USE OF PROCEEDS

General

The net proceeds from the Offering (without giving effect to the Over-Allotment Option) will be approximately $76,000,000, after deducting the Underwriters’ fee of $4,000,000, but prior to the deduction of the expenses of this Offering estimated at $400,000. In the event that the Over-Allotment Option is exercised in full, the net proceeds from the Offering would be approximately $87,400,000, after deducting the Underwriters’ fee of $4,600,000, but prior to the deduction of the expenses of the Offering estimated at $400,000.

The Corporation intends to use the net proceeds of the Offering for the purposes set forth in the table below. The amounts indicated in the table below are the estimates of management of the Corporation:

Use of Proceeds Amount

Additional development of the 007 Zone, including: (i) establishing a decline access from the surface; (ii) accelerating the current access from the Hinge Mine; and (iii) using the decline access to explore the Cohiba Zone

$15,000,000

Mobile mining equipment and camp facilities purchase for the 007 Zone

$10,000,000

Development of exploration and potential access drifts from the Rice Lake Mine towards depth extensions of the L13 Zone, the Hinge Zone and the 007 Zone at the 8th, 16th and 26th levels and exploration drilling of such zones using the new access drifts

$14,000,000

Initiation of decline and initial bulk sampling of the L13 Zone and accessing the remaining Mineral Reserves and Mineral Resources within the upper levels of the Rice Lake Mine

$5,000,000

Expansion of mill capacity and assessment of the feasibility of further increased mill capacity, increased tailings capacity and power distribution upgrades

$10,000,000

Assessment of the feasibility of centralized mining of all zones at higher volumes, depending on results of the above programs

$2,000,000

Further consolidation of areas of the Rice Lake belt using new geological model to prioritize targets

$10,000,000

Working capital and general corporate purposes including the evaluation of potential corporate targets

$9,600,000

Total $75,600,000

The Corporation expects to use the net proceeds of the Offering as described above. However, there may be circumstances where, on the basis of results obtained or for other sound business reasons, a reallocation of the net proceeds of the Offering
may be necessary or advisable. Accordingly, management of the Corporation will have broad discretion in the application of the net proceeds of the Offering. In the event that the Over-Allotment Option is exercised, the additional net proceeds received by the Corporation will be added to the working capital of the Corporation.

Unallocated funds will be deposited in the Corporation’s bank account(s) and added to the working capital of the Corporation. The Chief Financial Officer of the Corporation is responsible for the supervision of all financial assets of the Corporation. Based on the Corporation’s cash flow requirements, management will determine the appropriate level of liquidity required for operations and will draw down such funds as necessary.
It should be noted that the Corporation had negative operating cash flow for its financial year ended December 31, 2009.

To the extent that the Corporation has negative cash flow in future periods, the Corporation may use a portion of its general working capital to fund such negative cash flow.