Management’s Discussion and Analysis of Financial Condition and Results of Operations

For the year ended December 31, 2007 (Expressed in United States dollars)

FINANCIAL RESULTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2007

For the twelve months ended December 31, 2007, we reported mineral sales of $39.6 million (six months ended December 31, 2006 - $39.5 million). Gold sales from LEFA and Maco during the year were offset against capital costs, in accordance with our accounting policies, as the plants have not reached commercial production. In 2006 there was revenue reported from the former heap leach operation at LEFA.

Direct costs for the twelve months ended December 31, 2007 were $35.2 million (six months ended December 31, 2006 – $38.7 million). Mine site administration costs were $7.6 million (six months ended December 31, 2006 – $6.9 million). Direct costs and mine site administration costs in 2006 included costs relating to the LEFA heap leach operation and also mobilization and other start-up costs of $5.6 million at LEFA. LEFA and Maco costs in the year have been capitalized as the plants have not yet reached commercial production.

Gross margin for the twelve months ended December 31, 2007 was negative $3.2 million (six months ended December 31, 2006 – negative $6.1 million). Depletion and depreciation expense, which is a non-cash measure, was $8.7 million (six months ended December 31, 2006 – $6.7 million).

For the year ended December 31, 2007, general corporate administration and related costs were $17.7 million (six months ended December 31, 2006 - $11.6 million). Interest and finance charges expense were $21.6 million (six months ended December 31, 2006 - $10.1 million) and a 13.2% appreciation in the value of the Norwegian kroner against the US dollar resulted in unrealized foreign currency translation losses of $38.9 million (six months ended December 31, 2006 - $0.6 million). The Company also recorded realized fair value losses of $7.6 million and unrealized fair value losses of $0.4 million on its forward obligations.

The Company reduced its holdings of Intex shares systematically during the year and this resulted in the recognition of $72.2 million gains for the twelve months ended December 31, 2007 (six months ended December 31, 2006 - gains of $35.2 million). In 2006, the Company realized a gain of $6.7 million on the sale of its interest in Barberton Mines Ltd to Metorex and subsequent disposal of the Metorex shares.