MINERAL EXPLORATION ACTIVITIES

For the nine months ended September 30, 2008, the Company incurred expenditures of $3,755,292 on mineral properties and exploration compared to $2,206,288 in the same period of 2007.

James Bay Lowlands Properties

The announcement of the discovery of significant quantities of nickeVcopper mineralization in the James Bay Lowlands area by Noront Resources in early September 2007 sparked a staking rush into the area.

MacDonald Mines, due to its long term presents and infrastructure in the area was very well placed to acquire additional geologically favourable land positions throughout the area. Some of these claims were within 1.5 kilometers of the Noront discovery and are known to host favourable geology and geophysical signatures conducive to nickel sulphide deposits.

Due to the high cost of land acquisition and associated exploration work in this area it was decided to joint venture some of the newly staked ground with Temex Resources and Canadian Orebodies Inc. To date, MacDonald controls in excess of 600 square kilometers of land in the WebequiekJoront discovery area. Additional claims were staked onto both the McNugget and Big Mac claim groups which are 100% controlled by MacDonald Mines. Seven claim groups are now established as a 50150 joint venture with Temex while an additional three claim groups are in joint venture with Canadian Orebodies Inc. (SO%), Temex (25%) and MacDonald Mines (25%).

Additional claims have hen optioned from Coordinated Capital Corporation (CCC) and several claim groups have been acquired by MacDonald Mines over prominent magnetic targets located a significant distance to the west of its Big Mac and McNugget claims.

MacDonald Mines and its joint venture partners initiated extensive helicopter-borne geophysical surveys of the newly acquired properties. This work was contracted to Fugro Airborne Surveys and Geotech Ltd who commenced surveying in the latter part of October 2007. In excess of 10,000 kilometers of airborne survey work has been completed on all the new claim groups at 100 meter line spacing. This work has rapidly assessed the potential of the newly acquired claims to host nickel and or volcanogenic massive sulphide (VMS) deposits. Ground geophysical work commenced in the first quarter of 2008 in order to further define and prioritize drill targets.

On the Big Mac Property ten airborne geophysical anomalies defined fiom a previous 2004 AEM survey were selected for additional follow up work. The geological environment is favourable for nickel, massive sulphide and gold deposits and the area warrants additional exploration work over and above that which was completed in 2004 by MacDonald Mines.

An airborne EM survey was contracted to Geotech Ltd in early 2008 to survey the newly acquired contiguous claims to the northwest of the Big Mac Property. Initial results indicated 8 additional targets that warrant ground follow-up work. This work commenced in March 2008 under the direction of WSR Gold Inc. (see below).

McNugget Property, Ontario

The abundance of mineralization in the Sachigo Greenstone Belt has provided the foundation for our belief that finding additional economical mineral deposits other than the Noront nickelhopper discovery and the McFauld's Lake VMS deposit is achievable and that this potential prize remains worthy of our efforts and expenditures.

In March 2008 seven additional targets associated with the base of the geological sequence where ultramafic rocks are interpreted to be emplaced were selected for additional geophysical work in the form of HLEM, magnetometer and gravity. Target N1 was selected for additional surveying using a time domain EM system which achieves significantly deeper penetration than the HLEM system previously utilized. The TEM survey did not define any additional anomalies of significance and no additional work is contemplated for this area.

Additional claims have been staked contiguous to the southwest and southeast of the McNugget Property.

This newly acquired property has been flown by Geotech Ltd and interpretations reveal a number targets that will have to be followed up with diamond drilling..

In July 2008 the Company commenced another drill program to test AEM anomalies on the McNugget Property. Up to mid August, 17 drill holes totaling 2,620 meters were established on ten separate target areas. Assay results indicate that no mineralization of economic significance was encountered.

After a careful review and consultation with geophysicists and airborne geophysical specialists the Company elected to complete computer modeling of its priority anomalies using specialized computer sofhvare. The objective was to eliminate wherever possible the use of ground follow up geophysical surveys and go directly to drilling based on the airborne data.

Following a short break at the end of August the Company restarted its drilling program on the McNugget Property. An additional 16 holes were drilled on 11 separate target areas. Using the direct drilling from computer modeling technique has proven to be quite successful and cost effective. Significantly more sulphide ineralization has been intersected in the latter drilling campaign. Assays are pending from the above drilling.

Croal Lake and Reeb Lake Properties

MacDonald Mines identified several magnetic targets of some significance well to the west of the Big Mac and McNugget claims that were interpreted to be associated with favourable stratigraphy for nickel copper deposits. The areas were staked and subsequently flown by Geotech Ltd with their airborne geophysical system.

On the Croal Lake Property a total of 10 individual targets have been selected for ground follow up work while on the Reeb Lake Property a total of five targets have been selected for ground follow up work.

First Nations Community of Webequie

In

2007 and early 2008 the Company operated its base camp out of the First Nations Community of Webequie, which is about a 15 minute helicopter flight from the McNuggett Property. In co-operation with the Community, the Compauy had previously set up a permanent core building and storage area located near the airport.

In the first quarter of 2008 the Company elected to build an exploration camp within the bounds of the McNugget Property in order reduce helicopter costs and increase its overall efficiencies. This camp is now fully operational.

MINERAL PROPERTIES

The Attawapiskat James Bay Lowlands Properties are located in the Thunder Bay and Porcupine Mining

Division, Ontario, east of the First Nations Community of Webequie.

JOINT VENTURES

A.

MacDonald - Temex Resources

In a 50-50 joint venture with Temex Resources Corp, MacDonald has acquired a further 7 separate parcels of land totalling 97 claim blocks which represents approximately 24,000 hectares.

These claim groups are otherwise known as the York, Howe, Duncan, Bay, Pender, Hornhy and King Properties.

Airborne geophysical survey work was contracted to Fugro Airborne Surveys in the last quarter of 2007 to fly airborne EM and magnetometer surveys over the above properties at 100 meter line spacing. The hornby Property, which is located withim 5 kilometres to the east of the Noront nickel discovery, is underlain by several airborne EM anomalies which seemed to display coincident magnetic anomalies.

Several of these were drill tested in the latter part of the 2007 drill program. Initial interpretations are that these conductive zones which are caused by varying concentrations of sulphide mineralization are too high in the geological sequence to host nickel deposits.

Additional targets which are lower in the geological sequence have yet to be drill tested. On the western boundw of the Hornby West block the airborne survey has defmed an AEM response that exhibits a coincident magnetic response.. It is interpreted that this may be a south-westerly trending extension of the chromite horizon defmed on Freewest Resources' property located immediately to the north. MacDonald Mines will drill test this anomaly at some time in the future.

B. MacDonald

- Temex Resources - Canadian Orebodies Inc

In a 50-25-25 joint venture with Canadian Orebodies Inc. and Temex Resources Corp, MacDonald has acquired three separate parcels of land comprising over 50 claim blocks which represents approximately 12,500 hectares. These are now known as the Adelaide, Wellington and Richmond Properties

The properties were staked to reflect an interpreted optimum geological setting for nickelhopper deposits. This land acquisition strategy positions MacDonald with further

nickel-sulphide-potential properties, skilled and experienced business partners and strategic risk spreading for this important hut remote region of Ontario.

The Adelaide and Wellington Properties were flown by Fugro Airborne Surveys using their helicopterborne HeliGEOTEM system. Initial results indicate a number of favourable responses that will be followed up on the ground with HLEM and magnetometer surveys. The Richmond Property has subsequently been flown with the Geotech system. The data is still being processed.

On the Adelaide Property the airborne geophysical survey defmed 4 targets for subsequent ground follow p work. Two of the targets were tested with ground EM andlor magnetometer surveys on established

grids. Subsequent drilling of one hole on each target did not intersect any sulphides of economic significance. Two targets are located under lakes and will have to be drill tested in the winter months.

On the Wellington Properly, several high priority AEM targets with either direct or flanking magnetic association were defined from the airborne survey. These have subsequently been modeled using specialized software and a minimum of three drill targets have been defined. The Company will drill test these targets at some time in the future.

C. MacDnnald -WSR Gold Inc

On March 17,2008, WSR Gold Inc. (WSR) and MacDonald Mines Exploration Ltd, announced that they have executed the definitive agreement pursuant to their letter of intent dated February 15,2008, on the Big Mac Properties whereby WSR has an option to acquire up to 75% beneficial interest in the claims by:

1. Spending $2.5 million on the properly over two years;

2. Issuing to MacDonald 5,000,000 common shares of WSR;

3. Paying MacDonald $100,000; and

4. Issuing MacDonald 1,000,000 share purchase warrants of WSR, each full warrant is exercisable into one common shares of WSR within two years from the date of the agreement at $0.50 per warrant.

MacDonald Mines shall have a carried interest until WSR delivers a prefeasibility study to MacDonald Mines on the Big Mac Property. After the delivery of

a pre feasibility study, MacDonald Mines will berequired to pay a pro rata portion of costs related to the property to maintain its 25% interest.

The Big Mac Property includes 701 claim units, approximating 11,200 hectares, in the McFauld's Lake area of Ontario.

On March

3 1,2008 WSR announced that a 2,500 meter drill program had commenced on its recently acquired James Bay nickel and copper properties. Through three separate agreements WSR operates the exploration of 17 claim blocks on the northeast corner of the "Ring of Fire" on behalf of its partners, Noront Resources Ltd., Metallex Ventures Ltd. and MacDonald Mines Exploration Ltd. The agreements allow WSR an option to earn a 50% beneficial interest in both the Noront and Metallex claims and WSR has an option to earn a 75% interest in the MacDonald Mines claims Since mobilization on February 25,2008 WSR has:

1. Completed construction of a 20 person exploration camp with all the required equipment;

2. Mobilized an exploration team to the properties;

3. Reviewed geophysical flight data anipribritized exploration targets;

4.

Cut ground geophysics grids over selected targets and completed ground geophysical work;

5. Delineated a drill program and mobilized a drill to the properties.

A 2,500 meter drill program is currently undenvay on the prioritized exploration targets.

OVERALL PERFORRlANCE

Management has strived to keep overhead expenses to a minimum while continuing to explore and evaluate the Company's projects, and other potential mineral projects. The loss before provision of income taxes for the 9 months ended September 30,2008 was $619,112 ($0.00 per share) compared to a net loss of $1,020,217 ($0.01 per share) for the same period of the prior year.

For a discussion of trends that are reasonably likely to effect the Company's business, see "Liquidity and Capital Resources

- Trends" below.

LIQUIDITY

AND CAPITAL RESOURCES

On September 30, 2008 the Company had working capital of $8,547,933 and a cash and cash equivalent balance of $7,902,971.

For the 9 months ended September 30, 2008, the Company had a decrease in cash flow of $3,849,433 compared to an increase in cash flow of $750,039 for the prior period..

Operating activities

Funds used for operating activities for the 9 months ended September 30, 2008 were $610,017 compared to a net inflow of $106,199 in 2007.

Investing Activities

Funds used for investing activities for the 9 months ended September 30, 2008 were $3,704,491 compared to $2,129,569 in 2007. Included in investing activities were mineral properties and exploration costs in the amount of $3,755,292 (2007: $2,206,288).