 2012, with no transitional adjustment. 

Future accounting policy changes not yet in effect 
 The following are new pronouncements approved by the IASB. The standards and interpretations are not yet effective and have not been applied in preparing these financial statements; however, they may
impact future periods. 
 (i) IFRS 9 Financial Instruments (Revised) was issued by the IASB in October 2010. It incorporates revised
requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement. The revised financial liability provisions
maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value
related to changes in 

  
 22 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 
the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. IFRS 9 (2010) is effective for annual periods beginning on or after
January 1, 2015. The impact of IFRS 9 on the Company’s financial instruments has not yet been determined. 
 (ii) IFRS 10 Consolidated
Financial Statements is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRS 10 replaces the guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation –
Special Purpose Entities (“SPE’s”). IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that currently are SPEs in the scope of SIC-12. In addition, the consolidation procedures
are carried forward substantially unmodified from IAS 27. Given the nature of the Company’s operations, the Company does not expect the amendments to have a material impact on the financial statements. 

(iii) IFRS 12 Disclosure of Interests in Other Entities was released in May 2011 and is effective for annual periods beginning on or after
January 1, 2013, with early adoption permitted. If an entity applies this standard earlier, it does not need to apply IFRS 10, IFRS 11, IAS 27 (2011) and IAS 28 (2011) at the same time. IFRS 12 contains the disclosure requirements for
entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities. Interests are widely defined as contractual and non-contractual involvement that
exposes an entity to variability of returns from the performance of the other entity. The required disclosures aim to provide information in order to enable users to evaluate the nature of, and the risks associated with, an entity’s interest in
other entities, and the effects of those interests on the entity’s financial position, financial performance and cash flows. The Company intends to adopt IFRS 12 in its financial statements for the annual period beginning on January 1,
2013. Given the nature of the Company’s interests in other entities, the Company does not expect the amendments to impact the Company’s financial position or performance. 
 (iv) IFRS 13 Fair Value Measurement was issued in May 2011 and is effective prospectively for annual periods beginning on or after January 1, 2013. The disclosure requirements of IFRS 13 need not be
applied in comparative information for periods before initial application. IFRS 13 replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also establishes a framework for measuring fair value and sets out disclosure
requirements for fair value measurements to provide information that enables financial statement users to assess the methods and inputs used to develop fair value measurements and, for recurring fair value measurements that use significant
unobservable inputs (Level 3), the effect of the measurements on earnings or other comprehensive income. IFRS 13 establishes ‘how’ to measure fair value when it is required or permitted by other IFRSs. IFRS 13 does not introduce new
requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. The Company intends to adopt IFRS 13 prospectively in its
financial statements for the annual period beginning on January 1, 2013. The impact of adoption of IFRS 13 has not yet been determined. 

(v) Amendments to IAS 1 Presentation of Financial Statements was issued in June 2011 and is effective for annual periods beginning on or after
July 1, 2012. IAS 1 should be applied retrospectively, but early adoption is permitted. The amendments require that an entity present separately the items of OCI that may be reclassified to earnings in the future from those that would never be
reclassified to earnings. Consequently an entity that presents items of OCI before related tax effects will also have to allocate the aggregated 

  
 23 

 
tax amount between these categories. The existing option to present the earnings and other comprehensive income in two statements has remained unchanged. The Company intends to adopt the
amendments in its financial statements for the annual period beginning on January 1, 2013. The Company does not expect the amendments to have a material impact on the financial statements. 

Critical Accounting Estimates 
 The
preparation of financial statements under IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 
 The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review
affects both current and future periods. Accounts which require management to make material estimates and significant assumptions in determining amounts recorded include: recoverable reserves, inventory recoveries, share-based payments,
decommissioning liabilities, units of production amortization, and provisions and contingencies. 
 Judgments made by management in the
application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the current and following fiscal years include: impairment of tangible and intangible assets,
determination of functional currency, amortization methods, uncertain tax postitions and recovery of deferred tax assets. 
 i) Impairment:

 The Company assesses its mineral property, plant and equipment and exploration and evaluation assets annually to determine whether any
indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the
use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. 
 ii) Recoverable reserves: 
 Ore reserves are estimates of the amount of ore that can be
economically and legally extracted from the Company’s mining properties. The Company estimates its recoverable reserves based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and
shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of, commodity prices, production costs, future capital requirements, and foreign
exchange rates, along with geological assumptions and judgments made in estimating the size and grade of the ore body, and metallurgical assumptions made in estimating recovery of the ore body. Changes in the reserve or

  
 24 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 
resource estimates may impact the carrying value of exploration and evaluation assets, mineral property, plant and equipment, decommissioning liabilities, and amortization expense. 

iii) Units-of-production (“UOP”) amortization: 
 Estimated recoverable reserves are used in determining the amortization of certain mineral property, plant and equipment. This results in an amortization charge proportional to the depletion of the
anticipated remaining mine life. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditures. Numerous UOP amortization methods are available to choose
from; the Company has adopted a methodology based on estimated recoverable reserves over the life of mine. 
 iv) Inventory: 

The Company accounts for its in-process precious metals and ore in stockpiles inventory using a process flow for applicable costs appropriate to the
physical transformation of ore through the mining, crushing, leaching and gold recovery process. The Company is required to estimate the ultimate recovery based on laboratory tests and ongoing analysis of leach pad kinetics in order to determine the
recoverable metals from the leach pad at the end of each accounting period. If the Company determines at any time that the ultimate recovery should be adjusted downward, then the Company will adjust the average carrying value of a unit of metal
content in the in-process inventory and adjust upward on a prospective basis the unit cost of subsequent production. Should an upward adjustment in the average carrying value of a unit of metal result in the carrying value exceeding the realizable
value of the metal, the Company would write down the carrying value to the realizable value. 
 v) Share based payments: 

The Company follows accounting guidelines in determining the fair value of share-based compensation. The computed amount is not based on historical cost,
but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including estimates of: the average future hold period of issued stock options or stock
appreciation rights before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); and the appropriate risk-free rate of interest. Share-based
compensation incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from the
expected rate. 
 The resulting value calculated is not necessarily the value that the holder of the instrument could receive in an arm’s
length transaction, given that there is no market for these instruments and they are not transferable. It is management’s view that the value derived is highly subjective and dependent upon the input assumptions made. 

vi) Decommissioning liabilities: 
 The Company
is required to determine the expected value of the estimated costs of decommissioning liabilities and to recognize this value as a liability when reasonably 

  
 25 

 
determinable. Key assumptions in determining the amount of the liability are: total undiscounted cash outflows, expected timing of payment of the cash outflows and appropriate inflation and
discount rates to apply to the timing of cash outflows. Because the liability is recorded on a discounted basis, it is increased due to the passage of time with an offsetting charge to financing expense in the statement of comprehensive income. The
Company calculated its estimated mine site closure costs based on a mine closure and reclamation plan prepared by management and reviewed by an independent third party. The majority of the expenditures associated with reclamation and mine closure
will be incurred at the end of the mine life, expected to be approximately 9 years based on expected proven and probable reserves and the current rate of production. 
 vii) Provisions: 
 The Company records provisions which include various estimates, including the
Company’s best estimate of the future costs associated with settlement of the obligation, and discount rates applied. Such estimates are necessarily calculated with reference to external sources, all of which are subject to annual review and
change. 
 viii) Recovery of deferred tax assets: 
 Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require management to assess the likelihood that the Company will
generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. 

Risk Factors and Uncertainties 
 The
financing, exploration, development and mining of any of the Company’s properties is subject to a number of factors including the price of gold, laws and regulations, political conditions, currency fluctuations, environmental regulations,
hiring qualified people and obtaining necessary services in jurisdictions where the Company operates. The current trends relating to these factors are favorable but could change at any time and negatively affect the Company’s operations and
business. 
 The following is a brief discussion of those distinctive or special characteristics of the Company’s operations and industry
which may have a material impact on, or constitute risk factors in respect of the Company’s future financial performance. 
 (i) Industry

 The Company is engaged in exploration, mine development and the mining and production of precious metals, primarily gold, and is exposed to a
number of risks and uncertainties that are common to other companies in the same business. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, cave-ins, landslides and the inability to obtain
suitable adequate machinery, equipment or labour are risks involved in the operation of mines and the conduct of exploration programs. The Company has relied on and may continue to rely upon consultants and others for mine operating and exploration
expertise. Few properties that are explored are ultimately developed into producing mines. Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and in
the case of new properties, to develop the 

  
 26 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 
mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineral deposit, the Company may not
be able to raise sufficient funds for development. The economics of developing mineral properties are affected by many factors including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of mining and
processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. Where expenditures on a property have not led
to the discovery of mineral reserves, spent costs will not usually be recoverable. 
 (ii) Commodity Price 

The value of the Company’s mineral resources and future operating profit and loss is affected by fluctuations in gold prices, over which the Company
has no control. A reduction in the price of gold may prevent the Company’s properties from being economically mined or result in the write-off of assets whose value is impaired as a result of low gold prices. The price of gold may also have a
significant influence on the market price of the Company’s common shares. The price of gold is affected by numerous factors beyond the Company’s control, such as the level of inflation, fluctuation of the United States dollar and foreign
currencies, global and regional demand, sale of gold by central banks and the political and economic conditions of major gold producing countries throughout the world. The price of gold has increased significantly in the past several years. The
current gold price is significantly above impairment levels. The Company has elected not to engage in significant forward selling, as a number of gold mining companies have been adversely affected by maintaining a substantial forward sales book in
the face of a rising gold market. At the current rate of production, revenue will change by approximately $190,000 with each $1 change in the price of gold. 
 (iii) Currency 
 The Company is subject to currency risks. The Company’s functional currency
is the United States dollar, which is subject to recent fluctuations against other currencies. The Company’s primary operations are located in Mexico and many of its expenditures and obligations are denominated in Mexican pesos. In addition,
the Company has exploration and development activities ongoing in Turkey where the majority of its expenditures and obligations are in Turkish lira or Euros. The Company’s head office is in Canada where it maintains cash accounts in United
States and Canadian dollars. As a result, the Company has monetary assets and liabilities and expenditures in United States dollars, Canadian dollars, Mexican pesos, Turkish lira and Euros. The Company’s results of operations are subject to
foreign currency fluctuation risks and such fluctuations may adversely affect the financial position and operating results of the Company. The Company has not undertaken to mitigate transactional volatility in either the Mexican peso or the Canadian
dollar at this time. A 1% change in the relative value of the Canadian dollar would impact corporate and administrative costs by approximately $110,000 annually; a 1% change in the relative value of the Mexican peso would impact operating costs by
approximately $370,000 annually. A significant strengthening in the value of the Turkish lira compared to the United States dollar could adversely impact the economics associated with the Company’s development-stage assets in Turkey.

 (iv) Business 
 The Company has
limited financial resources which could affect its ability to carry out its business plan. The Company’s ability to secure fixed gold prices or future foreign exchange 

  
 27 

 
rates is affected by its creditworthiness. Because of its limited operating record, it may not be able to hedge future risk to the extent it feels is appropriate. The Company’s ability to
obtain financing to explore for mineral deposits and to continue and complete the development of those properties it has classified as assets is not assured, nor is there assurance that the expenditure of funds will result in the discovery of an
economic mineral deposit. 
 (v) Competitive 
 The Company’s business is intensely competitive, and the Company competes with other mining companies, many of which have greater resources and experience. Competition in the precious metals mining
industry is primarily for mineral rich properties which can be developed and produced economically; the technical expertise to find, develop, and produce such properties; the labour to operate the properties; and the capital for the purpose of
financing development of such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world-wide basis and some of these companies have much greater financial and technical
resources than the Company. Such competition may result in the Company being unable to acquire desired properties, recruit or retain qualified employees or acquire the capital necessary to fund its operations and develop its properties. The
Company’s inability to compete with other mining companies for these mineral deposits could have a material adverse effect on the Company’s results of operations and business. 
 (vi) Country 
 The Company conducts exploration, mine development and mining and production
activities in Sonora, Mexico. Mexico is a developing country and obtaining financing, finding or hiring qualified people or obtaining all necessary services for the Company’s operations in Mexico may be difficult. Mexico’s status as a
developing country may make it more difficult for the Company to attract investors or obtain any required financing for its mining projects. 

The Company recently acquired development-stage assets in Turkey and is subject to risks associated with conducting exploration activities and planning
mine development activities in Turkey, including risks with respect to staffing, financing, obtaining the required goods and services, permitting, community relations and environmental risks. 
 The Company strives to maintain good relations with the local communities in which it operates by providing employment opportunities and social services. The Company has entered into surface agreements
with the Mulatos Ejido. In addition, the Company has entered into agreements with individual Ejido members for the surface rights to which they have been assigned. The transfers of title to these surface rights have been registered under Mexican
law. 
 The Company is also in negotiations with Ejido and non-Ejido members, as a group and individually, to relocate the existing community of
Mulatos, and to acquire additional surface rights. Negotiations with the Ejido can become time-consuming if demands for compensation become unreasonable. In addition, risk exists that Ejido and/or non-Ejido members could take action in attempts to
physically impede access to the mine or mining operations. Such actions could include a blockade of the mine and could result in significant downtime and associated costs or suspension of operations and loss of production. With the assistance of
experienced legal advisors and input and assistance from state and local government officials, the Company expects that it will be able to acquire its land-use requirements at a reasonable cost, however, there can be no assurance that this will be
the case. The Company also expects that any actions taken by Ejido or non-Ejido members to interrupt or otherwise impede mine operations will be addressed by the appropriate state and federal government authorities. 

  
 28 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 In 2010, the Mulatos Ejido filed a complaint with the Unitary Agrarian Court to nullify the 2008 land
purchase agreement. In June 2012, the Agarian Unitary Court issued a judgement in which it ruled that the Company’s wholly-owned subsidiary has been completely discharged of all claims made against it in this lawsuit. The Court also confirmed
the validity of the 2008 land purchase agreement. In August 2012, the Mulatos Ejido filed an appeal with the Federal Courts. 
 The acquisition
of the right to exploit mineral properties is a detailed and time-consuming process. Although the Company is satisfied it has taken reasonable measures to acquire unencumbered rights to explore on and exploit its mineral reserves on the Salamandra
group of concessions, no assurance can be given that such claims are not subject to prior unregistered agreements or interests or to undetected or other claims or interests which could be material and adverse to the Company. 

Mexico recently enacted new tax laws which provide an additional layer of complexity and uncertainty in evaluating the financial benefit from current and
future operations. 
 (vii) Environmental 
 The operations of the Company are subject to environmental regulations promulgated by government agencies from time to time. Specifically, the Company activities related to its Salamandra Concessions are
subject to regulation by SEMARNAP, the environmental protection agency of Mexico. Regulations require that an environmental impact statement, known in Mexico as a Manifesto Impacto Ambiental, be prepared by a third-party contractor for
submittal to SEMARNAP. Studies required to support the Manifesto Impacto Ambiental include a detailed analysis of the following areas: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. The Company must also
provide proof of local community support for a project to gain final Manifesto Impacto Ambiental approval. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in
association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain
types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to reduce
the profitability of operations. 
 (viii) Regulatory 
 The Company’s activities are subject to extensive laws and regulations governing worker health and safety, employment standards, waste disposal, protection of historic and archaeological sites, mine
development, protection of endangered and protected species and other matters in both Mexico and Turkey. Specifically, the Company’s activities related to its Mulatos Mine and the Salamandra group of concessions are subject to regulation by
SEMARNAP, the environmental protection agency of Mexico, Comisión Nacional del Aqua (“CAN”), which regulates water rights, and the Mexican Mining Law. Mexican regulators have broad authority

  
 29 

 
to shut down and/or levy fines against facilities that do not comply with regulations or standards. The Company’s mineral exploration and mining activities in Mexico may be adversely
affected in varying degrees by changing government regulations relating to the mining industry or shifts in political conditions that increase the costs related to the Company activities or maintaining its properties. Operations may also be affected
in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. 

A number of other approvals, licenses and permits are required for various aspects of mine development. While the Company has used its best efforts to
ensure title to all its properties and secured access to surface rights, these titles or rights may be disputed, which could result in costly litigation or disruption of operations. The Company is uncertain if all necessary permits will be
maintained on acceptable terms or in a timely manner. Future changes in applicable laws and regulations or changes in their enforcement or regulatory interpretation could negatively impact current or planned exploration and development activities
within the Company’s Salamandra group of concessions or any other projects with which the Company becomes involved. Any failure to comply with applicable laws and regulations or failure to obtain or maintain permits, even if inadvertent, could
result in the interruption of exploration and development operations or material fines, penalties or other liabilities. 
 A new Mining Law was
adopted in Turkey in 2010. It contains certain provisions designed to streamline the permitting and development processes and encourage concession-holders to advance their projects on a more timely basis in order to maintain the concessions in good
standing. The Company’s concessions in Turkey are subject to meeting specific deadlines for obtaining certain permits and advancing its concessions in Turkey. While the Company is confident in its ability to meet all required deadlines or
milestones to maintain its concessions in good standing, there is no guarantee that the Company will be able to do this. The loss of key concessions could have a significant adverse impact on the Company’s operating and development plans.

 (ix) Estimates 
 The mineral
reserves and resource estimates of the Company are estimates only and no assurance can be given that any particular level of recovery of minerals will in fact be realized or that an identified reserve or resource will ever qualify as a commercially
mineable (or viable) deposit which can be legally and economically exploited. The Company relies on laboratory-based recovery models to project estimated ultimate recoveries by ore type at optimal crush sizes. Actual gold recoveries in a commercial
heap leach operation may exceed or fall short of projected laboratory test results. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Production can
be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations, inaccurate or incorrect geologic, metallurgical or engineering
work, and work interruptions, among others. Short term factors, such as the need for orderly development of deposits or the processing of new or different grades or ore types, may have an adverse effect on mining operations or the results of
operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in proven and probable reserves or
resources, grades, waste-to-ore ratios or recovery rates may affect the economic viability of projects. The estimated proven and probable reserves and resources described herein should not be interpreted as assurances of mine life or of the
profitability of future operations. Based on 

  
 30 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 
the expected 2013 rate of production and budgeted cash operating costs, a 1% change in the expected rate of recovery of gold would result in a $3 per ounce change in cash operating costs, and an
approximate $600,000 change in income and cash flow annually, before royalties and income taxes. A 1% change in cash cost per tonne of ore would result in a $3 per ounce change in cash cost, and approximately $600,000 change in income and cash flow
annually, before royalties and tax charges. 
 (x) Dependence on Management 
 The Company is dependent on key personnel and the absence of any of these individuals could result in a significantly negative effect on the Company. The Company strongly depends on the business and
technical expertise of its management and key personnel. There is little possibility that this dependence will decrease in the near term. As the Company’s operations expand, additional general management resources will be required, especially
since the Company encounters risks that are inherent in doing business in several countries. The Company is dependent, in particular, on its Chief Executive Officer, John McCluskey and its Chief Operating Officer, Manley Guarducci. Key man life
insurance is not in place on Messrs. McCluskey or Guarducci. If the services of the Company’s management and key personnel were lost, it could have a material adverse effect on future operations. 

(xi) Legal 
 Substantially all of the
Company’s assets are located outside of Canada, and are held indirectly through foreign affiliates. It may be difficult or impossible to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of the
securities laws of certain provinces against the portion of the Company’s assets located outside of Canada. 
 (xii) Acquisitions

 The Company may from time to time explore opportunities to acquire other companies or execute other strategic initiatives developed by
management. Acquisitions may involve a number of special risks, including failure to retain key personnel, unanticipated events or circumstances and legal liabilities, some or all of which could have a material adverse effect on the Company’s
business, results of operations and financial position. The Company cannot be sure that any acquired businesses will achieve the anticipated revenues, income and synergies. Failure on the part of the Company to manage its acquisition strategy
successfully could have a material adverse effect on its business, results of operations and financial position. The Company cannot be sure that it will be able to identify appropriate targets, profitably manage additional businesses or successfully
integrate any acquired business into its operations. It is also possible that unanticipated factors could arise and there is no assurance that the anticipated financial or strategic objectives will be achieved, which could adversely affect the
Company’s results of operations and financial position. 
 Forward-Looking Statements 

This MD&A contains “forward-looking information”, as such term is defined in applicable Canadian securities legislation and
“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, concerning Alamos’s future financial or operating performance and other statements that express management’s
expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as 

  
 31 

 
“expects”, “believes”, “anticipates”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “plans”
and variations of such words and phrases, or by statements that certain actions, events or results “may”, “will”, “could”, “would” or “might”, “be taken”, “occur” or “be
achieved”. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Alamos operates, are inherently subject to significant
operational, economic and competitive uncertainties and contingencies. Alamos cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Alamos’s actual results, performance or
achievements to be materially different from those expressed or implied by such information, including, but not limited to, gold and silver price volatility; fluctuations in foreign exchange rates and interest rates; the impact of any hedging
activities; discrepancies between actual and estimated production, between actual and estimated reserves and resources or between actual and estimated metallurgical recoveries; costs of production; capital expenditure requirements; the costs and
timing of construction and development of new deposits; and the success of exploration and permitting activities. In addition, the factors described or referred to in the section entitled “Risk Factors” in the Company’s Annual
Information Form for the year ended December 31, 2011 which is available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this MD&A. Although Alamos has attempted to identify important
factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated,
estimated or intended. There can be no assurance that such information will prove to be accurate or that management’s expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not
place undue reliance on forward-looking information. The forward-looking information in this MD&A is made as of the date of this interim report, and Alamos disclaims any intention or obligation to update or revise such information, except as
required by applicable law. 
 Cautionary non-GAAP Measures and Additional GAAP Measures 

Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain non-GAAP and additional GAAP measures as
indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. Non-GAAP and additional GAAP measures do not
have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies. 

(i) Cash flow from operating activities before changes in non-cash working capital 
 “Cash flow from operating activities before changes in non-cash working capital” is a non-GAAP performance measure that could provide an indication of the Company’s ability to generate cash
flows from operations, and is calculated by adding back the change in non-cash working capital to “Cash provided by (used in) operating activities” as presented on the Company’s consolidated statements of cash flows. 

  
 32 

 MANAGEMENT’S DISCUSSION & ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 
  

 The following table reconciles the non-GAAP measure to the consolidated statements of cash flows.

  

																	
	 	  	Q4 2012	 	 	Q4 2011	 	 	YTD
2012	 	 	YTD
2011	 
	 Cash flow from operating activities – IFRS (000)
	  	$	69,171	  	 	$	37,275	  	 	$	184,596	  	 	$	106,534	  
	 Changes in non-cash working capital (000)
	  	 	(15,648	) 	 	 	(5,474	) 	 	 	(6,062	) 	 	 	692	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Cash flow from operating activities before changes in non-cash working capital (000)
	  	$	53,523	  	 	$	31,801	  	 	$	178,534	  	 	$	107,226	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 (ii) Mining cost per tonne of ore 
 “Mining cost per tonne of ore” and “Cost per tonne of ore” are non-GAAP performance measures that could provide an indication of the mining and processing efficiency and effectiveness
of the mine. These measures are calculated by dividing the relevant mining and processing costs and total costs by the tonnes of ore processed in the period. “Cost per tonne of ore” is usually affected by operating efficiencies and
waste-to-ore ratios in the period. The following table reconciles the non-GAAP measure to the consolidated statements of comprehensive income 
  

																	
	 	  	Q4 2012	 	 	Q4 2011	 	  	YTD
2012	 	  	YTD
2011	 
	 Mining and processing costs – IFRS (000)
	  	$	23,480	  	 	$	16,319	  	  	$	70,168	  	  	$	53,868	  
	 Inventory adjustments and period costs (000)
	  	 	(1,968	) 	 	 	1,986	  	  	 	1,979	  	  	 	302	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total cost (000)
	  	$	21,512	  	 	$	14,333	  	  	$	72,147	  	  	$	54,170	  
	 Tonnes Ore stacked / milled (000)
	  	 	1,649.7	  	 	 	1,467	  	  	 	5,823.0	  	  	 	5,164	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total cost per tonne of ore
	  	$	13.04	  	 	$	9.77	  	  	$	12.39	  	  	$	10.49	  
		  	  
	  
	 	 	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 (iii) Cash operating costs per ounce and total cash costs per ounce 

“Cash operating costs per ounce” and “total cash costs per ounce” as used in this analysis are non-GAAP terms typically used by gold
mining companies to assess the level of gross margin available to the Company by subtracting these costs from the unit price realized during the period. These non-GAAP terms are also used to assess the ability of a mining company to generate cash
flow from operations. There may be some variation in the method of computation of “cash operating costs per ounce” as determined by the Company compared with other mining companies. In this context, “cash operating costs per
ounce” reflects the cash operating costs allocated from in-process and dore inventory associated with ounces of gold sold in the period. “Cash operating costs per ounce” may vary from one period to another due to operating
efficiencies, waste-to-ore ratios, grade of ore processed and gold recovery rates in the period. “Total cash costs per ounce” includes “cash operating costs per ounce” plus applicable royalties. Cash operating costs per ounce and
total cash costs per ounce are exclusive of exploration costs. 

  
 33 

 The following table reconciles these non-GAAP measure to the consolidated statements of comprehensive
income. 
  

																	
	 	  	Q4 2012	 	  	Q4 2011	 	  	YTD
2012	 	  	YTD
2011	 
	 Mining and processing costs – IFRS (000)
	  	$	23,480	  	  	$	16,319	  	  	$	70,168	  	  	$	53,868	  
	 Divided by: Gold ounces sold (1),(2)
	  	 	62,516	  	  	 	42,204	  	  	 	197,516	  	  	 	146,390	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Cash operating costs per ounce
	  	$	376	  	  	$	387	 	  	$	355	 	  	$	368	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Mining and processing costs – IFRS (000)
	  	$	23,480	  	  	$	16,319	  	  	$	70,168	  	  	$	53,868	  
	 Royalties – IFRS (000)
	  	 	5,255	  	  	 	3,573	  	  	 	16,411	  	  	 	11,157	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Cash costs (000)
	  	$	28,735	  	  	$	19,892	  	  	$	86,579	  	  	$	65,025	  
	 Divided by: Gold ounces sold (1),(2)
	  	 	62,516	  	  	 	42,204	  	  	 	197,516	  	  	 	146,390	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Cash costs per ounce
	  	$	460	 	  	$	471	 	  	$	438	 	  	$	444	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	(1) 	 Gold ounces sold in Q4 2011 were 45,224, of which 3,020 ounces were estimated to have been derived from ore processed in developing the Escondida zone
and have been accounted for as pre-production ounces with the associated revenues and operating costs offset against capitalized development costs. 

	(2) 	 Gold ounces sold in 2011 were 151,000, of which 4,610 ounces were estimated to have been derived from ore processed in developing the Escondida zone
and have been accounted for as pre-production ounces with the associated revenues and operating costs offset against capitalized development costs. 

 (iv) Other additional GAAP measures 
 Additional GAAP measures that are presented on the
face of the Company’s consolidated statements of comprehensive income and are not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures.
The following additional GAAP measures are used and are intended to provide an indication of the Company’s mine and operating performance: 
  

	 	•	 	 Mine operating costs – represents the total of mining and processing, royalties, and amortization expense 

 

	 	•	 	 Earnings from mine operations – represents the amount of revenues in excess of mining and processing, royalties, and amortization expense.

  

	 	•	 	 Earnings from operations – represents the amount of earnings before net finance income/expense, foreign exchange gain/loss, other income/loss, and
income tax expense 

  
 34

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