Wesdome ar2012

WESDOME GOLD MINES LTD.2012 ANNUAL REPORT

Wesdome has been mining

gold in Canada for 25 years.

Its philosophy has been to

build up long-term, sustainable

operations with only modest

initial capital costs. This long-term

view has enabled the Company

to acquire significant property

and infrastructure assets in two

proven gold mining districts. In

2012, surface mining at Mishi

commenced. This new mine

displays good growth potential

with low capital expenditure

requirements. As we develop

surface mining expertise and

experience, other substantial

assets like Moss Lake become

more relevant. We see very good,

low risk potential for growth

through astute investments in

exploration, development and

infrastructure.

CONTENTSMessage to Shareholders .................................... 1 Mishi Property... ................................................... 22012 Highlights..................................................... 4Reserves and Resources .................................... 5Management’s Discussion and Analysis ............. 6Management’s Responsibility for Financial Statements ........................................... 16Independent Auditors’ Report ............................ 17Consolidated Statements of Financial Position ... 18Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) ................... 19Consolidated Statements of Total Equity ........................................................ 20Consolidated Statements of Cash Flows ............21Notes to the Consolidated Financial Statements .................... 22Corporate Information ....................................... 36

2012 was a year of steady improvement at Wesdome. Despite the headwinds of persistent industry-wide challenges, your management has made consistent progress in delivering on our long-term strategy, while increasing gold production to 55,800 ounces.

Our new Mishi Mine came onstream on time and on budget, and reserves at Mishi increased 35% net of depletion. Its recovered grades came in 15% higher than expected at 2.3 g/t.

At our Eagle River Miine, recovered grades increased towards Life-of-Mine average grades, with higher grades forecast for the next three years.

At our Kiena Mine, a restructuring of operations yielded tangible cost savings, yet margins continued to contract due to falling grades. On March 7, 2013, we made a tough decision and suspended Kiena operations effective June 30, 2013, when operations will be placed on care and maintenance. Management believes that Kiena remains a good quality long-term asset, which will benefit from further exploration and development in an environment of higher gold prices and less challenging labour markets.

Our focus is on the Eagle River and Mishi Mines, where cash flow generation and return on capital are strong. As we enter a higher-grade mining sequence at Eagle River, and Mishi ore stockpiles grow at our Eagle River Mill, our top priority is upgrading our mill’s infrastructure to increase throughput and efficiency.

At the Mishi Mine we have worked through the early benches with higher stripping ratios in 2012 and have great confidence in the potential of Mishi to drive production growth over the longer term. Its capital intensity is much lower than underground mining and recovered grades compare favourably with our resource model.

We have commenced studies to select a new tailings management site in order to mine Mishi with higher intensity. We are also examining our options to increase milling capacity at our Wawa operations.

At Eagle River we have begun conceptual studies of shaft-deepening options as it becomes increasingly evident that significant mineralization extends to depths of more than 1,000 metres. We are working to improve our Eagle River mining infrastructure cost-effectively, pursuing capital investments in a disciplined manner.

At the end of fiscal 2012, your Company’s cash and bullion position was virtually unchanged year-over-year. During the year we paid down approximately $4.0 million of long-term debt and have kept the share count constant, as it has remained over the past five years. We are convinced that our focus on our most productive assets will improve the Company’s ability to generate free cash flow and stronger earnings going forward.

Although the market’s confidence in the gold mining industry is now fragile, the demand for gold – and its price – remain strong. We are confident that the current disconnect between market behaviour and your Company’s sound fundamentals will shake out over time.

In the meantime, we assure fellow shareholders that we have taken concrete, consistent steps to ensure that Wesdome Gold Mines will grow and prosper over the short, medium and long-term.

On behalf of the Board of Directors,

Donovan Pollitt, P.Eng., CFA President and CEO March 14, 2013

MESSAGETO ShAREhOLDERS

“2012 demonstrated

a good bounce back

from a challenging

2011 and provided

us confidence that

cash flow growth will

continue.”

~ Donovan Pollitt

1 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT

MIShIPROPERTY

MIShIPROPERTY

The Mishi Mine commenced commercial production on January 1, 2012. In 2012, we mined

102,000 tonnes of ore, milled 65,000 tonnes at a recovered grade of 2.3 gAu/tonne and built a

stockpile of 37,000 tonnes at 2.0 g/t at our mill. With the incorporation of a 200 metre long eastern

pit extension into the reserves, the current life-of-mine stripping ratio decreases to 2.7:1. As mining

advances, stripping ratios, and therefore costs, decline dramatically. In 2012, production essentially

offset direct costs plus about 2,000 ounces of gold were sitting in ore stockpiles at the mill. We have

completed the first year with better than expected grades and expanded reserves to 10 years at

current production rates of 9,000 tonnes per month.

We are now focused on improving the reliability, efficiency and capacity of our mill. This work is

ongoing and represents our easiest route to increasing production over the short-term. Furthermore,

we have commenced studies to select a new tailings management site with a view towards

increasing capacity. Mishi Reserves and Resources justify this longer term view.

The Mishi property was purchased in 1998 for $1.4 million. It produced seasonally in 2002, 2003,

2004 and 2007. With higher gold prices in 2010 studies indicated significant resources and 5 years

of reserves. Permitting, geotechnical, hydrogeological and pre-strip groundwork activities were

completed in 2011. historic production to December 31, 2012, is 200,000 tonnes at 3.2 gAu/tonne

for 20,000 ounces produced.

We congratulate our team for exceeding grade expectations in the first year of production at a new

operation. The surface mining expertise we develop here is very relevant to other substantial assets

like Moss Lake.

Drilling Bench 2995 – January, 2013 Ribbon Cutting – May 30, 2012

2 3 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT

RESERVES ESTIMATES* December 31, 2012

Category Tonnes Grade ContainedGold (gAu/tonne) (ounces)

EAglE RIVER

Proven 108,000 10.0 35,000

Probable 327,000 10.0 105,000

Proven + Probable 435,000 10.0 140,000

MIShI

Proven 150,000 1.9 9,000

Probable 950,000 2.3 70,000

Proven + Probable 1,100,000 2.2 79,000

ToTAl 219,000

RESoURCES ESTIMATES* December 31, 2012

Category Tonnes Grade ContainedGold (gAu/tonne) (ounces)

EAglE RIVER

Indicated 48,000 16.8 26,000

Inferred 204,000 7.1 46,000

KIEnA

Measured 717,000 3.2 74,000

Indicated 3,045,000 3.5 341,000

Measured + Indicated 3,762,000 3.4 415,000

MIShI – oPEn PITMeasured 186,000 2.7 16,000

Indicated 4,888,000 2.1 333,000

Measured + Indicated 5,074,000 2.1 349,000

Inferred 764,000 2.4 59,000

MIShI – UnDERgRoUnD

Indicated 567,000 4.5 82,000

Inferred 437,000 5.8 81,000

ToTAl MEASURED + InDICATED 872,000InFERRED 186,000

RESERVES ANDRESOURCES

2012hIGhLIGhTS

* OnMarch7,2013,theCompanyannouncedsuspensionofminingatKiena.Accordingly,theexistingMineralReserveswerereclassifiedasMineralResources.AllresourceestimatesatKienaemploydilutionfactorsof10to25%.

AllMineralReservesandMineralResourcesestimateshavebeenmadeinaccordancewiththeStandardsoftheCanadianInstituteofMining,MetallurgyandPetroleumandNationalInstrument43-101.

AllMineralResourcesareinadditiontoMineralReservesexceptfortheMishiMinewhereMineralReservesareasubsetofMineralResources.

MineralResourcesarenotinthecurrentmineplanandthereforedonothavedemonstratedeconomicviability.

Aspersection4.2(b)(ii)ofNationalInstrument43-101,thechangeinmineralreservesandresourcesfortheEagleRiver,KienaandMishiMinesdoesnotconstituteamaterialchangeintheaffairsoftheCompany.FortheEagleRiverMinerefertotheTechnicalReportfiledonSEDAR,datedDecember,2005,byStrathconaMineralServicesLtd.FortheKienaMinerefertotheTechnicalReportdatedApril15,2005,byGeologicaGroupeConseil,alsofiledonSEDAR.

TheMishiMineMineralResourceestimateswerecompletedbyInnovExploInc.ina43-101TechnicalReportdatedAugust25,2010,andfiledonSEDAR.TheinitialMishiMineralReservesestimateswerecompiledina43-101ReportbyInnovExploInc.datedJanuary12,2011,andalsofiledonSEDAR.

AtMishi,ProvenReservesincludebrokenore,stockpilesandone5metrebench(Bench2995).A1.0gAu/tonnecut-offgradeisemployed.

MishiResourcesarebasedonInnovExplo’s2010modelemployinga1.0gAu/tonnecut-offgrade.Thishasbeenadjustedtoreflectproduction,brokenoreandstockpilesminedin2012toBench3000.Actualorebrokenamountedto95,881tonnescomparedto95,200tonnesinthemodel.Thisisclearlyarobustandreliablemodeltodateandiscarriedforwardsubjecttoproductionreconciliation.

QualifiedPersonsfortheMineralReservesandMineralResourcesestimatesasper43-101areasfollows:

EagleRiver:GeorgeN.Mannard,P.Geo.,VicePresidentExploration,WesdomeGoldMinesLtd.

Kiena:MarcDucharme,P.Geo.,ChiefExplorationGeologist,KienaMine,WesdomeGoldMinesLtd.

MishiReserves:DanielLapointe,P.Geo.,MishiSuperintendent,andGeorgeMannard,P.Geo.,VicePresidentExploration,bothWesdomeGoldMinesLtd.

MishiResources:BasedonaResourceEstimatebyKarineBrosseau,P.Eng.andCarlPelletier,P.Geo.,InnovExploInc.,independentconsultants,datedAugust25,2010.Thisestimatehasbeenreconciledtoreflect2012productionandstockpilesbyDanielLapointe,P.Geo.,MishiSuperintendent,WesdomeGoldMinesLtd.

TheCompanyisaProducingIssueraspernationalInstrument43-101section5.3.

nNew Mishi Mine in productionnRevenues of $92.3 millionnCash flow from operations* of $12.1 million or $0.12 per share (*prior to working capital adjustments)

nPre-tax earnings of $2.1 million prior to one-time non-cash chargenCash and bullion at market at year-end of $19.5 millionnBullion inventory of 8,965 ounces at year end

New Mishi Mine in productionkGrades 15% higher than modeledkReserves increase 35%k200m east extension plannedk37,000 tonnes (approx 2,000 ounces) stockpiled at millkLife-of-Mine stripping ratio now 2.7:1k10 years reserves at current rates

Eagle RiverkGrades improve 35%khigher grade mining sequence projected 2013 – 2015kDrilling extends resources to 1,000m depth

KienakOperations to be suspended by June 30, 2013kDrilling continues to identify new zoneskSignificant resources and exploration merit future work

Going ForwardkFocus on cash flow from Eagle River and MishikInvest in milling infrastructure, capacity, efficiency and reliabilitykExamine material handling systems options for future development at depth at Eagle RiverkDisciplined capital allocation towards best margin, higher return projectskStrategic acquisitions and dispositions potential


MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2012

This Management’s Discussion and Analysis (“MD&A”) dated March 14, 2013, should be read in conjunction with Wesdome Gold Mines Ltd.’s (“Wesdome” or “the Company”) audited consolidated financial statements for the year ended December 31, 2012, and their related notes which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

This MD&A contains “forward-looking statements” that are subject to risk factors set out in the cautionary statement below. All figures are in Canadian dollars unless otherwise stated. Additional information on Wesdome, including current and previous years’ Annual Information Forms (“AIF”) and other corporate information, can be found at www.wesdome.com or www.sedar.com. Wesdome trades on the Toronto Stock Exchange under the symbol “WDO”. The Company’s head office is at 8 King Street East, Suite 1305, Toronto, Ontario, Canada.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, constitute “forward-looking statements” and are based on expectations, estimates and projections as at the date of this MD&A. The words ”believe”, “expect”, “anticipate”, “plan”, “intend”, “continue”, “estimate”, “may”, ”will”, “schedule” and similar expressions identify forward-looking statements. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Wesdome to be materially different from the Company’s estimated future results, performance or achievements expressed or implied by the forward-looking statements and the forward-looking statements are not guarantees of future performance. Factors that could cause results or events to differ materially from current expectations expressed or implied are inherent to the gold mining industry and include, but are not limited to, those discussed in the section entitled “Risks and Uncertainties”. The Company does not intend, and does not assume any obligation to update these forward-looking statements, whether as a result of new information, future events or results or otherwise except as required by applicable laws.

OVERALL PERFORMANCE

The Company owns and operates the Eagle River Mine Complex in Wawa, Ontario and the Kiena Mine Complex in Val-d’Or, Quebec. On January 1, 2012, the Mishi Mine in Wawa commenced commercial production. The Eagle River and Mishi Mines feed a common mill and are referred to as the Eagle River Complex. The Eagle River Mine has been in continuous production since commercial production commenced January 1, 1996. It has produced 919,086 ounces to date. The Kiena Mine was purchased by the Company in 2003. It restarted commercial production on August 1, 2006. It was previously in production from 1982 – 2002. To date the Kiena Mine has produced 1,749,705 ounces of gold.

At December 31, 2012, the Company had $13.9 million in working capital, which includes 8,965 ounces of gold bullion in inventory. In 2012, revenue exceeded mining and processing costs by $15.8 million, $11.2 million in capital costs were incurred and $4.1 million of debt was retired. Cash flow from operations totalled $12.1 million and the net loss was $45.3 million. The net loss is entirely attributable to non-cash impairment charges – a $60.9 million write-down to the carrying value of the Kiena Mine Complex – and another non-cash write-down of $1.0 million for an exploration property option which was allowed to lapse in Q2 of 2012. Without these one-time events, pre-tax earnings would be $2.1 million.

In 2012, production increased 17% to 55,813 ounces of gold and gold sales increased 7% to 55,500 ounces compared to 2011. Mining and processing costs increased 17% to average $1,385 per ounce for the year on production basis, and at year end the Company had a bullion inventory of 8,965 ounces of gold.

On March 7, 2013, the Company announced the suspension of operations at the Kiena Mine Complex. This will preserve and improve the Company’s financial position, allowing capital allocation to projects with the best shorter term returns to shareholders. Kiena remains a good long-term investment but our mining development sequence got tight to maintain an economic scale production rhythm at the current grades.

Favourable external factors which influence results are continued low interest rates, currency debasement and general distrust in financial institutions and economic policy. Negative external conditions included a stronger Canadian dollar and a continued shortage of experienced mine operators, professional staff, and technical services which has proven inflationary in our industry in general. We believe these demands will ease as risk capital has dried up and regional competing capital projects run their courses or cease being funded.

MANAGEMENT’SDISCUSSION AND ANALYSIS

In general, the mining industry has been stretched due to unprecedented activity. We see contractor and materials availability starting to ease. Large international capital projects have been suspended and tight risk capital markets have inhibited competing exploration and development projects from junior companies.

The market’s confidence in the gold mining industry is currently very fragile following a string of high-profile cost overruns, foreign mining policy misadventures, and executive ousters. Demand for gold remains strong, prices remain strong and the underlying fundamentals to support continued strength have never been more favourable.

SELECTED ANNUAL INFORMATION

(inthousandsexceptincomepercommonshare) 2012 2011Totalrevenue $ 92,308 $ 79,643Net(loss)income (45,253) 240Income(loss)percommonshare (0.44) 0.00Totalassets 108,850 151,823Longtermfinancialliabilities 8,968 2,433

RESULTS OF OPERATIONS ThreeMonthsEndedDec31 TwelveMonthsEndedDec31 2012 2011 2012 2011

Eagle River Mine Complex

Eagle River Mine Tonnesmilled 36,940 48,639 155,020 182,449 Recoveredgrade(g/t) 7.0 5.2 6.5 4.8 Production(oz) 8,314 8,104 32,223 28,231

Mishi Mine(commercialproductioncommencedJanuary1,2012) Tonnesmilled 11,919 - 64,915 - Recoveredgrade(g/t) 1.5 - 2.3 - Production(oz) 562 - 4,776 - Surfacestockpile(tonnes) 37,301 - 37,301 -

Total Eagle River Complex Production(oz) 8,876 8,104 36,999 28,231 Sales(oz) 7,500 5,000 36,400 29,000

Bullionrevenue($000)† 12,709 8,598 60,545 44,613 Miningandprocessingcosts($000) 11,460 5,604 44,759 29,448

Mineoperatingprofit($000)* 1,249 2,994 15,786 15,165 Goldpricerealized($Cdn/oz) 1,695 1,717 1,661 1,536

Kiena Mine Complex Tonnesmilled 70,279 56,414 265,872 255,311 Recoveredgrade(g/t) 2.2 2.5 2.2 2.4 Production(oz) 4,869 4,618 18,814 19,516 Sales(oz) 5,000 5,000 19,100 23,000


Mineoperatingprofit(loss)($000* 1,528 (68) (17) (538) Goldpricerealized($Cdn/oz) 1,700 1,717 1,658 1,519

Total Mine Operations Production(oz) 13,745 12,722 55,813 47,747 Sales(oz) 12,500 10,000 55,500 52,000 Bullioninventory(oz) 8,965 8,652 8,965 8,652


Mineoperatingprofit($000)* 2,777 2,926 15,769 14,627 Goldpricerealized($Cdn/oz) 1,697 1,717 1,660 1,529

† Bullion revenue includes minor by product silver sales.6 7 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT

At Eagle River, recovered grades improved 35% to 7.0 gAu/tonne, yet mill throughput declined 24% to 36,940 tonnes. Mill throughput was challenged by an unprecedented series of mechanical failures that were very frustrating and costly. These events likewise affected Mishi throughput and recovered grades during the quarter. As previously mentioned, we are investing in equipment, infrastructure and human resources to increase the mill’s efficiency, capacity and reliability.

Kiena posted a steady, uneventful quarter of production with sales of 5,000 ounces of gold (same as in 2011) and contributed $1.53 million of the fourth quarter’s $2.78 million mine operating profits.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2012, the Company had working capital of $13.9 million compared to $7.2 million at December 31, 2011. During fiscal 2012, capital expenditures totalled $11.2 million compared to $19.3 million in 2011. Capital expenditures were concentrated in minesite development, mine and mill infrastructure.

On May 24, 2012, the Company completed a $7,021,000 placement of unsubordinated convertible debentures. The term is 5-years bearing interest at 7% per annum payable semi-annually and convertible into common shares at $2.50 per common share. The net proceeds of $6,821,000, along with cash at hand, were used to redeem existing convertible debentures in the amount of $10,931,000 that matured on May 31, 2012. This resulted in the Company paying down $4.1 million in debt.

The result of this financing is that interest costs moving forward will decline and working capital improved by moving the liability component to long term liabilities from short term liabilities.

The Company traditionally maintains an inventory of refined gold bullion. At December 31, 2012, this liquid asset consisted of 8,965 ounces of gold with a market value of $14.9 million. The bullion inventory is carried at the lower of cost or market, in this case at a cost of $13.3 million.

Additionally, the Mishi ore stockpile at the mill, which totals 37,301 tonnes, is carried in inventory at a cost of $3.2 million, or $85 per tonne.

Management believes we have sufficient liquidity to carry out our mining, development and exploration programs and prefers not to dilute shareholders’ interest with equity issues. The Kiena mining suspension will help preserve our financial position and improve return on capital.

With current gold prices, operations are capable of generating cash flow as they have in the past.

The following table shows the timing of cash outflows relating to contractual obligations going forward. PaymentsDuebyPeriod(inthousands)ContractualObligations Total <1year 1–2years 3–5years After5yearsEquipmentleases $ 1,616 $ 921 $ 695 - -Convertibledebentures 9,149 491 983 7,675 - $ 10,765 $ 1,412 $ 1,678 $ 7,675 -

OFF-BALANCE SHEET ARRANGEMENTS

There are no off-balance sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

Key management personnel and director compensation comprised of the following:

ThreemonthsendedDec31 TwelvemonthsendedDec31 2012 2011 2012 2011Salariesandshort-termemployeebenefits $ 311 $ 355 $ 1,212 $ 1,266Postemploymentbenefits 11 15 46 44Fairvalueofshare-basedcompensation 76 60 415 493 $ 398 $ 430 $ 1,673 $ 1,803

In fiscal 2012, the Company paid $55,500 in directors’ fees (2011: $23,900) to companies whose managing partners are directors of the Company.


* The Company has included in this report certain non-IFRS performance measures, including mine operating profit and mining and processing costs to applicable sales. These measures are not defined under IFRS and therefore should not be considered in isolation or as an alternative to or more meaningful than, net income(loss) or cash flow from operating activities as determined in accordance with IFRS as an indicator of our financial performance or liquidity. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow.

Mine operating profit excludes the following specific items included as operating expenses on the Consolidated Statements of Income: Depletion, Production royalties, Corporate and general, Share-based compensation and Amortization of capital assets.

In 2012, bullion sales exceeded mining and processing costs resulting in a mine operating profit, or gross margin, of $15.8 million. In addition to these direct operating costs, additional cash costs, including royalty payments, corporate and general costs and interest payments amounted to $4.8 million.

At the Eagle River Mine, grades steadily improved as we worked our way through a heavily diluted sequence of stopes and development ore. In 2012, recovered grades were 35% higher than in 2011 and forward development in the 811 Zone reflects the start of a higher grade mining sequence expected to last through 2015.

The new Mishi Mine commenced commercial production on January 1, 2012. In 2012, we mined 102,216 tonnes of ore and 1,213,664 tonnes of waste for a stripping ratio of 11.9:1. With the incorporation of a 200 metre long east pit extension into the mine plan, the current life-of-mine stripping ratio decreases to 2.7:1. In 2012, mill availability was less than expected. Over the year we averaged 625 tonnes per day and we were planning for 900 tonnes per day. Considerable efforts have been made to debottleneck processes, update equipment and human resources and improve reliability and throughput. This work is ongoing and represents our easiest route to increasing production growth over the short term. Mishi reserves and resources justify a longer term view. We have commenced studies to select a new tailings management facility, with a view towards increasing our milling capacity.

We have substantially worked our way through the high strip early stages of the Mishi Mine, stockpiled over 37,000 tonnes of ore at the mill and increased our reserve life to 10 years at current rates. The fact that the first year’s production returned better grades than estimated gives us great optimism in the potential of this asset to drive a longer term vision and support key infrastructure investments.

The Kiena Mine in Val d’Or continued to operate on very thin margins. The last two years have been marginal in both grade and production. Mining viability, reserve and resource estimates are acutely leveraged and reliant on external factors, particularly the gold price. Despite this, we keep identifying new zones with limited drilling enforcing the view of this property’s outstanding exploration potential. On March 7, 2013, the Company opted to suspend mining at Kiena by June 30, 2013. Salvage mining of developed reserve blocks will continue, after which the infrastructure will be placed on care and maintenance status. The decision was made in context of optimizing returns of capital allocated amongst all our operating mines and projects. Management does not favour equity financing options under current fragile market conditions to fund further exploration and development work at this point at Kiena.

In summary, 2012 demonstrated a good bounce back from a challenging 2011 and provided us the confidence that this production growth can continue.

SUMMARY OF QUARTERLY RESULTS 2012(inthousandsexceptpersharedata) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Totalrevenue $ 21,207 $ 23,108 $ 25,948 $ 22,045Net(loss)income (46,464) 819 700 (308)(Loss)earningspershare–basicanddiluted (0.46) 0.01 0.01 (0.00)

2011 4thQuarter 3rdQuarter 2ndQuarter 1stQuarterTotalrevenue $ 17,206 $ 19,623 $ 19,220 $ 23,594Netincome(loss) 496 (1,616) (1,094) 2,454Earnings(loss)pershare–basicanddiluted 0.00 (0.01) (0.01) 0.02

FOURTH QUARTER

During the fourth quarter, 2012, combined operations produced 13,745 ounces of gold and 12,500 ounces were sold at an average realized price of $1,697 per ounce. This represents an 8% increase in production and a 25% increase in ounces sold compared to the fourth quarter of 2011, while realized gold prices were similar.



OUTLOOK

Management believes the suspension and salvage operations at Kiena will enhance the Company’s cash flow generating capacity.

Currently forecast production for 2013 is 55,000 ounces. We continue to expect the Eagle River Mine to produce about 41,000 ounces and the Mishi Mine about 9,000 ounces. We believe Kiena will contribute about 5,000 ounces by the time mining activities are suspended in June, 2013.

SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

(i) Reserves Proven and probable reserves are the economically mineable parts of the Company’s measured and indicated mineral resources that have been incorporated into the mine plan. The Company estimates its proven and probable reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments to interpret the data. The estimation of future cash flows related to proven and probable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body.

Changes in the proven and probable reserves or measured, indicated and inferred mineral resources estimates may impact the carrying value of mining properties and equipment, depletion, impairment assessments and the timing of decommissioning and remediation obligations.

(ii) DepletionMining properties are depleted using the unit-of-production method (“UOP”) over a period not to exceed the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves and measured and indicated resources.

Mobile and other equipment is depreciated, net of residual value over the useful life of the equipment but does not exceed the related estimated life of the mine based on proven and probable reserves and measured and indicated resources.

The calculation of the UOP rate, and therefore the annual depletion expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future production differing from current forecasts of future production, expansion of mineral reserves through exploration activities, differences between estimated and actual costs of mining and differences in the gold price used in the estimation of mineral reserves.

Significant judgment is involved in the determination of useful life and residual values for the computation of depletion and no assurance can be given that actual useful lives and residual values will not differ significantly from current assumptions.

(iii) Provision for decommissioning obligationsThe Company assesses its provision for decommissioning on an annual basis or when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for decommissioning obligations requires management to make estimates of the future costs the Company will incur to complete the decommissioning work required to comply with existing laws and regulations at each mining operation. Also, future changes to environmental laws and regulations could increase the extent of decommissioning work required to be performed by the Company. Increases in future costs could materially impact the amounts charged to operations for decommissioning. The provision represents management’s best

estimate of the present value of the future decommissioning obligation. The actual future expenditures may differ from the amounts currently provided.

(iv) Share-based paymentsThe determination of the fair value of share-based compensation is not based on historical cost, but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including estimates of the average future hold period of issued stock options before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); and the appropriate risk-free rate of interest. Stock-based compensation incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from the expected rate.

The resulting value calculated is not necessarily the value that the holder of the option could receive in an arm’s length transaction, given that there is no market for the options and they are not transferable. It is management’s view that the value derived is highly subjective and dependent entirely upon the input assumptions made.

(v) Deferred taxesPreparation of the consolidated financial statements requires an estimate of income taxes in each of the jurisdictions in which the Company operates. The process involves an estimate of the Company’s current tax exposure and an assessment of temporary differences resulting from differing treatment of items, such as depreciation and depletion, for tax and accounting purposes. These differences result in deferred tax assets and liabilities that are included in the Company’s consolidated statements of financial position.

An assessment is also made to determine the likelihood that the Company’s deferred tax assets will be recovered from future taxable income.

Judgment is required to continually assess changing tax interpretations, regulations and legislation, to ensure liabilities are complete and to ensure assets are realizable. The impact of different interpretations and applications could be material.

(vi) Recoverability of mining propertiesThe Company’s management reviews the carrying values of its mining properties on a regular basis to determine whether any write-downs are necessary. The recovery of amounts recorded for mining properties depends on confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete the development, and future profitable production or proceeds from the disposition thereof. Management relies on life-of-mine (“LOM”) plans in its assessments of economic recoverability and probability of future economic benefit. LOM plans provide an economic model to support the economic extraction of reserves and resources. A long-term LOM plan and supporting geological model identifies the drilling and related development work required to expand or further define the existing ore body.

(vii) Exploration and evaluation expendituresJudgment is required in determining whether the respective costs are eligible for capitalization where applicable, and whether they are likely to be recoverable by future exploration, which may be based on assumptions about future events and circumstances. Estimates and assumptions made may change if new information becomes available.

(viii) Equity component of convertible debenturesThe convertible debentures are classified as liabilities, with the exception of the portion relating to the conversion feature, resulting in the carrying value of the liability being less than its face value. The discount is being accreted over the term of the debentures, utilizing the effective interest method which approximates the market rate at the date the debentures were issued. Management uses its judgment to determine an interest rate that would have been applicable to non-convertible debt at the time the debentures were issued.

(ix) Inventory – ore stockpileExpenditures incurred and depletion of assets used in mining and processing activities are deferred and accumulated as the cost of ore maintained in stockpiles. These deferred amounts are carried at the lower of cost or NRV. Impairments of ore in stockpiles resulting from NRV impairments are reported as a component of current period costs.

The allocation of costs to ore in stockpiles and the determination of NRV involve the use of estimates. There is a high degree of judgment in estimating future milling costs, future milling levels, prevailing and long-term gold and silver prices, and the ultimate estimated recovery for ore.

MANAGEMENT’S DISCUSSION AND ANALYSISMANAGEMENT’S DISCUSSION AND ANALYSIS


FINANCIAL INSTRUMENTS – DISCLOSURES AND PRESENTATION

Financial instruments disclosures requires the Company to provide information about: a) the significance of financial instruments for the Company’s financial position and performance and, b) the nature and extent of risks arising from financial instruments to which the Company is exposed during the period and at the statement of financial position date, and how the Company manages those risks.

Financial Instruments – Fair ValuesFollowing is a table which sets out the fair values of recognized financial instruments using the valuation methods and assumptions described below:

(inthousands) 2012 2011 Carrying Fair Carrying Fair Value Value Value ValueFinancialLiabilitiesOtherfinancialliabilities: Convertible7%debentures - - $ 10,726 $ 11,040 Convertible7%debentures–newissues $ 7,021 $ 7,021 - -Determination of Fair ValueThe fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm’s length transaction between willing parties. The Company uses the following methods and assumptions to estimate fair value of each class of financial instruments for which carrying amounts are included in the consolidated balance sheets as follows:

Cash and cash equivalents and restricted funds – The carrying amounts approximate fair values due to the short maturity of these financial instruments.

Receivables – The carrying amounts approximate fair values due to the short maturity of these financial instruments.

Other financial liabilities – Payables and accruals and the convertible 7% debentures are carried at amortized cost. The carrying amount of payables and accruals approximates fair value due to the short maturity of these financial instruments. The fair value of the convertible 7% debentures is based on the quoted market price.

The fair value hierarchy for financial instruments measured at fair value is Level 1 for marketable securities. The Company does not have Level 2 or Level 3 inputs.

Financial Risk ManagementThe Company is exposed to a number of different risks arising from normal course business exposures, as well as the Company’s use of financial instruments. These risk factors include: (1) market risks relating to commodity prices, foreign currency risk and interest rate risk; (2) liquidity risk; and, (3) credit risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and establishes and monitors risk management policies to: identify and analyze the risks faced by the Company; to set appropriate risk limits and controls; and to monitor risks and adherence to market conditions and the Company’s activities.

1) Market RiskMarket risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of the business. The market price movements that could adversely affect the value of the Company’s financial assets and liabilities include commodity price risk, foreign currency exchange risk and interest rate risk.

(a) Commodity price riskThe Company’s financial performance is closely linked to the price of gold which is impacted by world economic events that dictate the levels of supply and demand. The Company had no gold price hedge contracts in place as at or during the years ended December 31, 2012 and 2011.

(b) Foreign currency exchange riskThe Company’s revenue is exposed to changes in foreign exchange rates as the Company’s primary product, gold, is priced in U.S. dollars. The Company had no forward exchange rate contracts in place and no foreign currency holdings as at or during the years ended December 31, 2012 and 2011.

(c) Interest rate riskInterest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company’s cash and cash equivalents include highly liquid investments that earn interest at market rates and interest paid on the Company’s convertible debentures is based on a fixed interest rate. Fluctuations in market rates of interest do not have a significant impact on the Company’s results of operations due to the short term to maturity of the investments held.

2) Liquidity RiskLiquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. The Company believes it has access to sufficient capital through internally generated cash flows and equity and debt capital markets. Senior management is also actively involved in the review and approval of planned expenditures.

The following table shows the timing of cash outflows relating to payables and accruals, mining taxes, capital leases and convertible debentures:

December 31, 2012 <1Year 1-2Years 3-5Years Over5YearsPayables&accruals $ 13,996 - - -Financeleases $ 921 $ 695 - -Convertibledebentures $ 491 $ 983 $ 7,675 -

December31,2011 <1Year 1-2Years 3-5Years Over5YearsPayables&accruals $ 8,944 - - -Financeleases $ 997 $ 854 - -Convertibledebentures $ 11,377 - - -

3) Credit RiskCredit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company minimizes its credit risk by selling its gold exclusively to financial institutions with forty-eight hour terms of settlement. The Company’s accounts receivable consist primarily of government refunds and credits. The Company estimates its maximum exposure to be the carrying value of cash and cash equivalents, accounts receivable and funds held against standby letters of credit.

The Company manages credit risk by maintaining bank accounts with Schedule 1 Canadian banks and investing only in Guaranteed Investment Certificates. The Company’s cash is not subject to any external limitations.

RISKS AND UNCERTAINTIES

The operations of the Company are speculative due to the high risk nature of its business which is the operation, exploration and development of mineral properties. In addition to risks described elsewhere herein, shareholders should note the following:

Nature of Mineral ExplorationThe exploration for and development of mineral deposits involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an orebody may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish ore reserves, to develop metallurgical processes and to construct mining and processing facilities at a site. It is impossible to ensure that the exploration programs planned by the Company will result in a profitable commercial mining operation.

Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices which are highly cyclical and government regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital.



InsuranceThe Company carries insurance to protect against certain risks in such amounts as it considers adequate. Risks not insured against include environmental pollution, mine flooding or other hazards against which such companies cannot insure or against which they may elect not to insure.

Additional Funding RequirementsFurther exploration on, and development of, the Company’s mineral resource properties, will require additional capital. In addition, a positive production decision on any of the Company’s development projects would require significant capital for project engineering and construction. Accordingly, the continuing development of the Company’s properties will depend upon the Company’s ability to either generate sufficient funds internally or to obtain financing through the joint venturing of projects, debt financing, equity financing or other means. Although the Company has been successful in the past in obtaining financing through the sale of equity securities and the issuance of debt instruments, there can be no assurance that it will obtain adequate financing in the future.

SUMMARY OF SHARES ISSUED

As of March 14, 2013, the Company’s share information is as follows: Commonsharesissued 101,879,659 Commonsharepurchaseoptions 1,793,000

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Disclosure Controls and ProceduresIn accordance with the requirements of National Instrument 52-109 “Certification of Disclosure in Issuers’ Annual and Interim Filings”, the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), have evaluated the effectiveness of the Company’s disclosure controls and procedures. Based upon the results of that evaluation, the Company’s CEO and CFO have concluded that as at December 31, 2012, the Company’s disclosure controls and procedures to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized and reported within the appropriate time periods and forms were effective.

Internal Control over Financial ReportingInternal control over financial reporting (“ICFR”) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable Canadian GAAP. Internal control over financial reporting should include those policies and procedures that establish the following: • maintenance of records in reasonable detail, that accurately and fairly reflect the transactions and dispositions of our assets • reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with applicable Canadian GAAP • receipts and expenditures are only being made in accordance with authorizations of management and the Board of Directors • reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial instruments

The Company’s management, with the participation of the CEO and CFO, assessed the effectiveness of the Company’s internal controls over financial reporting and concluded that as at December 31, 2012, the Company’s internal control over financial reporting was effective.

Limitations of Controls and ProceduresThe Company’s management, including the CEO and CFO, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that any design will not succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Mining Risks and InsuranceThe business of mining is generally subject to a number of risks and hazards, including environmental hazards, industrial accidents, labour disputes, encountering unusual or unexpected geologic formations, cave-ins, flooding and periodic interruptions due to inclement or hazardous weather conditions. Such risks could result in damage to, or destruction of, mineral properties or producing facilities, personal injury, environmental damage, delays in mining, monetary losses and possible legal liability. Insurance against environmental risks (including potential for pollution or other hazards as a result of disposal of waste products occurring from exploration and production) is not generally available to the Company or to other companies within the industry.

Government Regulations and Environmental MattersThe Company’s activities are subject to extensive federal, provincial and local laws and regulations controlling not only the mining of and exploration for mineral properties, but also the possible effects of such activities upon the environment. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development of the Company’s properties, the extent of which cannot be predicted. In the context of environmental permitting, including the approval of reclamation plans, the Company must comply with known standards, existing laws and regulations which may entail greater or lesser costs and delays depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. It is possible that the costs and delays associated with compliance with such laws, regulations and permits could become such that the Company would not proceed with the development or operation of a mine.

In Ontario, the Company has obtained approval for its closure plan for the Eagle River Mill, Eagle River Mine and the Mishi-Magnacon Complex and has provided security of approximately $0.9 million to cover estimated rehabilitation and closure costs. In Quebec, the Company has obtained approval for its closure plan for the Kiena Mine and Milling Complex and has provided security of approximately $1.0 million to cover estimated rehabilitation and closure costs. In the event of any future expansion or alteration of a mine on the Eagle River property or the Kiena Mine, the Company would likely be required to amend its closure plans and could also be required to provide further security.

Reliance on ManagementThe Company is heavily reliant on the experience and expertise of its executive officers. If any of these individuals should cease to be available to manage the affairs of the Company, its activities and operations could be adversely affected.

Economic ConditionsGeneral levels of economic activity and recessionary conditions may have an adverse impact on the Company’s business.

Mineral Resource and Mineral Reserve EstimatesThere are numerous uncertainties inherent in estimating mineral resources and mineral reserves, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral resources and mineral reserves estimate is a function of the quality of available data and of the assumptions made and judgements used in engineering and geological interpretation. Differences between management’s assumptions, including economic assumptions such as metal prices and market conditions, could have a material effect in the future on the Company’s financial position and results of operations.

CompetitionThe mining industry is intensely competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical facilities in its search for, and the acquisition of, mineral properties as well as the recruitment and retention of qualified employees with technical skills and experience in the mining industry. There can be no assurance that the Company will be able to compete successfully with others in acquiring mineral properties, obtaining adequate financing and continuing to attract and retain skilled and experienced employees.

Conflicts of InterestCertain officers and directors of the Company are, or may be, associated with other companies that acquire interests in mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest which they may have in any project or opportunity of the Company. Not every officer or director devotes all of their time and attention to the affairs of the Company.



TO THE SHAREHOLDERS OF WESDOME GOLD MINES LTD.

We have audited the accompanying consolidated financial statements of Wesdome Gold Mines Ltd., which comprise the consolidated statements of financial position as at December 31, 2012 and 2011, and the consolidated statements of income and comprehensive income, consolidated statements of total equity and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Wesdome Gold Mines Ltd. as at December 31, 2012 and 2011, and its financial performance and its cash flows for the years ended December 31, 2012 and 2011, in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Toronto, Ontario Grant Thornton LLP March 14, 2013 Chartered Accountants Licensed Public Accountants

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The accompanying consolidated financial statements and all of the data included in this annual report have been prepared by and are the responsibility of the management of the Company. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada for public companies and reflect management’s best estimate and judgement based on currently available information.

Management is also responsible for a system of internal control which is designed to provide reasonable assurance that assets are safeguarded, liabilities are recognized and that the accounting systems provide timely and accurate financial reports.

The Board of Directors is responsible for ensuring that management fulfils its responsibilities in respect of financial reporting and internal control. The Audit Committee of the Board of Directors meets periodically with management and the Company’s independent auditors to discuss auditing matters and financial reporting issues. In addition, the Audit

Committee reviews the annual consolidated financial statements before they are presented to the Board of Directors for approval.

The Company’s independent auditors, Grant Thornton LLP, are appointed by the shareholders to conduct an audit in accordance with generally accepted auditing standards in Canada, and their report follows.

Toronto, Canada Brian Ma March 14, 2013 Chief Financial Officer

INDEPENDENTAUDITOR’S REPORT


YearsEndedDecember31 2012 2011

Revenue Goldandsilverbullion $ 92,308 $ 79,643

operating expenses Miningandprocessing 76,539 65,016 Depletionofminingproperties 8,340 6,540 Productionroyalties 965 822 Corporateandgeneral 2,703 2,604 Sharebasedcompensation 601 935 Impairmentcharges(Note10) 61,898 - 151,046 75,917

(Loss)incomefromoperations (58,738) 3,726

Interestandotherincome 70 549Interestonlongtermdebt (1,081) (1,575)Otherinterest(Note24) (26) (1,301)Accretionofdecommissioningliability (54) (66)(Loss)incomebeforeincometax (59,829) 1,333

Incometaxexpense(recovery)(Note17) Current 13 (72) Deferred (14,589) 1,165 (14,576) 1,093

Net(loss)income (45,253) 240Totalcomprehensive(loss)income $ (45,253) $ 240

Net(loss)incomeandtotalcomprehensive(loss)incomeattributableto: Non-controllinginterest $ (195) $ (208) OwnersoftheCompany (45,058) 448 $ (45,253) $ 240

Earningsandcomprehensiveearningspershare Basic(Note18) $ (0.44) $ 0.00 Diluted(Note18) $ (0.44) $ 0.00

Seeaccompanyingnotestotheconsolidatedfinancialstatements

December31 2012 2011

AssetsCurrent Cashandcashequivalents $ 4,633 $ 5,215 Restrictedfunds–shortterm(Note8) 200 - Receivables(Note6) 4,298 7,337 Inventory(Note7) 19,633 15,271 28,764 27,823

Restrictedfunds(Note8) 2,381 2,385Deferredincometaxes(Note17) 14,870 615Miningproperties,plantandequipment(Note9) 32,681 90,114Explorationproperties(Note11) 30,154 30,886 $ 108,850 $ 151,823

liabilitiesCurrent Payablesandaccruals $ 13,996 $ 8,944 Currentportionofobligationsunderfinanceleases 898 913 Convertible7%debentures(Note13) - 10,726 14,894 20,583

Incometaxespayable 22 22Obligationsunderfinanceleases(Note12) 641 818Convertible7%debentures(Note13) 5,760 -Provisions(Note14) 2,545 1,593 23,862 23,016

EquityEquityattributabletoownersoftheCompany Capitalstock(Note15) 122,651 122,685 Contributedsurplus 2,059 1,960 Equitycomponentofconvertibledebentures(Note13) 870 1,970 (Deficit)retainedearnings (41,009) 1,585 84,571 128,200Non-controllinginterest 417 607Totalequity 84,988 128,807 $ 108,850 $ 151,823

Subsequentevents(Note26)

OnbehalfoftheBoard,

DonovanPollitt MarcBlais Director Director

Seeaccompanyingnotestotheconsolidatedfinancialstatements

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Expressed in thousands of Canadian dollars)

CONSOLIDATED STATEMENTS OFINCOME (LOSS) AND

COMPREhENSIVE INCOME (LOSS)(Expressed in thousands of Canadian dollars)


YearsEndedDecember31 2012 2011

operating activities Net(loss)income $ (45,253) $ 240 Depletionofminingproperties 8,340 6,540 Accretionofdiscountonconvertibledebentures 348 654 Impairmentcharges 61,898 - Loss(gain)onsaleofequipment 23 (19) Share-basedcompensation 601 935 Deferredincometaxes (14,589) 1,165 Interestexpensed 733 920 Accretionofdecommissioningliability 54 66 12,155 10,501 Netchangesinnon-cashworkingcapital(Note22) 2,016 (5,532) 14,171 4,969

Financing activities Exerciseofoptions - 1,600 SharesissuedbyasubsidiaryoftheCompanytothirdparties - 160 FundspaidtorepurchasecommonsharesunderNCIB (42) (118) Redemptionsofconvertibledebentures (10,931) - Issuanceofconvertibledebentures,netoffinancing 6,821 - Repaymentofobligationsunderfinanceleases (192) (1,266) Interestpaid (733) (920) Dividendspaid - (2,028) (5,077) (2,572)

Investing activities Additionstominingandexplorationproperties (11,234) (19,280) Proceedsonsaleofequipment 3 161 Fundsheldagainststandbylettersofcredit (196) 35 (11,427) (19,084) Netchangesinnon-cashworkingcapital(Note22) 1,751 (904) (9,676) (19,988)

Decreaseincashandcashequivalents (582) (17,591)

Cashandcashequivalents,beginningofyear 5,215 22,806

Cashandcashequivalents,endofyear $ 4,633 $ 5,215Cashandcashequivalentsconsistof: Cash $ 3,826 $ 5,215 Termdeposit(2012:0.93%) 807 - $ 4,633 $ 5,215

Supplementaldisclosure(Note22)

ContributedSurplus Equity Total Share Component Retained Attributable Capital Based Share Dilution Convertible Earnings toOwners Non-Controlling Total Stock Payments Repurchases Gains Debentures (Deficit)oftheCompany Interest Equity

Balance,December31,2010 $120,496 $ 1,016 $ 423 $ 428 $ 1,970 $ 2,945 $127,278 $ 740 $128,018

Netincome(loss)fortheyear endedDecember31,2011 - - - - - 448 448 (208) 240

Exerciseofoptions 1,600 - - - - - 1,600 160 1,760

Valueattributedtooptions exercised 667 (667) - - - - - - -

Valueattributedtooptions expired - (220) - - - 220 - - -

Sharebasedpayments - 935 - - - - 935 - 935

Sharespurchasedunder normalcourseissuerbid (78) - (40) - - - (118) - (118)

Dilutionofnon-controllinginterest - - - 85 - - 85 (89) (4)

Subsidiarycapitaltransactions - - - - - - - 4 4

Dividends - - - - - (2,028) (2,028) - (2,028)

Balance,December31,2011 122,685 1,064 383 513 1,970 1,585 128,200 607 128,807

Netincome(loss)fortheyear endedDecember31,2012 - - - - - (45,058) (45,058) (195) (45,253)

Valueattributedtooptions expired - (494) - - - 494 - - -

Sharebasedpayments - 601 - - - - 601 - 601

Sharespurchasedunder normalcourseissuerbid (34) - (8) - - - (42) - (42)

Subsidiarycapitaltransactions - - - - - - - 5 5

Redemptionofconvertibledebentures - - - - (1,970) 1,970 - - -

Equitycomponentofconvertibledebentures - - - - 870 - 870 - 870

Balance,December31,2012 $ 122,651 $ 1,171 $ 375 $ 513 $ 870 $ (41,009) $ 84,571 $ 417 $ 84,988

CONSOLIDATED STATEMENTS OF TOTAL EqUITY(Expressed in thousands of Canadian dollars)

CONSOLIDATED STATEMENTS OFCASh FLOWS(Expressed in thousands of Canadian dollars)

Seeaccompanyingnotestotheconsolidatedfinancialstatements Seeaccompanyingnotestotheconsolidatedfinancialstatements


YEARS ENDED DECEMBER 31, 2012 AND 2011

(Tabular amounts expressed in thousands of Canadian dollars)

1. DESCRIPTION OF BUSINESS

Wesdome Gold Mines Ltd. (“Wesdome Ltd.” or “the Company”) is a gold producer engaged in mining and related activities including exploration, extraction, processing and reclamation. The Company’s principal assets include the Eagle River Mine, the Mishi Mine and the Eagle River Mill located near Wawa, Ontario and the Kiena mining and milling complex and exploration properties located in Val D’Or, Quebec. The Company is a publicly traded company, continued under Part 1A of the Companies Act (Quebec) and its common shares are listed on the Toronto Stock Exchange (TSX: WDO). Wesdome’s head office is located at 8 King Street East, Suite 1305, Toronto, ON, M5C 1B5.

2. BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements are presented in Canadian dollars (“Cdn $”), which is also the functional currency of the Company.

These consolidated financial statements were authorized for issuance by the Board of Directors of the Company on March 14, 2013.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of ConsolidationThese consolidated financial statements include the financial statements of the parent company and its 57.6% (2011: 56.8%) owned subsidiary, Moss Lake Gold Mines Ltd. (“MLGM”).

All transactions and balances between the parent company and its subsidiary are eliminated on consolidation.

Non-controlling interests in the Company’s less than wholly-owned subsidiary are classified as a separate component of equity. On initial recognition, non-controlling interests are measured at their proportionate share of the acquisition-date fair value of identifiable net assets of the related subsidiary acquired by the Company. Subsequent to the acquisition date, adjustments are made to the carrying amount of non-controlling interests for the non-controlling interests’ share of changes to the subsidiary’s equity. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non-controlling interests’ relative interest in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interests and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to shareholders of the Company.

(b) Revenue RecognitionRevenue comprises the fair value of the consideration received or receivable from the sale of bullion and is recognized when an arrangement exists, risks pass to the buyer, the price is fixed, it is probable that the economic benefits will be realized, and collection is reasonably assured.

Interest and other revenue are reported on an accrual basis using the effective interest method.

(c) Cash and Cash EquivalentsCash and cash equivalents include cash on hand, balances with banks and highly liquid investments with maturities of less than three months.

(d) InventoryInventories consisting of gold bullion and ore stockpiles are recorded at the lower of production costs on a first-in, first-out basis and at net realizable value (“NRV”). Production costs include costs related to mining, crushing, and mill processing, as well as applicable overhead, and depletion.

Ore stockpiles consist of coarse ore that has been extracted from the mine and is available for further processing. Costs are added to stockpiles based on the current mining cost per tonne and removed at an average cost per tonne.

Supplies are valued at the lower of average cost and replacement cost, which approximates net realizable value.

(e) Mining Properties and Equipment (i) Cost and valuation

Mining properties, plant and equipment are carried at cost less accumulated depletion and any impairment in value. When an asset is disposed of, it is derecognized and the difference between its carrying value and net sales proceeds is recognized as a gain or loss in profit or loss.

(ii) Mining properties and equipmentMining properties and equipment include expenditures incurred on properties under development, payments related to the acquisition of land and mineral rights and property, plant and equipment which are recorded at cost on initial acquisition. Cost includes the purchase price and the directly attributable costs of acquisition or construction required to bring an asset to the location and condition necessary for the asset to be capable of operating in the manner intended by management.

Property acquisition and mine development costs are recorded at cost. Pre-production expenditures are capitalized until the commencement of production. Mine development costs incurred to expand operating capacity, develop new ore bodies or develop mine areas in advance of current production are capitalized. Mine development costs related to current period production are allocated to inventory as appropriate.

(iii) DepletionMine development costs, property, plant and equipment and other mining assets whose estimated useful life is the same as the remaining life of the mine are depleted over the mine’s estimated life using the unit-of-production method (“UOP”) calculated based on proven and probable reserves and measured and indicated resources.

Where components of an item of property, plant and equipment have a different useful life and cost that is significant to the total cost of the item, depreciation and depletion is calculated on each separate component.

Depreciation and depletion methods, useful lives and residual values are reviewed at a minimum at the end of each year.

(iv) Subsequent costsRepairs and maintenance costs are expensed as incurred. However, expenditures on major maintenance rebuilds or overhauls are capitalized when it is probable that the expenditures will extend the productive capacity or useful life of an asset. Any remaining costs of previous overhauls relating to the same asset are derecognized. All other expenditures are expensed as incurred.

(v) Deferred stripping costsStripping costs incurred to prepare the ore body for extraction are capitalized as mine development costs (pre-stripping). Stripping costs incurred during the production phase of a mine are considered production costs and are included in the cost of inventory produced during the period in which stripping costs are incurred. Capitalized stripping costs are amortized on a UOP basis over the economically recoverable proven and probable reserves and measured and indicated resources to which they relate.

(f) Leased AssetsWhen the economic ownership of a leased asset is transferred to the lessee, the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is then recognized at the inception of the lease at the lower of the present value of minimum lease payments and the fair value of the leased asset and a corresponding amount is recognized as a finance lease liability.

Depreciation methods and useful lives for assets held under finance lease agreements correspond to those applied to comparable assets which are legally owned by the Company. The corresponding finance lease liability is reduced by lease payments less finance charges, which are expensed as part of finance costs.

The interest portion of lease payments is charged to profit or loss over the period of the lease. Associated costs, such as maintenance and insurance, are expensed as incurred.

(g) Exploration and Evaluation CostsExploration expenditures reflect the costs related to the initial search for mineral deposits with economic potential or obtaining more information about existing mineral deposits. Exploration expenditures typically include costs associated with sampling, mapping, diamond drilling and other work involved in searching for ore. All expenditures relating to exploration activities are capitalized as incurred from the point at which the Company receives the legal right to explore.

Evaluation expenditures reflect costs incurred at exploration projects related to establishing the technical and commercial viability of developing mineral deposits identified through exploration or acquired through a business combination or asset acquisition.

Evaluation expenditures include the cost of:

(i) establishing the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an ore body that is classified as either a mineral resource or a proven and probable reserve,

(ii) determining the optimal methods of extraction and metallurgical and treatment processes,

(iii) studies related to surveying, transportation and infrastructure requirements,

(iv) permitting activities, and

(v) economic evaluations to determine whether development of the mineralized material is commercially justified, including scoping, prefeasibility and final feasibility studies.

Costs in relation to these activities are capitalized as incurred under exploration properties until such time as the Company expects that mineral resources will be converted to mineral reserves within a reasonable period and mine development commences. Thereafter, accumulated exploration and evaluation costs for the project are reclassified to mining properties. Exploration and evaluation costs of abandoned properties are expensed in the period in which the project is abandoned.

(h) Impairment of Non-Financial AssetsFor impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units (“CGUs”)). The Company’s CGUs are its individual operating mine sites. At the end of each reporting period, the Company reviews and evaluates its mining properties and equipment at the CGU level to determine whether there is any indication that these assets are impaired. If any such indication exists, the recoverable amount of the relevant CGU is estimated in order to determine the extent of impairment.

The recoverable amount of a mine site is the greater of its fair value less costs to sell (“FVLCTS”) and its value-in-use (“VIU”). The FVLCTS is estimated as the recoverable amount resulting from the sale of an asset or CGU, less the costs of disposal. The VIU is estimated as the discounted future pre-tax cash flows expected to be derived from a mine site. If the recoverable amount of a mine site is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. Impairment losses are recognized as operating expenses in the period they are incurred. When an impairment loss reverses in a subsequent period, the carrying amount of the related asset is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset previously. Reversals of impairment losses are recognized in profit or loss in the period the reversals occur.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2012 AND 2011 (Tabular amounts expressed in thousands of Canadian dollars)NOTES TO ThE CONSOLIDATED

FINANCIAL STATEMENTS


(i) Income TaxesIncome taxes are calculated using the liability method where current income taxes are recognized as an expense for the estimated income taxes payable for the current period.

Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and on unclaimed losses carried forward, to the extent that it is probable that deductions, credits and tax losses can be utilized, and are measured using the enacted or substantively enacted tax rates that will be in effect when the differences are expected to reverse or losses are expected to be utilized. Deferred income taxes relating to the initial recognition of an asset or liability in a transaction that, at the time of the transaction, neither affects accounting nor taxable income or is the result of a business acquisition, are not recognized. The deferred tax relating to items recorded in other comprehensive income is linked to these items for reporting purposes.

On a consolidated basis the Company does not offset asset and liability amounts with those of the subsidiary and with amounts owing to different taxation authorities. Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities from the same taxation authority.

(j) Equity, Reserves and Dividend PaymentsShare capital represents the consideration received for shares that have been issued, net of related issuance costs.

Contributed surplus includes the value of share based payments net of the value of expired grants; discounts, net of premiums, on shares repurchased; and dilution gains and losses relating to non-controlling interest.

Retained earnings represent accumulated retained profits from all current and prior periods.

Dividend distributions payable to equity shareholders are included in “current liabilities” when the dividends have been approved in a directors’ meeting prior to the reporting date.

(k) Employee BenefitsSalaries and short-term employee benefitsSalaries and short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

Post-employment benefitsPost-employment benefits include a defined contribution plan under which the Company pays fixed contributions through a separate entity. Under this plan, the Company will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense when due.

(l) Provisions(i) General

Provisions are recognized when present obligations, as a result of a past event, will probably lead to an outflow of economic resources from the Company and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events. Provisions are not recognized for future operating losses.

Provisions are based on the most reliable information available at the reporting date, including the risks and uncertainties associated with the current best estimate.

(ii) Decommissioning LiabilityThe Company’s mining and exploration activities are subject to various government laws and regulations relating to the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company has made, and will continue to make expenditures to comply with such laws and regulations. Decommissioning and closure costs expected to be incurred in the future are estimated by the Company’s management based on the information available to them.

Actual decommissioning and closure costs could be materially different from the current estimates. Any change in cost estimates, discount rates, or other assumptions should additional information become available would be accounted for on a prospective basis. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, and changes in estimates. Management considers the Bank of Canada bond rate related to the life of mine when determining the discount rate. The rate is subsequently adjusted for risk to allow for the indeterminate nature of the mine life.

The net present value of the future rehabilitation cost estimates arising from decommissioning of property, plant and equipment is recognized in the period in which it is incurred with an offsetting amount being recognized as an increase in the carrying amount of the corresponding mining asset. This asset is amortized on a UOP basis over the estimated life of the mine while the corresponding liability accretes to its undiscounted value by the end of the mine’s life.

(m) Financial Instrument Classification and MeasurementFinancial instruments are measured on initial recognition at fair value, and, in the case of financial instruments other than those classified as ‘‘fair value through profit and loss’’, directly attributable transaction costs. Measurement of financial assets in subsequent periods depends on whether the financial instrument has been classified as ‘‘fair value through profit and loss’’, ‘‘available-for-sale’’, ‘‘held-to-maturity’’, or ‘‘loans and receivables’’ as defined by IAS 39 - ‘‘Financial Instruments”:

Recognition and MeasurementMeasurement of financial liabilities subsequent to initial recognition depends on whether they are classified as fair value through profit and loss or ‘‘other financial liabilities’’.

Financial assets and financial liabilities at fair value through profit and loss include financial assets and financial liabilities that are held for trading or designated upon initial recognition as at fair value through profit and loss. These financial instruments are measured at fair value with changes in fair values recognized in profit or loss.

Financial assets designated as available-for-sale are measured at fair value, with changes in fair values recognized in other comprehensive income (“OCI”), except when there is objective evidence that the asset is impaired, at which point the cumulative loss that had been previously recognized in OCI is recognized in profit or loss. Financial assets classified as held-to-maturity and loans and receivables are measured subsequent to initial recognition at amortized cost using the effective interest method.

Financial liabilities, other than financial liabilities classified as fair value through profit and loss, are measured in subsequent periods at amortized cost using the effective interest method.

Cash and cash equivalents, restricted funds and receivables, are classified as loans and receivables. Long-term investments in equity securities, where the Company cannot exert significant influence, are designated as available-for-sale. Payables and accruals are classified as other financial liabilities.

(n) Convertible DebenturesThe holder has the right to demand that the Company pay all or part of the liability associated with the Company’s outstanding convertible notes in cash on the conversion date. Accordingly, the Company classifies the convertible notes as a financial liability with a conversion feature. The conversion feature is recognized initially at its fair value, as a separate component of equity. The liability component is recognized initially as the difference between the face value of the convertible notes as a whole and the value of conversion feature. The liability component is subsequently measured at amortized cost using the effective interest method.

Interest, gains and losses related to the liability component are recognized in profit or loss.

(o) Flow-through SharesThe Company has financed a portion of its exploration activities through the issuance of flow-through shares. Under the terms of flow-through share agreements, the tax attributes of the related expenditures are renounced to subscribers. The Company allocates the proceeds from the issuance of these shares between the offering of shares and the tax benefits to be renounced to subscribers. The allocation is made based on the difference between the quoted price of the same class of share without the flow-through feature and the amount the investor pays for the flow-through shares. A deferred flow-through premium liability is recognized for the difference. The liability is reversed after the expenditures are made and the Company expresses its intention to renounce the expenditures and is recorded in other income. The renunciation also gives rise to a taxable temporary difference between the accounting and tax bases of the qualifying expenditure.

(p) Share-based PaymentsThe Company’s share-based stock option plan is designed to advance the interests of the Company by encouraging employees, officers and directors to have equity participation in the Company through the acquisition of common shares. Stock options granted vest either immediately or over the term of the option. Stock options have an exercise price of no less than the closing price of the common shares on the Toronto Stock Exchange on the trading day immediately preceding the date on which the options are granted and are exercisable for a period not to exceed five years. The cost of these stock options is measured using the estimated fair value at the date of the grant determined using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires the input of subjective assumptions, including the expected term of the option and stock price volatility. The expected term of options granted is determined based on historical data on the average hold period before exercise, expiry or cancellation. Annually, the estimated forfeiture rate is adjusted for actual forfeitures in the period.

Expected volatility is estimated with reference to the historical volatility of the share price of the Company. The costs are recognized over the vesting period of the option. The total amount recognized as an expense is adjusted to reflect the number of options expected to vest at each reporting date. The corresponding credit for these costs is recognized in the share-based payment reserve in equity.

(q) Comprehensive Income (Loss)Comprehensive income (loss) is the change in the Company’s net assets arising from transactions, events and circumstances not related to the Company’s shareholders and include items that would not normally be included in profit or loss such as unrealized gains or losses on available-for-sale investments.

(r) Operating SegmentsThe Company operates in one industry segment, the gold mining and related activities industry including exploration, extraction, processing and decommissioning. All of the Company’s operations are located within one geographical area.

4. SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

(i) ReservesProven and probable reserves are the economically mineable parts of the Company’s measured and indicated mineral resources that have been incorporated into the mine plan. The Company estimates its proven and probable reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments to interpret the data. The estimation of future cash flows related to proven and probable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body.

Changes in the proven and probable reserves or measured, indicated and inferred mineral resources estimates may impact the carrying value of mining properties and equipment, depletion, impairment assessments and the timing of decommissioning and remediation obligations.

(ii) DepletionMining properties are depleted using the unit-of-production method (“UOP”) over a period not to exceed the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves and measured and indicated resources.

Mobile and other equipment is depreciated, net of residual value over the useful life of the equipment but does not exceed the related estimated life of the mine based on proven and probable reserves and measured and indicated resources.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2012 AND 2011 (Tabular amounts expressed in thousands of Canadian dollars)



The calculation of the UOP rate, and therefore the annual depletion expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future production differing from current forecasts of future production, expansion of mineral reserves through exploration activities, differences between estimated and actual costs of mining and differences in the gold price used in the estimation of mineral reserves.

Significant judgment is involved in the determination of useful life and residual values for the computation of depletion and no assurance can be given that actual useful lives and residual values will not differ significantly from current assumptions.

(iii) Provision for decommissioning obligationsThe Company assesses its provision for decommissioning on an annual basis or when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for decommissioning obligations requires management to make estimates of the future costs the Company will incur to complete the decommissioning work required to comply with existing laws and regulations at each mining operation. Also, future changes to environmental laws and regulations could increase the extent of decommissioning work required to be performed by the Company. Increases in future costs could materially impact the amounts charged to operations for decommissioning. The provision represents management’s best estimate of the present value of the future decommissioning obligation. The actual future expenditures may differ from the amounts currently provided.

(iv) Share-based paymentsThe determination of the fair value of share-based compensation is not based on historical cost, but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including estimates of the average future hold period of issued stock options before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); and the appropriate risk-free rate of interest. Stock-based compensation incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from the expected rate.

The resulting value calculated is not necessarily the value that the holder of the option could receive in an arm’s length transaction, given that there is no market for the options and they are not transferable. It is management’s view that the value derived is highly subjective and dependent entirely upon the input assumptions made.

(v) Deferred taxesPreparation of the consolidated financial statements requires an estimate of income taxes in each of the jurisdictions in which the Company operates. The process involves an estimate of the Company’s current tax exposure and an assessment of temporary differences resulting from differing treatment of items, such as depreciation and depletion, for tax and accounting purposes. These differences result in deferred tax assets and liabilities that are included in the Company’s consolidated statements of financial position.

An assessment is also made to determine the likelihood that the Company’s deferred tax assets will be recovered from future taxable income.

Judgment is required to continually assess changing tax interpretations, regulations and legislation, to ensure liabilities are complete and to ensure assets are realizable. The impact of different interpretations and applications could be material.

(vi) Recoverability of mining propertiesThe Company’s management reviews the carrying values of its mining properties on a regular basis to determine whether any write-downs are necessary. The recovery of amounts recorded for mining properties depends on confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete the development, and future profitable production or proceeds from the disposition thereof. Management relies on life-of-mine (“LOM”) plans in its assessments of economic recoverability and probability of future economic benefit. LOM plans provide an economic model to support the economic extraction of reserves and resources. A long-term LOM plan and supporting geological model identifies the drilling and related development work required to expand or further define the existing ore body.

(vii) Exploration and evaluation expendituresJudgment is required in determining whether the respective costs are eligible for capitalization where applicable, and whether they are likely to be recoverable by future exploration, which may be based on assumptions about future events and circumstances. Estimates and assumptions made may change if new information becomes available.

(viii) Equity component of convertible debenturesThe convertible debentures are classified as liabilities, with the exception of the portion relating to the conversion feature, resulting in the carrying value of the liability being less than its face value. The discount is being accreted over the term of the debentures, utilizing the effective interest method which approximates the market rate at the date the debentures were issued. Management uses its judgment to determine an interest rate that would have been applicable to non-convertible debt at the time the debentures were issued.

(ix) Inventory – ore stockpileExpenditures incurred and depletion of assets used in mining and processing activities are deferred and accumulated as the cost of ore maintained in stockpiles. These deferred amounts are carried at the lower of cost or NRV. Impairments of ore in stockpiles resulting from NRV impairments are reported as a component of current period costs.

The allocation of costs to ore in stockpiles and the determination of NRV involve the use of estimates. There is a high degree of judgment in estimating future milling costs, future milling levels, prevailing and long-term gold and silver prices, and the ultimate estimated recovery for ore.

5. UPCOMING CHANGES IN ACCOUNTING STANDARDS

IFRS 9 – Financial Instruments: Classification and MeasurementIn November, 2009, the IASB issued IFRS 9 which proposes to replace IAS 39. The replacement standard has the following significant components: establishes two primary measurement categories for financial assets – amortized cost and fair value; establishes criteria for classification of financial assets within the measurement category based on business model and cash flow characteristics; and eliminates existing held to maturity, available for sale and loans and receivable categories.

This standard is effective for the Company’s annual year end beginning January 1, 2015. The Company will evaluate the impact of the change to its consolidated financial statements based on the characteristics of its financial instruments at the time of adoption.

IFRS 10 – ConsolidationIFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation – Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. IFRS 10 is required to be applied for annual periods beginning January 1, 2013.

IFRS 11 – Joint ArrangementsIFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 is required to be applied for annual periods beginning January 1, 2013.

IFRS 12 – Disclosure of Interests in Other EntitiesIFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. IFRS 12 is required to be applied for annual periods beginning January 1, 2013.

IFRS 13 – Fair Value MeasurementIFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. IFRS 13 is required to be applied for annual periods beginning January 1, 2013.

Management has yet to assess the impact that IFRS 10, IFRS 11, IFRS 12 and IFRS 13 would have on the financial statements of the Company.

IFRIC 20 – Stripping Costs in the Production Phase of a Surface MineIn October, 2011, the IASB issued IFRIC 20, “Stripping Costs in the Production Phase of a Surface Mine”. IFRIC 20 provides guidance on the accounting for costs of stripping activity in the production phase of surface mining when two benefits accrue to the entity from the stripping activity: useable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. IFRIC 20 is required to be applied starting January 1, 2013. The Company is currently assessing the impact of adopting IFRIC 20 on our consolidated financial statements.

Amendments to Other StandardsIn addition, there have been amendments to existing standards, including IAS 27, “Separate Financial Statements” (IAS 27), and IAS 28, “Investments in Associates and Joint Ventures” (IAS 28). IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. IAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 to 13. The Company is currently in the process of analyzing the impact of these amendments on the consolidated financial statements.

The IASB is expected to publish new IFRSs on the following topics in the near future. The Company will assess the impact of these new standards on the Company’s operations as they are published: • IAS 18 Revenue Recognition

6. RECEIVABLES December 31 December31 2012 2011Miningdutiesrefundsandtaxcredits $ 412 $ 1,012Goodsandservicestax 3,340 4,365Prepaids 91 550RefundduefromCommissiondelaSantéetdelaSecuritieduTravail - 794Deposits 150 158Other 305 458 $ 4,298 $ 7,337

7. INVENTORY December 31 December31 2012 2011Goldbullion $ 13,287 $ 12,469Supplies $ 3,166 $ 2,802Orestockpiles 3,180 - $ 19,633 $ 15,271




8. RESTRICTED FUNDS December 31 December31 2012 2011Relatingtomineclosureplans(seeNote14) $ 1,966 $ 1,635Relatingtohydrodeposit 415 415Relatingtofinanceleases/equipmentrental 200 335 $ 2,581 $ 2,385Lesscurrentportion 200 - $ 2,381 $ 2,385

Funds are being held in Guaranteed Investment Certificates at interest rates ranging from 0.80% to 0.95% (2011: 0.89% to 0.95%) maturing to November, 2013.

9. MINING PROPERTIES AND EQUIPMENT EagleRiver KienaMinegross Carrying Amount Complex Complex TotalBalance,December31,2010 $ 35,206 $ 79,675 $ 114,881Additions 10,288 9,326 19,614Disposals (575) (110) (685)Changeindecommissioningprovision 22 (69) (47)Balance,December31,2011 44,941 88,822 133,763Additions 6,294 4,728 11,022Disposals (38) - (38)Impairmentcharge - (60,948) (60,948)Changeindecommissioningprovision 521 377 898 Balance,December31,2012 $ 51,718 $ 32,979 $ 84,697 Accumulated Depletion Balance,December31,2010 $ (13,269) $ (23,925) $ (37,194)Depletion (2,657) (3,798) (6,455)Balance,December31,2011 (15,926) (27,723) (43,649)Depletion (4,582) (3,785) (8,367)Balance,December31,2012 $ (20,508) $ (31,508) $ (52,016)

CarryingAmount,December31,2010 $ 21,937 $ 55,750 $ 77,687CarryingAmount,December31,2011 $ 29,015 $ 34,633 $ 90,114Carrying Amount, December 31, 2012 $ 31,210 $ 1,471 $ 32,681

Eagle River ComplexThe Eagle River Mine complex consists of the Eagle River Mine, the Mishi Mine and the Eagle River Mill and all related infrastructure and equipment.

The Eagle River Mine is subject to a 2% net smelter return royalty payable to the original vendors of the property.

The Mishi Mine is subject to royalty payments of $1 per tonne for open pit mining and $2 per tonne for underground mining in respect of ore mined and milled from the underlying claims in excess of 700,000 tonnes. Ore milled to date totals 200,410 tonnes.

Kiena Mine Complex The Kiena Mine Complex consists of the Kiena Mine Concession, Kiena Mill, related infrastructure and equipment and 165 mining claims in the Township of Dubuisson, Quebec.

10. IMPAIRMENT

During the year ended December 31, 2012, the Company recorded impairment charges aggregating $61.9 million, comprised to $60.9 million at the Kiena Mine Complex and $1.0 million at Pukaskwa (Note 11), which were recorded as a separate line in the Consolidated Statement of Income (Loss) and Comprehensive Income (Loss).

The fact that the Company’s market capitalization was below the book value of the net assets on the balance sheet was considered an indicator of impairment.

As a result of the amount of uncertainty in estimating the value of the Kiena Mine Complex, the Company determined that the FVLCTS of the property is equal to its residual value which consists of the salvage value of its equipment. This was determined to be appropriate as there are currently no bids for the property, and no comparable transactions in the market. Furthermore, the current best estimate of the fair value to an acquirer would be the salvage value of the equipment.

Subsequent to year-end, the Company received a report based on a preliminary LOM study which confirmed the estimated FVLCS and cast doubt on the current economic viability of the Kiena Mine Complex. As a result of the report, the Company decided subsequent to year-end that it would suspend mining operations at the Kiena Mine Complex by June 30, 2013.

11. EXPLORATION PROPERTIES

WesdomeGroup MossLake Magnacon Pukaskwa TotalBalance,December31,2010 $ 24,790 $ 2,989 $ 2,033 $ 950 $ 30,762Explorationexpenditures 3 120 1 - 124Balance,December31,2011 24,793 3,109 2,034 950 30,886Explorationexpenditures - 218 - - 218Impairmentcharge(Note10) - - - (950) (950) Balance,December31,2012 $ 24,793 $ 3,327 $ 2,034 $ - $ 30,154

The Wesdome Group PropertiesThe Wesdome Group Properties include the Wesdome, Shawkey, Siscoe and Siscoe-Extension, Mine École, Lamothe, Lamothe-Extension, Yankee Clipper and Callahan properties. These properties, in conjunction with the mining property Kiena Mine Complex, are contiguous and are integrated into the Company’s long term strategy of progressive exploration and development from a central infrastructure.

Wesdome propertyThe Company has a 100% interest in this property which consists of 51 claims totalling 2,003 acres and is located under de Montigny Lake in Vassan and Dubuisson Townships, Quebec and is contiguous to the Kiena Mine Complex. The property is subject to a 1% net smelter royalty.

Shawkey propertiesThe Company has a 100% interest in the Shawkey and the Shawkey South properties, which are contiguous to the Kiena Mine Complex and consist of four mining concessions and three mining claims, respectively, in Dubuisson Township, Quebec.

Siscoe and Siscoe-Extension propertiesThe Siscoe property is located in Dubuisson and Vassan Townships, Quebec and consists of two mining concessions. The Siscoe-Extension property consists of 13 contiguous claims. These properties are contiguous to the Kiena Mine Complex.

The Company owns a 100% interest in the Siscoe property and a 75% interest in the Siscoe-Extension property. The original vendor of these properties retains a 3% net smelter return royalty of which 1% can be purchased for $500,000.

Mine École propertyThe Mine École property is located in Dubuisson Township and consists of 23 claims located southeast and contiguous to the Shawkey property.

Other propertiesOther properties consist of interests in the Lamothe, Lamothe-Extension, Yankee Clipper and Callahan properties which are contiguous to the Wesdome property.

The Lamothe and Callahan properties are subject to a 1% net smelter royalty and 8 of the 10 claims comprising the Yankee Clipper property are subject to a 2% net profits royalty.

Moss Lake PropertiesThe Moss Lake property is owned by Moss Lake Gold Mines Ltd. (“MLGM”) which is obligated to pay underlying advance royalties of $5,469 per quarter to the vendors of the Moss Lake property until commercial production is achieved. Upon commencement of commercial production, the property is subject to an 8.75% net profits royalty, as defined, to these underlying vendors in lieu of the underlying advance royalty.

MLGM owns a 100% interest in the Fountain Lake property which consists of 149 mining claims contiguous to the Moss Lake property to the east, west and south. This property is subject to a 2.5% net smelter return royalty payable to certain original vendors of the property. This royalty is subject to a buyback clause whereby the royalty may be reduced to a 1.5% net smelter return for consideration of $1.0 million.

Magnacon PropertiesIn 2000, the Company acquired a 75% joint venture interest in the Magnacon properties located adjacent to the Eagle River Mill and entered into a joint venture agreement with the two companies holding the remaining 25% interest. Subsequently, the joint venture partners’ interest was reduced to approximately 22.72%. In June 2009, the Company purchased the joint venture partners’ interest for $750,000 and an additional 1% net smelter royalty. The Company owns 100% of the Magnacon properties which are subject to net smelter royalties of 1.5% on the Magnacon property and 2% on the adjacent property.

Pukaskwa PropertiesIn June 2009, the Company entered into an exploration and option agreement to earn up to a 60% interest in the Pukaskwa claims located 15 kilometres west of the Eagle River Mill. By spending or causing to be spent $1.5 million before June 30, 2012, the Company would have earned a 30% undivided working interest in the claims. The Company paid $25,000 to the owner upon closing and has written-off the carrying amount of the property as it did not spend the required $1.5 million by June 30, 2012.

12. OBLIGATIONS UNDER FINANCE LEASES

The Company leases, with options to purchase, certain mining equipment. Future minimum payments under finance leases, together with the balance of the obligations under finance leases are as follows:




December 31 December31 2012 2011Notlaterthanoneyear $ 921 $ 997Laterthanoneyearandnotlaterthanfiveyears 694 854Totalminimumleasepayments $ 1,615 $ 1,851Less:Interestportionattheweightedaverageof5.33%(2011:6.68%) 76 120Totalobligationsunderfinanceleases,securedbyequipment 1,539 1,731Less:Currentportion 898 913Longtermportion $ 641 $ 818

The cost of equipment under finance leases at December 31, 2012 is $3,573,000 (2011: $3,871,000) with related accumulated depreciation of $1,002,000 (2011: $1,021,000). These assets are included in mining properties and equipment.

13. CONVERTIBLE 7% DEBENTURES

The following table summarizes the changes in the liability and equity components of the convertible debentures during the years ended December 31, 2012 and 2011. December 31 December31Liabilitycomponent 2012 2011Balance,beginningofyear $ 10,726 $ 10,072Accretion 205 654Redemptionofconvertibledebentures (10,931) - - 10,726Issuanceofconvertibledebentures 5,617 -Accretion 143 -Balance,endofyear $ 5,760 $ 10,726

December 31 December31Equitycomponent 2012 2011Balance,beginningofyear $ 1,970 $ 1,970Redemptionofconvertibledebentures (1,970) - - 1,970Issuanceofconvertibledebentures 870 -Balance,endofyear $ 870 $ 1,970

On May 30, 2007, the Company completed a private placement of senior unsubordinated convertible debentures in the amount of $11,539,000. The debentures were convertible into common shares of the Company at $3.25 per common share until the maturity date of May 31, 2012, at which point they were redeemed by the Company.

On May 24, 2012, the Company completed a $7,021,000 non-brokered private placement of unsubordinated convertible debentures. The debentures mature on May 31, 2017, bearing interest at 7% per annum payable semi-annually, convertible into common shares of the Company at $2.50 per common share. The net proceeds of $6,821,000 of the new convertible debentures were used towards the redemption of the existing convertible debentures that matured on May 31, 2012.

The liability components of these debentures were calculated, at the dates of issuance, as the present value of the principal and interest, at a rate approximating the interest rate that would have been applicable to non-convertible debt at the dates the debentures were issued. The liability components were recorded at amortized cost and accreted to the principal amounts over the term of the convertible debentures by charges to interest expense using an effective interest rate of 12.50% and 13.92%, respectively, for the debentures maturing on May 31, 2017 and May 31, 2012.

The carrying value of the conversion option, $870,000, which is net of issuance costs ($57,000) and deferred income tax ($334,000) has been recorded as a separate component in shareholders’ equity.

At December 31, 2012, the face value of debentures available for conversion at $2.50 totalled $7,021,000.

14. PROVISIONS

The Company is committed to a program of environmental protection at its operating mines, development projects and exploration sites. The Eagle River ore and waste rocks are not acid generating which minimizes the environmental risks of mining. Although the ultimate amount of decommissioning costs is uncertain, the Company estimates its future decommissioning costs for the Eagle River Mine, Mishi Mine and the mill to be about $1.5 million and the Kiena mining and milling complex to be about $1.4 million. The Company has provided $2.0 million standby letters of credit to be held against these future environmental obligations.

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of mining properties: Balance,December31,2010 $ 1,574Accretionexpense 66Changeindecommissioningprovision (47)Balance,December31,2011 1,593Accretionexpense 54Changeindecommissioningprovision 898Balance,December31,2012 $ 2,545

As a result of increased activity at the Eagle River Mishi Mine, the Company was required to increase its decommissioning provision. The decommissioning provision is based on current reserve estimates, forecasted production and estimated future cash flows underlying the obligation. The risk adjusted interest rate employed was 3.36% (2011: 3.36%). The obligation will be accreted to $3.0 million (2011: $1.9 million) over the next 4 to 5 years.

15. CAPITAL STOCK

Authorized:TheauthorizedcapitaloftheCompanyconsistsofanunlimitednumberofcommonshareswithoutparvalue. Shares AmountIssued: Balance,December31,2010 101,176,159 $ 120,496Exerciseofoptions 797,000 1,600Valueattributedtooptionsexercised - 667SharespurchasedunderNCIB (65,000) (78)Balance,December31,2011 101,908,159 122,685SharespurchasedunderNCIB (28,500) (34)Balance,December31,2012 101,879,659 $ 122,651

On July 12, 2010, the Company received approval from the TSX for a Normal Course Issuer Bid (“NCIB”). The bid allowed the Company to purchase on the open market up to 6,681,620 of its common shares for cancellation over a period of one year to end on July 13, 2011. During the period July 12, 2010 to July 13, 2011, the Company repurchased for cancellation a total of 37,800 common shares with a carrying value of $43,000 for total cash consideration of $96,100. When the cash cost is less than the carrying amount the difference is charged to contributed surplus; when it is greater it is charged to contributed surplus to the extent there is a balance related to share repurchases, with any remainder charged to retained earnings.

On August 5, 2011, the Company received approval from the TSX for another NCIB. The bid allowed the Company to purchase, on the open market, up to 9,999,409 of its common shares for cancellation over a period of one year to end on August 7, 2012. The Company purchased for cancellation a total of 85,700 common shares under this NCIB with a carrying value of $103,000 for total cash consideration of $141,000.

16. COMMON SHARE PURCHASE PLAN

The Company has an equity settled common share purchase plan under which the Board of Directors may grant options to purchase common shares to qualified directors, officers, employees and consultants providing on-going services to the Company or any subsidiary of the Company. All options granted have a five year life with vesting periods based on the size of the option grant and at prices equal to the closing price for the day immediately preceding the date the options were granted. The maximum aggregate number of common shares under option at any time pursuant to the Plan is set at 5,000,000 of which 3,392,000 are available to be issued.

The following table reflects the continuity for the years ended December 31, 2012 and 2011 of options granted under the plan. WeightedAverage Options ExercisePrice 2012 2011 2012 2011 $ $Outstanding,beginningofyear 1,730,500 1,772,000 2.25 1.91Granted 435,000 940,000 1.13 2.67Exercised - (797,000) - 2.01Expired (557,500) (184,500) 1.59 2.23Outstanding,endofyear 1,608,000 1,730,500 2.17 2.25 OutstandingOptions ExercisableOptionsRangeof Number Weightedaverage Weightedaverage Number Weightedaverageexerciseprices outstanding remaininglife exerciseprice exercisable exerciseprice (years) $ $lessthan$1.00 268,000 4.34 0.83 188,000 0.83$1.00-$1.50 170,000 3.77 1.40 40,000 1.36$1.51-$2.00 140,000 2.76 1.80 110,000 1.78$2.01-$2.50 270,000 2.92 2.41 198,000 2.41$2.51-$3.00 760,000 3.21 2.79 390,000 2.76 1,608,000 3.37 2.17 926,500 2.12

The fair value of the options granted was estimated on the date of grant using the Black-Scholes option pricing model. For the years ended December 31, 2012 and 2011, grant date fair value indicated was based on the following factors:

2012 2011Weightedaveragefairvalue,peroption($) 0.64 1.51Weightedaveragerisk-freeinterestrate(%) 1.21 2.83Weightedaveragevolatility(%) 67.10 66.86Expectedlife(years) 5.0 5.0Dividendyield(%) - 0.7

The estimated fair value of the options granted is expensed over the vesting period. The fair value compensation and contributed surplus relating to stock options was $601,540 (2011: $934,950). The average fair value of the common shares during the years ended December 31, 2012 and 2011 was $1.22 and $2.54, respectively.




17. INCOME TAXES

Deferred tax arising from temporary differences and unused tax losses are summarized as follows:

Deferredtaxassets(liabilities) January 1 Recognized in Recognized in December 31 2012 equity profit and loss 2012 Unclaimednon-capitallosses $ 776 $ - $ 594 $ 1,370ITCcredit 71 - (1) 70UnclaimedSR&EDexpense 125 - 3 128Eligiblecapitalproperty 115 - (6) 109Deductiblereclamationcosts 417 - 262 679Unclaimedfinancingcosts 3 - 40 43Ontarioresourceprofittaxcredit 715 - (53) 662Resourcetaxcredit 1,116 - (1,116) -Equityportionofconvertibledebenture - (334) - (334)(Excessofcarryingvalueofminingandexplorationpropertiesover taxbasis)taxbasisinexcessofcarryingvalue (2,723) - 14,866 12,143 Netdeferredtaxasset $ 615 $ (334) $ 14,589 $ 14,870

Deferredtaxassets(liabilities) January1 Recognizedin Recognizedin December31 2011 equity profitandloss 2011 Unclaimednon-capitallosses $ 1,373 $ - $ (597) $ 776InvestmentTaxCredit 70 - 1 71UnclaimedSR&EDexpense 128 - (3) 125Eligiblecapitalproperty 127 - (12) 115Deductiblereclamationcosts 411 - 6 417Unclaimedfinancingcosts 65 - (62) 3Ontarioresourceprofittaxcredit 658 - 57 715Resourcetaxcredit 1,116 - - 1,116 3,948 - (610) 3,338Excessofcarryingvalueofminingandexplorationproperties overunclaimedresourcepoolsandundepreciatedcapitalcost(includinginventory) (2,168) - (555) (2,723)

Netdeferredtaxasset $ 1,780 $ - $ (1,165) $ 615

The following table reconciles the expected income tax expense/recovery at the combined Federal and Ontario statutory income tax rate 26.5% (2011: 28.3%) to the amounts recognized in the consolidated statements of income.

2012 2011 Netincome(loss)reflectedinconsolidatedstatementsofincome $ (59,829) $ 1,333Expectedincometax(recovery)expense $ (15,855) $ 377Non-deductibleexpense 17 379Changeinstatutoryrates 76 (25)Stockcompensationexpense 160 265Accretionofdiscountonconvertiblepromissorynote 93 185Ontarioresourceprofitsallowance - (83)Ontarioincometaxharmonization 4 (36)Miningtaxrecovery - (36)DerecognitionofFutureTaxAsset,Quebecnon-refundablecredits 708 -Other 138 -Changeintaxbenefitnotrecognized 83 67Taxexpense(recovery) $ (14,576) $ 1,093

The decrease in the statutory income tax rate is due to the enacted reduction in the Federal and Provincial corporation tax rates.

Non-capital losses available for carry forward to reduce taxable income in future years expire in 2028 and 2029. No tax benefit has been recorded for the deductible temporary differences and federal and provincial non-capital losses, totaling $3,907,000, of MLGM. Losses of $1,304,000 will expire between 2013 and 2032.

The Company is subject to income tax laws in various jurisdictions. Tax laws are complex and potentially subject to different interpretations by the taxpayer and the relevant tax authority. The provision for income taxes and deferred tax represents management’s interpretation of the relevant tax laws and its estimate of current and future income tax implications of the transactions and events during the period. The Company may be required to change its provision for income taxes or deferred tax balances when the ultimate deductibility of certain items is successfully challenged by taxing authorities or if estimates used in determining the amount of deferred tax asset to recognized change significantly, or when receipt of new information indicates the need for adjustment in the amount of deferred tax to be recognized. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax, deferred tax balances and the effective tax rate. Any such changes could materially affect the amounts reported in the consolidated financial statements in the year these changes occur.

18. EARNINGS PER SHARE AND DIVIDENDS

Basic earnings per share (“EPS”) is calculated by dividing the net earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the treasury method of calculating the weighted average number of common shares outstanding, except the if-converted method is used in assessing the dilution impact of convertible notes. The treasury method assumes that outstanding stock options with an average exercise price below the market price of the underlying shares are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average price of the common shares for the period. The if-converted method assumes that all convertible notes have been converted in determining diluted EPS if they are in-the-money except where such conversion would be anti-dilutive.

2012 2011(Loss)incomeavailabletocommonshareholders $ (45,058) $ 448Weightedaveragenumberofshares,basic 101,886,912 101,707,396Dilutivesecurities Options 104,872 273,058 Convertibledebentures - -Weightedaveragenumberofshares,diluted 101,991,784 101,980,454

Basic(loss)earningspershare $ (0.44) $ 0.00Diluted(loss)earningspershare $ (0.44) $ 0.00

Numberofsharesexcludedfromdilutedearningspersharecalculationduetoanti-dilutiveeffect: Options 1,320,000 765,000 Convertibledebentures 2,808,400 3,363,385

DividendsOn April 29, 2011, Wesdome’s Board of Directors approved payment of a dividend of $0.02 per share on the Company’s outstanding common shares to shareholders of record on the close of business on April 15, 2011 in the amount of $2,028,000.

19. EMPLOYEE BENEFITS

2012 2011Salariesandshort-termemployeebenefits $ 37,232 $ 40,162Postemploymentbenefits 753 727 37,985 40,889Share-basedcompensation 602 766 $ 38,587 $ 41,655

2012 2011Salariesandemployeebenefitsexpensedtominingandprocessingexpenses $ 35,330 $ 36,826Salariesandemployeebenefitscapitalized 3,257 4,829 $ 38,587 $ 41,655

20. RELATED PARTY INFORMATION

Key management of the Company are its Board of Directors and members of executive management. Key management personnel remuneration includes the following expenses:

2012 2011Salariesandshort-termemployeebenefits $ 1,212 $ 1,266Postemploymentbenefits 46 44Fairvalueofshare-basedcompensation 415 493 $ 1,673 $ 1,803

In fiscal 2012, the Company paid $55,500 in directors’ fees (2011: $23,900) to companies whose managing partners are directors of the Company.

21. FINANCIAL INSTRUMENTS – DISCLOSURES AND PRESENTATION

Financial instruments disclosures requires the Company to provide information about: a) the significance of financial instruments for the Company’s financial position and performance and, b) the nature and extent of risks arising from financial instruments to which the Company is exposed during the period and at the statement of financial position date, and how the Company manages those risks.

Financial Instruments – Fair ValuesFollowing is a table which sets out the fair values of recognized financial instruments using the valuation methods and assumptions described below:

2012 2011 Carrying Fair Carrying Fair Value Value Value ValueFinancialLiabilitiesOtherfinancialliabilities Convertible7%debentures $ - $ - $ 10,726 $ 11,040 Convertible7%debentures–newissue $ 7,021 $ 7,021 - -




22. SUPPLEMENTAL CASH FLOW INFORMATION

2012 2011

net changes in non-cash working capitalOperatingactivities Receivables $ 2,225 $ 268 Payablesandaccruals 4,042 (3,195) Incometaxespayable - (36) Miningtaxes - (1,317) Goldinventory (3,960) (1,483) Suppliesandother (291) 231 $ 2,016 $ (5,532)Investingactivities Receivables $ 814 $ (163) Payablesandaccruals 1,010 (799) Suppliesandother (73) 58 $ 1,751 $ (904)

non-cash transactions:Recognitionoffairvalueofstockoptionsandwarrantsexercisedtransferredtosharecapital(Note15) $ - $ 667Revisiontoassetretirementobligation(Note14) $ 897 $ 47

23. INDEMNITIES

The Company has agreed to indemnify its directors and officers, and certain of its employees in accordance with the Company’s by-laws. The Company maintains insurance policies that may provide coverage against certain claims.

24. OTHER INTEREST

During 2011, the Company received reassessments relating to previous periods which resulted in a partial repayment of resource tax credits, including an assessment of interest relating to amounts reassessed. The Company is appealing these reassessments and pursuing a full refund of the amount paid, with respect to both tax credits and interest paid.

25. CAPITAL RISK MANAGEMENT

The Company’s objectives of capital management are intended to safeguard its ability to support the Company’s normal operating requirements on an ongoing basis, continue the development and exploration of its mineral properties and support any expansionary plans.

The capital of the Company consists of items included in equity net of cash and cash equivalents: December 31 December31 2012 2011Totalequity $ 85,322 $ 128,807Cashandcashequivalents (4,633) (5,215)Capital $ 80,689 $ 123,592

The Company manages the capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the Company’s assets. In order to maintain or adjust its capital structure, the Company may issue new shares, issue new debt or issue new debt to replace existing debt with different characteristics.

There is no restriction on the ability of the Company to pay dividends other than cash flow considerations. The Company paid dividends of $0.02 per share on April 29, 2011. Dividend payments in the future will depend on the Company’s ability to generate earnings.

To effectively manage its capital investments, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has sufficient liquidity to meet its operating and growth objectives.

The Company expects its current capital resources and projected cash flow from continuing operations to support further exploration and development of its mineral properties.

Neither the Company nor its subsidiaries are subject to any externally imposed capital requirements such as loan covenants or capital ratios.

There were no changes to the Company’s approach to capital management during the current period.

26. SUBSEQUENT EVENTS

On March 4, 2013, the Company received approval from the TSX for an NCIB. The bid will allow the Company to purchase on the open market, up to 9,983,346 of its common shares and $351,000 principal amount of its convertible debentures (Note 13) for cancellation over a period of one year to end on March 5, 2014.

On March 7, 2013, the Company announced the suspension by June 30, 2013 of mining activities at the Kiena Mine Complex. The Company incurred an impairment charge of $60.9 million as at December 31, 2012 (Note 10). The Company expects to incur future restructuring costs of approximately $1.7 million relating to severance payouts at the mine.

Determination of Fair ValueThe fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm’s length transaction between willing parties. The Company uses the following methods and assumptions to estimate fair value of each class of financial instruments for which carrying amounts are included in the consolidated statements of financial position as follows:

Cash and restricted funds – The carrying amounts approximate fair values due to the short maturity of these financial instruments.

Receivables – The carrying amounts approximate fair values due to the short maturity of these financial instruments.

Other financial liabilities – Payables and accruals and the convertible 7% debentures are carried at amortized cost. The carrying amount of payables and accruals approximates fair value due to the short maturity of these financial instruments. The fair value of the convertible 7% debentures is based on the quoted market price.

The fair value hierarchy for financial instruments measured at fair value is Level 1 for marketable securities. The Company does not have Level 2 or Level 3 inputs.

Financial Risk ManagementThe Company is exposed to a number of different risks arising from normal course business exposures, as well as the Company’s use of financial instruments. These risk factors include: (1) market risks relating to commodity prices, foreign currency risk and interest rate risk; (2) liquidity risk; and, (3) credit risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and establishes and monitors risk management policies to: identify and analyze the risks faced by the Company; to set appropriate risk limits and controls; and to monitor risks and adherence to market conditions and the Company’s activities.

1) Market RiskMarket risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of the business. The market price movements that could adversely affect the value of the Company’s financial assets and liabilities include commodity price risk, foreign currency exchange risk and interest rate risk.

(a) Commodity price riskThe Company’s financial performance is closely linked to the price of gold which is impacted by world economic events that dictate the levels of supply and demand. The Company had no gold price hedge contracts in place as at or during the years ended December 31, 2012 and 2011.

(b) Foreign currency exchange riskThe Company’s revenue is exposed to changes in foreign exchange rates as the Company’s primary product, gold, is priced in U.S. dollars. The Company had no forward exchange rate contracts in place and no foreign currency holdings as at or during the years ended December 31, 2012 and 2011.

(c) Interest rate riskInterest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company’s cash includes highly liquid investments that earn interest at market rates and interest paid on the Company’s convertible debentures is based on a fixed interest rate. Fluctuations in market rates of interest do not have a significant impact on the Company’s results of operations due to the short term to maturity of the investments held.

2) Liquidity RiskLiquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. The Company believes it has access to sufficient capital through internally generated cash flows and equity and debt capital markets. Senior management is also actively involved in the review and approval of planned expenditures.

The following table shows the timing of cash outflows relating to payables and accruals, finance leases and convertible debentures:

(inthousands)December 31, 2012 <1 Year 1-2 Years 3-5 Years over 5 Years Payables&accruals $ 13,996 - - -Financeleases $ 921 $ 695 - -Convertibledebentures $ 491 $ 983 $ 7,675 -

December31,2011 <1Year 1-2Years 3-5Years Over5YearsPayables&accruals $ 8,944 - - -Financeleases $ 997 $ 854 - -Convertibledebentures $ 11,377 - - -

3) Credit RiskCredit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company minimizes its credit risk by selling its gold exclusively to financial institutions with forty-eight hour terms of settlement. The Company’s receivables consist primarily of government refunds and credits. The Company estimates its maximum exposure to be the carrying value of cash, receivables and funds held against standby letters of credit.

The Company manages credit risk by maintaining bank accounts with Schedule 1 Canadian banks and investing only in Guaranteed Investment Certificates. The Company’s cash is not subject to any external limitations.




BOARD OF DIRECTORS

Will F. Bawden, PhD, P.Eng.3,4 CEO, Mine Design Technologies Inc. Toronto, Ontario Dr. Bawden, the CEO of Mine Design Technologies Inc., previously served as the Director of the Lassonde Mineral Engineering Program at the University of Toronto and was formerly the Department Head for Geomechanical mine design at Noranda Technology, Montreal. Dr. Bawden holds a PhD from the University of Toronto an MSc from the University of Illinois and a B.Sc. from Queens University.

Eldon Bennett 2,3 Managing Partner, Aird & Berlis LLP Toronto, Ontario Eldon Bennett holds a PhD from Duke University and law degree from the University of Toronto. He has taught both political science and law at York University and practices law in the areas of civil litigation and labour relations.

Marc Blais, CPA, CGA 1 Chief Operating Officer, Sunset Cove Mining Saint-Lambert, Quebec Marc Blais is a Certified Public Accountant and has been with Sunset Cove Mining, a publicly traded mining firm since 2008. Previously he was President of Dynacor Mines from 1993 to 2007. From 1988 to 1993 he worked as senior chartered professional accountant and as a financial planner and consultant. Earlier on in his career he worked as an accountant in various assignments.

Brian Northgrave 2,3 Consultant, Trade Facilitation Office of Canada Ottawa, Ontario Brian Northgrave has been a director Wesdome since 2007, having been a director of Western Quebec Mines since 2004. Brian is a retired former Ambassador to the Eastern Republic of Uruguay for the Canadian government and has held various foreign assignments while employed by the Department of Foreign Affairs from 1966 to his retirement in 2002. Brian holds an MBA. from the University of Toronto, a Diploma of Business Administration from the London School of Economics and a B.A. (Economics & Political Science) from the University of Toronto.

Donald D. Orr, CA4 Consultant, Wesdome Gold Mines Ltd. Toronto, Ontario Don Orr is a Chartered Accountant with a B.Comm from the University of Toronto. Don has been involved in the mining industry since 1977. He was the Secretary-Treasurer of Wesdome Gold Mines Ltd. from 1994 to 2012 and has been a Director since 1994.

Donovan Pollitt, CFA, P.Eng.4 President and CEO, Wesdome Gold Mines Ltd. Toronto, Ontario Donovan Pollitt is a Professional Engineer in Ontario and holds a BASc. in Mining Engineering from the University of Toronto. Previously as VP Corporate Development, Donovan worked on mergers, financings and long-term planning at Wesdome. Donovan is also a holder of the Chartered Financial Analyst designation.

Hemdat Sawh, CA 1 CFO, Scorpio Mining Corporation Oakville, Ontario Hemdat Sawh is a chartered accountant, and holds an MBA degree in accounting from York University, a BSc degree in geology from Concordia University and a graduate diploma in geology from McGill University. Mr. Sawh has over 16 years of accounting and auditing experience at Grant Thornton LLP, culminating in the position of principal, where he acted as lead supervisor for auditing teams of businesses with a concentration in publicly listed mining companies. Mr. Sawh is currently the Chief Financial Officer for Scorpio Mining Corporation, a TSX listed company with polymetallic operations in Mexico. Mr. Sawh also served as Chief Financial Officer for Goldbelt Resources Ltd. and Crystallex International Corporation, both TSX listed gold mining companies.

A. William (Bill) Stein 1,2 CFO & CIO, Digital Realty Trust San Francisco, California, USA Since 2004, Bill Stein has been the Chief Financial and Investment officer of Digital Realty Trust, an NYSE listed real estate investment trust that owns, develops and manages data centers and internet gateways throughout North America and Europe. Bill has more than 30 years of investment, financial and operating management experience in both large company environments and small, rapidly growing companies. Prior to joining Digital Realty, Bill provided turnaround management advice to both public and private companies. Bill received a B.A. degree from Princeton University, a JD degree from the University of Pittsburgh and an M.S. degree with distinction from the Graduate School of Industrial Administration at Carnegie Mellon University.1 Audit committee member 2 Compensation committee member 3 Governance committee member 4 Environment, Health & Safety committee member

OFFICERS Brian Northgrave Chairman of the Board

Donovan Pollitt, P.Eng., CFA President and CEO

Brian Ma, MAcc., CA CFO

André Roy, P.Eng., MBA, MScA Vice President – Operations

George N. Mannard, P.Geo, MScA Vice President – Exploration

SENIOR STAFFKiena ComplexCarolle Audy Chief Accountant

Bernard Belley Mill Superintendent

Pierre Deschamps Mine Superintendent

Marc Ducharme, P.Geo. Chief Exploration Geologist

Pierre Jeansonne Chief – Geology Department

Michel Lafleur, Eng. Mine Manager

Daniel Petitclerc Maintenance Superintendent

Eagle River MineDavid Boulay Maintenance Superintendent

Don Bridges Mill Superintendent

Jeff Hutchings Mine Manager

Daniel Lapointe, P.Geo., MSc. Mishi Superintendent

Allan MacDonald Office Manager

Scott Carruthers Chief Assayer

John Plecash Chief – Geology Department

Gilbert Wahl Safety/Security Director

Dave Whiteway Mine Superintendent

ANNUAL MEETING

The Annual Meeting of Shareholders

will be held at:

TSX Gallery

130 King Street West,

Toronto, Ontario

on Wednesday, May 1, 2013

at 4:00 p.m.

CORPORATE INFORMATION

TRANSFER AGENT AND REGISTRARComputershare Investor Services Inc.Toronto, OntarioTel: 1.800.564.6253 or 514.982.7555www.computershare.com

AUDITORSGrant Thornton LLPToronto, Ontariowww.grantthornton.ca

LEGAL COUNSELHeenan Blaikie LLPToronto, Ontariowww.heenan.ca

STOCk ExChANGE LISTINGToronto Stock ExchangeSymbol: WDOwww.tsx.com

37 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT36 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT

WESDOME.COM

HEAD OFFICE8 King Street East, Suite 1305 Toronto, ON M5C 1B5Tel: 416.360.3743 Fax: 416.360.7620email: [email protected]

KIENA MINE950 chemin Kienawisik, C.P. 268 Val d’Or, QC J9P 4P3Tel: 819.738.4031 Fax: 819.738.5452

EAGLE RIVER MINE93 Mission Road, P.O. Box 1520 Wawa, ON P0S 1K0Wawa OfficeTel: 705.856.2718 Fax: 705.856.7173Mine SiteTel: 705.856.2721 Fax: 705.856.2986

Documents

Wesdome ar2012