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## MANAGEMENT’S DISCUSSION & ANALYSIS 

For the period ended June 30, 2010 

## Form51-102F 

The operating results of the Company reflect its on-going corporate business development, administrative costs and other income or expenses such as interests and foreign exchange gains or losses. 

## Twelve month results 

For the year ended June 30, 2010, the Company reported a net loss of $2,936,587, or $0.02 per share, compared to a net loss of $3,498,950, or $0.02 per share, reported for the corresponding period in fiscal 2009. 

The operating expenses of $2,779,937 for fiscal 2010 are comprised of salaries, office and administration, legal and accounting, shareholder communications, conference and travel, regulatory compliance and stock-based compensation. Excluding stock- based compensation expenses of $1,227,420, the Company incurred operating expenses of $1,552,517 compared to operating expenses of $2,040,393 for fiscal 2009. 

General and administration expenses, decreased by 13% to $1,018,132 in fiscal 2010 from $1,168,403 in fiscal 2009, were comprised of salary expenses of $782,030 (2009 - $665,956) and office rent, general office expenses $236,102 (2009 - $502,447). The salaries increased comparing to the same period of the last year reflecting increased corporate activities, which are partially offset by decreased general administrative expenditures. 

Shareholder communications, conference and travel expenses totaled $251,078 in fiscal 2010, decreased by $281,042 from $532,120 in fiscal 2009, reflecting budget cuts implemented as a result of the global recession. The regulatory and filing expense was $29,886 in fiscal 2010 compared to $46,160 in the same period of fiscal 2009 primarily due to non-recurring cost of fees paid to TSXV for the new stock plan in 2009. Legal, accounting and audit expenses were $235,148 in fiscal 2010 compared to $280,086 in fiscal 2009, the variance reflects a non-recurring audit fee adjustment in the same period of 2009 and reduced general legal expenses. 

During fiscal 2010, a total $1,496,855 (2009 - $1,890,837) stock-based compensation expenses were credited to contributed surplus, of which $1,227,420 (2009 - $1,416,204) was charged to operations, $269,435 (2009 - $474,633) was charged to exploration, mine development and construction of the plant. 

During fiscal 2010, the Company received $29,675 (2009 - $311,591) interest income generated from a cash balance. The Company incurred a foreign exchange loss of $192,424 compared to $352,911 for the prior year. 

## 1.5 Summary of Quarterly Results 

The following is selected quarterly financial information about the Company, for its most recent eight quarters: 

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## 1.6 Liquidity and Financial Condition 

The Company’s principal cash requirements are working capital used for business development, general administration, property maintenance and development, the gold treatment plant construction and production at Selinsing and exploration at Buffalo Reef. 

The Company's cash balance as at June 30, 2010 was $4,134,141, decreased by $2,048,461, from $6,182,602 as at June 30, 2009. During fiscal 2010, $6,286,751 was used in operations; $4,411,148 was generated from investing activities; and $156,741 was spent on financing activities. 

During fiscal 2010, the Company spent $6,286,751 on operating activities compared to $1,749,681 in fiscal 2009, the increase was primarily due to inventory of $4,818,599 at Selinsing Gold Project, reflecting purchase of mine operation supplies, mining expenditure to stockpile ores and milling process expenditure to extract the gold component from ore materials. 

