Premier Evolution 2014 Annual Report

Transcription

1 Premier Evolution 2014 Annual Report

2 Together, we will capitalize on opportunity and drive forward our plan to build a dynamic, growth-oriented company that will survive and thrive in this new market environment.

3 Premier Projects, Premier Growth..a Premier Transformation Premier realized numerous achievements in During the year, major advancements were made at the Trans-Canada Property, we consolidated the McCoy-Cove property package, made new discoveries at Cove, and maintained progress at the Rahill-Bonanza Joint Venture in Red Lake. Despite challenging market conditions that have continued to affect the gold sector, the exceptional efforts from all members of our dedicated team ensured sustained progress. Early in the year we completed and released PEA s for the Hardrock and Brookbank deposits at Trans-Canada. A mid-year mineral resource estimate substantially increased the in-pit resource at Hardrock, leading us to initiate work on a full feasibility study and project permitting. In Red Lake, with the haulage drift completed across the joint venture property, underground drilling focused on testing the large expanse of favourable geology between the Red Lake and Cochenour Gold Mine complexes. While the Wilmar target program encountered difficulties, several significant intercepts were returned elsewhere, including a favourable gold mineralization discovery that will remain the focus of drilling in In Nevada, we were successful at consolidating the McCoy-Cove district. The world class gold trends of Nevada remain a focal district for Premier as we continue to look for growth opportunities. We are not standing still MESSAGE TO SHAREHOLDERS In early 2015, Premier entered into a 50/50 partnership with Centerra Gold Inc. for the development of the Hardrock Project at Trans-Canada, completed a land swap with Goldcorp resulting in Premier holding 100% ownership of the Hasaga Property in Red Lake, and entered into an agreement to acquire Goldcorp s 40% interest in the South Arturo Property in Nevada. We have also significantly strengthened an already enviable balance sheet for a company our size. The South Arturo acquisition is a transformational event for your Company. With initial gold production expected in late 2015, this transaction will accelerate Premier s pathway to producer status and will provide substantial leverage to near-term improvements in the gold price. This project, located in the heart of the Carlin Trend, meets Premier s world class district and safe mining jurisdiction criteria and will bring to the Company a new partner in Barrick Gold Corporation. The partnership model has been, and will continue to be, an important part of the Company s past and future successes. Our philosophy remains unchanged, and the guiding principles that have driven our success to date remain intact. Maintain a strong treasury Establish an industry-best management team Consolidate key land packages in safe, accessible mining jurisdictions Establish a project portfolio that can serve as a pipeline for growth well into the future Leverage relationships with key industry players through partnership and collaboration By adhering to these principles we will evolve from explorer, to developer, to producer. And through our unwavering commitment we will drive future success and deliver the growth in share value that you, our shareholders, desire. We recognize that the support of our shareholders is essential. Therefore when you speak, we listen. Together, we will capitalize on opportunity and drive forward our plan to build a dynamic, growth-oriented company that will survive and thrive in this new market environment. Ewan S. Downie President & Chief Executive Officer May 18,

4 A World of Opportunity for Today and Tomorrow 2 Ontario Projects Ontario is our backyard; the backbone of Premier. Our greatest organic growth has been realized here; our centre of gravity resides here. During 2014 and in early 2015, Premier s Made in Ontario accomplishments have generated hope and excitement for the future, despite the headwinds of the current investment climate. Trans-Canada Property (50% Premier) At our flagship Trans-Canada Property, Premier began 2014 by issuing PEA s for the Hardrock and Brookbank Projects, each supporting the potential for robust mining operations at Trans-Canada in the future. This was encouraging news for beleaguered communities in the north and an important first step for Premier shareholders. The final phase of delineation drilling at Hardrock, currently in progress, will ensure appropriate condemnation has been conducted, will seek to convert much of the remaining inferred mineral resources and ensure the resource estimate in the Feasibility block model is optimized. The Trans-Canada property has many advantages including its location in Canada, grade, ease of access and proximity to infrastructure and services and Premier believed that these advantages were valuable assets that could be leveraged when the question of financing came to be addressed. The recent announcement of the formation of the Trans-Canada Partnership (TCP) with Centerra Gold Inc. has brought clarity to future project development where uncertainty previously existed. Going forward, our goal is to deliver a feasibility study at Hardrock that builds toward the vision set out in our 2013 strategic review and meets the stringent expectations of our local communities and shareholders alike. Rahill-Bonanza Property (44% Premier) Owing to challenges realized during 2014, that included difficulty drilling the high priority Wilmar target related to ground conditions associated with a fault structure south of the tram, the JV initiated a strategic review for future exploration. This review has resulted in the establishment of a 3-year vision that will return to testing higher level, more regional targets, while continuing to follow-up on the intriguing results we have released on the very accessible fold target mineralization. This more balanced approach to our exploration planning will result in renewed surface exploration to test for extensions of the Bonanza deposit, and in the future may result in additional underground development to be properly positioned to delineate attractive targets at Wilmar, WGZ and the PG70 zone. Fundamentally, the opportunity for Premier at the RBJV has not diminished. The main Mine Trend is a location that has been reinventing itself since mining at Balmertown and Cochenour began some 70 years ago. Our belief in its future is as strong as ever. Hasaga Property (100% Premier) Premier has recently embarked on an ongoing program to streamline our property holdings in order to sharpen our focus on core holdings. In early 2015, an important step in this process was realized when it was announced that Premier had secured a 100% interest in the historic Hasaga Property in Red Lake by divesting itself of secondary assets in a non-cash property swap with Goldcorp Inc.. The Premier team views Hasaga today much the same as we viewed Hardrock in The Hasaga Property has historic gold production of some 650,000 ounces but has seen only intermittent exploration in the last 60 years. Historic drilling completed in the late 1980 s and early 1990 s suggest mineralization on the property is still open at depth, and may be extensive near surface as well. Premier anticipates drilling some 25,000 metres or more to test this model in 2015 and hopes to demonstrate that the Hasaga Property has potential to add significant value to Premier shareholders in the future. Premier Gold Mines U.S.A. Premier has never been a company willing to risk its entire future on a single project. It is our belief that we must manage shareholder risk as much as shareholder opportunity. Our original vision to diversify outside of Ontario and into Nevada was made with this in mind. Nevada hosts some of the world s most endowed gold regions, and is a safe and accessible jurisdiction that complements our Ontario assets. McCoy-Cove Property (100% Premier) Properties having truly world class potential are rare to find and often require having patience and a longer term view. Premier s original purchase of the Cove Property in 2012 held the belief that its multi-million ounce gold and silver production history was only a window into the true potential of the property.

5 Late in 2013, Premier began testing initial target areas proximal to and beneath the Cove Pit that it had identified as being prospective. This work bore immediate success with the discovery of the CSD and 2201 zones within stratigraphic horizons that had received little or no exploration in the past. During 2014, an opportunity to purchase the historic McCoy Property reunited the district land position. Premier s plan for 2015 includes assessing remaining oxide mineral potential on the property before focussing on deeper gold potential at McCoy (based on historic drilling) and selectively testing exploration targets that include a large I.P. anomaly that occurs parallel to the Gold Dome fault at about 400 metres below surface. South Arturo Property (40% Premier) Very recently, Premier negotiated an agreement to purchase Goldcorp s interest in the South Arturo development property, located some 5 kilometres northwest of Barrick Gold Corporation s Goldstrike operation. The acquisition will position Premier as a near-term goldproducing company in the Carlin Trend of Nevada, one of the world s premier gold districts South Arturo requires little new infrastructure to be built, and is operated by a strong operating team at Barrick. Most importantly, advancing South Arturo is not expected to compromise our ability to meet our future obligations to the Trans-Canada Partnership in Ontario or our other exploration-based assets. During 2015, the Barrick team is pre-stripping South Arturo, completing necessary infrastructure specific to the project, and conducting exploration and delineation drilling with the hope of confirming and/or making additional contributions to the mineral resources. Realizing Opportunity At Premier Gold, we see A World of Opportunity to succeed on behalf of our shareholders, employees and community stakeholders. It defines our mission. Our strategy adheres to very simple principles that include: Proven Management, Accessible Districts, Safe Jurisdictions and Sensible Partnerships. We see opportunity to discover where others have not, opportunity to create exciting futures and positive legacies, and opportunity to create partnerships that work for everyone. It s an opportunity we wake up to everyday and a responsibility we take very seriously. Stephen McGibbon Executive Vice-President, Corporate & Project Development May 18, 2015 Financial Strength & Stability To grow as a company we must evolve as a company. To evolve as a company we must commit to the path toward mine development and production. We understand that growth with no corresponding increase in share value is meaningless, and that growth at the expense of financial stability has the potential to be fatal. Furthermore, we recognize that our shareholders expect management to focus on its objective to ensure share value appreciation. Growth for the sake of growth is not an option. We are therefore committed to managing our capital structure and ensuring that our investments and decisions translate into a corresponding increase in share value. Striking a balance between growth and financial stability is therefore essential, especially during times when fluctuations in commodity prices, and volatile market conditions, result in scarce and highly selective sources of capital. This is a challenge that all companies face and must navigate. At Premier, we believe that the relationships and partnerships we have managed to foster within the industry have proven to be a competitive advantage. Whether on our own, or through relationships, we are working towards finding a balance that will drive each of our projects forward to create a year of unprecedented growth. Steve Filipovic Chief Financial Officer May 18,

6 CORPORATE SCORECARD Catalysts for Growth and What we Have Delivered Tabled Preliminary Economic Assessment for the Trans- Canada Property (Hardrock and Brookbank) Updated mineral resource estimate completed for the Hardrock Project in advance of a Feasibility Study Underground drilling from the Red Lake haulage drift commenced Consolidated McCoy-Cove Gold District Identified for follow up, prospective new targets proximal to the Hardrock Deposit 50/50 partnership with Centerra Gold Inc for the development of Hardrock Project at Trans- Canada Completed Land Swap with Goldcorp Inc resulting Premier holding 100% of Hasaga Entered into and agreement to acquire Goldcorp s 40% interest in the South Arturo Hardrock resource contingency payment Initial production from South Arturo Hardrock Feasibility Study Ongoing exploration results from the McCoy-Cove and Hasaga Gold Projects Continue to optimize asset portfolio, through sale of noncore assets and evaluating potential opportunities to position the Company for longterm focused growth 4

7 Management s Discussion & Analysis Management s Discussion XX & Analysis 07 Financial Statements XX Financial Statements 27 Auditors Report XX Auditors Report 28 Notes to Financial Statements XX Notes to Financial Statements 35 Corporate Directory Corporate Directory XX 75

8

9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014 The following Management's Discussion and Analysis ( MD&A ) of Premier Gold Mines Limited (the Corporation or Premier ) should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2014 and 2013 and the notes thereto. The Corporation s audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). Unless otherwise stated, all amounts discussed herein are denominated in Canadian dollars. This MD&A was prepared as of March 27, 2015 and all information is current as of such date. Readers are encouraged to read the Corporation s public information filings on SEDAR at This discussion provides management's analysis of Premier s historical financial and operating results and provides estimates of Premier s future financial and operating performance based on information currently available. Actual results will vary from estimates and the variances may be significant. Readers should be aware that historical results are not necessarily indicative of future performance. Cautionary Statement on Forward-Looking Statements Certain information set forth in this MD&A, including management's assessment of the Corporation's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of resource estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be inaccurate and, as such, reliance should not be placed on forward-looking statements. Premier s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, if any, that Premier will derive there from. Premier disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable law. Company Overview Premier is a Canadian-based mineral exploration company, focused on exploring for and developing gold deposits within the Americas. Premier has a diverse portfolio of advanced-stage gold exploration properties located in Northwestern Ontario - Canada and Nevada - USA. Canada In Canada, Premier has properties in two districts; and the Beardmore-Geraldton Greenstone Belt and the Red Lake Mining District (which also includes the Musselwhite area). Beardmore-Geraldton Greenstone Belt This highly prospective high-grade gold district boasts more than 4.1 Million ounces of historic gold production that, prior to Premier s sustained exploration and development focus, had seen relatively little exploration over the past several decades. The Trans-Canada Property, which is located in the heart of this district, is host to several past-producing mines and covers some of the most strategic ground in the region. While the property is host to numerous exploration targets and several deposits, its two principal projects are the Hardrock and Brookbank Projects. 1 Page 7

10 Since late 2007, Premier has completed in excess of 650,000 metres of diamond drilling at the property, which concluded with NI mineral resource estimate reports being completed on four deposits. In early 2014, Preliminary Economic Assessments (PEA) were completed at Hardrock and Brookbank. In February 2015, Premier announced the signing of an agreement with Centerra Gold Inc. ( Centerra ) whereby Centerra will acquire a 50% interest in the Trans-Canada Property by making cash payments to Premier of up to $115 million and making $185 million in project related expenditures. On March 9, 2015 Centerra and Premier announced the closing of the 50/50 joint venture partnership formed for the purpose of the joint ownership and development of Premier's Trans-Canada Property including the Hardrock Gold Project located in the Geraldton-Beardmore Greenstone belt in Ontario. Premier, through a wholly-owned subsidiary, has contributed all property, assets and rights it held in respect of the Trans-Canada Property to the partnership in consideration for its 50% interest in the partnership, and Centerra has made an initial cash contribution to the partnership in the amount of C$85 million for its 50% limited partner interest. Centerra and Premier have formed a joint board of directors to oversee future exploration, development and operations by the partnership at the Trans-Canada Property. Red Lake Mining District (including Musselwhite Area) World renowned for high-grade gold, the mines of Red Lake Mining District have produced tens of millions of ounces of gold, making it one of the world s most prolific gold districts. In the heart of the district lies Goldcorp s Red Lake Gold Mine (RLGM), considered to be one of the highest grade producing gold mines in the world. Premier is involved in two projects in the Red Lake Mining District. Premier s flagship project in Red Lake is the Rahill-Bonanza Property (49% Premier) located immediately adjacent to, and along strike from, Goldcorp s RLGM complex and is a joint venture with Goldcorp Inc. s affiliate, Red Lake Gold Mine. The Rahill-Bonanza joint venture will include the Broulan Reef Property purchased by Premier in 2013, which is immediately adjacent to Goldcorp s Bruce Channel deposit and Cochenour Mine complex. The East Bay Property is located largely beneath East Bay in Red Lake and is operated by RLGM. The PQ North Property, strategically located just north of, and along strike from, Goldcorp s Musselwhite Gold Mine, encompasses a major fold structure that lies along strike from and within the main rock unit that hosts Musselwhite s gold-bearing ore zones. Early in 2015, Premier entered into a property swap agreement with Goldcorp that saw Premier transfer to Goldcorp its 35% interest in the East Bay Property as well as its 100% interest in the PQ North property. Premier retains a small NSR in the PQ North Property. In return, Premier received from Goldcorp, a 100% interest in the Hasaga Property. This non-financial transaction helps streamline Premier s property interests in the district and puts greater control over exploration in the Company s hands. Hasaga was last explored in 1996 and has a production history which (when combined with the Howey Mine) exceeds 650,000 ounces of gold. United States In the United States, Premier is focused its McCoy-Cove Gold Property in the Eureka-Battle Mountain trend in Nevada, where ongoing exploration activities are focused on advancing both open pit and underground deposit opportunities. Premier continues to evaluate other high quality Americas based gold projects in proven pro mining districts with the belief that A World of Opportunity lies before it. Premier believes that an aggressive exploration strategy complimented by mine operating and building capability will repeatedly reward our shareholders. 2 Page 8

11 Results of Operations CANADA Development In late January 2014 Premier released a Preliminary Economic Assessment (PEA) for each of the Hardrock and Brookbank Projects. Strong economic profiles for each project were returned at gold prices (in Cdn$ terms) of $1,315. Highlights of the 2014 PEA studies (all currency amounts in Canadian dollars unless otherwise stated) include: Hardrock Project Estimates Average annual gold production during the first 8 years of 253,100 ounces with life of mine "LOM" (15 years) annual production of 202,700 ounces (including low-grade stockpiles). Average grade over the first 8 years of 1.50 grams per tonne gold "g/t Au" with a LOM average grade of 1.18 g/t Au (including low-grade stockpiles). Initial processing of 10,000 tonnes per day "tpd", expanding to 18,000 tpd in Year 3. Pre-production capital costs of $410.6 million including $83 million for contingency. Pre-tax net present value "NPV" (at a 5% discount rate) of $519 million at US$1,250 gold. Pre-tax internal rate of return "IRR" of 23.0% and a 3.5 year payback at US$1,250 gold. Brookbank Project Estimates Pre-tax NPV (at 5% discount rate) of $76 million and IRR of 30.7% at US$1,250 gold when rock is trucked to Hardrock versus stand-alone processing option. Average annual gold production during LOM (7 years) of 48,700 ounces. At the beginning of Q Premier subsequently updated its mineral resource estimate for Hardrock, based on the addition of some 94,000 metres of drilling completed since early August Highlights of the 2014 Hardrock mineral resource estimate include: Overall Indicated resources of 4.87 million (M) ounces, an increase of 1.63M ounces or 50%. Overall Inferred resources of 2.74M ounces, a decrease of 1.04M ounces or 27%. O/P Indicated resources of 3.97M ounces, an increase of 1.62M ounces or 69% with coincident increases in resource grades. New estimate utilizes identical grade capping, COG's and gold price (in Canadian dollar terms) versus previous estimate as well as 86,500 metres of additional infill drilling for a total of 621,000 metres. The very significant increase in the open pitable resource was due primarily to positive geotechnical characteristics of the Hardrock deposit, allowing for steeper pit walls than previously reported. Generally positive metallurgical test results may have positive implications on future economic modelling as well. During early Q Premier also disclosed the signing of a joint Memorandum of Understanding (MOU) with Long Lac #58 First Nation, whose community is located some 30 kilometres east of the Hardrock Project area. The Hardrock Gold Deposit is the largest gold deposit within the Trans-Canada Property. It is located 3.0 kilometres south of the Township of Geraldton in the Municipality of Greenstone in Ontario. Open Pit mineralization has been identified where historic gold mining comes to surface, and underground mineralization consists of both new horizons located parallel to the historic mine and extensions of the main zones historically mined. The Brookbank Gold Deposit is located approximately 77 kilometres to the west of Hardrock. The Brookbank Deposit has traditionally been regarded as a potential underground opportunity, however the current resource suggests that a small portion of the deposit may be amenable to being evaluated as an open-pit mining resource. 3 Page 9

12 Since release of the PEA studies in January 2014 Premier s focus has been on the completion of activities required to support project permitting and a feasibility study for the Hardrock Project that is expected to be released in Significant activities completed during the quarter in this regard include: Signing of a Joint Memorandum of Understanding with Long Lake #58 First Nation. The receipt of a letter of advice from the Province of Ontario on November 12 th, 2014 providing guidance regarding the aboriginal communities Premier is to engage with at all levels (consultation, notification and additional notification). The completion of infill drilling required to convert the June 2014 inferred resources into indicated resources. The commencement of a sampling program whereby 7,000m of the 11,400m of unsampled core in the pit will be sampled to support the final resource estimate. The completion of a resource audit by Roscoe Postle Associates Inc. (RPA) to support the preparation of a 2015 resource estimate. The completion of a waste pile design study to evaluate the possibility of using mined portions of the pit for waste. The completion of a preliminary dump schedule and mobile equipment list. Revisions to the mine plan to minimize pre-production capital and increase project economics. The preparation of preliminary manpower lists, including salary lists and social benefit packages for each position. Continued metallurgical testing of samples not sampled in the PEA pit and samples with low metallurgical recovery or high net value loss. Assessment of High pressure grinding roller (HPGR) technology for use. The completion of geotechnical studies to support infrastructure and road design. Site selection and phased construction concepts for the tailings management facility was finalized and a best fit option for the Goldfield Creek deviation was selected. Exploration Trans-Canada Property, Northwestern Ontario Up to five diamond drills were active during the year, with a total of some 55,412 metres being completed on the Trans-Canada Property in 154 holes. The primary purpose of this drilling was to convert existing Inferred mineral resources to Indicated, as well as target remaining areas where additional ounces may be found. In early 2015, it was anticipated that an additional 26,000 metres of drilling would be completed prior to the completion of the feasibility study. 4 Page 10

13 Red Lake Mining District, Northwestern Ontario Diamond drilling exceeding 10,400 metres was completed on joint venture projects with RLGM during This drilling included 7,617 metres drilled at Rahill-Bonanza (underground platforms) and some 2,800 metres at East Bay in seven holes from surface. The Rahill-Bonanza Project (49% Premier & 51% RLGM) covers approximately 4.5 kilometres of the main Red Lake "Mine Trend" between the Red Lake Gold Mines complex to the east, and the Cochenour Complex to the west. The haulage drift was excavated from the 5400 foot Level of Red Lake Gold Mines and intersected several kilometres of some of the highest potential and untested geology in the heart of the Red Lake camp. Underground diamond drilling at Rahill-Bonanza met with significant challenges in 2014 owing to difficult (squeezing) ground around boreholes resulting in holes not reaching their targeted depth on the Wilmar Mine projection program. The problem was exacerbated by a less than ideal position from which holes were being targeted from. By mid-year, the drill plan was modified to follow-up on earlier results in drilled from DB 20, where a series of narrow veins and breccias were intersected proximal to a favourable folded ultramafic rock unit. As a result of these challenges, no press releases of exploration results were made. The East Bay Project was active during the 1st quarter of 2014 only, and included drilling a total of 2,800 metres of drilling in five (5) holes. Three target areas were included in the program which focused within the Footwall structure drilled in previous programs. No East Bay-related press releases were made during the quarter. UNITED STATES Exploration McCoy-Cove Gold Project, Battle Mountain-Eureka District, Nevada, USA Some 20,130 metres of drilling was completed by Premier at the McCoy-Cove Gold Project during 2014 in 31 new holes. Significant progress was made on the property as a result of the aggressive exploration program including: New assay results from the initial holes drilled in 2014 demonstrated continuity in the Cove South Deep Zone and have expanded the mineralized envelope within the recently discovered 2201 Zones. In 2013, drilling within the 2201 Zone intersected grams per tonne gold (g/t Au) or 0.39 ounces per ton (oz/t) and g/t Ag (1.13 oz/t) across 10.3 metres (m) and g/t Au (0.55 oz/t) and g/t Ag (0.67 oz/t) across 4.1 m in hole AX-51; and g/t Au (0.46 oz/t) and g/t Ag (1.14 oz/t) across 6.1 m in hole PG-02. Step-out drilling on the 2013 discovery holes was completed in 100 m increments, intersecting mineralization over an area approximately 350 m by 300 m and remains open in all directions. Highlights from recent drilling include: 2201 Zone Discovery highlight assay results PG14-02: g/t Au (5.33 oz/t), g/t Ag (1.37 oz/t), 0.10% Pb/Zn across 1.5 m (5.0 ft) PG14-03: g/t Au (1.17 oz/t), g/t Ag (5.93 oz/t), 1.58% Pb/Zn across 4.9 m (16.2 ft) PG14-05: g/t Au (0.83 oz/t), g/t Ag (0.97 oz/t), 0.89% Pb/Zn across 1.5 m (5.0 ft) and g/t Au (0.33 oz/t), g/t Ag (2.12 oz/t), 2.45% Pb/Zn across 4.3 m (14.0 ft) 5 Page 11

14 PG14-01 was an exploration hole drilled from the north edge of the pit and returned low gold values. Step-out hole's PG14-02 and PG14-03 were drilled approximately 200 m west of the initial discovery holes in the 2201 Zone showing the potential to define resources in this horizon. Additional step-out and infill drilling continues to focus on the 2201 Zone. During Q finalized the transaction with Newmont Mining relating to the purchase of the historic McCoy property, located immediately south of Premier s Cove Gold project. Pursuant to the acquisition, Premier will make staged payments to Newmont over 18 months equal to US$21 Million (plus bonding) including $15 Million on closing and transferred to Newmont all land sections that comprise its South Carlin Project. Key benefits of the transaction include: 100% interest in the consolidated Cove-McCoy property package (now totaling 31,000 acres or 48 square miles) in the heart of one of the world's most productive gold districts. Elimination of "back-in" rights previously held by Newmont as well as a revision of the royalty terms held by Newmont from a "potential" 5.0% royalty (NSR) to a 1.5% NSR. The potential to define near-surface heap leachable mineralization at McCoy that could be prioritized towards development. Existing infrastructure, including lined heap leach pads that could potentially be utilized under a renewed development scenario. A "good faith efforts" processing arrangement with Newmont over a 10-year period within a 12-year window for ores mined at Cove-McCoy. Premier will retain a 1.5% Net Smelter Royalty ("NSR") in the South Carlin property interests. The Cove-McCoy Gold Mines have produced some 3.3 million ounces of gold and million ounces of silver between 1986 and 2006; a 20-year period of historically low gold and silver prices. While the ores mined at Cove and McCoy occurred in different rock units, the two mines are believed to have a close genetic relationship through their association with the same fault/feeder structures. These feeder structures have seen only limited previous exploration and represent a priority future exploration target. 6 Page 12

15 Selected Financial Data The following table provides selected financial information and should be read in conjunction with the Corporation s audited consolidated financial statements for the periods below: Year ended Year ended Year ended December 31, December 31, December 31, $ $ $ Operations Investment and other income 589, , ,351 Loss for the year: From continuing operations (47,473,984) (29,244,473) (21,418,662) From discontinued operations - (82,230) (19,472,853) (47,473,984) (29,326,703) (40,891,515) Basic and diluted loss per share Continuing operations (0.31) (0.19) (0.15) Discontinued operations - - (0.14) (0.31) (0.19) (0.29) Comprehensive loss for the year: From continuing operations (43,478,192) (26,832,683) (22,720,903) From discontinued operations - (82,230) (19,472,853) (43,478,192) (26,914,913) (42,193,756) Comprehensive loss for the year attributable to: Non-controlling interest - (29,018) (8,779,849) Owners of the parent (43,478,192) (26,885,895) (33,413,907) (43,478,192) (26,914,913) (42,193,756) Balance Sheet Working capital 33,151,483 58,749,981 72,650,601 Total assets 384,214, ,492, ,411,927 Total liabilities 46,330,939 50,690,531 65,977,643 The Corporation prepares its consolidated annual financial statements in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). 7 Page 13

16 Quarterly Information The following is a summary of selected financial information of the Corporation for the quarterly periods indicated. Quarter Fourth Third Second First Fourth Third Second First $ $ $ $ $ $ $ $ Investment and other income 107, , , , , , , ,352 Other significant income / (loss): Unrealized gain (loss) on investments (883,069) (1,334,361) 2,683,333 19,549,913 7,756 3,669,875 (19,842,302) (12,701,886) Realized gain (loss) on sale of investments - (1,031,472) (976,583) (13,954,677) (4,056,851) (5,289,129) (687,491) 1,595 Gain on disposal of subsidiary ,978,038 (883,069) (2,365,833) 1,706,750 5,595,236 (4,049,095) (1,619,254) (20,529,793) 25,277,747 Net income (loss) for the period Continuing operations (2,454,950) (15,673,549) (33,481,441) 4,135,956 (12,703,459) (7,544,891) (29,130,087) 20,133,964 Discontinued operations (82,230) (2,454,950) (15,673,549) (33,481,441) 4,135,956 (12,703,459) (7,544,891) (29,130,087) 20,051,734 Basic and diluted income / (loss) per common share Continuing operations (0.02) (0.10) (0.22) 0.03 (0.09) (0.05) (0.19) 0.14 Discontinued operations (0.02) (0.10) (0.22) 0.03 (0.09) (0.05) (0.19) 0.14 Comprehensive income / (loss) for the period: Continuing operations (2,007,361) (12,491,567) (34,723,843) 5,744,579 (12,311,555) (8,653,943) (27,154,677) 21,287,492 Discontinued operations (82,230) (2,007,361) (12,491,567) (34,723,843) 5,744,579 (12,311,555) (8,653,943) (27,154,677) 21,205,262 Total long-term liabilities 42,011,009 39,895,017 38,055,028 38,742,454 37,968,971 42,093,606 38,746,497 45,613,777 Cash dividends Page 14

17 Overall performance Year ended December 31, 2014 and 2013 Loss from continuing operations for the year ended December 31, 2014 was $47,473,984 compared to a loss of $29,244,473 for 2013 for a variance of $18,229,511. The variances for the year ended December 31, 2014 compared to 2013 are: Increase YTD Q4 YTD Q4 (Decrease) $ $ $ EXPENSES Depreciation and impairment loss on property, plant and equipment 2,528,312 2,537,509 (9,197) Impairment loss on exploration and evaluation assets 43,461,699 17,758,606 25,703,093 Share-based payments 3,331,875 4,677,871 (1,345,996) General and administrative 4,115,281 4,259,155 (143,874) Professional fees 405, ,494 (347,973) Exploration expenses 260, ,783 7,445 Property maintenance 503, ,950 (23,810) Long term debt accretion 617,355 1,311,618 (694,263) Environmental rehabilitation accretion 82,760 49,519 33,241 55,166,806 32,146,271 23,020,535 Loss from operating activities (55,166,806) (32,146,271) (23,020,535) Investment and other income 589, ,440 (189,187) Unrealized gain (loss) on investments 20,015,816 (28,866,557) 48,882,373 Loss on sale of investments (15,962,732) (10,031,876) (5,930,856) Interest expense - (21,142) 21,142 Foreign exchange gain (loss) (51,512) 112,553 (164,065) Gain on sale of Premier Royalty - 37,978,038 (37,978,038) Loss on disposal of property plant & equipment - (15,065) 15,065 4,590,825 (65,609) 4,656,434 Loss before income taxes (50,575,981) (32,211,880) (18,364,101) Current tax expense (608) (29,538) 28,930 Deferred tax recovery 3,102,605 2,996, ,660 Loss for the year from continuing operations (47,473,984) (29,244,473) (18,229,511) Loss for the year from discontinued operations - (82,230) 82,230 Loss for the year (47,473,984) (29,326,703) (18,147,281) Exchange difference on translation of foreign operations 6,184,556 3,858,685 2,325,871 Deferred tax expense (2,188,764) (1,446,895) (741,869) 3,995,792 2,411,790 1,584,002 Comprehensive loss for the year (43,478,192) (26,914,913) (16,563,279) Continuing operations (43,478,192) (26,832,683) (16,645,509) Discontinued operations - (82,230) 82,230 (43,478,192) (26,914,913) (16,563,279) 9 Page 15

18 The significant items with variances include: An increase of $25,703,093 impairment loss on mineral properties o o $42,908,371 was taken in 2014 due to the transfer of the Saddle and Blue Sage properties in Nevada as part of the acquisition of the McCoy-Cove property as described in Note 8 to the audited consolidated financial statements. An impairment of $553,328 was taken in 2014 versus $17,758,606 in 2013 based on the continuing evaluation of non-core assets. A decrease of $1,345,996 for share-based payments attributable to both an decrease in the number of options issued (1,972,500 this year compared to 3,452,500 for last year) offset by a increase in the fair value of the options granted based on the Black-Scholes option pricing model and the vesting provisions ($2.75 this year compared to $2.28 weighted average exercise price in the prior year). A decrease in long term debt accretion of $694,263 in 2014 compared to 2013 due to the repayment of the balance of the Cove debt in June, A combined increase in the total realized and unrealized net investment gains for the period this year compared to last year of $1,807,453. This period last year included the sale of Premier Royalty and resulting unrealized losses on the subsequent investment. As the resulting investment is being liquidated (approximately 84% to date), the unrealized losses are reversing and are replaced with realized losses with a positive net gain this period of $4,856,361. An increase in deferred tax recovery of $105,660 mainly due to: o o o A deferred tax recovery totaling $4,527,561 was included in 2013 related to the impact of the deferred flow through premium and the renouncement of exploration expenses from 2012 financings. A flow through financing was completed during 2014 however, the impact was a deferred tax expense of only $207,857. A deferred tax recovery of $4,761,710 was recorded in 2014 on the utilization of losses as a result of the completion of a tax reorganization whereby tax benefit moved to the Canadian Development Expenditure pool from loss carry forwards offset by $2,544,661 of the recovery charged to equity rather than operations related to share issue costs included in the losses used. A reversal of temporary timing differences related mainly to loss carryforwards applied to the exchange gain and share issue costs resulting in a deferred tax recovery of $3,049,192. Other comprehensive income (loss) Included in the comprehensive loss for the year ended December 31, 2014 is an exchange gain on the translation of foreign operations of $6,184,556, compared to a loss of $3,858,685 for the year ended December 31, 2013 as a result of the strengthening of the U.S. dollar by an average of 9 basis points during the year. The increased exploration and evaluation assets offset by new debt for the McCoy property purchase in the U.S. operations contributed to the significance of the change. The exchange gain has been offset by a related deferred tax expense of $2,188, Page 16

19 Three months ended December 31, 2014 and 2013 Loss from continuing operations for the three months ended December 31, 2014 was $2,454,950 compared to a loss of $12,703,559 for the same period of the previous year for a variance of $10,248,509. $16,686,159 of the variance related to the loss before income taxes offset by $6,449,772 due to a deferred tax recovery of $433,659 for this quarter compared to a recovery of $6,883,431 for the previous year s quarter. The variances for the three months ended December 31, 2014 compared to the same period of 2013 are: Increase Q4 Q4 (Decrease) $ $ $ EXPENSES Depreciation and impairment loss on property, plant and equipment 30,460 93,141 (62,681) Impairment loss on exploration and evaluation assets 159,864 13,365,231 (13,205,367) Share-based payments 71, ,728 (532,018) General and administrative 1,383,098 1,026, ,078 Professional fees 101, ,238 (83,413) Exploration expenses 78,054 73,207 4,847 Property maintenance 146, ,682 2,629 Long term debt accretion 136, ,558 (97,115) Environmental rehabilitation accretion 14,231 49,519 (35,288) 2,121,996 15,773,324 (13,651,328) Loss from operating activities (2,121,996) (15,773,324) 13,651,328 Investment and other income 107, ,464 (41,226) Unrealized gain (loss) on investments (883,069) 7,756 (890,825) Loss on sale of investments - (4,056,851) 4,056,851 Interest expense - 10,100 (10,100) Foreign exchange gain 9, ,699 (94,934) Loss on disposal of property plant & equipment - (15,065) 15,065 (766,066) (3,800,897) 3,034,831 Loss before income taxes (2,888,062) (19,574,221) 16,686,159 Current tax expense (547) (12,669) 12,122 Deferred tax recovery 433,659 6,883,431 (6,449,772) Loss for the period (2,454,950) (12,703,459) 10,248,509 Exchange difference on translation of foreign operations 2,636,353 1,838, ,554 Deferred tax expense (2,188,764) (1,446,895) (741,869) 447, ,904 55,685 Comprehensive loss for the period (2,007,361) (12,311,555) 10,304,194 The significant items with variances include: An impairment loss on exploration and evaluation assets of $13,365,231 was taken during this quarter of last year on properties identified as non-core assets which resulted in a positive variance this quarter compared to the same period last year. 11 Page 17

20 Fewer option grants this quarter compared to the same quarter last year caused a decrease in sharebased payments of $532,018. A combined decrease in the total realized and unrealized net investment losses for the period this year compared to last year of $3,166,026 due to a significant reduction in investment activity from 2013 resulting from the Premier Royalty deal. A deferred tax variance of $6,449,772 related to a recovery booked in the fourth quarter of last year as a result of the decision to offset deferred tax assets related to loss carry forwards created on the amortization of mineral property costs for tax purposes as well as recognition of the tax benefit associated with unrealized losses on investments which were used to offset the realized gain on the disposal of Premier Royalty. Other comprehensive income (loss) Included in the comprehensive loss for the three months ended December 31, 2014 is an exchange gain on the translation of foreign operations of $2,636,353 compared to a gain of $1,838,799 for the same period of The U.S dollar strengthened 4 basis points during this quarter compared to a similar strengthening of 3.5 basis points last year. Financial position at December 31, 2014 and 2013 Total assets decreased by $24,277,459 from $408,492,298 to $384,214,839 for the period December 31, 2013 to December 31, 2014: Current assets decreased by $34,000,128 (see Liquidity and Capital Resources ). Restricted cash and cash equivalents increased $59,718, due to exchange rate differences offset by the release or reclassification of bonds related to the McCoy-Cove deal in the amount of $25,000USD and $10,442USD for Saddle. Property, plant and equipment decreased by $2,468,168 due to additional impairment charges taken on the Northern Empire mill and related equipment. Exploration and evaluation assets increased $12,121,698, with additions of $24,712,752 for the McCoy- Cove purchase, $26,641,728 in continuing exploration and evaluation expenditures and $4,228,917 in currency adjustments offset by the reduction in the assets due to the disposal of Saddle and Blue Sage for $42,908,371 as well as an impairment charge on the remaining non-core asset net book value of $553,328. The exploration and evaluation additions during the year ended December 31, 2014 of $26,641,728 is made up of the following: $17,778,226 or 67% was spent at the Hardrock Project in Geraldton, Canada including: o $7,390,342 on exploration activities $4,764,014 in drilling related costs $591,240 in geological costs for exploration including wages and salaries $713,520 in analytical and sampling costs $1,015,455 in operations support including wages and salaries $151,396 in administration costs $154,717 in property work 12 Page 18

21 o $10,381,994 on activities related to the preliminary economic assessment and feasibility studies for Hardrock development $1,036,099 on mine development studies $225,534 in geological consulting $2,247,200 on metallurgical studies $3,619,909 in environmental permitting, community relations and related costs $1,709,486 in infrastructure purchases and studies $1,543,765 on management salaries and administration $1,074,065 or 4% of exploration spending was for the Corporation s joint venture exploration activities at the Rahill-Bonanza and East Bay projects in Red Lake, Canada. A further $7,692,580 or 29% of total expenditures was on the McCoy-Cove property located in Nevada, USA, $5,560,558 for drilling related costs, geological including wages and benefits of $796,423, $413,901 for analytical costs, $554,468 for operations support and related costs and $367,230 on property development work. Total liabilities decreased by $4,359,592 with the main items being the $10,000,000 Cove debt repayment to Victoria Resources (US) Inc. in June 2014 offset by the $6,000,000USD debt and the 829,446USD asset retirement obligation recorded on the McCoy-Cove purchase and the reduction in deferred taxes of $3,399,993. Liquidity and capital resources At December 31, 2014, the Corporation had cash and cash equivalents of $32,141,013 ($52,552,321 at December 31, 2013). The decrease in cash and cash equivalents of $20,411,308 over the year ended December 31, 2014 was due to the following: $4,556,160 cash used in operating activities offset by positive changes in working capital of $279,683 $15,000,000USD cash used for the purchase of the McCoy-Cove property $18,827,076 cash used in exploration and evaluation activities $17,792,541 net cash received on the sale of investments $4,398,370 cash received on the exercise of stock options $5,000,000 cash debt repayment representing 50% of the Cove debt repayment with the balance being paid in shares $8,810,419 net cash received on shares issued in private placement Premier is financing current exploration and development spending through financings and liquidation of investments related to the sale of Premier Royalty. The Corporation anticipates that it will have sufficient capital resources in order to manage current projects through 2015 and is actively managing the ongoing development activities at the Hardrock and Brookbank properties through the partnership disclosed in the subsequent event note to the audited consolidated financial statements. The Corporation finances a portion of its Canadian exploration activities with flow-through share issuances. Resource expenditure deductions for income tax purposes related to exploration and development activities funded by flow-through share issuances are renounced to investors in accordance with income tax legislation. A flow through financing for $9,187,500 was completed on November 25, 2014 of which $8,187,500 remains to be spent on exploration activities during Page 19

22 As at December 31, 2014 the financial instruments of the Corporation consisted of cash and cash equivalents, accounts receivable, investments, accounts payable and accrued liabilities and long term debt. The Corporation is authorized to issue an unlimited number of common shares of which 159,147,353 were outstanding as of March 27, As at March 27, 2015 the Corporation had outstanding options to purchase an aggregate of 12,789,822 common shares under its share incentive plan with exercise prices ranging from $1.40 to $7.45 per share, and expiry dates ranging from April 13, 2015 to March 9, 2020 as discussed in Note 11 to the audited consolidated financial statements for the year ended December 31, 2014 and including options issued up to March 27, As of December 31, 2014 there were 435,000 unvested stock options. As at December 31, 2014 the Corporation had no warrants outstanding. On April 5, 2014, 50,000 common share purchase warrants with an exercise price of $6.62 expired. Commitments Contractual Obligations The following is a summary of the commitments of the Corporation as at December 31, 2014: Total $ $ $ $ $ Long term debt 58,005 7,018,562 58,005 58,005 7,192,577 Contracts and operating leases 365, ,939 73, ,013 Exploration expenditure commitment from the issuance of flow through shares 8,187, ,187,500 Surety Bonds At December 31, 2014, the corporation has outstanding surety bonds in the amount of $4,417,691USD in favour of the United States Department of the Interior, Bureau of Land Management (BLM) as financial support for environmental reclamation and exploration permitting. The surety bonds are currently unsecured and are subject to fees competitively determined in the market place. The obligations associated with these instruments are generally related to performance requirements that the Corporation addresses through its ongoing operations. As specific requirements are met, the BLM as beneficiary of the instrument will return the instrument to the issuing entity. As these instruments are associated with operating sites with long-lived assets, they will remain outstanding until closure. Environmental rehabilitation provision The Corporation has three environmental rehabilitation obligations related to properties acquired as a result of the 2011 Goldstone acquisition and the more recent McCoy-Cove acquisition in 2014 as follows: December 31, 2014 December 31, 2013 $ $ Northern Empire Mill, Ontario 2,430,402 2,351,185 Faymar-Deloro, Ontario 1,388,561 1,352,195 McCoy-Cove, Nevada 1,011,539-4,830,502 3,703, Page 20

23 The new obligation recorded in 2014 related to the purchase of the McCoy property as discussed in Note 8 to the audited consolidated financial statements. As the obligation formed part of the consideration for the property, it was recorded as acquisition cost on the property. Additional details on activity for the year are discussed in Note 10 to the audited consolidated financial statements. Transactions with related parties Transactions are as disclosed in Note 17 to the December 31, 2014 audited consolidated financial statements with no significant changes for the quarter or the year. Contingency The contingency is as disclosed in Note 21 to the December 31, 2014 audited consolidated financial statements with no significant changes for the quarter or the year. Subsequent events Partnership agreement On February 5, 2015 the Corporation announced that they have signed a definitive agreement to form a 50/50 partnership with Centerra Cold Inc. ( Centerra ) for the joint ownership and development of the Corporations Trans- Canada Property including the Hardrock and Brookbank Projects located in the Geraldton-Beardmore Greenstone Belt in Ontario. Centerra and the Corporation have agreed to form a partnership to develop the Trans-Canada Property whereby Centerra will contribute up to $300,000,000 in cash to the partnership in accordance with the terms described below, while the Corporation will contribute all property, assets and rights it holds in respect of the Trans-Canada Property. Key terms of the agreements and the development strategy for Hardrock include: On closing, the Corporation, through a wholly-owned subsidiary, will contributed all property, assets and rights it holds in respect of the Trans-Canada Property to the partnership in consideration for its 50% interest in the partnership and Centerra will make an initial cash contribution to the partnership in the amount of $85,000,000 for its 50% limited partner interest which amount will be distributed to the Corporation on the closing date. Centerra has agreed to make capital contributions to the partnership in the aggregate amount of $185,000,000 half of which is on behalf of the Corporation. A portion of these funds will initially be used to complete a comprehensive technical and economic feasibility study including an updated mineral resource calculation for the Hardrock Project at the Trans-Canada Property. Subject to the satisfaction of certain feasibility and project advancement criteria the remainder of the funds will be used towards the construction and development of the Hardrock Project. The Corporation will not be required to make any contributions to the partnership until Centerra has provided the full amount of the capital contributions, following which cash calls will be satisfied by each of Centerra and the Corporation on a 50/50 basis pursuant to approved annual programs and budgets. The partnership agreement contains customary dilution mechanisms for failures to meet cash calls and certain other events Centerra has agreed to make an additional contingent capital contribution to the partnership not to exceed 15 Page 21

24 $30,000,000 based on the results of the updated mineral resource calculation in respect of the Trans- Canada Property which amount, if any, will be distributed to the Corporation. The partnership will be managed by a corporation (the "Managing Partner"), owned 50/50 by Centerra and the Corporation. Initially the board of directors of the Managing Partner will consist of four directors with two nominees from the respective partners. The board of directors of the Managing Partner will be responsible for, among other things, approving the partnership's annual programs and budgets. On March 9, 2015, Centerra Gold Inc. and the Corporation announced that the 50/50 joint venture partnership was completed and management is currently assessing the impact of agreement. Assets that will be transferred to the partnership include the Hardrock and Brookbank mineral properties totaling $208,388,898 included in exploration and evaluation assets as well as net assets included in property, plant and equipment totaling $172,289. Property transfer agreement On February 11, 2015, the Corporation announced that it had entered into an agreement to obtain 100% interest in the past-producing Hasaga Property, located in Red Lake, Ontario, from Goldcorp. In exchange, the Corporation will assign to Goldcorp its 35% participating interest in the East Bay Property and its 100% interest in the PQ-North Property located near Goldcorp's Musselwhite Mine in Ontario. Given the nature of the assets involved in the agreement, there will be no gain or loss recognized on the exchange of properties. Financial instruments and related risks The Corporation's operations include the acquisition and exploration of mineral properties in Canada, the United States and Mexico. The Corporation examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk and market risk. Market risk incudes fair value interest rate risk, currency risk and security price risk. Where material, these risks are reviewed and monitored by the Board of Directors. [a] Credit Risk Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes any cash amounts owed to the Corporation by those counterparties, less any amounts owed to the counterparty by the Corporation where a legal right of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements. i) Trade credit risk The Corporation is in the exploration stage and has not yet commenced commercial production or sales. Therefore, the Corporation is not exposed to significant credit risk and overall the Corporation's credit risk has not changed significantly from the prior year. ii) iii) Cash and cash equivalents and restricted cash In order to manage credit and liquidity risk the Corporation invests only in highly rated investment grade instruments that have maturities of one year or less and are cashable or readily convertible to cash. Limits are also established based on the type of investment, the counterparty and the credit rate. Derivative financial instruments As at December 31, 2014, the Corporation has no derivative financial instruments. It may in the future enter into derivative financial instruments and in order to manage credit risk, it will only enter into derivative financial instruments with highly rate investment grade counterparties. 16 Page 22

25 [b] Liquidity risk Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation manages liquidity risk through the management of its capital structure. [c] Market risk i) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that the Corporation will realize a significant loss as a result of a decline in the fair market value of investments and other items held within cash and cash equivalents is limited given that the majority of investments have a relatively short maturity and are cashable. The Corporation manages its interest rate risk with investments by investing the majority of funds in short-term investments and therefore is not exposed to significant fluctuations in interest rates. ii) Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized asset and liabilities are denominated in a currency that is not the Corporation s measurement currency. The Corporation s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The functional currency and reporting currency of the Corporation is the Canadian dollar. The Corporation s capitalized exploration and evaluation assets and expenses also include amounts incurred in U.S. dollars and to a lesser extent, the Mexican peso which are the functional currencies of these operations. The Corporation s exchange risk is therefore related to movement between these currencies. Changes in the currency exchange rates between the Canadian dollar relative to the U.S. dollar and the Mexican peso have an effect on the Corporation s results of operations through comprehensive income (loss), financial position or cash flows. The Corporation s has mitigated this risk by diversifying its cash resources in the U.S. dollar and Mexican peso roughly in proportion to expected future expenditure over the following twelve months. The carrying amounts of the Company s U.S. dollar denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: December 31, 2014 There are no significant financial instruments in Mexican pesos. December 31, 2013 $ $ Cash and cash equivalents 2,794,550 7,948,582 Restricted cash and cash equivalents 1,132,935 1,076,391 Accounts receivable 97,103 46,018 Accounts payables and accrued liabilities 286, ,959 Long term debt 6,511, ,288 During the year ended December 31, 2014, the Corporation recognized a net foreign exchange loss of $51,512 and an exchange gain on the translation of foreign operations in comprehensive income (loss) of $6,184,556. As of December 31, 2014, if the Canadian dollar to the U.S. dollar exchange rate increases or decreases by 10%, the Corporation s net loss will increase or decrease by 17 Page 23

26 $198,375 and the Corporation s other comprehensive income (loss) will increase or decrease by $535,918. iii) Security price risk Security price risk is the risk that the fair value or future cash flow of the Corporation's financial instruments will fluctuate because of the changes in the market price. In situations where the Corporation has taken a position in the securities of another entity, the Corporation manages its exposure to price risk by monitoring the market(s) where the entity's securities trade and planning the divestiture accordingly. The Corporation only takes a position in another entity where it has a strategic objective; or as a result of a purchase or sale transaction. The Corporation does not invest in derivatives to mitigate these risks. [d] Fair value IFRS 13 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows: 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 following table sets forth the Corporation's financial assets measured at fair value by level within the fair value hierarchy. December 31, 2014 Level 1 Level 2 Total December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 $ $ $ $ $ $ Investments 3,777,233 17,516, ,777,233 17,516,690 Set out below are the Corporation s financial assets by category: Fair value through profit or loss Loans and receivables Total December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 $ $ $ $ $ $ Cash and cash equivalents ,141,013 52,552,321 32,141,013 52,552,321 Accounts receivable ,804 1,285, ,804 1,285,757 Investments held for sale 3,632,955 17,381, ,632,955 17,381,833 Restricted cash and cash equivalents - - 3,994,990 3,935,272 3,994,990 3,935,272 Investments 144, , , ,857 3,777,233 17,516,690 37,029,807 57,773,350 40,807,040 75,290, Page 24

27 Set out below are the Corporation s financial liabilities by category: Fair value through profit or loss Other financial liabilities Total December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 $ $ $ $ $ $ Accounts payable and accrued liabilities - - 3,807,742 3,094,360 3,807,742 3,094,360 Long term debt - - 6,511,068 9,779,028 6,511,068 9,779, ,318,810 12,873,388 10,318,810 12,873,388 The fair value of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short term nature. The fair value of the Corporation s long term debt is also approximated by its carrying value. Management of capital The Corporation manages its common shares, stock options and warrants as capital. The Corporation's objectives when managing capital are to safeguard the Corporation's ability to continue as a going-concern in order to pursue the exploration of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. The Corporation manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Corporation may attempt to issue new shares, acquire or dispose of assets or acquire new debt. In order to maximize ongoing exploration efforts, the Corporation does not pay out dividends. The Corporation's investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments with short-term maturities, selected with regard to the expected timing of expenditures from continuing operations. The Corporation expects its current capital resources will be sufficient to carry out its exploration plans and operations through Off-Balance Sheet Arrangements The Corporation has not participated in any off-balance sheet or income statement arrangements. Changes in Internal Control Over Financial Reporting ( ICFR ) No changes occurred in the current period of the Corporation s ICFR that have materially affected, or are reasonably likely to materially affect the Corporation s ICFR. Controls and Procedures In accordance with the requirements of National Instrument Certification of Disclosure in Issuer s Annual and Interim Filings, the Corporation s management, including Chief Executive Officer (CEO) and Chief Financial Officer (CFO), have evaluated the operating effectiveness of the Corporation s internal control over financial reporting. Management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under, the supervision of, the CEO and CFO and effected by management and other personnel to provide reasonable assurance regarding the 19 Page 25

28 reliability of financial reporting and the preparation of financial statements for external purposes in accordance with international financial reporting standards. Management assessed the effectiveness of the Corporation s internal control over financial reporting as of December 31, Based on this assessment, management believes that, as of December 31, 2014, the Corporation s internal control over financial reporting is designed and is operating effectively. Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the CEO and CFO, on a timely basis so that appropriate decisions can be made regarding annual and interim financial statement disclosure. Management believes these disclosure controls and procedures have been effective during the period ended December 31, Additional Information Additional information relating to the Corporation can be found on SEDAR at or on the Corporation s web-site at Steve Filipovic (Signed) Steve Filipovic Chief Financial Officer Thunder Bay, Canada March 27, Page 26

29 Consolidated Financial Statements December 31, 2014 and

30 28

31 29

32 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at December 31, Note $ $ ASSETS Current assets Cash and cash equivalents 4 32,141,013 52,552,321 Accounts receivable 893,804 1,285,757 Prepaids and deposits 803, ,630 Investments held for sale 5 3,632,955 17,381,833 Total current assets 37,471,413 71,471,541 Non-current assets Restricted cash and cash equivalents 6 3,994,990 3,935,272 Investments 5 144, ,857 Property, plant and equipment 7 779,378 3,247,546 Exploration and evaluation assets 8 341,824, ,703,082 Total non-current assets 346,743, ,020,757 Total assets 384,214, ,492,298 LIABILITIES Current liabilities Accounts payable and accrued liabilities 3,807,742 3,094,360 Current portion of long term debt 9 44,331 9,627,200 Deferred premium on flow-through shares 467,857 - Total current liabilities 4,319,930 12,721,560 Non-current liabilities Deferred taxes 16 30,713,770 34,113,763 Long term debt 9 6,466, ,828 Provision for environmental rehabilitation 10 4,830,502 3,703,380 Total non-current liabilities 42,011,009 37,968,971 Total liabilities 46,330,939 50,690,531 EQUITY Share capital ,946, ,211,022 Reserves 11 42,757,295 37,936,321 Deficit (144,819,560) (97,345,576) Total equity 337,883, ,801,767 Total liabilities and equity 384,214, ,492,298 Commitments [note 18] Contingencies [note 21] Subsequent events [note 22] See accompanying notes to the consolidated financial statements Approved by the Board of Directors and authorized for issue on March 27, 2015 "John Seaman" Director "Ewan Downie" Director 3 30

33 CONSOLIDATED STATEMENTS OF LOSS For the years ended December 31, Note $ $ EXPENSES Depreciation and impairment loss on property, plant and equipment 7 2,528,312 2,537,509 Impairment loss on exploration and evaluation assets 8 43,461,699 17,758,606 Share-based payments 11 3,331,875 4,677,871 Flow-through interest penalty (139,365) 18,766 General and administrative 17 4,115,281 4,259,155 Professional fees 405, ,494 Exploration expenses 260, ,783 Property maintenance 503, ,950 Long term debt accretion 9 617,355 1,311,618 Environmental rehabilitation accretion 10 82,760 49,519 Loss before the following (55,166,806) (32,146,271) Investment and other income 589, ,440 Unrealized gain / (loss) on investments 5 20,015,816 (28,866,557) Loss on sale of investments 5 (15,962,732) (10,031,876) Gain on sale of Premier Royalty 15-37,978,038 Interest expense - (21,142) Foreign exchange gain / (loss) (51,512) 112,553 Loss on disposal of property, plant and equipment 7 - (15,065) 4,590,825 (65,609) Loss before income taxes (50,575,981) (32,211,880) Current tax expense 16 (608) (29,538) Deferred tax recovery 16 3,102,605 2,996,945 Loss for the year from continuing operations (47,473,984) (29,244,473) Loss for the year from discontinued operations 15 - (82,230) Loss for the year (47,473,984) (29,326,703) Loss for the year attributable to: Non-controlling interest 15 - (29,018) Owners of the parent (47,473,984) (29,297,685) Loss for the year (47,473,984) (29,326,703) Basic and diluted loss per share Loss from continuing operations 12 (0.31) (0.19) Loss from discontinued operations Total (0.31) (0.19) See accompanying notes to the consolidated financial statements 4 31

34 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS For the years ended December 31, Note $ $ Loss for the year (47,473,984) (29,326,703) Exchange difference on translation of foreign operations 6,184,556 3,858,685 Deferred tax expense 16 (2,188,764) (1,446,895) Total comprehensive loss for the year (43,478,192) (26,914,913) Comprehensive loss for the year From continuing operations (43,478,192) (26,832,683) From discontinued operations 15 - (82,230) Loss and comprehensive loss for the year (43,478,192) (26,914,913) Comprehensive loss for the year attributable to: Non-controlling interest - (29,018) Owners of the parent 15 (43,478,192) (26,885,895) Loss and comprehensive loss for the year (43,478,192) (26,914,913) See accompanying notes to the consolidated financial statements 5 32

35 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, Note $ $ OPERATING ACTIVITIES Loss for the year from continuing operations (47,473,984) (29,244,473) Items not affecting cash Depreciation and impairment loss on property, plant and equipment 7 2,528,312 2,537,509 Impairment loss on exploration and evaluation assets 8 43,461,699 17,758,606 Share-based payments 11 3,331,875 4,677,871 Long term debt accretion 9 617,355 1,311,618 Environmental rehabilitation accretion 10 82,760 49,519 Unrealized (gain) / loss on investments 5 (20,015,816) 28,866,557 (Gain) / loss on sale of investments 5 15,962,732 (27,946,162) Foreign exchange loss 51, ,799 Loss on disposal of property, plant and equipment 7-15,065 Deferred tax recovery 16 (3,102,605) (2,996,945) (4,556,160) (4,841,036) Changes in non-cash working capital balances related to operations Accounts receivable 391,953 (684,846) Prepaids and deposits (552,011) (57,501) Accounts payable and accrued liabilities 439,740 (26,685) Taxes payable - (24,806) Cash used in operating activities (4,276,478) (5,634,874) INVESTMENT ACTIVITIES Addition to exploration and evaluation assets 8 (43,001,908) (34,417,830) Costs associated with sale of Premier Royalty Inc. - (39,384) Proceeds from the sale of investments 5 17,792,541 12,121,463 Net change in restricted cash and cash equivalents 6 41,116 (1,025,868) Purchase of property, plant and equipment (19,297) (206,716) Cash used in investment activities (25,187,548) (23,568,335) FINANCING ACTIVITIES Shares issued in private placement 11 9,187,500 - Proceeds from the exercise of stock options 11 4,398, ,450 Share issue costs (377,081) - Repayment of long term debt 9 (5,054,500) (5,049,508) Cash provided by (used in) financing activities 8,154,289 (4,160,058) Decrease in cash and cash equivalents during year (21,309,737) (33,363,267) Cash and cash equivalents, beginning of the year 52,552,321 85,101,642 Effect of exchange rate changes on cash and cash equivalents 898, ,946 Cash and cash equivalents, end of the year 32,141,013 52,552,321 Supplemental cash flow information [Note 13] See accompanying notes to the consolidated financial statements 6 33

36 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Issued and outstandings: Note Number of shares Share capital Reserves Share capital Warrants Equity settled employee benefits Contributed surplus Foreign currency translation Deficit Equity attributable to owners of the parent Non-controlling interest Total equity Balance as at December 31, ,027, ,425, ,933 24,358,107 7,539,763 (1,229,637) (68,047,891) 373,797,141 40,637, ,434,284 Exercise of stock options ,000 1,330,145 - (440,695) , ,450 Shares issued for Broulan Reef , , , ,200 Shares issued for Cove debt repayment 12 2,142,612 5,000, ,000,000-5,000,000 Shares based payments ,546, ,546,060-4,546,060 Surrender of shares by Goldstone Resources Inc. 12 (400,000) Share issued as compensation 94, , , ,811 Non-controlling interest arising from Premier Royalty / Bridgeport arrangement (40,608,125) (40,608,125) Comprehensive loss for the year ,411,790 (29,297,685) (26,885,895) (29,018) (26,914,913) Balance as at December 31, ,496, ,211, ,933 28,463,472 7,539,763 1,182,153 (97,345,576) 357,801, ,801,767 Private placement 12 3,750,000 9,187, ,187,500-9,187,500 Exercise of stock options 12 1,686,390 6,905,063 - (2,506,693) ,398,370-4,398,370 Deferred tax recovery on share issue costs 16-2,544, ,544,661-2,544,661 Shares issued for Cove debt repayment 12 2,204,488 5,000, ,000,000-5,000,000 Share-based payments ,331, ,331,875-3,331,875 Share issue costs - - (377,081) (377,081) - (377,081) Deferred flow-through premium - - (525,000) (525,000) - (525,000) Comprehensive loss for the year ,995,792 (47,473,984) (43,478,192) - (43,478,192) Balance as at December 31, ,137, ,946, ,933 29,288,654 7,539,763 5,177,945 (144,819,560) 337,883, ,883,900 See accompanying notes to the consolidated financial statements 34 7

37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and NATURE OF BUSINESS Premier Gold Mines Limited (the Corporation ), a Canadian based mineral exploration company publicly listed on the Toronto Stock Exchange, is focused on exploring for and development of gold deposits in Canada, the United States and Mexico. The Corporation s principal assets include the Hardrock and Brookbank properties located along the Trans-Canada highway and the Rahill-Bonanza property in the Red Lake mining district within Northwestern Ontario, Canada and the McCoy-Cove property located in Nevada in the United States. Premier Gold Mines Limited's head office is located at Suite 200, 1100 Russell Street, Thunder Bay, Ontario, P7B 5N2. 2. SIGNIFICANT ACCOUNTING POLICIES Statement of compliance The consolidated financial statements of the Corporation have been prepared in accordance with accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The consolidated financial statements of the Corporation for the year ended December 31, 2014 were approved and authorized for issue by the Board of Directors on March 27, Basis of presentation The consolidated annual financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. Measurement bases are more fully described in the accounting policies below. The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Basis of consolidation The Corporation's financial statements consolidate those of the parent Corporation and all of its subsidiary undertakings drawn up to December 31, Subsidiaries are all entities over which the Corporation has the power to control the financial and operating policies. The Corporation obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of December 31. The Corporation's subsidiaries are: Percentage of Jurisdiction Principal activity ownership Premier Gold Mines USA Inc. 100% United States Mineral exploration Premier Gold Mines Nevada Inc. 100% United States Mineral exploration Au-reka Gold Corporation 100% United States Mineral exploration Goldstone Resources Inc. 100% Canada Mineral exploration Premier Gold Mines Hardrock Inc. 100% Canada Mineral exploration Premier Gold Mines Brookbank Inc. 100% Canada Mineral exploration Premier Gold Mines NWO Inc. 100% Canada Mineral exploration Cherbourg Gold Inc. 85.7% Canada Mineral exploration Barraute Gold Inc. 100% Canada Mineral exploration Oro Premier de Mexico S.A. de C.V. 100% Mexico Mineral exploration 8 35

38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 In January, 2014 the Corporation filed articles of amendment to change the names of the subsidiary companies, Ontario Inc. and Ontario Inc. to Premier Gold Mines Hardrock Inc. and Premier Gold Mines Brookbank Inc. respectively. All transactions and balances between the Corporation and its subsidiaries are eliminated on consolidation, including unrealized gains and losses on transactions between the companies. Where unrealized losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Corporation. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable. Business combinations For business combinations occurring since January 1, 2010, the requirements of IFRS 3 have been applied. The consideration transferred by the Corporation to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Corporation, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Corporation recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognized as profit immediately. Joint operations Operations that are jointly controlled by the Corporation and other venturers independent of the Corporation (joint ventures) are accounted for by recognizing the Corporation's share of the assets, liabilities, income and expenses included line by line in the consolidated financial statements. Amounts reported in the financial statements for joint operations have been adjusted where necessary to ensure consistency with the accounting policies of the Corporation. The Corporation participates in co-ownership agreements with other parties which are labelled joint venture agreements. These agreements do not constitute joint arrangements for purposes of applying IFRS 11 in that the percentage ownership in the jointly held property is such that control resides with the majority ownership interest. In that case, the Corporation records their share of the assets, liabilities, income and the expenses related to the venture. Foreign currency translation Functional and presentation currency The consolidated financial statements are presented in Canadian dollars (CDN), which is also the functional currency of the parent Corporation. Foreign currency transactions Foreign currency transactions are translated into the functional currency of the respective Corporation, using the 9 36

39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at period-end exchange rates are recognized in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. Foreign currency translations In the Corporation's consolidated financial statements, all assets, liabilities and transactions of the Corporation's subsidiaries with a functional currency other than the $CDN (the Corporation's presentation currency) are translated into $CDN upon consolidation. The functional currency of the entities in the Corporation has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into $CDN at the closing rate at the reporting date. Income and expenses have been translated into the Corporation's presentation currency at the average rate over the reporting period. Exchange differences are charged/credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation differences recognized in equity are reclassified to profit or loss and recognized as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated into $CDN at the closing rate. Financial instruments Financial assets and financial liabilities are recognized when the Corporation becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires. Financial assets and financial liabilities are measured initially at fair value adjusted by transactions costs, and subsequently accounted for at amortized cost, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and financial liabilities are measured subsequently as described below. Financial assets For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: loans and receivables financial assets at fair value through profit or loss held-to-maturity investments available-for-sale financial assets The category determines subsequent measurement and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income. All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that the recoverable amount of a financial asset or a group of financial assets exceeds its carrying amount. Different criteria to determine impairment are applied for each category of financial assets, which are described below

40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 All income and expenses relating to financial assets that are recognized in profit or loss are presented within 'investment income' or 'other income'. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortized cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Corporation's cash and cash equivalents, accounts receivables and restricted cash and cash equivalents fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty may default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or that meet certain conditions and are designated at fair value through profit or loss upon initial recognition. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. The Corporation's investments fall into this category of financial instrument. Assets in this category are measured at fair value with gains or losses recognized in profit or loss. The fair values of derivative financial instruments are determined by reference to active market transactions or using a valuation technique where no active market exists. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity other than loans and receivables. Investments are classified as held-to-maturity if the Corporation has the intention and ability to hold them until maturity. The Corporation currently does not hold any investments designated into this category. Held-to-maturity investments are measured subsequently at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in profit or loss. Available-for-sale financial assets Available-for-sale ("AFS") financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. All other available-for-sale financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognized in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognized in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest calculated using the effective interest method and dividends are recognized in profit or loss within 'finance income'. The corporation currently does not hold any investments designated into this category. Reversals of impairment losses are recognized in other comprehensive income, except for financial assets that are 11 38

41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 debt securities which are recognized in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognized. Financial liabilities The Corporation's financial liabilities include borrowings and accounts payable and accrued liabilities. Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss. All derivative financial instruments that are not designated and effective as hedging instruments are accounted for at fair value through profit or loss. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'general and administrative costs'. Impairment of financial assets Financial assets are assessed for indicators of impairment at each financial position reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flow of the investment have been impacted. For unlisted shares classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or default of delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organization For certain categories of financial assets, such as amounts receivable and deposits, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of an allowance account. When an amount receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decreases can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS equity securities, impairment loses previously recognized through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity. Non-current assets and liabilities classified as held for sale and discontinued operations When the Corporation intends to sell a non-current asset or a group of assets (a disposal group), and if sale within 12 months is highly probably, the asset or disposal group is classified as held for sale and presented separately in the statement of financial position. Liabilities are classified as held for sale and presented as such in the statement of financial position if they are directly associated with a disposal group. Assets classified as held for sale are measured at the lower of their carrying amounts immediately prior to their 12 39

42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 classification as held for sale and their fair value less costs to sell. However, some held for sale assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Corporation s relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortization. Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part of a single line item, profit or loss from discontinued operations. Exploration and evaluation Exploration and evaluation assets include the costs of acquiring rights and licenses, costs associated with exploration and evaluation activity (e.g. geological, geophysical studies, exploratory drilling and sampling), and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination or asset purchase. The Corporation follows the practice of capitalizing all costs related to the acquisition of, exploration for and evaluation of mineral claims and crediting revenue received until production is achieved against the cost of related claims. Costs incurred before the Corporation has obtained the legal rights to explore an area are recognized in the statement of comprehensive loss. Capitalized costs, including general and administrative costs, are only allocated to the extent that these costs can be related directly to operational activities in the relevant area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The aggregate costs related to abandoned mineral claims are charged to operations at the time of any abandonment or when it has been determined that there is evidence of a permanent impairment. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets. Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. Property, plant and equipment Buildings and equipment are stated at historical cost less accumulated depreciation and any provision for impairment in value. Cost includes the purchase price, any directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the present value of the estimated costs of decommissioning and restoration, if applicable. Costs relating to major upgrades are included in buildings and equipment if it is probable that future economic benefits associated with the expenditure will flow to the Corporation. Depreciation commences on property plant and equipment when the asset is available for use. Depreciation on buildings, exploration equipment and office equipment is recognized on a declining balance basis to write down the cost or valuation less estimated residual value. The rates generally applicable are: Buildings 4-10% Exploration equipment 20% Office equipment 30% Depreciation on leasehold improvements is recognized on a straight-line basis over the estimated useful life of the assets, which is fifteen years

43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Depreciation on mill and mining equipment is done using the unit-of-production method once commercial production begins. Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of equipment are determined as the difference between the disposal proceeds and the carrying amount of the equipment and are recognized in profit or loss within 'other income' or 'other expenses'. Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Impairment of non-financial assets At each financial position reporting date the carrying amounts of the Corporation's non-financial assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less that its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. Share capital Share capital represents the fair value of consideration received. Equity instruments are contracts that give a residual interest in the net assets of the Corporation. Financial instruments issued by the Corporation are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Corporation s common shares, stock options, and share warrants are classified as equity instruments. Incremental costs directly attributable to the issue of new shares, options or warrants are also shown in equity as a deduction. The Corporation periodically issues units to investors consisting of common shares and warrants in non-brokered private placements. Each whole warrant issued entitles the holder to acquire a common share of the Corporation, at a fixed Canadian dollar price over a specified term. These warrants are not transferable from the original investor to a new investor. The Corporation s investor warrants are equity instruments and not financial liabilities or financial derivatives. Accordingly, gross investor proceeds received from the issuance of units are accounted for as an increase in share capital. No separate valuation (i.e. bifurcation ) of investor warrants is made for accounting purposes at the time of issuance or at any time thereafter. When investor or other warrants are exercised, the proceeds received are added to share capital. When investor or other warrants expire unexercised, no accounting entry is recorded

44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Share-based payment transactions The Corporation operates equity-settled share-based remuneration plans for its employees, directors and consultants. None of the Corporation's plans feature any options for a cash settlement. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is determined at the grant date. All share-based remuneration is ultimately recognized as an expense in profit or loss with a corresponding credit to 'reserves'. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are fewer then that estimated on vesting. Income taxes Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit or other current tax activities, which differs from profit or loss in the financial statements. Calculation of current tax expense is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Corporation and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilised against future taxable income. To the extent that the Corporation does not consider it probable that a future tax asset will be recovered, it is not recognized in the financial statements. Deferred tax assets and liabilities are offset only when the Corporation has a right and intention to offset current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognized as a component of taxable income or expense in profit or loss, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively. Provisions Provisions are recognized when the Corporation or its subsidiaries have a present obligation (legal or constructive) 15 42

45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, 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, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Contingent liabilities are not recognized in the financial statements, if not estimable and probable, and are disclosed in notes to the financial information unless their occurrence is remote. Contingent assets are not recognized in the financial statements, but are disclosed in the notes if their recovery is deemed probable. Environmental rehabilitation Provisions for environmental rehabilitation are made in respect of the estimated future costs of closure and restoration and for environmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas) in the accounting period when the related environmental disturbance occurs. The provision is discounted using a pre-tax rate, and the unwinding of the discount is included in finance costs. At the time of establishing the provision, a corresponding asset is capitalized and is depreciated over future production from the mining property to which it relates. The provision is reviewed each reporting period for changes in cost estimates, discount rates and operating lives. Changes to estimated future costs are recognized in the statement of financial position by adjusting the rehabilitation asset and liability. If, for mature mines, the revised mine assets net of rehabilitation provisions exceeds the carrying value, that portion of the increase is charged directly to expenses. For closed sites, changes to estimated costs are recognized immediately in profit and loss. Loss from discontinued operations A discontinued operation is a component of the Corporation that either has been disposed of, or is classified as held for sale, and: represents a separate major line of business or geographical area of operations is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale Loss from discontinued operations, including prior year components of loss, is presented in a single amount in the statement of loss. This amount, which comprises the post-tax loss of discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets classified as held for sale. The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the reporting date of the latest period presented. Loss per share The Corporation presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Corporation by the weighted average number of common shares outstanding during the period. Diluted loss per share is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares

46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Segment reporting An operating segment is a component of an entity (i) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), (ii) whose operating results are regularly reviewed by the entity's management, and (iii) for which discrete financial information is available. The Corporation has identified its reportable segments on the basis of their geographic location. As a result the Corporation discloses information geographically based on the location of each of its operations. Interest Interest income and expenses are reported on an accrual basis using the effective interest method. Operating expenses Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin. Flow-through shares Under Canadian income tax legislation, a company is permitted to issue flow-through shares whereby the company agrees to incur qualifying expenditures and renounce the related income tax deductions to the investors. The Corporation allocates the proceeds from the issuance of these shares between the offering of shares and the sale of tax benefits. The allocation is made based on the difference between the quoted price of the shares and the amount the investor pays for the shares. A deferred flow-through premium liability is recognized for the difference. The liability is reversed when the expenditures are made and is recorded in deferred tax expense. The spending also gives rise to a deferred tax timing difference between the carrying value and tax value of the qualifying expenditure. Significant accounting judgements and estimates In the application of the Corporation s accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Significant judgements in applying the Corporation's accounting policies Exploration and evaluation assets The most significant judgement that members of management have made in the process of applying the Corporation s accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements is the policy on exploration and evaluation assets. In particular, management is required to assess exploration and evaluation assets for impairment. Note 8 discloses the carrying values of such assets. As part of this assessment, management has carried out an assessment whether there are indicators of impairment. If there are indicators, management performs an impairment test on the major assets within this balance. The recoverability of exploration and evaluation assets is dependent on a number of factors common to the natural resource sector. These include the extent to which the Corporation can continue to renew its exploration and future development licenses with local or other authorities, establish economically recoverable reserves on its properties, the availability of the Corporation to obtain necessary financing to complete the development of such reserves and future profitable production or proceeds from the disposition thereof. The Corporation will use the evaluation work of professional geologists, geophysicists and engineers for estimates in determining whether to commence or continue mining and processing. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether or not the deposit contains economically recoverable mineralisation

47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Functional currency of foreign subsidiaries Another significant judgement that members of management have made in the process of applying the Corporation s accounting policies and that have a significant effect on the amounts recognized in the consolidated financial statements is the policy on functional currency of foreign subsidiaries. Management uses its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. As part of this approach, management gives priority to indicators like the currency that mainly influences costs and the currency in which those costs will be settled and the currency in which funds from financing activities are generated. Management also assesses the degree of autonomy the foreign operation has with respect to operating activities. Significant estimates The consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods. Significant estimates include: the inputs used in accounting for share purchase option expense in the consolidated statements of loss the provision for income taxes which is included in the consolidated statements of loss and comprehensive loss and composition of deferred income tax liabilities included in the consolidated statements of financial position which have not yet been confirmed by the taxation authorities the provision for environmental rehabilitation which is included in the consolidated statements of financial position the estimated useful lives of property, plant and equipment which are included in the consolidated statements of financial position and the related depreciation included in the consolidated statements of loss and comprehensive loss the discount rate used to determine the carrying value of long term debt 3. RECENT ACCOUNTING PRONOUNCEMENTS The accounting policies adopted in the preparation of these consolidated financial statements have been prepared on the basis of all IFRS and interpretations effective as at January 1, Accounting standards issued and effective January 1, 2014 The following standards were applied for the period beginning on January 1, 2014 and had no effect on the Corporation s financial performance: IAS 32, Financial Instruments: Presentation clarifies the application of offsetting rules and requires additional disclosure on financial instruments subject to netting arrangements IAS 36, Impairment of Assets modifies some of the disclosure requirements regarding the recoverable amount of non-financial assets IFRIC 21, Levies provides guidance on when to recognise a liability for a levy imposed by a government, other than those levies within the scope of the other standards The additional required disclosures of applying the above standards were incorporated in the notes to these consolidated financial statements

48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Accounting standards issued and effective for the annual periods beginning on or after July 1, 2014 The Corporation has not applied the following revised or new IFRS that have been issued but were not yet effective at December 31, These accounting standards are not expected to have a significant effect on the Corporation s accounting policies or consolidated financial statements: IFRS 2, Share-based Payments clarifies the definition of a vesting condition and separately defines performance and service conditions IFRS 3, Business Combinations requires that an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as a financial liability or as equity on the basis of definitions of IAS 32 and additionally clarifies that IFRS 3 does not apply to the formation of any joint arrangement and that the scope exemption only applies in the financial statements of the joint arrangement itself IFRS 8, Operating Segments requires disclosure of the judgements made by management in aggregating operating segments, and a reconciliation of segment assets to the total assets when segment assets are reported IFRS 13, Fair Value Measurement clarifies that the portfolio exception in IFRS 13, which allows fair measurement as a group of financial assets and liabilities on a net basis, applies to all contracts within the scope of IAS 39 or IFRS 9 IAS 16, Property, Plant and Equipment and IAS 38, Intangible Assets clarify the requirements for the revaluation method in these standards to address concerns about the calculation of the accumulated depreciation or amortization at the date of revaluation IAS 19, Employee Benefits clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service IAS 24, Related Party Disclosures requires a reporting entity to include as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity Accounting standards issued and effective January 1, 2015 The Corporation is currently assessing the impact that the change to IFRS 7, Financial Instruments Disclosures may have on the consolidated financial statements. The change to IFRS 7 requires new disclosures on gross amounts subject to rights of set-off, amounts set-off and net credit exposure. Accounting standards issued and effective January 1, 2016 The Corporation is currently assessing the impact that the changes to the following standards may have on the consolidated financial statements: amendment to IFRS 11, Joint Arrangements which requires an acquirer of a joint operation in which the activity constitutes a business to apply all of the business combinations accounting principles and disclosures in IFRS 3 and IFRSs, except for those principles that conflict with the guidance in IFRS 11, to be applied prospectively amendments to IAS 16, Property, Plant and Equipment and IAS 38, Intangible Assets prohibiting entities from using a revenue-based depreciation method for items of property, plant and equipment as well as intangible assets except in limited circumstances, to be applied prospectively amendment to IAS 27, Separate Financial Statements to permit investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements amendments to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures (2011) to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture At present, the Corporation does not anticipate that the application of these amendments would have a significant impact on the consolidated financial statements

49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Accounting standards issued and effective January 1, 2017 In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations when it becomes effective. As the Corporation is presently in the exploration and development stage of operations and currently has no revenue producing properties, the application of IFRS 15 would not have a material impact on the amounts reported and disclosures made in the consolidated financial statements. The Corporation will reassess the application of this standard when circumstances dictate. Accounting standards issued and effective January 1, 2018 The Corporation continues to assess the impact that the changes to IFRS 9, Financial Instruments may have on the consolidated financial statements. The changes to IFRS 9 introduce new requirements for the classification and measurement, impairment, general hedge accounting and derecognition of financial assets and liabilities. 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and in banks including money market savings accounts and short term deposits that have a one year maturity but that are cashable within 30 days or less into a known amount of cash $ $ Cash 17,698,585 7,374,587 Short-term money market investments 14,442,428 45,177,734 32,141,013 52,552, INVESTMENTS Market Cost Market Cost $ $ $ $ Equities Canadian equities held for sale 3,632,955 12,099,607 17,381,833 45,854,880 Canadian equities 144,278 1,283, ,857 1,283,775 3,777,233 13,383,382 17,516,690 47,138,655 Canadian equities consist of common shares held in Canadian publicly traded corporations. Fair values of equities are determined as the bid price at December 31, Investments that are held for short term trading are classified as held for sale and are included in current assets. On January 28, 2013 the Corporation entered into a share purchase agreement with Sandstorm Gold Ltd. ("Sandstorm") pursuant to which Sandstorm acquired 33,655,821 common shares and 6,965,676 warrants of Premier Royalty Inc. from the Corporation, representing the Corporation's entire position in Premier Royalty Inc. The resulting consideration for the Premier Royalty Units was satisfied by the issuance of 5,604,277 special warrants in the capital of Sandstorm, all of which have been exercised for no additional consideration into one common share each of Sandstorm in accordance with the terms thereof. Included on the statement of loss is an unrealized gain of $20,036,042 and a realized loss of $15,953,681 on the Sandstorm shares for the year ended December 31, 2014 ( unrealized loss of $27,119,042 and a realized loss of $9,844,840). Sandstorm shares held at period end are included in Canadian equities held for sale

50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and RESTRICTED CASH AND CASH EQUIVALENTS Property $ $ Hardrock, Ontario (i) 633, ,089 Saddle, Nevada (ii) - 11,106 Northern Empire Mill, Ontario (iii) 2,228,973 2,225,789 McCoy-Cove, Nevada (iv) 1,132,928 1,065,288 3,994,990 3,935,272 (i) (ii) (iii) The Corporation has a $633,089 standby letter of credit outstanding in favour of the Ontario Ministry of Northern Development and Mines relating to reclamation obligations of the Hardrock property in Ontario. Security for the standby letter of credit is held with the Royal Bank of Canada. The Saddle property was transferred to Newmont Mining Corporation (Newmont) during the period as discussed in Note 8. As a result of this transfer the Corporation is no longer liable for the reclamation obligation. The Corporation has a total of $2,228,973 in restricted cash and cash equivalents relating to reclamation obligations associated with the Northern Empire mill in Ontario including: a $150,000 standby letter of credit with the Toronto Dominion Bank in the name of the Corporations' wholly owned subsidiary, Goldstone Resources Inc., and payable in favour of the Ontario Ministry of Northern Development and Mines (MNDM) a $1,678,493 standby letter of credit with the Royal Bank of Canada and payable in favour of the MNDM $400,480 in financial assurance held directly by the MNDM (iv) The Corporation's wholly owned subsidiary, Au-reka Gold Corporation has $976,584USD ($1,132,928CAD) in restricted cash related to reclamation obligations associated with the McCoy-Cove property in Nevada including: $976,584USD ($1,132,928CAD) held in trust with the United States Department of the Interior, Bureau of Land Management as a result of the purchase of McCoy-Cove from Newmont the $25,000USD deposit previously held by Newmont was returned to the Corporation during the period 21 48

51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and PROPERTY, PLANT AND EQUIPMENT Costs Building Leasehold improvements Exploration equipment Mill and mining equipment Office equipment $ $ $ $ $ $ Balance, December 31, , , ,090 4,910, ,645 5,882,990 Assets acquired 50, , , ,715 Provision for rehabilitation (147,338) - (147,338) Assets disposed (32,282) (32,282) Foreign currency adjustment - - 3, ,886 Balance, December 31, , , ,976 4,762, ,936 5,913,971 Assets acquired - 30,261 19, ,558 Currency adjustment - 7,999 5, ,464 Balance, December 31, , , ,738 4,762, ,936 5,976,993 Accumulated depreciation Building Leasehold improvements Exploration equipment Mill and mining equipment Office equipment $ $ $ $ $ $ Balance, December 31, ,032 8,078 23, , ,409 Depreciation for the year 12,146 21,059 23,740-70, ,043 Impairment loss 17,340-39,350 2,353,776-2,410,466 Assets disposed (17,217) (17,217) Foreign currency adjustment Balance, December 31, ,518 29,309 86,920 2,353, ,902 2,666,425 Depreciation for the year 20,248 27,982 13,910-57, ,141 Impairment loss ,409,171-2,409,171 Currency adjustment - 1,090 1, ,878 Balance, December 31, ,766 58, ,618 4,762, ,903 5,197,615 Carrying amounts Building Leasehold improvements Exploration equipment Mill and mining equipment Office equipment $ $ $ $ $ $ Balance, December 31, , ,132 57,056 2,409, ,034 3,247,546 Balance, December 31, , ,320 66, , ,378 The Corporation had previously assessed the carrying value of the mill and mining equipment based on facts and circumstances existing at the time which resulted in an impairment charge in 2013 of $2,353,776. An additional impairment of $2,409,171 was taken in September, 2014 as a potential sale of these assets did not materialize resulting in a revaluation of the recoverable amount of the assets. During the previous year the Corporation recognized an impairment loss of $56,690 from buildings and exploration equipment. The Corporation determined there was evidence that the carrying value of the assets was impaired and the loss was recorded to reduce the carrying cost to the estimated fair value less the cost to sell. During the previous year the Corporation wrote off computer equipment and office furniture with a net book value of $15,065. All depreciation and impairment charges are included in depreciation and impairment loss on the consolidated statements of loss. Total Total Total 22 49

52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and EXPLORATION AND EVALUATION ASSETS Property December 31, Additions Impairment / Currency December 31, 2013 Disposal Adjustment 2014 $ $ $ $ $ Rahill-Bonanza, Ontario 35,837, , ,694,091 East Bay, Ontario 7,893, , ,111,139 PQ North, Ontario 12,674, ,675,013 Hardrock, Ontario 173,944,156 17,778, ,722,382 Brookbank, Ontario 16,639,298 27, ,666,516 McCoy-Cove, Nevada 39,928,245 32,405,132-3,622,262 75,955,639 Saddle, Nevada 40,126,726 13,508 (40,741,383) 601,149 - Other areas 2,658,635 56,175 (2,720,316) 5, ,703,082 51,354,480 (43,461,699) 4,228, ,824,780 Property December 31, Additions Impairment Currency December 31, 2012 Adjustment 2013 $ $ $ $ $ Rahill-Bonanza, Ontario 33,074,799 2,762, ,837,625 East Bay, Ontario 7,531, , ,893,540 PQ North, Ontario 12,674, ,674,857 Hardrock, Ontario 151,403,519 22,540, ,944,156 Brookbank, Ontario 16,062, , ,639,298 Cove, Nevada 29,183,911 8,729,802-2,014,532 39,928,245 Saddle, Nevada 39,140,569 14, ,132 40,126,726 Other areas 19,340,098 1,037,280 (17,758,606) 39,863 2,658, ,411,808 36,023,353 (17,758,606) 3,026, ,703,082 The amounts shown represent costs incurred to date, and do not necessarily represent present or future values as these are entirely dependent upon the economic recovery of future ore reserves. Impairment and disposal on exploration and evaluation assets The Corporation regularly reviews the carrying amount if its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. Mineral property interests are tested for impairment when facts and circumstances suggest that the carrying amount of the mineral property interests exceed their recoverable amount. In the absence of other factors, a mineral property that has not been actively explored within the past three years and for which no future exploration plans exist will be considered to be impaired Saddle As a result of the transfer of the Saddle property in Nevada in the acquisition discussed below, the Corporation recognized both an impairment loss of $31,473,441 and a loss on disposal of $9,267,942 on the related exploration and evaluation assets. Other areas As a result of the transfer of the Blue Sage property in Nevada in the acquisition discussed below, the Corporation recognized an impairment loss of $2,166,988 on the related exploration and evaluation assets. The Corporation had previously identified certain other mineral properties as non-core assets as they had not been actively explored within 23 50

53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 the past three years and had no future exploration plans. The resulting evaluation of the carrying value of those mineral properties resulted in an impairment charge in 2013 of $17,758,606. An additional impairment of $553,328 was taken in September, 2014 as a potential sale of these properties did not materialize during the period resulting in a revaluation of the recoverable amount of the properties. Acquisitions 2014 McCoy-Cove On September 11, 2014, the Corporation acquired a 100% ownership interest in the McCoy gold property adjacent to the Cove property and located along the Eureka-Battle Mountain Trend in Nevada from Newmont for a total of $21,153,088USD ($23,691,459CAD). The Corporation paid $15,000,000USD on closing, will pay an additional $6,000,000USD within 18 months or on publishing a resource and transferred all land sections that comprise its South Carlin project, including the Saddle and Blue Sage properties. In addition, the Corporation assumed existing reclamation and environmental liabilities associated with the property of $877,272USD ($1,017,717CAD) and replaced the existing financial surety with the United States Bureau of Land Management in the amount of $4,417,691USD. The acquisition includes the following: 100% interest in the consolidated McCoy-Cove property package (now totaling 31,000 acres or 48 square miles) elimination of back-in rights previously held by Newmont as well as a revision of the royalty terms held by Newmont from a potential 5.0% royalty (NSR) to a 1.5% NSR the potential to define near-surface heap leachable mineralization at McCoy that could be prioritized towards development existing infrastructure, including lined heap leach pads that could potentially be utilized under a renewed development scenario a good faith efforts processing arrangement with Newmont over a 10-year period within a 12-year window for ores mined at McCoy-Cove the Corporation will retain a 1.5% Net Smelter Royalty ( NSR ) in the South Carlin property interests 2013 Broulan Reef On May 6, 2013, the Corporation acquired the Broulan Reef Project from Cypress Development Corp. and Skyharbour Resources Ltd. The project, which is located in the Dome Township, of Red Lake Mining District, is immediately adjacent to Goldcorp Inc.'s Bruce Channel deposit and the Corporation / Goldcorp's Rahill-Bonanza Joint Venture. The Corporation acquired the Broulan Reef project for a payment of $1,750,000 cash and the issuance of 160,000 common shares of the Corporation. The property is subject to an existing 2.0% NSR and the vendors shall retain a 0.5% NSR. The Corporation shall have the right to purchase the entire 0.5% NSR at any time for aggregate purchase price of $500,000. Goldcorp Inc. acquired a 51% interest in the Broulan Reef Project by funding 51% of the acquisition costs under the terms of the Rahill-Bonanza Joint Venture Agreement between the Corporation and Goldcorp Inc. in the amount of $1,076,459. Argonaut Claims On September 12, 2013, the Corporation acquired the Argonaut claims from Argonaut Gold Inc. The claims which are located in the Errington Township, of the Thunder Bay Mining District, are located under the Hardrock project. The Corporation acquired the Argonaut claims for a payment of $40,000 cash. This property is subject to a 3% NSR. The Corporation shall have the right to purchase up to 2% NSR at any time for an aggregate purchase price of $1,000,000 for the first 1% and $1,500,000 for the second 1%

54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Transfer of exploration and evaluation assets During 2012, $11,220,000 of mineral property acquisition costs were transferred from exploration and evaluation assets to royalty interests related to the Saddle property in Nevada and subsequently sold to Premier Royalty Corporation. The costs were transferred when the property began issuing royalty payments. The royalty interest was included in the disposal group assets classified as held for sale and royalty operations included in discontinued operations as discussed in Note 15. Rahill-Bonanza The Bonanza property, located in Dome township within the Red Lake mining district of Ontario, is comprised of 12 patented mining claims; 6 of which were formerly known as the Follansbee property. The property is subject to a 1.7% net smelter return (NSR) in favour of Pure Gold Minerals Inc. ("Pure Gold"), a 0.3% NSR in favour of Eugenic Corp ("Eugenic") which relates to the 6 Bonanza claims, and a 2% NSR in favour of Interquest Incorporated relating to the 6 Follansbee claims. The Corporation has retained a right to purchase a portion, namely a 1% NSR for $1,000,000 and a first right of refusal to purchase the remaining 0.7% NSR from Pure Gold. The Corporation has also retained a first right of refusal to purchase Eugenic's 0.3% NSR. On March 1, 2007 the Corporation acquired the Meunier Claim in Red Lake, Ontario from an unrelated party. As consideration, the Corporation paid $50,000 on execution and issued 50,000 common shares, valued at the trading price of the Corporation's shares at the time the agreement was entered into. An additional $50,000 cash and 50,000 common shares were paid on the 18th month anniversary of the agreement. Costs associated with this acquisition are included within the Rahill-Bonanza Project. On February 13, 2012 the Corporation paid Meunier $75,000 cash in lieu of making any annual advance royalty payments. Goldcorp Inc. agreed to participate and reimbursed the Corporation its respective portion. On May 9, 2007 the Corporation signed an Asset Exchange Agreement (the "Agreement") with Red Lake Gold Mines, an affiliate of Goldcorp Inc. Under the terms of the Agreement, Red Lake Gold Mines agreed to transfer to the Corporation an undivided 50% interest in and to certain mining claims in the Red Lake District known as the Rahill-Wilmar and Kostynuk Properties, and the Corporation agreed to transfer to the Partnership an undivided 50% interest in and to certain mining claims in the Red Lake District known as the Bonanza and Marathon Properties. On May 29, 2007 the Corporation signed the definitive joint venture Agreement. Pursuant to the agreement, the Corporation funded the initial $1,000,000 in exploration on the project commencing December 1, 2006; the date the original letter of intent was signed. Exploration expenditures in excess of the initial $1,000,000 have been funded on a 50:50 basis. The Corporation was the operator during the initial period of $5,000,000 in exploration. On January 18, 2008, Goldcorp exercised its option pursuant to the joint venture agreement to increase its interest in the joint venture by 1% to 51% by paying the Corporation $440,000. By doing this, Goldcorp took over as primary operator of the joint venture. The Corporation now holds a 49% interest in the property and will continue to participate in the ongoing exploration program. On May 6, 2013 the Corporation acquired the Broulan Reef Project from Cypress Development Corp. and Skyharbour Resources Ltd. The project, which is located in the Dome Township, of Red Lake Mining District, is immediately adjacent to Goldcorp Inc.'s Bruce Channel deposit and the Corporation / Goldcorp's Rahill-Bonanza Joint Venture. The Corporation acquired the Broulan Reef project for a payment of $1,750,000 cash and the issuance of 160,000 common shares of the Corporation. The property is subject to an existing 2.0% NSR and the vendors shall retain a 0.5% NSR. The Corporation shall have the right to purchase the entire 0.5% NSR at any time for aggregate purchase price of $500,000. Goldcorp Inc. acquired a 51% interest in the Broulan Reef Project by funding 51% of the acquisition costs under the terms of the Rahill-Bonanza joint venture Agreement between the Corporation and Goldcorp Inc. in the amount of $1,076,

55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 East Bay The East Bay property, a joint venture with Goldcorp Canada Ltd. ("Goldcorp"), is comprised of 80 unpatented mineral claims located in Bateman township within the Red Lake mining district of Ontario. Pursuant to the joint venture agreement, Goldcorp increased its proportionate interest in the joint venture from 50% to 65% by completing, at its own expense, a feasibility study during the year ended December 31, On March 22, 2012 the Corporation acquired two patented claims from Belmont Resources and International Montoro Resources Inc., located in the East Bay region of Red Lake. As consideration, the Corporation paid $20,000 in cash and issued 5,000 shares valued at $21,300. These claims have a 3% Net Smelter Return royalty subject to a 1% buy-back for $500,000. On March 22, 2012 the Corporation entered into an option agreement to acquire four key patented claims from William Ehlers, located in the Easy Bay region of Red Lake. As consideration, the Corporation paid $20,000 in cash and issued 4,000 shares valued at $20,280. These claims have a 2% Net Smelter Return royalty subject to a 1% buy-back for $500,000. PQ North The PQ North Project is located in the Musselwhite District of Northwestern Ontario, some 300 kilometres northeast of Red Lake, proximal to Goldcorp's Musselwhite Mine. The property is within 10 kilometres of the Musselwhite Mine surface infrastructure and is accessed by road in winter and by road and lake in summer. The Corporation holds the right to a 100% interest in the PQ North Property subject to a 2% net smelter return royalty. On April 4, 2011 the Corporation exercised its option to acquire the 2% Net Smelter Returns Royalty from the vendor. As compensation, the Corporation paid $100,000 cash and issued 150,000 shares as well as 50,000 common share purchase warrants exercisable at $6.62 which expired during the year (see Note 11). Hardrock The Hardrock project is located in the Greenstone district of Northwestern Ontario, some 300 kilometres east of Thunder Bay Ontario and is comprised of the Corporation's Hardrock and Key Lake properties. The Hardrock property was acquired from Lac Properties Inc. ("Lac"), a wholly-owned subsidiary of Barrick Gold Corporation in The property which is comprised of the mining claims commonly known as Geraldton, Ozone Creek and Eva Summers is subject to a ranging royalty obligation from 1.0% net smelter return royalty (the "NSR Royalty") to 5.0% net profit interest ("NPI") on production from the property. The Corporation retains a 100% interest in the Key Lake property located in Lindsley Township near Geraldton, Ontario. The property is contiguous to the Hardrock property and is subject to a varying NSR in the range of 1.0% to 2.25% under certain conditions. On September 12, 2013 the Corporation acquired the Argonaut claims from Argonaut Gold Inc. The claims which are located in the Errington Township, of the Thunder Bay Mining District, are included with the Hardrock project. The Corporation acquired the Argonaut claims for a payment of $40,000 cash. This property is subject to a 3% NSR. The Corporation has the right to purchase up to 2% NSR at any time for an aggregate purchase price of $1,000,000 for the first 1% and $1,500,000 for the second 1%. Brookbank The Brookbank project is located in the Greenstone district of Northwestern Ontario some 250 kilometers east of Thunder Bay, Ontario and is comprised of the Brookbank and Cherbourg Fox properties. The Corporation has a 100% interest in the Brookbank property subject to a 1% NSR in favour of Metalore Resources Limited on certain mineral claims

56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 The Corporation has a 74% interest in the Cherbourg-Fox Ear property. The remaining 26% interest which is held by Metalore can be acquired by the Corporation at the incremental rate of 1% for each $20,000 in exploration expenditures incurred by the Corporation for which Metalore does not remit its proportionate share of the expenditures. The Corporation and Metalore are currently in discussion regarding adjustments to the relative ownership percentages in relation to exploration expenditures incurred in 2009 and The Corporation has a 79% interest in certain Staked Claims (the "Staked Claim Option"). The remaining 21% interest which is held by Metalore can be acquired by the Corporation at the incremental rate of 1% for each $20,000 in exploration expenditures incurred by the Corporation for which Metalore does not remit its proportionate share of the expenditures. The Corporation and Metalore are currently in discussion regarding adjustments to the relative ownership percentages in relation to exploration expenditures incurred in 2009 and The Corporation also has a right of first refusal with respect to the mineral rights for six leased claims in Walters Township owned by Metalore. McCoy-Cove On June 13, 2012 the Corporation's wholly owned subsidiary Au-reka Gold Corporation acquired a 100% interest in the Cove Gold Project, located in the Battle Mountain-Eureka Trend in Nevada, U.S.A from Victoria Gold Corp. Total consideration for the acquisition included a $20,000,000 non-interest bearing promissory note issued in favour of Victoria Gold, $4,000,000 in cash, and the issuance 892,857 common shares valued at $4,223,214. In addition, the Corporation also reimbursed Victoria $1,206,277USD in respect of actual exploration costs incurred by Victoria between March 15, 2012 and the closing date of the acquisition. On September 11, 2014, the Corporation acquired a 100% ownership interest in the McCoy gold property adjacent to the Cove property and located along the Eureka-Battle Mountain Trend in Nevada from Newmont for a total of $21,153,088USD ($23,691,459CAD). The Corporation paid $15,000,000USD on closing, will pay an additional $6,000,000USD within 18 months or on publishing a resource and transferred all land sections that comprise its South Carlin project including the Saddle and Blue Sage properties. In addition, the Corporation assumed existing reclamation and environmental liabilities associated with the property of $829,446USD ($928,935CAD) and replaced the existing financial surety with the United States Bureau of Land Management in the amount of $4,417,691USD. The McCoy-Cove property is subject to a 1.5% NSR. Saddle On June 14, 2010 the Corporation acquired Saddle Gold Inc. ("Saddle"). Saddle owns, among other things, the mineral rights in respect of a majority portion of the Saddle Gold Deposit (the "Saddle Property"). The Saddle Property is located in the heart of the Carlin Trend in Elko, County, Nevada. On September 11, 2014 the Corporation transferred the Saddle property in Nevada to Newmont Gold as discussed above in acquisitions. The Corporation will retain a 1.5% NSR in the Saddle property interest. Other areas Other mineral interests held by the Corporation include: a 100% interest in the Faymar property located in Deloro Township in the Timmins Gold Camp subject to a 1% NSR a 100% interest in the Bartec property located in Barraute township, in the Val d Or district of Quebec a 100% interest in the Nortoba-Tyson property located in Dorothea Township in the Thunder Bay Mining District a 100% interest in Northern Empire West Extension property subject to a 3% NSR for which the Corporation has retained the right to purchase up to 1% of the NSR under certain conditions a 100% interest in the Northern Empire property located in McComber and Summers Township in the 27 54

57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Thunder Bay Mining District subject to a 2.75% NSR a 100% interest in the Leitch-Sand River property located near Beardmore, Ontario subject to a varying NSR in the range of 1-2% on certain claims under certain conditions, for which the Corporation has retained the right to purchase up to one half of the ranging NSR's under prescribed conditions a 100% interest in the Santa Teresa Mineral Concession and Quasaro located in Mexico a 100% interest in Raingold Property, comprised of 6 Patented mining claims On September 11, 2014 the Corporation transferred the Blue Sage mineral claim in Nevada to Newmont Gold as discussed above in acquisitions. The Corporation will retain a 1.5% NSR in the Blue Sage mineral claims interest. 9. LONG-TERM DEBT (a) The Corporation, through its wholly owned subsidiary, Premier Gold Mines Nevada Inc. holds a non-interest bearing promissory note issued by various parties related to the acquisition of South Africa Platinum Inc. The promissory note was secured by a deed of trust on the Blue Sage property. At December 31, 2014, the outstanding principal of the promissory note is $200,000USD ($232,020CAD). The current portion of the promissory note is $50,000USD (discounted at a rate of 15% $44,331CAD). The remaining balance of the promissory note of $150,000USD (discounted at a rate of 15% $132,437CAD), will be repaid over the next 4 years. The present value of the debt, using a discount rate of 15% is $176,768CAD. The value of the debt is being accreted to the face value of the promissory note at its maturity date, with the charge to the statement of comprehensive loss as a form of interest expense over the term of the note. Anniversary Date Total payment ($USD) Total payment ($CAD) Discounted principal ($CAD) Accreted interest ($CAD) July 19, ,000 58,005 44,331 13,674 July 19, ,000 58,005 38,138 19,867 July 19, ,000 58,005 43,860 14,145 July 19, ,000 58,005 50,439 7,566 Total 200, , ,768 55,252 (b) Pursuant to the acquisition of the Cove Gold Project, the Corporation issued a non-interest bearing promissory note in favour of Victoria Resources (US) Inc., through its wholly owned subsidiary, Au-reka Gold Corporation in the amount of $20,000,000CAD of which $10,000,000 was repaid on June 13, 2013 and the remaining $10,000,000 on June 13, The Corporation made one-half of the payment in consideration shares issued by the Corporation on behalf of Au-reka Gold Corporation in both years. (c) As a result of the acquisition of the McCoy-Cove Property described in Note 8, the Corporation agreed to an additional long term payable in favour of Newmont, through its wholly owned subsidiary, Au-reka Gold Corporation in the amount of $6,000,000USD ($6,960,557CAD). The payment is due within 30 days of the earlier of: a published one million ounce mineral resource estimate or the completion of a positive feasibility study. In accordance with the purchase agreement the Corporation shall make reasonable effort to complete a mineral resource estimate within 18 months of September 11, 2014 and as such, the present value of the debt over the eighteen months and using a discount rate of 8%, is $6,334,300CAD. The value of the debt is being accreted to the face value of the payable at its maturity date, with the charge to the statement of comprehensive loss as a form of interest expense over the term of the debt. Anniversary Date Total payment Total payment Discounted Accreted ($USD) ($CAD) principal ($CAD) interest ($CAD) March 11, ,000,000 6,960,557 6,334, ,

58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and PROVISION FOR ENVIRONMENTAL REHABILITATION The Corporation's provision for environmental rehabilitation results from an ownership interest in a mill, mining equipment and previously mined property interests. The provision consists primarily of costs associated with mine reclamation and closure activities. These activities, which tend to be site specific, generally include costs for decommissioning the mill complex and related infrastructure, physical and chemical stability of the tailings area and post-closure site security and monitoring costs. In determining the estimated costs, the Corporation considers such factors as changes in laws and regulations and requirements under existing permits. Such analysis is performed on an ongoing basis. The Corporation estimates that the future value of the cash flows required to settle the provision is $4,093,509 for the Northern Empire Mill and the Faymar Delora property in Canada and $1,003,063USD ($1,163,653CAD) for the McCoy-Cove property in the United States. In calculating the fair value of the Corporation's provision, management used risk free interest rates ranging from 1.998% to 2.381%. A reconciliation of the discounted provision is provided below: 2014 $ $ $ $ Northern Empire Mill Faymar Delora property McCoy-Cove property Total Balance, beginning of the period 2,351,185 1,352,195-3,703,380 New obligation - - 1,017,717 1,017,717 Accretion expense 47,615 30,061 5,084 82,760 Adjustment due to change in estimate 31,602 6,305-37,907 and interest rate Reclamation expenditures - - (10,967) (10,967) Currency adjustment - - (295) (295) 2,430,402 1,388,561 1,011,539 4,830, $ $ $ $ Northern Empire Mill Faymar Delora property McCoy-Cove property Total Balance, beginning of the period 2,449, ,449,004 New obligation - 1,352,195-1,352,195 Accretion expense 49, ,519 Adjustment due to change in interest (147,338) - - (147,338) rate 2,351,185 1,352,195-3,703,380 The additional obligation accounted for during the year is related to the McCoy-Cove mineral property interest acquired on September 11, 2014 as described in Note 8. The additional obligation accounted for during the year ended December 31, 2013 is related to the Faymar mineral property interest acquired as a result of the 2011 Goldstone acquisition and referenced in Note 8 of the December 31, 2013 audited consolidated financial statements under Other areas. The property was subject to a site visit by the MNDM during 2013 and identified as requiring reclamation including building foundations, crown pillar and tailings basin stability. These costs were capitalized to the related mineral property which was subsequently impaired as further discussed in Note 8 of the December 31, 2013 statements. As the Northern Empire Mill and Faymar Delora properties are considered fully impaired, the change in estimate and interest rates are expensed as property maintenance. In 2013 the adjustment due to a change in interest rate was related to the existing Northern Empire Mill provision and resulted in a decrease to the related asset

59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and CAPITAL AND RESERVES Authorized The Corporation is authorized to issue an unlimited number of common shares. Details of share issuances 2014 Private Placement On November 25, 2014 the Corporation issued 3,750,000 flow-through common shares, on a "bought deal" basis, at a price of $2.45 per common share for gross proceeds of $9,187,000. In consideration of the agents' services in connection with the offering, the agents were paid an aggregate cash fee equal to 5 per cent of the gross proceeds raised in the offering. Shares issued as payment On June 13, 2014, the Corporation issued 2,204,488 common shares, valued at $5,000,000 on behalf of it's wholly owned subsidiary Au-reka Gold Corporation for partial repayment of the promissory note pursuant to the Cove property acquisition completed in Shares issued for mineral property On May 6, 2013 the Corporation issued 160,000 common shares, valued at $323,200 for the Broulan Reef property located in the Red Lake Mining District. Goldcorp Inc. acquired a 51% interest in the Broulan Reef Project under the terms of the Rahill-Bonanza Joint Venture Agreement between the Corporation and Goldcorp Inc. Purchase details are described in Note 8. Shares issued as payment On June 13, 2013 the Corporation issued 2,142,612 common shares, valued at $5,000,000 on behalf of its wholly owned subsidiary Au-reka Gold Corporation for partial repayment of the promissory note pursuant to the Cove property acquisition completed in Shares issued as compensation On December 31, 2013 the Corporation issued 94,151 common shares valued at $131,811 to officers and management as compensation

60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Warrants The Corporation had 50,000 warrants outstanding at an exercise price of $6.62. The warrants were issued on April 5, 2011 and expired on April 5, The Corporation applies the fair value method of accounting for all warrants issued. There were no warrants issued during the year ended December 31, 2014 or Share option plan The Corporation has a share option plan (the "Plan") which is restricted to directors, officers, key employees and consultants of the Corporation. The number of common shares subject to options granted under the Plan (and under all other management options and employee stock purchase plans) is limited to 10% in the aggregate and 5% with respect to any one optionee of the number of issued and outstanding common shares of the Corporation at the date of the grant of the option. Options issued under the Plan may be exercised during a period determined by the Board of Directors which cannot exceed ten years

61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 The following table reflects the stock options outstanding as at December 31, 2014: Exercise Opening Expired/ Closing Expiry Date Price Balance Granted Exercised Cancelled Balance $ # # # # # January 6, , (34,136) - May 27, ,640 - (42,640) (5,000) - June 17, ,741,500 - (1,550,000) (191,500) - November 21, , (194,200) - April 13, ,648, ,648,000 September 17, , ,003 October 5, , ,401 October 16, , ,001 December 8, , ,000 June 24, , ,001 July 28, ,327, ,327,000 August 10, , ,000 August 25, , ,666 October 19, , ,000 December 20, , ,000 March 5, , ,000 May 2, , ,000 May 8, , ,000 June 13, , ,000 August 13, , ,000 October 24, , ,000 January 28, , ,000 February 22, , ,000 March 6, , ,000 March 18, , ,000 April 8, , ,000 August 8, ,379,500 - (89,750) (9,500) 1,280,250 August 13, , ,000 September 20, , ,000 September 24, ,000 - (4,000) - 4,000 October 22, , ,000 December 18, , ,000 March 7, , ,000 May 2, , ,000 April 15, , ,000 August 29, ,682, ,682,500 September 22, , ,000 12,823,048 1,972,500 (1,686,390) (434,336) 12,674,822 Weighted average exercise price

62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Total exercisable stock options at December 31, 2014 were 12,239,822 with a weighted average exercise price of $3.96 (2013, 11,928,048 with a weighted average exercise price of $3.98). The Corporation applies the fair value method of accounting for all stock based compensation awards and accordingly, $3,331,875 was recorded for options and shares issued as compensation during the year ( $4,677,871 was recorded as compensation for the year). As of December 31, 2014 there were 435,000 unvested stock options (895,000 at December 31, 2013). For purposes of the options granted, the fair value of each option was estimated on the date of grant using the Black- Scholes option pricing model, with the following assumptions: Risk-free interest rate 1.58% % 1.34% % Annualized volatility 61% - 66% 58% - 64% Expected dividend yield Nil Nil Expected option life years 5 years Treasury shares In 2013 Goldstone Resources Inc., a wholly owned subsidiary of the Corporation, surrendered 400,000 shares of the Corporation previously held by it for $nil consideration. 12. LOSS PER SHARE Both the basic and diluted earnings per share have been calculated using the loss attributable to shareholders of the Corporation as the numerator. No adjustments to loss were necessary in 2014 or Numerator: Loss from continuing operations (47,473,984) (29,244,473) Loss from discontinued operations - (82,230) (47,473,984) (29,326,703) Denominator: Weighted Average number of common shares 153,727, ,480,513 Basic and diluted loss per share: Loss from continuing operations (0.31) (0.19) Loss from discontinued operations - - Total (0.31) (0.19) 33 60

63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and SUPPLEMENTAL CASH FLOW INFORMATION The significant non-cash financing and investing activities during the period are as follows: As at December 31, Note $ $ Increase in accounts payable and accrued liabilities included in 310,538 - capitalized exploration and evaluation assets Fair value of debt issued for the purchase of exploration and evaluation 5,987,367 - assets Fair value of shares issued for compensation ,811 Fair value of stock options allocated to share capital upon exercise 11 2,506, ,695 Fair value of shares issued for the purchase of evaluation and ,200 exploration assets Fair value of shares issued for repayment of promissory note 11 5,000,000 5,000, SEGMENTED INFORMATION The Corporation s significant segments that are represented by its separately identifiable exploration and evaluation properties as described in Note 8 that operate in three distinct geographic areas. The Canadian operations, which are located in Ontario, are managed from the Corporation s head office in Thunder Bay. The United States of America (U.S.A.) operations are managed from an office in Nevada. The Mexican operations are managed from an office in Mexico City. For the year ended December 31, 2014 Canada U.S.A. Mexico Total $ $ $ $ Depreciation and impairment (3,060,312) (42,929,699) - (45,990,011) Net finance costs - (617,355) - (617,355) Overhead costs (7,652,374) (40,051) (20,887) (7,713,312) Exploration and maintenance (766,007) (39,877) (40,244) (846,128) Other income 4,580,254 10,571-4,590,825 Loss before income taxes (6,898,439) (43,616,411) (61,131) (50,575,981) Current tax (582) (26) - (608) Deferred tax 877,202 2,225,403-3,102,605 Loss for the year (6,021,819) (41,391,034) (61,131) (47,473,984) Exploration and evaluation asset additions (net) 18,379,666 (6,257,968) - 12,121,

64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 For the year ended December 31, 2013 Canada U.S.A. Mexico Total $ $ $ $ Depreciation and impairment (19,485,860) (129,689) (695,630) (20,311,179) Net finance costs - (1,332,760) - (1,332,760) Overhead costs (9,601,481) (87,446) (20,359) (9,709,286) Exploration and maintenance (829,252) - - (829,252) Other income/(expenses) 99,982 (129,385) - (29,403) Loss before income taxes (29,816,611) (1,679,280) (715,989) (32,211,880) Current tax (29,476) (62) - (29,538) Deferred tax (1,931,630) 4,928,575-2,996,945 Net earnings (31,777,717) 3,249,233 (715,989) (29,244,473) Loss for the year from discontinued operations (82,230) - - (82,230) Loss for the year (31,859,947) 3,249,233 (715,989) (29,326,703) Exploration and evaluation asset additions (net) 10,244,052 11,675,297 (628,075) 21,291,274 As at December 31, 2014 Canada U.S.A. Mexico Total $ $ $ $ Exploration and evaluation assets 265,869,141 75,955, ,824,780 Total assets 306,043,703 78,144,444 26, ,214,839 Total liabilities (38,515,539) (7,808,610) (6,790) (46,330,939) As at December 31, 2013 Canada U.S.A. Mexico Total $ $ $ $ Exploration and evaluation assets 247,489,475 82,213, ,703,082 Total assets 322,476,025 86,009,531 6, ,492,298 Total liabilities (40,466,269) (10,224,262) - (50,690,531) 15. DISCONTINUED OPERATIONS The incorporation of Premier Royalty Corporation and the subsequent reverse takeover transaction with Bridgeport was intended to disaggregate Premier s royalty interests from its core exploration and evaluation business with a view to a possible future sale of the resulting entity. Consequently, the assets and liabilities held by Premier Royalty Inc. at December 31, 2012 and included in the audited consolidated financial statements of the Corporation were classified as a disposal group. As discussed above, the sale of the Premier Royalty Inc. shares was completed on January 28, Revenue and expenses relating to the discontinuation of this disposal group have been eliminated from the continuing operations of the Corporation and are shown as a single line item on the face of the consolidated statements of loss and comprehensive loss (see loss for the year from discontinued operations)

65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 The discontinued operations are comprised of the revenue and expenses of royalties held directly by the Corporation and the revenue and expenses related to Premier Royalty Corporation prior to the business combination and the revenue and expenses of Premier Royalty Inc. subsequent to the business combination up to the date of disposition as follows: As at December 31, $ $ Revenue - 441,549 Expenses: Depletion - (245,654) General and administration - (223,777) Stock based compensation - (104,429) Other income - 9,267 Foreign exchange loss - 40,814 Total expenses - (523,779) Loss for the year - (82,230) Loss and comprehensive loss for the year - (82,230) Discontinued operations attributable to: Non-controlling interest in Premier Royalty Inc. - (29,018) Owners of the parent - (53,212) - (82,230) 16. INCOME TAXES (a) The major components of income tax expense (benefit) are as follows: $ $ Current income tax ,712 Origination and reversal of temporary differences (1,168,626) 1,880,566 Effect of change in tax rates ,320 Deferred tax liability incurred on renouncement expenses 265,000 5,420,728 Reversal of deferred flow-through premium (57,143) (2,889,206) Recognition of previously unrecognized tax assets from the renouncement of flow-through expenditures - (7,059,083) Recognition of previously unrecognized tax assets from the use of loss carryforwards (4,761,710) - Impact of the use of loss carryforwards related to share issue costs charged to equity 2,544,661 - Other 74,602 (347,444) (3,101,997) (2,967,407) 36 63

66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 (b) The Corporation's income tax expense (benefit) differs from the amount computed by applying the combined Canadian federal and provincial income tax rates to loss before income taxes as a result of the following: $ $ Loss for the year (50,575,981) (32,211,880) Statutory rates (i) 26.50% 26.50% Income tax recovery computed at statutory rates (13,402,635) (8,536,148) Difference in foreign tax rates (1,573,282) (166,304) Increase in deferred tax assets not recognized 6,293,634 10,171,905 Non-deductible items 7,513, ,113 Effect of change in tax rates ,320 Impact of attributes renounced to shareholders (flow-through shares) 265,000 5,420,729 Impact of flow-through share premium (57,143) (2,889,206) Recognition of previously unrecognized tax assets from the renouncement of flow-through shares - (7,059,083) Recognition of previously unrecognized tax assets from the use of loss carryforwards (4,761,710) - Impact of the use of loss carryforwards related to share issue costs charged to equity 2,544,661 - Other 75,217 (334,733) (3,101,997) (2,967,407) $ $ Exchange difference on translation of foreign operations through other 6,184,556 3,858,685 comprehensive income (ii) Statutory tax rates 35% 35% Income tax expense computed at statutory rates 2,164,595 1,350,540 Exchange difference not subject to income tax 24,169 96,355 Income tax expense 2,188,764 1,446,895 (i) The Corporation operates in multiple industries and jurisdictions, and the related income is subject to varying rates of taxation. The combined Canadian federal and provincial tax rate reflects the tax rate of 26.5% in effect in Ontario, Canada for each applicable tax year. The corporation operates in Mexico, which reflects a 30% tax rate for the current year. As well, the corporation operates in Nevada, USA and reflects a 35% tax rate for each applicable tax year. (ii) A tax rate of 35% is applicable to the exchange difference on translation of foreign operations as it relates to timing differences originating from the subsidiaries' operations in Nevada, USA

67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 (c) The deferred income tax liabilities reported on the balance sheet are comprised of temporary differences as presented below: As at December 31, $ $ Deferred income tax assets Non-capital losses 8,956,154 8,268,794 Deferred tax assets set off against deferred tax liabilities (8,956,154) (8,268,794) Deferred tax asset - - Deferred income tax liabilities Exploration and evaluation (36,402,276) (41,086,169) Investments (3,265,468) (1,232,166) Other (2,160) (64,222) Gross deferred tax liabilities (39,669,904) (42,382,557) Deferred tax assets set off against deferred tax liabilities 8,956,134 8,268,794 Deferred tax liabilities per balance sheet (30,713,770) (34,113,763) Balance at the beginning of the year (34,113,763) (32,670,536) Effect of exchange rate differences 1,836 (120,270) Recognized in loss 3,101,997 2,967,407 Deferred premium on flow-through shares (57,143) (2,889,206) Deferred tax recovery recognized on share issue costs charged to equity 2,544,661 - Deferred tax liability recognized on exchange difference on translation of foreign operations (2,188,765) (1,446,892) Other (2,593) 45,734 Balance at the end of the year (30,713,770) (34,113,763) 38 65

68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 (d) Deferred tax assets not recognized Management believes that it is not probable that sufficient taxable profits will be available in future years to allow the benefit of the following deferred tax assets to be utilized: $ $ Deferred tax assets not recognized Non-capital losses 9,867,748 9,865,516 Common share issue costs 908,744 1,485,432 Exploration and evaluation 8,712,709 5,172,878 Investments 1,272,815 3,866,221 Pre-production ITC 1,073, ,445 Other 6,360 6,360 21,841,849 20,738,852 Unused operating tax losses (i) Canada 22,195,733 35,172,062 U.S.A 36,879,656 25,115,360 Mexico 121, ,155 59,197,293 60,392,577 Total unused operating tax losses not recognized Potential tax benefit at tax rate between 26.5% and 35% 18,823,882 18,140,415 Operating tax losses set off against deferred tax liabilities (8,956,134) (8,268,794) Total unused operating tax losses not recognized 9,867,748 9,871,621 (i) Unused operating tax losses totaled $59,197,293 as of December 31, Canadian tax losses will expire between 2022 and 2034; U.S. losses will expire between 2027 and 2034; and Mexican losses will expire between 2020 and RELATED PARTY TRANSACTIONS The Corporation's related parties include key management personnel and entities over which they have control or significant influence as described in Note 2 and below. Nature of transactions DSA Corporate services Corporate secretarial services DSA Filing Services Filing services DRAX Services Limited Corporate secretarial services The Alyris Group Corporate accounting and IT services Alyris Leasing Inc. Facilities rental Apex Security and Investigation Inc. Security services Mega Precious Metals Inc. Facilities rental Wolfden Resources Corporation Facilities rental Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. The following are the related party transactions, recorded at the exchange amount as agreed to by the parties: (a) Included in general and administrative expenses are amounts totalling $84,271 ( $87,930) for corporate secretarial and filing services provided by DSA Corporate Services, DRA Filing Services and DRAX Services 39 66

69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Limited, all of which are related to the Corporation through Shaun Drake, Corporate Secretary of the Corporation. (b) Included in general and administrative expenditures are amounts totalling $108,394 ( $110,358) for charges related to IT consulting and accounting and management services provided by Ontario Inc., O/A The Alyris Group a company related to the Corporation through Ewan Downie, Director, President and Chief Executive Officer of the Corporation, and Steve Filipovic, Chief Financial Officer of the Corporation. (c) Included in other revenue are amounts totaling $2,650 ( $31,800) for rental of a core shack paid by Mega Precious Metals Inc., a company related to the Corporation through Ewan Downie, Director, President and Chief Executive Officer of the Corporation, who is also a director of Mega Precious Metals Inc. (d) Included in exploration and evaluation assets are amounts totalling $nil ( $12,728) for security related services paid to Apex Security and Investigation Inc., a company related to the Corporation through John Seaman, Director of the Corporation. e) Included in general and administrative expenditures are amounts totalling $160,949 ( $162,510) for rental charges paid to Alyris Leasing Inc., a company related to the Corporation through Ewan Downie, Director, President and Chief Executive Officer of the Corporation, and Steve Filipovic, Chief Financial Officer of the Corporation. (f) Included in general and administrative expenses are amounts totaling $7,200 ( $nil) for rental of office space paid by Wolfden Resources Corporation, a company related to the Corporation through Ewan Downie, Director, President and Chief Executive Officer of the Corporation, who is also a director of Wolfden Resources Corporation. Transactions with key management personnel Key management personnel remuneration includes the following amounts: $ $ Salary and wages 1,494,382 1,521,782 Share-based payments 884,170 1,007,621 2,378,552 2,529,

70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and COMMITMENTS (a) Contractual obligations The Corporation has commitments relating to operating and facilities leases extending to The minimum annual contractual and lease payments for the five years are as follows: $ , , , ,013 (b) Flow-through commitment The Corporation has $8,187,500 in remaining flow-through obligations to be spent by December 31, (c) Surety Bonds At December 31, 2014, the Corporation has outstanding surety bonds in the amount of $4,417,691USD ($5,124,963CAD) in favour of the United States Department of the Interior, Bureau of Land Management (BLM) as financial support for environmental reclamation and exploration permitting. The surety bonds are currently unsecured and are subject to fees competitively determined in the market place. The obligations associated with these instruments are generally related to performance requirements that the Corporation addresses through its ongoing operations. As specific requirements are met, the BLM as beneficiary of the instrument will return the instrument to the issuing entity. As these instruments are associated with operating sites with long-lived assets, they will remain outstanding until closure. 19. FINANCIAL INSTRUMENTS AND RELATED RISKS The Corporation's operations include the acquisition and exploration of mineral properties in Canada, the United States and Mexico. The Corporation examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other risks. Where material, these risks are reviewed and monitored by the Board of Directors. (a) Credit Risk Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes any cash amounts owed to the Corporation by those counterparties, less any amounts owed to the counterparty by the Corporation where a legal right of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements. (i) (ii) Trade credit risk The Corporation is in the exploration stage and has not yet commenced commercial production or sales. Therefore, the Corporation is not exposed to significant credit risk and overall the Corporation's credit risk has not changed significantly from the prior period. Cash and cash equivalents In order to manage credit and liquidity risk the Corporation invests only in highly rated investment grade instruments that have maturities of one year or less. Limits are also established based on the type of investment, the counterparty and the credit rate

71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 (iii) Derivative financial instruments As at December , the Corporation has no derivative financial instruments. It may in the future enter into derivative financial instruments and in order to manage credit risk, it will only enter into derivative financial instruments with highly rate investment grade counterparties. (b) Liquidity risk Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation manages liquidity risk through the management of its capital structure. As at December 31, 2014 the Corporation's liabilities that have contractual maturities are as follows: Total $ $ $ $ $ $ Accounts payable and accrued liabilities 3,807, ,807,742 Long term debt - 58,005 7,018,562 58,005 58,005 7,192,577 3,807,742 58,005 7,018,562 58,005 58,005 11,000,319 (c) Market risk (i) (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that the Corporation will realize a significant loss as a result of a decline in the fair market value of investments and other items held within cash and cash equivalents is limited given that the majority of investments have a relatively short maturity. The Corporation manages its interest rate risk with investments by investing the majority of funds in shortterm investments and therefore is not exposed to significant fluctuations in interest rates. Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Corporation s measurement currency. The Corporation s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The functional currency and reporting currency of the Corporation is the Canadian dollar. The Corporation s capitalized exploration and evaluation assets and expenses also include amounts incurred in U.S. dollars and to a lesser extent, the Mexican peso which are the functional currencies of these operations. The Corporation s exchange risk is therefore related to movement between these currencies. Changes in the currency exchange rates between the Canadian dollar relative to the U.S. dollar and the Mexican peso have an effect on the Corporation s results of operations through comprehensive loss, financial position or cash flows

72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 The Corporation has mitigated this risk by diversifying its cash resources in the U.S. dollar and Mexican peso roughly in proportion to expected future expenditure over the following twelve months. The carrying amounts of the Company s U.S. dollar denominated monetary assets and monetary liabilities in Canadian dollars at the end of the reporting period are as follows: $ $ Cash and cash equivalents 2,794,550 7,948,582 Restricted cash and cash equivalents 1,132,935 1,076,391 Accounts receivable & prepaids 97,103 46,018 Accounts payable 286, ,959 Long term debt 6,511, ,288 There are no significant financial instruments in Mexican pesos. During the year ended December 31, 2014, the Corporation recognized a foreign exchange loss of $51,512 and an exchange gain on the translation of foreign operations in comprehensive income of $6,184,556. As of December 31, 2014, if the Canadian dollar to the U.S. dollar exchange rate increases or decreases by 10%, the Corporation s net loss will increase or decrease by $198,375 and the Corporation s other comprehensive loss will increase or decrease by $535,918. (iii) Security price risk Security price risk is the risk that the fair value or future cash flow of the Corporation's financial instruments will fluctuate because of the changes in the market price. In situations where the Corporation has taken a position in the securities of another entity, the Corporation manages its exposure to price risk by monitoring the market(s) where the entity's securities trade and planning the divestiture accordingly. The Corporation only takes a position in another entity where it has a strategic objective; or as a result of a purchase or sale transaction. The Corporation does not invest in derivatives to mitigate these risks. (d) Fair value IFRS 13 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows: 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 following table sets forth the Corporation's financial assets measured at fair value by level within the fair value hierarchy: Level 1 Level 2 Total $ $ $ $ $ $ Investments 3,777,233 17,516, ,777,233 17,516,

73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Set out below are the Corporation's financial assets by category: Fair value through profit or loss Loans and receivables Total $ $ $ $ $ $ Cash and cash equivalents ,141,013 52,552,321 32,141,013 52,552,321 Accounts receivable ,804 1,285, ,804 1,285,757 Investments held for sale 3,632,955 17,381, ,632,955 17,381,833 Restricted cash and cash - - 3,994,990 3,935,272 3,994,990 3,935,272 equivalents Investments 144, , , ,857 3,777,233 17,516,690 37,029,807 57,773,350 40,807,040 75,290,040 Set out below are the Corporation's financial liabilities by category: Fair value through profit or loss Other financial liabilities Total $ $ $ $ $ $ Accounts payable and accrued - - 3,807,742 3,094,360 3,807,742 3,094,360 liabilities Long term debt - - 6,511,068 9,779,028 6,511,068 9,779, ,318,810 12,873,388 10,318,810 12,873,388 The fair value of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short term nature. The fair value of the Corporations long term debt is approximated by its carrying value. 20. MANAGEMENT OF CAPITAL The Corporation manages its common shares, stock options and warrants as capital. The Corporation's objectives when managing capital are to safeguard the Corporation's ability to continue as a going-concern in order to pursue the exploration and development of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. The Corporation manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Corporation may attempt to issue new shares, acquire or dispose of assets or acquire new debt. In order to maximize ongoing exploration efforts, the Corporation does not pay out dividends. The Corporation's investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments with short-term maturities, selected with regard to the expected timing of expenditures from continuing operations. To effectively manage its capital requirements, the Corporation has in place a planning and budgeting process to help determine the funds required to ensure the Corporation has the appropriate liquidity to meet its operating and growth objectives. The Corporation expects capital resources will be sufficient to carry out its exploration and evaluation plans through CONTINGENCIES Legal claims In October 2010, prior to the Goldstone Arrangement, Patrick Sheridan, the former President and Chief Executive Officer and a director of Goldstone, and Gary Conn, a former senior officer and director of Goldstone, together with 44 71

74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 their respective management companies, commenced legal actions against Goldstone. Mr. Sheridan alleged breach of contract and sought damages of up to $1,400,000, including punitive damages, plus costs and interest. Mr. Conn alleged breach of a consulting agreement or, alternatively, wrongful dismissal and other causes of action and is seeking damages of up to approximately $3,400,000, plus costs and interest. With respect to the Sheridan Action, the parties have agreed to a settlement. Pursuant to such settlement, Goldstone paid a sum to Mr. Sheridan, which was included in general and administrative expenses in Goldstone had also commenced third party claims against Mr. Conn and three former directors in order to seek contribution and indemnity for any amounts that it may be found liable to pay Mr. Sheridan and his management company in the Sheridan Action - which third party claims have been dismissed. Goldstone dismissed Mr. Conn for cause on October 1, In its counterclaim against Mr. Conn (the Conn Counterclaim ), Goldstone is seeking damages from Mr. Conn and his management company in the amount of $5,000,000 for breach of fiduciary duty and duty of care, fraud, misrepresentation, conflict of interest, unjust enrichment, gross negligence, negligence and breach of contract; and $100,000 in punitive damages. Goldstone has also alleged other causes of action, plus costs and interest. In February 2014, Mr. Conn first informed Goldstone that he would seek advancement of expenses and indemnification from Goldstone relating to his defence of the Conn Counterclaim. Mr. Conn has commenced an application for this relief, which was scheduled to be heard in February, 2015 and subsequently adjourned and rescheduled to April, Goldstone is responding to the application on the basis that Mr. Conn is not entitled to advancement and indemnification because he acted with mala fides (bad faith) towards the corporation. In January 2011, Mr. Conn commenced a legal action (the Defamation Claim ) against Goldstone, four of its directors, and other individuals, seeking damages of $2,500,000 based on alleged conspiracy, libel, defamation and intentional infliction of mental suffering arising from alleged improper publication of certain allegations contained in the Conn Counterclaim. On May 24, 2011, the Superior Court of Justice (Ontario) granted Goldstone s motion for summary judgment. The summary judgment concluded that the allegations in the Conn Counterclaim which, in Goldstone s view justified Mr. Conn s termination for cause, but which according to Mr. Conn were allegedly defamatory, were true. Mr. Conn sought to appeal the judgment, but the Ontario Court of Appeal dismissed his appeal on November 18, With respect to the Conn Action, Goldstone launched a summary judgment motion on the basis that certain allegations which were relied upon to justify cause for Mr. Conn s dismissal have already been proven in a related proceeding being the Defamation Claim. Goldstone s motion for summary judgment was unsuccessful and the parties will now continue with the Conn Action and related Conn Counterclaim. Goldstone expects that the Conn Action and the Conn Counterclaim will be tried in or after September, SUBSEQUENT EVENTS Partnership agreement On February 5, 2015 the Corporation announced that it has signed a definitive agreement to form a 50/50 partnership with Centerra Gold Inc. ( Centerra ) for the joint ownership and development of the Corporation's Trans- Canada Property including the Hardrock and Brookbank Projects located in the Geraldton-Beardmore Greenstone Belt in Ontario. Centerra and the Corporation have agreed to form a partnership to develop the Trans-Canada Property whereby Centerra will contribute up to $300,000,000 in cash to the partnership in accordance with the terms described below, while the Corporation will contribute all property, assets and rights it holds in respect of the Trans-Canada Property

75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013 Key terms of the agreements and the development strategy for Hardrock include: On closing, the Corporation, through a wholly-owned subsidiary, will contributed all property, assets and rights it holds in respect of the Trans-Canada Property to the partnership in consideration for its 50% interest in the partnership and Centerra will make an initial cash contribution to the partnership in the amount of $85,000,000 for its 50% limited partner interest which amount will be distributed to the Corporation on the closing date. Centerra has agreed to make capital contributions to the partnership in the aggregate amount of $185,000,000 half of which is on behalf of the Corporation. A portion of these funds will initially be used to complete a comprehensive technical and economic feasibility study including an updated mineral resource calculation for the Hardrock Project at the Trans-Canada Property. Subject to the satisfaction of certain feasibility and project advancement criteria the remainder of the funds will be used towards the construction and development of the Hardrock Project. The Corporation will not be required to make any contributions to the partnership until Centerra has provided the full amount of the capital contributions, following which cash calls will be satisfied by each of Centerra and the Corporation on a 50/50 basis pursuant to approved annual programs and budgets. The partnership agreement contains customary dilution mechanisms for failures to meet cash calls and certain other events. Centerra has agreed to make an additional contingent capital contribution to the partnership not to exceed $30,000,000 based on the results of the updated mineral resource calculation in respect of the Trans- Canada Property which amount, if any, will be distributed to the Corporation. The partnership will be managed by a corporation (the "Managing Partner"), owned 50/50 by Centerra and the Corporation. Initially the board of directors of the Managing Partner will consist of four directors with two nominees from the respective partners. The board of directors of the Managing Partner will be responsible for, among other things, approving the partnership's annual programs and budgets. On March 9, 2015 Centerra Gold Inc. and the Corporation announced that the 50/50 joint venture partnership was completed and management is currently assessing the impact of the agreement. Assets that will be transferred to the partnership include the Hardrock and Brookbank mineral properties totaling $208,388,898 included in exploration and evaluation assets as well as net assets included in property, plant and equipment totaling $172,289. Property transfer agreement On February 11, 2015, the Corporation announced that it had entered into an agreement to obtain a 100% interest in the past-producing Hasaga Property, located in Red Lake, Ontario, from Goldcorp. In exchange, the Corporation will assign to Goldcorp its 35% participating interest in the East Bay Property and its 100% interest in the PQ-North Property located near Goldcorp's Musselwhite Mine in Ontario. Given the nature of the assets involved in the agreement, there will be no gain or loss recognized on the exchange of properties

76 Cautionary Note Regarding Forward-Looking Statements This annual report contains forward-looking information (within the meaning of applicable Canadian securities laws). Forward-looking information is prospective and by its nature requires the Corporation to make certain assumptions and is subject to inherent risks and uncertainties. There can be no assurance that forward-looking information will prove to be accurate, and readers are cautioned not to place undue reliance on the forward-looking information contained in this report. All statements, other than statements of historical fact, constitute forward-looking information. Generally, but not always, forward-looking information is identifiable by use of the words continue, expect, anticipate, estimate, forecast, believe, intend, schedule, budget, plan or project or the negative or other variations of these words or comparable terminology, or states that certain actions, events or results may, could, should, would, might or will be taken, occur or be achieved. Forward-looking information in this annual report includes, but is not limited to, statements with respect to: future financial and operating performance, strategic plans, future operations, cost estimates, estimation of mineral resources, realization of mineral resources, results of exploration, future work programs, capital expenditures and objectives, timing of exploration and development projects, costs, timing and location of future drilling, timing of geological and/or technical reports, exploration budgets and targets, continuity of a favourable gold market, contractual commitments, environmental and reclamation expenses, continuous availability of required manpower and continuous access to capital markets. In order to give such forward-looking information, the Corporation has made certain assumptions about the Corporation s business, the economy and the mineral exploration industry in general and has also assumed that contracted parties provide goods and services on agreed timeframes, plant and equipment work as anticipated, required regulatory approvals are received, no unusual geological or technical problems occur, no material adverse change in the price of gold occurs and no significant events occur outside of the Corporation s normal course of business. Although the assumptions were considered reasonable by management of the Corporation at the time the forward-looking information is given, there can be no assurance that such assumptions will prove to be accurate. In addition, the following are material factors that could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information in this annual report: the inability of the Corporation to maintain its interest in its mineral projects or to obtain or comply with all required permits and licences, risks normally incidental to exploration and development of mineral properties, uncertainties in the interpretation of drill results, the possibility that future exploration, development or mining results will not be consistent with expectations, uncertainty of mineral resource estimates, joint venture risk, changes in governmental regulation adverse to the Corporation, First Nations consultations, environmental risks, economic uncertainties, the inability of the Corporation to obtain additional financing when and as needed, dependence on a small number of key personnel, competition from other mining businesses, the future price of gold and other metals and commodities, title defects and other related matters. Although the Corporation has attempted to identify material factors that could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information, there may be other factors that could cause results to differ from what is anticipated, estimated or intended. Additional risks and uncertainties not presently known to the Corporation or that the Corporation currently deems immaterial may also impair the Corporation s business operations. All forward-looking information contained in this annual report is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. The Corporation undertakes no obligation to update or revise the forward-looking information contained in this report, whether as a result of new information, future events or otherwise, except as required by applicable laws. 74

77 CORPORATE DIRECTORY HEAD OFFICE Suite 200, 1100 Russell Street Thunder Bay, ON P7B 5N2 Telephone: (807) Fax: (807) Website: INVESTOR RELATIONS Matthew Gollat (888) DIRECTORS Ebe Scherkus (Chairman) John Begeman Ewan S. Downie Henry J. Knowles, Q.C. Claude Lemasson John W. Seaman Michael S. Vitton OFFICERS Ewan S. Downie President & CEO Stephen McGibbon Executive VP Steve Filipovic CFO Shaun Drake Secretary AUDITORS Grant Thornton LLP Chartered Accountants Thunder Bay, Ontario LEGAL ADVISORS Bennett Jones LLP Toronto, Ontario Carrel & Partners LLP Thunder Bay, Ontario TRANSFER AGENT Equity Transfer & Trust Company 200 University Avenue, Suite 400 Toronto, ON M5H 4H1 BANKERS Royal Bank of Canada Toronto, Ontario STOCK LISTINGS PG:TSX P2O:FSX PIRGF:OTO [USA]

78 Russell RussellStreet Street Thunder Bay, Ontario, Thunder Bay, Ontario, Canada, P7B 5N2 Canada, P7B 5N2 We are not standing still We are not standing still t.t.(807) (807) tf.tf.(888) (888) Ewan Downie President CEO Ewanand Downie PremierPresident Gold Mines Limited and CEO Premier Gold Mines Limited PG:TSX PG:TSX