Exploration Mining Processing

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CONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTS

(unaudited)

FOR

THE

NINE

MONTHS

ENDED

SEPTEMBER

30,

2012

(Canadian

dollars)

76;9:27&4;:0)LQIR#JZPJFDZZZJZPJFD

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CondensedConsolidatedInterimFinancialStatements

FinancialStatementsasatSeptember30,2012 (inCanadiandollars)

Notice to Reader

Management has compiled the unaudited condensed consolidated interim financial statements of Great Western Minerals Group Ltd. for the nine months ended September 30, 2012. The Company’s external auditors have not reviewed these condensed consolidated interim financial statements.

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CondensedConsolidatedInterimStatementsofFinancialPosition

Asat

September30December31

20122011

$ $

Assets

Cashandcashequivalents 54,603,419 10,930,208

Accountsreceivable(Note6) 5,412,472 2,686,651

Inventories(Note7) 5,355,166 4,634,114

Currentportionofescrowaccount(Note8) 7,079,040 Ͳ

Depositsandprepaidexpenses 989,359 764,148

Currentassets 73,439,456 19,015,121

Longtermportionofescrowaccount(Note8) 3,539,520 Ͳ

InvestmentinVaaldiamMiningInc.(Note9) Ͳ 51,143

Property,plantandequipment(Note10) 10,396,223 5,699,768

Mineralproperties(Note11) 61,986,084 48,381,570

Intangibleassets 756,072 881,279 Goodwill 2,105,015 2,082,476 NonͲcurrentassets 78,782,914 57,096,236 Totalassets 152,222,370 76,111,357 Liabilities

Accountspayableandaccruedliabilities 11,123,236 6,656,254

Incometaxpayable Ͳ 262,756

Currentliabilities 11,123,236 6,919,010

Convertiblebonds–debt(Note12) 53,853,199 Ͳ

Convertiblebonds–embeddedconversionoption(Note12) 22,609,936 Ͳ

Deferredincometaxes 311,807 339,077

NonͲcurrentliabilities 76,774,942 339,077

Shareholders’Equity

Sharecapital(Note13) 111,127,886 109,062,087

Warrants(Note13) 11,261,621 11,448,682

Sharebasedpaymentsreserve(Note13) 10,921,194 8,443,630

Accumulatedothercomprehensiveincome(loss) (5,333,277) (2,968,902)

Deficit (63,653,232) (57,132,227) Totalshareholders’equity 64,324,192 68,853,270 Totalliabilitiesandshareholders’equity 152,222,370 76,111,357

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

ApprovedbytheBoard

“IanMcNaughton” “RobertQuinn”

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CondensedConsolidatedInterimStatementsofComprehensiveLoss

ForthethreemonthsFortheninemonths

endedSep30,endedSep30,

2012201120122011 $ $ $ $ Sales 4,786,838 4,214,616 12,897,685 13,630,390 Costofsales 3,625,731 2,558,154 8,948,567 8,995,153 Grossmargin 1,161,107 1,656,462 3,949,118 4,635,237 Expenses

Generalandadministration 1,175,969 1,153,056 3,402,226 2,791,774

Wagesandbenefits 1,368,439 1,393,038 4,333,576 3,434,192

Stockbasedcompensation(Note13) 619,761 440,648 2,536,727 5,121,066

Propertyresearch (3,841) 67,873 30,149 431,336

Professionalfees 434,410 158,921 1,951,193 418,186

Investorrelations 59,357 83,654 180,122 403,542

Occupancy 456,142 352,849 1,448,978 969,690

Depreciationandamortization 244,462 219,121 732,282 618,734

Interestexpenseandfinancecosts 2,594,320 57,180 7,283,185 260,754 Gainondisposalofproperty,plantandequip (6,725) Ͳ (5,191) Ͳ

Writedownofmineralproperties Ͳ Ͳ Ͳ 165,359

Exchange(gain)loss 206,737 (150,934) (248,491) (140,086)

Totalexpenses 7,149,031 3,775,406 21,664,756 14,474,547

Other

Interestincome 46,514 72,604 145,426 258,766

Gainonconversionoption(Note12) 2,166,221 Ͳ 10,966,496 Ͳ

Otherincome(loss) 118,592 (23,960) 149,758 (111,627)

Lossbeforeincometaxes (3,656,597) (2,070,300) (6,433,958) (9,692,171)

Incometaxrecovery(expense) 28,685 (228,966) (87,047) (584,750)

Netloss (3,627,912) (2,299,266) (6,521,005) (10,276,921)

Othercomprehensiveincome(loss):

Unrealizedgainonavailablefor

saleinvestments (108,262) Ͳ Ͳ Ͳ Translationadjustment (2,188,888) (1,746,844) (2,364,375) 215,951 Othercomprehensiveincome(loss) (2,297,150) (1,746,844) (2,364,375) 215,951 Netlossandcomprehensiveloss (5,925,062) (4,046,110) (8,885,380) (10,060,970) Basicandfullydilutedlosspershare (0.009) (0.006) (0.016) (0.028) Weightedaveragenumberof sharesoutstanding 416,458,119 383,116,211 414,880,634 370,965,504

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CondensedConsolidatedInterimStatementsofCashFlows

Fortheninemonths

endedSep30, 2012 2011 $ $ Cashprovidedby(usedin) Operatingactivities

Netlossfortheperiod (6,521,005) (10,276,971)

Adjustmentfor:

Amortizationofproperty,plantand

equipmentandintangibleassets 732,282 618,734

Stockbasedcompensation(Note13) 2,536,727 5,121,066

Financecosts 7,277,223 Ͳ

Gainonconversionoptions(Note12) (10,966,496) Ͳ

Deferredincometax (27,270) 226,901 Loss(gain)ondisposalofproperty,plant&equip 5,191 Ͳ

Writedownofmineralproperties Ͳ 165,359

Foreignexchangegain (363,566) 29,674

VaaldiumMiningshares (108,262) Ͳ

Netchangeinworkingcapital(Note16) 400,483 299,581

(7,034,693) (3,815,656)

Investingactivities

Mineralproperties (13,961,677) (29,005,180)

Property,plantandequipment (4,715,225) (329,638)

ChangeinvalueofVaaldiumMiningshares 159,405 156,439

InvestmentinRareco Ͳ 5,501,552

(18,517,497) (23,676,827)

Financingactivities

Issuanceofsharecapital,netofissuancecosts 513,910 10,207,865

Demandloan Ͳ (1,499,956)

Issuanceofconvertiblebonds,

netofissuecosts 85,641,931 Ͳ

Interestandconvertiblebondcostspaid (5,755,243) Ͳ

Cashintrust Ͳ 14,778,030

Paymentinescrowforprepaidinterest(Note8) (10,618,560) Ͳ

69,782,038 23,485,939

Netincreaseincashandcash

equivalentsduringtheperiod 44,229,848 (4,006,544)

Exchangeratechangesonforeigncurrency

cashbalances (556,637) 143,696

Cashandcashequivalents,beginningofperiod 10,930,208 9,181,458

Cashandcashequivalents,endofperiod 54,603,419 5,318,610

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CondensedConsolidatedInterimStatementsofChangesinShareholders’Equity

Fortheninemonthsended Sep30, 20122011 $ $ Sharecapital(Note13) Beginningbalance 109,062,087 77,032,019

Exerciseofshareoptions 185,062 520,090

Exerciseofwarrants 575,072 13,878,952

Noncashshareissue 1,305,665 985,500

Shareissuecosts Ͳ (46,253)

Endingbalance 111,127,886 92,370,308 Warrants(Note13) Beginningbalance 11,448,682 15,599,177 Exerciseofwarrants (187,061) (3,771,102) Endingbalance 11,261,621 11,828,075 Sharebasedpaymentsreserve(Note13) Beginningbalance 8,443,630 3,380,019 Grantofoptions 2,536,727 5,121,066 Exerciseofoptions (59,163) (373,822) Endingbalance 10,921,194 8,127,263 Accumulatedothercomprehensiveincome(loss) Beginningbalance (2,968,902) (836,428)

Changeinfairvalueofavailableforsaleinvestments Ͳ Ͳ

Translationadjustment (2,364,375) 215,951 Endingbalance (5,333,277) (620,477) Deficit Beginningbalance (57,132,227) (43,091,646) Netloss (6,521,005) (10,276,921) Endingbalance (63,653,232) (53,368,567) Endofperiodshareholders’equity 64,324,192 58,336,602

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

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NotestotheRestatedCondensedConsolidatedInterimFinancialStatements

FinancialStatementsasatSeptember30,2012

(statedinCanadiandollars,unlessotherwisestated)

1

1.Natureandcontinuanceofoperations

GreatWesternMineralsGroupLtd.(the"Company"or“GWMG”)wasincorporatedundertheBusiness

CorporationsActofBritishColumbiaonSeptember30,1983.EffectiveDecember12,2007,theCompany’s

jurisdictionwascontinuedoutofBritishColumbiaintothefederaljurisdiction.Theregisteredofficeofthe

Companyis219RobinCrescent,Saskatoon,SKS7L6M8.

TheCompanyisanintegratedrareearthprocessorwhichmanufacturesspecialtyalloysusedinthemagnet,

battery,defenseandaerospaceindustries.Thesealloyscontainiron,nickel,cobaltandotherrareearth

elements.AspartoftheCompany’sverticalintegrationstrategy,in2011,theCompanyacquireda74%equity

interestintheSteenkampskraalrareearthformerproducingmineinSouthAfrica. Onceinproduction,the

mineisintendedtoprovidetherawmaterialneededtoproducetheCompany’sspecialtyalloys.TheCompany

alsoholdsinterestsinfouractiverareearthexplorationanddevelopmentpropertiesinNorthAmerica.

ThecondensedconsolidatedinterimfinancialstatementsoftheCompanyasatandfortheninemonthsended

September30,2012arecomprisedofGWMGanditssubsidiaries(collectively“theCompany”),LessCommon

MetalsLtd.(“LCM”),LCMGLimited(“LCMG”),GreatWesternTechnologiesInc.("GWTI"),GWUSInc.(“GWUS”),

andRareEarthExtractionCo.Limited("Rareco").ThedetailsofthesesubsidiariescanbefoundinNote20of

annualconsolidatedfinancialstatements.TheCompanyhasrecentlybecomepartytoajointventurecompany

inSouthAfrica,GreatWesternGQDRareEarthMaterialsCo.Ltd.(“GWGQD”),whichwillconstructandoperate

theseparationextractionfacilityfortheSteenkampskraalmine.Nosignificantactivityhasoccurredtodateat

GWGQD.

ThesefinancialstatementshavebeenpreparedonthebasisofInternationalFinancialReportingStandards

(“IFRS”)asapplicabletoagoingconcern,whichcontemplatestherealizationofassetsandthedischargeof

liabilitiesinthenormalcourseofbusinessfortheforeseeablefuture.FortheninemonthsendedSeptember

30,2012,theCompanyreportedalossof$6,521,005. AtSeptember30,2012,theCompanyhasan

accumulateddeficitof$63,653,232andhasworkingcapitalof$62,316,220.TheCompanyhasnotgenerated

positivecashflowfromconsolidatedoperations.

TheCompanyhasincurrednetcashlossesinitsexplorationandmanufacturingoperations,anditsabilityto

continueasagoingconcernisdependentuponthediscoveryofeconomicallyrecoverablemineralreserves,the

abilityoftheCompanytoobtainnecessaryfinancingtocompletetheirdevelopmentandfundtheiroperations

untilcommerciallysuccessful,andfutureproductionorproceedsfromthedispositionthereof.Management

continuestoactivelytargetsourcesofadditionalfinancingthroughallianceswithfinancial,explorationand

miningentities,orotherbusinessandfinancialtransactionswhichwouldassurecontinuationoftheCompany’s

operationsandexplorationprograms. WhiletheCompanyhasbeensuccessfulinraisingfinancingtodate,

therecanbenoassurancesthatitwillbeabletodosointhefutureorthatfutureproductiontogenerate

positivecashflowswillbesuccessful.

2.Statementofcomplianceandbasisofpresentation

These condensed consolidated interim financial statements have been prepared in accordance with

InternationalFinancialReportingStandards(“IFRS”),includingInternationalAccountingStandardNo.34– InterimFinancialReporting,asissuedbytheInternationalAccountingStandardsBoard(“IASB”)anddonot

includealloftheinformationrequiredforfullannualfinancialstatements.

TheseconsolidatedfinancialstatementswereauthorizedforissuancebytheCompany’sBoardofDirectorson

November28,2012.

TheCompany’scondensedconsolidatedinterimfinancialstatementshavebeenpreparedonahistoricalcost

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2

currencyofGWMGistheCanadiandollarandthefunctionalcurrencyofforeignsubsidiariesincludestheUK

sterling,theSouthAfricanrand,andtheUnitedStates(US)dollar.

Inpreparingthesecondensedconsolidatedinterimfinancialstatements,thesignificantjudgmentsmadeby

managementapplyingtheCompany’saccountingpoliciesandthesourcesofestimationarethesameasthose

disclosedinNote2oftheCompany’sconsolidatedannualfinancialstatementsfortheyearendedDecember

31,2011,exceptasotherwisedisclosedinthesefinancialstatements.

Certainpriorperiodbalanceshavebereclassifiedtoconformtothecurrentfinancialstatementpresentation.

3. Significantaccountingpolicies

TheaccountingpoliciesappliedbytheCompanyinthesecondensedconsolidatedinterimfinancialstatements

arethesameasthosedisclosedinNote3oftheCompany’sconsolidatedannualfinancialstatementsforthe

yearendedDecember31,2011.

4. Accountingstandards

a)Newstandardsandinterpretationsnotyetadopted

Anumberofnewstandards,interpretationsandamendmentstoexistingstandardsarenotyeteffective,

andhavenotbeenappliedinpreparingthesecondensedconsolidatedinterimfinancialstatements.The

Companyintendstoadoptthefollowingstandardsnolaterthantheaccountingperiodbeginningon

January1,2013:IFRS10ConsolidatedFinancialStatements,IFRS12DisclosureofInterestsinOtherEntities,

IFRS13FairValueMeasurement.TheCompanydoesnotexpecttheadoptionofthesestandardstohavean

impactonitsfinancialstatements.

TheCompanyintendstoadoptthefollowingstandardnolaterthantheaccountingperiodbeginningon

January1,2013:IFRS11JointArrangements.Theextentoftheimpactofadoptionofthisstandardhasyet

tobedetermined.

TheCompanyintendstoadoptthefollowingstandardnolaterthantheaccountingperiodbeginningon

January1,2015:IFRS9FinancialInstruments.Theextentoftheimpactofadoptionofthisstandardhasyet

tobedetermined.

5. Financialriskmanagement

TheCompany’sriskexposuresandtheimpactontheCompany’sfinancialinstrumentsaresummarizedbelow:

a) Creditrisk

TheCompany’screditriskisprimarilyattributabletocash,accountsreceivableandcashheldintheescrow

account.TheCompanyreducesitscreditriskbymaintainingitsbankaccountsatlargereputablefinancial

institutions.TheCompanyalsohascreditriskinrelationtotradereceivables.TheCompanyhasmitigated

thecreditriskthroughthesaletolargeinternationalcompanieswithhighcreditratings.Historicallevelsof

receivabledefaultsandoverduebalancesovernormalcredittermsarebothnegligible,thusthecreditrisk

associatedwithaccountsreceivablesisalsoconsideredtobenominal.Themaximumexposuretocredit

riskisequaltothefairvalueorcarryingvalueofthefinancialassets.

b) Liquidityrisk

LiquidityriskistheriskthattheCompanywillnotbeabletomeettheobligationsassociatedwithits

financialliabilities. TheCompanyensuresthatthereissufficientcapitalinordertomeetshortterm

businessrequirements,aftertakingintoaccountcashflowsfromoperationsandtheCompany’sholdingsof

cashandcashequivalentsaswellasthematurityoffinancialliabilities. TheCompany’scashand

equivalentsareinvestedinbusinessaccountsinvariouscharteredbanksandareavailableondemandfor

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3

ThefollowingtabledetailstheCompany’sexpectedremainingcontractualcashflowrequirementforits

financialliabilitieswithagreedrepaymentperiods. Theamountspresentedarebasedonundiscounted

cashflowsoffinancialliabilitiesandtherefore,donotequatetothecarryingamountsonthecondensed

consolidatedinterimstatementoffinancialposition.

Lessthan1

year 2to3years 4to5years

After5 years Total contractual cashoutflows atSep30, 2012 Total contractual cashoutflows atDecember 31,2011 $ $ $ $ $ $

Accountspayableand

accruedliabilities 11,123,236 Ͳ Ͳ Ͳ 11,123,236 6,919,010 Leases 787,363 2,214,213 1,355,704 5,450,162 9,807,442 9,265,500 Convertiblenotes Ͳ Ͳ 88,488,000 Ͳ 88,488,000 Ͳ Interestpayableon convertiblenotes 3,623,451 14,158,080 14,158,080 Ͳ 31,939,611 Ͳ Total 15,534,050 16,372,293 104,001,784 5,450,162 141,358,289 16,184,510

AsatSeptember30,2012,theCompanyhadliquidcashandcashequivalentsandfundsheldinescrowof

$65,221,979tosettleitscontractualliabilitiesof$141,358,289. Inmanagement’sopinion,theCompany

hastheabilitytomeetitsshortͲtermcontractualobligationsandcontinueitsplannedactivities. The

Companywillneedexternalfinancingtocompleteitsplanneddevelopmentactivitiesortorepayits

obligationsrelatedtotheconvertiblebondsinthefuture. TheCompanybelievesitwillbesuccessfulin

raisingtheadditionalfundstofinanceitplanneddevelopmentactivitiesandalsobelievesthatthecash

flowsfromitsfutureoperationswillbesufficienttomeetitsobligationsastheycomedue.Asignificant

portionoftheabovecommitmentsarebasedinUSdollars.A10%weakeningintheCanadiandollaragainst

theUSdollarwouldincreasetotalcontractualliabilitiesatSeptember30,2012by$10.3million.

c) Marketrisk

i) Interestraterisk

ThecashandthefundsheldinescrowbearinterestatavariablerateandtheCompanyistherefore

exposedtotheriskofchangesinfairvalueresultingfrominterestratefluctuations. Theconvertible

bondsbearinterestatafixedrateofinterestandarenotsubjecttochangesinmarketinterestrate.The

fairvalueoftheembeddedconversionoptionintheconvertiblebondsisexposedtointerestraterisk,

asthevaluationtechniquerequiresaninterestrateasaninputintothevaluationmodel. The

Company’sotherfinancialassetsandliabilitiesdonotcompriseanyinterestraterisksincetheydonot

bearinterest.FluctuationsofmarketinterestrateshavenomaterialimpactontheCompany’sfinancial

results.TheCompanyhasnotenteredintoanyderivativecontractstomanageinterestraterisk.

ii) Pricerisk

TheCompanyisexposedtopriceriskwithrespecttothemarketpriceofrareearthoxides(“REOs”).

ThefluctuationinthepriceofREOsmayhaveapotentialadverseeffectontheCompany’sabilityto

financetheSteenkampskraalproject(“SKK”)andmayinfluencethecourseofactiontakenindeveloping

theprojectorcontinuedexplorationonvariousotherprojects.

TheCompanyisalsosubjecttopriceriskforchangesinthefairvalueoftheembeddedconvertible

optionintheCompany’sconvertiblebondsduetochangesintheCompany’sshareprice(Note12).

iii) Foreigncurrencyrisk

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4

financialassetsandliabilitiesinforeigncurrencieswhichareprimarilydenominatedinUSdollars.The

Company’sforeignsubsidiariestransactpredominatelyintheirfunctionalcurrencywhichlimitstheir

exposure. TheUSdollarnotionalamountsoftheCompany’sforeigncurrencydenominatedfinancial

assetsandliabilitiesareasfollows:

Sep30 2012 US $

Cashandcashequivalents 46,089,578

Receivables Ͳ

Fundsheldinescrow 10,800,000 Accountspayableandaccruedliabilities (3,541,445) ConvertiblebondsͲdebt (53,853,199) Netfinancialasset(liability) (505,066)

TheimpactofcurrencyriskontheCompany’sstatementoflossandcomprehensivelossisaresultofthe

retranslationofmonetaryfinancialinstrumentsincludingcashandcashequivalents,receivables,funds

heldinescrow,accountspayableandaccruedliabilities(includingaccruedinterestonconvertiblebonds)

andconvertiblebonds. Theembeddedconversionoptionintheconvertiblebondsisnotsubjectto

currencyriskgiventhatitisfixedataspecifiedrate(Note12).

IftheCanadiandollarstrengthenedorweakenedby10percentagainsttheUSdollaratSeptember30,

2012,theCompany’slossandcomprehensivelosswouldhaveincreasedordecreasedby$0.05million,

respectively.

d) Fairvalueoffinancialinstruments

TheCompany’sfinancialinstrumentsconsistofcash,receivables,fundsheldinescrow,investments,

accountspayableandaccruedliabilitiesandconvertiblebonds.

Thefairvaluesofcash,accountsreceivable,fundsheldinescrowandaccountspayableandaccrued

liabilitiesapproximatetheircarryingvaluesbecauseoftheshortͲtermnatureoftheseinstruments.

Theconvertiblebondsarebrokenintotwocomponents. Theconvertiblebondsarebrokenintoadebt

component(carriedatamortizedcost)andanembeddedconversionoption(carriedatfairvaluethrough

profitandloss).Thefairvalueoftheembeddedconversionoptionisbasedontheassumptionsdisclosedin

Note12.

e) Capitalriskmanagement

Whenmanagingcapital,theCompany’sobjectiveistoensuretheentitycontinuesasagoingconcernas

wellastomaintainappropriatereturnstoshareholders. TheCompanyadjustsitscapitalstructureas

necessaryinordertosupporttheacquisition,explorationanddevelopmentofitsprojects.TheCompany

considersitscommonshares,warrants,shareoptionsandconvertiblebondsassourcesofcapital.

TheCompanyisnotexposedtoanyexternallyimposedcapitalrequirements,exceptasrequiredunderthe

termsoftheconvertiblebonds.UnderthetermsofthebondagreementtheCompanyisnotpermittedto

grantsecurityoveranyofitsassets,disposeofanyassets,declaredividendsonitscommonsharesfora

threeyearperiodfromdateoftheissuanceoftheconvertiblebonds,norbecomepartytoadditional

indebtedness(exceptinlimitedcircumstances).

TheBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheCompany’s

capitalriskmanagement.TheBoardofDirectorsdeterminedthataddingconvertiblebondstoitscapital

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5 6. Accountsreceivable Sep30 Dec31 2012 2011 $ $ Tradereceivables 4,377,684 920,413 Receivablesduefromrelatedparties Ͳ 470,278 GST/VATreceivables 682,501 1,292,670 Otherreceivables 352,287 3,290 Total 5,412,472 2,686,651 7. Inventories Sep30 Dec31 2012 2011 $ $ Material 2,950,745 2,281,096 WorkInProgress 1,448,182 1,023,439 FinishedGoods 956,239 1,329,579 Total 5,355,166 4,634,114 8. Escrowaccount

Asaconditionoftheconvertiblebondoffering(Note12),US$10,800,000istoremaininescrowtomeetthe

firstthreescheduledinterestpaymentswhichcommenceOctober5,2012andarepayablesemiͲannually.The

currentportionrepresentstheinterestthatwillbepaidwithina12monthperiodfromSeptember30,2012.

Sep30 Dec31

2012 2011

$ $

Fundsheldinescrow(US$10,800,000convertedtoCanadian) 10,618,560 Ͳ Less:currentportionofescrowaccount (7,079,040) Ͳ LongͲtermportionofescrowaccount 3,539,520 Ͳ

9. InvestmentinVaaldiamMiningInc.

OnJune28,2012,theCompany’sinvestmentinVaaldiamMiningInc.(“Vaaldiam”)wasacquiredbyBCKP

Limitedfor$0.265pershareinaccordancewithanapprovedplanofarrangement.Inthethirdquarterof2012,

theCompanysurrendereditssharecertificatestobeexchangedforcashof$159,405.Includedinotherincome

atSeptember30,2012was$108,262gainrelatedtotheCompany’sinvestmentofVaaldiamthathadbeen

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6 10. Property,plantandequipment

Computer Equipment Furniture Motor Vehicles Plant Equipment Leasehold ImproveͲ ments AssetsUnder Construction Total $ $ $ $ $ $ $ Cost Dec31,2011 218,300 1,254,056 402,620 5,451,188 439,040 3,212,417 10,977,621 Additions 39,255 204,255 32,690 227,892 Ͳ 4,211,134 4,715,225 Capitalizedinterest Ͳ Ͳ Ͳ Ͳ Ͳ 608,937 608,937 Disposals Ͳ Ͳ (51,765) Ͳ Ͳ Ͳ (51,765) Effectof movementsin exchangerates (3,447) 4,232 (26,490) (59,199) (16) 14,233 (70,687) Balance Sep30,2012 254,108 1,462,543 357,055 5,619,881 439,024 8,046,721 16,179,332 Accumulated Depreciation Dec31,2011 132,081 1,148,776 40,057 3,742,620 214,319 Ͳ 5,277,853 Additions 25,994 51,002 11,494 404,159 14,891 Ͳ 507,540 Disposals Ͳ Ͳ Ͳ Ͳ Ͳ Ͳ Ͳ Effectof movementsin exchangerates (1,370) 20,240 (1,924) (19,797) 567 Ͳ (2,284) Balance Sep30,2012 156,705 1,220,018 49,627 4,126,982 229,777 Ͳ 5,783,109 NetBookValue Dec30,2011 86,219 105,280 362,563 1,708,568 224,721 3,212,417 5,699,768 NetBookValue Sep30,2012 97,403 242,525 307,428 1,492,899 209,247 8,046,721 10,396,223 11. Mineralproperties Douglas River Hoidas Lake SKK Benjamin River Red

Wine Other Total

$ $ $ $ $ $ $ Balance Dec31,2011 1,385,319 12,215,668 28,953,755 1,365,468 3,349,988 1,111,372 48,381,570 Expenditures Acquisition Ͳ Ͳ 1,305,665 Ͳ Ͳ Ͳ 1,305,665 PreͲfeasibility Ͳ 210 Ͳ Ͳ Ͳ Ͳ 210 Geology 11,520 Ͳ 84,802 Ͳ 8,739 191,699 296,760 Exploration 13,032 119,517 12,211,549 91,971 508,121 530,224 13,474,414 Capitalizedinterest Ͳ Ͳ 190,293 Ͳ Ͳ Ͳ 190,293 Effectof movementsin exchangerates Ͳ Ͳ (1,662,828) Ͳ Ͳ Ͳ (1,662,828) Writedowns Ͳ Ͳ Ͳ Ͳ Ͳ Ͳ Ͳ Balance Sep30,2012 1,409,871 12,335,395 41,083,236 1,457,439 3,866,848 1,833,295 61,986,084

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7 a) DouglasRiver

TheCompanyowns100%interestsinthreemineraldispositionsintheDouglasRiverareaofSaskatchewan

totaling1,405hectares(“ha”),whichitacquiredbystaking.TheCompanyisawaitingdrillingresultsbefore

furtherworkisconductedonthisproperty.

b) HoidasLake

TheCompanyholdsa100%interestintheHoidasLakerareearthproperty.Thepropertyconsistsof14

claimstotaling12,522ha.Thepropertyissubjecttoa1.8%netsmelterreturnsroyalty,toamaximumof

$1,000,000.TheCompanyannounceditintendstodoaPreliminaryEconomicAssessmentonthisproperty

inthefuture.

c) Steenkampskraal(SKK)

OnDecember22,2008,theCompanyenteredintoanOptionAgreementwithRarecotorefurbish,

recommission,andoperatetheabandonedSKKundergroundrareearthelement(“REE”)mineinthe

WesternCape,SouthAfrica.Afteraseriesoftransactions,onJuly12,2011theCompanyacquired100%of

thesharesofRareco.Inaddition,onMarch2,2012,theCompanyissued2,072,484commonshareswitha

fairvalueof$0.63persharetoaformershareholderofRarecoasadditionalconsideration.

TheCompanyiscurrentlyrefurbishingtheundergroundmineinordertocompletecertainexplorationwork

aswellaspreliminarydesignandengineeringwork necessarytocomplete aPreliminaryEconomic

Assessmentreportonthispropertybeforedevelopmentcommences.

d) BenjaminRiver

TheCompanyenteredintoanOptionAgreementwithathirdpartytoacquirea100%workinginterestina

REEproperty(the“BenjaminRiverProperty”)intheProvinceofNewBrunswick,approximately53kmeastͲ

northeastofthecityofBathurst.TheBenjaminRiverPropertycovers481claimstotaling10,434haand

hostsanapatiteͲdiopsideͲmagnetitevein.Aspartoftheagreementandinadditiontotheconsideration

previouslygivenup,theCompanymustpay$100,000cashinNovember2012,andafinalpaymentof

$300,000cashinNovember2013.Uponcompletionoftheprescribedpayments,theCompanywillown

100%oftheproperty,subjecttoa2%netsmeltersroyaltypayabletothevendor.

e) RedWine

InJulyof2011,theCompanyfulfilledtherequirementsofanoptionagreementtoacquirea50%working

interestinAlterraResourcesInc.’s(Alterra)RedWineproperty,locatedapproximately100kmnorthͲeastof

ChurchillFalls,Labrador.TheRedWinePropertycomprises10,025haheldunder401claims,allofwhich

areingoodstanding.

TheCompanyandAlterra,whichistheoperator,haveajointarrangementforthedevelopmentand

exploitationoftheRedWineProperty.

Oncommencementofcommercialproduction,theCompanywillhaveathreeyearrenewablerightto

marketAlterra’sshareofproductionofREE,niobiumandtantalumfromtheRedWineProperty.Alterra

willretaintheoptiontorenewsuchmarketingagreementeverythreeyears.

12. Convertiblebonds

OnApril5,2012,theCompanycloseditsofferingofUS$80millionofsecuredconvertiblebondstogetherwith

anadditionaloverͲallotmentoptionofUS$10millionforatotalissuanceofbondsinaggregateprincipal

amountofUS$90million.Thebondshaveatermof5years,matureonApril6,2017andbearinterestat8%

perannum,payablesemiͲannually,commencingOctober5,2012. ThefirstthreesemiͲannualinterest

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8

advancetheminingandprocessingprojectsinSouthAfrica,advancethecapitalexpansionatLCMandfor

generalworkingcapital.

ThebondsaresecuredagainstthesharesofthemajorityoftheCompany’ssubsidiarieswhichholdtitletothe

Company’smajorassets,butexcludetheCanadianexplorationpropertiesheldbytheCompany.

AfterApril5,2015,theCompanyhastherighttoredeemallofthebondsifthevolumeweightedaverageprice

duringaspecifiedperiodpriortoredemptionofacommonshareisatleast130percentoftheconversion

price.

ThebondsareconvertiblebytheholderintocommonsharesoftheCompanyataconversionrateof$0.66per

share ata fixed foreign exchange rateof C$1.00=US$1.0072. Intheevent,theCompanyhasnot

commissioneditsSeparationExtractionFacilityandproducedaleast500metrictonnesofREOswithin30

monthsoftheclosingdate(the“ResetDate”),theconversionratewillbereducedtothehigherof(i)the20

dayvolumeweightedaveragepriceofacommonshareprecedingtheResetDate;and(ii)83.34percentofthe

conversionpriceontheclosingdate,providedthatsuchadjustedconversionpricewillnotbegreaterthanthe

originalconversionpricewhichissubjecttochangeforcertainevents.

Duetothevariableconversionfeatureoftheconvertiblebonds,thefinancialinstrumentisconsideredtobea

hybridinstrumentthatcontainsanembeddedderivative.Asaresult,theconversionoptionofthebond(the

embeddedderivative)isbifurcatedfromthedebtportionofthebond. Eachcomponentofthebondis

describedbelow.

Convertiblebonds–embeddedconversionoption

Theconversionoptionisanembeddedderivativethatmustbefairvaluedthroughprofitandlossandwillbe

revaluedeveryreportingperiod.ThefairvalueoftheconversionoptionwasdeterminedusingtheBlackͲ

ScholesvaluationmethodasitisconsideredaLevel2financialinstrumentinthefairvaluehierarchy.

AssumptionsusedinthepricingmodelforApril5,2012andSeptember30,2012areasfollows:

Assumption April5,2012 Sep30,2012

Strikepriceofconversionoption $0.66 $0.66

Marketpricepershare $0.47 $0.375

Riskfreerateofinterest 1.64% 1.32%

Dividendyield 0.00% 0.00%

Volatilityfactor 72.5% 72.5%

Expectedlife(inyears) 5.00 4.52

Fairvalue(C$) $33,576,432 $22,609,936

Thechangeinfairvalueof$10,966,496hasbeenrecognizedinprofitandlossfortheperiodendingSeptember

30,2012.

ThefollowingtableillustratesthesensitivityofchangestothekeyassumptionsintheBlackͲScholesmodelon

thefairvaluedeterminationoftheconversioncomponentofthebonds.Allothervariableswereheldconstant

withtheApril5,2012assumptionsindeterminingthesensitivities. 10%increase 10%decease Increase in fairvalue Decrease in fairvalue Marketprice $5,144,776 $(5,009,387) Volatilityfactor $3,249,332 $(3,384,721)

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9

ThefairvalueasdeterminedasofApril5,2012oftheembeddedconversionoptionwouldhaveincreasedby

$2,436,999ifastrikepriceof83.34%oftheoriginalconversionpriceof$0.66wasusedinsteadofthe$0.66

conversionprice.

Transactioncostsrelatingtotheconvertiblebondswereallocatedtothedebtcomponentandtheembedded

conversationoptionbasedonthevalueassignedtotheinstruments.Totaltransactioncostsallocatedtothe

embeddedconversionoptionwere$2,236,034andwerechargedtofinancecoststhroughprofitandloss.

ConvertiblebondsͲdebtcomponent

Thedebtcomponentisdeterminedbytakingthefacevalueofthebondslessthefairvalueoftheembedded

conversionoptionofUS$33,818,182andtheallocatedtransactionscostsofUS$3,741,447.Thedebtportionof

theconvertiblenoteswillbecarriedatamortizedcostusingtheeffectiveinterestratemethod.Thediscount

totalingUS$37,559,629willbechargedtofinancecostsandaccretedtotheliabilityoverthetermofthebonds

untiltheamortizedcostequalsthefacevalueofUS$90million. Theeffectiveinterestratetoaccretethe

discountedamountoverthelifeoftheconvertiblebondsis21.38%.

Since the debt was raised for specific purposes, capitalization of interest will commence only when

expendituresforaspecificassethascommenced. Duringtheperiod,financecharges(includinginterest,

amortizationofbondissuecostsandtheamortizationofthediscountrelatedtotheembeddedconversion

option)were$5,755,243. Ofthisamount,$190,293wascapitalizedtomineralproperties,$608,937was

capitalizedtoproperty,plantandequipmentand$4,936,013wasexpensed.

Summaryofcomponentsoftheconvertiblebondscarryingvalues

Amount

Facevalueofconvertiblebondsissued(US$)

$

90,000,000

Embeddedconversionoption(US$) (33,818,182) Transactioncosts(US$) (3,741,447) Amortizationofdiscount(US$) 2,316,181 Foreignexchangeeffects (903,353)

Convertiblebonds– debtcomponent 53,853,199

Accruedinterest

Interestexpense 3,519,208

Interestpaid Ͳ

Foreignexchangegain (66,619)

Accruedinterestincludedinaccruedliabilities 3,452,589

Fairvalueofembeddedconversionoption(US$) 33,818,182

ForeignexchangeeffectonApril5,2012 (241,750) Changeinfairvalueofembeddedconversionoption (10,966,496)

ConvertiblebondsͲembeddedconversionoption 22,609,936

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10 13. Sharecapitalandsharebasedpayments

a) Sharecapital

TheCompanyhasanunlimitednumberofcommonshares,withoutparvalue,authorizedforissuance.The

followingtablesummarizestheCompany’ssharecapitalactivityfortheperiodendingSeptember30,2012. CommonShares Numberof Amount Shares $ Balance–Dec31,2011 412,255,802 109,062,087 Sharesissued:

formineralproperties 2,072,484 1,305,665 onexerciseofwarrantsandbrokerwarrants 1,904,888 575,072 onexerciseofoptions 505,000 185,062

cashissuecosts Ͳ Ͳ

Balance–Sep30,2012 416,738,174 111,127,886

During2012,theCompanyissuedthefollowingshares:

x OnMarch2,2012theCompanyissued2,072,484commonshareswithafairvalueof$0.63pershare

toaformershareholderofRareco.

x Inaddition,in2012theCompanyissued1,904,888commonsharesduetowarrantconversionsfor

grossproceedsof$575,072,andissued505,000commonsharesduetoshareoptionexercisesfor

grossproceedsof$185,062.

b) Shareoptionplan

TheCompanyhasestablishedaStockOptionPlan(“shareoptionplan”)underwhichoptionsmaybe

grantedtodirectors,officers,employees,consultantsandmembersofthetechnicaladvisorycommittee.

Optionsgrantedhaveanexercisepriceofnotlessthanthemarketpriceofthecommonsharesontheshare

exchangeonwhichthesharesaretradedandareexercisableintoonecommonshare.Certainoptionsvest

immediatelywhilethemajorityvestafterfourmonths.

Stockbasedcompensation

ThefairvalueofshareoptionsissuedintheyearisestimatedusingtheBlackͲScholesoptionpricingmodel,

withassumptionsbeingmadeforeachofthefollowingvariables:riskͲfreerate,volatilityfactor,dividend

yield,weightedͲaverageexpectedoptionlifeandexpectedforfeiturerate.Theexpensefortheninemonth

periodendedSeptember30,2012of$2,536,727(September30,2011Ͳ$5,121,066)wasdeterminedbased

onthevestingrequirementsoftheoptionsgrantedandusingtheassumptionsdescribedbelowto

determinetheoptionsfairvalue. Informationregardingthefairvalueassumptionsusedtocalculatethe

September30,2011comparativenumbercanbefoundinNote19oftheconsolidatedannualfinancial

statements.

Inthefirstquarterof2012,theCompanygranted4,000,000shareoptionstoemployees.Thegranthasa

strikepriceof$0.58exercisableover5years.Thegrantwasintwotranches,300,000issuedtoconsultants

and3,700,000issuedtoemployees.Assumptionsusedinthepricingmodelwere:anexpectedlifeofthe

optionsof1yearand5years;riskfreeratesof0.95%and1.26%;anannualizedvolatilityrateof80.73%and

112.1%;forfeitureratesof10.19%and19.9%;andadividendrateofnil.

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11

Inthesecondquarterof2012,theCompanygranted4,500,000shareoptionstoemployees,officersand

directors.Thegranthasastrikepriceof$0.63exercisableover5years.Assumptionsusedinthepricing

modelwere:anexpectedlifeoftheoptionsof5years;riskfreerateof1.62%;anannualizedvolatilityrate

of111.93%;forfeiturerateof19.9%;andadividendrateofnil.

Optionsoutstanding

Foroptionsoutstanding,weightedaverageexercisepricesareasfollows: Numberof Options Average Price $ Balance–Dec31,2011 30,310,000 0.57 Optionsgranted 8,500,000 0.61 Optionsexercised (505,000) 0.28 Optionslapsed Ͳ Ͳ Balance–Sep30,2012 38,305,000 0.58

TheoptionsoutstandingatSeptember30,2012haveanexercisepriceintherangeof$0.18to$1.05anda

weightedaveragecontractuallifeof2.94years.TheoptionsexpirebetweenOctober5,2012andApril17,

2017.AlloptionsareexercisableasofSeptember30,2012.Includedintheoptionoutstandingbalanceat

September30,2012are1,400,000optionswithanexercisepriceof$0.18thatweretohavepreviously

expired.TheseoptionshavebeenextendedinaccordancewiththetermsoftheCompany’sapprovedstock

optionplan.

c) Warrants

Oncertainissuesofcommonshares,theCompanyhasattachedwarrantsentitlingtheholdertoacquire

additionalcommonsharesoftheCompany.Asummaryoftheoutstandingwarrantsisasfollows:

Numberof Warrants Average Price $ Balance–Dec31,2011 55,555,077 0.46 Granted Ͳ Ͳ Exercised (1,099,888) 0.14 Expired Ͳ Ͳ Balance–Sep30,2012 54,455,189 0.46

Fromtheabovebalance,42,650,086ofthewarrantswillexpireonOctober19,2012andhaveanexercise

priceof$0.45(Note18). Theremainingwarrantshaveanexercisepriceof$0.50andexpirebetween

November6,2014andJanuary25,2015.

d) Brokerwarrants

Oncertainissuancesofcommonshares,theCompanygrantedeitherbrokerunitwarrantsorbroker

warrantsaspartialconsiderationtotheagentforservicesassociatedtosuchshareissues.

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12

Asummaryoftheoutstandingbrokerwarrantsisasfollows: Numberof Broker Warrants Average Price $ Balance–Dec31,2011 5,932,273 0.43 Granted Ͳ Ͳ Exercised (805,000) 0.28 Expired Ͳ Ͳ Balance–Sep30,2012 5,127,273 0.45

TheabovebrokerwarrantsexpireonOctober19,2012.

Thefairvalueofcertainshareoptions,warrantsandbrokerwarrantshavebeenvaluedusingtheBlackͲScholes

optionpricingmodel. ThefairvalueonthegrantofthesesecuritiesisaddedtowarrantsorshareͲbased

paymentsreserve.Uponexercise,thecorrespondingamountrelatedtothesecurityisremovedfromwarrants

orshareͲbasedpaymentsreserveandaddedtosharecapital.

14. Commitmentsandcontingencies

TheCompanyhasprovidedanindemnificationtosubscribersofflowͲthroughsharesinanamountequaltothe

incometaxthatwouldbepayablebysubscribersintheevent,andasaconsequenceoftheCompanynot

incurringandrenouncingqualifyingCEEasrequiredunderthesubscriptionagreement.Companiesmustpay

PartXII.6taxinrespectofeachmonthintheyearofrenunciationequaltothebalanceoffundsinrespectof

therenunciationthathavenotbeenspentonqualifyingCEEtimesthecurrentprescribedinterestrate.Iffunds

remainunspentattheendoftheyear,thereisanextrataxlevyof1/10oftheunspentbalance.

TheCompanyisliableforanytaxthatwillbepayablebysubscribersasaresultofnotincurring$3,569,574of

qualifyingCEEbyDecember31,2009.

TheCompanyrecordedaliabilityof$1,570,745,representingtheestimatedamountpayabletoindemnifythe

subscribersforthereducedrenunciations. Estimatedinterestrelatingtotheindemnificationofsubscribers

since2009of$193,141isaccruedatSeptember30,2012.

TheCompany’sguaranteewiththeHSBCBankasdisclosedinNote21oftheconsolidatedannualfinancial

statementsremainsineffectatSeptember30,2012.

15. Relatedpartytransactions

TheCompanytransactswithkeyindividualsfrommanagementandwithitsdirectorswhohaveauthorityand

responsibilitytoplan,directandcontroltheactivitiesoftheCompany.Thenatureofthesedealingswerein

theformofpaymentsforservicesrendered,compensationandloans.Keymanagementpersonnelaredefined

astheofficersanddirectorsoftheCompanyincludingExecutiveChairman,PresidentandChiefExecutive

Officer,VicePresidentofFinanceandChiefFinancialOfficer,VicePresidentofExploration,VicePresidentof

Operations,VicePresidentofOperationsSouthAfrica,VicePresidentofCorporateDevelopmentandVice

PresidentCorporateandLegalAffairs,andCorporateSecretary.

a) Servicesrendered

Duringtheyearlegalserviceswererenderedbylawfirms,ofwhichadirectororofficeroftheCompanyisa

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13

establishedandagreedtobytherelatedparties.Alloutstandingbalancesaresettledincashbytheirdue

dates.

Sep30 Sep30

2012 2011

$ $

Legalservicesrenderedbyrelatedparties 257,446 65,433

Totallegalservicesrenderedduringtheperiod

(includedinprofessionalfees,bondissuecostsandmineralproperties) 3,327,899 181,744

b) Managementcompensation

Duringtheperiod,salaries,bonuses,management,consultingfeesandoptionswerepaidorgrantedto

directors,officersandcompaniescontrolledbycommondirectors.

Sep30 Sep30

2012 2011

$ $

Thefollowingsummarizesthecompensationexpenseforrelatedparties

Includedinmineralproperties 167,400 173,415 Includedinmanagementfees 599,597 342,537 Includedinbenefits 9,687 8,433 Includedinsalaries 868,242 622,106 Includedinstockbasedcompensation 2,258,689 330,119 Total 3,903,615 1,476,610

Theabovetransactionswereinthenormalcourseofoperationsandaremeasuredattheexchange

amount,whichistheamountofconsiderationestablishedandagreedtobetherelatedparties.Thefair

valueofsharebasedpaymentswasdeterminedusingtheBlackͲScholesmodel(Note13).

c)Accountspayable

AtSeptember30,2012amountstotaling$48,274wereduetocontractorswhowerealsoofficersofthe

Company.

16. Statementofcashflows

DuringtheninemonthperiodendedSeptember30,netchangesinnonͲcashworkingcapitalitemsrelatedto

operationsincludedthefollowing:

Sep30 Sep30

2012 2011

$ $

Accountsreceivable (2,725,821) 71,386

Inventories (721,052) (2,766,870)

Depositsandprepaidexpenses (225,211) (96,465)

Accountspayableandaccruedliabilities 4,466,982 2,558,354

Incometaxespayable (262,756) 501,128

Foreignexchangedifferencesinworkingcapital (131,659) 32,048

Total 400,483 299,581

17. Segmentinformation Businesssegments

TheCompanyhasonereportablesegmentanditsremainingcostsarenotseparatelyreportable. The

manufacturingservicessegmentinvolvesthemanufacturingandsupplyofrareearthbasedalloys,highpurity

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14

businessactivitiessegmentsthatarenotreportableandincludetheCompany’sheadofficeactivitiessuchas

financing as well as exploration activities. The Company’s policy is to capitalize exploration related

expendituresandaccordinglyhaveminimalimpactonthecompany’sprofitandloss,exceptinthecaseof

mineralpropertyimpairmentsandthereversalthereof.

Accountingpoliciesusedineachsegmentareconsistentwiththepoliciesoutlinedinthemostrecentannual

consolidatedfinancialstatements. Segmentedinterestincomeandexpenseincludetransactionsbetween

segmentsandareeliminatedonconsolidation.BelowisasummaryoftheCompany’ssegmentedlossforthe

ninemonthperiodendingSeptember30,2012withcomparativeinformation.Additionaldisclosurehasbeen

providedregardingtheCompany’ssegmentedassetsduetothesignificantchangesincethelastannual

financialstatements.

Segmentedprofitandloss

FortheninemonthsendedSep30,2012 Manufacturing Services AllOther Segments Total $ $ $ Sales 12,897,685 Ͳ 12,897,685 CostofSales 8,948,567 Ͳ 8,948,567 GrossMargin 3,949,118 Ͳ 3,949,118 Expenses Generalexpenses 3,495,110 10,387,861 13,882,971

Depreciationandamortization 577,131 155,151 732,282

Interestexpense 785,741 7,281,535 8,067,276

Foreignexchange(gain)loss 269,151 (517,642) (248,491)

Loss(gain)ondisposalofassets Ͳ (5,191) (5,191)

Totalexpenses 5,127,133 17,301,714 22,428,847

Otherincome

Interestandotherincome 255,116 824,159 1,079,275

Gainonembeddedconversionoption Ͳ 10,966,496 10,966,496

Lossbeforeincometaxes (922,899) (5,511,059) (6,433,958) Incometaxrecovery(expense) (83,663) (3,384) (87,047)

Netloss (1,006,562) (5,514,443) (6,521,005)

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15

FortheninemonthsendedSep30,2011

Manufacturing Services AllOther Segments Total $ $ $ Sales 13,630,390 Ͳ 13,630,390 CostofSales 8,995,153 Ͳ 8,995,153 GrossMargin 4,635,237 Ͳ 4,635,237 Expenses Generalexpenses 3,081,136 10,488,650 13,569,786

Depreciationandamortization 575,546 43,188 618,734

Interestexpense 441,124 151,201 592,325

Foreignexchange(gain)loss (80,052) (60,034) (140,086)

WriteͲdownofmineralproperties Ͳ 165,359 165,359

Totalexpenses 4,017,753 10,788,364 14,806,118

Otherincome

Interestandotherincome Ͳ 478,710 478,710

Income(loss)beforeincometaxes 617,484 (10,309,654) (9,692,171) Incometaxrecovery(expense) (584,750) Ͳ (584,750)

Netgain(loss) 32,734 (10,309,654) (10,276,921) Segmentedassets Sep30 2012 Dec31 2011 $ $ ManufacturingServices 18,888,877 17,670,650 Allothersegments 133,333,493 58,440,707

Totalassets 152,222,370 76,111,357

Allothersegmentsassetsincreasedsignificantlywhichpredominatelyrelatedtotheproceedsreceivedfrom

theissuanceoftheconvertiblebondsthatwillbeusedtofundexplorationanddevelopmentactivitiesaswell

asothercorporatematters.

18. Eventsafterthereportingdate

OnOctober11,2012,theCompanyreceivedapprovalfortheextensionoftheexpirydateof42,650,086

warrantshavinganexercisepriceof$0.45perwarrant.ThewarrantsweresettoexpireonOctober19,2012

andhavebeenextendedtoDecember15,2012.Theexercisepriceofthewarrantsremainsunchanged.

Exploration Mining Processing

CONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTS

(unaudited)

FOR

THE

NINE

MONTHS

ENDED

SEPTEMBER

30,

2012

(Canadian

dollars)

76;9*:*27&4;*:0*)LQIR#JZPJFDZZZJZPJFD

76;9:27&4;:0)LQIR#JZPJFDZZZJZPJFD