Donner Metals Ltd. · Notice to Reader The accompanying unaudited condensed consolidated interim...

Donner Metals Ltd.

Condensed Consolidated Interim Financial StatementsFor the Six Months Ended August 31, 2011(Unaudited)

Notice to Reader

The accompanying unaudited condensed consolidated interim financial statements of Donner Metals Ltd. (�“the Company�”) havebeen prepared by and are the responsibility of the Company�’s management. The Company�’s independent auditor has notperformed a review of the Company�’s unaudited condensed consolidated interim financial statements as at and for the six monthsended August 31, 2011.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

DONNER METALS LTD.Condensed Consolidated Interim Statements of Financial Position(Stated in Canadian Dollars)(Unaudited)

August 31, February 28,Notes 2011 2011

ASSETS (note 18)Current assetsCash 9,365,113$ 5,022,048$Trade and other receivables 303,046 47,433Tax credits recoverable 3,751,099 960,753Advances for exploration 124,398 126,692Prepaid expenses 62,347 36,599

Total current assets 13,606,003 6,193,525Non current assetsProperty, plant & equipment 5,6 14,423,539 13,894Long term tax credits recoverable 550,577 156,784Investment 4 97,584 370,822

Total non current assets 15,071,700 541,500

TOTAL ASSETS 28,677,703$ 6,735,025$

LIABILITIES AND EQUITYCurrent liabilitiesTrade and other payables 10,569$ 102,350$Flow through share premium 7 233,224 383,362

Total current liabilities 243,793 485,712Non current liabilitiesUnearned revenue 8 17,018,700Decommissioning liabilities 9 294,400

Total non current liabilities 17,313,100EquityCommon shares 10 32,705,250 25,312,092Warrants reserve 10 1,269,554Contributed surplus reserve 8,437,941 6,395,533Available for sale revaluation reserve (314,037) (40,799)Deficit (29,702,750) (26,681,659)

Equity attributable to owners of the Company 11,126,404 6,254,721Non controlling interest (5,594) (5,408)

Total equity 11,120,810 6,249,313

TOTAL LIABILITIES AND EQUITY 28,677,703$ 6,735,025$

Nature and continuance of operations (note 1); Commitments (notes 6 and 8); Subsequent events (note 17)

Approved by the Board of Directors

"Harvey Keats"Director "David Patterson"Director


DONNER METALS LTD.Condensed Consolidated Interim Statements of Loss and Comprehensive Loss(Stated in Canadian Dollars)(Unaudited)

Three months ended August 31, Six months ended August 31,Notes 2011 2010 2011 2010

(note 18) (note 18)ExpensesAdministration & management fees 170,462 126,045 363,255$ 240,294$Consulting fees 51,678Depreciation 1,956 2,599 4,063 5,168Directors fees 9,000 8,938 43,000 17,938Exploration expenditures 6 464,478 1,268,935 664,115 2,345,317Filing and transfer agent fees 10,820 5,386 14,108 9,014Office and miscellaneous 16,881 22,126 37,608 46,049Professional fees (28,706) 7,751 9,362 8,710Promotion 142,596 91,700 315,907 167,795Rent 34,647 22,048 69,294 44,096Share based payments 11 19,830 (12,906) 1,525,072 17,496Travel 41,154 30,558 113,463 50,054

Loss before other items (883,118) (1,573,180) (3,210,925) (2,951,931)

Other itemsInterest income 25,308 5,305 44,624 10,598Finance costs 9 (978) (978)Impairment of property, plant & equipment (4,136) (4,136)Flow through share premium 7 106,613 311,462 150,138 800,381

126,807 316,767 189,648 810,979

Loss for the period (756,311) (1,256,413) (3,021,277) (2,140,952)

Other comprehensive lossAvailable for sale investment:Unrealized loss on fair value, net of tax 4 (97,585) (123,608) (273,238) (370,823)

Total comprehensive loss for the period (853,896)$ (1,380,021)$ (3,294,515)$ (2,511,775)$

Loss attributable to:Owners of the Company (756,213)$ (1,256,180)$ (3,021,091)$ (2,135,565)$Non controlling interest (98) (233) (186) (5,387)

(756,311)$ (1,256,413)$ (3,021,277)$ (2,140,952)$

Total comprehensive loss attributable to:Owners of the Company (853,798)$ (1,379,788)$ (3,294,329)$ (2,506,388)$Non controlling interest (98) (233) (186) (5,387)

(853,896)$ (1,380,021)$ (3,294,515)$ (2,511,775)$

Basic and diluted loss per share (0.01)$ (0.01)$ (0.02)$ (0.02)$

Weighted average number of commonshares outstanding basic and diluted 146,588,924 112,010,954 140,152,400 111,423,260


DONNER METALS LTD.Condensed Consolidated Interim Statement of Changes in Equity(Stated in Canadian Dollars)(Unaudited)

Available for Equity

Contributed sale attributable Non

Warrants Surplus revaluation to owners of controlling

Number Amount Reserve Reserve Reserve Deficit the Company Interest Total Equity

Balance at February 28, 2011 127,214,818 25,312,092$ 1,269,554$ 6,395,533$ (40,799)$ (26,681,659)$ 6,254,721$ (5,408)$ 6,249,313$

Private placements, net of costs 6,428,571 2,145,300 2,145,300 2,145,300

Exercise of warrants 16,615,935 5,247,858 (752,218) 4,495,640 4,495,640

Expiry of warrants (517,336) 517,336

Share based payments 1,525,072 1,525,072 1,525,072

Loss for the period (3,021,091) (3,021,091) (186) (3,021,277)

Unrealized loss on available for

sale investment (273,238) (273,238) (273,238)

Balance at August 31, 2011 150,259,324 32,705,250$ $ 8,437,941$ (314,037)$ (29,702,750)$ 11,126,404$ (5,594)$ 11,120,810$

Available for Equity

Contributed sale attributable Non

Warrants Surplus revaluation to owners of controlling

Number Amount Reserve Reserve Reserve Deficit the Company Interest Total Equity

Balance at March 1, 2010 109,796,258 20,604,572$ 1,931,198$ 5,658,116$ 948,061$ (21,798,045)$ 7,343,902$ $ 7,343,902$

Exercise of stock options 730,000 188,710 (57,310) 131,400 131,400$

Exercise of warrants 1,733,976 476,426 (67,932) 408,494 408,494$

Expiry of warrants (286,805) 286,805 $

Share based payments 17,496 17,496 17,496$

Loss for the period (2,135,565) (2,135,565) (5,387) (2,140,952)$

Unrealized loss on available for

sale investment (370,823) (370,823) (370,823)$

Balance at August 31, 2010 112,260,234 21,269,708$ 1,576,461$ 5,905,107$ 577,238$ (23,933,610)$ 5,394,904$ (5,387)$ 5,389,517$

At August 31, 2011, the total available for sale revaluation reserve and deficit was $30,016,787 (2010 $23,356,372).

Common Shares

Common Shares


DONNER METALS LTD.Condensed Consolidated Interim Statements of Cash Flows(Stated in Canadian Dollars)(Unaudited)

Six months ended August 31,Notes 2011 2010

Operating activitiesLoss for the period (3,021,277)$ (2,140,952)$Adjustments for:Depreciation 4,063 5,168Share based payments 1,525,072 17,496Interest income (44,624) (10,598)Finance costs 978Impairment of property, plant & equipment 4,136Flow through share premium (150,138) (800,381)

Changes in non cash working capital items:Trade and other receivables (255,613) (19,233)Tax credits recoverable (2,790,346) (741,452)Advances for exploration 2,294 (338,106)Prepaid expenses (25,748) (10,540)Long term tax credits recoverable (393,793) (165,237)Trade and other payables (91,781) (100,799)

Cash used in operating activities (5,236,777) (4,304,634)

Financing activitiesUnearned revenue 17,018,700Common shares issued for cash, net of issue costs 6,640,940 539,894

Cash generated by financing activities 23,659,640 539,894

Investing activitiesInterest received 44,624 10,598Purchase of property, plant & equipment (14,124,422) (10,153)

Cash used in investing activities (14,079,798) 445

Change in cash during the period 4,343,065 (3,764,295)

Cash, beginning of period 5,022,048 5,733,400

Cash, end of period 9,365,113$ 1,969,105$

Supplemental cash flow information 15

DONNER METALS LTD.Notes to the Condensed Consolidated Interim Financial StatementsAugust 31, 2011(Stated in Canadian Dollars)(Unaudited)

1. Nature and Continuance of Operations

Donner Metals Ltd. (the �“Company�”) was incorporated on June 28, 2005, pursuant to the Business Corporations Act of BritishColumbia. The Company�’s shares are listed on the TSX Venture Exchange. The Company is engaged in the acquisition, explorationand development of zinc, copper and nickel properties in Quebec and Newfoundland and Labrador, Canada and is considered to bein the exploration and development stage as it has not placed any of its mineral properties into production. The Company operatesin one segment, being the acquisition, exploration and development of mineral properties.

The head office, principal address and registered and records office of the Company are located at Suite 2150 �– 885 West GeorgiaStreet, Vancouver, BC, V6C 3E1.

The Company is in the process of exploring its mineral properties in the Matagami Camp, Quebec and the South Voisey Bay areaof Labrador. The Company has received a positive feasibility study on the Bracemac McLeod deposits at the Matagami Camp whichindicates that these deposits contain ore reserves that are likely economically recoverable. Based on the positive feasibility study,the construction of the Bracemac McLeod mine is underway (note 5). The measurement of certain assets and liabilities isdependent on future events, therefore the preparation of these condensed consolidated interim financial statements requiresthe use of estimates, which may vary from actual results. The success of the Company�’s exploration and development of itsmineral interests is influenced by significant financial risks, legal and political risks, commodity prices, and the ability of theCompany to discover economically recoverable reserves and to bring such reserves into future profitable production.

As of August 31, 2011, the Company has no source of operating cash flows, has not yet achieved profitable operations, has adeficit of $29,702,750 (February 28, 2011 $26,681,659) and expects to incur further losses in the development of its business,all of which cast substantial doubt about the Company�’s ability to continue as a going concern. The Company�’s ability tocontinue as a going concern is dependent upon the Company obtaining additional financing on a timely basis, and achievingsufficient positive cash flows to cover obligations and expenses. Management is actively seeking investment capital and is ofthe opinion that additional financing will be available to continue its planned activities in the normal course of its operations.These condensed consolidated interim financial statements do not give effect to any adjustments to the amounts andclassifications of assets and liabilities, which might be necessary should the Company be unable to continue its operations as agoing concern. Such adjustments could be material.

The condensed consolidated interim financial statements are presented in Canadian dollars and all values are rounded to thenearest dollar except where otherwise indicated.

2. Basis of Preparation

a) Statement of compliance

These condensed consolidated interim financial statements are unaudited and have been prepared in accordance with IAS34, Interim Financial Reporting (�“IAS 34�”) using accounting policies consistent with the International Financial ReportingStandards (�“IFRS�”) issued by the International Accounting Standards Board (�“IASB�”) and Interpretations of the InternationalFinancial Reporting Interpretations Committee (�“IFRIC�”). These condensed consolidated interim financial statements havebeen prepared using the accounting policies the Company expects to adopt in its consolidated financial statements for theyear ending February 29, 2012.

These are the Company�’s first IFRS interim consolidated financial statements for part of the period covered by theCompany�’s first IFRS consolidated annual financial statements for the year ending February 29, 2012, with a transition dateof March 1, 2010. Previously, the Company prepared its consolidated annual and consolidated interim financial statementsin accordance with Canadian generally accepted accounting principles (�“GAAP�”). The rules of first time adoption are set outin IFRS 1 �‘First�–time Adoption of International Financial Reporting Standards�’. In preparing the Company�’s first IFRSfinancial statements, these transition rules have been applied to the amounts previously reported under GAAP. Thesecondensed consolidated interim financial statements should be read in conjunction with the Company�’s 2011 annual GAAPfinancial statements, the condensed consolidated interim financial statements as at and for the three months ended May31, 2011, and in consideration of the disclosure in note 18.


2. Basis of Preparation (cont�’d)

The Company has elected to exceed the minimum requirements under IAS 34 in order to present the Company�’saccounting policies in accordance with IFRS and the additional disclosures required under IFRS, which also highlight thechanges from the Company�’s 2011 annual consolidated financial statements prepared in accordance with GAAP. However,these condensed consolidated interim financial statements do not include all the necessary annual disclosures inaccordance with IFRS. In 2012 and beyond, the Company may not provide the same amount of disclosure in the Company�’scondensed consolidated interim financial statements under IFRS as the reader will be able to rely on the annualconsolidated financial statements which will be prepared in accordance with IFRS.

b) Basis of presentation

The consolidated interim financial statements have been prepared on the historical cost basis except for certain financialinstruments, which are measured at fair value. The accounting policies in note 3 of the condensed consolidated interimfinancial statements for the three months ended May 31, 2011 have been applied in preparing these condensedconsolidated interim financial statements.

These condensed consolidated interim financial statements include the accounts of the Company and its 76.69% ownedsubsidiary, SVB Nickel Company Ltd. (�“SVBN�”).

c) Adoption of new and revised standards and interpretations

The IASB issued a number of new and revised International Accounting Standards, International Financial ReportingStandards, amendments and related interpretations which are effective for the Company�’s financial year beginning on orafter March 1, 2011. For the purpose of preparing and presenting the financial information for the relevant periods, theCompany has consistently adopted all these new standards for the relevant reporting periods.

At the date of authorization of these financial statements, the IASB and IFRIC has issued the following new and revisedStandards and Interpretations which are not yet effective for the relevant reporting periods:

IFRS 7 (Amendment) Enhanced disclosure on transfer of financial assets1

IFRS 9 New financial instruments standard that replaces IAS 39 for classification andmeasurement of financial assets5

IFRS 10 New standard to establish principles for the presentation of consolidatedfinancial statements when an entity controls multiple entities4

IFRS 11 New standard to account for the rights and obligations in accordance with ajoint agreement4

IFRS 12 New standard for the disclosure of interests in other entities not within thescope of IFRS 9/IAS 394

IFRS 13 New standard on the measurement and disclosure of fair value4

IAS 1 (Amendment) Presentation of other comprehensive income3

IAS 12 (Amendment) Recovery of underlying assets measured using a fair value model2

IAS 27 (Amendment) New standard issued that supersedes IAS 27 to prescribe the accounting forseparate financial statements4

IAS 28 (Amendment) New standard issued that supersedes IAS 28 (2003) to prescribe the accountingfor investments in associates and joint ventures4

1Effective for annual periods beginning on or after July 1, 20112Effective for annual periods beginning on or after January 1, 20123Effective for annual periods beginning on or after July 1, 20124Effective for annual periods beginning on or after January 1, 20135Effective for annual periods beginning on or after January 1, 2013, current proposal to delay until 2015


2. Basis of Preparation (cont�’d)

The Company has not early adopted these standards, amendments and interpretations. The Company is currently assessingthe application of these standards, amendments and interpretations on the results and financial position of the Company.

3. Summary of Significant Accounting Policies

The accounting policies in note 3 of the condensed consolidated interim financial statements for the three months ended May31, 2011 have been applied in preparing these condensed consolidated interim financial statements except as described belowconcerning an updated property, plant and equipment accounting policy which discusses mine development costs and theunits of production depreciation method, accounting for joint ventures, and updated significant accounting judgments andestimates concerning provisions.

a) Property, plant and equipment (�“PPE�”)

PPE are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of PPEconsists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessaryfor its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site onwhich it is located.

Depreciation is provided at rates calculated to write off the cost of PPE, less their estimated residual value, using thestraight line method or unit of production method over the following expected useful lives:

Computer software 2 yearsComputer hardware 3 yearsOffice furniture and equipment 6 yearsMine development costs based on resources on a unit of production basis

Mine development costs are carried at cost less any recognized impairment loss. Depreciation of these assets begins whencommercial production commences.

An item of PPE is derecognized upon disposal, when held for sale or when no future economic benefits are expected toarise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the differencebetween the net disposal proceeds and the carrying amount of the asset, is recognized in the consolidated statement ofloss and comprehensive loss.

The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being usedfor PPE and any changes arising from the assessment are applied by the Company prospectively.

b) Joint ventures

A joint venture is a contractual arrangement between two or more parties that establishes joint control over the jointventure. There are three broad types of joint ventures: 1) jointly controlled operations; 2) jointly controlled assets; and 3)jointly controlled entities. The Company�’s involvement in the various mineral properties described in note 6 are examplesof a jointly controlled assets whereby the Company has joint control and ownership of the assets.

In respect of its interests in these jointly controlled assets, the Company recognizes in its financial statements: 1) its shareof the jointly controlled assets, classified according to the nature of the assets; 2) any liabilities that it has incurred; 3) itsshare of any liabilities incurred jointly with the other venturers in relation to the joint venture; 4) any income from the saleor use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture;and 5) any expenses that it has incurred in respect of its interest in the joint venture.


3. Summary of Significant Accounting Policies (cont�’d)

c) Significant accounting judgments and estimates

The preparation of these financial statements requires management to make judgments and estimates and formassumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reportedamounts of expenses during the reporting period. On an ongoing basis, management evaluates its judgements andestimates in relation to assets, liabilities and expenses. Management uses historical experience and various other factors itbelieves to be reasonable under the given circumstances as the basis for its judgements and estimates. Actual outcomesmay differ from these estimates under different assumptions and conditions.

The most significant estimates include: recoverability of tax credits, valuation and depreciation of property, plant andequipment, valuation of deferred income tax amounts, valuation of share based payments, impairment testing, and theprovision for decommissioning costs.

Management must also exercise significant judgments in order to arrive at stated amounts. Depreciation of PPE isdetermined based on estimates of useful lives which require significant judgment. The assessment of impairment of PPEdepends on estimates of recoverable amounts, which takes into account factors requiring significant judgment includingeconomic and market conditions and the useful lives of assets. The determination of commissioning date and provision fordecommissioning costs are dependent on various judgments, including the nature, estimate of future cost and timing of thework to be completed, which may change based on changes in future costs and environmental laws and regulations.

4. Investment

August 31, February 28,2011 2011

Cost 411,622$ 411,622$Cumulative gain (loss) in other comprehensive income (314,037) (40,800)

Carrying/market value 97,585$ 370,822$

As at August 31, 2011, the Company owns 650,573 common shares, which represents 8.6% (February 28, 2011 �– 8.6%) of theoutstanding common shares, of Knight Metals Ltd. (�“Knight�”). On May 25, 2011, Knight�’s shares were consolidated on a 19 old for 1new and its name changed from Knight Resources Ltd. to Knight Metals Ltd. The investment has been classified as an available forsale investment, with changes in fair value being recorded in other comprehensive income.

The market value was determined using the closing quoted price of Knight�’s stock on the TSX Venture Exchange on the applicabledates.


5. Property, Plant and Equipment

Computer & Mineoffice development

equipment Costs TotalCostAs at February 28, 2011 114,298$ $ 114,298$Additions 11,857 14,405,987 14,417,844Impairment (6,204) (6,204)

As at August 31, 2011 119,951$ 14,405,987$ 14,525,938$

Accumulated depreciationAs at February 28, 2011 100,404$ $ 100,404$Depreciation 4,063 4,063Impairment (2,068) (2,068)

As at August 31, 2011 102,399$ $ 102,399$

Carrying valueAs at February 28, 2011 13,894$ $ 13,894$

As at August 31, 2011 17,552$ 14,405,987$ 14,423,539$

The Company has pledged its interest in its share of the revenues from the Bracemac McLeod mine to Sandstorm Metals & EnergyLtd. as security for liabilities pursuant to the SandstormMetals Purchase Agreement (note 8).

The Company has pledged its interest in plant and equipment from the Bracemac McLeod mine to Xstrata Canada Corporation assecurity for liabilities to Xstrata Canada Corporation.

6. Mineral Properties

The Company�’s mineral properties are comprised of an option and joint venture agreement and a development and operatingagreement in the Matagami Mining Camp of Quebec, Canada and wholly owned mineral claims and interests in joint ventureagreements in South Voisey Bay, Labrador, Canada. Although the Company holds some mineral properties through joint ventureagreements, none of the Company�’s operations are carried on through joint venture entities.

For properties that have not reached technical feasibility, exploration and evaluation expenditures are charged to operations asthey are incurred. The Company�’s exploration and evaluation expenditures incurred during the three and six months ended August31, 2011 and 2010 are as follows:

Three months ended August 31, Six months ended August 31,2011 2010 2011 2010

MatagamiExploration and evaluation expenditures 675,465$ 1,413,488$ 970,208$ 3,219,897$Refundable tax credits (210,987) (144,721) (306,093) (906,689)

464,478 1,268,767 664,115 2,313,208

South Voisey BayExploration and evaluation expenditures 168 32,109

464,478$ 1,268,935$ 664,115$ 2,345,317$


6. Mineral Properties (cont�’d)

For properties that have reached technical feasibility, development, exploration and evaluation expenditures are capitalized asthey are incurred. The Company�’s Bracemac McLeod property at Matagami has reached technical feasibility and development,exploration and evaluation expenditures incurred during the six months ended August 31, 2011 are as follows:

BracemacMcLeod

As at February 28, 2011 $Exploration and evaluation expenditures 56,003Mine development costs 17,228,030Refundable tax credits (2,878,046)

As at August 31, 2011 14,405,987$

Matagami Property

The Company is party to an Option and Joint Venture Agreement (�“OJVA�”) and Development and Operating Agreement (�“DOA�”)with Xstrata Canada Corporation �– Xstrata Zinc Canada Division (�“Xstrata�”) for the joint exploration, development and miningon the Matagami Project of Quebec.

In April 2011, pursuant to the OJVA, the Company completed its option to earn a 50% participating interest in the joint ventureareas that make up the Matagami Project by:

1) incurring a total of $20 million of expenditures, exclusive of management fees, on exploration and related work byMay 31, 2011;

2) incurring an additional expenditure of up to $5 million, exclusive of management fees, towards establishing aninferred resource on the Bracemac McLeod discovery; and

3) issuing to Xstrata 1 million common shares of its own stock, which were issued in September 2006.

Under the OJVA, Xstrata has a separate right in each of the joint venture areas to �“bump up�” its interest by an additional 15%by completing a bankable feasibility study or incurring a maximum of $20 million towards a bankable feasibility study. ShouldXstrata exercise its right in a joint venture, the interests in that joint venture will become 65% Xstrata and 35% the Company.Xstrata has provided a feasibility study on the Bracemac McLeod deposit which has resulted in Xstrata completing its bump upoption in the South Flank and Bracemac McLeod joint venture areas.

The current joint venture areas are:

Joint Venture Area Xstrata The Company

South Flank JV 65% 35%Bracemac McLeod JV 65% 35%North Flank JV 50% 50%Central Area JV 50% 50%West Camp JV 50% 50%East JV 50% 50%

Current Interests


6. Mineral Properties (cont�’d)

The joint venture areas are comprised of existing mineral title and any ground acquired within the area of interest until May 31,2013. The Matagami Property is roughly centered on the town of Matagami in central Quebec and comprises an area of mutualinterest of 4,737 km2 which includes 2,986 mineral claims covering 644 square kilometres.

The Bracemac McLeod joint venture area, and the development and future production from the Bracemac McLeod mine, isgoverned by the DOA. Under the DOA, Xstrata will process the Company�’s share of ores produced from the Bracemac McLeodMine and purchase, net of benchmark smelting and refining charges, the Company�’s share of the concentrates.

Under the OJVA and the DOA, Xstrata, has the right to be operator of any mining operations or exploration programs providedit holds at least a 50% interest in the governing joint venture. Xstrata has a life of mine right to elect to process and treat theCompany�’s share of any ore/concentrates produced from the Matagami property and to market the Company�’s share of anymetals produced from the property.

In order to maintain its interest in each respective joint venture, the Company must finance its relative share of the programsapproved by the joint venture management committees. Should the Company not meet its obligations in the South Flank, NorthFlank, Central Area, West Camp and East joint venture areas, the Company will suffer dilution of its interest and should itsinterest reach 10%, the interest will be converted to a 2% net smelter return royalty, of which a 1% net smelter return can bepurchased by Xstrata for $1 million. Failure to meet obligations on the Bracemac McLeod joint venture under the DOA, willresult in direct conversion of the Company�’s interest to a 2% net smelter return royalty, of which a 1% net smelter return can bepurchased by Xstrata for $1 million.

The feasibility study on the Bracemac McLeod mine contemplates capital costs of approximately USD$164 million. TheCompany�’s share (35%) of these costs is approximately USD$57 million (including pre production and sustaining capital).Construction of the Bracemac McLeod mine began in April 2010. The Company anticipates spending approximately $4.0 millionfrom September to December 2011 and approximately $20.0 million during calendar 2012 to achieve initial production in January2013.

South Voisey Bay Properties

The Company�’s South Voisey Bay properties (the �“Combined Property�”) are comprised of the following:

i) Two licences covering approximately 46 km2 held 100% by SVBN with the exception of a 37.25 km2 licence held 75% bySVBN (the �“SVBN Property�”);

ii) One licence covering approximately 15 km2 owned 52.38% by the Company and 47.62% by Northern Abitibi MiningCorp. (the �“Donner/Northern Abitibi Property�”); and

iii) One licence covering approximately 35.5 km² and owned 51.68% by the Company and 48.32% by CommanderResources Ltd. (the �“Donner/Commander Property�”).

Teck Resources Limited (�“Teck�”) has a right to earn 50% of the Company�’s interest in any deposits discovered and developed onthe Combined Property. Teck can earn this interest by funding the Company�’s share of feasibility costs and arranging theCompany�’s share of production financing.

As at August 31, 2011, the Company has an outstanding share issuance commitment relating to the South Voisey Bay Propertieswhereby the Company must issue 25,000 shares upon incurring $1 million in exploration on the Thistle II claims which are nowincluded in the property held by SVBN. The Company has not yet triggered this commitment.

There are Net Smelter Royalty (�‘NSR�’) agreements on certain South Voisey Bay mineral licenses ranging up to 3%.


7. Flow Through Share Premium

In December 2010 the Company issued 8,281,250 flow through common shares at a price of $0.32 per share for gross proceedstotalling $2,650,000. For income tax purposes, the subscription funds of $2,650,000 will be applied towards carrying outexploration activities and the expenditures will be renounced for tax purposes in favour of the subscriber. Accordingly, theCompany will not have available deductions from taxable income in respect of such expenditures. As a result of the issuance ofthese flow through shares during December 2010, the Company is committed to incur $2,650,000 in qualifying CanadianExploration Expenditures on or before December 31, 2011.

The Company has recognized a liability based on the premium received on the flow through shares compared to the Company�’sclosing share price on the date of issuance for $484,375. The liability is reversed as the qualifying expenditures are incurred by theCompany. For the six months ended August 31, 2011, the Company has satisfied approximately $1,370,000 of its $2,650,000commitment. As a result, the liability has been reduced by $150,138.

During the year ended February 28, 2010, the Company issued 25,614,118 flow through common shares and units at prices rangingfrom $0.19 to $0.475 per share/unit for gross proceeds of $6,707,260. The Company has recognized a liability based on thepremium received on the flow through shares and units compared to the Company�’s closing share price on the date of issuance for$1,283,854. The liability is reversed as the qualifying expenditures are incurred by the Company. As at August 31, 2010, the liabilityhad been reduced to $nil.

8. Unearned Revenue

On July 12, 2011, the Company and Sandstorm Metals & Energy Ltd. (TSXV SND) (�“Sandstorm�”) signed a Metal PurchaseAgreement on an area covering the Bracemac McLeod Mine and surrounding area. The limit of the agreement is defined by a circlewith a radius of 3.2 kilometres, centered on the Bracemac McLeod deposit. This region covers a portion of the Bracemac McLeodjoint venture area and a portion of the South Flank joint venture area.

Under the terms of the Metal Purchase Agreement, the Company received an upfront purchase deposit from Sandstorm in theamount of US$17.75 million and will receive a second purchase deposit of US$5 million, subject to the Company raising anadditional $10,000,000, on or before June 30, 2012. In addition, Sandstorm subscribed for 6,428,571 common shares of theCompany at a deemed price of USD$0.35 per share, for gross proceeds of USD$2,250,000 (note 10).

The Metal Purchase Agreement provides for the sale of metal by the Company to Sandstorm equal to 17.5% of the copper andprecious metals (gold and silver) from the Bracemac McLeod mine. The Company will receive US$0.80 per pound of deliveredcopper if the spot price of copper per pound as quoted on the London Metal Exchange is above US$2.75 per pound, otherwise, thelesser of US$0.55 and the prevailing spot price of copper per pound. Once Sandstorm has purchased 14.8 million pounds of copper,the Company will receive US$1.05 per pound of delivered copper, if the spot price of copper per pound is above US$2.75 perpound, otherwise, the lesser of US$0.80 and the prevailing spot price of copper per pound. The Company will receive for gold orgold equivalent ounces the lesser of US$350 per ounce and the prevailing spot price for gold per ounce as quoted by the LondonBullion Market Association. The Company has the option until December 31, 2013 to purchase back from Sandstorm half of themetal to be sold to Sandstorm for US$17.5 million.

Pursuant to the Metal Purchase Agreement, the Company has guaranteed to Sandstorm that Sandstorm will receive minimum cashflow from the purchase of copper and precious metals of (i) US$6.5 million in calendar 2013, (ii) US$6.5 million in calendar 2014, (iii)US$7.0 million in calendar 2015, and (iv) US$5.0 million in calendar 2016.

Pursuant to the Metal Purchase Agreement, the Company has also agreed to issue to Sandstorm US $1.4 million worth of commonshares on the date of the second purchase deposit.

Sandstorm has no other rights in the remainder of the Matagami Project. The Company has pledged its interest in its share of therevenues from the Bracemac McLeod mine to Sandstorm as security for liabilities pursuant to the Metals Purchase Agreement(note 5).


9. Decommissioning Liability

The Company�’s provision for closure and reclamation costs consists of costs accrued based on the current best estimate of mineclosure and reclamation activities that will be required at the Bracemac McLeod mine upon completion of mining activity.Significant closure activities include land rehabilitation, demolition of buildings and mine facilities and other costs.

The Company has estimated its share of the total undiscounted value of decommissioning liability to be $303,975 as at August31, 2011. These payments are expected to be made in 2016. The Company used a risk free interest rate of 2.46% and aninflation rate of 1.8% to calculate the present value of the decommissioning liability.

As at February 28, 2011 $New estimated cash flows 293,422Finance costs 978

As at August 31, 2011 294,400$

10. Common Shares andWarrants

a) Authorized:

An unlimited number of common shares without par value.

b) Issued:

During the six months ended August 31, 2011, the Company completed a private placement with Sandstorm wherebySandstorm subscribed for 6,428,571 common shares of the Company at a deemed price of $0.34 (USD$0.35) per share, forgross proceeds of $2,157,300 (USD$2,250,000). The Company incurred fees and costs of $12,000.

c) Warrants:

The changes in warrants issued during the six months ended August 31, 2011 and the year ended February 28, 2011 are asfollows:

Weighted WeightedNumber of average Number of averagewarrants exercise price warrants exercise price

Balance, beginning of period 27,690,181 0.29$ 40,873,251 0.32$Exercised (16,615,935) 0.27$ (8,207,310) 0.24$Expired (11,074,246) 0.32$ (4,975,760) 0.38$

Balance, end of period $ 27,690,181 0.29$

August 31, 2011Six months ended Year ended

February 28, 2011

11. Share based Payments

a) Stock option plan

A stock option plan (the �“Plan�”) was adopted by the Company and approved by shareholders in 2005. Under the Plan, theCompany may grant options to directors, officers, employees, dependent contractors or consultants. The number of optionsoutstanding at any time may not be more than 10% of the number of common shares issued and outstanding. The exerciseprice associated with each grant of options is determined by the Company and is subject to the policies of the TSX VentureExchange. The maximum term of each option is 5 years. The options vest on a basis as determined by the directors or acommittee thereof at the time of grant.


11. Share based Payments (cont�’d)

During the three months ended May 31, 2011, the Company granted 8,775,000 (2010 Nil) stock options to officers,employees and directors at an exercise price of $0.30 with an expiry date of March 3, 2014. The Company recognized$1,525,072 for share based payments.

During the six months ended August 31, 2010, the Company did not grant any stock options, however, the Companyextended the expiry date of 530,000 stock options. The Company recognized $17,496 for share based payments.

The fair value of stock options granted is estimated using the Black Scholes Option Pricing Model with the followingassumptions:

Six months ended August 31,2011 2010

Weighted average fair value at grant date $0.17 $0.02Average risk free interest rate 2.16% 0.56%Expected life 3 years 139 daysExpected volatility 89% 68%Expected dividend yield 0% 0%Forfeiture rate 1% 1%

The expected volatility assumption is based on the historical volatility of the Company�’s common share price on the TSXVenture Exchange. The risk free interest rate is based on yield curves on the Canadian government zero coupon bonds orCanadian government treasury bills with a remaining term equal to the stock options�’ expected life.

b) Stock options

The changes in stock options issued during the six months ended August 31, 2011 and the year ended February 28, 2011are as follows:

Weighted WeightedNumber of average Number of average

options exercise price options exercise price

Balance, beginning of period 3,945,000 0.27$ 10,974,950 0.29$Granted 8,775,000 0.30$ 3,695,000 0.20$Exercised $ (930,000) 0.30$Forfeited or expired (450,000) 0.18$ (9,794,950) 0.28$

Balance, end of period 12,270,000 0.29$ 3,945,000 0.27$

August 31, 2011Six months ended Year ended

February 28, 2011

The following table summarizes information about stock options outstanding and exercisable at August 31, 2011:


11. Share based Payments (cont�’d)

Weighted Weightedaverage average

Exercise Number of remaining Number of remainingprice options life (years) options life (years)

0.25$ 750,000 0.001 662,500 0.0010.28$ 400,000 0.04 400,000 0.04

0.285$ 2,345,000 0.47 2,195,000 0.470.30$ 8,775,000 1.79 8,325,000 1.79

12,270,000 2.30 11,582,500 2.30

Options outstanding Options exercisable

12. Related Party Transactions

Balances and transactions between the Company and its subsidiary have been eliminated on consolidation and are notdisclosed in this note. The following is a summary of the related party transactions that occurred during the three monthsended August 31, 2011 and 2010.

a) Trading transactions

The Company incurred the following fees and expenses in the normal course of operations in connection with companiesowned by key management and directors.

August 31, August 31,2011 2010

Management fees 246,755$ 158,207$Technical geological services 103,420 50,863Directors fees 43,000 17,938Rent 69,294 44,096

462,469$ 271,104$

i) incurred $64,780 (2010 $44,587) for management fees to a company controlled by the CEO, incurred $132,000 (2010$67,000) for management fees to a company controlled by the CFO, incurred $43,750 (2010 $46,620) for managementfees to a company controlled by the Vice President of Exploration, and $6,225 (2010 $nil) for management fees to theVice President of Engineering;

ii) incurred $50,020 (2010 $32,287) for technical geological services to a company controlled by the CEO, and incurred$53,400 (2010 $18,575) for technical geological services to a company controlled by the Vice President of Exploration;

iii) incurred $43,000 (2010 $17,938) for directors fees to three separate companies controlled by three separate nonmanagement directors; and

iv) incurred $69,294 (2010 $44,096) for rent to a company with a common director;

Trade and other receivables include $684 (February 28, 2011 $362) owing from related parties and trade and other payablesinclude $nil (February 28, 2011 $6,923) owing to related parties. Amounts due to or from related parties are unsecured, noninterest bearing and are due on demand.


12. Related Party Transactions (cont�’d)

b) Compensation of key management personnel

The remuneration of directors and other members of key management personnel during the three months ended August 31,2011 and 2010 were as follows:

August 31, August 31,2011 2010

Short term employee benefits 393,175$ 227,008$Share based payments 1,412,937

1,806,112$ 227,008$

i) Short term employee benefits include management fees, technical geological services and directors fees disclosed in note12a.

ii) Share based payments are the fair value of options granted to key management personnel.

iii) Key management personnel were not paid post employment benefits, termination benefits, or other long term benefitsduring the six months ended August 31, 2011 and 2010.

13. Financial Instruments

As at August 31, 2011, the Company�’s financial instruments are cash, trade and other receivables, tax credits recoverable,investment, and trade and other payables. The amounts reflected in the balance sheet are carrying amounts and approximatetheir fair values due to their short term nature. These financial instruments are classified as follows:

Cash �– loans and receivablesTrade and other receivables �– loans and receivablesTax credits recoverable �– loans and receivablesInvestment �– available for saleTrade and other payables �– other financial liabilities

Based on these inputs, the evaluation of our investment is classified as Level 1 in the fair value hierarchy.

a) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing todischarge an obligation. The Company�’s cash, trade and other receivables and tax credits recoverable are exposed to creditrisk. Management believes the credit risk on cash is small because the counterparties are highly rated financial institutionsand the credit risk on trade and other receivables and on tax credits recoverable are small because the counterparties arefederal and provincial governments.

The aging of trade and other receivables and tax credits recoverable are as follows:


13. Financial Instruments (cont�’d)

August 31, February 28,2011 2011

Trade and other receivables0 to 60 days 303,046$ 47,433$61 to 120 days

303,046$ 47,433$

Tax credits recoverable0 to 365 days 4,294,636$ 1,110,497$> 365 days 7,040 7,040

4,301,676$ 1,117,537$

b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates. The Company is not exposed to significant interest rate risk due to the short term tomaturity of its financial instruments. The Company had no interest rate swaps or financial contracts in place as at or duringthe six months ended August 31, 2011.

c) Currency risk

Currency risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes inforeign exchange rates. The Company�’s exposure to currency risk is negligible because the Company�’s operations are in onecountry, being Canada. The dollar amount and number of transactions conducted in currencies other than the Canadiandollar are not significant.

d) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.The Company�’s trade and other payables are all current and due within 90 days of the balance sheet date. The Companyensures that it has sufficient capital to meet short term financial obligations after taking into account its explorationobligations and cash on hand. The Company is seeking financing in order to continue exploration of the Matagami Project,meet anticipated general and administrative expenditures, and fund its share of the Bracemac McLeod mine development.

The following table details the Company�’s expected remaining contractual maturities for its financial liabilities. The table isbased on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required tosatisfy the liabilities.

Less than30 days 31 to 90 days Total

At August 31, 2011Trade and other payables 10,362$ 207$ 10,569$

At February 28, 2011Trade and other payables 99,698$ 2,652$ 102,350$


14. Capital Management

The Company includes as capital its common shares, warrants reserve and contributed surplus reserve. Total capital as atAugust 31, 2011 was $41,143,191 (February 28, 2011 $32,977,179). The Company has no externally imposed capitalrequirements.

The Company�’s objectives are to safeguard the Company�’s ability to continue as a going concern in order to pursue thedevelopment of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at anacceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the riskcharacteristics of the underlying assets. As the Company does not have cash flow from operations, to maintain or adjust thecapital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the amountof cash and cash equivalents.

In order to maximize ongoing development efforts, the Company does not pay out dividends. The Company�’s investment policyis to invest its cash in highly liquid short term interest bearing investments, selected with regards to the expected timing ofexpenditures from continuing operations.

As discussed in note 6, significant additional mine development expenditures will be required.

15. Supplemental Cash Flow Information

Six months ended August 31,2011 2010

Non cash financing activities:Fair value of warrants transferred to commonshares on exercise of warrants 752,218$ 67,932$

Fair value of options transferred to commonshares on exercise of options $ 57,310$

16. Segmented information

At August 31, 2011 the Company has one reportable operating segment, being acquisition, exploration and development ofmineral properties in Canada. All of the Company�’s assets are located in Canada.

An operating segment is defined as a component of the Company:

that engages in business activities from which it may earn revenues and incur expenses; whose operating results are reviewed regularly by the entity�’s chief operating decision maker; and for which discrete financial information is available.

17. Subsequent Events

a) Subsequent to August 31, 2011, 750,000 stock options with an exercise price of $0.25 expired unexercised and theCompany granted 750,000 new stock options with an exercise price of $0.25 and a term of one year.

b) Subsequent to August 31, 2011, the Company entered into an agreement with Haywood Securities Inc. (�“Haywood�”) underwhich Haywood has agreed to act as agent for a private placement, on a guaranteed agency basis, of 9,090,910 flowthrough common shares of the Company at a price of $0.22 per share, for gross proceeds of $2,000,000. The Company alsointends to complete a concurrent non brokered private placement of 2,000,000 flow through common shares at a price of$0.22 per share for gross proceeds of $440,000. The aggregate proceeds from the sale of the flow through shares will be


used for the advancement of the Matagami Project in Quebec. The private placements have not closed as of the date ofthis report.

18. First Time Adoption of IFRS

The Company has adopted IFRS on March 1, 2011 with a transition date of March 1, 2010 (the �“Transition Date�”). Theaccounting policies in note 3 of the condensed consolidated interim financial statements for the three months ended May 31,2011 and the additional accounting policies described in note 3 have been applied in preparing the condensed consolidatedinterim financial statements for the six months ended August 31, 2011. In note 15 of the May 31, 2011 condensed consolidatedinterim financial statements, the Company reported the impact of the transition to IFRS at March 1, 2010 and February 28,2011. There were no changes to the reconciliations as previously reported.

Under IFRS 1 �‘First�–time Adoption of International Financial Reporting Standards�’(�“IFRS 1�”), the IFRS are applied retrospectivelyat the Transition Date with all adjustments to assets and liabilities as stated under Canadian GAAP taken to retained earnings(deficit) unless certain optional exemptions are applied. The Company has elected to apply the following IFRS 1 optionalexemptions at the Transition Date:

a) Business combinations

IFRS 1 indicates that a first time adopter may elect not to apply IFRS 3 �‘Business Combinations�’ (�“IFRS 3�”) retrospectively tobusiness combinations that occurred before the Transition Date. The Company has used this election and has applied IFRS 3prospectively from the Transition Date. Accordingly, there is no adjustment required to the Transition Date statement offinancial position. As a result of this election, the Company�’s accounting for its non controlling interests which existed priorto the Transition Date, per the requirement of IAS 27 �‘Consolidated and Separate Financial Statements�’, have been appliedprospectively from the date of the transition of IFRS per the required exception in IFRS 1.

b) Consolidated and separate financial statements

In accordance with IFRS 1, if a company elects to apply IFRS 3 retrospectively, IAS 27 �‘Consolidated and Separate FinancialStatements�’ (�“IAS 27�”) must also be applied retrospectively. As the Company elected to apply IFRS 3 prospectively, theCompany has also elected to apply IAS 27 prospectively.

c) Share based payments

IFRS 1 encourages, but does not require, first time adopters to apply IFRS 2 �‘Share based Payments�’ (�“IFRS 2�”) to equityinstruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent toNovember 7, 2002 and vested before the later of the Transition Date and January 1, 2005. The Company has elected to notapply IFRS 2 to awards that vested prior to the Transition Date.

d) Borrowing costs

IFRS 1 provides the Company with an option to account for borrowing costs under IAS 23 �‘Borrowing Costs�’ (�“IAS 23�”) as ofthe Transition Date. The Company has elected to apply IAS 23 prospectively from the Transition Date.

IFRS 1 requires that the Company�’s estimates under IFRS at the Transition Date must be consistent with estimates made for thesame date under Canadian GAAP, unless there is objective evidence that those estimates are in error. The Company�’s IFRSestimates as of March 1, 2010 are consistent with its Canadian GAAP estimates at the same date.

IFRS employs a conceptual framework that is similar to Canadian GAAP. However, significant differences exist in certain mattersof recognition, measurement and disclosure. While adoption of IFRS has not changed the Company�’s actual cash flows, it hasresulted in changes to the Company�’s reported financial position and results of operations. In order to allow the users of thefinancial statements to better understand these changes, the Company�’s Canadian GAAP statement of loss and comprehensiveloss and statement of financial position for the six months ended August 31, 2010 and the year ended February 28, 2011 havebeen reconciled to IFRS, with the resulting differences explained.


18. First Time Adoption of IFRS (cont�’d)

The adoption of IFRS does not have a significant impact on the statement of cash flows for the six months ended August 31,2010 and the year ended February 28, 2011. Therefore, no reconciliation is presented in these condensed consolidated interimfinancial statements.

Notes to the IFRS reconciliations:

i) Flow through shares

Canadian GAAP �– flow through shares are credited to share capital, net of any issuance costs. On the date the tax creditsare renounced to the flow through share subscribers, a deferred tax liability/recovery is recognized as a cost of issuing theflow through shares.

IFRS �– a liability is recognized for the difference between the net proceeds received and the market price of the shares onthe date of issue (the �“flow through share premium�”). Provided the Company has the intention to renounce the taxbenefits to the flow through subscriber, the flow through share premium is reversed and taken into earnings as qualifyingexpenditures are incurred. The deferred tax impact, if any, is recognized at the same time. As a result, an adjustment of$151,141 was credited to common shares with a corresponding charge to deficit as at August 31, 2010 and adjustments of$460,388 and $383,362 were credited to common shares and flow through share premium with a corresponding charge todeficit of $843,750 as at February 28, 2011.

ii) Non controlling interests

Canadian GAAP �– non controlling interests in the equity of a consolidated affiliate are classified as a separate componentbetween liabilities and equity in the consolidated statement financial position and as a separate component of net earningswithin the consolidated statement of earnings. Also, if the non controlling interest was in a deficit position, the Companywas not required to show the non controlling interest�’s portion of the loss.

IFRS �– non controlling interests in the equity of a consolidated affiliate are classified as a component of equity separatefrom the equity of the parent and are not included in net earnings, but instead are presented as an allocation of netearnings, even if this results in the non controlling interests having a deficit balance. As a result, the non controllinginterest�’s share of loss and comprehensive loss for the six months ended August 31, 2010 was $5,387 and has been shownseparately on the statement of loss and comprehensive loss and the statement of financial position and the non controllinginterest�’s share of loss and comprehensive loss for the year ended February 28, 2011 was $5,408 and has been shownseparately on the statement of loss and comprehensive loss and the statement of financial position.



The August 31, 2010 Canadian GAAP consolidated statement of financial position has been reconciled to IFRS as follows:

Effect ofCanadian transition to

Notes GAAP IFRS IFRSASSETS

Current assetsCash 1,969,105$ $ 1,969,105$Trade and other receivables 32,961 32,961Tax credits recoverable 1,339,306 1,339,306Advances for exploration 842,013 842,013Prepaid expenses 37,034 37,034

Total current assets 4,220,419 4,220,419

Non current assetsProperty and equipment 24,287 24,287Long term tax credits recoverable 172,277 172,277Investment 988,860 988,860

Total non current assets 1,185,424 1,185,424

Total assets 5,405,843$ $ 5,405,843$

LIABILITIES AND EQUITY

Current liabilitiesTrade and other payables 16,326$ $ 16,326$Flow through share premium i

Total current liabilities 16,326 16,326

EquityCommon shares i 21,118,567 151,141 21,269,708Warrants reserve 1,576,461 1,576,461Contributed surplus reserve 5,905,107 5,905,107Available for sale revaluation reserve 577,238 577,238Deficit i,ii (23,787,856) (145,754) (23,933,610)

Equity attributable to owners of the Company ii 5,389,517 5,387 5,394,904Non controlling interest ii (5,387) (5,387)

Total equity 5,389,517 5,389,517

Total liabilities and equity 5,405,843$ $ 5,405,843$



The Canadian GAAP consolidated statement of loss and comprehensive loss for the three months ended August 31, 2010 has beenreconciled to IFRS as follows:


Notes GAAP IFRS IFRS

ExpensesAdministration and management fees 126,045$ $ 126,045$Amortization 2,599 2,599Directors fees 8,938 8,938

Exploration expenditures 1,268,935 1,268,935Filing and transfer agent fees 5,386 5,386Office and miscellaneous 14,906 14,906Professional fees 7,751 7,751Promotion 91,700 91,700Rent 22,048 22,048Stock based compensation (12,906) (12,906)Telephone and communications 7,220 7,220Travel 30,558 30,558

Loss before other items (1,573,180) (1,573,180)

Other itemsInterest income 5,305 5,305Flow through share premium i 311,462 311,462

5,305 311,462 316,767

Loss for the period (1,567,875) 311,462 (1,256,413)

Other comprehensive lossUnrealized loss on mark to market of investment, net of tax (123,608) (123,608)

Total comprehensive loss (1,691,483)$ 311,462$ (1,380,021)$

Loss attributable to:Non controlling interest ii $ (233)$ (233)$Owners of the Company ii (1,256,180) (1,256,180)

$ (1,256,413)$ (1,256,413)$

Comprehensive loss attributable to:

Non controlling interest ii $ (233)$ (233)$Owners of the Company ii (1,379,788) (1,379,788)

$ (1,380,021)$ (1,380,021)$

Basic and diluted loss per share (0.01)$ (0.01)$Weighted average number of common shares outstanding basic and diluted 112,010,954 112,010,954



The Canadian GAAP consolidated statement of loss and comprehensive loss for the six months ended August 31, 2010 has beenreconciled to IFRS as follows:


Notes GAAP IFRS IFRS

ExpensesAdministration and management fees 240,294$ $ 240,294$Amortization 5,168 5,168Directors fees 17,938 17,938

Exploration expenditures 2,345,317 2,345,317Filing and transfer agent fees 9,014 9,014Office and miscellaneous 22,667 22,667Professional fees 8,710 8,710Promotion 167,795 167,795Rent 44,096 44,096Stock based compensation 17,496 17,496Telephone and communications 23,382 23,382Travel 50,054 50,054

Loss before other items (2,951,931) (2,951,931)

Other itemsInterest income 10,598 10,598Flow through share premium i 800,381 800,381

10,598 800,381 810,979

Loss for the period (2,941,333) 800,381 (2,140,952)

Other comprehensive lossUnrealized loss on mark to market of investment, net of tax (370,823) (370,823)

Total comprehensive loss (3,312,156)$ 800,381$ (2,511,775)$

Loss attributable to:Non controlling interest ii $ (5,387)$ (5,387)$Owners of the Company ii (2,135,565) (2,135,565)

$ (2,140,952)$ (2,140,952)$

Comprehensive loss attributable to:

Non controlling interest ii $ (5,387)$ (5,387)$Owners of the Company ii (2,506,388) (2,506,388)

$ (2,511,775)$ (2,511,775)$

Basic and diluted loss per share (0.03)$ 0.01$ (0.02)$Weighted average number of common shares outstanding basic and diluted 111,423,260 111,423,260

19. Approval of the Financial Statements

The condensed consolidated interim financial statements of the Company for the six months ended August 31, 2011 wereapproved and authorized for issue by the Board of Directors on October 25, 2011.

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