8 annual report - premier gold mines | premier gold mines€¦ · federal ea was approved and the...

2018 Annual Report

TABLE OF CONTENTS

About Us 1

Message from the President 2

Board of Directors & Management Team 4

Management’s Discussion & Analysis & Consolidated Financial Statements – Dec 31, 2018 7

1

Our Purpose

Generate superior returns for our shareholders by

identifying and investing in precious metal exploration

and mining opportunities with the potential to create

significant value.

Our Strategy

Proven Management

Premier has assembled a highly accomplished team of

proven professionals widely recognized for their

expertise, sound judgement and trusted

decision-making.

World-Class Districts

Our focus on world-class mining districts in North

America helps balance risk versus reward in favour of

our shareholders. These accessible regions reduce the

cost of discovery and allows for an accelerated

exploration cycle.

Safe Jurisdictions

Doing business where the rule of law is respected

means that our properties are our properties.

Sensible Partnerships

The partnership model has been an important part of

the Company’s success. It allows for a diversification of

both financial and asset-related risk and leverages the

experience of and builds relationships with other peer

companies.

Our Values

Our values reflect our belief that long-term success

cannot be realized without also safeguarding the

confidence we have earned from our shareholders,

partners and local communities. We draw upon their

experience, wisdom and concerns to ensure our

practices and impacts maintain the highest regard for

the well-being of the environment and their cultural

legacy.

Founded in 2006, Premier is a company that has successfully transitioned from explorer to gold producer. Premier is a North American focused company that holds a portfolio of projects, ranging from early exploration to production, located in the heart of several of the world’s most sought-after mining districts.

At Premier Gold Mines Limited, "A World of Opportunity" embodies the Purpose, Strategy and Values critical to the success of our organization and to the well-being of our employees, their families and our local communities.

2

Message from the President

Our strategy is to build a mining company that generates superior returns for our shareholders by identifying and investing in exploration and mining opportunities with the potential to create significant value. This is not something that we take lightly. Our Company continues to progress systematically to grow safe, sustainable production to generate appreciable cash flow. Our focus to achieve mid-tier producer status while maintaining aggressive exploration to discover our “mines of the future” has not, and will not, change.

2018 and 2019 represent years that will be dominated by development as we proceed on our aggressive growth platform with new mines in construction. Following a successful transition to gold-producer, we now have a clear path towards increased future production with ongoing mine development at South Arturo, and two further projects being permitted.

With active mines and advanced-stage projects in several of North America’s most prospective gold districts, our portfolio offers jurisdictional safety. To ensure a strong future, exploration continues to remain a corporate priority as we stress reserve and resource replacement and a sustainable production profile.

Our Operations

Following the very successful completion of mining the Phase 2 open-pit, efforts at South Arturo have now shifted towards the development of the Phase 1 open-pit and the El Nino underground mine. These operations are expected to provide years of low-cost production with El Nino ramping up later in 2019. The partnership is also advancing additional opportunities including the Phase 3 open-pit, a potential heap leach operation, and East Dee that could provide another production center owing to the highly successful 2018 drill program.

Mercedes is back on track as our team works to achieve production targets and reduce costs. A renewed focus on exploration will occur in 2019 as underground access is gained at the Marianas deposit, a higher-grade zone not currently carried in the mine’s reserves. Drilling will also test several new targets at the mine with the intent of adding years to the Mercedes mine plan.

3

Our Future

To recognize our plans for increased production in the years to come, permitting of the Cove deposit in Nevada and the Hardrock deposit in Ontario, remain a priority for the Company.

The largest deposit in Premier’s portfolio remains the Hardrock deposit that is being advanced by Greenstone Gold Mines, a 50/50 joint venture created with Centerra Gold. In late 2018, the Federal EA was approved and the Provincial EIS approval is expected in early 2019, paving the way for permits and an ultimate construction decision to develop the 4.6 million-ounce Hardrock open-pit deposit.

A Preliminary Economic Assessment (“PEA”) completed in 2018 demonstrated the potential of the 100%-owned Cove deposit to provide significant returns to the Company. A major hydrology program is now underway in advance of planned underground development and drilling to support a full Feasibility Study for this high-grade deposit. Adjacent to the main deposit, we have embarked on a major exploration campaign with our partner Barrick, in an effort to delineate additional resources and deposits on the larger property package.

Exploration has been the key element in the Company’s growth and will continue to be a priority in our future. Substantial drill programs were completed at Hasaga and Goldbanks in 2018 with Rye being a priority project in 2019.

The Hasaga Property has clearly demonstrated its

potential to host both bulk tonnage near-surface mineralization, and higher-grade mineralization down-plunge of the past-producing Howey and Hasaga gold mines. During the year, exploration was focused on delineating the “C-Zone” target which remains open for expansion and could represent the next significant deposit in the prolific Red Lake gold camp.

Exploration in Nevada will receive much attention as we focus on defining our mines of the future. The Rye Property, under Option from Barrick Gold, will be a priority in 2019 given past drilling success that demonstrated the potential for high-grade gold mineralization within a highly prospective, yet under-explored, epithermal vein system.

Looking Forward

Our mission is to realize safe and profitable production growth, building a mid-tier producer primarily through organic project development. With new mines under construction, a strengthened balance sheet, and sustained exploration initiatives, we are confident that we will deliver on behalf of our shareholders.

As in previous years, I take this opportunity to thank the dedicated professionals I have the pleasure of working with for their determination and hard work in building value and positioning Premier for a great future.

Ewan S. Downie

President & Chief Executive Officer

4

Board of Directors

John Begeman

Executive Chairman

Over 35 years experience in mining. Former VP western operations for Goldcorp, COO Wolfden Resources, President of Avion Gold Corp and is currently a director of Yamana Gold Inc. and African Gold Group Inc.

Mike Vitton

Director

Over 30 years experience in the mining finance industry. Formerly Executive Managing Director, Head, US Equity Sales, BMO Capital Markets, Seat Holder, NYSE; and President, New York Society of Metals Analysts.

Tony Makuch

Director

More than 20 years of direct mining experience - formerly Executive Vice President/President of Canadian Operations of Tahoe Resources Inc., President and CEO of Lake Shore Gold Corp. Currently President and CEO of Kirkland Lake Gold.

John Seaman

Lead Director

Former CFO of Premier Gold Mines and Wolfden Resources Inc. Currently President and CEO of a large private security Company.

Claude Lemasson

Director

More than 20 years of mining and development experience. Previously held senior mine development and operational roles with Goldcorp Inc., formerly President and CEO Guyana Goldfileds Inc., currently President and CEO of Eastmain Resources.

Ron Little

Director

More than 30 years experience in the mining industry. Formerly President and CEO of Orezone Gold Corporation. Ron is currently President & CEO of Wolfden Resources.

5

Management Team

Ewan Downie

CEO, President and Director

Over 25 years experience in the exploration and mining industry. Founder of Wolfden Resources, recipient of the PDAC “Bill Dennis Prospector of The Year” award and several Exploration and Development awards from the Northwestern Ontario Prospectors Association.

Steve Filipovic

Chief Financial Officer

Chartered Professional Accountant with over 18 years’ experience in financial management and reporting, M&A, and international risk management, taxation and structuring. Previously held senior finance and director roles with several listed mining companies.

Stephen McGibbon

Executive Vice-President Corporate & Project Development

Over 30 years of exploration, mine production and management experience - Former Chief Geologist and Exploration Manager at the Red Lake Mine (Goldcorp) and senior member of the team that discovered the “High Grade Zone”.

Brent Kristof

Senior Vice-President Operations

Over 35 years of experience in and leadership of underground and surface mining operations. Previously COO of Klondex, GM (Turquoise Ridge Mine), and several years managing operations for Newmont and Barrick in Canada, Nevada, Australia, and Papua New Guinea.

Kerri Chaboyer-Jean

Vice-President, Finance

Over 20 years of experience as a finance professional in public practice, manufacturing & mining operations and as a business systems consultant.

Matthew Gollat

Vice-President, Business Development

Over 10 years of experience with Premier working on several initiatives including its financings, the creation of, development and spin-out of Premier Royalty Corporation, as well as key transactions by the Company including the Trans-Canada Property joint venture, the South Arturo acquisition and Mercedes Mine acquisition and transition.

Shaun Drake

Corporate Secretary

President of DRAX Services Limited, a firm providing dedicated corporate secretarial services to reporting issuers for various companies listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange.

jhunt

Typewritten Text

Management's Discussion and Analysis

For the year ended December 31, 2018

2

TABLE OF CONTENTS OVERVIEW ......................................................................................................................................................................... 3

Company Overview ........................................................................................................................................................ 3

Functional and Presentation Currency Change ........................................................................................................... 3

Quarter and Year 2018 Operating and Financial Highlights ......................................................................................... 3

RESULTS OF OPERATIONS .............................................................................................................................................. 5

Selected Quarterly Information ..................................................................................................................................... 5

Quarter Results .............................................................................................................................................................. 6

Mining Operations........................................................................................................................................................ 10

Exploration, Evaluation and Pre-development ........................................................................................................... 15

Selected Financial Data ............................................................................................................................................... 17

FINANCIAL POSITION ...................................................................................................................................................... 18

Balance Sheet Review ................................................................................................................................................. 18

Liquidity and Capital Resources ................................................................................................................................. 18

MINE OPERATING SEGMENTS ....................................................................................................................................... 20

Mercedes Mine ............................................................................................................................................................. 20

South Arturo Mine ........................................................................................................................................................ 23

COMMITMENTS AND CONTINGENCIES .......................................................................................................................... 25

Environmental Rehabilitation Provision ..................................................................................................................... 25

Contractual Obligations and Commitments ............................................................................................................... 26

Gold Forward Contracts .............................................................................................................................................. 26

Surety Bonds ............................................................................................................................................................... 26

Off Balance Sheet Arrangements ................................................................................................................................ 26

TRANSACTIONS WITH RELATED PARTIES ................................................................................................................... 27

SUBSEQUENT EVENTS ................................................................................................................................................... 28

Credit Facility and Financing Package ....................................................................................................................... 28

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES, POLICIES AND CHANGES .............................................. 29

Functional and Presentation Currency Change ......................................................................................................... 29

Accounting Standards Adopted January 1, 2018 ....................................................................................................... 30

Recent Accounting Pronouncements ......................................................................................................................... 31

Significant Accounting Judgements and Estimates .................................................................................................. 31

NON-IFRS MEASURES ..................................................................................................................................................... 34

RISKS AND RISK MANAGEMENT .................................................................................................................................... 41

Financial Instruments and Related Risks ................................................................................................................... 41

Management of Capital Risk ........................................................................................................................................ 41

Risks and Uncertainties ............................................................................................................................................... 41

Risks Relating to Premier Common Shares Generally ............................................................................................... 46

MANAGEMENT’S REPORT ON INTERNAL CONTROLS ................................................................................................. 47

MINERAL RESERVES AND RESOURCES ....................................................................................................................... 48

Summary of 2018 Proven and Probable Reserves for Gold and Silver ..................................................................... 48

Summary of 2018 Mineral Resources for Gold and Silver (exclusive of mineral reserves) ...................................... 48

CAUTIONARY STATEMENT ON FORWARD LOOKING STATEMENTS .......................................................................... 49

ADDITIONAL INFORMATION ........................................................................................................................................... 49

3

Management's Discussion and Analysis of Financial Condition and Results of Operations The following Management's Discussion and Analysis (“MD&A”) of Premier Gold Mines Limited (the “Company” or “Premier”) should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 and the notes thereto. The Company’s audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Unless otherwise stated, all amounts discussed herein are denominated in U.S. dollars. This MD&A was prepared as of March 6, 2019 and all information is current as of such date. Readers are encouraged to read the Company’s public information filings on SEDAR at www.sedar.com. This discussion provides management's analysis of Premier’s historical financial and operating results and provides estimates of Premier’s future financial and operating performance based on information currently available. Actual results will vary from estimates and the variances may be significant. Readers should be aware that historical results are not necessarily indicative of future performance.

OVERVIEW Company Overview Premier is a growth oriented, Canadian based, mining company involved in the exploration, development and production of gold and silver deposits in Canada, the United States and Mexico. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) under the symbol PG and its head office is located at Suite 200, 1100 Russell Street, Thunder Bay, Ontario, P7B 5N2. The Company’s principal mining assets include:

• Wholly owned Mercedes Mine in Sonora, Mexico,

• A 40% interest in the South Arturo Mine in Nevada, USA, and

• A 50% interest in the Hardrock Gold Project through a partnership with Greenstone Gold Mines located along the Trans-Canada highway in Ontario, Canada.

Other key advanced exploration and development properties include:

• A 100% interest in the Cove gold property located in Nevada, USA,

• An earn-in agreement with Barrick Gold, related to the McCoy-Cove property located in Nevada, USA,

• A 100% interest in the Hasaga Gold Project in Red Lake, Ontario, Canada, and

• A 44% joint venture interest with Goldcorp in the Rahill Bonanza projects, also of Red Lake Ontario, Canada.

Functional and Presentation Currency Change

Effective January 1, 2018, the Company changed the presentation currency from the Canadian dollar (“CAD”) to the United States dollar (“USD” or “U.S. dollars”). The Company applied the change to USD presentation currency retrospectively and restated the comparative financial information as if the USD has always been the Company’s presentation currency. The functional currency of Premier, the parent company, changed from CAD to USD commencing on January 1, 2018. Unless otherwise stated, all amounts discussed herein are denominated in U.S. dollars. Refer to the “Critical Accounting Judgements and Estimates, Polices and Changes” section of this Management’s Discussion and Analysis for further details. Quarter and Year 2018 Operating and Financial Highlights Fourth Quarter

• Production of 23,042 ounces of gold and 120,730 ounces of silver

• Cash costs1 of $619 per ounce of gold sold, a 28% reduction from Q3 2018

• AISC1 of $798 per ounce of gold sold, a 21% reduction from Q3 2018

• Revenue of $19.9 million

• Mine operating income of $6.1 million

• Net loss of $8.9 million

Year 2018

• Production of 89,699 ounces of gold and 321,814 ounces of silver

• Sales of 87,036 ounces of gold at an average realized price1 of $1,264 per ounce

• Cash costs1 of $788 per ounce of gold sold

• AISC1 of $927 per ounce of gold sold

• Revenue of $113.9 million

• Mine operating income of $16.5 million

• Net loss of $20.4 million

1 See “Non-IFRS Measures” section of this Management’s Discussion and Analysis.

http://www.sedar.com/

4

Key Operating and Financial Statistics

Three months ended

December 31 Years ended

December 31

(in millions of U.S. dollars, unless otherwise stated) (iv)

2018 2017 2018 2017

Ore milled tonnes 188,444 227,353 861,058 1,074,426

Gold produced ounces 23,042 24,385 89,699 139,658

Silver produced ounces 120,730 77,082 321,814 357,901

Gold sold ounces 15,653 23,000 87,036 155,727

Silver sold ounces 90,135 77,096 299,819 338,831

Realized Price (2017 as restated) (iii)

Average realized gold price (i,ii) $/ounce 1,250 1,265 1,264 1,254

Average realized silver price (i,ii) $/ounce 15 16 16 17

Non-IFRS Performance Measures

Co-product cash costs per ounce of gold sold (i,ii) $/ounce 619 665 788 524

Co-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 798 792 927 627

Co-product cash costs per ounce of silver sold (i,ii) $/ounce 10 10 10 9

Co-product all-in sustaining costs per ounce of silver sold (i,ii) $/ounce 13 11 13 11

By-product cash costs per ounce of gold sold (i,ii) $/ounce 591 643 771 508

By-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 785 775 917 615

Financial Measures (2017 as restated) (iii)

Gold revenue m $ 19.4 29.0 109.6 194.6

Silver revenue m $ 0.5 1.3 4.2 5.7

Total revenue m $ 19.9 30.2 113.9 200.3

Mine operating income m $ 6.1 7.2 16.5 64.0

Net income / (loss) m $ (8.9) (3.6) (20.4) 16.2

Earnings / (loss) per share /share (0.04) (0.02) (0.10) 0.08

Adjusted earnings / (loss) per share (i,ii) /share (0.00) (0.02) (0.06) 0.08

EBITDA (i,ii) m $ (5.4) 5.7 9.3 80.4

Adjusted EBITDA (i,ii) m $ 2.9 5.7 17.6 80.4

Cash & cash equivalents balance m $ 43.9 103.0 43.9 103.0

Cash flow from operations m $ (7.5) (0.1) (10.7) 64.0

Free cash flow (i,ii) m $ (14.5) (5.4) (37.6) 42.4

Exploration, evaluation & pre-development expense m $ 4.4 5.7 22.2 26.3

Capital (2017 as restated) (iii)

Total capital expenditures m $ 7.0 5.1 26.9 21.6

Capital expenditures - sustaining (i,ii) m $ 1.6 1.3 7.0 9.6

Capital expenditures - expansionary (i,ii) m $ 5.4 3.8 19.9 12.0

(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis.

(ii) Cash costs, all-in sustaining costs, free cash flow, EBITDA, adjusted EBITDA, adjusted earnings (loss) per share, sustaining and expansionary capital expenditures as well as average realized gold\silver price per ounce are Non-IFRS metrics and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis.

(iii) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis. (iv) May not add due to rounding.

5

2018 Guidance

Production estimates for 2018 were derived from life of mine operating plans prepared on the basis of mineral reserves associated with each property. Accordingly, the following table represents the revised assumptions and guidance for 2018.

Gold Guidance 2018

Mine Production

ounces

Realized Gold Price

per ounce (i) Cash Cost

per ounce (i) AISC

per ounce (i)

South Arturo 20,000 - 25,000 $1,200 $425 - $475 $475 - $525

Mercedes 70,000 - 75,000 $1,200 $875 - $925 $1000 - $1050

Consolidated 90,000 - 100,000 $1,200 $775 - $825 $900 - $950

Mercedes mine silver forecast of 225,000 - 250,000 oz for 2018. (i) See “Non-IFRS Measures” section.

RESULTS OF OPERATIONS

Selected Quarterly Information

The following is a summary of selected financial information which reflects the activity related to operations, investment, acquisition and divestment activities undertaken by the Company over the past eight quarters.

For the years 2017 and 2018

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

2018 2018 2018 2018 2017 2017 2017 2017

Gold sales (ounces) (ii) 15,653 21,466 20,642 29,275 23,000 37,920 43,212 51,594

Silver sales (ounces) (ii) 90,135 85,376 58,098 66,210 77,096 90,545 97,356 73,834

(in thousands of U.S. dollars, unless otherwise stated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

2018 2018 2018 2018 2017

Restated(i)

2017 Restated

(i) 2017

Restated(i)

2017 Restated

(i)

Revenue 19,885 27,336 27,470 39,176 30,240 49,989 55,532 64,547

Costs of sales (10,582) (19,305) (20,539) (21,337) (17,106) (26,286) (21,676) (20,499)

Depletion, depreciation and amortization (3,234) (6,011) (8,126) (8,197) (5,927) (9,936) (12,363) (22,504)

Mine operating income / (loss) 6,069 2,020 (1,195) 9,641 7,207 13,767 21,493 21,545

Other significant income / (loss):

Gain attributable to Greenstone Gold development commitment

2,349 2,450 3,403 1,690 1,593 991 1,421 1,290

Write-down of inventory (8,260) - - - - - - -

Income / (loss) for the period (8,908) (1,844) (7,654) (2,020) (3,647) 2,261 12,501 5,055

Basic and diluted income / (loss) per share (0.04) (0.01) (0.04) (0.01) (0.02) 0.01 0.06 0.02

(i) Restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this Management's Discussion and

Analysis. (ii) May not total to annual amounts due to rounding.

Sales A total of 15,653 gold ounces were sold during the fourth quarter of 2018, with 1,280 ounces from South Arturo and 14,373 ounces from Mercedes compared to the third quarter total of 21,466 ounces, of which 1,932 ounces were from South Arturo and 19,534 ounces from Mercedes. While production has increased from the previous quarter, sales were lower due to the write- down of finished goods inventory as a result of Republic Metals Corporation bankruptcy as further discussed in Note 28 of the December 31, 2018 audited consolidated financial statements. Historical gold sales ounces over the past eight quarters follow the beginning of production at South Arturo in the third quarter of 2016 and the purchase of the Mercedes mine in the fourth quarter of 2016. Production at South Arturo, as expected, has been trending downward following completion of Phase 2 open pit mining. While the transition from the completed Phase 2 open pit to the El Nino underground extension and the next Phase 1 pit has begun, 2018 saw lower quarterly gold sales from South Arturo as compared to the quarter of 2017 due to the processing of stockpiles from the Phase 2 open pit.

6

Mercedes production has been impacted this year by the requirement to redesign stopes in new mining zones following changes in geologic interpretations which resulted in lower mined grades during the transition period. Production improved in the third and fourth quarters of 2018 following the completion of stope designs in the new Diluvio, Lupita, and Rey de Oro deposits. Revenue Revenue of $19.9 million for the fourth quarter of 2018 is consistent with lower quarterly sales ounces and a higher average realized gold price of $41 per ounce than in the third quarter of 2018. For the year ending 2018, the realized gold price is $10 per ounce higher than the year ended 2017. Net Income / (Loss) Net income / (loss) presented over the eight quarters is generally reflective of the limited life of the South Arturo Phase 2 open pit where production has been winding down in the second half of 2017 and into 2018 with the processing of stockpile ounces. Higher production than expected in the first half of 2018 for South Arturo was offset by a decrease in Mercedes production and the exploration and pre-development activity on the other U.S. properties. Fourth quarter improvement in Mercedes operations along with a slight decrease in exploration, evaluation and pre-development activity contributed to the reduction in the net loss compared to prior periods in 2018.

Quarter Results

Three months ended


December 31

(in thousands of U.S. dollars, unless otherwise noted) 2018

2017 as restated(i)

2018 2017

as restated(i)

Revenue 19,885 30,240 113,867 200,308

Cost of sales (10,582) (17,106) (71,763) (85,567)

Depletion, depreciation and amortization (3,234) (5,927) (25,568) (50,730)

Mine operating income 6,069 7,207 16,536 64,011

Expenses

Exploration, evaluation, and pre-development 4,449 5,725 22,233 26,251

Property maintenance 41 115 243 328

General and administrative 3,547 2,257 9,528 7,893

Share-based payments 37 117 2,571 2,716

Re-measurement of environmental rehabilitation provision - (170) (99) (297)

Operating income / (loss) (2,005) (837) (17,940) 27,120

(i) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this Management's Discussion and Analysis.

Certain items within the statement of income / (loss) and comprehensive income / (loss) have been reclassified in the current period and prior periods have been reclassified to reflect the change in presentation. Revenue and Mine Operating Income The decrease in revenue for the three months and year ended December 31, 2018 compared with the prior-year period was due to the decrease in sales volume of 7,347 and 68,691 gold ounces respectively and a decrease in the average realized gold selling price of $15 per ounce for the quarter offset by a small increase of $10 per ounce year to date. Cost of sales on a per ounce basis for the quarter was lower than in the prior-year period due to improved cost structure at Mercedes. Mercedes cost of sales per ounce for the year ended 2018 was higher than the year ended 2017 due to the weighting of Mercedes mine sales to South Arturo sales which are at a lower cost. Depletion is at a lower cost per ounce also due to the weighting of Mercedes with the longer life of mine. Expenses Exploration, evaluation and pre-development expense for the three months ended December 31, 2018 was $4.4 million compared to $5.7 million for the prior-year period. For the year ended December 31, 2018, expenses were $22.2 million compared to $26.3 million for the prior-year period. See further discussion in the Exploration, Evaluation and Pre-development section below. General and administrative expenditures for the three months and year ended December 31, 2018 were $3.5 million and $9.5 million compared to $2.3 million and $7.9 million in the prior-year period respectively. The year to date increase in administrative costs is the result of increased corporate development activity and is also in part attributed to the conversion to in-house technology services from contracted services in 2017.

7

Share-based payments are related to the annual grant and vesting of stock options and restricted share units. A lower share price at December 31, 2018 impacted the three months ended December 31, 2018 compared to the prior-year period. Other Income / Expense

Three months ended


December 31

(in thousands of U.S. dollars) 2018

2017 as restated(i)

2018 2017

as restated(i)

Investment and other income 1,618 11 1,684 12

Interest earned 135 279 680 743

Gain on disposal of property, plant and equipment - 24 321 38

Gain / (loss) on derivatives (306) (97) 637 (1,127)

Loss on investments (16) (210) (110) (337)

Loss on foreign exchange (1,519) (747) (2,756) (711)

Write-down of inventory (8,260) - (8,260) -

Write-down of property, plant and equipment - (160) - (1,584)

Gain attributable to Greenstone Gold development commitment

2,349 1,593 9,891 5,294

(5,999) 693 2,087 2,328


Investment and other income increased during the three months and year ended December 31, 2018 when compared to the prior-year period, mainly due to the recognition of income due to the cancellation of a Mercedes retirement savings plan which was not benefiting employees. Interest income is lower compared to the prior-year period for the three months and year ended December 31, 2018 as a result of a decrease in cash balances as discussed further in the liquidity section. A gain on disposal of property, plant and equipment for the year ended December 31, 2018 is related to the disposal of a non-core mineral interest for minimal proceeds less costs and the elimination of the related environmental rehabilitation obligation of $0.4 million. The loss on derivatives of $0.3 million for the three months ended December 31, 2018 is due to a reduction in the year to date fair value gain of $0.5 million on the offtake obligation from the previous quarter. The gain for the year ended December 31, 2018 of $0.6 million also includes a gain on the fair value adjustment for the warrant liability of $0.4 million. The loss of $1.1 million in the prior-year period was due to a fair value adjustment to the forward contract. The loss on investments is not significant and is related to fair market value adjustments on Canadian equities held. Canadian dollars, Mexican pesos and other monetary balances are impacted by fluctuations in the valuation of the U.S. dollar against the Canadian dollar and the Peso. For the three months ended December 31, 2018, the U.S. dollar strengthened by 5.1%, causing a foreign exchange loss on Canadian cash balances. The U.S. dollar also strengthened against the Peso by 4.4% causing an additional loss on Peso denominated cash balances. For the year ended December 31, 2018, the U.S. dollar strengthened against the Canadian dollar by 8.2% and weakened against the Peso by 0.3% causing an overall exchange loss of $2.8 million. The write-down of inventory in the three months ended December 31, 2018 was due to the RMC bankruptcy as further discussed in Note 28 of the December 31, 2018 audited consolidated financial statements. The gain attributable to the Greenstone Gold development commitment for the three months and year ended December 31, 2018 was $2.3 million compared to $1.6 million and $9.9 million compared to $5.3 million respectively in the prior-year period, directly attributable to the level of exploration and pre-development work being carried out on the property as further discussed in the Exploration, Evaluation and Pre-Development section. The project continues to be fully funded by the co-ownership partner, Centerra Gold Inc. (“Centerra”).

8

Interest and Finance Expense

Three months ended December 31

Years ended December 31


2017 as restated(i)

2018 2017 as restated(i)

Environmental rehabilitation accretion 376 298 1,279 932

Interest paid 327 971 1,984 4,798

Amortization of finance costs 56 2,025 1,090 5,065

Amortization of gold prepay interest (269) (422) (1,306) (1,920)

Silver stream accretion 226 - 693 -

Amortization of discount - 2 4 10

716 2,874 3,744 8,885


For the three months ended December 31, 2018, the environmental accretion was similar compared to the prior-year period and mainly due to the long-term risk-free rate. For the year ended December 31, 2018, the environmental accretion increased when compared to the prior-year period due to an increase in the provision for McCoy-Cove and Mercedes mine as well as increases in the long-term risk-free rates. Interest costs and amortization of finance costs for the three months ended December 31, 2018 decreased when compared to the prior-year period due to the lower level of debt held; $20 million in 2018 versus $45 million in 2017. In addition, the $20 million remaining debt was repaid on May 4, 2018. The amortization of the gold prepay interest is declining as the deferred revenue balance is drawn down reflected in the decreasing expense for the three months and year ended December 31, 2018 as compared to the prior-year period. Finance cost also now includes accretion on the silver stream deferred revenue arrangement considered to have a significant financing component as required under the new IFRS 15 standard as discussed in the ‘Critical Accounting Judgements and Estimates, Policies and Changes section of this MD&A. As this change has been applied using the modified retrospective approach, there is no comparative for 2017. Current and Deferred Taxes



(in thousands of U.S. dollars)

2018 2017

as restated(i) 2018

2017 as restated(i)

Income / (loss) before income taxes (8,720) (3,018) (19,597) 20,563

Current tax recovery / (expense) (664) 3,604 (2,781) (5,166)

Deferred tax recovery / (expense) 476 (4,233) 1,952 772

Income / (loss) for the period (8,908) (3,647) (20,426) 16,169


(ii) May not add due to rounding.

Current income taxes are comprised of net proceeds tax in Nevada related to the South Arturo mine operation, mining royalty tax at Mercedes operations, Mercedes withholding tax and a current provision for income taxes for the Mexico service company providing operations staff for Mercedes. The current income tax expense decreased by $4.3 million for the three months ended and $2.4 million for the year ended December 31, 2018 compared to the prior-year periods primarily due to a reduction in net proceeds tax on processing at the South Arturo mine operation which was offset by an increase in Mercedes tax. In addition, alternative minimum tax (“AMT”) for the U.S. operations of $1.1 million was recorded in 2017, prior to the repeal of AMT U.S. tax reform legislation on December 22, 2017.

Deferred tax recoveries include a reversal of the deferred tax liability for Premier Gold Mines NWO Inc. due to exploration expensed for accounting purposes but capitalized for tax purposes and a recovery of mining royalty deferred taxes for Mercedes Mine. The current deferred tax recovery changed by $4.7 million for the three months ended December 31, 2018 compared to the prior-year period due to a reversal of deferred tax recovery related to foreign exchange gains and losses in 2017 which was not required in 2018. The $1.2 million increase in deferred tax recovery for the year ended December 31, 2018 compared to the prior-year related to the Premier Gold Mines NWO Inc. recovery noted as well as a benefit on deferred royalty taxes due to the use of previously unrecognized loss carryovers. Also included in 2017 was a deferred tax recovery related to the deferred flow-through premium on flow-through financing from 2016 of $1.0 million.

9

Other Comprehensive Income / (Loss) Other comprehensive income / (loss) includes the exchange gain or loss on the translation of foreign operations and is now impacted by the Premier subsidiaries that have a functional currency of CAD and MXN as a result of the change in presentation currency discussed in Note 2(f) to the December 31, 2018 audited consolidated financial statements of the Company. The exchange gain for the three months ended December 31, 2018 is $0.9 million compared to a gain of $0.1 million for the prior-year period as a result of a 5.1% swing for the CAD to USD rate versus a weakening of 0.3% for 2017. For the year ended December 31, 2018, the exchange loss is $3.1 million compared to a gain of $6.7 million in the prior-year period based on a weakening of the CAD to USD rate of 8.2% in 2018 and a 7.3% swing in the opposite direction in 2017. The MXN rate does not impact the exchange gain / (loss) on translation of foreign operations to the same extent as the Mercedes

mine has a functional currency of U.S. dollars.

10

Mining Operations

The following tables provide financial and non-financial information for the three months ended December 31, 2018 and 2017 respectively.

Three months ended

December 31, 2018

(in millions of U.S. dollars, unless otherwise stated) (v) Mercedes South Arturo Total

Ore & Metals

Ore milled tonnes 183,158 5,286 188,444

Gold produced ounces 22,465 577 23,042

Silver produced ounces 119,039 1,691 120,730

Gold sold ounces 14,373 1,280 15,653

Silver sold ounces 90,135 - 90,135

Average gold grade grams/t 3.96 4.14

Average silver grade grams/t 44.78 -

Average gold recovery rate % 96.3 82.2

Average silver recovery rate % 45.2 -

Realized Price (2017 as restated) (iv)

Average realized gold price (i,ii) $/ounce 1,247 1,279 1,250

Average realized silver price (i,ii) $/ounce 15 - 15


Co-product cash costs per ounce of gold sold (i,ii) $/ounce 639 385 619

Co-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 808 678 798

Co-product cash costs per ounce of silver sold (i,ii) $/ounce 10 - 10

Co-product all-in sustaining costs per ounce of silver sold (i,ii) $/ounce 13 - 13

By-product cash costs per ounce of gold sold (i,ii,iii) $/ounce 609 385 591

By-product all-in sustaining costs per ounce of gold sold (i,ii,iii) $/ounce 795 678 785

Financial Measures (2017 as restated) (iv)

Gold revenue m $ 17.8 1.6 19.4

Silver revenue m $ 0.5 - 0.5

Total revenue m $ 18.2 1.6 19.9

Mine operating income m $ 5.3 0.8 6.1

Exploration, evaluation & pre-development expense m $ - 0.2 0.2

Capital (2017 as restated) (iv)

Total capital expenditures m $ 3.1 3.6 6.8

Capital expenditures - sustaining (i,ii) m $ 1.6 - 1.6

Capital expenditures - expansionary (i,ii) m $ 1.6 3.6 5.2

(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold/silver price per ounce are Non-IFRS

metrics and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis. (iii) Given the small nature and timing of South Arturo silver output, no silver by-product credits are reported, with any revenues offsetting costs. (iv) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis. (v) May not add due to rounding.

11

Three months ended December 31, 2017


Ore & Metals


Gold produced ounces 19,913 4,472 24,385

Silver produced ounces 77,082 - 77,082

Gold sold ounces 17,119 5,882 23,000

















Gold revenue m $ 21.4 7.6 29.0


Total revenue m $ 22.7 7.6 30.2

Mine operating income / (loss) m $ 7.6 (0.4) 7.2

Exploration, evaluation & pre-development expense m $ 0.3 0.3 0.6



Capital expenditures - sustaining (i,ii) m $ 1.1 0.3 1.3


(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold\silver price per ounce are Non-IFRS



12

The following tables provide financial and non-financial information for the year ended December 31, 2018 and 2017 respectively.

Year ended

December 31, 2018


Ore & Metals




Gold sold ounces 65,760 21,276 87,036











Co-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 1,073 478 927




By-product all-in sustaining costs per ounce of gold sold (i,ii,iii) $/ounce 1,060 478 917


Gold revenue m $ 81.9 27.8 109.6


Total revenue m $ 86.1 27.8 113.9


Exploration, evaluation & pre-development m $ 1.3 1.3 2.6





(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion

and Analysis.

(ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold\silver price per ounce are Non-IFRS metrics

and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis.

(iii) Given the small nature and timing of South Arturo silver output, no silver by-product credits are reported, with any revenues offsetting costs. (iv) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this


13

Year ended

December 31, 2017


Ore & Metals

Ore milled tonnes 683,545 390,881 1,074,426



Gold sold ounces 85,285 70,442 155,727

















Gold revenue m $ 106.4 88.2 194.6


Total revenue m $ 112.1 88.2 200.3


Exploration, evaluation & pre-development expense m $ 1.1 0.8 1.9





(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold/silver price per ounce are Non-IFRS



Production Consolidated gold production for the three months ended December 31, 2018 was 23,042 ounces of gold compared to 24,385 ounces of gold in the prior-year period. Lower gold production was attributable to South Arturo’s transition out of Phase 2 processing, which was offset by a stronger output by Mercedes of 22,465 ounces compared to 19,913 ounces in the prior-year period. Gold production from Mercedes in the fourth quarter of 2018 improved over the prior-year period due to higher mined grades upon transitioning to the new Rey de Oro and Lupita zones as well as consistent production from the Diluvio zone. Consolidated silver production for the three months ended December 31, 2018 was 120,730 ounces, significantly higher than the 77,082 ounces produced in the prior-year period, primarily due to the higher production from Mercedes. For the year ending December 31, 2018, production at Mercedes was lower than the prior-year due to the requirement to redesign stopes in the Diluvio zone following changes in geologic interpretations and resource modeling during the first half of 2018. This resulted in lower mined grades from the processing of development ore and less stope ore during the transition period in Diluvio. Accordingly, average gold grade in 2018 was 3.34 g/t compared to 3.93 g/t in the prior-year and average recovery for the year

14

was 96.0%, up slightly from the prior-year of 95.6%. As expected, gold production at South Arturo has transitioned from the completed Phase 2 open pit to processing stockpiles during the development of the El Nino underground extension and the Phase 1 open pit. South Arturo’s average gold recovery for the three months ended December 31, 2018 was 82.2%, similar to the prior-year period of 82.7%. For the year ending December 31, 2018, gold production at South Arturo was 20,980 compared to 57,124 ounces in the prior-year period. This level of output was expected, as explained above. Revenue Gold revenue of $19.4 million and silver revenue of $0.5 million for the three months ended December 31, 2018 was lower when compared to $29.0 million and $1.3 million respectively in the prior-year period. The decrease in gold revenue is mainly attributable to the planned lower production from South Arturo as described above and a lower gold sales price. The decrease in silver revenue is mainly attributable to IFRS 15 variable consideration adjustment against deferred revenue on silver contracts. Cash Costs1 Cash costs per ounce of gold sold was $619 for the three months ended December 31, 2018 compared to $665 in the prior-year period. Fourth quarter cash costs represent a 28% or $239 per ounce cost reduction over the third quarter of 2018.

For the year ending December 31, 2018, due mainly to the production impacts during the first half of the year as described above at Mercedes and a larger weighted average of production out of Mercedes versus South Arturo, consolidated cash costs per ounce of gold sold was $788 compared to $524 in the prior-year. All-in Sustaining Costs1 All-in sustaining costs per ounce of gold sold was $798 for the three months ended December 31, 2018 compared to $792 in the prior-year period. Fourth quarter ASIC were lower by 21% or $210 per ounce, as compared to the third quarter of 2018. For the year ending December 31, 2018, all-in sustaining costs per ounce of gold sold was $927 compared to $627 in the prior-year. As described above, the increase relative to the prior-year period was primarily due to the planned lower production from South Arturo and lower grades from the stockpile during the transition period at South Arturo. For a detailed review of the Company’s operating mines, refer to the “Mining Operating Segments” section of this MD&A. Exploration Exploration activity at the mine sites for the quarter continued as planned with a greater focus on reserve and resource additions and/or replacement than in the previous quarter. Adjustments to the plan remain results driven.


15

Exploration, Evaluation and Pre-development

The Company has nine properties in various stages of the exploration, evaluation and pre-development phase.

Three months ended

December 31 Years ended December 31

(in thousands of U.S. dollars) (ii)

2018 2017

as restated(i) 2018

2017 as restated(i)

Rahill-Bonanza, Ontario, Canada 1 15 29 73

Hasaga, Ontario, Canada 195 504 2,905 3,579

Greenstone Gold, Ontario, Canada 2,107 1,338 8,786 4,492

McCoy-Cove, Nevada, USA 1,221 1,701 5,161 11,359

South Arturo, Nevada, USA 173 294 1,294 831

Goldbanks, Nevada, USA 531 1,306 2,037 3,207

Mercedes Mine, Sonora, Mexico 57 326 1,331 1,122

Cristina, Mexico - 4 - 1,156

Rye, Nevada, USA 23 - 60 -

Rodeo Creek, Nevada, USA 4 - 4 -

Other 174 237 626 432

4,486 5,725 22,233 26,251

(i) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis. (ii) May not add due to rounding.

Hasaga There was no drilling completed at Hasaga during the fourth quarter as the drilling program was finalized in the third quarter with the data being analyzed to prepare plans for further exploration. For the year, 19,529 meters were drilled at the project. The drilling sought to infill and expand mineralization within the C-Zone and to test and define the D-Zone. A follow-up drilling program is being considered for 2019 based on excellent assay results on the C and D-Zones as a result of the better understanding of the structural controls. In addition, the 1.6 km gap west of Hasaga zones to the Buffalo zone has potential for new discoveries. Greenstone

Expenditures totalled $4.2 million in the fourth quarter (contributed by Centerra on a 100% basis) for a total of $17.6 million during 2018, on a range of project activities. Key expenditures include external engineering on public infrastructure programs including tailings management facility, process plant engineering, hydro infrastructure relocation, infrastructure repositioning, support permit applications, legal consultation and operating support to First Nations. McCoy-Cove

A Preliminary Economic Assessment (“PEA”) was completed in the first half of 2018 on the McCoy-Cove project, including designs for underground exploration development and drilling, preliminary engineering, dewatering, and environmental baseline studies, and a life of mine plan. Dewatering simulations, including a pump test of the proposed underground advanced exploration areas around the Helen Zone were completed during 2017. During the fourth quarter of 2018, spending focused on pre-development, including engineering and permitting to change the portal and power line to safer and more practical locations and changing the design of the waste rock stockpile to improve economics without compromising the environment. Well drilling, pump tests, and updating of the groundwater model will be completed in the first half of 2019 and underground exploration development is now expected to begin in the fourth quarter of 2019. A McCoy-Cove “Earn-in” agreement was signed with Barrick Gold in December 2017 to explore the claims surrounding the Cove properties. During the fourth quarter, 1,431 meters were drilled with a total of 9,725 meters for the whole year concentrating on the top two priority target areas of Lakeside and Windy Point with a focus on vectoring towards the most favorable geologic controls. The drilling was split between the Windy point and Lakeside east extension areas, both with encouraging results. Goldbanks A total of 1,762 meters was drilled at the Goldbanks property during the fourth quarter for a total of 5,474 meters during 2018. Drilling during the year focused primarily on the Hawkeye target, located in the northwest portion of the property. In general, results for these shallow open-pit targets were disappointing and do not require additional follow-up. South Arturo Exploration activity in the fourth quarter and during 2018 focused on analysis of near pit and underground resource expansion drilling that occurred earlier in the year for Phases 1 and 3 and El Nino, respectively. A total of 6,279 meters were drilled in 2018.

16

Mercedes Exploration drilling continued during the fourth quarter with 1,972 meters completed for a total drilling of 40,721 meters for the year. An average of three drill rigs were on site for the quarter. Drilling continued to target the Diluvio and Marianas veins with encouraging results for replacing reserves. The 2018 exploration program tested several targets early in the year with the focus of adding near mine resources and reserves, supporting mine production, extensions of the main mine trend and testing new geological targets. The following table represents the cumulative exploration, evaluation and pre-development expenses to date by project.

as restated 1

Status

Cumulative to

December 31, 2016

Year ended December 31,

2017

Cumulative to December 31,

2017

Year ended December 31,

2018

Cumulative life of project

to date


Rahill-Bonanza, Ontario, Canada Active 16,375 73 16,448 29 16,477

East Bay, Ontario, Canada Swap (i) 1,625 - 1,625 - 1,625

PQ North, Ontario, Canada Swap (i) 9,884 - 9,884 - 9,884

Hasaga, Ontario, Canada Swap (i) 12,237 3,579 15,815 2,905 18,720

Brookbank, Ontario, Canada 50% sold (ii) 1,489 - 1,489 - 1,489

Hardrock, Ontario, Canada 50% sold (ii) 96,672 - 96,672 - 96,672

Greenstone Gold, Ontario, Canada

Active (ii) 23,508 4,507 28,015 8,786 36,801

McCoy-Cove, Nevada, USA Active 32,302 11,359 43,660 5,161 48,821

South Arturo, Nevada, USA Active 1,107 831 1,938 1,294 3,233

Goldbanks, Nevada, USA Active 1,518 3,207 4,725 2,037 6,762

Mercedes Mine, Sonora, Mexico Active - 1,121 1,121 1,331 2,452

Cristina, Mexico Inactive (iii) 476 1,156 1,632 - 1,632

Rye, Nevada, USA Active - - - 60 60

Rodeo Creek, Nevada, USA Active - - - 4 4

Other (iv) 4,046 417 4,464 626 5,090 201,239 26,251 227,489 22,233 249,722

1 Restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of

this Management's Discussion and Analysis. 2016 translated at a 10-year annual average rate. 2 May not add due to rounding.

(i) East Bay (35% co-ownership) and PQ North (100% owned) properties were exchanged during 2015 for the Hasaga property (100%) as discussed in the

December 31,2015 audited consolidated financial statements.

(ii) Brookbank and Hardrock properties (100% owned) were transferred into the 50% owned Greenstone Gold partnership during 2015, Centerra continues

to sole-fund the Greenstone Gold partnership until their development commitment is complete.

(iii) Cristina property located in Mexico was under an exploration agreement that was not renewed in 2017.

(iv) Other includes inactive mineral interests and current charges for regional technical services costs not charged to a property, the inactive properties

include:

• Faymar property located in Deloro Township in the Timmins Gold Camp. This property was sold in 2018.

• Nortoba-Tyson property located in Dorothea Township in the Thunder Bay Mining District.

• Northern Empire West Extension and Northern Empire property located in McComber and Summers Township in the Thunder Bay Mining District.

• Leitch-Sand River property located near Beardmore, Ontario.

• Santa Teresa mineral concession and Quasaro property located in Mexico (claims under an option to purchase agreement).

• Raingold property comprised of 6 patented mining claims. This property was sold in 2018.

• Bartec property located in Barraute Township, in the Val D'or district of Quebec in 2015 (claim not renewed).

17

Selected Financial Data

The following table provides selected annual financial information and should be read in conjunction with the Company's audited consolidated financial statements for the periods below:

For the years ended

December 31 (in thousands of U.S. dollars, unless otherwise stated)

2018 2017

as restated (i)

2016

as restated (i)

Revenue

Gold ounces sold ounces 87,036 155,727 90,263

Revenue 000 $ 109,628 194,638 112,485

Realized price $/ounce 1,264 1,254 1,246

Silver ounces sold ounces 299,819 338,831 65,380

Revenue 000 $ 4,239 5,669 1,125

Realized price $/ounce 16 17 17

Total revenue 113,867 200,308 113,610

Cost of goods sold

Mining cost 000 $ 71,763 85,567 29,519

Depletion, depreciation and amortization 000 $ 25,568 50,730 51,075

Total cost of sales 97,331 136,297 80,595

Other operating expenses

Exploration, evaluation and pre-development 000 $ 22,233 26,251 26,206

General and administration 000 $ 9,528 7,893 8,720

Other income / expense

Gain / (loss) on investments 000 $ (110) (337) 1,624

Gain / (loss) on derivatives 000 $ 637 (1,127) (842)

Gain on ongoing development commitment 000 $ 9,891 5,294 11,742

Write-down inventory 000 $ (8,260) - -

Transaction costs on acquisition of mine 000 $ - - (3,910)

Finance costs 000 $ 3,744 8,884 (2,362) (i) Restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis.

The Company prepares its consolidated annual financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The onset of production from South Arturo and Mercedes in the last half of 2016 had a significant impact on operations and the Company’s 2016 cash position. Production from both sites for most of 2017 accounts for the significant increase in revenue. The variance in other income / (expense) from 2016 to 2017 is largely related to the consolidation and divestment of mineral property interests which notably includes the gain on Premier’s divestment of a 50% interest in the Hardrock and Brookbank properties to the Greenstone Gold Mines partnership.

Throughout 2018, South Arturo transitioned from the completed Phase 2 open pit to the El Nino underground extension and the Phase 1 pit. South Arturo processing during this period pertained to the stockpiles from the Phase 2 open pit. Accordingly, this had a significant impact on the 2018 cash position. During 2018, Mercedes production had been impacted by the requirement to redesign stopes in new mining zones following changes in geologic interpretations. These changes resulted in lower mined grades during this transition period. Production improved in the second half of 2018 following the completion of stope designs in the new Diluvio, Lupita, and Rey de Oro deposits.

Lower overall 2018 exploration, evaluation and predevelopment spending was partially due to the McCoy-Cove project, as 2018 focused on completing the Preliminary Economic Assessment (“PEA”) and hydrology assessment work. As a result, there was also less drilling on the property in 2018 when compared to 2017. In 2018, Greenstone Gold focused on higher spending in exploration, evaluation and predevelopment which related to external engineering, infrastructure and support permit applications, while no exploration, evaluation and predevelopment was undertaken for the Cristina project, in Mexico during 2018.

18

FINANCIAL POSITION

Balance Sheet Review The following review compares December 31, 2017 results to December 31, 2018.

Assets The decrease in cash and cash equivalents of $59.2 million was primarily the result of the repayment of debt of $20.1 million, $26.9 million in capital expenditures on property, plant and equipment for the South Arturo and Mercedes mines, and $10.7 million use of cash for operating activities which includes a $7.9 million use of cash for working capital. Receivables increased by $11.8 million mainly due to an increase in recoverable taxes in Mexico of $10.3 million as a result of the timing of value added tax filings. South Arturo 2018 production was generated from ore stockpiles resulting in a reduction in the cash cost of short and long-term stockpile inventory of $1.3 million. Cash cost in finished goods inventory at Mercedes increased by $1.8 million due to the timing of sales. During the quarter, there was a $8.3 million write-down of finished goods inventory as a result of Republic Metals Corporation bankruptcy as further discussed in Note 28 of the December 31, 2018 audited consolidated financial statements. Property, plant and equipment decreased by $1.8 million during the year despite $26.9 million in capital additions offset by $20.9 million in current depletion, depreciation and amortization. The decrease includes a change in estimate on the Mercedes environmental rehabilitation of $3.3 million (related to changes in the risk-free rate), and the foreign currency effect on Canadian held assets of $5.8 million. The Company spent $26.9 million on capital investment, with the primary focus on sustaining and growth capital expenditures. Liabilities Accounts payable decreased by $0.6 million mainly due to operational activities at Mercedes. Taxes payable decreased by $3.0 million, impacted by a decrease in net proceeds tax due to reduced production at South Arturo of $1.8 million and a reduction of $1.5 million due to mining royalty taxes paid by Mercedes. The current portion of long-term debt was reduced by the $20.0 million debt repayment to Orion on May 4, 2018 and a $0.1 million final payment on a promissory note on July 1, 2018.

Deferred taxes decreased by $2.2 million with the deferred royalty taxes at Mercedes decreasing by $1.1 million related to timing differences on provisions and with regular deferred taxes decreasing for Premier Gold Mines NWO Inc. by $1.1 million due to the capitalization of exploration expenditures for tax purposes but expensed for accounting purposes.

The long-term deferred revenue decreased $11.1 million due to the quarterly settlements of the gold prepay and silver stream. The long-term provision for environmental rehabilitation decreased by $1.9 million mainly due to the change in estimate of the Mercedes rehabilitation provision related to rate.

Working Capital Working capital ratio of 2.92:1 improved slightly compared to 2.49:1 at December 31, 2017 mainly due to the repayment of debt that was included in current liabilities.

Non-current assets decreased by $4.3 million including:

• $0.9 million increase in restricted cash and cash equivalents;

• $1.8 million decrease in property plant and equipment: $26.9 million in capital additions; $2.3 million reduction due to a change in estimate on the environmental rehabilitation provision; disposal $1.6 million, $20.9 million in depletion, depreciation and amortization, a net currency adjustment of $5.8 million; and

• $3.3 million decrease in South Arturo long-term stockpile inventory.

Liquidity and Capital Resources

For the year ended December 31, 2018, the Company had cash and cash equivalents of $43.9 million, a decrease of $59.2 million from December 31, 2017.

Operating activities used cash of $10.7 million and include the following key items:

• $42.1 million from mining operations after adding back non-cash depletion included in inventory;

• $22.2 million spent in exploration and pre-development activities (offset by the Greenstone Gold development commitment gain of $9.9 million);

• $13.2 million deducted for deferred revenue on metal agreements included in operating revenue;

• $9.5 million spent in general and project administration expenditures; and

19

• $7.9 million in working capital decrease due to an increase in accounts receivable of $12.0 million, a reduction in accounts payable, accrued liabilities and taxes payable of $3.4 million, an inventory decrease of $7.3 million and a decrease in prepaids of $0.2 million.

Investment activities were almost solely related to capital investment of $26.9 million focused on mining operations.

Financing activities included the debt repayment of $20.1 million, interest of $2.0 million paid on the gold prepay and the Orion debt offset by $1.3 million cash received from the exercise of stock options.

Liquidity Outlook

Years ended

December 31 (in thousands of U.S. dollars)

2018 2017

restated (i)

Cash and cash equivalents 43,882 103,046

Working capital 53,560 85,826

Long term debt and deferred revenue 11,386 22,512

(i) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis.

Premier funds current exploration, evaluation, pre-development and development expenditures through existing cash and financings. The Company anticipates that it will have sufficient funds to manage current projects through 2019 through the credit facility entered into subsequent to year. The Company also actively manages the ongoing pre-development activities at the Greenstone Gold property through its partnership agreement with Centerra (who is expected to continue to sole-fund the project into 2020).

Premier periodically funds a portion of its Canadian exploration activities via flow-through share financings. Resource expenditure deductions for income tax purposes related to exploration and development activities funded by flow-through shares are renounced to investors in accordance with income tax legislation. All of the flow-through financing completed on October 14, 2016 has been spent prior to the December 31, 2017 deadline and no flow-through financing has been entered into for 2018.

Equity

The Company is authorized to issue an unlimited number of common shares of which 203,214,036 were outstanding at December 31, 2018 and 210,430,482 at the date of this report, March 6, 2019 and which includes the equity issued related to the financing activities discussed in the subsequent events Note 29 of the December 31, 2018 audited consolidated financial statements. Also in connection with the financing, the Company had 3.5 million warrants issued and outstanding as of March 6, 2019. At December 31, 2018 and March 6, 2019, the Company had outstanding options to purchase an aggregate of 9,488,000 and 9,042,000 common shares respectively under its share incentive plan with exercise prices ranging from CAD$2.19 to CAD$4.78 per share and expiry dates ranging from August 29, 2019 to May 14, 2023. At December 31, 2018, there were 195,000 unvested stock options.

During the year ended December 31, 2018, 311,500 restricted share units (“RSU”s) were issued under the restricted share unit plan of the Company. Each RSU has the same value as one Premier Gold Mines Limited common share. The RSUs vest equally over a three-year period vesting on August 31 of each year. The RSUs are expected to settle in cash. During the period, 31,000 RSUs were forfeited and 193,000 RSUs were settled for cash.

On July 20, 2017, the Company announced that approval had been received from the Toronto Stock Exchange for a normal course issuer bid to purchase up to 19,599,646 of its issued and outstanding shares from July 25, 2017 until July 24, 2018. No shares were purchased under the bid which has now expired.

20

MINE OPERATING SEGMENTS

Mercedes Mine

Mercedes mine is located 60 kilometres southeast of the town of Magdalena de Kino and 150 kilometres north-northeast of the city of Hermosillo in the state of Sonora, Mexico. Operations are exploiting low sulfidation quartz veins and quartz veinlet stockwork for gold and silver using underground modified overhand cut and fill, narrow vein longitudinal longhole mining, and longhole open stoping methods at an ore extraction rate of approximately 2,000 tonnes per day. Processing is by wet milling with a Merrill-Crowe recovery system.

Three months ended


December 31


2018 2017 2018 2017

Ore milled tonnes 183,158 182,470 665,522 683,545

Gold produced ounces 22,465 19,913 68,719 82,534

Silver produced ounces 119,039 77,082 309,165 337,983

Gold sold ounces 14,373 17,119 65,760 85,285

Silver sold ounces 90,135 77,096 299,819 338,831

Average gold grade grams/t 3.96 3.52 3.34 3.93

Average silver grade grams/t 44.78 33.95 35.34 37.63

Average gold recovery rate % 96.3 96.5 96.0 95.6

Average silver recovery rate % 45.2 38.7 40.9 40.9



Average realized silver price (i,ii) $/ounce 15 16 16 17



Co-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 808 894 1,073 854

Co-product cash costs per ounce of silver sold (i,ii) $/ounce 10 10 10 9

Co-product all-in sustaining costs per ounce of silver sold (i,ii) $/ounce 13 11 13 11

By-product cash costs per ounce of gold sold (i,ii) $/ounce 609 731 885 676

By-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 795 871 1,060 832


Gold revenue m $ 17.8 21.4 81.9 106.4

Silver revenue m $ 0.5 1.3 4.2 5.7

Total revenue m $ 18.2 22.7 86.1 112.1

Mine operating income m $ 5.3 7.6 4.1 34.3




Capital expenditures - sustaining (i,ii) m $ 1.6 1.1 7.0 9.2


(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold\silver price per ounce are Non-IFRS metrics

and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis.

(iii) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis. (iv) May not add due to rounding.

Production Mercedes production for the three months ended December 31, 2018 of 22,465 ounces of gold and 119,039 ounces of silver was higher for both gold and silver, when compared to 19,913 and 77,082 respectively in the prior-year period. Increased quarterly output was the result of higher mined grades upon transitioning to the new Rey de Oro and Lupita zones as well as consistent production from the Diluvio zone. Average gold grade for the quarter was 3.96 g/t compared to 3.52 g/t in the prior-year period and average recovery for the quarter was 96.3%, comparable to 96.5% in the prior-year period. For the year ending December 31, 2018, production was impacted by the transition to redesigned stopes at Diluvio. This resulted in lower mined grades from the processing of development ore and less stope ore during the transition period. Accordingly, average gold grade for the year was 3.34 g/t compared to 3.93 g/t in the prior-year and average recovery for the year was 96.0%, up slightly from 95.6% in the prior-year.

21

Sales and Revenue Gold ounces sold were 14,373 and silver ounces sold were 90,135 for the three months ended December 31, 2018, compared to 17,119 ounces and 77,096 ounces respectively in the prior-year period. Gold revenue of $17.8 million and silver revenue of $0.5 million for the three months ended December 31, 2018 compared to $21.4 million and $1.3 million respectively in the prior-year period were mainly due to lower production, as explained above, resulting from the need to remodel the resources and redesign the stopes in Diluvio and lower selling prices. Cash Costs1 Co-product cash cost per ounce of gold sold was $639 per ounce for the three months ended December 31, 2018 compared to $760 per ounce in the prior-year period. Co-product cash cost per ounce of silver sold was $10 per ounce for the three months ended December 31, 2018, similar to the prior-year period. The improvement in cash costs over the prior-year period is mainly due to increased output from the Diluvio zone and higher ore grades following the transition to the new Rey de Oro and Lupita zones. Full year co-product cash cost per ounce of gold sold was $908 per ounce compared to $706 per ounce in the prior-year. Co-product cash cost per ounce of silver sold was $10 per ounce for the year ended December 31, 2018, up from $9 in the prior-year. The increase in gold cash costs relative to the prior-year period was primarily driven by lower ore tonnes and grades during the first three quarters of the year as explained above. All-in Sustaining Costs1 All-in sustaining cost per ounce of gold sold was $808 per ounce for the three months ended December 31, 2018 compared to $894 per ounce in the prior-year period. The decrease relative to the prior-year period was driven by increased ore grade and ounce production, as explained above. Exploration Activities Exploration drilling for the three months ended December 31, 2018 was 1,973 meters completed and a total drilling of 40,721 meters for the year. An average of six drill rigs were active during the year. The drill program continued to target the Diluvio, Rey de Oro and Barrancas veins with encouraging results for replacing reserves. Surface drilling on the Aida vein focused on confirming the continuity of the veining with the goal of converting resources in the vein to reserves. Capital exploration expenditures for the three months ended December 31, 2018 of $0.4 million include drilling, geology and other related costs. The 2019 exploration program will follow a similar pattern as the 2018 program with preliminary testing of several targets early in the year and converting resources to reserves later in the year. The focus remains on adding near mine resources and reserves, supporting mine production, extensions of the main mine trend and testing new geological targets. Capital Expenditures Capital expenditures were primarily related to underground mine development, the completion of a new tailings dam, and exploration. For the three months ended December 31, 2018, total capital expenditures at Mercedes were $3.1 million which includes $1.6 million of sustaining capital, $0.4 million on exploration capital and $1.2 million of expansionary capital. Capital spending in the prior-year period was similar at $3.0 million. For the full year, total capital expenditures were $17.4 million, focusing on underground mine development, and the building of a new tailings dam, and exploration. Of the total capital expenditures, $7.0 million was sustaining in nature. This compares to total capital expenditures of $18.2 million in the prior-year of which $9.2 million was sustaining in nature.


22

Mercedes operational and financial information for the current and previous quarters is as follows:

Years 2018 and 2017


Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Ore & Metals

Ore milled tonnes 183,158 159,608 154,442 168,314 182,470 156,402 177,883 166,790

Gold produced ounces 22,465 17,465 13,780 15,009 19,913 18,564 21,893 22,164

Silver produced ounces 119,039 88,390 44,366 57,370 77,082 82,856 89,474 88,572

Gold sold ounces 14,373 19,534 14,673 17,180 17,119 24,894 26,379 16,894

Silver sold ounces 90,135 85,376 58,098 66,210 77,096 90,545 97,356 73,834

Average gold grade grams/t 3.96 3.52 2.90 2.91 3.52 3.88 4.03 4.34

Average silver grade grams/t 44.78 39.40 23.82 31.78 33.95 36.50 36.47 43.90

Average gold recovery rate % 96.3 96.6 95.8 95.2 96.5 95.4 94.9 95.4

Average silver recovery rate % 45.2 43.7 37.5 33.4 38.7 45.2 43.0 37.3


Average realized gold price (i,ii) $/ounce 1,247 1,210 1,269 1,287 1,258 1,292 1,249 1,204

Average realized silver price (i,ii) $/ounce 15 15 16 17 16 17 17 17


Co-product cash costs per ounce of gold sold (i,ii) $/ounce 639 904 1,161 921 760 793 577 675

Co-product all-in sustaining costs per ounce of gold sold (i,ii)

$/ounce 808 1,059 1,325 1,096 894 998 707 785

Co-product cash costs per ounce of silver sold (i,ii) $/ounce 10 10 12 11 10 10 10 7

Co-product all-in sustaining costs per ounce of silver sold (i,ii)

$/ounce 13 12 13 13 11 13 12 8

By-product cash costs per ounce of gold sold (i,ii) $/ounce 609 884 1,142 897 731 772 550 632

By-product all-in sustaining costs per ounce of gold sold (i,ii)

$/ounce 795 1,046 1,312 1,081 871 988 688 746


Gold revenue m $ 17.8 23.5 18.5 22.0 21.4 32.0 32.8 20.2

Silver revenue m $ 0.5 1.5 1.1 1.2 1.3 1.5 1.6 1.3

Total revenue m $ 18.2 25.0 19.6 23.2 22.7 33.5 34.4 21.5

Mine operating income / (loss) m $ 5.3 1.0 (4.7) 2.4 7.6 7.0 13.9 5.7

Exploration, evaluation & pre-development expense m $ 0.0 0.6 0.0 0.6 0.3 0.3 0.2 0.3


Total capital expenditures m $ 3.1 5.5 4.4 4.4 3.0 6.6 5.0 3.7

Capital expenditures - sustaining (i,ii) m $ 1.6 1.9 1.8 1.8 1.1 4.0 2.3 1.8

Capital expenditures - expansionary (i,ii) m $ 1.6 3.6 2.6 2.6 1.9 2.5 2.6 1.9

(i) A cautionary note regarding Non-IFRS financial metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis.

(ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold/silver price per ounce are Non-IFRS metrics and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis. (iii) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this Management's Discussion and Analysis.

(iv) May not add due to rounding.

23

South Arturo Mine

The mine is 45 kilometres northwest of the town of Carlin, Nevada, USA. Operations are exploiting a Carlin-style disseminated gold deposit by open pit methods but are now transitioning and expanding to include other open pit and underground deposits. An underground deposit called El Nino being developed out of the completed Phase 2 open pit. Premier holds a 40% interest in South Arturo while Barrick holds the remaining 60% and is the operator for the joint venture.



(in millions of U.S. dollars, unless otherwise stated) (v) 2018 2017 2018 2017

Ore & Metals

Ore milled tonnes 5,286 44,883 195,536 390,881

Gold produced ounces 577 4,472 20,980 57,124

Gold sold ounces 1,280 5,882 21,276 70,442

Silver produced ounces 1,691 - 12,649 19,918

Average gold grade grams/t 4.14 3.75 3.97 5.22

Average gold recovery rate % 82.2 82.7 84.1 87.0





Co-product all-in sustaining costs per ounce of gold sold (i,ii) $/ounce 678 497 478 351

By-product cash costs per ounce of gold sold (i,ii,iii) $/ounce 385 386 419 304

By-product all-in sustaining costs per ounce of gold sold (i,ii,iii) $/ounce 678 497 478 351


Gold revenue m $ 1.6 7.6 27.8 88.2

Mine operating income / (loss) m $ 0.8 (0.4) 12.5 29.7




Capital expenditures - sustaining (i,ii) m $ - 0.3 0.0 0.4


(i) A cautionary note regarding Non-IFRS metrics is included in the "Non IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, sustaining and expansionary capital expenditures as well as average realized gold\silver price per ounce are Non-IFRS

metrics and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis. (iii) Given the small nature and timing of South Arturo silver output, no silver by-product credits are reported. 2017 silver output has been re-stated (iv) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this


Production South Arturo production for the three months ended December 31, 2018 of 577 ounces of gold was lower when compared to 4,472 ounces in the prior-year period. This was expected, as mining transitions from the completed Phase 2 open pit to processing of lower grade stockpiles during the development of the El Nino underground and the Phase 1 open pit deposit. South Arturo average recovery for the third quarter was 82.2%, down from the prior-year period of 82.7%. Full year production was 20,980 ounces of gold, lower than the prior-year due to the ongoing transition of mining and the processing of the lower grade stockpiles, as explained above. Sales and Revenue Gold ounces sold were 1,280 for the three months ended December 31, 2018, compared to 5,882 ounces in the prior-year period due to the processing of lower grade stockpiled ore as explained above. Accordingly, gold revenue was $1.6 million for the three months ended December 31, 2018 compared to $7.6 million in the prior-year period due to lower volumes and a lower average realized selling price. Full year 2018 gold ounce sales of 21,276 compares to 70,442 for the prior-year, reflecting the lower annual production as explained above.

24

Cash Costs1 Co-product cash cost per ounce of gold sold was $385 for the three months ended December 31, 2018 compared to $386 in the prior-year period. Co-product cash cost per ounce of gold sold was $419 in 2018 compared to $304 in the prior-year. The increase relative to the prior-year reflects the mining transition and the processing of lower grade stockpiles as explained above. All-in Sustaining Costs1

All-in sustaining cost per ounce of gold sold was $678 for the three months ended December 31, 2018 compared to $497 in the prior-year period. Full year 2018 cost per ounce of gold sold was $478 as compared to $351 in the prior-year. The increase in costs reflects the mining transition and the processing of lower grade stockpiles as explained above. Exploration Activities Exploration drilling activity for the quarter focused mainly on near-pit and underground resource expansion. Capital Expenditures Capital expenditures of $3.6 million for the three months ended December 31, 2018 and for the year were $8.4 million, primarily for stripping of the Phase 1 open pit and underground development at El Nino. South Arturo operational and financial information for the current and previous quarters is as follows:

Years 2018 and 2017

(in millions of U.S. dollars, unless otherwise stated) (v) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

2018 2018 2018 2018 2017 2017 2017 2017

Ore & Metals

Ore milled tonnes 5,286 21,334 23,379 145,536 44,883 79,479 112,466 154,053

Gold produced ounces 577 2,635 2,227 15,541 4,472 8,113 15,724 28,815

Gold sold ounces 1,280 1,932 5,969 12,095 5,882 13,026 16,833 34,700

Silver produced ounces 1,691 1,122 7,380 2,456 - 2,575 7,533 9,810

Average gold grade grams/t 4.14 4.48 3.58 3.95 3.75 3.79 5.01 6.55

Average gold recovery rate % 82.2 85.7 82.8 84.1 82.7 83.8 86.7 88.8


Average realized gold price (i,ii) $/ounce 1,279 1,200 1,318 1,317 1,287 1,264 1,253 1,242


Co-product cash costs per ounce of gold sold (i,ii) $/ounce 385 396 475 398 386 363 332 244

Co-product all-in sustaining costs per ounce of gold sold (i,ii)

$/ounce 678 498 506 439 497 371 451 261

By-product cash costs per ounce of gold sold (i,ii,iii) $/ounce 385 396 475 398 386 363 332 244

By-product all-in sustaining costs per ounce of gold sold (i,ii,iii)

$/ounce 678 498 506 439 497 371 451 261


Gold revenue m $ 1.6 2.3 7.9 15.9 7.6 16.5 21.1 43.1

Mine operating income / (loss) m $ 0.8 1.0 3.5 7.2 (0.4) 6.7 7.6 15.8

Exploration, evaluation & pre-development expense m $ 0.2 0.4 0.6 0.1 0.3 0.4 0.1 -


Total capital expenditures m $ 3.6 2.8 1.6 0.5 0.6 0.5 - 0.1

Capital expenditures - sustaining (i,ii) m $ - - - 0.0 0.3 - - 0.1

Capital expenditures - expansionary (i,ii) m $ 3.6 2.8 1.6 0.5 0.3 0.5 - 0.0 (i) A cautionary note regarding Non-IFRS metrics is included in the "Non-IFRS Measures" section of this Management's Discussion and Analysis. (ii) Cash costs, all-in sustaining costs, free cash flow, EBITDA, sustaining and expansionary capital expenditures as well as average realized gold/silver price per ounce are Non-IFRS metrics

and discussed in the section "Non-IFRS Measures" of this Management's Discussion and Analysis. (iii) Given the small nature and timing of South Arturo silver output, no silver by-product credits are reported, with any revenues offsetting costs. 2017 silver output re-stated. (iv) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this Management's Discussion and

Analysis. (v) May not add due to rounding.


25

COMMITMENTS AND CONTINGENCIES

Environmental Rehabilitation Provision

The Corporation currently has five active environmental rehabilitation obligations related to past and current mining activities. As per the table below, the provisions for each project are updated regularly for a change to the risk-free discount rate, accretion and currency adjustments if applicable. Changes in estimate on the projects are applied where an engineering assessment on the project has been carried out.

Years ended

December 31

(in thousands of U.S. dollars) (ii)

2018 2017 as restated (i)

Northern Empire Mill, Ontario 1,380 1,566

Faymar-Deloro, Ontario - 391

Hasaga, Ontario, Canada 167 186

McCoy-Cove, Nevada, USA 3,500 1,713

South Arturo, Nevada, USA 3,973 4,805

Mercedes, Sonora, Mexico 12,375 14,648

21,395 23,309

(i) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgement and Estimates, Policies and Changes" section of this

Management's Discussion and Analysis. (ii) May not add due to rounding.

Northern Empire Mill, Ontario There were no reclamation expenditures during the fourth quarter with changes in the provision due to accretion and currency adjustments. There was no rehabilitation program scheduled for 2018 and little activity is schedule for 2019 which will mainly focus on security. Faymar Deloro, Ontario This property was sold in April to Central Timmins Exploration Corp, therefore the property and its liabilities, including the rehabilitation provision have been written off. Hasaga, Ontario There were no reclamation expenditures during the fourth quarter with changes in the provision due to accretion and currency adjustments. No expenditures related to progressive rehabilitation or closure are anticipated for the immediate future, as the property is currently being assessed for potential development. McCoy-Cove, Nevada There were $0.1 million in expenditures for the three months ending December 31, 2018 and a total of $0.2 million for the year ended December 31, 2018. The provision was impacted by an updated risk-free discount rate, accretion, change in timing of the rehabilitation, new disturbances in exploration roads and the reassessment of the rehabilitation cost using the Nevada Standardized Reclamation Cost Estimate (“SRCE”). The McCoy-Cove reclamation obligation is partly related to the McCoy portion of the property purchased from Newmont Mining Corporation in 2014. The property had a remaining obligation from previous mining activities, most of which was completed prior to acquiring the property. There are ongoing reclamation activities related to the tailings dam and the cleanup of the old pads. Structural reclamation is on hold for several years pending a new mine plan for the property. A portion of the obligation is related to the Cove-Helen underground project and will not commence reclamation for several years. The provision was impacted by an updated risk-free discount rate and accretion. South Arturo, Nevada South Arturo reclamation obligation is managed by Barrick and is based on a 20-year reclamation plan with minimal expenditures until 2021. Main reclamation activities will begin in 2025. There were no reclamation expenditures related to closure activities during the fourth quarter. The change in provision is mainly due to updated risk-free discount rates and accretion. Mercedes, Mexico There were no reclamation expenditures related to closure activities for the three months ending December 31, 2018. The change in the provision is mainly due to accretion and updated risk-free discount rate. Based on the current life of mine projection no expenditures are anticipated in the immediate future as the mine will continue in operation.

26

Contractual Obligations and Commitments

The following is a summary of the commitments of the Company at December 31, 2018:

As at December 31, 2018

(in thousands of U.S. dollars) as restated (i) 2019 2020 2021 2022 2023

2024 and later

Total

Contracts and operating leases 1,912 347 21 3 2 - 2,285

Debt repayment - - - - - - -

Exploration expenditure commitment - Rye Vein project

3,000 - - - - - 3,000

Provisions for environmental rehabilitation (ii) 210 41 542 4,290 2,174 19,090 26,347

5,122 388 563 4,293 2,176 19,090 31,632

(i) 2017 restated for the presentation currency change as discussed in the "Critical Accounting Judgements and Estimates, Policies and Changes" section of this Management's Discussion and Analysis. (ii) Amounts presented in the table for the provisions for environmental rehabilitation represent the undiscounted uninflated future payments for the expected cost of the rehabilitation. Timing of expected expenditures has been updated based on the most current estimate of the provision.

Gold Forward Contracts

At December 31, 2018, the Company held forward contracts requiring the delivery of 400 ounces of gold per month at a price of $1,247.50 per ounce from January 2019 to December 2019. The contracts required no cash or other consideration and are intended to be settled with production from the Company's mining operations. If the contracted ounces are not delivered on the delivery date, as per the terms of the agreement, the Company will compensate the counterparty for the difference between the contract price and the market price per ounce on the delivery date.

Surety Bonds

At December 31, 2018, the Company has outstanding surety bonds in the amount of $10.2 million in favor of the United States Department of the Interior, Bureau of Land Management ("BLM") as financial support for environmental reclamation and exploration permitting. The surety bonds are secured by a $0.6 million deposit and are subject to fees competitively determined in the market place. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations. As specific requirements are met, the BLM as beneficiary of the instrument will return the instrument to the issuing entity. As these instruments are associated with operating sites with long-lived assets, they will remain outstanding until closure.

Off Balance Sheet Arrangements

The Company has not participated in off-balance sheet or income statement arrangements other than the surety bonds discussed above.

27

TRANSACTIONS WITH RELATED PARTIES

Transactions with related parties are disclosed in Note 24 of the December 31, 2018 audited consolidated financial statements with no significant changes for the quarter.

Transactions with Key Management Personnel

Key management personnel remuneration includes the following amounts:

Three months ended


December 31 (in thousands of U.S. dollars) as restated (i) 2018 2017

as restated(i) 2018 2017

as restated(i)

Salary, wages and benefits 1,830 2,134 3,804 3,649

Share-based payments - - 1,661 1,447

1,830 2,134 5,465 5,096

Directors remuneration includes the following amounts:

Three months ended


December 31 (in thousands of U.S. dollars) as restated (i) 2018 2017

as restated(i) 2018 2017 as restated(i)

Fees earned and other remuneration 59 61 249 257 Share-based payments - - 399 375

59 61 648 632


28

SUBSEQUENT EVENTS Credit Facility and Financing Package On February 1, 2019 the Company announced the closing of a $50.0 million secured revolving term credit facility with Investec Bank plc ("Investec"), as administrative agent for the lenders thereunder (the "Investec Credit Facility") and certain financing arrangements with OMF Fund II SO Ltd. and Orion Mine Finance Fund II LP (collectively, "Orion") for aggregate gross proceeds of approximately $18.3 million. Amounts borrowed under the Investec Credit Facility will bear interest at a variable rate per annum equal to LIBOR plus an applicable rate ranging from 3.00% to 4.30% based on certain criteria. The Investec Credit Facility is secured by the assets relating to the South Arturo mine in Elko County, Nevada, U.S.A. ("South Arturo Mine"), and the Mercedes mine in Hermosillo, Sonora, Mexico ("Mercedes Mine"). The Investec Credit Facility matures in four years and will be used for working capital requirements and general corporate purposes. To date, the Company has not drawn-down under the Investec Credit Facility. In connection with the closing of the Orion financing arrangements:

• Orion subscribed for seven million common shares of the Company for aggregate gross proceeds of approximately $8.3 million or approximately C$1.58 per common share;

• The Company issued two million common share purchase warrants to Orion with each warrant exercisable into one common share with an exercise price of C$2.05 for a period of three years;

• The original silver stream agreement entered into on September 30, 2016 was amended and restated pursuant to which: o Orion paid an additional deposit of US$10.0 million to a wholly owned subsidiary of the Company which will deliver

to Orion 100% of the silver production from the Mercedes Mine and 100% of the silver production from the South Arturo Mine attributable to the Company until the delivery of 3.75 million ounces of silver (including deliveries previously made to Orion), after which the delivery will be reduced to 30% of the silver production from the Mercedes Mine and the South Arturo Mine;

o The Company is required to deliver at least 300,000 ounces of refined silver in each calendar year to Orion until 2.1 million ounces of refined silver in aggregate have been delivered to Orion after the date hereof;

o Orion will continue to pay an ongoing cash purchase price equal to 20% of the prevailing silver price; and o Orion has security over the assets relating to the South Arturo Mine in addition to the Mercedes Mine.

• The original offtake agreement entered into on September 30, 2016 was amended and restated to increase the annual gold sale quantity to 60,000 ounces of gold, subject to an annual aggregate maximum of 40,000 ounces of gold from each of (i) all of the Company’s producing projects (other than the Mercedes Mine) and (ii) the Mercedes Mine; and

• The original gold prepay agreement entered into on September 30, 2016 was amended and restated to provide security to Orion over the assets relating to the South Arturo Mine and to provide for Orion’s consent to security changes at the Mercedes Mine to facilitate the Investec Credit Facility.

The proceeds of the Orion financing arrangements will be used for the development, construction and working capital requirements for the South Arturo Mine.

29

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES, POLICIES AND CHANGES

Functional and Presentation Currency Change Functional Currency

Prior to January 1, 2018, the functional currency of Premier Gold Mines Limited, the parent company, was the Canadian dollar (“CAD”). Per IAS 21 The Effects of Changes in Foreign Exchange Rates (“IAS 21”), an entity’s functional currency should reflect the underlying transactions, events and conditions that are relevant to the entity. Management considered primary and secondary indicators in determining functional currency including the currency that influences sales prices, labour, purchases and other costs. Other indicators including the currency in which funds from financing activities are generated and the currency in which receipts from operations are usually retained. Based on these factors, management concluded that effective January 1, 2018, the parent company’s functional currency should be measured using United States dollars (“USD”). One of the main factors affecting the decision was the introduction in 2018 of forward gold sales contracts in USD which had previously been denominated in CAD. As the Company’s Canadian subsidiaries have not commenced mining operations, primarily operate in CAD and are financed in CAD, management has determined that their functional currency remains CAD. The Company’s USA and Mexico mining and exploration and development operations continue to remain with a functional currency of USD with the sales and majority of costs incurred in USD. For the international operations used for the deferred revenue arrangements related to gold and silver sales, the functional currency also remains USD. The holding companies with debt in Mexican pesos remain in pesos. The Company has accounted for the change in functional currency prospectively, as required under IAS 21 with no impact of this change on prior-year comparative information other than in conjunction with the change in presentation currency as discussed below.

Presentation Currency

On January 1, 2018, the Company elected to change its presentation currency from CAD to USD. The change in presentation currency is to better reflect the Company’s business activities and to improve comparability of the Company’s financial results with other publicly traded businesses in the mining industry. The Company applied the change to USD presentation currency retrospectively and restated the comparative financial information as if the new presentation currency had always been the Company’s presentation currency in accordance with the guidance in IAS 21 and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

From January 1, 2018, the USD presentation is consistent with the functional currency of the Company. For periods prior to January 1, 2018, the statements of financial position for each period presented have been translated from the CAD functional currency to the new USD presentation currency at the rate of exchange prevailing at the respective financial position date with the exception of equity items which have been translated at accumulated historical rates from the Company’s date of incorporation in 2006. The statements of income / (loss) and comprehensive income / (loss) were translated at the average exchange rates for the reporting period, or at the exchange rate prevailing at the date of the transactions. Exchange differences arising in 2017 on translation from the CAD functional currency to the USD presentation currency have been recognized in other comprehensive income / (loss) and accumulated as a separate component of equity. In addition to the comparative financial statements, the Company has presented a third statement of financial position as at January 1, 2017 as required by IFRS.

Equity has been restated using historical average exchange rates other than for significant transactions for which the actual historical rate was used with the difference being presented as an adjustment to the foreign currency exchange reserve.

Share Capital and Warrants

Share capital represents the fair value of consideration received. Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. Incremental costs directly attributable to the issue of new shares or options are also shown in equity as a deduction.

The Company periodically issues units to investors consisting of common shares and warrants in non-brokered private placements or as additional consideration in a brokered financing or purchase transaction. Each whole warrant issued entitles the holder to acquire a common share of the Company, at a fixed Canadian dollar price over a specified term. These warrants are not transferable from the original investor to a new investor. Prior to January 1, 2018, these warrants were considered equity instruments and not financial liabilities or financial derivatives however, in connection with the change in functional currency described in Note 2(c) of the December 31, 2018 consolidated audited financial statements, they are now considered derivatives because their exercise price is in CAD whereas the Company’s functional currency is in USD. Accordingly, the Company now recognizes the warrants at fair value with changes recognized in profit or loss with the initial recognition of warrants existing at January 1, 2018 recorded as an adjustment to share capital.

When investor or other warrants are exercised, the liability is revalued prior to derecognition with the change in fair value recognized in profit or loss, proceeds received are added to share capital and the liability is derecognized.

30

Accounting Standards Adopted January 1, 2018 IFRS 9 – Financial Instruments

On January 1, 2018, the Company adopted IFRS 9 – Financial Instruments ("IFRS 9"). IFRS 9 replaces IAS 39 – Financial Instruments: Recognition and Measurement ("IAS 39"), introduces new requirements for the recognition and measurement of financial assets and liabilities, a single, forward looking "expected loss" impairment model and a reformed approach to hedge accounting. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules previously under IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity's own credit risk in other comprehensive income, rather than within profit or loss. The International Accounting Standards Board ("IASB") requires an entity to apply IFRS 9 for annual periods beginning on or after January 1, 2018. The Company's financial assets have been comprised of Canadian equities and derivatives including put options or forward contracts for the delivery of gold ounces at various prices to manage exposure to fluctuations in gold prices. Financial liabilities include credit facilities with embedded derivatives related to various components of the agreements. The Company does not have hedging relationships which qualify for hedge accounting. The assessment of the impact in applying IFRS 9 is summarized below. The Company does not hold put options at this time and the forward contracts currently held are intended to be settled using our own production and therefore are accounted for under the own use exemption whereby the value of the contracts is not recognized in the financial statements, this has not changed under IFRS 9. As most of the requirements in IFRS 9 have been retained for financial liabilities and the Company has accounted for the embedded derivatives at fair value, no adjustments are required. With respect to term modification of a debt instrument, the Company is in compliance with IFRS 9 by continuing its current practice of assessing change of terms of debt instruments in order to determine if the modification of the terms is substantial and would result in an extinguishment of the original liability and recognition of the amended debt instrument as a new financial liability. The standard requires that when a financial liability at amortized cost is modified or exchanged, and such modification does not result in de-recognition, that the adjustment to amortized cost of the financial liability is recognized in profit or loss. Application of IFRS 9 to the Company's other financial instruments also has no impact on the Company's financial position or results of operations and there is no financial impact that requires disclosure. The Company did have an early repayment of debt however, there was no change in terms of the debt instrument and an adjustment to the amortized cost was recorded in the year. IFRS 15 – Revenue from Contracts with Customers On January 1, 2018, the Company adopted IFRS 15 – Revenue from Contracts with Customers ("IFRS 15"). IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 supersedes the current revenue recognition guidance including IAS 18 – Revenue, IAS 11 – Construction Contracts and the related interpretations. In adopting the guidance, the Company has opted to use the modified retrospective basis in accordance with the transitional provisions of IFRS 15 whereby the cumulative effect of initially applying the standard has been recognized as an adjustment to the opening deficit at January 1, 2018 and comparative figures are not restated and continue to be reported under the accounting standards in effect for those periods. The Company's revenue is generated mainly from the sale of gold and silver through various revenue streams. Typical for the mining industry, each metal sale transaction is stand alone and without multiple element arrangements. For gold and silver sales, revenue is recognized after the related performance obligations have been met which is concluded to be essentially the same under IFRS 15 and IAS 18. In general, the performance obligations of the sale transactions are satisfied at a point in time with reliably measurable transaction prices and no financing consideration due to the nature of the commodity market where the Company operates. Management has determined that the application of IFRS 15 with respect to sales transactions did not result in an adjustment to the consolidated financial statements except as discussed in the gold prepay and silver stream arrangements below. Gold Prepay and Silver Stream

The Company entered into a gold prepay and silver stream agreement with Orion in 2016 in conjunction with the acquisition of the Mercedes Mine. Advance payments were received from Orion on execution of the agreements, with a right to receive deliveries of the gold and silver from the production of certain of the Company’s mines based on a predetermined pricing formula during the future delivery date. The advance payments were recorded as deferred revenue, with amounts recognized in revenue as deliveries are made to Orion and as further discussed in Note 11 of the December 31, 2018 consolidated audited financial statements. The gold prepay agreement has an interest component, the silver stream does not.

Under IFRS 15, where consideration is received in advance of the Company’s performance of its obligation, there is an inherent financing component. Where the period between receipt of consideration and revenue recognition for these contracts is greater than one year, the Company is required to determine whether a significant financing component exists. The Company performed this assessment on these arrangements and determined that the financing component was significant to the silver stream but

31

was not to the gold prepay.

Accordingly, in accounting for the silver stream under IFRS 15, the transaction price is increased by an imputed interest amount and a corresponding amount of interest expense is recognized in each period.

Also under the standard, an entity is required to estimate the transaction price in a contract. For contracts containing variable consideration the transaction price is to be continually updated and re-allocated to the related revenue. As a result, we have updated our accounting policy for revenue earned on streaming agreements such that we will treat the deferred revenue as variable, requiring an adjustment to the transaction price per unit each time there is a change in the underlying production profile of the mine (typically the last half of each year). The change in the transaction price per unit results in a retroactive adjustment to revenue in the period in which the change is made, reflecting the new production profile expected to be delivered under the streaming agreement.

Based on a combination of the financing component at the rate determined at the inception of the contact and the variable consideration, a retroactive adjustment is made to accretion expense, reflecting the impact of the change in the deferred revenue balance.

The impact of the initial adoption of this change in accounting policy using the modified retrospective approach was an adjustment to reduce the opening deficit on January 1, 2018 of $0.3 million with a corresponding adjustment to reduce the deferred revenue balance. The impact to the net loss for the period was an increase to non-cash silver revenue of $0.1 million and a recognition of silver stream accretion of $0.2 million. Recent Accounting Pronouncements IFRS 16 - Leases

In January 2016, the IASB issued IFRS 16 – Leases which replaces the existing lease accounting guidance in IAS 17. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the current finance lease accounting, with limited exemptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual reporting periods beginning January 1, 2019 although early application is permitted for companies that also apply IFRS 15 – Revenue from Contracts with Customers. The Company has planned to apply IFRS 16 at the date it becomes effective and will adopt it using the modified retrospective approach, resulting in no restatement of prior year comparatives and the cumulative impact of applying IFRS 16 will be recognized at January 1, 2019. The Company has completed the assessment of it’s equipment and building rentals, land leases and service agreements and therefore will recognize additional right of use assets and lease liabilities as well as a decrease in lease expense and a corresponding increase in both depreciation expense and finance charges. Upon adoption, the Company has elected to apply the available exemptions as permitted by IFRS 16 to recognize a lease expense on a straight-line basis for short-term leases (lease term of 12 months or less) and low value assets ($5,000 or less). There was close attention paid to all of the Company’s development, mining and drilling contracts to ensure that they did not contain embedded leases for property, plant and equipment. None of those contracts resulted in right of use of an asset. The quantitative impact of adopting IFRS 16 will be provided in the Company's first 2019 quarterly report. IFRIC 23, Uncertainty over Income Tax Treatments On June 7, 2017, the IASB issued IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Interpretation is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Company intends to adopt the Interpretation in its financial statements for the annual period beginning on January 1, 2019. The Company has completed its analysis of the impact of the adoption of IFRIC 23 on the Company’s consolidated financial statements and has determined there will be no material impact.

Significant Accounting Judgements and Estimates

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities, disclosure of commitments and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience, current and expected economic conditions. Actual results could differ from these estimates.

The significant judgements and estimates used in the preparation of the audited consolidated financial statements that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities and earnings within the next financial year include:

32

Business Combinations

Determination of whether a group of assets acquired and liabilities assumed constitute the acquisition of a business or an asset may require the Company to make certain judgements as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 - Business Combinations.

Purchase Price Allocation

Applying the acquisition method to business combinations requires each identifiable asset and liability to be measured at its acquisition date fair value. The excess, if any, of the fair value of consideration over the fair value of the net identifiable assets acquired is recognized as goodwill. The determination of the acquisition date fair values require management to make assumptions and estimates about future events. The assumptions and estimates relating to determining the fair value of property, plant and equipment acquired generally require a high degree of judgement, and include estimates of mineral reserves acquired, future metal prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could affect the amounts assigned to assets, liabilities and goodwill in the purchase price allocation.

Inventory Valuation

Finished goods, work-in-process, heap leach ore and stockpile ore are valued at the lower of costs and net realizable value. The assumptions used in the valuation of work-in process inventories include estimates of gold contained in the ore stacked on leach pads, assumptions of the amount of gold stacked that is expected to be recovered from the leach pads, the amount of gold in the mill circuits and assumption of the gold price expected to be realized when the gold is recovered. If these estimates or assumptions prove to be inaccurate, the Company could be required to write-down the recorded value of its work-in process inventories and heap leach ore, which would reduce earnings and working capital.

Impairment and Reversal of Impairment for Non-Current Assets

Non-current assets are tested for impairment at the end of each reporting period if in management’s judgement there is an indicator of impairment. If there are indicators, management performs an impairment test on the major assets within this balance.

In the case of mineral property assets, recoverability is dependent on a number of factors common to the natural resource sector. These include the extent to which the Company can continue to renew its exploration and future development licenses with local or other authorities, establish economically recoverable reserves on its properties, the availability of the Company to obtain necessary financing to complete the development of such reserves and future profitable production or proceeds from the disposition thereof. The Company will use the evaluation work of professional geologists, geophysicists and engineers for estimates in determining whether to commence or continue mining and processing. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether or not the deposit contains economically recoverable mineralization.

Recoverable Ounces

The carrying amount for each of the Company's mining properties is depleted based on recoverable ounces contained in proven and probable mineral reserves. Changes to estimates of recoverable ounces and depletable costs including changes resulting from revisions to mine plans and changes in metal price forecasts can result in a change in future depletion rates.

The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43- 101 Standards of Disclosure for Mineral Projects, issued by the Canadian Securities Administrators. This National Instrument lays out the standards of disclosure for mineral projects including rules relating to the determination of mineral reserves and mineral resources. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company's control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgements used in engineering and geological interpretation. Differences between management's assumptions, and actual events 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 operation. Application of Variable Consideration Constraint in Silver Stream Agreement The Company determines the amortization of deferred revenue to the statement of operations on a per unit basis using the expected quantity of silver that will be delivered over the term of the contract, which is based on geological reports and the Company’s life of mine plan at contract inception. As subsequent changes to the expected quantity of silver to be delivered triggers a retrospective adjustment to revenue, management is required to estimate the ounces to be included in the denominator that will be sufficient such that subsequent changes are not expected to result in a significant revenue reversal. Accordingly, management includes reserves and portion of resources, included in the annual review of life of mine, in the calculation. With this approach, the Company considers that it is highly probable that changes in subsequent reserve and resource estimates will not result in a significant revenue reversal of previously recognized revenue.

Asset Retirement Obligations

Management assesses the asset retirement obligations on an annual basis or when new information becomes available. This assessment includes the estimation of the future rehabilitation costs required based on the existing laws and regulations in each

33

jurisdiction the Company operates in, the timing of these expenditures, and the impact of changes in the discount rate. The actual future expenditures may differ from the amounts currently provided if the estimates made are significantly different than actual results or if there are significant changes in environmental and / or regulatory requirements in the future.

Valuation of Financial Instruments

The fair value of derivative financial liabilities that are not traded in an active market, including the offtake agreement entered into during the period, is determined using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are based on market conditions existing at the end of each reporting period as an indication of the expected future market conditions. The Company has used a discounted cash flow analysis for the offtake agreement, incorporating key assumptions for the production to be delivered under the offtake agreement, expected metal prices and discount to metal prices during the quotational period, and discount rates that are commensurate with the risks associated with the financial liability to reflect the time value of money.

The Company also issued warrants either in connection with a private placement or as purchase consideration in a business combination that, effective January 1, 2018 the date of the functional currency change of the parent company, are recorded as a financial liability. As such, in determining fair value, management judgement is required in respect to input variables of the financial model used for estimation purposes. These variables include such inputs as the Company's stock price, stock price variability, trading volumes and risk-free rates of return. Deferred Revenue The Company entered into a gold prepay and silver stream agreement with Orion in 2016 in conjunction with the acquisition of the Mercedes Mine and as further discussed in Note 11 of these consolidated financial statements. The upfront payment for the gold prepay facility with Orion has been accounted for as deferred revenue as management has determined that the agreement is not a derivative as it will be satisfied through the delivery of non-financial items (i.e. gold commodity from the Company’s production), rather than cash or financial assets.

The upfront payment for the silver stream arrangement has also been accounted for as deferred revenue, as management has determined that the agreement is not a derivative as it will be satisfied through the delivery of non-financial items (i.e. silver commodity from the Company’s production), rather than cash or financial assets. Commercial Production The determination of the date on which a mine enters the commercial production stage is a significant judgement since capitalization of certain costs ceases and the recording of revenues and expenses commences upon entering commercial production. As a mine is constructed, certain costs are capitalized and proceeds from sales are offset against the capitalized costs. This continues until the mine is available for use in the manner intended by management, which requires significant judgement. Functional Currency of Foreign Subsidiaries

Management uses its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. As part of this approach, management gives priority to indicators like the currency that mainly influences costs and the currency in which those costs will be settled and the currency in which funds from financing activities are generated. Management also assesses the degree of autonomy the foreign operation has with respect to operating activities.

Deferred Income Taxes

The Company operates in several tax jurisdictions and is required to estimate the income tax provision in each of these jurisdictions in preparing its financial statements. The provision for income taxes which is included in the consolidated statements of income (loss) and comprehensive income (loss) and composition of deferred income tax liabilities included in the consolidated statements of financial position is based on factors such as tax rates in the different jurisdictions, changes in tax law and management’s assessment of future results and have not yet been confirmed by the taxation authorities. The Company does not recognize deferred tax assets where management does not expect such assets to be realized based on current forecasts.

In the event that actual results differ from these estimates, adjustments are made in future periods and changes in the amount of amount of deferred tax assets recognized may be required. These adjustments could materially impact the financial position and income or loss for the period.

Other Estimates

Other significant estimates which could materially impact the financial statements include:

• Inputs used in accounting for share purchase option expense in the consolidated statements of income / (loss);

• Estimated useful lives of property, plant and equipment which are included in the consolidated statements of financial position and related depreciation included in the consolidated statements of income / (loss) and comprehensive income / (loss); and

• Discount rate used to determine the carrying value of long-term debt and deferred revenue if applicable.

34

NON-IFRS MEASURES

The Company has included certain terms or performance measures commonly used in the mining industry that are not defined under International Financial Reporting Standards (“IFRS”) in this document. These include: co-product and by-product cash cost per ounce sold, co-product and by-product all-in sustaining cost (“AISC”) per ounce sold, earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted earnings before interest, tax, depreciation and amortization, free cash flow, capital expenditures (expansionary), capital expenditures (sustaining), adjusted net earnings and average realized price per ounce. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore, they may not be comparable to similar measures employed by other companies. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and should be read in conjunction with the Company's consolidated financial statements. Definitions

Adjusted net earnings and earnings per share excludes significant write-down adjustments.

Adjusted EBITDA removes the effect of significant write-down adjustments on earnings before interest, tax, depreciation and

amortization (including accretion) and excludes exchange gain/loss on translation of foreign operations.

All-in sustaining costs on a by-product basis per ounce include total production cash costs on a by-product basis plus incorporates

costs related to sustaining production.

All-in sustaining costs on a co-product basis per ounce include total production cash costs on a co-product basis plus incorporates

costs related to sustaining production.

Average realized gold price represents the sale price of gold per ounce before deducting mining royalty (Mexico), treatment and

refining charges as well as gain or losses derived from the stream agreements with Orion.

Average realized silver price represents the sale price of silver per ounce before deducting mining royalty (Mexico), treatment

and refining charges as well as gain or losses derived from the stream agreements with Orion.

By-product credits include revenues from the sale of by-products from operating mines.

Capital expenditure (expansionary) is a capital expenditure intended to expand the business or operations by increasing

production capacity beyond current levels of performance and includes capitalized exploration.

Capital expenditure (sustaining) is a capital expenditure necessary to maintain existing levels of production. The sustaining

capital expenditures maintain the existing mine fleet, mill and other facilities so that they function at levels consistent from year

to year.

Cost of sales per ounce sold is calculated by dividing the attributable cost of sales by the attributable ounces sold.

EBITDA - Earnings before interest, tax, depreciation and amortization (including accretion). Excludes exchange gain/loss on

translation of foreign operations.

Exploration and evaluation (sustaining) expense is presented as mine site sustaining if it supports current mine operations.

Free cash flow is calculated as cash flow from operating activities less capital expenditures.

Rehabilitation – accretion and amortization include depreciation on the assets related to the rehabilitation provision of gold

operations and accretion on the rehabilitation provision of gold operations.

Cash Costs

Cash costs per ounce sold represents all direct and indirect operating costs related to the physical activities of producing gold,

including on-site mining costs, processing, third-party smelting, refining and transport costs, on-site general and administrative

costs, community site relations, royalties and royalty tax. State of Nevada net proceeds taxes are excluded. Cash costs

incorporate the Company’s share of production costs but exclude, among other items, the impact of depreciation, depletion and

amortization (“DD&A”), reclamation costs, financing costs, capital development and exploration and income taxes. In order to

arrive at consolidated cash costs, the Company includes its attributable share of total cash costs from operations where less

than 100% interest in the economic share of production is held.

Cash costs are computed on a co-product basis, however, by-product cost per ounce metrics have also been provided in order

to provide more information to the Company’s stakeholders.

Cash cost: by-product - When deriving the cash costs associated with an ounce of gold, the Company includes by-product credits,

35

as the Company considers that the cost to produce the gold is reduced as a result of the by-product sales incidental to the gold

production process. Accordingly, total production costs are reduced for revenues earned from silver sales.

Cash cost: co-product - When deriving the cash costs associated with an ounce of gold, the Company allocates a share of

production costs to the co-product based on the ratio of silver sales dollars to gold sales dollars.

Cash costs per ounce is a common performance measure in the mining industry, but does not have any standardized meaning.

In determining it’s cash cost and cash cost per ounce, the Company has considered the guidelines provided by the World Gold

Council, a non-regulatory, non-profit market development organization for the gold industry. A Company’s adoption of the

standard is voluntary and other companies may quantify these measures differently as a result of different underlying principles

and policies applied.

All-in Sustaining Costs

AISC include total production cash costs incurred at the Company’s mining operations, which forms the basis of the Company’s

by-product and co-product cash costs. Additionally, the Company includes sustaining capital expenditures which are expended

to maintain existing levels of production (to which costs do not contribute to a material increase in annual gold ounce production

over the next 12 months), rehabilitation accretion and amortization, general and administrative (excluding stock compensation)

and exploration and evaluation expenses. The measure seeks to reflect the full cost of production from current operations,

therefore expansionary capital is excluded. Certain other cash expenditures, including tax payments (including the State of

Nevada net proceeds tax), dividends and financing costs are also excluded. The Company reports AISC on a per ounce sold

basis.

This performance measure was adopted as a result of an initiative undertaken within the gold mining industry; however, this

performance measure has no standardized meaning and should not be considered in isolation or as a substitute for measures

of performance prepared in accordance with IFRS. In determining AISC, the Company has considered the guidelines provided

by the World Gold Council, a non-regulatory, non-profit market development organization for the gold industry. A Company's

adoption of the standard is voluntary and other companies may quantify these measures differently as a result of different

underlying principles and policies applied.

The following table provides a reconciliation of the net earnings, net earnings per share, adjusted net earnings and adjusted net

earnings per share for the three months and year ended December 31, 2018 and 2017:

Three months ended

December 31 Year ended

December 31 (in thousands of U.S. dollars unless otherwise indicated)

as restated (i) 2018 2017 as restated(i) 2018 2017

as restated(i)

Net earnings / (loss) (8,908) (3,647) (20,426) 16,169

Other expense adjustments (ii) 8,260 - 8,260 -

Adjusted net earnings / (loss) (iii) (648) (3,647) (12,166) 16,169

Net earnings / (loss) per share (0.04) (0.02) (0.10) 0.08

Adjusted net earnings / (loss) per share (0.00) (0.02) (0.06) 0.08


(ii) Other expense adjustment in Q4 2018 is a write-down of inventory due to RMC bankruptcy as discussed in Note 28 of the December 31, 2018 audited consolidated financial statements.

(iii) Adjusted net earnings / (loss) and adjusted net earnings / (loss) per share are non-IFRS performance measures. For more information, see the "Non-IFRS Measures" section of the 2018 Management's Discussion & Analysis.

36

The following table provides a reconciliation of the EBITDA and Adjusted EBITDA for the three months and year ended December

31, 2018 and 2017:

Reconciliation of EBITDA and Adjusted EBITDA

Three months ended

December 31 Year ended

December 31

(in thousands of U.S. dollars)

as restated (i) 2018 2017 as restated(i) 2018 2017

as restated(i)

Income / (loss) for the period (8,908) (3,647) (20,426) 16,169

Depreciation 3,285 5,874 25,867 50,955

Interest 37 2,873 3,065 8,884

Taxes 188 630 829 4,394

EBITDA (iii) (5,398) 5,730 9,335 80,402

Other expense adjustment (ii) 8,260 - 8,260 -

Adjusted EBITDA (iii) 2,862 5,730 17,595 80,402


(ii) Other expense adjustment in Q4 2018 is write-down of inventory due to RMC bankruptcy. See Note 28 of the December 31, 2018 audited consolidated financial statements.

(iii) EBITDA and Adjusted EBITDA are Non-IFRS performance measures. For more information, see the "Non-IFRS Measures" section of the 2018 Management's Discussion & Analysis.

37

The following table provides a reconciliation on a co-product basis for cash cost and AISC cost for the three months ended

December 31, 2018:

The following table provides a reconciliation on a co-product basis for cash cost and AISC cost for the three months ended

December 31, 2017:

in thousands of U.S. dollars, except per ounce information in dollars (i)

Co-ProductGold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Silver

000$

Per silver

ounce

sold

Total

000$

Cost of sales excluding depletion, depreciation and amortization 9,158 637 529 413 9,687 619 895 10 10,582

Depletion, depreciation and amortization 2,630 183 347 271 2,977 190 257 3 3,234

Total cost of sales 11,788 820 876 684 12,664 809 1,152 13 13,815

Depletion, depreciation and amortization (2,630) (183) (347) (271) (2,977) (190) (257) (3) (3,234)

Royalty tax 121 8 - - 121 8 12 0 133

Other costs (ii) (91) (6) (36) (28) (126) (8) (9) (0) (135)

Cash cost : co-product 9,188 639 493 385 9,682 619 898 10 10,579

General and administrative 477 33 305 238 782 50 47 1 829

Rehabilitation - accretion and amortization 448 31 34 26 482 31 44 0 525

Sustaining capital expenditures 1,454 101 - - 1,454 93 142 2 1,596

Sustaining exploration and evaluation expense 52 4 36 28 88 6 5 0 93

All-in sustaining cost : co-product 11,619 808 868 678 12,487 798 1,135 13 13,622

Total ounces produced 22,465 577 23,042 119,039

Total ounces sold (i i i) 14,373 1,280 15,653 90,135

(i) Results may not add due to rounding

(i i) General and administrative expenses that align with all-in sustaining costs

(i i i) Given the smaller nature of South Arturo silver output, any silver revenue received offset costs

For the three months ended December 31, 2018

MercedesMercedes South Arturo Consolidated Gold


Co-ProductGold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Silver

000$

Per silver

ounce

sold

Total

000$

Cost of sales excluding depletion, depreciation and amortization 13,425 784 2,483 422 15,909 692 754 10 16,663

Depletion, depreciation and amortization 3,381 197 2,051 349 5,431 236 191 2 5,622

Total cost of sales 16,806 982 4,534 771 21,340 928 945 12 22,285

Depletion, depreciation and amortization (3,381) (197) (2,051) (349) (5,431) (236) (191) (2) (5,622)

Other costs (ii) (408) (24) (211) (36) (619) (27) (22) (0) (641)

Cash cost : co-product 13,017 760 2,272 386 15,290 665 733 10 16,022

General and administrative 450 26 242 41 692 30 24 - 716

Rehabilitation - accretion and amortization 548 32 66 11 614 27 30 - 645

Sustaining capital expenditures 1,016 59 283 48 1,299 56 41 1 1,340

Sustaining exploration and evaluation expense 269 16 60 10 329 14 13 - 342

All-in sustaining cost : co-product 15,301 894 2,923 497 18,224 792 841 11 19,065

Total ounces produced 19,913 4,472 24,385 77,082

Total ounces sold 17,119 5,882 23,000 77,096


(ii) General and administrative expenses that align with all-in sustaining costs


Mercedes South Arturo Consolidated Gold Mercedes

38

The following table provides a reconciliation on a co-product basis for cash cost and AISC cost for the year ended December 31,

2018:

The following table provides a reconciliation on a co-product basis for cash cost and AISC cost for the year ended December 31,

2017:


Co-ProductGold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Silver

000$

Per silver

ounce

sold

Total

000$

Cost of sales excluding depletion, depreciation and amortization 59,603 906 9,019 424 68,622 788 3,140 10 71,763


Total cost of sales 77,967 1,186 15,273 718 93,239 1,071 4,091 14 97,331


Royalty tax 419 6 - - 419 5 25 0 444

Other costs (ii) (321) (5) (111) (5) (432) (5) (19) (0) (452)

Cash cost : co-product 59,700 908 8,908 419 68,608 788 3,146 10 71,755

General and administrative 1,347 20 649 30 1,996 23 85 0 2,081

Rehabilitation - accretion and amortization 1,583 24 482 23 2,066 24 94 0 2,160


Sustaining exploration and evaluation expense 1,269 19 120 6 1,388 16 62 0 1,450

All-in sustaining cost : co-product 70,565 1,073 10,160 478 80,725 927 3,762 13 84,487


Total ounces sold (i i i) 65,760 21,276 87,036 299,819



(i i i) Given the smaller nature of South Arturo silver output, any silver revenue received offset costs

For the twelve months ended December 31, 2018

MercedesMercedes South Arturo Consolidated Gold


Co-ProductGold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Gold

000$

Per gold

ounce

sold

Silver

000$

Per silver

ounce

sold

Total

000$

Cost of sales excluding depletion, depreciation and amortization 60,584 710 21,838 310 82,423 529 3,216 9 85,639


Total cost of sales 76,948 902 55,337 786 132,285 849 4,084 12 136,369


Other costs (ii) (408) (5) (416) (6) (824) (5) (22) (0) (845)

Cash cost : co-product 60,177 706 21,423 304 81,599 524 3,194 9 84,794

General and administrative 450 5 482 7 931 6 24 0 955

Rehabilitation - accretion and amortization 1,941 23 2,418 34 4,358 28 103 0 4,461


Sustaining exploration and evaluation expense 1,024 12 60 1 1,083 7 54 0 1,138

All-in sustaining cost : co-product 72,834 854 24,758 351 97,592 627 3,866 11 101,458


Total ounces sold (iii) 85,285 70,442 155,727 338,831



(iii) Given the smaller nature of South Arturo silver output, any silver revenue received offset costs


MercedesMercedes South Arturo Total

39

The following table provides a reconciliation on a by-product basis for gold cash cost and AISC for the three months ended December 31, 2018:

The following table provides a reconciliation on a by-product basis for gold cash cost and AISC for the three months ended December 31, 2017:


By-Product 000$Per gold

ounce sold000$

Per gold

ounce sold000$

Per gold

ounce sold

Cost of sales excluding depletion, depreciation and amortization 10,053 699 529 413 10,582 676

Depletion, depreciation and amortization 2,887 201 347 271 3,234 207

Total cost of sales 12,940 900 876 684 13,815 883

Depletion, depreciation and amortization (2,887) (201) (347) (271) (3,234) (207)

Royalty tax 133 9 - - 133 8

By-product credits (1,332) (93) - - (1,332) (85)

Other costs (ii) (100) (7) (36) (28) (135) (9)

Cash cost : by-product 8,754 609 493 385 9,247 591

General and administrative 523 36 305 238 829 53

Rehabilitation - accretion and amortization 492 34 34 26 525 34

Sustaining capital expenditures 1,596 111 - - 1,596 102

Sustaining exploration and evaluation expense 57 4 36 28 93 6

All-in sustaining cost : by-product 11,423 795 868 678 12,291 785

Total gold ounces produced 22,465 577 23,042

Total gold ounces sold 14,373 1,280 15,653




TotalSouth ArturoMercedes



ounce sold000$

Per gold

ounce sold000$

Per gold

ounce sold

Cost of sales excluding depletion, depreciation and amortization 14,180 828 2,483 422 16,663 724

Depletion, depreciation and amortization 3,572 209 2,051 349 5,622 244

Total cost of sales 17,751 1,037 4,534 771 22,285 969

Depletion, depreciation and amortization (3,572) (209) (2,051) (349) (5,622) (244)


Other costs (ii) (429) (25) (211) (36) (641) (28)

Cash cost : by-product 12,515 731 2,272 386 14,787 643


Rehabilitation - accretion and amortization 579 34 66 11 645 28

Sustaining capital expenditures 1,057 62 283 48 1,340 58

Sustaining exploration and evaluation expense 282 16 60 10 342 15

All-in sustaining cost : by-product 14,907 871 2,923 497 17,830 775

Total gold ounces produced 19,913 4,472 24,385





TotalSouth ArturoMercedes

40

The following table provides a reconciliation on a by-product basis for gold cash cost and AISC for the year ended December 31, 2018:

The following table provides a reconciliation on a by-product basis for gold cash cost and AISC for the year ended December 31, 2017:



ounce sold000$

Per gold

ounce sold000$

Per gold

ounce sold



Total cost of sales 82,058 1,248 15,273 718 97,331 1,118


Royalty tax 444 7 - - 444 5


Other costs (ii) (341) (5) (111) (5) (452) (5)


General and administrative 1,432 22 649 30 2,081 24

Rehabilitation - accretion and amortization 1,678 26 482 23 2,160 25


Sustaining exploration and evaluation expense 1,331 20 120 6 1,450 17

All-in sustaining cost : by-product 69,674 1,060 10,160 478 79,834 917






Mercedes South Arturo Total



ounce sold000$

Per gold

ounce sold000$

Per gold

ounce sold



Total cost of sales 81,032 950 55,337 786 136,369 876



Other costs (ii) (429) (5) (416) (6) (845) (5)



Rehabilitation - accretion and amortization 2,044 24 2,418 34 4,461 29


Sustaining exploration and evaluation expense 1,078 13 60 1 1,138 7

All-in sustaining cost : by-product 70,996 832 24,758 351 95,754 615





Mercedes South Arturo Total


41

RISKS AND RISK MANAGEMENT

Financial Instruments and Related Risks

The Company's activities expose it to risks, including financial and operational risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth and shareholder returns and which are more fully described in the risks and uncertainties section.

For financial instruments, the carrying amounts of cash and cash equivalents, receivables and accounts payable and accrued liabilities are considered to be reasonable approximations of their fair values due to the short term nature of these instruments. At December 31, 2018 and December 31, 2017, the carrying amount of restricted cash and notes payable are considered to be a reasonable approximation of their fair value as there have been no significant changes in market interest rates since inception.

Debt is initially recognized at fair value, net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are held at amortized cost using the effective interest method.

Derivative instruments are recorded at fair value through profit or loss and are recorded on the statement of financial position at fair market value. Fair value for derivative instruments are determined using valuation techniques with assumptions based on market conditions existing at the statement of financial position date or settlement date of the derivative.

For full details on the financial instruments and related risks affecting the Company, please refer to the Company's audited annual consolidated financial statements, notes and information for the year ended December 31, 2018.

Management of Capital Risk

The Company manages its share capital, equity settled employee benefits reserve, warrant reserve and contributed capital as capital. The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to pursue the exploration and development of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, acquire or dispose of assets, utilize existing credit facilities or acquire new debt.

In order to maximize ongoing exploration and development efforts, the Company does not pay out dividends. The Company's investment policy is to invest its short-term excess cash in highly liquid short-term interest bearing investments with short-term maturities, selected with regard to the expected timing of expenditures from continuing operations.

To effectively manage its capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company expects its current capital resources will be sufficient to carry out its exploration and evaluation plans through 2019.

Risks and Uncertainties

Fluctuating Commodity Prices

Historically, gold prices have fluctuated widely and are affected by numerous external factors beyond Premier's control, including industrial and retail demand, central bank lending, sales and purchases of gold, forward sales of gold by producers and speculators, production and cost levels in major producing regions, short-term changes in supply and demand because of speculative hedging activities, confidence in the global monetary system, expectations of the future rate of inflation, the strength of the US dollar (the currency in which the price of gold is generally quoted), interest rates, terrorism and war, and other global or regional political or economic events. Resource prices have fluctuated widely and are sometimes subject to rapid short-term changes because of speculative activities. The exact effect of these factors cannot be accurately predicted, but any one of, or any combination of, these factors may result in not receiving an adequate return on invested capital and a loss of all or part of an investment in securities in Premier.

Dependence on Key Personnel

Premier’s success is dependent on a relatively small number of key employees. The loss of one or more of these key employees, if not replaced, could materially adversely affect Premier's business, results of operations and financial condition. Dependence on Third Parties Premier relies significantly on strategic relationships with other entities and also on good relationships with regulatory and governmental departments. Premier also relies upon third parties to provide essential contracting services. In some cases, Premier holds its interest in its properties through joint ventures. In certain cases, including the South Arturo Mine and the Rahill Bonanza Project, Premier is not the manager of the joint venture. In these situations the joint venture decision may not accord with Premier's stated or desired plan. There can be no assurance that Premier's existing relationships will continue to be maintained or that new ones will be successfully formed and Premier could be adversely affected by changes to such relationships or difficulties in forming new ones. Any circumstance, which causes the early termination or nonrenewal of one or

42

more of these key business alliances or contracts, could adversely impact Premier, its business, operating results and prospects.

No Assurance of Title

The acquisition of title to mineral projects is a very detailed and time consuming process. Although Premier has taken precautions to ensure that legal title to its property interests is properly recorded in the name of Premier where possible, there can be no assurance that such title will ultimately be secured. Furthermore, there is no assurance that the interests of Premier in any of its properties may not be challenged or impugned. Title insurance is generally not available for mineral properties and Premier has a limited ability to ensure that it has obtained secure claim to individual mineral claims. While Premier intends to take all reasonable steps to maintain title to its mineral properties, there can be no assurance that Premier will be successful in extending or renewing mineral rights on or prior to expiration of their term or that the title to any such properties will not be affected by an unknown title defect.

Construction and Start-up of New Mines

The success of construction projects and the start up of new mines by the Company is subject to a number of factors including the availability and performance of engineering and construction contractors, mining contractors, suppliers and consultants, the receipt of required governmental approvals and permits in connection with the construction of mining facilities and the conduct of mining operations (including environmental permits), the successful completion and operation of ore passes, the adsorption/desorption/recovery plants and conveyors to move ore, among other operational elements. Any delay in the performance of any one or more of the contractors, suppliers, consultants or other persons on which the Company is dependent in connection with its construction activities, a delay in or failure to receive the required governmental approvals and permits in a timely manner or on reasonable terms, or a delay in or failure in connection with the completion and successful operation of the operational elements in connection with new mines could delay or prevent the construction and start up of new mines as planned. There can be no assurance that current or future construction and start up plans implemented by the Company will be successful, that the Company will be able to obtain sufficient funds to finance construction and start up activities, that personnel and equipment will be available in a timely manner or on reasonable terms to successfully complete construction projects, that the Company will be able to obtain all necessary governmental approvals and permits or that the completion of the construction, the start up costs and the ongoing operating costs associated with the development of new mines will not be significantly higher than anticipated by the Company. Any of the foregoing factors could adversely impact the operations and financial condition of the Company.

Permits and Licenses

The operations of Premier require licenses and permits from various governmental authorities. Premier believes that it presently holds all necessary licenses and permits required to carry on with activities which it is currently conducting under applicable laws and regulations, and Premier believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in regulations and in various operating circumstances. Where required, obtaining necessary licenses and permits can be a complex and time consuming process. The costs and delays associated with obtaining necessary licences and permits could stop or materially delay or restrict Premier from proceeding with the development of an exploration project. There can be no assurance that Premier will be able to obtain all necessary licenses and permits required to carry out exploration, development and mining operations at its mineral projects or that Premier will be able to comply with the conditions of all such necessary licenses and permits in an economically viable manner.

Environmental Regulations and Potential Liabilities

The operations of Premier are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental hazards may exist on the properties on which Premier holds interests which are unknown to Premier at present and which have been caused by previous or existing owners or operators of the properties. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in exploration or mining operations may be required to compensate those suffering loss or damage by reason of the exploration or mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on Premier and cause increases in exploration expenses, capital expenditures or production costs, reduction in levels of production at producing properties, or abandonment or delays in development of new mining properties. The potential financial exposure may be significant. Infrastructure

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, railways, power sources and water supply are important determinants affecting capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such

43

infrastructure could adversely affect the Company's operations, financial condition and results of operations.

Aboriginal Claims and Consultation Issues Aboriginal interests and rights as well as related consultation issues may impact Premier's ability to pursue exploration, development and mining at its projects. Premier may enter into agreements with First Nations and other Aboriginal communities in order to manage its relationship with those groups but there is no assurance that claims or other assertions of rights by Aboriginal communities or consultation issues will not arise on or with respect to Premier's properties or activities. These could result in significant costs and delays or materially restrict Premier's activities.

Fluctuations in Foreign Currency Exchange Rates

A portion of Premier's current and proposed expenditures are made in Canadian dollars and Mexican Pesos. The effects of the foreign exchange rates on operating costs and on future cash flows may be significant. Premier does not currently have any hedging contracts in connection with its use of Canadian dollars or Mexican Pesos. Depreciation of the Canadian dollar against the U.S. dollar or Mexican Peso would increase the costs associated with the exploration and development of Premier's properties and potentially increase future operating costs, taxes and royalties paid. These increased costs could materially adversely affect Premier's results of operation and financial condition.

Availability and Costs of Infrastructure, Energy and Other Commodities Mining, processing, capital development projects and exploration activities depend on adequate infrastructure. Reliable access to energy and power sources and water supply are important factors that affect capital and operating costs. If the Company does not have timely access to adequate infrastructure, there is no assurance that it will be able to start or continue exploiting and develop projects, complete them on timely basis or at all. There is no assurance that the ultimate operations will achieve the anticipated production volume, or that construction costs and operating costs will not be higher than estimates calculated.

The profitability of the Company’s business is also affected by the market prices and availability of commodities and resources which are consumed or otherwise used in connection with the Company’s operations and development projects such as diesel fuel, electricity, finished steel, tires, steel, chemicals and reagents. Prices of such commodities and resources are also subject to volatile price movements, which can be material and can occur over short periods of time due to factors beyond the Company’s control.

If there is a significant and sustained increase in the cost of certain commodities, the Company may decide that it is not economically feasible to continue all of the Company’s commercial production and development activities and this could have an adverse effect on profitability. Higher worldwide demand for critical resources like input commodities, drilling equipment, mobile mining equipment, tires and skilled labour could affect the Company’s ability to acquire them and lead to delays in delivery and unanticipated cost increases, which could have an effect on the Company’s operating costs, capital expenditures and production schedules.

Further, the Company relies on certain key third party suppliers and contractors for services, equipment, raw materials used in, and the provision of services necessary for, the development, construction and continuing operation of its assets. As a result, the Company’s activities are subject to a number of risks some of which are outside its control, including negotiating agreements with suppliers and contractors on acceptable terms, the inability to replace a supplier or a contractor and its equipment, raw materials or services in the event that either party terminates the agreement, interruption of operations or increased costs in the event that a supplier or contractor ceases its business due to insolvency or other unforeseen event and failure of a supplier or contractor to perform under its agreement with the Company. The occurrences of one or more of these events could have a material effect on the business, results of operations and financial condition of the Company.

Uncertainty of Production Estimates

Future estimates of gold production for the Company’s operation as a whole are derived from a mining plan and these estimates are subject to change. There is no assurance the production estimates will be achieved and failure to achieve production estimates could have a materially adverse effect on the Company’s future cash flow, results of operations and financial condition. These plans are based on, among other things, mining experience, reserve estimates, assumptions regarding ground conditions and physical characteristics of ores and estimated rates and costs of production. Actual ore production may vary from estimates for a variety of reasons, including risks and hazards of the types discussed above.

Such occurrences could result in damage to mineral properties, interruptions in production, money losses and legal liabilities and could cause a mineral property that has been mined profitably in the past to become unprofitable.

Any decrease in production or change to the timing of production or the prices realized for gold sales, will directly affect the amount and timing of the cash flow from operations. A production shortfall or any of these other factors would change the timing of the Company’s projected cash flow and its ability to use the cash to fund capital expenditures.

Financing Risk

The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing debt and equity market conditions, the price of gold, the performance of the Company and other factors outlined herein. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such

44

financing will be favourable to the Company.

If the Company raises additional funds through the sale of equity securities or securities convertible into equity securities, shareholders may have their equity interest in the Company diluted.

In addition, failure to comply with covenants under the Company’s current or future debt agreements or to make scheduled payments of the principal of, or to pay interest on, its indebtedness or to make scheduled payments under hedging arrangements would likely result in an event of default under the debt agreements and would allow the lenders to accelerate the debt under these agreements, which may affect the Company’s financial condition.

Losses from or Liabilities for Risks which are not Insured

Hazards such as unusual or unexpected geological formations and other conditions are involved in mineral exploration and development and mining. The Company may become subject to liability for pollution, cave-ins or hazards against which it cannot insure or against which it may elect not to insure. The payment of such liabilities would have a material, adverse effect on the Company’s financial position and results of operations.

Although the Company maintains liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable against, or the Company might not elect to insure itself against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs that could have a materially adverse effect upon its financial condition and results of operations.

Governmental Regulation

Exploration, development and mining of minerals are subject to extensive federal, provincial, state and local laws and regulations governing acquisition of the mining interests, prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, water use, land use, land claims that may be brought by First Nations and other aboriginal groups, environmental protection and remediation, endangered and protected species, mine safety and other matters. No assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied or amended in a manner that could have a material adverse effect on the business, financial condition and results of operations of Premier. The costs and delays associated with obtaining necessary licences and permits and complying with these licences and permits and applicable laws and regulations could stop or materially delay or restrict Premier from proceeding with the development of a project. Any failure to comply with applicable laws and regulations or licences and permits, even if inadvertent, could result in interruption or closure of exploration, development or mining operations or material fines, penalties or other liabilities. Premier may be required to compensate those suffering loss or damage by reason of its mining operations and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits.

These laws and regulations are administered by various governmental authorities including the federal, provincial and municipal governments of Canada, the USA and Mexico.

Health and Safety

Mining operations generally involve a high degree of risk. Personnel involved in the Company’s operations are subject to many inherent risks, including but not limited to, rock bursts, cave-ins, flooding, fall of ground, electricity, slips and falls and moving equipment that could result in occupational illness, health issues and personal injuries. The Company has implemented various health and safety measures designed to mitigate such risks. Such precautions, however, may not be sufficient to eliminate health and safety risks and employees, contractors and others may not adhere to the occupational health and safety programs that are in place. Any such occupational health and personal safety issues may adversely affect the business of the Company and its future operations. Tax Matters The Company’s taxes are affected by a number of factors, some of which are outside of its control, including the application and interpretation of the relevant tax laws and treaties. If the Company’s filing position, application of tax incentives or similar ‘holidays’ or benefits were to be challenged for whatever reason, this could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company is subject to routine tax audits by various tax authorities. Tax audits may result in additional tax, interest payments and penalties which would negatively affect the Company’s financial condition and operating results. New laws and regulations or changes in tax rules and regulations or the interpretation of tax laws by the courts or the tax authorities may also have a substantial negative impact on the Company’s business. There is no assurance that the Company’s current financial condition will not be materially adversely affected in the future due to such changes. Information Technology The Company is reliant on the continuous and uninterrupted operations of its Information Technology (“IT”) systems. User access and security of all IT systems are critical elements to the operations of the Company. Protection against cyber security incidents and cloud security, and security of all of the Company’s IT systems are critical to the operations of the Company. Any IT failure pertaining to availability, access or system security could result in disruption for personnel and could adversely affect the reputation, operations or financial performance of the Company. The Company’s IT systems could be compromised by unauthorized parties attempting to extract business sensitive, confidential

45

or personal information, corrupting information or disrupting business processes or by inadvertent or intentional actions by the Company’s employees or vendors. A cyber security incident resulting in a security breach or failure to identify a security threat, could disrupt business and could result in the loss of business sensitive, confidential or personal information or other assets, as well as litigation, regulatory enforcement, violation of privacy and security laws and regulations and remediation costs. Labour Difficulties Factors such as work slowdowns or stoppages caused by the attempted unionization of operations and difficulties in recruiting qualified miners and hiring and training new miners could materially adversely affect the Company’s business. This would have a negative effect on the Company’s business and results of operations which might result in the Company not meeting its business objectives.

Nature of Mineral Exploration and Mining The economics of exploring and developing mineral properties are affected by many factors including capital and operating costs, variations of the grades and tonnages of ore mined, fluctuating mineral market prices, costs of mining and processing equipment and such other factors as government regulations, allowable production, importing and exporting of minerals and environmental protection. The effect of these factors cannot be accurately predicted, but the combination of these factors may result in Premier not receiving an adequate return on invested capital. The operations of Premier are also subject to all of the hazards and risks normally incidental to exploration and development of mineral properties, any of which could result in damage to life or property, environmental damage and possible legal liability for any or all damage. The activities of Premier may be subject to prolonged disruptions due to inclement or hazardous weather conditions depending on the location of operations in which Premier has interests. Hazards, such as unusual or unexpected geological formations, rock bursts, formation pressures, cave-ins, flooding or other conditions may be encountered in the drilling and removal of material. Other risks include, but are not limited to, mechanical equipment performance problems, industrial accidents, labour disputes, drill rig shortages, the unavailability of materials and equipment, power failures, hydrological conditions, earthquakes, fires, landslides and other Acts of God. While Premier may obtain insurance against certain risks in such amounts as it considers adequate, the nature of these risks are such that liabilities could exceed policy limits or could be excluded from coverage. There are also risks against which Premier cannot insure or against which it may elect not to insure. The potential costs which could be associated with any liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause substantial delays and require significant capital outlays, adversely affecting the future earnings and competitive position of Premier and, potentially, its financial position.

Estimates of Mineral Resources and Mineral Reserves

Mineral reserves and mineral resources are estimates only, and no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized or that mineral reserves can be mined or processed profitably. Mineral reserve and mineral resource estimates may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing and other relevant issues. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company's control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data, the nature of the ore body and of the assumptions made and judgments used in engineering and geological interpretation. These estimates may require adjustments or downward revisions based upon further exploration or development work or actual production experience. Fluctuations in gold or silver prices, results of drilling, metallurgical testing and production, the evaluation of mine plans after the date of any estimate, permitting requirements or unforeseen technical or operational difficulties, may require revision of mineral reserve and mineral resource estimates. Prolonged declines in the market price of gold (or applicable by-product metal prices) may render mineral reserves containing relatively lower grades of mineralization uneconomical to recover and could materially reduce the Company's mineral reserves. Should reductions in mineral resources or mineral reserves occur, the Company may be required to take a material write-down of its investment in mining properties, reduce the carrying value of one or more of its assets or delay or discontinue production or the development of new projects, resulting in increased net losses and reduced cash flow. Mineral resources and mineral reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations. There is a degree of uncertainty attributable to the calculation and estimation of mineral resources and mineral reserves and corresponding grades being mined and, as a result, the volume and grade of mineral reserves mined and processed and recovery rates may not be the same as currently anticipated. Any material reductions in estimates of mineral reserves and mineral resources, or of the Company's ability to extract these mineral reserves, could have a material adverse effect on the Company's results of operations and financial condition. Mineral resources are not mineral reserves and have a greater degree of uncertainty as to their existence and feasibility. There is no assurance that mineral resources will be upgraded to proven or probable mineral reserves.

Competition

There is significant competition in the precious metals mining industry for mineral rich properties that can be developed and produced economically, the technical expertise to find, develop, and operate such properties, the labour to operate the properties and the capital for the purpose of funding such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a global basis. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than Premier, Premier may be unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund its operations and develop its projects. Existing or future competition in the mining industry could materially adversely affect

46

Premier's prospects for mineral exploration and success in the future. Increased competition can result in increased costs and lower prices for metal and minerals produced and reduced profitability. Consequently, the revenues of Premier, its operations and financial condition could be materially adversely affected.

From time to time several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In determining whether or not Premier will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the degree of risk to which Premier may be exposed and its financial position at that time. Conflicts of Interest The directors and officers of Premier may serve as directors or officers of other public resource companies or have significant shareholdings in other public resource companies. Situations may arise in connection with potential acquisitions and investments where the other interests of these directors and officers may conflict with the interests of Premier. In the event that such a conflict of interest arises at a meeting of the directors of Premier, a director is required by the Ontario Business Company’s Act (“OBCA”) to disclose the conflict of interest and to abstain from voting on the matter.

Current Global Financial Condition

Current global financial conditions have been subject to increased volatility, and access to public financing, particularly for resource companies, has been negatively impacted. These factors may impact the ability of the Company to obtain equity or debt financing in the future and, if obtained, such financing may not be on terms favourable to the Company. If increased levels of volatility and market turmoil continue, the Company's operations could be adversely impacted, and the value and price of the Common Shares could be adversely affected.

Risks Relating to Premier Common Shares Generally

No Guarantee of Positive Return on Investment

There is no guarantee that an investment in the securities of Premier will earn any positive return in the short term or long term. The mineral exploration and development business is subject to numerous inherent risks and uncertainties, and any investment in the securities of Premier should be considered a speculative investment. Past successful performance provides no assurance of any future success. The purchase of securities of Premier involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks. An investment in the securities of Premier is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment.

Volatility of the Trading Price of Premier Common Shares

The Premier Common Shares are listed on the TSX. In recent years, the securities markets have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly those considered exploration or development stage companies, have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continued fluctuations in price will not occur, which may result in losses to investors. The purchase of Premier Common Shares should be undertaken only by investors who have no need for immediate liquidity in their investment. The trading price of the Premier Common Shares may increase or decrease in response to a number of events and factors, including, but not limited to: Premier's operating performance and the performance of competitors and other similar companies; volatility in gold and other metal prices; the public's reaction to Premier's press releases, other public announcements and Premier's filings with the various securities regulatory authorities; the failure of Premier to meet the reporting and other obligations under Canadian securities laws or imposed by the TSX; changes in recommendations by research analysts who track the Premier Common Shares or the shares of other companies in the resource sector; a reduction in coverage by such research analysts; changes in general economic and/or political conditions; the arrival or departure of key personnel; and acquisitions, strategic alliances or joint ventures involving Premier or its competitors, which, if involving the issuance of Premier Common Shares, or securities exercisable or exchangeable for or convertible into Premier Common Shares, would result in dilution to present and prospective holders of Premier Common Shares. In addition, the market price of the Premier Common Shares is affected by many variables not directly related to Premier's success and are, therefore, not within Premier's control, including other developments that affect the market for all resource sector securities, the breadth of the public market for the Premier Common Shares, and the attractiveness of alternative investments. Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities. Premier may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management's attention and resources. No Dividend Record

Premier does not have a dividend policy and has never declared or paid any dividends to its shareholders. Premier intends to invest all available funds toward the development and growth of its business and does not expect to pay any cash dividends for the foreseeable future. The payment of any cash dividend to shareholders of Premier in the future will be at the discretion of the directors of Premier and will depend on, among other things, the financial condition, capital requirements and earnings of Premier, and any other factors that the directors of Premier may consider relevant.

47

Issuance of Preference Shares

As of December 31, 2018, there were no Preference Shares outstanding; however, pursuant to its articles, Premier is authorized to issue an unlimited number of Preference Shares, in one or more series, with the designation of, and the rights, privileges, restrictions and conditions attached thereto, determined at the discretion of the directors of Premier, subject to the articles of Premier and the OBCA. Payment of dividends and repayment of the liquidation preference of such Preference Shares may take preference over dividends or other payments to holders of Premier Common Shares.

MANAGEMENT’S REPORT ON INTERNAL CONTROLS Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the President and Chief Executive Officer (“CEO”) and the Executive Vice President and Chief Financial Officer (“CFO”), as appropriate to permit timely decisions regarding public disclosure.

The Corporation’s management, including the CEO and CFO, have as at December 31, 2018, designed Disclosure Controls and Procedures (as defined in National Instrument 52-109 of the Canadian Securities Administrators), or caused them to be designed under their supervision, to provide reasonable assurance that material information relating to the issuer is made known to them by others, particularly during the period in which the interim or annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

Internal Control over Financial Reporting

The Corporation’s management, including the CEO and CFO, are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the CEO and CFO and effected by management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Corporation’s management, including the CEO and CFO, believe that disclosure controls and procedures and 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. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been prevented or detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed.

Management used the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate the effectiveness of the Company’s internal controls for the year ended December 31, 2018. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was designed and operating effectively as at December 31, 2018 to provide reasonable assurance the financial information is recorded, processed, summarized and reported in a timely manner.

Due to its inherent limitations, internal controls over financial reporting and disclosure may not prevent or detect all misstatements. Management will continue to monitor the effectiveness of its internal control over financial reporting and disclosure controls and procedures and may make modifications from time to time as considered necessary.

There have been no changes in the Company’s internal control over financial reporting during the three months and year ended December 31, 2018, that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

48

MINERAL RESERVES AND RESOURCES

Summary of 2018 Proven and Probable Reserves for Gold and Silver

Summary of 2018 Mineral Resources for Gold and Silver (exclusive of mineral reserves)

(1) GREENSTONE GOLD: Mineral reserves and resources were calculated at a gold price of US$1250 and US$1320 respectively. The current independent technical report on the property, dated December 21, 2016, is entitled “Hardrock Project, Ontario, Canada” was completed by G Mining Services Inc.

(2) MERCEDES: For 2018, mineral reserves and mineral resources were calculated under the supervision of Stephen McGibbon, Executive Vice-President of Project & Corporate Development at Premier Gold Mines Ltd at gold prices of US$1200 and US$1400 and silver prices of US$16.50 and US$19.25 respectively. The independent technical report on the property dated April 18, 2018, entitled “TECHNICAL REPORT ON THE MERCEDES GOLD-SILVER MINE, SONORA STATE, MEXICO” provides detail on resource estimate methodologies and assumptions.

(3) SOUTH ARTURO: Calculations have been prepared by employees of Barrick under the supervision of Rick Sims, Vice President, Resources and Reserves, of Barrick, Geoffrey Locke, Manager, Metallurgy, of Barrick and Mike Tsafaras, P. Eng., Manager, Value Realization of Barrick. Except as noted below, reserves have been estimated based on an assumed gold price of US$1,200 per ounce, an assumed silver price of US$16.50 per ounce

(4) McCOY-COVE: Mineral resources at Cove were estimated using a gold price of US$1400 per ounce. One ounce of gold is equivalent to 140 ounces of silver. The current independent technical report on the property, dated June 29, 2018, is entitled “PRELIMINARY ECONOMIC ASSESSMENT FOR THE COVE PROJECT, LANDER COUNTY, NEVADA” and was completed by Practical Mining LLC

(5) HASAGA: Mineral resources at Hasaga were estimated using a gold price of US$1400 per ounce. The current independent technical report on the property, dated February 24, 2017, is entitled “NATIONAL INSTRUMENT 43-101 TECHNICAL REPORT: HASAGA PROJECT, RED LAKE MINING DISTRICT, ONTARIO, CANADA, NTS MAP SHEETS 52K/13 AND 52 N/04” and was completed by MRB and Associates.

49

CAUTIONARY STATEMENT ON FORWARD LOOKING STATEMENTS

Certain information set forth in this MD&A, including management's assessment of the Company's future plans and operations, contains forward looking statements. By their nature, forward looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company’s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of resource estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be inaccurate and, as such, reliance should not be placed on forward looking statements. Premier’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, if any, that Premier will derive there from. Premier disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise except as required by applicable law. ADDITIONAL INFORMATION

Additional information relating to the Company can be found on SEDAR at www.sedar.com, or on the Company’s web-site at www.premiergoldmines.com.

“Steve Filipovic” (Signed) Steve Filipovic Chief Financial Officer Thunder Bay, Canada March 6, 2019

Consolidated Financial Statements

December 31, 2018

(Stated in thousands of United States Dollars)

Grant Thornton LLP 11th Floor 200 King Street West, Box 11 Toronto, ON M5H 3T4

T +1 416 366 0100 F +1 416 360 4949

Audit | Tax | Advisory © Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 1

Independent auditor’s report

To the Shareholders of Premier Gold Mines Limited

Opinion

We have audited the consolidated financial statements of Premier Gold Mines Limited and its

subsidiaries ("the Company"), which comprise the consolidated statements of financial position as at

December 31, 2018 and 2017 and the consolidated statements of income (loss) and comprehensive

income (loss), consolidated statements of changes in equity and consolidated statements of cash

flows for the years then ended, and notes to the consolidated financial statements, including a

summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements, present fairly, in all material

respects, the consolidated financial position of the Company as at December 31, 2018 and 2017, and

its consolidated financial performance and its consolidated cash flows for the years then ended in

accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our

responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the

Company in accordance with the ethical requirements that are relevant to our audit of the consolidated

financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance

with these requirements. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Information Other than the Consolidated Financial Statements and Auditor’s Report

Thereon

Management is responsible for the other information. The other information comprises the

Management’s Discussion and Analysis and the Annual Report but does not include the consolidated

financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do

not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent

with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears

to be materially misstated.

We obtained the Management’s Discussion and Analysis prior to the date of this auditor’s report. If,

based on the work we have performed on the other information that we obtained prior to the date of


this auditor’s report, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of this auditor’s report. If,

based on the work we will perform on this other information, we conclude that there is a material

misstatement of this other information, we are required to report that fact to those charged with

governance.

Responsibilities of Management and Those Charged with Governance for the


Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with IFRS, 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.

In preparing the consolidated financial statements, management is responsible for assessing the

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to

liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting

process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue

an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but

is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing

standards will always detect a material misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these consolidated

financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise

professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Company's ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

auditor's report to the related disclosures in the consolidated financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditor's report. However, future events or conditions may

cause the Company to cease to continue as a going concern.


• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Mark Irwin.

Toronto, Canada Chartered Professional Accountants

March 6, 2019 Licensed Public Accountants

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


December 31,2018

December 31,2017

January 1,2017

Note (As restatedNote 2(f))

(As restatedNote 2(f))

ASSETSCurrent assetsCash and cash equivalents 4 $ 43,882 $ 103,046 $ 89,152Receivables 5 23,571 11,807 8,879Inventory 6 17,384 26,373 66,437Prepaids and deposits 1,776 2,026 1,452Other assets 7 110 318 3,991Total current assets 86,723 143,570 169,911Non-current assetsRestricted cash and cash equivalents 8 5,581 4,721 3,208Long-term inventory 6 2,266 5,606 -Long-term receivable 9 2,933 2,933 -Property, plant and equipment 10 268,983 270,759 261,527Total non-current assets 279,763 284,019 264,735Total assets $ 366,486 $ 427,589 $ 434,646

LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities $ 17,870 $ 18,471 $ 22,893Taxes payable 1,122 4,132 3,708Current portion of deferred revenue 11 12,977 13,775 13,784Current portion of long-term debt 12 - 19,205 2,043Current provision for environmental rehabilitation 13 389 440 705Current portion of other liabilities 14 805 1,721 3,097Total current liabilities 33,163 57,744 46,230Non-current liabilitiesDeferred taxes 23 10,715 12,916 15,712Deferred revenue 11 11,386 22,512 35,750Long-term debt 12 - - 39,521Provision for environmental rehabilitation 13 21,007 22,869 14,811Other liabilities 14 2,380 3,061 4,393Total non-current liabilities 45,488 61,358 110,187Total liabilities 78,651 119,102 156,417

EQUITYShare capital 538,129 536,484 533,635Reserves (18,244) (16,709) (27,949)Deficit (232,050) (211,288) (227,457)Total equity 287,835 308,487 278,229Total liabilities and equity $ 366,486 $ 427,589 $ 434,646

Commitments [Note 25]

Contingencies [Note 28]

Subsequent events [Note 29]

See accompanying notes to the consolidated financial statements

Approved by the Board of Directors and authorized for issue on March 6, 2019

"John Seaman"Director

"Ewan Downie"Director

4

CONSOLIDATED STATEMENTS OF INCOME / (LOSS)

AND COMPREHENSIVE INCOME / (LOSS)

(Stated in thousands of United States Dollars, except for share data)

Year endedDecember 31,

2018 2017

Note(restated -Note 2(f))

Revenue $ 113,867 $ 200,308Cost of sales (71,763) (85,567)Depletion, depreciation and amortization 10 (25,568) (50,730)Mine operating income 16,536 64,011

ExpensesExploration, evaluation, and pre-development 18 22,233 26,251Property maintenance 243 328General and administrative 19 9,528 7,893Share-based payments 15(f) 2,571 2,716Re-measurement of environmental rehabilitation provision 13 (99) (297)Income / (loss) before the following (17,940) 27,120

Other income 20 2,087 2,328Finance expense 21 (3,744) (8,885)

Income / (loss) before income taxes (19,597) 20,563

Current tax expense 23 (2,781) (5,166)Deferred tax recovery 23 1,952 772

Income / (loss) for the year (20,426) 16,169

Other comprehensive income / (loss)Exchange gain / (loss) on translation of foreign operations (3,086) 6,684Deferred tax recovery 23 - 3,436

Total comprehensive income / (loss) for the year $ (23,512) $ 26,289

Basic and diluted income / (loss) per share 16 $ (0.10) $ 0.08

Weighted average number of shares outstandingBasic 16 202,744,999 202,626,958Diluted 16 202,744,999 207,790,330


5

CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

Note(restated - Note 2(f))

OPERATING ACTIVITIESIncome / (loss) for the year $ (20,426) $ 16,169

Items not affecting cash Depletion, depreciation and amortization 10 25,905 50,955 Greenstone Gold non-cash operating expenses 9,891 5,294 Non-cash share-based payments 2,271 2,426 Re-measurement of environmental rehabilitation provision 13 (99) (297) Loss / (gain) on derivatives 20 (637) 1,127 Loss on investments 20 110 337 Gain on disposal of property, plant and equipment 20 (321) (38) Foreign exchange loss 1,814 501 Write-down of property, plant and equipment 20 - 1,584 Gain attributable to Greenstone Gold development commitment 20 (9,891) (5,294) Finance expense 21 3,744 8,885 Deferred tax recovery 23 (1,952) (772) Deferred revenue on metal agreements (13,202) (13,631)Change in non-cash working capital balances related tooperations

17(i) (7,899) (3,200)

Cash provided by / (used in) operating activities $ (10,692) $ 64,046

INVESTMENT ACTIVITIESProceeds from the sale of investments 178 1,792Purchase / settlement of derivative investments - 364Capital expenditures on property, plant and equipment 10 (26,873) (21,612)Purchase of investments - (165)Environmental liability security placed (1,031) (1,373)Proceeds on disposal of property, plant and equipment 14 -Reclamation expenditures charged to the provision for environmentalrehabilitation

13 (264) (232)

Cash used in investment activities $ (27,976) $ (21,226)

FINANCING ACTIVITIESInterest paid 21 (1,984) (4,798)Proceeds from the exercise of stock options 1,285 1,779Repayment of long-term debt (20,050) (27,050)Cash provided by / (used in) financing activities $ (20,749) $ (30,069)

Change in cash and cash equivalents during the year (59,417) 12,751Cash and cash equivalents, beginning of the year 103,046 89,152Effect of exchange rate changes on cash held 253 1,143Cash and cash equivalents, end of year $ 43,882 $ 103,046

Supplemental cash flow information [Note 17]


6

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Share Capital Reserves

Issued and outstanding NoteNumber of

shares Share capital

Equity settledemployeebenefits

Contributedsurplus

Foreigncurrency

translation Deficit Total equityBalance as at January 1, 2017 (as restated - Note 2(c)) 201,473,187 $ 533,635 $ 31,499 $ 8,267 $ (67,716) $ (227,457) $ 278,228Exercise of stock options 17(ii) 892,900 2,849 (1,070) - - - 1,779Equity settled share-based payments - - 2,191 - - - 2,191Comprehensive income for the year - - - - 10,120 16,169 26,289Balance as at December 31, 2017(as restated - Note 2(c)) 202,366,087 536,484 32,620 8,267 (57,596) (211,288) 308,487Impact of adopting IFRS 15 on January 1, 2018 3(a) - - - - - (336) (336)Balance as at January 1, 2018 (as restated - Note 2(c)) 2(f) 202,366,087 536,484 32,620 8,267 (57,596) (211,624) 308,151Exercise of stock options 17(ii) 824,800 2,028 (801) - - - 1,227Shares issued for termination of option agreement 23,149 58 - - - - 58Equity settled share-based payments - - 2,352 - - - 2,352Warrants reclassified to liability on change of functional currency - (441) - - - - (441)Comprehensive loss for the year - - - - (3,086) (20,426) (23,512)Balance as at December 31, 2018 203,214,036 $ 538,129 $ 34,171 $ 8,267 $ (60,682) $ (232,050) $ 287,835


7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. NATURE OF BUSINESS

Premier Gold Mines Limited (the “Company”) is a Canadian based, growth oriented gold and silver producer engaged in the exploration,development and production of gold and silver deposits in Canada, the United States and Mexico.

The Company’s principal assets include the Mercedes Mine in Sonora, Mexico, a 40% interest in the South Arturo Mine in Nevada, USAand a 50% interest in the Hardrock Gold Project (Greenstone Gold Mines Partnership) located along the TransCanada highway inOntario, Canada. Other key property interests include a 44% interest in Rahill Bonanza and a 100% interest in the Hasaga goldproperties located in the Red Lake mining district of Northwestern Ontario, Canada and a 100% interest in the McCoy Cove gold propertylocated in Nevada, USA where Barrick Gold Corporation is earning a 60% interest in the area that surrounds the qualified resources.

The Company’s common shares are listed on the Toronto Stock Exchange under the symbol PG and its head office is located at Suite200, 1100 Russell Street, Thunder Bay, Ontario, P7B 5N2.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The consolidated financial statements of the Company have been prepared in accordance with accounting policies consistent withInternational Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Accountingpolicies are consistently applied to all periods presented, unless otherwise stated. Certain items within the statement of income havebeen reclassified in the current year. The prior periods have been restated to reflect the change in presentation.

The consolidated financial statements of the Company for the year ended December 31, 2018 were approved and authorized for issue bythe Board of Directors on March 6, 2019.

(b) Basis of presentation

The consolidated annual financial statements have been prepared using the measurement bases specified by IFRS for each type ofasset, liability, income and expense. Measurement bases are more fully described in the accounting policies below.

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptionsthat affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ fromthese estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historicalexperience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting effectson the carrying amounts of the Company's assets and liabilities are accounted for prospectively. The critical judgments and estimatesapplied in the preparation of the Company's consolidated financial statements are consistent with those applied and disclosed in Note 2and are discussed below.

8



(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company.Control is achieved when the Company is exposed to variable returns and has the ability to affect those returns through power to directthe relevant activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered whenassessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferredto the Company. Subsidiaries will be de-consolidated from the date that control ceases.

SubsidiaryPercentage of

ownership Jurisdiction Principal activityPremier Gold Mines USA Inc. 100% United States Mineral explorationPremier Gold Mines Nevada Inc. 100% United States Mineral explorationAu-reka Gold Corporation 100% United States Mineral explorationPremier Goldbanks LLC 100% United States Mineral explorationGoldcorp Dee LLC 100% United States ProductionPremier Rye LLC 100% United States Mineral explorationGoldstone Resources Inc. 100% Canada Mineral explorationPremier Gold Mines Hardrock Inc. 100% Canada Pre-developmentGreenstone Gold Mines GP Inc. 50% Canada Pre-developmentPremier Gold Mines NWO Inc. 100% Canada Mineral explorationCherbourg Gold Inc. 85.7% Canada Mineral explorationBarraute Gold Inc. 100% Canada Mineral explorationOro Premier de Mexico S.A. de C.V. 100% Mexico Mineral explorationMinera Mercedes Minerales S. de R.L. de C.V. (i) 100% Mexico ProductionMercedes Gold Holdings Mexico S. de R.L. de C.V. (i) 100% Mexico ProductionPremier Mining Mexico S. de R.L. de C.V. (i) 100% Mexico ProductionPremier Gold Mines Cayman Ltd. 100% Cayman Islands Holding2401794 Ontario Inc. 100% Canada Holding2536062 Ontario Inc. 100% Canada HoldingPremier Gold Mines Netherlands Cooperative U.A. 100% Netherlands HoldingPremier Gold Mines Netherlands B.V. 100% Netherlands Holding

(i) In accordance with the acquisition agreement for the purchase of the Mercedes mine in 2016, the Company was required to changethe name of the acquired companies. As a result, Minera Meridian Minerales S. de R.L. de C.V was changed to Minera MercedesMinerales S. de R.L. de C.V, Meridian Gold Holdings Mexico S. de R.L. de C.V was changed to Mercedes Gold Holdings Mexico S.de R.L. de C.V, and Minera Meridian Mexico S. de R.L. de C.V was changed to Premier Mining Mexico S. de R.L. de C.V.

All transactions and balances between the Company and its subsidiaries are eliminated on consolidation, including unrealized gains andlosses on transactions between the companies. Where unrealized losses on intra-group asset sales are reversed on consolidation, theunderlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiarieshave been adjusted where necessary to ensure consistency with the accounting policies adopted by the Company.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the period are recognized from the effectivedate of acquisition, or up to the effective date of disposal, as applicable.

(d) Joint and co-ownership arrangements

A joint arrangement is defined as one over which two or more parties have joint control, which is the contractually agreed sharing ofcontrol over an arrangement. This exists only when the decisions about the relevant activities (being those that significantly affect thereturns of the arrangement) require the unanimous consent of the parties sharing control. There are two types of joint arrangements, jointoperations (“JO”) and joint ventures (“JV”).

A JO is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for theliabilities, relating to the arrangement. In relation to our interests in joint operations, we recognize our share of any assets, liabilities,revenues and expenses of the JO.

A JV is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the jointventure. These types of investments in JVs are accounted for using the equity method.

The Company also participates in co-ownership agreements with other parties which are labeled joint venture agreements. Theseagreements do not constitute joint arrangements for purposes of applying IFRS 11 in that the percentage ownership in the jointly heldproperty is such that control resides with the majority ownership interest. In that case, the Company records their share of the assets,liabilities, income and the expenses related to the venture.

9



Amounts reported in the financial statements for joint operations have been adjusted where necessary to ensure consistency with theaccounting policies of the Company.

Outlined below is information related to our joint arrangements and entities other than 100% owned subsidiaries of the Company atDecember 31, 2018:

Property Entity type Economic interest (i) Method (ii)Rahill-Bonanza, Ontario Co-ownership 44% Our shareGreenstone Gold, Ontario (iii) Joint operation 50% Our shareSouth Arturo, Nevada Co-ownership 40% Our share

(i) Our joint arrangements are funded by contributions made by the partners in proportion to their economic interest other than forGreenstone Gold as discussed in Note 10.

(ii) We recognize our share of any assets, liabilities, revenues and expenses of the JO.(iii) The Company has joint control given that decisions about relevant activities require unanimous consent of the parties to the joint

operation.

(e) Business combinations

The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition date fair valuesof assets transferred, liabilities incurred and the equity interests issued by the Company, which includes the fair value of any asset orliability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they havebeen previously recognized in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed aregenerally measured at their acquisition date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value ofconsideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition date fair value of anyexisting equity interest in the acquiree, over the acquisition date fair values of identifiable net assets. If the fair values of identifiable netassets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognized as profit immediately.

(f) Change in functional and presentation currency

Functional currency

Prior to January 1, 2018, the functional currency of Premier Gold Mines Limited, the parent company, was the Canadian dollar (“CAD”).Per IAS 21 – The Effects of Changes in Foreign Exchange Rates (“IAS 21”), an entity’s functional currency should reflect the underlyingtransactions, events and conditions that are relevant to the entity. Management considered primary and secondary indicators indetermining functional currency including the currency that influences sales prices, labor, purchases and other costs. Other indicatorsincluding the currency in which funds from financing activities are generated and the currency in which receipts from operations areusually retained.

Based on these factors, management concluded that effective January 1, 2018, the parent company’s functional currency should be theUnited States dollars (“USD”). One of the main factors affecting the decision was the introduction in 2018 of forward gold sales contractsin USD which had previously been denominated in CAD.

As the Company’s Canadian subsidiaries have not commenced mining operations, primarily operate in CAD and are financed in CAD,management has determined that their functional currency remains CAD. The Company’s USA and Mexico mining, exploration anddevelopment operations continue to remain with a functional currency of USD with the sales and majority of costs incurred in USD. Forthe international operations used for the deferred revenue arrangements related to gold and silver sales, the functional currency alsoremains USD. The holding companies with debt in Mexican pesos ("MXN") remain in pesos.

The Company has accounted for the change in functional currency prospectively, as provided for under IAS 21 with no impact of thischange on prior period comparative information other than in conjunction with the change in presentation currency as discussed below.

10



Presentation currency

On January 1, 2018, the Company elected to change its presentation currency from CAD to USD. The change in presentation currency isto better reflect the Company’s business activities and to improve comparability of the Company’s financial results with other publiclytraded businesses in the mining industry. The Company applied the change to USD presentation currency retrospectively and restatedthe comparative financial information as if the new presentation currency had always been the Company’s presentation currency inaccordance with the guidance in IAS 21 and IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.

From January 1, 2018, the USD presentation is consistent with the functional currency of the Company. For years prior to January 1,2018, the statements of financial position for each year presented have been translated from the CAD functional currency to the new USDpresentation currency at the rate of exchange prevailing at the respective financial position date with the exception of equity items whichhave been translated at accumulated historical rates from the Company’s date of incorporation in 2006. The statements of income / (loss)and comprehensive income / (loss) were translated at the average exchange rates for the reporting period, or at the exchange rateprevailing at the date of the transactions. Exchange differences arising in 2017 on translation from the CAD functional currency to theUSD presentation currency have been recognized in other comprehensive income / (loss) and accumulated as a separate component ofequity. In addition to the comparative financial statements, the Company has presented a third statement of financial position as atJanuary 1, 2017 as required by IFRS.

Equity has been restated using historical average exchange rates other than for significant transactions for which the actual historical ratewas used with the difference being presented as an adjustment to the foreign currency exchange reserve.

(g) Financial instruments

Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classifiedas fair value through profit or loss ("FVPL"), directly attributable transaction costs. Financial instruments are recognized when theCompany become party to the contracts that give rise to them and are classified as amortized cost, fair value through profit or loss or fairvalue through other comprehensive income, as appropriate. The Company considers whether a contract contains an embedded derivativewhen the entity first becomes a party to it. The embedded derivatives are separated from the host contract if the host contract is notmeasured at fair value through profit or loss and when the economic characteristics and risks are not closely related to those of the hostcontract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that wouldotherwise be required.

Financial assets at FVPL

Financial assets at FVPL include financial assets held for trading and financial assets not designated upon initial recognition as amortizedcost or fair value through other comprehensive income ("FVOCI"). A financial asset is classified in this category principally for the purposeof selling in the short term, or if so designated by management. Transaction costs are expensed as incurred. On initial recognition, afinancial asset that otherwise meets the requirements to be measured at amortized cost or FVOCI may be irrevocably designated asFVPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets measured atFVPL are measured at fair value with changes in fair value recognized in the consolidated statements of operations. Warrant investmentsare classified as FVPL.

Financial assets at FVOCI

On initial recognition of an equity investment that is not held for trading, an irrevocable election is available to measure the investment atfair value upon initial recognition plus directly attributable transaction costs and at each period end, changes in fair value are recognizedin other comprehensive income ("OCI") with no reclassification to the consolidated statements of earnings. The election is available on aninvestment-by-investment basis. Investments in equity securities, where the Company cannot exert significant influence, are designatedas financial assets at FVOCI.

Financial assets at amortized cost

A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets to collect contractualcash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding, and is not designated as FVPL. Financial assets classified as amortized cost are measured subsequent toinitial recognition at amortized cost using the effective interest method. Cash, restricted cash, trade receivables and certain other assetsare classified as and measured at amortized cost.

11



Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified asheld-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair valueand net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequentlymeasured at amortized cost using the effective interest method. Gains and losses are recognized in net earnings when the liabilities arederecognized as well as through the amortization process. Borrowing liabilities are classified as current liabilities unless the Company hasan unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date. Accountspayable and accrued liabilities and finance leases are classified as and measured at amortized cost.

Derivative instruments

Derivative instruments, including embedded derivatives, are measured at fair value on initial recognition and at each subsequent reportingperiod. Any gains or losses arising from changes in fair value on derivatives are recorded in net earnings.

Fair values

The fair value of quoted investments is determined by reference to market prices at the close of business on the statement of financialposition date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arm’slength market transactions; reference to the current market value of another instrument which is substantially the same; discounted cashflow analysis; and, pricing models.

Financial instruments that are measured at fair value subsequent to initial recognition are grouped into a hierarchy based on the degree towhich the fair value is observable as follows:

Level 1 fair value measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable forthe asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are notbased on observable market data (unobservable inputs).

Impairment of financial assets

A loss allowance for expected credit losses in recognized in OCI for financial assets measured at amortized cost. At each balance sheetdate, on a forward-looking basis, the Company assesses the expected credit losses associated with its financial assets carried atamortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.The impairment model does not apply to investment in equity instruments.

The expected credit losses are required to be measured through a loss allowance at an amount equal to the 12- month expected creditlosses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after thereporting date) or full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of thefinancial instrument). A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of thatfinancial instrument has increased significantly since initial recognition.

Derecognition of financial assets and liabilities

A financial asset is derecognised when either the rights to receive cash flows from the asset have expired or the Company hastransferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full withoutmaterial delay to a third party. If neither the rights to receive cash flows from the asset have expired nor the Company has transferred itsrights to receive cash flows from the asset, the Company will assess whether it has relinquished control of the asset or not. If theCompany does not control the asset then derecognition is appropriate.

A financial liability is derecognised when the associated obligation is discharged or canceled or expires. When an existing financial liabilityis replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. Thedifference in the respective carrying amounts is recognised in net earnings.

12



(h) Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand and demand deposits, together with other short-term, highly liquid investments thatare readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

(i) Inventory

Material extracted from our mines is classified as either ore or waste. Ore represents material that, at the time of extraction, is expected tobe processed into a saleable form and sold at a profit. Raw materials are comprised of both ore in stockpiles and ore on leach pads asprocessing is required to extract benefit from the ore. Ore is accumulated in stockpiles that are subsequently processed into gold andsilver in a saleable form. The recovery of gold from certain oxide ores is achieved through the heap leaching process. Work-in-processrepresents gold and silver in the processing circuit that has not completed the production process, and is not yet in a saleable form. Finished goods inventory represents gold and silver in saleable form. Mine operating supplies represent commodity consumables andother raw materials used in the production process, as well as spare parts and other maintenance supplies that are not classified ascapital items.

Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis and includes allcosts incurred, based on a normal production capacity, in bringing each product to its present location and condition. Cost of inventoriescomprises direct labor, materials and contractor expenses, including non-capitalized stripping costs; depreciation on property, plant andequipment including capitalized stripping costs; and an allocation of general and administrative costs. As ore is removed for processing,costs are removed based on the average cost per ounce/pound in the stockpile.

Provisions to reduce inventory to net realizable value are recorded to reflect changes in economic factors that impact inventory value andto reflect present intentions for the use of slow moving and obsolete supplies inventory. Net realizable value is determined with referenceto relevant market prices less applicable variable selling expenses. Provisions recorded also reflect an estimate of the remaining costs ofcompletion to bring the inventory into its saleable form. Provisions are also recorded to reduce mine operating supplies to net realizablevalue, which is generally calculated by reference to its salvage or scrap value, when it is determined that the supplies are obsolete.Provisions are reversed to reflect subsequent recoveries in net realizable value where the inventory is still on hand.

(j) Property, plant and equipment

General

Property, plant and equipment are recorded at cost less accumulated depreciation, depletion and impairment charges.

Major overhaul expenditures and the cost of replacement of a component of plant and mobile equipment are capitalized and depreciatedover the average expected life between major overhauls. All other replacement spares and other costs relating to maintenance of mobileequipment are charged to the cost of production.

Directly attributable costs, including capitalized borrowing costs, incurred for major capital projects and site preparation are capitalizeduntil the asset is in a location and condition necessary for operation as intended by management. These costs include dismantling andsite restoration costs to the extent these are recognized as a provision. Management annually reviews the estimated useful lives, residualvalues and depreciation methods of the Company’s property, plant and equipment and also when events and circumstances indicate thatsuch a review should be made. Changes to estimated useful lives, residual values or depreciation methods resulting from such review areaccounted for prospectively.

An item of property, plant and equipment is de-recognized upon disposal or when no further future economic benefits are expected fromits use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between any proceeds receivedand the carrying amount of the asset) is included in the statements of income / (loss) and comprehensive income / (loss) in the period theasset is de-recognized.

13



Exploration, evaluation and predevelopment expenditure

The exploration, evaluation and predevelopment expenditure policy is to charge exploration and evaluation expenditures within an area ofinterest as expense until management conclude that the technical feasibility and commercial viability of extracting a mineral resource aredemonstrable and that future economic benefits are probable. In making this determination, the extent of exploration, as well as thedegree of confidence in the mineral resource is considered. Once a project has been established as commercially viable and technicallyfeasible and has been subject to an impairment analysis, further expenditures are capitalized and classified as development properties.

Exploration, evaluation and predevelopment expenditure consist of:

- gathering exploration data through topographical and geotechnical studies;- exploratory drilling, trenching and sampling;- determining the volume and grade of the resource;- test work on geology, metallurgy, mining, geotechnical and environmental; and- conducting engineering, marketing and financial studies.

Exploration and evaluation assets acquired are initially recognized at fair value as exploration rights within tangible assets.

Development properties (underground and open pit)

A property, either open pit or underground, is classified as a development property when a mine plan has been prepared and technicalfeasibility has been established, a permit has been obtained and a decision is made to commercially develop the property. Developmentexpenditure is accumulated separately for each area of interest for which economically recoverable mineral reserves and resources havebeen identified.

All expenditures incurred prior to the commencement of commercial levels of production from each development property are capitalized.In addition, capitalized costs are assessed for impairment when there is an indicator of impairment.

Development properties are not amortized until they are reclassified as mine property assets following the achievement of commerciallevels of production.

Mine properties

After a mine property has been brought into commercial production, costs of any additional mining, in-pit drilling and related work on thatproperty are expensed as incurred. Mine development costs incurred to expand operating capacity, develop new ore bodies or developmine areas in advance of current production, including the stripping of waste material, are deferred and then amortized on a unit-of-production basis.

Deferred stripping costs

Stripping costs incurred in the production phase of a mining operation are accounted for as variable production costs and are included inthe costs of inventory produced. Stripping activity that improves access to ore in a future period is accounted for as an addition to orenhancement of an existing asset. The Company recognizes stripping activity assets when it is probable that the future economic benefitassociated with the stripping activity will flow to the Company; the component of the ore body for which access has been improved can beidentified; and the costs relating to the stripping activity associated with that component can be measured reliably.

Stripping activity assets are amortized on a unit of production basis in subsequent periods over the proven and probable reserves towhich they relate.

Depreciation and depletion

The carrying amounts of mine properties, plant and equipment are depreciated or depleted to their estimated residual value over theestimated economic life of the specific assets to which they relate, using the depreciation methods or depletion rates as indicated below.Estimates of residual values or useful lives and depreciation methods are reassessed annually and any change in estimate is taken intoaccount in the determination of the remaining depreciation or depletion rate. Depreciation or depletion commences on the date the assetis available for its use as intended by management.

14



Depreciation or depletion is computed using the following rates:

Item Methods RatesMine properties Units of production Estimated proven and probable mineral reserves

Equipment, facilities under financeleases, leasehold improvements

Straight line Lesser of lease term and estimated useful life

Furniture, office equipment and software Straight line 2 – 5 years

Plant and equipment Straight line, units of production 4 – 10 years, estimated proven and probablemineral reserves

Mining equipment Straight line 1 – 10 years based on life of mine

Deferred stripping costs Units of production Estimated proven and probable mineral reservesaccessible due to stripping activity

(k) Deferred revenue

The Company recognizes deferred revenue in the event it receives payments from customers in consideration for future commitments todeliver metals and before such sale meets the criteria for revenue recognition. The Company recognizes amounts in revenue as themetals are delivered to the customer.

Specifically, for the metal agreements entered into with OMF Fund II SO LTD. (“Orion”), the Company determines the amortization ofdeferred revenue to the consolidated statement of income (loss) on a per unit basis using the estimated total quantity of metal expectedto be delivered to Orion over the term of the contract. The Company estimates the current portion of deferred revenue based on quantitiesanticipated to be delivered over the next twelve months.

(l) Provisions

Provisions are recognized when the Company or its subsidiaries have a present obligation (legal or constructive) as a result of a pastevent, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of theamount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the end of the reporting period. If the effect of the time value of money is material, provisions are determined by discountingthe expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and, whereappropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time isrecognized as a finance cost. Contingent liabilities are not recognized in the financial statements, if not estimable and probable, and aredisclosed in notes to the financial information unless their occurrence is remote. Contingent assets are not recognized in the financialstatements, but are disclosed in the notes if their recovery is deemed probable.

Environmental rehabilitation

Provisions for environmental rehabilitation are made in respect of the estimated future costs of closure and restoration and forenvironmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials andremediation of disturbed areas) in the accounting period when the related environmental disturbance occurs. The provision is discountedusing a pretax rate, and the unwinding of the discount is included in finance costs. At the time of establishing the provision, acorresponding asset is capitalized and is depreciated over future production from the mining property to which it relates. The provision isreviewed each reporting period for changes in cost estimates, discount rates and operating lives. Changes to estimated future costs arerecognized in the statement of financial position by adjusting the rehabilitation asset and liability. If, for mature mines, the revised mineassets net of rehabilitation provisions exceeds the carrying value, that portion of the increase is charged directly to expenses. For closedsites, changes to estimated costs are recognized immediately in profit and loss.

(m) Share capital and warrants

Share capital represents the fair value of consideration received. Equity instruments are contracts that give a residual interest in the netassets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet thedefinition of a financial liability or financial asset. Incremental costs directly attributable to the issue of new shares or options are alsoshown in equity as a deduction.

15



The Company periodically issues units to investors consisting of common shares and warrants in non-brokered private placements or asadditional consideration in a brokered financing or purchase transaction. Each whole warrant issued entitles the holder to acquire acommon share of the Company, at a fixed Canadian dollar price over a specified term. These warrants are not transferable from theoriginal investor to a new investor. Prior to January 1, 2018, these warrants were considered equity instruments and not financial liabilitiesor financial derivatives however, in connection with the change in functional currency described in Note 2(f), they are now consideredderivatives because their exercise price is in CAD whereas the Company’s functional currency is in USD. Accordingly, the Company nowrecognizes the warrants as a liability at fair value with changes in fair value recognized in profit or loss with the initial recognition ofwarrants existing at January 1, 2018 recorded as an adjustment to share capital.

When investor or other warrants are exercised, the liability is revalued prior to de-recognition with the change in fair value recognized inprofit or loss, proceeds received are added to share capital and the liability is de-recognized.

(n) Share-based compensation

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Whereemployees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference tothe fair value of the equity instruments granted. This fair value is determined at the grant date.

All share-based remuneration is ultimately recognized as an expense in profit or loss with a corresponding credit to 'reserves'.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimateof the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of shareoptions expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period.No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are fewer than that estimated onvesting.

The Company has three share-based compensation plans: The Share option plan, Deferred share unit plan and Restricted share unitplan, as noted below, and as further discussed in Note 15 of these consolidated financial statements.

Share Option Plan

Stock options are equity-settled share-based compensation awards. The fair value of stock options at the grant date is estimated usingthe Black-Scholes option pricing model. Compensation expense is recognized over the stock option vesting period based on the numberof units estimated to vest. Vesting periods range from immediate to five years. This expense is recognized as share-based compensationexpense with a corresponding increase in contributed surplus. When options are exercised, the proceeds received by the Company,together with the amount in contributed surplus, are credited to common shares.

Deferred Share Unit Plan

Deferred share units ("DSU") granted to eligible members of the Board of Directors are settled in cash or shares at the discretion of theCompany. The DSUs are subject on grant to terms and conditions set out in a Deferred Share Unit Grant letter that will determine thevesting conditions. DSUs are paid in full in the form of a lump sum payment no later than December 31 of the calendar year immediatelyfollowing the calendar year of termination of service. The Company may issue shares in lieu of a cash payment.

Restricted Share Unit Plan

Restricted share units ("RSU") are granted to eligible members of the Board of Directors, eligible employees and eligible contractors. TheRSUs are settled in cash or equity at the option of the Company. The RSUs vest subject to a RSU award letter but no later thanDecember 31, of the third calendar year following the service year determined based on date of grant. The RSUs granted are accountedfor under the equity method where the RSU grant letter specifies settlement in shares.

(o) Impairment of non-financial assets

At each financial position reporting date the carrying amounts of the Company's non-financial assets are reviewed to determine whetherthere is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated inorder to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs of disposal and valuein use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction betweenknowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using apretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If therecoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount and the impairment loss is recognized in the profit or loss for the period.

16



For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the explorationactivity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revisedestimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have beendetermined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairmentloss is recognized immediately in profit or loss.

(p) Revenue

Revenue from the sale of precious metals, gold and silver, is recognized at the fair value of the consideration received:

- When all significant risks and rewards of ownership pass to the purchaser including delivery of the product;- There is a fixed or determinable selling price and collectability is reasonably assured; and- The costs incurred or to be incurred in respect of the sale can be reliably measured.

Gold and silver revenue is recorded at the time of physical delivery and transfer of title. Sale prices are either fixed at the delivery datebased on the terms of the contract or at spot prices or are determined based on existing offtake agreements and adjusted to fair valuethrough the related derivative liability.

The above revenue recognition policy was applied to all revenue transactions completed in 2017. On January 1, 2018, the Companyadopted IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”). All revenue transactions completed in 2018 have beenaccounted for in accordance with IFRS 15 and as further discussed in Note 3(a) of these consolidated financial statements.

(q) Income taxes

Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensiveincome or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or priorreporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit or other current tax activities, which differsfrom profit or loss in the financial statements. Calculation of current tax expense is based on tax rates and tax laws that have beenenacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets andliabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of anasset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporarydifferences associated with investments in subsidiaries and co-ownership is not provided if reversal of these temporary differences can becontrolled by the Company and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period ofrealization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are alwaysprovided for in full.

Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Tothe extent that the Company does not consider it probable that a future tax asset will be recovered, it is not recognized in the financialstatements.

Deferred tax assets and liabilities are offset only when the Company has a right and intention to offset current tax assets and liabilitiesfrom the same taxation authority.

Changes in deferred tax assets or liabilities are recognized as a component of taxable income or expense in profit or loss, except wherethey relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is alsorecognized in other comprehensive income or equity, respectively.

(r) Income / (loss) per share

The Company presents basic income / (loss) per share data for its common shares, calculated by dividing the income / (loss) attributableto common shareholders of the Company by the weighted average number of common shares outstanding during the period. Dilutedincome per share is determined using the treasury stock method and the weighted average number of common shares outstanding forthe effects of all dilutive stock options.

17



(s) Segment reporting

An operating segment is a component of an entity (i) that engages in business activities from which it may earn revenues and incurexpenses (including revenues and expenses relating to transactions with other components of the same entity), (ii) whose operatingresults are regularly reviewed by the entity's management, and (iii) for which discrete financial information is available. The Company hasidentified its reportable segments on the basis of their geographic location. As a result the Company discloses information geographicallybased on the location of each of its operations.

(t) Interest

Interest income and expenses are reported on an accrual basis using the effective interest method.

(u) Operating expenses

Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin.

(v) Flow-through shares

Under Canadian income tax legislation, a company is permitted to issue flow-through shares whereby the company agrees to incurqualifying expenditures and renounce the related income tax deductions to the investors. The Company allocates the proceeds from theissuance of these shares between the offering of shares and the sale of tax benefits. The allocation is made based on the differencebetween the quoted price of the shares and the amount the investor pays for the shares. A deferred flow-through premium liability isrecognized for the difference. The liability is reversed when the expenditures are made and is recorded in deferred tax expense. Thespending also gives rise to a deferred tax timing difference between the carrying value and tax value of the qualifying expenditure.

(w) Significant accounting judgments and estimates

The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptionsabout the carrying amounts of assets and liabilities, disclosure of commitments and contingent liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires theexercise of judgement based on various assumptions and other factors such as historical experience, current and expected economicconditions. Actual results could differ from these estimates.

The significant judgments and estimates used in the preparation of these consolidated financial statements that have a significant risk ofcausing a material adjustment to the carrying amount of assets and liabilities and earnings within the next financial year include:

Business combinations

Determination of whether a group of assets acquired and liabilities assumed constitute the acquisition of a business or an asset mayrequire the Company to make certain judgments as to whether or not the assets acquired and liabilities assumed include the inputs,processes and outputs necessary to constitute a business as defined in IFRS 3 Business Combinations.

Purchase price allocation

Applying the acquisition method to business combinations requires each identifiable asset and liability to be measured at its acquisitiondate fair value. The excess, if any, of the fair value of consideration over the fair value of the net identifiable assets acquired is recognizedas goodwill. The determination of the acquisition date fair values require management to make assumptions and estimates about futureevents. The assumptions and estimates relating to determining the fair value of property, plant and equipment acquired generally requirea high degree of judgement, and include estimates of mineral reserves acquired, future metal prices and discount rates. Changes in anyof the assumptions or estimates used in determining the fair value of acquired assets and liabilities could affect the amounts assigned toassets, liabilities and goodwill in the purchase price allocation.

Inventory valuation

Finished goods, work-in-process, heap leach ore and stockpile ore are valued at the lower of cost and net realizable value. Theassumptions used in the valuation of work-in-process inventories include estimates of gold contained in the ore stacked on leach pads,assumptions of the amount of gold stacked that is expected to be recovered from the leach pads, the amount of gold in the mill circuitsand assumption of the gold price expected to be realized when the gold is recovered. If these estimates or assumptions prove to beinaccurate, the Company could be required to write-down the recorded value of its work-in-process inventories and heap leach ore, whichwould reduce earnings and working capital.

18



Impairment and reversal of impairment for non-current assets

Non-current assets are tested for impairment at the end of each reporting period if in management’s judgement there is an indicator ofimpairment. If there are indicators, management performs an impairment test on the major assets within this balance.

In the case of mineral property assets, recoverability is dependent on a number of factors common to the natural resource sector. Theseinclude the extent to which the Company can continue to renew its exploration and future development licenses with local or otherauthorities, establish economically recoverable reserves on its properties, the availability of the Company to obtain necessary financing tocomplete the development of such reserves and future profitable production or proceeds from the disposition thereof. The Company willuse the evaluation work of professional geologists, geophysicists and engineers for estimates in determining whether to commence orcontinue mining and processing. These estimates generally rely on scientific and economic assumptions, which in some instances maynot be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether ornot the deposit contains economically recoverable mineralization.

Recoverable ounces

The carrying amounts of the Company's mining property is depleted based on recoverable ounces contained in proven and probablemineral reserves. Changes to estimates of recoverable ounces and depletable costs including changes resulting from revisions to mineplans and changes in metal price forecasts can result in a change in future depletion rates.

The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43-101 – Standards ofDisclosure for Mineral Projects, issued by the Canadian Securities Administrators. This National Instrument lays out the standards ofdisclosure for mineral projects including rules relating to the determination of mineral reserves and mineral resources. There arenumerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company'scontrol. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of thequantity and quality of available data and of the assumptions made and judgements used in engineering and geological interpretation.Differences between management's assumptions, and actual events including economic assumptions such as metal prices and marketconditions, could have a material effect in the future on the Company's financial position and results of operation.

Asset retirement obligations

Management assesses the asset retirement obligations on an annual basis or when new information becomes available. Thisassessment includes the estimation of the future rehabilitation costs required based on the existing laws and regulations in eachjurisdiction the Company operates in, the timing of these expenditures, and the impact of changes in the discount rate. The actual futureexpenditures may differ from the amount currently provided if the estimates made are significantly different than actual results or if thereare significant changes in environmental and / or regulatory requirements in the future.

Valuation of financial instruments

The fair value of derivative financial liabilities that are not traded in an active market is determined using valuation techniques. TheCompany uses its judgment to select a variety of methods and make assumptions that are based on market conditions existing at the endof each reporting period as an indication of the expected future market conditions. The Company has used a discounted cash flowanalysis for the offtake agreement, incorporating key assumptions for the production to be delivered under the offtake agreement,expected metal prices and discount to metal prices during the quotational period, and discount rates that are commensurate with the risksassociated with the financial liability to reflect the time value of money.

The Company also issued warrants either in connection with a private placement or as purchase consideration in a business combinationand are recorded within share capital. Where the warrants are issued in non-brokered private placements, the warrants are equityinstruments and not financial liabilities. Where the warrants are issued in conjunction with a business combination, the warrants are fairvalued as one of the instruments included in the consideration. As such, in determining fair value, management judgement is required inrespect to input variables of the financial model used for estimation purposes. These variables include such inputs as the Company'sstock price, stock price variability, trading volumes and risk-free rates of return.

Deferred revenue

The Company entered into a gold prepay and silver stream agreement with Orion in 2016 in conjunction with the acquisition of theMercedes mine and as further discussed in Note 11 of these consolidated financial statements.

The upfront payment for the gold prepay facility with Orion has been accounted for as deferred revenue as management has determinedthat the agreement is not a derivative as it will be satisfied through the delivery of non-financial items (i.e. gold commodity from theCompany’s production), rather than cash or financial assets.

19



The upfront payment for the silver stream arrangement has also been accounted for as deferred revenue, as management hasdetermined that the agreement is not a derivative as it will be satisfied through the delivery of non-financial items (i.e. silver commodityfrom the Company’s production), rather than cash or financial assets.

As a result of the application of IFRS 15, management has determined that the deferred revenue component of the streaming agreementis considered to be variable and is subject to a cumulative current adjustment when there is a change in the underlying production profileof the mine and as further discussed in Note 3(a) of these consolidated financial statements.

Commercial Production

The determination of the date on which a mine enters the commercial production stage is a significant judgement since capitalization ofcertain costs ceases and the recording of revenues and expenses commences upon entering commercial production. As a mine isconstructed, certain costs are capitalized and proceeds from sales are offset against the capitalized costs. This continues until the mine isavailable for use in the manner intended by management, which requires significant judgement.

Functional currency of foreign subsidiaries

Management uses its judgement to determine the functional currency that most faithfully represents the economic effects of theunderlying transactions, events and conditions. As part of this approach, management gives priority to indicators like the currency thatmainly influences costs and the currency in which those costs will be settled and the currency in which funds from financing activities aregenerated. Management also assesses the degree of autonomy the foreign operation has with respect to operating activities.

Deferred income taxes

The Company operates in several tax jurisdictions and is required to estimate the income tax provision in each of these jurisdictions inpreparing its financial statements. The provision for income taxes which is included in the consolidated statements of income (loss) andcomprehensive income (loss) and composition of deferred income tax liabilities included in the consolidated statements of financialposition is based on factors such as tax rates in the different jurisdictions, changes in tax law and management’s assessment of futureresults and have not yet been confirmed by the taxation authorities. The Company does not recognize deferred tax assets wheremanagement does not expect such assets to be realized based on current forecasts.

In the event that actual results differ from these estimates, adjustments are made in future periods and changes in the amount of amountof deferred tax assets recognized may be required. These adjustments could materially impact the financial position and income or lossfor the period.

Other estimates


- the inputs used in accounting for share purchase option expense in the consolidated statements of income / (loss);- the estimated useful lives of property, plant and equipment which are included in the consolidated statements of financial position and

the related depreciation included in the consolidated statements of income / (loss) and comprehensive income / (loss); and- the discount rate used to determine the carrying value of long-term debt.

20



3. ADOPTION OF NEW ACCOUNTING STANDARDS

(a) Accounting standards issued and effective January 1, 2018

IFRS 9 – Financial Instruments

On January 1, 2018, the Company adopted IFRS 9 – Financial Instruments ("IFRS 9"). IFRS 9 replaces IAS 39 – Financial Instruments:Recognition and Measurement ("IAS 39"), introduces new requirements for the recognition and measurement of financial assets andliabilities, a single, forward looking "expected loss" impairment model and a reformed approach to hedge accounting. IFRS 9 uses asingle approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules previouslyunder IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forwardunchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change inits fair value due to changes in the entity's own credit risk in other comprehensive income, rather than within profit or loss. TheInternational Accounting Standards Board ("IASB") requires an entity to apply IFRS 9 for annual periods beginning on or after January 1,2018.

The Company's financial assets have been comprised of Canadian equities and derivatives including put options or forward contracts forthe delivery of gold ounces at various prices to manage exposure to fluctuations in gold prices. Financial liabilities include credit facilitieswith embedded derivatives related to various components of the agreements. The Company does not have hedging relationships whichqualify for hedge accounting. The assessment of the impact in applying IFRS 9 is summarized below.

The Company does not hold put options at this time and the forward contracts currently held are intended to be settled using our ownproduction and therefore are accounted for under the own use exemption whereby the value of the contracts is not recognized in thefinancial statements, this has not changed under IFRS 9.

As most of the requirements in IFRS 9 have been retained for financial liabilities and the Company has accounted for the embeddedderivatives at fair value, no adjustments are required.

With respect to term modification of a debt instrument, the Company is in compliance with IFRS 9 by continuing its current practice ofassessing change of terms of debt instruments in order to determine if the modification of the terms is substantial and would result in anextinguishment of the original liability and recognition of the amended debt instrument as a new financial liability. The standard requiresthat when a financial liability at amortized cost is modified or exchanged, and such modification does not result in de-recognition, that theadjustment to amortized cost of the financial liability is recognized in profit or loss.

Application of IFRS 9 to the Company's other financial instruments also has no impact on the Company's financial position or results ofoperations and there is no financial impact that requires disclosure. The Company did have an early repayment of debt however, therewas no change in terms of the debt instrument and an adjustment to the amortized cost was recorded in the year.

IFRS 15 – Revenue from Contracts with Customers

On January 1, 2018, the Company adopted IFRS 15 – Revenue from Contracts with Customers ("IFRS 15"). IFRS 15 establishes a singlecomprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 supersedes the currentrevenue recognition guidance including IAS 18 – Revenue, IAS 11 – Construction Contracts and the related interpretations. In adoptingthe guidance, the Company has opted to use the modified retrospective basis in accordance with the transitional provisions of IFRS 15whereby the cumulative effect of initially applying the standard has been recognized as an adjustment to the opening deficit at January 1,2018 and comparative figures are not restated and continue to be reported under the accounting standards in effect for those periods.

The Company's revenue is generated mainly from the sale of gold and silver through various revenue streams. Typical for the miningindustry, each metal sale transaction is stand alone and without multiple element arrangements. For gold and silver sales, revenue isrecognized after the related performance obligations have been met which is concluded to be essentially the same under IFRS 15 andIAS 18. In general, the performance obligations of the sale transactions are satisfied at a point in time with reliably measurabletransaction prices and no financing consideration due to the nature of the commodity market where the Company operates.

Management has determined that the application of IFRS 15 with respect to sales transactions did not result in an adjustment to theconsolidated financial statements except as discussed in the gold prepay and silver stream arrangements below.

21



Gold prepay and silver stream

The Company entered into a gold prepay and silver stream agreement with Orion in 2016 in conjunction with the acquisition of theMercedes mine. Advance payments were received from Orion on execution of the agreements, with a right to receive deliveries of thegold and silver from the production of certain of the Company’s mines based on a predetermined pricing formula during the future deliverydate. The advance payments were recorded as deferred revenue, with amounts recognized in revenue as deliveries are made to Orionand as further discussed in Note 11 of these consolidated financial statements. The gold prepay agreement has an interest component,the silver stream does not.

Under IFRS 15, where consideration is received in advance of the Company’s performance of its obligation, there is an inherent financingcomponent. Where the period between receipt of consideration and revenue recognition for these contracts is greater than one year, theCompany is required to determine whether a significant financing component exists. The Company performed this assessment on thesearrangements and determined that the financing component was significant to the silver stream but was not to the gold prepay.

Accordingly, in accounting for the silver stream under IFRS 15, the transaction price is increased by an imputed interest amount and acorresponding amount of interest expense is recognized in each period.

Also under the standard, an entity is required to estimate the transaction price in a contract. For contracts containing variableconsideration the transaction price is to be continually updated and re-allocated to the related revenue. As a result, we have updated ouraccounting policy for revenue earned on streaming agreements such that we will treat the deferred revenue as variable, requiring anadjustment to the transaction price per unit each time there is a change in the underlying production profile of the mine (typically the lasthalf of each year). The change in the transaction price per unit results in a retroactive adjustment to revenue in the period in which thechange is made, reflecting the new production profile expected to be delivered under the streaming agreement.

Based on a combination of the financing component at the rate determined at the inception of the contact and the variable consideration,a retroactive adjustment is made to accretion expense, reflecting the impact of the change in the deferred revenue balance.

The impact of the initial adoption of this change in accounting policy using the modified retrospective approach was an adjustment toreduce the opening deficit on January 1, 2018 of $0.34 million with a corresponding adjustment to reduce the deferred revenue balance.The impact to the net loss for the period was an increase to non-cash silver revenue of $0.12 million and a recognition of silver streamaccretion of $0.16 million.

(b) Accounting standards issued and effective January 1, 2019

IFRS 16 – Leases

In January 2016, the IASB issued IFRS 16 – Leases which replaces the existing lease accounting guidance in IAS 17. IFRS 16 applies acontrol model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customercontrols the asset. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to theaccounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the current finance lease accounting,with limited exemptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accountingpractice.

The standard is effective for annual reporting periods beginning January 1, 2019 although early application is permitted for companiesthat also apply IFRS 15 – Revenue from Contracts with Customers. The Company has planned to apply IFRS 16 at the date it becomeseffective and will adopt it using the modified retrospective approach, resulting in no restatement of prior year comparatives and thecumulative impact of applying IFRS 16 will be recognized at January 1, 2019. The Company has completed the assessment of it’sequipment and building rentals, land leases and service agreements and therefore will recognize additional right of use assets and leaseliabilities as well as a decrease in lease expense and a corresponding increase in both depreciation expense and finance charges. Upon adoption, the Company has elected to apply the available exemptions as permitted by IFRS 16 to recognize a lease expense on astraight line basis for short-term leases (lease term of 12 months or less) and low value assets ($5,000 or less). There was close attentionpaid to all of the Company’s development, mining and drilling contracts to ensure that they did not contain embedded leases for property,plant and equipment. None of those contracts resulted in right of use of an asset. The quantitative impact of adopting IFRS 16 will beprovided in the Company's first 2019 quarterly report.

22



IFRIC 23 – Uncertainty over Income Tax Treatments

On June 7, 2017, the IASB issued IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments. The Interpretation providesguidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over incometax treatments. The Interpretation is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted.The Company intends to adopt the Interpretation in its financial statements for the annual period beginning on January 1, 2019. TheCompany has completed its analysis of the impact of the adoption of IFRIC 23 on the Company's consolidated financial statements andhas determined there will be no material impact.

(c) Significant accounting judgments and estimates

Application of variable consideration constraint in silver stream agreement

The Company determines the amortization of deferred revenue to the statement of operations on a per unit basis using the expectedquantity of silver that will be delivered over the term of the contract, which is based on geological reports and the Company’s life of mineplan at contract inception. As subsequent changes to the expected quantity of silver to be delivered triggers a retrospective adjustment torevenue, management is required to estimate the ounces to be included in the denominator that will be sufficient such that subsequentchanges are not expected to result in a significant revenue reversal. Accordingly, management includes reserves and portion ofresources, included in the annual review of life of mine, in the calculation. With this approach, the Company considers that it is highlyprobable that changes in subsequent reserve and resource estimates will not result in a significant revenue reversal of previouslyrecognized revenue.

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and in banks including money market savings accounts and short term deposits thathave a one year maturity but that are cashable within 30 days or less into a known amount of cash.

December 31, December 31,2018 2017

Cash $ 41,677 $ 101,149Short-term money market investments 2,205 1,897

$ 43,882 $ 103,046

5. RECEIVABLES


Recoverable taxes (i) $ 18,353 $ 7,370Taxes receivable (ii) 3,876 3,876Trade receivables (iii) 263 503Other receivable 1,079 58

$ 23,571 $ 11,807

(i) Recoverable taxes include Canadian harmonized sales tax recoverable, Quebec sales tax recoverable, income tax recoverable andMexico value added tax recoverable.

(ii) Taxes receivable are tax installments paid in excess of current taxes payable for Alternative Minimum Tax ("AMT") in the UnitedStates.

(iii) Trade receivables are outstanding gold and silver invoices under contracts with Orion.

23



6. INVENTORY


Finished goods $ 2,061 $ 8,168Work-in-process 174 188Current ore stockpiles 266 3,831Materials and supplies 14,883 14,186Total current inventory 17,384 26,373Long-term ore stockpiles 2,266 5,606Total inventory $ 19,650 $ 31,979

The amount of inventory recognized as an expense for the year ended December 31, 2018 was $80.02 million ($85.57 million for the yearended December 31, 2017), of which $71.76 million is included in cost of sales excluding depletion, depreciation and amortization and$8.26 million is included in other income as a write-down of finished goods inventory. The write-down is a result of the Republic MetalsCorporation (“RMC”) bankruptcy further discussed in Note 20 and 28 of these consolidated financial statements. Long-term inventory iscomprised of low grade ore not expected to be processed in the next year.

7. OTHER ASSETS

The Company's investments consist of common shares and warrants held in Canadian publicly traded companies. Fair values of sharesare determined at the closing price on December 31, 2018 unless the shares have a hold year in which case the initial fair market valuedifference from the cost is deferred until the hold year has expired. In the event of a hold period, the value of the shares are determinedusing the Black-Scholes option pricing model taking the restriction into account. Warrants are also valued using the Black Scholes optionpricing model taking any restriction into account and are revalued at each reporting period until exercise or expiry.

8. RESTRICTED CASH AND CASH EQUIVALENTS

December 31, December 31,Property 2018 2017Hardrock, Ontario (i) $ 232 $ 253Northern Empire Mill, Ontario (ii) 1,641 1,779McCoy-Cove, Nevada (iii) 600 600Hasaga, Ontario (iv) 82 89South Arturo, Nevada (v) 3,026 2,000

$ 5,581 $ 4,721

(i) The Company has a C$0.63 million ($0.46 million) standby letter of credit outstanding in favour of the Ontario Ministry of NorthernDevelopment and Mines ("MNDM") relating to potential reclamation obligations of the Greenstone Gold property in Ontario. Securityfor the standby letter of credit, in the form of a guaranteed investment certificate, is held with the Royal Bank of Canada. As a result ofthe 50% divestment of the interest in the Greenstone Gold properties only C$0.32 million ($0.23 million) is recorded on the books ofthe Company. Upon discharge of all reclamation related obligations 100% of the funds held as security will be returned to theCompany.

(ii) The Company has a total of C$2.23 million ($1.64 million) in restricted cash and cash equivalents relating to reclamation obligationsassociated with the Northern Empire Mill in Ontario including:

a C$0.15 million ($0.11 million) standby letter of credit with the Toronto Dominion Bank in the name of the Company's wholly

owned subsidiary, Goldstone Resources Inc., and payable in favour of the MNDM;

a C$1.68 million ($1.23 million) standby letter of credit with the Royal Bank of Canada and payable in favour of the MNDM; and

C$0.40 million ($0.30 million) in financial assurance held directly by the MNDM.

(iii) The Company's wholly owned subsidiary, Au-reka Gold Corporation, has a total of $0.60 million in restricted cash related toreclamation obligations associated with the McCoy-Cove property in Nevada including $0.25 and $0.35 million held in trust with LexonSurety Group as security for the surety bonds described in Note 25(c).

24



(iv) The Company has a C$0.11 million ($0.08 million) standby letter of credit outstanding in favour of the MNDM relating to reclamationobligations for a workshop located on the Hasaga property in Ontario. Security for the standby letter of credit, in the form of aguaranteed investment certificate, is held with the Royal Bank of Canada.

(v) The Company has $3.03 million in restricted cash relating to the reclamation of the Company's 40% ownership of the South Arturoproject.

9. LONG-TERM RECEIVABLE

The Company has $2.93 million in AMT credits which are expected to be realized over the next four years. The receivable includes arecovery of $0.28 million of AMT paid for 2016 and $2.65 million incurred in 2017. The recovery is due to the enactment of U.S. TaxReform legislation on December 22, 2017.

10. PROPERTY, PLANT AND EQUIPMENT

Cost

Mineralpropertiessubject to

depletion (i)

Mineralproperties

not subject todepletion (ii)

Buildings,plant and

equipment TotalBalance, January 1, 2017 $ 151,650 $ 112,353 $ 96,405 $ 360,408Additions 13,957 22 7,633 21,612Disposals - - (175) (175)Change in estimate of environmental rehabilitation 5,016 899 - 5,915Write-down of property, plant and equipment - (1,475) - (1,475)Foreign currency adjustment - 4,579 280 4,859Balance, December 31, 2017 170,623 116,378 104,143 391,144Additions 15,380 281 11,212 26,873Disposals (iv) - (1,309) (252) (1,561)Change in estimate of environmental rehabilitation (4,251) 1,927 - (2,324)Foreign currency adjustment - (5,320) (461) (5,781)Balance, December 31, 2018 $ 181,752 $ 111,957 $ 114,642 $ 408,351

Accumulated depreciation and impairmentBalance, January 1, 2017 $ 88,593 $ 2,787 $ 7,501 $ 98,881Depletion, depreciation and amortization 12,011 - 9,139 21,150Disposals - - (62) (62)Foreign currency adjustment - 155 261 416Balance, December 31, 2017 100,604 2,942 16,839 120,385Depletion, depreciation and amortization (iii) 11,398 - 9,547 20,945Disposals (iv) - (1,309) (198) (1,507)Foreign currency adjustment - (123) (333) (456)Balance, December 31, 2018 $ 112,002 $ 1,510 $ 25,855 $ 139,367

Carrying amountsBalance, December 31, 2017 $ 70,019 $ 113,436 $ 87,304 $ 270,759Balance, December 31, 2018 $ 69,750 $ 110,447 $ 88,787 $ 268,983

25



(i) Mineral properties subject to depletion

PropertyDecember 31,

2017 Additions

Change inestimate of

environmentalprovision Depletion

December 31,2018

South Arturo, Nevada $ 1,764 $ 3,408 $ (969) $ (393) $ 3,810Mercedes, Mexico 68,255 11,972 (3,282) (11,005) 65,940

$ 70,019 $ 15,380 $ (4,251) $ (11,398) $ 69,750

PropertyJanuary 1,

2017 Additions



December 31,2017

South Arturo, Nevada $ 5,973 $ 1,120 $ (1,877) $ (3,452) $ 1,764Mercedes, Mexico 57,084 12,837 6,893 (8,559) 68,255

$ 63,057 $ 13,957 $ 5,016 $ (12,011) $ 70,019

(ii) Mineral properties not subject to depletion


2017 Additions


environmentalprovision

Write-downsand

disposalsCurrency

AdjustmentDecember 31,

2018Rahill-Bonanza, Ontario $ 14,306 $ 17 $ - $ - $ (1,151) $ 13,172Hasaga, Ontario 10,604 (42) (8) - (850) 9,704Greenstone Gold, Ontario 39,743 - - - (3,196) 36,547McCoy-Cove, Nevada 48,756 201 1,935 - - 50,892Rye, Nevada 27 55 - - - 82Rodeo Creek, Nevada - 50 - - - 50

$ 113,436 $ 281 $ 1,927 $ - $ (5,197) $ 110,447

PropertyJanuary 1,

2017 Additions



Write-downsand disposals

CurrencyAdjustment

December 31,2017

Rahill-Bonanza, Ontario $ 13,366 $ 1 $ - $ - $ 939 $ 14,306Hasaga, Ontario 9,949 - (43) - 698 10,604Greenstone Gold, Ontario 37,133 - - - 2,610 39,743McCoy-Cove, Nevada 47,814 - 942 - - 48,756Cristina, Mexico 1,304 (6) - (1,475) 177 -Rye, Nevada - 27 - - - 27

$ 109,566 $ 22 $ 899 $ (1,475) $ 4,424 $ 113,436

(iii) Depreciation, depletion and amortization on property, plant and equipment during the years ended December 31, 2018 and 2017include amounts allocated to:


2018 2017Depreciation, depletion and amortization $ 25,568 50,730Recorded in exploration, evaluation and pre-development 103 79Recorded in general and administrative 230 142Recorded in property maintenance 4 4

25,905 50,955Inventory movement (4,960) (29,805)Total depletion, depreciation and amortization $ 20,945 $ 21,150

(iv) During the year ended December 31, 2018, the Company sold the non-core, fully impaired, exploration properties of Faymar Deloro(including a reduction of the total provision for environmental rehabilitation of $0.37 million (Note 13)), and Rain Gold for a gain of$0.34 million and $0.02 million respectively.

26



(a) Impairment

The Company regularly reviews the carrying amount of its non-financial assets to determine whether there is any indication that thoseassets have suffered an impairment loss. Mineral property interests are tested for impairment when facts and circumstances suggest thatthe carrying amount of the mineral property interests exceed their recoverable amount. In the absence of other factors, a mineral propertythat has not been actively explored within the past three years and for which no future exploration plans exist will be considered to beimpaired. There were no impairments recorded for the years ended December 31, 2018 and 2017.

(b) Acquisitions and option agreements

Option Agreement for Rodeo Creek property

On November 12, 2018, the Company and its wholly owned subsidiary Au-reka Gold Corporation signed an option agreement to earn a100% interest in Nevada Select Royalty Inc's ("Nevada Select"), Rodeo Creek Property (“Rodeo Creek”) in Elko County, Nevada subjectto total cash payments of $0.50 million paid over five years, plus all mining claim maintenance and rental fees payable over the term ofthe option. Nevada Select will retain a 2% NSR on Rodeo Creek.

Exploration and Option to Purchase Agreement for Rye Claims

On December 20, 2017, the Company, through its wholly owned subsidiary Premier Goldbanks LLC, signed an option agreement toacquire four claims of 83 acres in Pershing County, Nevada from Kurt Schendel for an initial payment of $8 thousand plus costs of $1thousand, an additional $5 thousand on each of the first and second anniversary dates and a final payment of $50 thousand on the thirdanniversary date for a total acquisition cost of $68 thousand on exercise of the option. In the event of the Company’s completion of anupdated mineral resource estimate demonstrating the potential on the Rye claims to be an aggregate of 75,000 ounces, an additionalpayment of $50 thousand in cash is also required. A production payment of $0.10 million will also be required provided the Companyexercises and closes the option. Schendel will retain an NSR of 2%. The Company will have an option to purchase one-half of the NSRfor $0.15 million in cash.

Exploration and Earn-In Agreement for Interest in McCoy Cove Property

On December 11, 2017, the Company, through its wholly owned subsidiary Au-reka Gold Corporation, entered into an agreement withBarrick, through several wholly owned subsidiaries, that includes the following:

Barrick has the option to earn a 60% interest in the exploration portion of the McCoy Cove property by spending $22.50 million in

exploration before June 30, 2022, $6 million of that amount to be spent by June 30, 2019 after which Barrick has the option to

become the operator;

The Company retains 100% ownership over the Cove deposit portion of the McCoy Cove property; and

The Company has secured a one-time bulk sample processing arrangement for the planned test mining program at the 100% owned

portion of the McCoy Cove property.

Rye Vein Exploration and Earn-In Agreement

On December 11, 2017, the Company and its wholly owned subsidiary Premier Rye LLC signed an agreement to earn a 100% interest inBarrick’s Rye Vein property (“Rye”) in Pershing County, Nevada subject to a minimum of $3 million in exploration expenditures on theproperty before December 31, 2019. Barrick will retain a 1% NSR on Rye where there is no existing royalty. Barrick will also retain a back-in right to purchase a 51% interest in Rye in return for a cash payment equal to three times the cumulative work expenditures on theproperty under certain timelines and conditions which if not met, could result in lump sum payments to Barrick on a production decisionby the Company.

Exploration and Option to Purchase Agreement for NSL Claims

On November 6, 2017, the Company, through it's wholly owned subsidiary Premier Goldbanks LLC, signed an option agreement toacquire 27 claims of 558 acres in Pershing County, Nevada from Nevada Sunrise LLC ("NSL") for an initial payment of $20 thousand plus$5 thousand in costs, an additional $20 thousand on each of the first and second anniversary dates and a final payment of $0.20 millionon the third anniversary date for a total acquisition cost of $0.26 million on exercise of the option. An additional payment of $0.20 millionin cash or shares is also required in the event of the Company's completion of an updated mineral resource estimate demonstrating thepotential on the NSL claims to be an aggregate of 500,000 ounces. NSL will retain an NSR of 2%. The Company will have the option topurchase one-half of the NSR for $0.20 million in cash or shares.

27



Goldbanks Exploration and Earn-In Agreement

On July 26, 2017, the Company and its wholly owned subsidiary Premier Goldbanks LLC signed an agreement with Kinross Gold USA,Inc. ("Kinross"), a wholly owned subsidiary of Kinross Gold Corporation, on the Goldbanks project. The Company is required to spend $20million in exploration over five years on the Goldbanks Project to earn a 50% interest, including a firm commitment of $3.50 millionbetween July 26, 2016 and December 31, 2017. A total of $3.88 million was spent as of December 31, 2017.

(c) Write-down of property, plant and equipment

For the year ended December 31, 2017, upon purchase of the building that was previously rented in Thunder Bay, a write-down ofleasehold improvements with a net book value of $0.15 million was also included in write-down of property, plant and equipment.

(d) Summary of mineral property Net Smelter Return ("NSR") royalties (at December 31, 2018)

Active properties NSRRahill Bonanza, Ontario 2% NSR Marathon Canada Ltd.

3% NSR William, Michael and the estate of Steve Kostynuk3% NSR Dave Meunier0.5% NSR Cypress/Skyharbour2% underlying NSR owed to a third party

Hasaga, Ontario 3% NSR Lac Properties 1% NSR Pure Gold Mining Inc.3% NSR Camp McMann Red Lake Gold Mine Ltd. 0.5% NSR Sandstorm Gold Ltd.

Greenstone Gold Mines, Ontario 3% NSR Argonaut Gold Inc.2% NSR Algoma Steel Inc.1% NSR on the first 350,000 tons of production from the property payable to Griffin Mining

Limited (formerly European Mining Limited)3% NSR Franco-Nevada Corporation5% NSR Algoma Steel Inc.1% NSR Metalore Resources

McCoy Cove, Nevada 1.5% NSR Newmont Mining Corporation2% NSR Kinross Gold Corporation

South Arturo, Nevada 49% Annual minimum royalty Franco-Nevada CorporationMercedes Mine, Mexico 1 % NSR to Yamana Gold Inc. (Mercedes Mine Cucurpe) on the earlier of the date on which

450,000 ounces of gold equivalent has been produced by the Mercedes Mine followingSeptember 30, 2016; and September 30, 20222 % NSR to Yamana Gold Inc. (La Espera)2 % NSR to Yamana Gold Inc. (La Silla)

Inactive properties NSRNorthern Empire, Ontario 3% NSR Shirley Lafontaine, Amede Lafontaine, Stewart Robertson, Geneva NicholsSand River Leitch, Ontario 12% NSR Osisko Gold Royalties

3% NSR Franco-Nevada Corporation0.8925% NSR AfriCan Marine Minerals

Nortoba-Tyson, Ontario 1% NSR Wayne Gorrie2% NSR Cote

Ozone Creek, Ontario 3% NSR Lac PropertiesRodeo Creek, Nevada 2% NSR Nevada Select Royalty IncSanta Teresa, Mexico 1.53% NSR Grupo Alamo S.A. de C.V.

28



11. DEFERRED REVENUE

The Company entered into a gold prepay and silver stream agreement with Orion in 2016 in conjunction with the acquisition of theMercedes mine.


Gold prepay (i) $ 16,753 $ 27,805Silver stream agreement (ii) 7,610 8,482Total deferred revenue 24,363 36,287Less: current portion 12,977 13,775Total long-term portion $ 11,386 $ 22,512

(i) In exchange for a $42.19 million gold prepay, the Company will deliver to Orion 2,450 troy ounces of gold per quarter for a period of15 consecutive quarters commencing December 31, 2016 for a total of 36,750 ounces. The gold prepay has an annual interest rate of6.5% payable on the principal balance quarterly which has been recorded as a liability based on the present value of the futureinterest payments. Subject to certain exceptions, the Company has the option to satisfy four interest payments in common sharesissued at the then 10 day volume weighted average closing price. As of December 31, 2018, the Company has delivered 22,050 troyounces of gold towards the gold prepay agreement with Orion.


Opening balance $ 27,805 $ 38,764Recognition of revenue during the year (11,250) (11,250)Amortization of costs 198 291

$ 16,753 $ 27,805

(ii) For the silver streaming agreement, in exchange for $11.50 million the Company will deliver to Orion 50% of the silver productionfrom the Mercedes mine for the first year following closing, 60% for the subsequent year, and 70% thereafter until the delivery of 1.25million ounces of silver, after which the delivery will be reduced to 25% of the silver production until the delivery of 2.0 million ounces,and reduced further to 12.5% thereafter. Orion will pay an ongoing cash purchase price equal to 20% of the prevailing silver price. Asof December 31, 2018, the Company has delivered 398,720 ounces of silver towards the silver streaming agreement with Orion.


Opening balance $ 8,482 $ 10,770Impact of adopting IFRS 15 on January 1, 2018 (Note 3(a)) 336 -Adjusted balance at January 1, 2018 8,818 10,770Recognition of revenue during the year (3,122) (2,381)Variable consideration adjustment 1,170 -Interest accretion 693 -Amortization of costs 51 93

$ 7,610 $ 8,482

Revenue earned on streaming agreements is considered to be variable, requiring and adjustment to the transaction price per uniteach time there is a change to the underying production profile expected to be delivered under the streaming agreement . For theyear ended December 31, 2018, the Company recorded a $1.17 million adjustment to silver revenue due to a change in theproduction profile of the Mercedes mine.

29



12. LONG-TERM DEBT


Promissory note payable (i) $ - $ 47Credit facility (ii) - 19,158Current portion of long-term debt $ - $ 19,205

(i) Promissory note payable

The Company, through its wholly owned subsidiary, Premier Gold Mines Nevada Inc. held a non-interest bearing promissory notesecured by a deed of trust on the Blue Sage property. The outstanding principal of the promissory note of $0.05 million was fullyrepaid on July 19, 2018, the scheduled repayment date.


Opening principal balance $ 50 $ 100Less: principal repayment (50) (50)Outstanding principal balance - 50Less: interest and debt agreement costs to be accreted - (3)Present value of the obligation - 47Current portion of long-term debt $ - $ 47

(ii) Credit facility

In conjunction with the financing arrangement related to the acquisition of the Mercedes mine in 2016, the Company drew $45 millionon the senior unsecured term facility (“credit facility”) with Orion. The credit facility had interest at a rate of 6.0% annually, payableonly on the amount drawn and paid quarterly. There was no stand-by interest payable under the credit facility, but loan commitmentand other fees that were paid upon closing were $2.80 million. The credit facility principal was due upon maturity at June 30, 2018.On November 6, 2017, the Company paid $25 million to Orion on exercise of the option to repay a portion of the term facility leaving abalance outstanding of $20 million at December 31, 2017. On May 4, 2018, the Company paid the remaining principal balance of $20million along with accrued interest owing.


Opening principal balance $ 20,000 $ 45,000Less: principal repayment (20,000) (25,000)Outstanding principal balance - 20,000Less: interest and debt agreement costs to be accreted - (842)Present value of the obligation - 19,158Current portion of long-term debt $ - $ 19,158

(iii) Newmont payable

As a result of the 2014 acquisition of the McCoy-Cove Property, the Corporation agreed to an additional $6.0 million payable in favourof Newmont Mining Corporation. The value of the debt was accreted to the face value of the payable at the maturity date, with thediscounted payable rate of 8% accretion charged to the statement of income / (loss) and comprehensive income / (loss) as a form ofinterest expense over the term of the debt. The final instalment of $2.0 million was paid on March 1, 2017.

30



13. PROVISION FOR ENVIRONMENTAL REHABILITATION

The Company's provision for environmental rehabilitation results from an ownership interest in a mill, mining equipment and previouslymined property interests. The provision consists primarily of costs associated with mine reclamation and closure activities. Theseactivities, which tend to be site specific, generally include costs for decommissioning the mill complex and related infrastructure, physicaland chemical stability of the tailings area, post-closure site security and monitoring costs. The Company considers such factors aschanges in laws and regulations, and requirements under existing permits in determining the estimated costs. Such analysis is performedon an on-going basis.

The Company estimates that the undiscounted un-inflated future value of the cash flows required to settle the provision is $1.90 million forthe Hasaga and Northern Empire Mill properties in Canada, $5.16 million for the McCoy-Cove property, $10.20 million ($4.08 million atthe Company's 40% share) for the South Arturo Mine project in the United States and $15.20 million for the Mercedes mine project inMexico. In calculating the best estimate of the Company's provision, management used risk-free interest rates ranging from 2.38% to8.80%. A reconciliation of the discounted provision is provided below:

NorthernEmpire Mill

FaymarDeloro Hasaga McCoy-Cove South Arturo

MercedesMine Total

Balance, December 31, 2017 $ 1,566 $ 391 $ 186 $ 1,713 $ 4,805 $ 14,648 $ 23,309New obligation - - - 389 - - 389Change in estimate expensed (99) - - - - - (99)Change in estimate capitalized - - (8) 1,545 (944) (3,282) (2,689)Accretion expense 34 3 4 94 135 1,009 1,279Reclamation expenditures - - - (241) (23) - (264)Currency adjustment (121) (20) (15) - - - (156)Disposal (Note 10 (iv)) - (374) - - - - (374)Balance, December 31, 2018 $ 1,380 $ - $ 167 $ 3,500 $ 3,973 $ 12,375 $ 21,395Less current portion 146 - - 111 132 - 389Long-term portion $ 1,234 $ - $ 167 $ 3,389 $ 3,841 $ 12,375 $ 21,007

NorthernEmpire Mill


MercedesMine Total

Balance, January 1, 2017 $ 1,588 $ 575 $ 212 $ 884 $ 6,530 $ 5,727 $ 15,516New obligation - - - 1,096 - 3,615 4,711Change in estimate expensed (147) (150) - - - - (297)Change in estimate capitalized - - (43) (154) (1,905) 3,725 1,623Accretion expense 30 9 4 29 180 680 932Reclamation expenditures (11) (79) - (142) - - (232)Currency adjustment 106 36 13 - - 901 1,056Balance, December 31, 2017 $ 1,566 $ 391 $ 186 $ 1,713 $ 4,805 $ 14,648 $ 23,309Less current portion - 128 4 302 6 - 440Long-term portion $ 1,566 $ 263 $ 182 $ 1,411 $ 4,799 $ 14,648 $ 22,869

14. OTHER LIABILITIES


Financial liability (i) $ 806 $ 2,113Offtake obligation (ii) 2,237 2,434Share based payment liability (iii) 142 235Total other liabilities 3,185 4,782Less current portion 805 1,721Long-term portion $ 2,380 $ 3,061

(i) Financial liability

The financial liability represents the present value of the interest component of the gold prepay agreement discussed in Note 11. $0.69 million of the liability represents the amount of interest to be amortized within the next year and is included within the currentportion of other liabilities.

31



(ii) Offtake obligation

In 2016, the Company entered into an agreement with Orion to sell up to 20,000 ounces of gold annually for a period of 90 monthsfrom the date of the first out-turn from the South Arturo mine, subsequently amended to an additional 20,000 ounces for Mercedesgold production, limited to an annual aggregate maximum of 35,000 ounces of gold from all properties. In the event that the Companydoes not produce 35,000 ounces in any given year, the obligation is limited to those ounces actually produced.

The Company has determined the offtake obligation represents a derivative liability for the gold price option feature included in theagreement and as such is re-measured at fair value at each balance sheet date with changes in fair value being recorded in profit orloss. The offtake obligation had an unrealized gain of $0.20 million for the year ended December 31, 2018 (a $0.22 million gain for theyear ended December 31, 2017) and is included in the unrealized gain on derivatives.

(iii) Share based payment liability

The Company recognized a share based payment liability of $0.14 million at December 31, 2018 ($0.24 million at December 31,2017) under the Company's restricted share unit plan as discussed in Note 15. The current portion of the liability is $0.11 million atDecember 31, 2018 ($0.15 million at December 31, 2017) representing the cash settlement expected on the next vesting date.

(iv) Warrant liability

On January 1, 2018, the Company had four million Common Share Purchase Warrants outstanding of which each are exercisableinto one fully paid and non-assessable common share of the Company. One million of the warrants were exercisable into one millioncommon shares at C$5.46 per share until June 30, 2018 and three million of the warrants were exercisable into three million commonshares at C$4.75 per share until September 30, 2018. The warrants were considered derivatives because their exercise price is inCAD whereas the Company’s functional currency is in USD. Accordingly, the Company recognized the warrants as liabilities at fairvalue with changes in fair value recognized in profit or loss.

At January 1, 2018, on the change in functional currency discussed in Note 2(f), the Company recognized an initial fair value warrantliability of $0.44 million (C$0.55 million) with a corresponding reduction in share capital.

For the year ended December 31, 2018, the Company recognized a reduction in the liability of $0.44 million based on the expiration ofone million warrants at June 30, 2018 and the remaining three million warrants at September 30, 2018. The fair value for the warrantsat December 31, 2018 was nil as all had expired. The original warrants were valued using the Black-Scholes option pricing model withthe following weighted average assumptions:

January 1,2018

Risk free rate 1.5%Warrant expected life 0.75 yearsExpected volatility 36% to 42%Expected dividend 0%Share price C$3.52

32



15. SHARE CAPITAL

(a) Authorized share capital

At December 31, 2018, the authorized share capital consisted of an unlimited number of common shares and an unlimited number ofpreferred shares without par value.

(b) Normal course issuer bid

On July 20, 2017, the Company announced that approval had been received from the Toronto Stock Exchange for a normal course issuerbid to purchase up to 19,599,646 of its issued and outstanding shares. The bid expired on July 24, 2018 with no shares purchased underthe bid.

(c) Share option plan

The Company has a share purchase compensation plan (the "Plan") which is restricted to directors, officers, key employees andconsultants of the Company. The number of common shares subject to options granted under the Plan (and under all other managementoptions and employee stock purchase plans) is limited to 10% in the aggregate and 1% with respect to any one optionee of the number ofissued and outstanding common shares of the Company at the date of the grant of the option. Options issued under the Plan may beexercised during a period determined by the Board of Directors which cannot exceed ten years.

(d) Stock options

The continuity of stock options issued and outstanding are as follows:

Optionsoutstanding

Weightedaverage

exercise price# CAD

Outstanding at January 1, 2017 9,593,900 $3.04Granted 1,991,000 3.07Exercised (892,900) 2.52Expired (1,900,000) 4.61Forfeited (38,000) 2.53Outstanding at December 31, 2017 8,754,000 2.77Granted 2,011,000 3.21Exercised (824,800) 1.94Expired (363,900) 2.89Forfeited (88,300) 3.00Outstanding at December 31, 2018 9,488,000 $2.93

The weighted average share price at the date of exercise in 2018 was C$3.18 (C$3.72 at December 31, 2017).

At December 31, 2018 the following options were outstanding and outstanding and exercisable:

Outstanding Outstanding and Exercisable

Exercise price Options

Weightedaverage exercise

price

Weightedaverage

remaining lifeOptions


price

Weightedaverage

remaining life(CAD) # (CAD) in years # (CAD) in years2.19 - 2.85 3,445,000 $2.40 $1.26 3,400,000 $2.40 $1.263.02 - 3.65 5,813,000 3.17 3.23 5,663,000 3.17 3.214.28 - 4.78 230,000 4.71 2.60 230,000 4.71 2.60

9,488,000 $2.89 $2.50 9,293,000 $2.93 $2.48

Total vested stock options at December 31, 2018 were 9,293,000 with a weighted average exercise price of C$2.93 (8,489,000 atDecember 31, 2017 with a weighted average exercise price of C$2.75).

The Company applies the fair value method of accounting for all stock based compensation awards and accordingly, $2.35 million wasrecorded for options issued as compensation during the year ended December 31, 2018 ($2.15 million for the year endedDecember 31, 2017). The options had a weighted average grant date fair value of C$1.43 for the year ended December 31, 2018 (C$1.35for the year ended December 31, 2017). As of December 31, 2018, there were 195,000 unvested stock options (265,000 at December31, 2017).

33



For purposes of the options granted, the fair value of each option was estimated on the date of grant using the Black-Scholes optionpricing model, with the following assumptions:


Risk-free interest rate 1.465% - 1.631% 0.97% - 1.02%Annualized volatility based on historic volatility 57% 57%Expected dividend Nil NilForfeiture rate 1.35% NilExpected option life 4 years 4 years

(e) Restricted Share Unit Plan

The Company adopted the Restricted Share Unit ("RSU") plan to allow the Board of Directors to grant its employees non-transferableshare units based on the value of the Company's share price at the date of grant. The awards have a graded vesting schedule over athree-year period.

Under the RSU plan, the awards can be equity or cash settled immediately upon vesting. The following table summarizes the changes inthe RSUs for the year ended December 31, 2018:

RSUsoutstanding

Weightedaverage

exercise price# CAD

Outstanding at January 1, 2017 - $-Granted 302,000 3.06Settled (97,000) 3.86Forfeited (11,000) 3.08Outstanding at December 31, 2017 194,000 3.60Granted 311,500 3.24Settled (193,000) 2.01Forfeited (48,333) 2.93Outstanding at December 31, 2018 264,167 $1.75

As the options are expected to be settled in cash, at December 31, 2018 a current liability of $0.11 million and a long-term liability of $28thousand was outstanding and included in other liabilities as disclosed in Note 14 ($0.15 million and $88 thousand respectively atDecember 31, 2017). For the year ended December 31, 2018, $0.22 million has been recorded as an expense and included in share-based payments ($0.57 million for the year ended December 31, 2017). The fair value of the RSUs at December 31, 2018 was C$0.46million (C$0.70 million at December 31, 2017).

For purposes of the RSUs granted, the fair value of the liability was estimated using the share price of the valuation date and an expectedforfeiture rate of 6%.

34



(f) Share-based payments


2018 2017Stock option valuation $ 2,352 $ 2,145RSU valuation 219 571

$ 2,571 $ 2,716

16. BASIC AND DILUTED INCOME PER SHARE

Basic income / (loss) per share is calculated based on the weighted average number of common shares and common share equivalentsoutstanding during the year ended ended December 31, 2018 and 2017. Diluted income per share is based on the assumption that stockoptions that have an exercise price less than the average market price of the Company's common shares during the year have beenexercised on the later of the beginning of the year and the date granted. Net income / (loss) and basic weighted average sharesoutstanding are reconciled to diluted net income and diluted weighted average shares outstanding, respectively, as follows:


2018 2017Net income / (loss) for the year $ (20,426) $ 16,169

Basic weighted average shares outstanding 202,744,999 202,626,958Dilution adjustment for stock options - 5,163,372Diluted weighted average shares outstanding 202,744,999 207,790,330Basic and diluted income / (loss) per share $ (0.10) $ 0.08

An amount of 9,293,000 stock options (Note 15(d)) were excluded from the computation of diluted weighted average shares outstandingfor the year ended December 31, 2018 (2,420,200 for the year ended December 31, 2017), as their effect would be anti-dilutive.

17. SUPPLEMENTAL CASH FLOW INFORMATION

(i) The following table summarizes the increase and decrease in working capital for the year ended December 31, 2018 and 2017:


2018 2017Receivables $ (11,993) $ (4,776)Prepaids and deposits 205 898Inventory 7,331 4,620Accounts payable and accrued liabilities (399) (4,008)Taxes payable (3,043) 66Decrease in working capital $ (7,899) $ (3,200)

(ii) The significant non-cash activities during the year are as follows:


2018 2017Fair value of shares issued for termination of option agreement $ 58 $ -Fair value of stock options allocated to share capital upon exercise 801 1,070Fair value gain on offtake derivative liability 197 218Fair value loss on forward contract - 1,364

35



18. EXPLORATION, EVALUATION AND PRE-DEVELOPMENT


2018 2017Rahill-Bonanza, Ontario $ 29 $ 73Hasaga, Ontario 2,905 3,579Greenstone Gold, Ontario 8,786 4,492McCoy-Cove, Nevada (Note 10(b)) 5,161 11,359Goldbanks, Nevada (Note 10(b)) 2,037 3,207South Arturo, Nevada 1,294 831Cristina, Mexico - 1,156Mercedes, Mexico 1,331 1,122Rye, Nevada (Note 10(b)) 60 -Rodeo Creek, Nevada (Note 10(b)) 4 -Technical services 626 432

$ 22,233 $ 26,251

19. GENERAL AND ADMINISTRATION


2018 2017Corporate administration $ 1,770 $ 801Corporate salaries and benefits 5,210 4,746Professional fees 1,295 1,174Project administration (i) 1,218 1,172

$ 9,528 $ 7,893

(i) Management fees and other administrative costs related to the projects are included in the co-ownerships.

20. OTHER INCOME / (EXPENSE)


2018 2017Investment and other income $ 1,684 $ 12Interest earned 680 743Gain on disposal of property, plant and equipment 321 38Gain / (loss) on derivatives 637 (1,127)Loss on investments (110) (337)Loss on foreign exchange (2,756) (711)Write-down of property, plant and equipment - (1,584)Write-down of inventory (i) (8,260) -Gain attributable to Greenstone Gold development commitment 9,891 5,294

$ 2,087 $ 2,328

(i) Finished goods inventory was written down by $8.26 million as a result of the RMC bankruptcy further discussed in Note 28.

36



21. FINANCE EXPENSE


2018 2017Environmental rehabilitation accretion $ 1,279 $ 932Interest paid 1,984 4,798Amortization of finance costs 1,090 5,065Amortization of gold prepay interest (1,306) (1,920)Silver stream accretion 693 -Amortization of discount 4 10

$ 3,744 $ 8,885

22. SEGMENTED INFORMATION

Results of the operating segments are reviewed by the Company's chief operating decision makers ("CODM") to make decisions aboutresources to be allocated to the segments and to assess their performance. Each CODM is a member of the senior management teamwho rely on management positioned in the geographical regions where the key operations are located.

(a) Operating mine properties and exploration projects

The Company's operating segments are reported by operating mine properties and exploration projects. The results from operations forthese reportable segments are summarized in the following tables:

Year ended December 31, 2018 Mercedes South Arturo ExplorationCorporateand other Total

Revenue $ 86,112 $ 27,755 $ - $ - $ 113,867Cost of sales (62,744) (9,019) - - (71,763)Depletion, depreciation and amortization (19,315) (6,253) - - (25,568)Exploration, maintenance and rehabilitation (1,331) (1,294) (18,427) (1,325) (22,377)Overhead costs (32) (47) (1,170) (10,850) (12,099)Other income / (expense) 582 58 10,238 (8,791) 2,087Finance expense (1,009) (135) (139) (2,461) (3,744)Income / (loss) before income taxes 2,263 11,065 (9,498) (23,427) (19,597)Current tax expense (772) (614) - (1,395) (2,781)Deferred tax recovery 1,160 - 792 - 1,952Income / (loss) for the year $ 2,651 $ 10,451 $ (8,706) $ (24,822) $ (20,426)

37




Revenue $ 112,092 $ 88,216 $ - $ - $ 200,308Cost of sales (60,598) (24,969) - - (85,567)Depletion, depreciation and amortization (17,232) (33,498) - - (50,730)Exploration, maintenance and rehabilitation (1,122) (831) (23,031) (1,298) (26,282)Overhead costs (196) (54) (941) (9,418) (10,609)Other income / (expense) (321) 9 5,337 (2,697) 2,328Finance expense (680) (180) (83) (7,942) (8,885)Income / (loss) before income taxes 31,943 28,693 (18,718) (21,355) 20,563Current tax expense (1,251) (2,499) - (1,416) (5,166)Deferred tax recovery 3,121 - 87 (2,436) 772Income / (loss) for the year $ 33,813 $ 26,194 $ (18,631) $ (25,207) $ 16,169

As at December 31, 2018 Mercedes South Arturo ExplorationCorporateand Other Total

Capital expenditures $ 17,428 $ 8,427 $ 561 $ 457 $ 26,873Property, plant & equipment 143,925 11,768 111,054 2,236 268,983Total assets 182,655 14,231 124,198 45,402 366,486Total liabilities 31,561 3,973 12,231 30,886 78,651


Capital expenditures $ 18,156 $ 1,158 $ 155 $ 2,143 $ 21,612Property, plant & equipment 149,752 4,970 113,923 2,114 270,759Total assets 185,554 14,480 122,910 104,644 427,589Total liabilities 36,864 14,480 14,377 63,057 119,102

(b) Geographic segments

The Company operates in three principal geographical areas - Canada (country of domicile), the United States, and Mexico. TheCompany's revenue by location of operations and information about the Company’s assets by location are detailed below:

Year ended December 31, 2018 Canada United States MexicoCorporateand other Total

Revenue $ - $ 27,755 $ 86,112 $ - $ 113,867Cost of sales - (9,019) (62,744) - (71,763)Depletion, depreciation and amortization - (6,253) (19,315) - (25,568)Exploration, maintenance and rehabilitation (11,874) (7,848) (1,330) (1,325) (22,377)Overhead costs (1,150) (59) (40) (10,850) (12,099)Other income / (expense) 10,234 58 586 (8,791) 2,087Finance expense (41) (232) (1,010) (2,461) (3,744)Income / (loss) before income taxes (2,831) 4,402 2,259 (23,427) (19,597)Current tax expense - (614) (772) (1,395) (2,781)Deferred tax recovery 792 - 1,160 - 1,952Income / (loss) for the year $ (2,039) $ 3,788 $ 2,647 $ (24,822) $ (20,426)


Revenue $ - $ 88,216 $ 112,092 $ - $ 200,308Cost of sales - (24,969) (60,598) - (85,567)Depletion, depreciation and amortization - (33,498) (17,232) - (50,730)Exploration, maintenance and rehabilitation (8,150) (14,548) (2,286) (1,298) (26,282)Overhead costs (900) (70) (221) (9,418) (10,609)Other income / (expense) 5,294 18 (287) (2,697) 2,328Finance expense (43) (220) (680) (7,942) (8,885)Income / (loss) before income taxes (3,799) 14,929 30,788 (21,355) 20,563Current tax expense - (2,499) (1,251) (1,416) (5,166)Deferred tax recovery 87 - 3,121 (2,436) 772Income / (loss) for the year $ (3,712) $ 12,430 $ 32,658 $ (25,207) $ 16,169

38



As at December 31, 2018 Canada United States MexicoCorporateand Other Total

Capital expenditures $ 59 $ 8,929 $ 17,428 $ 457 $ 26,873Property, plant & equipment 59,665 63,157 143,925 2,236 268,983Total assets 60,635 77,404 183,045 45,402 366,486Total liabilities 4,895 11,308 31,562 30,886 78,651


Capital expenditures $ 8 $ 1,312 $ 18,149 $ 2,143 $ 21,612Property, plant & equipment 64,913 53,980 149,752 2,114 270,759Total assets 65,930 71,063 185,952 104,644 427,589Total liabilities 8,445 10,736 36,864 63,057 119,102

(c) Sales by customer

The following table presents sales to individual customers representing 100% of the Company’s concentrate and doré sales revenue:


2018 2017Orion $ 84,011 $ 121,113Scotia Mocatta 27,436 79,195Other 2,420 -

$ 113,867 $ 200,308

The Company is not economically dependent on a limited number of customers for the sale of its product because gold and other metalscan be sold through numerous commodity market traders worldwide.

23. INCOME TAXES

(a) The major components of income tax expense are as follows:


Current income tax $ 2,781 $ 5,166Deferred income tax

Origination and reversal of temporary differences (6,354) (2,434)Future Taxes to Reverse at future rate rather than statutory rate 21 3,131Deferred tax liability incurred on renouncement expenses - (998)Effect of foreign exchange 2,899 (3,095)Mining royalty, net proceeds and withholding taxes 174 2,419Other 1,308 205

(1,952) (772)Income tax expense $ 829 $ 4,394

39



(b) The Company's income tax expense differs from the amount computed by applying the combined Canadian federal and provincial incometax rates to loss before income taxes as a result of the following:


Income / (loss) before income taxes $ (19,597) $ 20,563Statutory rates (i) %26.5 %26.5Income tax recovery computed at statutory rates (5,193) 5,449Mexico withholding tax 1,362 1,347Mexico royalty tax (480) 3,886Mining Tax ITC Pre-Production 654 -Inflation on balances (1,157) (374)Difference in foreign tax rates (559) (3,734)Increase in deferred tax assets not recognized 2,073 (1,732)Non-deductible/ non-taxable items (1,503) (128)Future Taxes to Reverse at future rate rather than statutory rate 21 3,131Updates from recovery of taxes/rights (12) -Impact of flow-through share premium - (998)Net processing tax 614 2,493Foreign exchange 2,932 (4,141)True-up 1,099 -Prior year adjustment 464 -Other 514 (805)Income tax expense $ 829 $ 4,394


Exchange gain / (loss) on translation of foreign operations through other comprehensive income $ (3,086) $ 6,684Statutory tax rates (i) %26.5 %26.5Income tax recovery computed at statutory rates (818) 1,771Difference in foreign tax rates (ii) - 329Future taxes to reverse at a future rate rather than the statutory rate (iii) - (2,178)Deferred tax recovery not recognised 818 -Exchange difference not subject to income tax - 3,514Other comprehensive income deferred tax recovery $ - $ 3,436

(i) The Company operates in multiple jurisdictions and the related income is subject to varying rates of taxation. The combined Canadianfederal and provincial tax rate reflects the tax rate of 26.5% in effect in Ontario, Canada for each applicable tax year. The Companyoperates in Mexico, which reflects a 30% tax rate in the current year and in Nevada, USA which reflects a tax rate of 21% and 35%for 2018 and 2017, respectively.

(ii) A tax rate of 21% for 2018 and 35% for 2017 is applicable to the exchange difference on translation of foreign operations as it relatesto timing differences originating from the subsidiaries' operations in Nevada, USA.

(iii) The adjustment for future tax rates in 2017 was the result of the U.S. Tax Reform legislation that was enacted on December 22, 2017reducing the corporate tax rate to 21% from 35% beginning January 1, 2018 and was applied to the accumulated deferred taxes.

40



(c) The deferred income tax liabilities reported on the balance sheet are comprised of temporary differences as presented below:


Deferred income tax assetsNon-capital losses $ 1,202 $ 614Provisions not currently allowed for tax purposes 3,501 7,382Gross deferred tax assets 4,703 7,996Deferred tax assets set off against deferred tax liabilities (4,703) (7,996)Deferred tax asset - -

Deferred income tax liabilitiesInventory (484) (1,568)Exploration and evaluation (4,995) (14,422)Accounts payable and accrued liabilities (3,430) -Mining royalty tax (5,639) (4,817)Other (870) (105)Gross deferred tax liabilities (15,418) (20,912)Deferred tax assets set off against deferred tax liabilities 4,703 7,996Deferred tax liabilities per balance sheet (10,715) (12,916)

Balance at the beginning of the year (12,916) (15,712)Effect of exchange rate differences 249 562Recognized on loss 1,952 770Deferred tax liability recognized on exchange difference on translation of foreign operations throughOCI

- 3,434

Deferred premium on flow-through shares - (998)Other - (972)Balance at the end of the year $ (10,715) $ (12,916)

41



(d) Deferred tax assets not recognized

Management believes that it is not probable that sufficient taxable profits will be available in future years to allow the benefit of thefollowing deferred tax assets to be utilized:


Deferred tax assets not recognizedNon-capital losses $ 13,617 $ 12,858Common share issue costs 462 788Exploration and evaluation 11,383 22,790Investments 20 481Pre-production ITC 172 863Provisions recognized for accounting not currently deductible for tax 8,937 1,985Other 55 518

34,646 40,283

Unused operating tax losses (i)Canada 45,329 28,533United States 17,962 23,026Mexico 15,589 1,986Other 1,408 792

80,288 54,337

Total unused operating tax losses not recognizedPotential tax benefit at tax rate between 26.5% and 35% 20,801 16,458Operating tax losses set off against deferred tax liabilities (1,202) (614)Total unused operating tax losses not recognized $ 19,599 $ 15,844

(i) Unused operating tax losses totaled $80,288 at December 31, 2018. Canadian tax losses will expire between 2023 and 2036; U.S.losses will expire between 2028 and 2036; and Mexican losses will expire between 2021 and 2025.

24. RELATED PARTY TRANSACTIONS

Related parties include key management personnel and entities over which they have control or significant influence as described in Note2(c).

For the year ended December 31, 2017, related parties included DRAX Services Limited, The Alyris Group and Alyris leasing Inc. Servicecontracts with DRAX Services Limited, The Alyris Group and Alyris Leasing Inc. were terminated prior to January 1, 2018 and thereforethere are no transactions with these entities to report for the year ended December 31, 2018.

The transactions identified below are shown for comparative purposes only. They relate to the year ended December 31, 2017 and wererecorded at the exchange amount agreed to by the parties.

(i) Included in general and administrative expenses are amounts totaling $0.01 million for corporate secretarial services by DRAXServices Limited related to the Company through Shaun Drake, Corporate Secretary of the Company.

(ii) Included in general and administrative expenditures are amounts totaling $0.08 million for IT support services provided by The AlyrisGroup, a company related to the Company through Ewan Downie, Director, President and Chief Executive Officer of the Company,and Steve Filipovic, Chief Financial Officer of the Company.

(iii) Included in general and administrative expenditures are amounts totaling $0.14 million for rental charges paid to Alyris Leasing Inc., acompany related to the Company through Ewan Downie, Director, President and Chief Executive Officer of the Company, and SteveFilipovic, Chief Financial Officer of the Company.

42



Transactions with key management and directors



2018 2017Salary, wages and benefits $ 3,804 $ 3,649Share-based payments 1,661 1,447

$ 5,465 $ 5,096



2018 2017Fees earned and other remuneration $ 249 $ 257Share-based payments 399 375

$ 648 $ 632

25. COMMITMENTS

(a) Contractual obligations

The Company has commitments relating to facilities and other operating leases extending to 2023. The minimum annual contractual andlease payments for the five years are as follows:

2019 $ 1,9122020 3472021 212022 32023 2

$ 2,285

(b) Gold forward contracts

At December 31, 2018, the Company held forward contracts requiring the delivery of 400 ounces of gold per month at a price of$1,247.50 per ounce from January 2019 to December 2019.

The contracts required no cash or other consideration and are intended to be settled with production from the Company's miningoperations. If the contracted ounces are not delivered on the delivery date, as per the terms of the agreement, the Company willcompensate the counterparty for the difference between the contract price and the market price per ounce on the delivery date.

(c) Surety bonds

At December 31, 2018, the Company has outstanding surety bonds in the amount of $10.15 million in favour of the United StatesDepartment of the Interior, Bureau of Land Management ("BLM") as financial support for environmental reclamation and explorationpermitting. The surety bonds are secured by a $0.60 million deposit and are subject to fees competitively determined in the market place.The obligations associated with these instruments are generally related to performance requirements that the Company addressesthrough its ongoing operations. As specific requirements are met, the BLM as beneficiary of the instrument will return the instrument tothe issuing entity. As these instruments are associated with operating sites with long-lived assets, they will remain outstanding untilclosure.

26. FINANCIAL INSTRUMENTS

The Company's operations include the acquisition and exploration of mineral properties in Canada, the United States of America andMexico. The Company examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence.These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other risks. Where material, these risks are reviewedand monitored by the Board of Directors.

43



(a) Credit risk

Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaultson its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amountsowed to the counterparty by the Company where a legal right of setoff exists and also includes the fair values of contracts with individualcounterparties which are recorded in the financial statements.

(i) Trade credit risk

The Company closely monitors its financial assets and does not have any significant concentration of trade credit risk. The Companysells its products exclusively to large international financial institutions and other organizations with strong credit ratings. Thehistorical level of customer defaults is negligible and, as a result, the credit risk associated with trade receivables is considered to benegligible. The trade receivable balance outstanding at December 31, 2018 was $0.26 million (December 31, 2017 - $0.50 million).

(ii) Cash and cash equivalents

In order to manage credit and liquidity risk the Company invests only in highly rated investment grade instruments that havematurities of 90 days or less and which are cashable after 30 days or less into a known amount of cash. Limits are also establishedbased on the type of investment, the counterparty and the credit rate. The credit risk on cash and cash equivalents is thereforenegligible.

(iii) Derivative financial instruments

As a way of managing commodity risk, the Company has invested in derivative financial instruments. The derivative financialinstruments are with highly rated investment grade counterparties. These derivatives have allowed the Company to reduce the downside risk on commodity markets. Given the nature of the derivatives the Company is not exposed to significant credit risk.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidityrisk through the management of its capital structure.

As at December 31, 2018, the Company's liabilities that have contractual maturities total $17.87 million. This figure is fully comprised ofaccounts payable and accrued liabilities.

(c) Market risk

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in marketinterest rates. The risk that the Company will realize a significant loss as a result of a decline in the fair market value of investmentsand other items held within cash and cash equivalents is limited given that the majority of investments have a relatively short maturity.The Company manages its interest rate risk with investments by investing the majority of funds in short term investments andtherefore is not exposed to significant fluctuations in interest rates. All of the Company's debt instruments or deferred revenuearrangements are at a fixed rate and therefore do not expose the Company to interest rate risk.

(ii) Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency riskarises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not theCompany’s functional currency. The Company’s management monitors the exchange rate fluctuations on a continuous basis and actsaccordingly.

The functional currency and presentation currency of the Company is USD. The Company’s capitalized mineral properties andexpenses also include amounts incurred in CAD and to a lesser extent, MXN which are the functional currencies of these operations.The Company’s exchange risk is therefore related to movement between these currencies. Changes in the currency exchange ratesbetween USD relative to CAD and MXN have an effect on the Company’s results of operations through comprehensive income (loss),financial position or cash flows.

44



The Company has mitigated this risk by diversifying its cash resources in CAD and MXN roughly in proportion to expected futureexpenditure over the following twelve months. The carrying amounts of the Company’s CAD and MXN denominated monetary assetsand monetary liabilities in USD at the end of the reporting period are as follows:

CAD MXNDecember 31,

2018December 31,

2017December 31,

2018December 31,

2017(As restated

Note 2(f))(As restated

Note 2(f))Cash and cash equivalents 5,604 44,819 8,092 24,440Restricted cash and cash equivalents 1,955 2,121 - -Receivables 162 150 22,337 10,927Prepaids and deposits 580 476 975 1,223Accounts payable and accrued liabilities 4,034 3,921 14,887 15,321Taxes payable - - 338 1,567

For the year ended December 31, 2018, the Company recognized an unrealized foreign exchange loss of $1.82 million (a loss of$0.50 million for the year ended December 31, 2017) and an exchange loss on the translation of foreign operations in comprehensiveincome / (loss) of $3.09 million (a gain of $6.68 million for the year ended December 31, 2017). As of December 31, 2018, if the USDto CAD exchange rate increases or decreases by 10%, the Company’s net income / (loss) will increase or decrease by $0.47 million(December 31, 2017 - $4.42 million) and the Company’s other comprehensive income / (loss) will increase or decrease by $0.04million (December 31, 2017 - $0.05 million). As of December 31, 2018, if the USD to MXN exchange rate increases or decreases by10%, the Company’s net income / (loss) will increase or decrease by $0.57 million (December 31, 2017 - $2.05 million) and theCompany’s other comprehensive income / (loss) will increase or decrease by $1.05 million (December 31, 2017 - $0.08 million).

(iii) Security price risk

Security price risk is the risk that the fair value or future cash flow of the Company's financial instruments will fluctuate because of thechanges in the market price. The Company only takes a position in the securities of another entity where it has a strategic objective;or as a result of a purchase or sale transaction. In situations where the Company has taken a position in the securities of anotherentity, the Company manages its exposure to price risk by monitoring the market(s) where the entity's securities trade and planningthe divestiture accordingly. The fair value of held for trading securities at December 31, 2018 and December 31, 2017 was $0.11million and $0.32 million respectively, representing the maximum potential losses from changes in prices of equity investments.

(iv) Commodity price risk

Commodity price risk is the risk that the fair value or future cash flow of the Company's derivative financial instruments will fluctuatebecause of the changes in the commodity price. The Company has entered into forward contracts in order to reduce the down siderisk on the gold commodity market.

(d) Fair value

IFRS 13 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows:

Level 1:quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) orindirectly (i.e., derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

45



The following table sets forth the Company's financial assets and liabilities measured at fair value by level within the fair value hierarchy:

Level 1 Level 2 Level 3 TotalDec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,

2018 2017 2018 2017 2018 2017 2018 2017Canadian equity investments $ 110 $ 318 $ - $ - $ - $ - $ 110 $ 318Offtake obligation (i) - - - - 2,237 2,434 2,237 2,434Share-based payment liability - - 142 235 - - 142 235

$ 110 $ 318 $ 142 $ 235 $ 2,237 $ 2,434 $ 2,489 $ 2,987

(i) The offtake obligation entered into during 2016 has been classified as level 3 as the valuation includes significant unobservableinputs.

Set out below are the Company's financial assets by category:

Fair value throughprofit or loss Amortized cost Total

Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,

2018 2017 2018 2017 2018 2017Cash and cash equivalents $ - $ - $ 43,882 $ 103,046 $ 43,882 $ 103,046Receivables - - 23,571 11,807 23,571 11,807Canadian equity investments 110 318 - - 110 318Restricted cash and cash equivalents - - 5,581 4,721 5,581 4,721

$ 110 $ 318 $ 73,034 $ 119,574 $ 73,144 $ 119,892

Set out below are the Company's financial liabilities by category:



2018 2017 2018 2017 2018 2017Accounts payable and accrued liabilities $ - $ - $ 17,870 $ 18,471 $ 17,870 $ 18,471Long-term debt - - - 19,205 - 19,205Offtake obligation 2,237 2,434 - - 2,237 2,434Share-based payment liability 142 235 - - 142 235Other liability - - 806 2,113 806 2,113

$ 2,379 $ 2,669 $ 18,676 $ 39,789 $ 21,055 $ 42,458

The fair value of cash and cash equivalents, receivables, and accounts payable and accrued liabilities approximate their carrying valuedue to their short term nature. The fair value of the Company's long-term debt is approximated by its carrying value.

The offtake obligation is valued using the a forward strike lookback option valuation model with key inputs that include the Company’sassessment of expected gold prices and discount to gold prices during the quotational period, discount rates that are commensurate withthe risks associated with the financial liability to reflect the time value of money and the expected production levels.

46



27. MANAGEMENT OF CAPITAL

The Company manages its share capital, equity settled employee benefits reserve, warrant reserve and contributed surplus as capital,the balance of which is $580.57 million at December 31, 2018 ($577.37 million at December 31, 2017). The Company's objectives whenmanaging capital are to safeguard the Company's ability to continue as a going-concern in order to pursue the exploration anddevelopment of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the riskcharacteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares,acquire or dispose of assets or acquire new debt.

In order to maximize ongoing exploration efforts, the Company does not pay out dividends. The Company's investment policy is to investits short-term excess cash in highly liquid short-term interest-bearing investments with short-term maturities, selected with regard to theexpected timing of expenditures from continuing operations.

To effectively manage its capital requirements, the Company has in place a planning and budgeting process to help determine the fundsrequired to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company expects itscurrent capital resources will be sufficient to carry out its exploration and evaluation plans through 2019.

28. CONTINGENCIES

Legal claim

On December 17, 2017, a claim was filed against the Company and certain of its affiliates (collectively “Premier”) for approximately $4.6million in connection with a share purchase transaction that closed on September 30, 2016. The claim relates to a dispute over certainpost-closing adjustments which, based on the terms of the agreement, result in a payment to Premier of $1.26 million. Premier has fileda Statement of Defence denying liability and counterclaiming for the $1.26 million. Premier is awaiting delivery of the reply and defenceto the counterclaim. Based on facts currently known to us, we believe that Premier has a strong defence and that there is significantmerit to the counterclaim.

Other

On November 2, 2018, the Company was advised that RMC filed for chapter 11 bankruptcy protection in the Southern District of NewYork’s Federal Bankruptcy Court. RMC had processed gold and silver dore (“material”) produced from the Company’s Mercedes minelocated in Sonora, State of Mexico under a toll arrangement. RMC had approximately 8,000 gold equivalent oz of the Company’s materialwhen the bankruptcy filing took place. As the material was liquidated under a chapter 11 ruling, the Company has taken a write-down ofthe inventory and is working with its counsel to assert its legal right to the value associated with the inventory.

47



29. SUBSEQUENT EVENTS

Credit facility and financing package

On February 1, 2019 the Company announced the closing of a $50 million secured revolving term credit facility with Investec Bank plc("Investec"), as administrative agent for the lenders thereunder (the "Investec Credit Facility") and certain financing arrangements withOMF Fund II SO Ltd. and Orion Mine Finance Fund II LP (collectively, "Orion") for aggregate gross proceeds of approximately $18.30million.

Amounts borrowed under the Investec Credit Facility will bear interest at a variable rate per annum equal to LIBOR plus an applicable rateranging from 3.00% to 4.30% based on certain criteria. The Investec Credit Facility is secured by the assets relating to the South Arturomine in Elko County, Nevada, U.S.A. ("South Arturo Mine"), and the Mercedes mine in Hermosillo, Sonora, Mexico ("Mercedes Mine").The Investec Credit Facility matures in four years and will be used for working capital requirements and general corporate purposes. Todate, the Company has not drawn-down under the Investec Credit Facility.

In connection with the closing of the Orion financing arrangements:

Orion subscribed for seven million common shares of the Company for aggregate gross proceeds of approximately $8.30 million or

approximately C$1.58 per common share;

The Company issued two million common share purchase warrants to Orion with each warrant exercisable into one common share

with an exercise price of C$2.05 for a period of three years;

The original silver stream agreement entered into on September 30, 2016 was amended and restated pursuant to which:

Orion paid an additional deposit of US$10 million to a wholly owned subsidiary of the Company which will deliver to Orion 100% of

the silver production from the Mercedes Mine and 100% of the silver production from the South Arturo Mine attributable to the

Company until the delivery of 3.75 million ounces of silver (including deliveries previously made to Orion), after which the delivery

will be reduced to 30% of the silver production from the Mercedes Mine and the South Arturo Mine;

The Company is required to deliver at least 300,000 ounces of refined silver in each calendar year to Orion until 2.1 million

ounces of refined silver in aggregate have been delivered to Orion after the date hereof;

Orion will continue to pay an ongoing cash purchase price equal to 20% of the prevailing silver price; and

Orion has security over the assets relating to the South Arturo Mine in addition to the Mercedes Mine.

The original offtake agreement entered into on September 30, 2016 was amended and restated to increase the annual gold sale

quantity to 60,000 ounces of gold, subject to an annual aggregate maximum of 40,000 ounces of gold from each of (i) all of the

Company’s producing projects (other than the Mercedes Mine) and (ii) the Mercedes Mine; and

The original gold prepay agreement entered into on September 30, 2016 was amended and restated to provide security to Orion over

the assets relating to the South Arturo Mine and to provide for Orion’s consent to security changes at the Mercedes Mine to facilitate

the Investec Credit Facility.

The proceeds of the Orion financing arrangements will be used for the development, construction and working capital requirements forthe South Arturo Mine.

48

Grant Thornton LLP 11th Floor 200 King Street West, Box 11 Toronto, ON M5H 3T4

T +1 416 366 0100 F +1 416 360 4949


Independent auditor’s report

To the Shareholders of Premier Gold Mines Limited

Opinion

We have audited the consolidated financial statements of Premier Gold Mines Limited and its

subsidiaries ("the Company"), which comprise the consolidated statements of financial position as at

December 31, 2018 and 2017 and the consolidated statements of income (loss) and comprehensive

income (loss), consolidated statements of changes in equity and consolidated statements of cash

flows for the years then ended, and notes to the consolidated financial statements, including a

summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements, present fairly, in all material

respects, the consolidated financial position of the Company as at December 31, 2018 and 2017, and

its consolidated financial performance and its consolidated cash flows for the years then ended in

accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our

responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the

Company in accordance with the ethical requirements that are relevant to our audit of the consolidated

financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance

with these requirements. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Information Other than the Consolidated Financial Statements and Auditor’s Report

Thereon

Management is responsible for the other information. The other information comprises the

Management’s Discussion and Analysis and the Annual Report but does not include the consolidated

financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do

not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent

with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears

to be materially misstated.

We obtained the Management’s Discussion and Analysis prior to the date of this auditor’s report. If,

based on the work we have performed on the other information that we obtained prior to the date of


this auditor’s report, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of this auditor’s report. If,

based on the work we will perform on this other information, we conclude that there is a material

misstatement of this other information, we are required to report that fact to those charged with

governance.

Responsibilities of Management and Those Charged with Governance for the


Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with IFRS, 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.

In preparing the consolidated financial statements, management is responsible for assessing the

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to

liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting

process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue

an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but

is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing

standards will always detect a material misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these consolidated

financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise

professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Company's ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

auditor's report to the related disclosures in the consolidated financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditor's report. However, future events or conditions may

cause the Company to cease to continue as a going concern.


• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Mark Irwin.

Toronto, Canada Chartered Professional Accountants

March 6, 2019 Licensed Public Accountants

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


December 31,2018

December 31,2017

January 1,2017

Note (As restatedNote 2(f))

(As restatedNote 2(f))

ASSETSCurrent assetsCash and cash equivalents 4 $ 43,882 $ 103,046 $ 89,152Receivables 5 23,571 11,807 8,879Inventory 6 17,384 26,373 66,437Prepaids and deposits 1,776 2,026 1,452Other assets 7 110 318 3,991Total current assets 86,723 143,570 169,911Non-current assetsRestricted cash and cash equivalents 8 5,581 4,721 3,208Long-term inventory 6 2,266 5,606 -Long-term receivable 9 2,933 2,933 -Property, plant and equipment 10 268,983 270,759 261,527Total non-current assets 279,763 284,019 264,735Total assets $ 366,486 $ 427,589 $ 434,646

LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities $ 17,870 $ 18,471 $ 22,893Taxes payable 1,122 4,132 3,708Current portion of deferred revenue 11 12,977 13,775 13,784Current portion of long-term debt 12 - 19,205 2,043Current provision for environmental rehabilitation 13 389 440 705Current portion of other liabilities 14 805 1,721 3,097Total current liabilities 33,163 57,744 46,230Non-current liabilitiesDeferred taxes 23 10,715 12,916 15,712Deferred revenue 11 11,386 22,512 35,750Long-term debt 12 - - 39,521Provision for environmental rehabilitation 13 21,007 22,869 14,811Other liabilities 14 2,380 3,061 4,393Total non-current liabilities 45,488 61,358 110,187Total liabilities 78,651 119,102 156,417

EQUITYShare capital 538,129 536,484 533,635Reserves (18,244) (16,709) (27,949)Deficit (232,050) (211,288) (227,457)Total equity 287,835 308,487 278,229Total liabilities and equity $ 366,486 $ 427,589 $ 434,646

Commitments [Note 25]

Contingencies [Note 28]

Subsequent events [Note 29]


Approved by the Board of Directors and authorized for issue on March 6, 2019

"John Seaman"Director

"Ewan Downie"Director

4

CONSOLIDATED STATEMENTS OF INCOME / (LOSS)

AND COMPREHENSIVE INCOME / (LOSS)



2018 2017

Note(restated -Note 2(f))

Revenue $ 113,867 $ 200,308Cost of sales (71,763) (85,567)Depletion, depreciation and amortization 10 (25,568) (50,730)Mine operating income 16,536 64,011

ExpensesExploration, evaluation, and pre-development 18 22,233 26,251Property maintenance 243 328General and administrative 19 9,528 7,893Share-based payments 15(f) 2,571 2,716Re-measurement of environmental rehabilitation provision 13 (99) (297)Income / (loss) before the following (17,940) 27,120

Other income 20 2,087 2,328Finance expense 21 (3,744) (8,885)

Income / (loss) before income taxes (19,597) 20,563

Current tax expense 23 (2,781) (5,166)Deferred tax recovery 23 1,952 772

Income / (loss) for the year (20,426) 16,169

Other comprehensive income / (loss)Exchange gain / (loss) on translation of foreign operations (3,086) 6,684Deferred tax recovery 23 - 3,436

Total comprehensive income / (loss) for the year $ (23,512) $ 26,289

Basic and diluted income / (loss) per share 16 $ (0.10) $ 0.08

Weighted average number of shares outstandingBasic 16 202,744,999 202,626,958Diluted 16 202,744,999 207,790,330


5

CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

Note(restated - Note 2(f))

OPERATING ACTIVITIESIncome / (loss) for the year $ (20,426) $ 16,169

Items not affecting cash Depletion, depreciation and amortization 10 25,905 50,955 Greenstone Gold non-cash operating expenses 9,891 5,294 Non-cash share-based payments 2,271 2,426 Re-measurement of environmental rehabilitation provision 13 (99) (297) Loss / (gain) on derivatives 20 (637) 1,127 Loss on investments 20 110 337 Gain on disposal of property, plant and equipment 20 (321) (38) Foreign exchange loss 1,814 501 Write-down of property, plant and equipment 20 - 1,584 Gain attributable to Greenstone Gold development commitment 20 (9,891) (5,294) Finance expense 21 3,744 8,885 Deferred tax recovery 23 (1,952) (772) Deferred revenue on metal agreements (13,202) (13,631)Change in non-cash working capital balances related tooperations

17(i) (7,899) (3,200)

Cash provided by / (used in) operating activities $ (10,692) $ 64,046

INVESTMENT ACTIVITIESProceeds from the sale of investments 178 1,792Purchase / settlement of derivative investments - 364Capital expenditures on property, plant and equipment 10 (26,873) (21,612)Purchase of investments - (165)Environmental liability security placed (1,031) (1,373)Proceeds on disposal of property, plant and equipment 14 -Reclamation expenditures charged to the provision for environmentalrehabilitation

13 (264) (232)

Cash used in investment activities $ (27,976) $ (21,226)

FINANCING ACTIVITIESInterest paid 21 (1,984) (4,798)Proceeds from the exercise of stock options 1,285 1,779Repayment of long-term debt (20,050) (27,050)Cash provided by / (used in) financing activities $ (20,749) $ (30,069)

Change in cash and cash equivalents during the year (59,417) 12,751Cash and cash equivalents, beginning of the year 103,046 89,152Effect of exchange rate changes on cash held 253 1,143Cash and cash equivalents, end of year $ 43,882 $ 103,046

Supplemental cash flow information [Note 17]


6

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Share Capital Reserves

Issued and outstanding NoteNumber of

shares Share capital

Equity settledemployeebenefits

Contributedsurplus

Foreigncurrency

translation Deficit Total equityBalance as at January 1, 2017 (as restated - Note 2(c)) 201,473,187 $ 533,635 $ 31,499 $ 8,267 $ (67,716) $ (227,457) $ 278,228Exercise of stock options 17(ii) 892,900 2,849 (1,070) - - - 1,779Equity settled share-based payments - - 2,191 - - - 2,191Comprehensive income for the year - - - - 10,120 16,169 26,289Balance as at December 31, 2017(as restated - Note 2(c)) 202,366,087 536,484 32,620 8,267 (57,596) (211,288) 308,487Impact of adopting IFRS 15 on January 1, 2018 3(a) - - - - - (336) (336)Balance as at January 1, 2018 (as restated - Note 2(c)) 2(f) 202,366,087 536,484 32,620 8,267 (57,596) (211,624) 308,151Exercise of stock options 17(ii) 824,800 2,028 (801) - - - 1,227Shares issued for termination of option agreement 23,149 58 - - - - 58Equity settled share-based payments - - 2,352 - - - 2,352Warrants reclassified to liability on change of functional currency - (441) - - - - (441)Comprehensive loss for the year - - - - (3,086) (20,426) (23,512)Balance as at December 31, 2018 203,214,036 $ 538,129 $ 34,171 $ 8,267 $ (60,682) $ (232,050) $ 287,835


7



1. NATURE OF BUSINESS

Premier Gold Mines Limited (the “Company”) is a Canadian based, growth oriented gold and silver producer engaged in the exploration,development and production of gold and silver deposits in Canada, the United States and Mexico.

The Company’s principal assets include the Mercedes Mine in Sonora, Mexico, a 40% interest in the South Arturo Mine in Nevada, USAand a 50% interest in the Hardrock Gold Project (Greenstone Gold Mines Partnership) located along the TransCanada highway inOntario, Canada. Other key property interests include a 44% interest in Rahill Bonanza and a 100% interest in the Hasaga goldproperties located in the Red Lake mining district of Northwestern Ontario, Canada and a 100% interest in the McCoy Cove gold propertylocated in Nevada, USA where Barrick Gold Corporation is earning a 60% interest in the area that surrounds the qualified resources.

The Company’s common shares are listed on the Toronto Stock Exchange under the symbol PG and its head office is located at Suite200, 1100 Russell Street, Thunder Bay, Ontario, P7B 5N2.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The consolidated financial statements of the Company have been prepared in accordance with accounting policies consistent withInternational Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Accountingpolicies are consistently applied to all periods presented, unless otherwise stated. Certain items within the statement of income havebeen reclassified in the current year. The prior periods have been restated to reflect the change in presentation.

The consolidated financial statements of the Company for the year ended December 31, 2018 were approved and authorized for issue bythe Board of Directors on March 6, 2019.

(b) Basis of presentation

The consolidated annual financial statements have been prepared using the measurement bases specified by IFRS for each type ofasset, liability, income and expense. Measurement bases are more fully described in the accounting policies below.

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptionsthat affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ fromthese estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historicalexperience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting effectson the carrying amounts of the Company's assets and liabilities are accounted for prospectively. The critical judgments and estimatesapplied in the preparation of the Company's consolidated financial statements are consistent with those applied and disclosed in Note 2and are discussed below.

8