Hinge Mine (L10 /L8/L13)

In the second quarter of 2013, the Company completed 6,788 metres of underground definition diamond drilling within the Hinge mine. In addition, the Company completed 5,366 metres of surface drilling and have intersected what is interpreted to be the possible downward extension of the L13 zone. Drilling is ongoing and results are pending.

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Geologic Modelling

In addition, as part of this extensive exploration campaign on the mine lease, the Company completed a comprehensive structural analysis and geologic modelling exercise that was designed to better define the controls on gold mineralization as an aid for exploration targeting. Information from historical underground workings at the Rice Lake mine, augmented from more recent mining at the 007 and Hinge mines and adjacent core drilling, was used to refine the previous geologic model. It is now interpreted that a number of east-northeast trending sub-parallel shear zones that transect the mine lease served as conduits for mineralizing fluids and deposited gold where these shears intersected other structures and/or favourable geologic horizons, such as more mafic and often more competent lithologies. Using this new geologic model, exploration targeting has identified and delineated a number of new “offset” targets adjacent to the existing mining areas. In the second quarter of 2013, in excess of 35,000 metres of diamond drilling was completed to test these targets. Initial drilling has returned encouraging results having intersected alteration of the host rock and associated quartz veining, thus validating the updated geologic model.

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Under an agreement dated June 3, 2011, the Company holds 20 claims covering 3,117 hectares under option from Cougar Minerals Corp (“Cougar”). The property is six kilometres east of the Rice Lake mine. The Company can earn an 80% interest in the claims. The Company must spend $1.5 million on exploration on the claims and undertake the purchase of $0.6 million worth of Cougar common stock during the four year period ending June 3, 2015. The Company is not in compliance with this option agreement and is in discussion with Cougar.

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Share-based compensation expense in the second quarter of 2013 of $0.05 million was significantly lower compared to the same quarter of 2012. The decrease in share-based compensation expense was due to no option grants in the quarter as well as the expiry of previously outstanding stock options.

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