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

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

RESULTS FROM OPERATIONS

LEFA Gold Mine

Ore mined in the quarter ended December 31, 2007 totalled 828,405 tonnes at an average grade of 1.85 g/t and containing 49,317 oz gold. Mining activities early in the period were affected by the heavy rainfall, but are now performing well. Mining production has progressively increased with excavator production rates now in line with that forecast in the feasibility study. Total mine production (ore plus waste) for November and December was the best so far and exceeds by 15 to 20% the monthly average planned for 2008. This performance results from improved planning, equipment utilization, the positive impact of operator training and recruitment of key mining operations personnel.

Ore mined in the twelve months to December 31, 2007 totalled 2,253,671 tonnes at an average grade of 1.62 g/t, containing 117,136 oz of gold.

Ore milled during the quarter ended December 31, 2007 was 791,450 tonnes containing 33,823 oz of gold. Throughput in December was reduced when the site experienced a component failure in an electrical panel for one of the grinding mills. This impacted production by five days whilst repairs were effected and replacement PLC cards were sourced and delivered to site.

Ore processed for the twelve months ended December 31, 2007 was 2,482,203 tonnes containing 108,907 oz of gold.

Gold produced in the quarter was 27,579 oz, compared to the 28,953 oz for the previous quarter ended September, 2007. The production during Q4 was lower than expected due to the impact of the disruptions to plant operations mentioned above. Gold produced for the year to December 31, 2007 was 91,684 oz.

Gold sold was 24,824 oz and 87,188 oz for the quarter and year ended December 31, 2007 respectively. All proceeds from gold sold and associated costs were capitalized for accounting purposes.

Maco

During the quarter ended December 31, 2007 26,901 tonnes of lower grade development ore was processed through the pilot plant at 2.6 g/t. Gold recovered from the plant in the period was 1,957 oz. Gold sold in the quarter was 2,196 oz.

For the twelve months ended December 31, 2007, 84,965 tonnes were processed through the plant at 3.2 g/t Au and 13.59 g/t Ag. Gold recovered in the year was 7,228 oz and gold sold was 7,155 oz. The mine also produced 21,790 oz of silver in the year.

Nalunaq Gold Mine and Nugget Pond Processing Facility

During the twelve months ended December 31, 2007, $3.4 million (six months ended December 31, 2006 – $1.2 million) was spent on further development of the mine. The focus of this work was ramp development to provide access from the Upper Target Block to the Mountain Block. A portal was established at the 600MB level to provide for exhaust ventilation and access to an additional waste dump.

The South Block development has continued down to the 230SB level as the Upper Target Block has intersected the 600m level.

Ore produced in the quarter ended December 31, 2007 was 31,748 tonnes, an average of approximately 345 t/d, and for the twelve months the ore production was 132,930 tonnes, representing an average of 364 t/d (six months ended December 31, 2006 – 52,139 tonnes representing an average of 283 tpd). Production for the year was focused on three mining fronts, the Upper Target Block, the Lower Target Block and the South Block.

Shipping of ore to Nugget Pond continued throughout the quarter as planned and four shipments totalling 45,406 tonnes of ore at an average grade of 12.0 g/t containing 17,500 oz were delivered to South Brook in Newfoundland, for subsequent road haulage to Nugget Pond. Total ore shipments for the year to December 31, 2007 to Nugget Pond were 161,514 tonnes containing 77,036 oz, representing an average grade of 14.8 g/t. At December 31, 2007, 6,000 tonnes of run-of-mine ore was stockpiled at Nalunaq's port in Greenland containing Management's estimate of approximately 2,100 oz of gold. In addition there was 28,000 tonnes of ore containing approximately 12,700 oz of gold at Nugget Pond.

During the quarter, a total of 40,183 dry metric tonnes of ore were processed at the plant (an average mill throughput of 437 t/d) at a grade of 13.2 g/t. Ore processed for the year to December 31, 2007 was 132,579 tonnes at an average grade of 14.9 g/t. Gold produced from the plant during the quarter and year ended December 31, 2007 were 15,378 oz and 58,716 oz, respectively. There was no gold produced in Q1 2007 as the Nugget Pond plant was being commissioned.

Gold sold during the quarter and year ended December 31, 2007 were 14,809 oz and 56,570 oz, respectively.