Company Overview

Overall Performance

Property Summaries and Exploration Updates

British Columbia Properties

The Slocan Silver Camp is centered around the historic town of Sandon, located 53 kilometres north of Nelson in

southeastern, British Columbia. Sandon is 14.5 kilometres east of New Denver, and year round access is gained

via an all-weather gravel road branching off Highway 31A.

Klondike Silver’s claims in the Slocan Camp cover an area of approximately 130 square kilometers and include

most of the historical past-producing silver-lead-zinc prospects of the camp, including the Silvana Mine. The Slocan

Camp includes a fully operational 100-tonne per day mill situated at Sandon. The claims include legacy claims,

crown-granted claims, and recently acquired or converted mineral claims. Not all of the ground within the Camp is

held by Klondike Silver and not all claims are contiguous.

The area around Sandon has been divided into nine distinct areas for exploration, which include the Wonderful

property around the town of Sandon, Cody Creek immediately to the east, the Payne Mine area to the north, the

Hewitt-Van Roi camp southwest of Sandon, centered on two past producers, and to the far northeast, the Jackson

Basin exploration area. Additionally, the Rambler property, situated between the Payne and Jackson areas, the

Silverton Creek and Sandon Peak properties on the south slope of Silver Ridge and the Mt. Con property are in

early stages of exploration.

The central area of the Sandon camp, includes one of the largest past producing mines in the region as well as

numerous smaller past producers, and has been the focus of much of Klondike Silver’s surface and underground

exploration for the past several years. Klondike Silver opened its Sandon mining complex in Sandon, B.C. in the fall

of 2007 after being non-operational for several years. The Company rehabilitated old underground workings at its

Silvana Mine and the Wonderful Mine, both located within five kilometres of the Company's Sandon mill.

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The principal source of the Slocan Camp's historic silver-lead-zinc production comes from the Main Lode structure

which is more than 8 km long, extending from Silverton on Slocan Lake to Sandon in the east through the 'Silver

Ridge' of the Selkirk Mountains. The Silvana production came from less than 1.5 km of the Main Lode. The

Company holds approximately 1.5 km of the ground to the west of this productive zone, to within 0.5 km of the

Mammoth Mine.

About 1.5 million tons of ore was locally processed or direct-shipped from these historic operations. Total

recovered production to 1964 from the western segment was 9.5 million ounces of silver, 45,000 tons of lead and

60,000 tons of zinc. The eastern segment yielded approximately 9 million ounces of silver, 43,000 tons of lead and

13,000 tons of zinc. Almost all of this recovered production came from a zone within the Main Lode lying roughly

between 1,200 m and 1,700 m elevation. The central unexplored portion of this prospective deep zone passes for 4

km beneath 1,500 m to nearly 2,400 m approximate elevations of the steep-sided Silver Ridge. This area received

initial underground exploration westerly from the Silversmith Mine area in the late 1940s by the Kelowna

Exploration Company using a program of lateral drift mining and diamond drilling.

This section was explored, developed and mined by Silmonac's successors (including Kam-Kotia Mines Limited,

Silvana Mines Inc., Dickenson Mines Limited and Treminco Resources Ltd.) almost continuously from 1970 to

1993, and now by Klondike Silver. Production to date is about 8 million ounces of silver and over 30,000 tons each

of lead and zinc from some 550,000 tons of mill feed, representing 30% of the area's silver and 25% of its lead

production. This makes the Silmonac/Silvana operation the second largest single producer of silver and lead in the

Slocan camp after the Standard Mine. It should be noted that the silver-to-lead ratio from Silvana production was

higher than production from the Standard Mine, an enhancement that improves the potential economics of

Silvana's typical mill feed.

At the Silvana Mine, Company personnel have identified several small but potentially economically mineable areas

beyond the limits of productive former stopes developed in the early 1970s. These areas lie roughly 30 meters or

more in elevation above the main 4625 Level adit access. Detailed re-examination of historic records (including

assays from diamond drill holes and chip/channel samples) show the possibility of mineralized areas amenable to

small-scale mining using best-practice grade control to achieve desired economic returns.

The work program currently under way includes replacing a timbered ore-chute on 4625 Level at the base of the

gravity muck pass from 4755 Level, rehabilitating the skipway and manway between the two levels, re-establishing

compressed air, water and electrical services and bringing mining equipment up to 4755 Level. The initial testmining

will be by sub-drifting in the Main Lode structure towards the identified areas of interest. Channel and muck

sampling will be carried out to identify the best sections for stopping. The muck from the development will be

evaluated and stockpiled as appropriate.

The objectives of 2009/2010 underground exploration programs were to identify the presence of the lode structure

within the prospective horizon and to locate any ore-bearing chutes within the structure. The discovery of lode

structure early in the initial phase of exploration has allowed for optimism that projections are correct and should

allow the Company to quickly increase its resources and mining length.

During the last quarter of 2009 the Company announced that lateral drifting to the west had commenced from the

underground western extension of the main access 4625 Level. This heading is starting to cross-cut the lode

structure intersected in a recent drill program. The planned 100 meter drift is the first into a 1.5 km long unexplored,

underground segment of the productive and historic Main Lode structure which is the principal source of the Slocan

mining camp’s silver/lead/zinc production. The Company also completed a diamond drilling program and reevaluation

in an easily accessible, partly-explored area near former productive stopes. Test mining is planned for

this area on and just below the main 4625 Level of the Silvana Mine. Upon completion of the western drift

extension the drill will be moved to drill into the lode structure to test for mineralization.

Early work in the Camp by Klondike Silver going back to 2004, concentrated on the Wonderful property, located a

few hundred meters northwest of the Klondike Silver mill, which was rehabilitated and is now fully operational.

Older geochemical and geophysical surveys (1981) indicated that possible extensions to known veins might exist

in this area and subsequently two of the old, caved portals(No. 2 and No. 4), were located and opened by backhoe

excavation.

Trenching at the ‘A’ portal, also known as the McLanders portal, exposed a galena-rich vein through a strike length

of approximately 25 meters. The McLanders vein is open at both ends, exposed at the head of a small adit at its

east end and buried in overburden at its west end. When the vein was exposed seven samples were taken which

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returned values with high grade silver (to 4384 g/tonne or 135.8 oz/ton) and lead contents, as well as a high silver

to lead ratio which were encouraging and led to further trenching, extending the strike length of the McLanders

vein.

Drilling in 2005 confirmed the down-dip extension (to approximately 48 meters) of the McLanders vein, but total

sulphide content as well as lead and silver grades were considerably less than those exposed at surface.

Mineralization in the McLanders vein is highly variable within the laterally continuous, fault structure, and this

feature is common to all vein systems in the camp. Exploration therefore necessitates testing mineralized

structures on fairly closely spaced intervals, by both drilling and trenching. Other drill holes, in areas with VLF-EM

geophysical anomalies generally intersected fault structures with little or no mineralization.

In 2008 samples were taken from the McLanders vein. The vein in this area has been traced up slope for an

additional 9 meters of strike length, giving a total vein exposure of 33 meters. Five grab samples taken from the

exposed portion of the vein have been assayed with the following results:

1 79.93 0.80 197.6 rock subcrop

2 75.37 1.50 117.2 rock subcrop

3 44.72 2.28 63.1 rock subcrop

4 67.51 2.21 161.4 rock subcrop

5 71.10 3.11 113.2 rock subcrop

During 2007 the Company completed the rehabilitation of the underground workings of theNo. 4 level, with raise

development and the rehabilitation of the No. 3 level completed in the summer of 2008. Mapping and chip sampling

of the raise and rehabilitated No. 3 level were completed in September 2008.

Twelve sample sections were taken along the length of a raise (the connecting shaft between two levels) driven

from the lowest No. 4 level (1144m elevation) up to the No. 3 level (1192m elevation). The raise follows a

mineralized vein on the Wonderful system across all lithologies for a length of 54.5m at 49° and connects with the

mineralization on the No. 3 level. The raise confirms connectivity of 53m of the mineralized vein on the No. 4 level

with 152m of vein mapped 48m higher on No. 3 level. Eighteen sample sections were taken from the No.3 level

with both the raise and the No. 3 level geology showing the same trend. Results of all 30 samples as discussed in

a press release dated December 8, 2008 are shown in the following table:

Table: Raise Assay Results, Wonderful No. 4/3 level

25cm

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Underground diamond drilling was completed on the No. 4 level in the Wonderful Mine, on a heading down dip

from the McLanders zone, (grab values reported as high as 79% lead and silver as high as 197 oz per ton). The

diamond drill program was designed to test the steeply dipping mineralized vein that was discovered in a raise

being driven from the No. 4 level to the No. 3 level where drilling tested the width of the vein both along strike and

down dip of the raise.

The Cody Creek area includes the eastern projection of the largest producing vein in the Sandon camp, the Main

lode. A second vein, the Adams lode, extends onto the property to the south of, and parallel to the Main lode. The

past producing Richmond-Eureka, Silversmith and Slocan King mines occur along the eastern extension of the

Main lode, while the Noonday mine is believed to be on the extension of the Adams lode. A 2007 soil

geochemistry program, targeting the area east of the known producing mines, identified several linear anomalies

that are coincident with these trends. Additional soil geochemistry, prospecting and trenching have been

conducted.

In 2009 an extensive surface exploration program was developed to explore the east slope of Cody Creek. The

project involved two ground geophysics surveys and 600m of surface trenching. Several veins were exposed in

the trenching with significant alteration commonly associated with mineralized vein carrying lode structures. It is

believed that these structure are extensions of east-west trending lodes but are poorly mineralized due to host

rock competency on the east side of Cody Creek. Continued exploration of the Cody Creek property is focused

on the west side of the creek where host rock units are highly competent, and undeveloped mineralized veins

are known to occur.

In 2010 geological mapping and prospecting on the west side of Cody Creek sampled a mineralized zone and

indicated trenching targets for the fall of 2010 and spring of 2011. Part of the trenching program was undertaken

in 2010 and results are pending sample analysis. The Company’s exploration staff is anticipating good results

from completed work and further efforts in 2011 on the west slope of Cody Creek is proposed.

Exploration of the Payne property, located on the slopes and ridges north of Carpenter Creek, was restricted to a

reconnaissance soil survey in 2007. The soil grid was extended to the north in 2008, and several anomalous areas

recognized from the 2007 survey required infill lines and sampling. In 2009, an anomalous zone of lead and silver

soil geochemistry was targeted for further exploration. The zone was located to the west of the Payne mine and

was thought to be an extension of known mineralization to the southeast. Magnetics and electromagnetic surveys

were conducted in the area followed by 500m of trenching. Vein exposures in the trenches were limited to discreet

narrow veins with only slight alteration. Host rock competency is low in the area, and northwest trending fault

structures are common, neither conducive to hosting mineralization. However, a rock unit similar to that hosting the

Payne mine is only 100m to the northeast and along strike with the veins discovered in trenching.

In 2010 the Company focused its efforts on a second anomalous zone on the Payne property. The zone was first

explored by prospecting and geological mapping followed by 350m of trenching in the fall. The results of this

program are yet to be released and samples taken from several large structures with lode type alteration are

awaiting assay.

The Jackson basin, located in the northeastern part of the Slocan area, is centered on several small, but reportedly

high grade northeast-trending veins. Known BC Minfile deposits and occurrences include the Jackson, Corrigan,

Towser and Zuni and prospecting by Klondike Silver discovered a new vein, or extension of a known vein, located

in the northwestern part of the area.

Exploration in 2007 included extending an earlier soil grid, and trenching one of the known occurrences, Stenson,

(which contained grab samples with up to 53 oz/ton silver) with only limited success. A subsequent ground

geophysical survey demonstrated more clearly the trend of this vein and future trenching will be more accurately

controlled. Soil sampling in the Jackson basin was completed in 2008, and a ground geophysical survey was

extended between the known occurrences along areas marked by prominent airborne linears.

On June 26, 2009 the Company announced the staking of 145 hectares to the west of the Jackson Mine claims. In

2010, the Company extended its holding east of the Jackson basin into the relatively unexplored Robb Creek basin

where the projected Jackson lode structure extends.

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During the last quarter of 2009 the Company received assays for a number of samples taken from ten recently

completed trenches. The trenching uncovered a 20cm diameter boulder in Trench 3 of mainly galena which

contained 72.42% Pb, 2.41%Zn, 2895g/tonne Ag. Trench 5 had a fault zone with samples assaying up to 17.59%

Pb, 1.12% Zn, 687g/tonne Ag. Mineralized quartz veins were discovered in 5 of the 10 trenches.

Based on known showings, and projected trends of lode structures, an exploration program was conducted in the

northern part of the basin, referred to as the Stenson Property, in the 2010 field season. Past soil and geophysical

surveys on the Stenson by Klondike Silver confirmed the east to northeasterly trend of Stenson mineralization,

helping direct a trenching program which exposed a silver-lead-zinc vein. Analyses of selected samples of the vein

returned values up to 53 oz/ton Ag, 6.38% Pb and 10.49 % Zn. Proposed exploration is intended to focus on the

western slopes of Stenson Creek and will include some fill-in soil geochemical and geophysical surveys followed

by trenching in an attempt to expose the mineralized structure.

Little exploration has been done by Klondike Silver in the Hewitt-Van Roi area in the southern part of the Slocan

Silver camp. The area has produced more than 146 million grams (5,149,998 ozs) silver, 10,800,000 kg

(23,809,924 lbs) lead and 9, 370,000 kg (20,657,313 lbs) zinc. The 2008 program included a regional soil survey

to the west of the two past producing mines, additional prospecting and, as in all areas, both reconnaissance and

detailed geological mapping. In 2009 infill soil geochemistry and geophysics were conducted to identify targets for

diamond drilling which was carried out in the fall of 2009. Early in 2010 the company contracted an Induced

Polarization survey which identified two excellent targets for a second phase of drilling, one of which is on strike

with the past producing mines.

On June 26, 2009 the Company announced the staking of 956 hectares of new ground adjacent to the Hewitt Mine

area.

All other areas have seen preliminary exploration efforts such as soil geochemistry, prospecting and geological

mapping. Systematic evaluation of targets within these properties is ongoing and later development along known

vein occurrences is expected. An expansion of the Company’s holdings in 2009 lead to creation of new

properties such as the Sandon Peak property consisting of 951 hectares including the Iron Mask mineral

occurrence.

In 2010 the company gave special attention to the Rambler property, where samples taken from a vein in 2009

assayed 2190 g/tonne Ag with no more than 1.0% Pb. The ratio of silver to lead in the sample indicated the

presence of high grade silver minerals such as prousite, and pyrargyrite commonly known as “ruby silver’ and

other silver sulphosalts. The area was further prospected and mapped and samples are awaiting analysis.

Historic data from the Sandon camp has been converted and compiled into digital format on to common base

maps at the field office at Rosebery, just north of New Denver. This has allowed for a ready comparison and

integration of all data, including surface and airborne geophysics, soil surveys, prospecting, and mapping, which

will lead to more accurate and controlled delineation of trenching targets.

The Goldsmith Property Group consists of eight mineral properties, optioned from Locke Goldsmith, in and around

the Sandon Silver Camp, including several past producing mines.

Hallmac: This former producer (1980-1984) has rail in place and natural ventilation and strong air flow from the

adit. Proposed work, including drill-testing, would focus on the projected position of the lode on the 1690 Level.

Vulture: Historical mapping and soil sampling suggest that an offset portion of the previously mined lode at this

former producer (pre-1900 and 1952) may be present upslope and east of the drift. A second mineralized lode is

exposed on an adjacent claim. The lower Vulture adit has not yet been located. A soil sampling program has

recently begun and proposed work includes hand-trenching and underground mapping.

Enterprise: This former producer was worked by various parties to 1972, with production from a “dry” ore silica vein

with high silver and low base metals. Sampling in 1980 returned positive results at the face of the 8 Level (lowest

adit). Large dumps at several portals were selectively sampled, with results suggesting some fractions contain

appreciable mineralization.

Chambers: One adit and several stopes to surface have been located at this past-producing mine, which operated

intermittently to 1984. Proposed work will focus on higher grade, silver-rich areas if the adit portal is open.

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Adams Lode: Several adits were developed to explore lodes on the Chicago and Cristein claims. The Adams Lode

has been projected by soil geochemistry to continue from Sandon Creek through these claims. A sample of the

lode assayed 28.36 oz silver per ton, 52.42% lead and 1.40% zinc. Hand-trenching along the trend of the

geochemical anomalies is proposed.

Conductor: The Conductor Lode may be a northeastern extension of the formerly productive Alamo Lode. Soil

geochemistry and geological mapping have identified three or more lodes and two mineralized breccia zones.

Samples from an exposed lode and nearby dumps have returned positive results. More work is planned, including

sampling, mapping, hand-trenching, and drilling of the Conductor Lode and possibly other lodes.

Tufa: This former crown grant has no recorded history, although adits and trenches exist on the property. Results

are awaited from recent soil sampling and may be followed by an underground sampling program using existing

adits.

Vernon: This area has no published history, but covers a weak geochemical anomaly that may be tested with

further soil sampling.

The Connaught prospect is located within the Sixtymile placer gold camp near Dawson, YT. Klondike Silver has

earned 50% interest in the property from ATAC. Previous work had outlined a 13- by 5-kilometre area of

anomalous geochemical response from stream sediment samples. Follow-up trenching along the lightly vegetated

ridgetops exposed 0.3- to two-metre-wide veins that typically grade between 100 and 1,000 grams per tonne silver,

and 0.3 to two grams per tonne gold.

Historical work began in the early 1960s and continued intermittently through the mid 1980s. During that time,

exploration consisted of grid soil geochemical sampling, ground geophysical surveys, bulldozer trenching and

limited diamond drilling. The older work identified numerous lead-in-soil geochemical anomalies and seven silverlead-

gold bearing veins (referred to as #1 through #7) within a 13 km by 5 km area that is now mostly covered by

the CN property. The CN property has reported historical grades for galena dominant samples collected

intermittently along a 275 m strike length range from 723 g/t to 5498 g/t Ag with lead values up to 84.65%.

Exploration in 2006 included an airborne property wide, time-domain electromagnetic system (VTEM) survey

completed by Geotech Ltd. This survey delineated strong conductors that appear to be related to an extensive

system of veins that extend across ridge tops into the adjacent heavily vegetated and overburden covered valleys.

The 2007 exploration work consisted of prospecting, grid soil sampling, approximately 1100 m of excavator

trenching and 566 m of diamond drilling. Most of this work was directed toward better establishing the tenor of

mineralization at the known vein zones.

Four historical vein zones were sampled and one new vein, the Stirling vein, was discovered. Excavator trenching

in the vicinity of the #1, #3, #4 and #7 veins located significant mineralization on the floor of an old trench at the #3

Vein and discovered two promising lenses in new trenches near the #7 Vein. All of these occurrences consist of

massive anglesite/galena in lenses, which have been exposed for widths up to 1.25 m and along strikes for up to

16 m. Closely spaced sawn channel samples were collected along each of the vein exposures to establish grade

control.

Part of the 2007 program consisted of a total of seven diamond drill holes testing at shallow depths beneath the #1,

#3 and #4 veins. Mineralized vein material was encountered in all holes. All analyses for the 2007 program were

performed at ALS Chemex laboratory in North Vancouver using industry-standard fire assay and ICP techniques.

This laboratory carries ISO 9001:2000 registration and is accredited to ISO 17025 by Standards Council of Canada

for a number of specific test procedures including fire assay Au by AA, ICP and gravimetric finish, and multielement

ICP and AA assays for Ag, Cu, Pb and Zn.

200 excavator trenching was conducted to enhance exposure and access to high grade silver veins, in preparation

for bulk sampling. The program was done by an exploration team led by Professional Geologist William Mann.

Assay results have confirmed three new areas of mineralization discovered by prospecting during the program

including:

•

•

•

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The #1 Vein is coincident with a linear, northeast trending lead-in-soil geochemical anomaly that extends for 1100

m along strike and contains peak values of 7400 ppm. Historical bulldozer trenching conducted along a 220 m

portion of the anomaly exposed a vein dominantly composed of quartz and arsenic-antimony sulfosalts with

intermittent lenses of massive galena.

Detail chip sampling was conducted along a 70 m portion of the vein zone in an open cut left from the bulk

sampling performed in the late 1960s and 1970s. The 2007 samples returned peak grades of 2550 g/t silver and

74.62% lead. These peak values are from galena- rich lenses. Adjacent quartz vein selvage material with arsenicantimony

sulfosalt mineralization also contains significant silver (up to 763 g/t) and lead (up to 25.28%)

accompanied by gold values up to 10.90 g/t. The two diamond drill holes tested beneath the vein on a section line

that passes under the trench 49.5 m from its start. The holes encountered quartz dominant vein material at the

anticipated piercement depths of 43 and 82 m. No significant mineralization was associated with either intersection.

The #3 Vein is situated 3 km north of the #1 Vein and this site is marked by an old bulldozer pit, where the largest

portion of the historical bulk sample was believed to have been collected. In 2007, the base of the pit was cleared

of slough and debris exposing a 5 m long massive galena and anglesite lens that is up to 1.25 m wide. Channel

samples were sawn across the lens at various points and yielded grades up to 2880 g/t silver, 54.89% lead and

3.54 g/t gold. The highest grades for silver and lead are associated with massive galena and anglesite.

Two diamond drill holes CN-07-05 and -07 tested the #3 Vein Zone with piercements at 25 m directly beneath the

massive galena lens and 25 m along strike to the northeast. Both holes encountered massive galena and anglesite

at the anticipated piercement points. A third hole CN-07-06 was drilled from the same site as CN-07-05. It was

designed to test the vein at a target depth of 50 m but encountered a porphyry dyke that appears to have cut-off or

displaced the vein.

Vein mineralogy at the #4 Vein is similar to the veins exposed on the CN property and reported historical grades for

galena-dominant samples collected intermittently along a 275 m strike length range from 723 g/t to 5498 g/t silver

with lead values up to 84.65%.

The #7 Vein was exposed by extending an old bulldozer trench where massive galena cobbles were found within

the lower part of the soil profile. A vein zone that is likely the source of the galena cobbles was exposed in two

excavator trenches situated approximately 120 m apart. The northern trench, TR-07-27, exposed a quartz vein with

arsenic-antimony sulfosalt mineralization and massive galena lenses up to 55 cm wide, along a strike length of

roughly 23 m. The northernmost of the galena lenses is open to the northeast where it projects beneath an access

road. Approximately 2 tonnes of massive galena was recovered during the exploration of this lens.

TR-07-29, which is located 120 m to the southwest of TR-07-27, exposed a vein zone dominantly composed of

quartz with arsenic-antimony sulfosalt mineralization. A chip sample across this exposure returned 479 g/t silver

8.81% lead and 1.51 g/t gold across 0.56 m.

The Stirling Vein is a new discovery made by deepening an old bulldozer trench, situated approximately 400 m

northeast of the #7 Vein. It is characterized by a strong arsenic-antimony sulfosalt-bearing quartz vein, again with

intermittent massive galena lenses up to 47 cm wide. The vein was exposed for a strike length of 22 m. The

samples yielded grades up to 2083 g/t silver over 0.66 m, 51.50% lead over 0.66 m, and 5.81 g/t gold over 0.43 m.

The Stump property lies six kilometres east of the former Ketza gold mine, which is currently being explored by

Yukon Nevada Gold Corp. The mineralization occurs in a strong vein that is exposed in bulldozer trenches and two

levels of underground development. Trenching has exposed the vein over an 850-metre length, of which the best

247-metre grades 853.6 grams per tonne silver and 22.2% lead over an average width of 1.2 metres. A raise

extending from the upper adit to within three metres of surface averaged 582.8 grams per tonne silver and 16.5%

lead across 1.4 metres for a length of 40 metres up the incline of the vein. This prospect is primarily viewed as a

small-scale high-grading opportunity that could be rapidly brought to production to capitalize on price spikes in the

silver market.

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In August 2007, Klondike Silver dug a trench along the best mineralized parts of the vein. Combined with earlier

trenches, this excavation provides continuous exposure of the vein for a 350-metre strike length. Results of the

2007 excavator trenching present a slightly different interpretation than was suggested by previous bulldozer

trenching. These results show that most of the metal is concentrated in discrete lenses, which should make it

amenable to small-scale extraction without on-site beneficiation. Six main lenses of semi-massive to massive

galena were identified along a 300 m strike length. The lenses have an aggregate length of 75 m and an average

width of 0.25 m.

In 2007 four bulk samples collectively comprising approximately 80 tons of galena-rich material were extracted

from the four largest lenses. The bulk samples were transported to Klondike Silver’s mill at Sandon, B.C. where

they were crushed and milled. Head grades reported from the mill reported originally in a press release dated July

31, 2008 are listed in the table below:

Mill Run at Sandon, BC - Sept/Oct 2007

B 2459 Head sample Lot B 8.7 39.87 1578 46.03 0.38

C 2464 Head sample Lot C 31.5 37.41 1416 41.30 0.37

E 2456 Head sample Lot E 27.0 39.32 1559 45.47 1.34

F 2461 Head sample Lot F 13.5 42.62 1612 47.02 0.30

Analyses for the 2007 head grade samples were performed at Acme Analytical Laboratories Ltd. in Vancouver

using industry standard ICP-ES techniques. This laboratory is currently registered with ISO 9001:2000

accreditation.

The 2008 program at the Stump property commenced a bulk sampling campaign of the near surface galena

lenses. This bulk sampling campaign produced some 1500 tons of ore that was shipped to Sandon for processing

and to Teck Cominco in Trail for smelting.

This property is staked land wholly owned by the Company, and located 5km east of the Connaught Joint

Venture claims, along the same geological trend. A late Cretaceous intrusive body lies at the center of the

claims, and multi-element geochemical anomalies are revealed by a regional survey of the area. The claims are

drained by streams with placer gold production.

Early stage work in 2010 has returned gold in soil geochemical anomalies.

The Espiritu property is a Porphyry-Polymetallic Gold/Silver/Copper/Lead/Zinc/Molybdenum/ Tungsten prospect

and is located approximately 150 km east of Hermosillo, in Sonora State, Mexico. The Espiritu alteration zone is

located some 20 km east of the pueblo of Sahuaripa at the head of arroyo Espiritu. The project covers

approximately 10,000 hectares and is operated by JV partner Kootenay Gold of Vancouver, B.C.

Spring 2009 exploration programs confirmed the project is host to an extensive area of polymetallic vein,

stockwork, breccia and copper-gold porphyry mineralization. Mineralization and alterations are hosted along a 5 km

east northeast trending structure that measures between 1 to 2 kilometres in width. The pervasive alteration

covering some 1-2 km x 5 km area define the Espiritu property. The alteration includes variations of propylite, iron

carbonate, argillic (kaolinitic), phyllic (sericite), tourmaline and biotite. The presence of “leach-cap” weathering

features have been noted from a number of locations. Secondary copper mineralization has been noted. The

northeastern portion of the alteration zone is marked by a distinctive “kill” zone.

Two zones of mineralization have been identified; the northeast zone dominated by a porphyry setting is separated

by a major fault from the southwest zone dominated by polymetallic veins and stockworks of precious and base

metal mineralization. The two zones appear to be genetically related and the polymetallic vein/stockwork systems

represent mineralized systems that would be expected to overlie the porphyry setting.

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The northeast Espiritu porphyry prospect is a 2.2 km x 1.4 km sub-circular area defined by a concentric pattern of

zonation diagnostic of copper gold porphyry deposits. The different zones are strong propylite, argillic, sericitic and

potassic (biotite) alteration hosted in a biotite, feldspar quartz porphyry. Extensive leaching of the argillic and

sericite alteration zones has resulted in the development of a leach-cap zone marked by the limonites goethite,

jarosite and hematite with local presence of the secondary copper minerals turquoise and chrysocolla.

In the biotite zone of alteration, 19 grab samples from the disseminated and fracture mineralization showed good

values of copper averaging 0.24% and gold averaging 0.239 gpt. In the argillic/sericitic zone of alteration or leachcap

zone, the average copper content shows values of 0.034%, consistent with the general average copper values

within the leach-cap zones that sit on top of known porphyry deposits of the southwest USA and northwest Mexico

(e.g.: Asarco's Silver Bell Mine and Grupo Mexico's Cananea and La Caridad Mines). The polymetallic veins within

the porphyry setting show anomalous values in gold (to a high of 3.60 gpt) and silver (to a high of 462gpt).

The southwestern part of the system is represented by veins, breccias and stockworks anomalous in gold, silver,

copper, lead and zinc. At present, the main mineralization in the southwest is defined by several zones spread out

along a 2 km length. These are named the west, central and east polymetallic zones. Anomalous mineralization

has been recognized in two other separate zones: the PS-1 zone about 2 km to the northwest and the PS-2 zone

about 500 metres to the east.

Two stages of mineralization are noted: one stage marked by mainly quartz veins low in all metal values and a

second stage marked by veins, breccias and stockworks of polymetallic gold, silver, copper, lead and zinc

mineralization.

A total of 58 grab samples were collected within the west, central and eastern parts of the southwest polymetallic

zone. The polymetallic veins averaged 226 gpt silver, 1.58% lead and 1.57% zinc associated with 0.18 gpt gold

and 0.15% copper. From the 35 samples collected from the polymetallic zone, 18 of 35 were greater than 0.100 gpt

gold and 29 of 35 were greater than 30 gpt silver.

The PS-1 area reported values of 0.84, 0.50 and 0.46 gpt gold and 277 and 217 gpt silver associated with

anomalous lead to 6% and zinc to 1.5%. The PS-2 zone reported silver values of 686, 644 and 487 gpt and

anomalous copper, lead and zinc from 13 samples has been noted. Anomalous values of molybdenum to 0.129%)

were noted from this area.

The property and geology is discussed in more detail in a press release dated November 26, 2008

Klondike Silver is exploring a number of properties in and around the Gowganda and Elk Lake silver camp areas of

Ontario. The Gowganda and Elk Lake silver camps were the largest silver producing areas in Ontario outside of the

Cobalt silver camp. The three camps collectively produced more than 400 million ounces of silver. Discoveries and

mining within the silver camps largely occurred in areas where rock is exposed and prospectors could more easily

discover the high-grade silver veins. Klondike Silver is using new state-of-the-art technologies to help map out the

geology, structures and potential silver-rich veins beneath areas covered with glacial till and overburden.

The Haultain property and area has been explored primarily for silver-cobalt-nickel veins. Historically there were

four shafts sunk on the Haultain property: (1) the Haultain Shaft, where a number of silver-cobalt veins were found

to a depth of 350 feet. Native silver is reported in the veins with multiple ounce silver values reported; (2) the

Ottawa-Gowganda Shaft was sunk 207 feet with work on the 100 and 200 foot levels; (3) the Millcrest Shaft was

sunk 308 feet in 1925 and 7 high grade veins up to 12 inches wide with native silver and cobalt mineralization

reported; and (4) the McAlpine Shaft was sunk 100 feet on a silver/cobalt vein but with no reported results. Little

work has been done since the 1960s on the majority of the property with some areas not having been examined

since the 1920s.

In 2006 the Company completed surface trenching on the property, and in 2007 a program of nine drill holes

totalling 981 metres on diabase targets of the Flatstone diabase basin was completed.

In February 2008, the Company announced that the Phase I Diamond Drill Program in Haultain Township,

Gowganda, Ontario, has been completed. Nine drill holes totaling 981 metres were drilled on diabase targets of

the Flatstone Diabase Basin. The Flatstone Diabase Basin adjoins the Miller Lake Diabase Basin of Haultain

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and Nicol Townships, where historical silver, and cobalt production from diabase-hosted deposits exceeded 56

million ounces silver and 560 tonnes of cobalt.

Drill targets were defined through prospecting with input from the assessment records of previous explorers and

producers in both Miller Lake and Flatstone Diabase Basins.

Hole Number Easting Northing Elevation

(m)

Azimuth

(degrees)

Dip

(degrees)

Length

(m)

HLT-07-01 521462 5280725 381 163 -45 303

HLT-07-02 521472 5281831 378 360 -45 81

HLT-07-03 521517 5281814 380 014 -45 81

HLT-07-04 521517 5281814 380 360 -45 210

HLT-07-05 521446 5281385 394 123 -60 201

HLT-07-06 521379 5281057 391 090 -45 102

HLT-07-07 523008 5280918 354 320 -45 201

HLT-07-08 522718 5280986 355 160 -45 201

HLT-07-09 522874 5280819 370 340 -45 201

Drill hole HLT-07-01 was drilled to test the presence of silver bearing quartz-carbonate veins associated with

faulting under Babs Lake, which lies on the eastern margin of the Miller Lake Diabase Basin. The target fault

zone is one of two principal faults that cross the Township from southwest to northeast, and which appear

implicit in the localization of mineralization at Miller Lake Diabase Basin mines.

Drill holes HLT-07-02, HLT-07-03, and HLT-07-04 were drilled to test the downdip and lateral extent of a 40cm

aplite vein associated with quartz-carbonate veining and chalcopyrite mineralization. This aplite/quartzcarbonate

vein zone was exposed at surface by logging activities and discovered during regional prospecting.

Aplite veins are important as they appear to represent the last stage of differentiation of the host diabase, and

occupy the same stratigraphic position and structures as silver-cobalt-nickel veins in the Miller Lake Diabase

Basin, three km to the west; the Calcite Creek Diabase Basin, five km to the east; and the Cobalt Silver Camp,

some 100 km east.

Drill hole HLT-07-05 was drilled to test the orientation and potential differentiation of the diabase as well as the

identity and stratigraphic relationships of the rocks at the upper and lower contacts of the diabase.

Drill hole HLT-07-06 tested the downdip extent of rocks and structures potentially favourable for the discovery of

silver and cobalt. Target rocks were exposed on surface in trenching carried out by the Company in 2006, and

are seen in historic shafts in the area.

Drill holes HLT-07-07, HLT-07-08, and HTL-07-09 tested a strong zone of quartz-carbonate veining over a 175m

distance. This zone is visible at surface, and mapping suggests the orientation of the vein set is consistent with

large-scale structural observations at the past-producing Miller Lake O’Brien Mine in the Miller Lake Diabase

Basin, which produced in excess of 36 million ounces silver and 360 tonnes of cobalt between 1910 and 1965.

The vein zone also appears correlative with the Haultain Mine prospect some in the Flatstone Diabase Basin,

and the Wigwam Silver prospect in the adjoining Calcite Lake Diabase Basin.

Due to budget constraints no work is scheduled this year.

Drilling was conducted on these properties with no success. The projects are located in an area of significant past

work and a compilation of data is required moving forward. Due to budget constraints exploration work for this

season on these properties has been postponed. The South Bay property was written-off in this period.

On November 3, 2009, the Company entered into a property option agreement to earn a 100% interest in a

mineral property, located in Cleaver Townships, Ontario. The property consists of four claims (46 units) and

access is via an all-weather road from Timmins. There is a 3% NSR payable, of which one third may be

purchased for $1,000,000. Consideration for the property consists of $105,000 ($10,000 paid) and 400,000

shares (100,000 issued), payable over 36 months.

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During the year the Company acquired an option to earn a 100% interest in the Clagor property, located in the

Timmins mining camp, 40 km south of Timmins, Ontario in English Township. Access is via an all-weather road

from Timmins, which passes just east of the property, with secondary logging roads accessing the east side and

coming within 1 km of the west side of the property. The property consists of two claims (28 units), covering a total

of 448 hectares (1,107 acres) of crown land.

The property is underlain by north-northeast striking Archean mafic to intermediate and felsic metavolcanics flows

tuffs, and mafic intrusive rocks. The government airborne geophysical MEGATEM survey has identified a number

of electromagnetic anomalies proximal to the junction of three regional linear magnetic anomalies on the property.

Klondike Silver plans to carry out ground geophysical and prospecting surveys to assess the potential for silver

mineralization that may be associated with the geophysical anomalies.

For the period ended August 31, 2010, the Company incurred a net loss of $165,658 compared to a net loss of

$539,902 in the previous year. The significant differences between the two years include:

•

•

•

•

•

The following table sets forth selected quarterly financial information for each of the last eight quarters with the

figures for each quarter in Canadian dollars.

August 31, 2010 (53,532) 165,658 0.00

May 31, 2010 (1,013,667) 621,248 0.00

February 28, 2010 (12,759) 408,837 0.00

November 30, 2009 (32,509) 452,743 0.00

August 31, 2009 (21,609) 518,293 0.00

May 31, 2009 (2,166,152) 1,808,456 0.03

February 28, 2009 (674,548) 421,947 0.00

November 30, 2008 56,323 466,634 0.00

Note: The increase in Other Expense and as a consequence Net Loss for the quarters ending May 31, 2010 and

2009 are due to the write off of properties in those quarters.

The Company has financed its operations primarily by the issue of share capital and loans from related parties.

The continued operations of the Company are dependent on its ability to develop a sufficient debt restructuring

plan, receive continued financial support from related parties, complete sufficient public equity financing, or

generate profitable operations in the future.

The Company had a working capital deficiency of $94,319 at August 31, 2010 (2009 - $781,253 working capital).

The decrease in working capital deficiency is a result of ongoing exploration activities. The Company believes it

13

does not have sufficient working capital to meet its obligations for the next twelve months. Additional capital will

be required to meet the obligations of the option agreements and meet its flow through obligations.

The Company’s capital needs in the current period and previous fiscal year have been met by the following

equity financings:

Period ended August 31, 2010:

i) In July 2010, the Company closed a private placement for 16,200,000 units at a price of $0.05 per unit for

total proceeds of $810,000. Each flow through unit consisted of one flow through common share and one

non flow through share purchase warrant entitling the holder to purchase one additional common share for

two years at a price of $0.10 per share. Each non flow through unit consisted of one non flow through

common share and one non flow through share purchase warrant entitling the holder to purchase one

additional common share for five years at a price of $0.10 per share in years one and two, $0.15 per share

in year three, and $0.20 per share in years four and five. For this private placement, commission was paid

in the amount of $40,800.

Year ended May 31, 2010:

ii) On February 1, 2010, the Company closed a private placement for 15,152,959 flow-through and

6,282,500 non flow-through units priced at $0.065 for gross proceeds of $1,393,305. Each flow through

unit consisted of one flow through common share and one non flow through share purchase warrant

entitling the holder to purchase one additional share for two years at the price of $0.10 per share. Each

non flow through unit consisted of one non flow through common share and one non flow through share

purchase warrant entitling the holder to purchase one additional share for five years at a price of $0.10

per share in years one and two, $0.15 per share in year three, and $0.20 per share in years four and

five.

iii) On December 10, 2009, the Company closed a private placement for 1,992,000 flow-through units at a

price of $0.08 and 11,020,308 non flow-through units priced at $0.065 for gross proceeds of $875,680.

Each unit consisted of either one flow-through or non flow-through common share and one non flowthrough

share purchase warrant entitling the holder to purchase one additional share at a price of $0.10

in the first two years and $0.15 for the next three years.

iv) On November 17, 2009, the Company closed a private placement for 2,500,000 flow-through units

priced at $0.065 for gross proceeds of $162,500. Each unit consisted of one flow-through common

share and one non flow-through share purchase warrant entitling the holder to purchase one additional

share at a price of $0.10 in the first two years and $0.15 for the next three years.

v) On July 14, 2009, the Company closed a private placement for 9,500,000 flow-through units priced at

$0.06 for gross proceeds of $570,000. Each unit consisted of one flow-through common share and one

non flow-through share purchase warrant entitling the holder to purchase one additional share for a

period of two years at a price of $0.10.

vi) On July 13, 2009, the Company closed a private placement for 2,210,000 flow-through and 8,400,000

non flow-through units priced at $0.06 for gross proceeds of $636,600. Each unit consisted of either one

flow-through or non flow-through common share and one non flow-through share purchase warrant

entitling the holder to purchase one additional share for a period of two years at a price of $0.10.

vii) On June 18, 2009, the Company closed a private placement for 1,893,000 flow-through and 200,000

non flow-through units priced at $0.06 for gross proceeds of $125,580. Each unit consisted of either one

flow-through or non flow-through common share and one non flow-through share purchase warrant

entitling the holder to purchase one additional share for a period of two years at a price of $0.10.

viii) On June 11 and 25, 2009, the Company closed private placements for 11,000,332 flow-through and

2,700,000 non flow-through units priced at $0.06 for gross proceeds of $822,020. Each unit consisted of

either one flow-through or non flow-through common share and one non flow-through share purchase

warrant entitling the holder to purchase one additional share for a period of two years at a price of $0.10.

ix) The Company incurred $200,226 share issuance costs pursuant to the private placements closed in the

year ended May 31, 2010.

Flow-Through Obligations

The Company has raised funds from the issuance of flow-through common shares whereby the Company has

agreed to incur those funds on Canadian Exploration Expenses (CEE”) and renounce, to the shareholders, the

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tax benefits associated with CEE incurred. As at August 31, 2010 the Company was committed to spend

approximately $299,207 by December 31, 2010, $81,413 by December 31, 2011, and $675,000 by December

31, 2012 on qualifying CEE. Subsequently, the Company spent an additional $57,389 towards CEE.

Other than for CEE expenditures, the Company does not have any capital resource commitments.

Related party balances consisted of the following: