KDKGF Klondike Gold Company (QB)

RISK FACTORS

In addition to the other information included in this Prospectus/Offer to Exchange (please see the section entitled “Where You Can Find More Information”), including the matters addressed in the section entitled “Forward-Looking Statements,” you should carefully consider the following risks before deciding whether to tender your shares of Klondike Star common stock in the offer.

Risks and Uncertainties

Klondike Gold is subject to a number of risks and uncertainties due to the nature of its business.  Klondike Gold's exploration and development activities expose it to various financial and operational risks that could have a significant impact on its level of operating cash flows in the future.  Klondike Star shareholders are advised to study and consider risk factors stressed below.

The following are identified as main risk factors that could cause actual results to differ materially from those stated in any forward-looking statements made by, or on behalf of, Klondike Gold.

We lack an operating history and have had losses since inception, which we expect to continue into the future.  As a result, we may have to suspend or cease operations.

We were incorporated on August 23, 1979, and we have not realized any significant revenues to date.  We have no operating history upon which an evaluation of our future success or failure can be made.  Our net loss for the year ended February 28, 2013, is $1,472,210 and for the three month period ended May 31, 2013 is $816,212.  To achieve and maintain profitability and positive cash flow we are dependent upon:

Based upon current plans, we expect to incur operating losses in future periods.  This will happen because there are expenses associated with the research and exploration of our mineral properties.  As a result, we may not generate revenues in the future.  Failure to generate revenues will cause us to suspend or cease operations.

We will not be able to determine the viability of our claims until substantial exploration work is undertaken

There is no assurance that a commercially viable mineral deposit exists on any of the mineral properties in which we have an interest or the right to acquire an interest.  Mineral property exploration is typically performed in phases.  Commencing from the initial phase of exploration work, each subsequent phase of exploration work is recommended by a geologist based on the results of the last completed phase of exploration.  Even if we complete exploration programs on our mineral properties and are successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling, geochemical, engineering and other studies before we will know if we have a commercially viable mineral deposit.

Many of our competitors have great resources than we have.

Many of the mineral exploration companies with which we compete for financing and for the acquisition of mineral exploration properties have greater financial and technical resources than those available to us.  Accordingly, these competitors may be able to spend greater amounts on acquiring mineral exploration interests of merit or on exploring or developing their mineral exploration properties.  This advantage could enable our competitors to acquire mineral exploration properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development.  Such competition could adversely impact our ability to attain the financing necessary for us to acquire further mineral exploration interests or explore and develop our current or future mineral exploration properties.

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We complete with other junior mineral exploration companies for funding and mining resources

We also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to invest in such companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their mineral exploration properties or the price of the investment opportunity.  In addition, we compete with both junior and senior mineral exploration companies for available resources, including, but not limited to, professional geologists, engineers, staff, helicopters, mineral exploration supplies and drill rigs.

Klondike Gold has limited capital, and may need to limit its exploration activity.

For the year ended February 28, 2013, Klondike Gold incurred $2,778,639 in exploration and evaluation asset expenditures, representing a 50% increase in expenditures over those incurred in the year ended February 29, 2012.  Cash on hand at February 28, 2013, was $1,096,304and Klondike Gold had no revenues from mining operations.  Expenditures during the period ended May 31, 2013, were $187,320, representing a significant decrease in expenditures expected for the year ended February 28, 2014.  This lack of liquidity may affect Klondike Gold’s ability to continue its operations and it may be need to seek additional financing elsewhere.  Such financing may not be available on terms that are agreeable to Klondike Gold, if at all.

Financing for Future Development is Uncertain

Klondike Gold's future financial success depends on the ability to raise additional capital from the issue of shares or the discovery of properties which could be economically justifiable to develop.  Such development could take years to complete and resulting income, if any, is difficult to determine.  The sales value of any mineralization potentially discovered by Klondike Gold is largely dependent upon factors beyond its control, such as the market value of the products produced.

General Resource Exploration Risks and Competitive Conditions

The resource exploration industry is an inherently risky business with significant capital expenditures and volatile metals markets.  The marketability of any minerals discovered may be affected by numerous factors that are beyond Klondike Gold's control and which cannot be predicted, such as market fluctuations, mineral markets and processing equipment, and changes to government regulations, including those relating to royalties, allowable production, importing and exporting of minerals, and environmental protection.  This industry is intensely competitive and there is no guarantee that, even if commercial quantities are discovered, a profitable market will exist for their sale.  Klondike Gold competes with other junior exploration companies for the acquisition of mineral claims as well for the engagement of qualified contractors. Metal prices have fluctuated widely in recent years, and they are determined in international markets over which Klondike Gold has no influence.

Governmental Regulation

Regulatory standards continue to change, making the review process longer, more complex and therefore more expensive.  Exploration and development of Klondike Gold's properties is affected by government regulations relating to such matters as environmental protection, health, safety and labor, mining law reform, restrictions on production, price control, tax increases, maintenance of claims and tenure.  There is no assurance that future changes in such regulations would not result in additional expenses and capital expenditures, decreasing availability of capital, increased competition, reserve uncertainty, title risks, and delays in operations.  Klondike Gold relies on the expertise and commitment of its management team, advisors, employees and contractors to ensure compliance with current laws.

There can be no assurance of rights to any claims on properties owned by Klondike Gold.

The acquisition of the right to exploit mineral properties is a very detailed and time consuming process.  There can be no guarantees that Klondike Gold has acquired title to any such surface or mineral rights or that such rights will be obtained in the future.  To the extent they are obtained, titles to Klondike Gold’s surface or mineral properties may be challenged or impugned and title insurance is generally not available.  Klondike Gold’s surface or mineral properties may be subject to prior unregistered agreements, transfer or claims and title may be affected by, among other things, undetected defects.  Such third party claims could have a material adverse impact on Klondike Gold’s operations.

The cost of acquisition, exploration, and development activities are substantial and there is no assurance that the returns from mining activities will justify commercial operations.

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Neither Klondike Gold nor Klondike Star currently has active mining operations.  Klondike Gold cannot be certain its acquisition, exploration and development activities will be commercially successful.  Substantial expenditures are required to acquire existing mineral properties, to establish reserves through drilling and analysis, to develop metallurgical processes to extract metal from the ore in the case of new properties and to develop the mining and processing facilities and infrastructure at any site chosen for mining.  There can be no assurance that any mineral reserves or mineralized material acquired or discovered will be in sufficient quantities or adequate grade to justify commercial operations or that the funds required for development can be obtained on a timely basis.

Risk Factors Relating to the Offer

The exchange ratio of the offer is fixed and will not be adjusted.  Because the market price of shares of Klondike Gold common stock may fluctuate, Klondike Star shareholders cannot be sure of the market value of the shares of Klondike Gold common stock that will be issued in connection with the offer

Each outstanding share of Klondike Star common stock will be exchanged for .25 shares of Klondike Gold common stock upon consummation of the offer.  This exchange ratio is fixed and will not be adjusted in case of any increases or decreases in the price of Klondike Gold common stock or Klondike Star common stock.  If the price of Klondike Gold common stock declines (which may occur as the result of a number of reasons (many of which are out of the control of Klondike Gold), including as a result of the risks described in this section entitled “Risk Factors”), Klondike Star shareholders will receive less value for their shares upon exchange of tendered shares in the offer than the value calculated pursuant to the exchange ratio on the date the offer was announced.  Because the offer may not be completed until certain conditions have been satisfied or waived (please see the section of this offer to exchange entitled “The Exchange Offer—Conditions of the Offer”), a significant period of time may pass between the commencement of the offer and the time that Klondike Gold accepts shares of Klondike Star common stock for exchange.  Therefore, at the time you tender your shares pursuant to the offer, you will not know the exact market value of the shares of Klondike Gold common stock that will be issued if Klondike Gold accepts such shares for exchange.  However, tendered shares of Klondike Star common stock may be withdrawn at any time prior to the time they are accepted for exchange pursuant to the offer.  Please see the section entitled “Comparative Market Price and Dividend Information” for the historical high and low sales prices per share of Klondike Gold and Klondike Star common stock.

Klondike Star shareholders are urged to obtain current market quotations for Klondike Gold and Klondike Star common stock when they consider whether to tender their shares of Klondike Star common stock pursuant to the offer.

The offer may adversely affect the liquidity and value of non-tendered shares of Klondike Star common stock

In the event that not all of the shares of Klondike Star common stock are tendered in the offer and Klondike Gold accepts for exchange those shares tendered in the offer, the number of shareholders and the number of shares of Klondike Star common stock held by individual holders will be greatly reduced.  As a result, Klondike Gold’s acceptance of shares for exchange in the offer could adversely affect the liquidity and could also adversely affect the market value of the remaining shares of Klondike Star common stock held by the public.  Please see the section of this Offer to Exchange entitled “The Exchange Offer—Plans for Klondike Star.”

The market for Klondike Gold common stock may be adversely affected by the issuance of shares pursuant to the offer

In connection with the completion of the offer, and as described in the section of this offer to exchange entitled “The Exchange Offer—Ownership of Klondike Gold After the Offer,” Klondike Gold estimates it will issue approximately 17,163,365 shares of Klondike Gold common stock.  The increase in the number of shares of Klondike Gold common stock may lead to sales of such stock or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, Klondike Gold common stock.

No assurance of trading market.

There is no assurance that an active or liquid market for Klondike Gold common stock will develop or be maintained.  If an active and liquid market for the stock is not maintained, the market price of the stock may be adversely affected.

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THE COMPANIES

KLONDIKE GOLD

History and Development of Klondike Gold

Klondike Gold was incorporated pursuant to the laws of the Province of British Columbia, Canada, in 1978 under the name Arbor Resources Inc. The company's name was changed to Klondike Gold Corp. in January, 1996, and its issued and outstanding common shares consolidated on the basis of one new common share for each fifteen old common shares in October, 2010.

Klondike Gold's principal executive offices are located at 711- - 675 West Hasting Street, Vancouver, BC, V6B 1N2, Canada. The telephone number for its executive offices is (604) 685-2222, and its Internet website address is www.klondikegoldcorp.com .

Klondike Gold is a Canadian public company with its shares listed and called for trading on the TSX Venture Exchange (the "Exchange") under the symbol “KG””. Its listing is as a Tier 2 company.

Klondike Gold is a junior resource exploration and development company on Tier 2 of the Exchange.

Since its inception, Klondike Gold has been engaged in the acquisition, and exploration of mineral resource property interests. In 1986, it acquired its first option on a group of claims in the Yukon Territory. Klondike Gold over a number of years conducted exploration on these claims, earned and exercised the option to acquire the title thereto, subsequently optioned the claims to third parties and received them back when the options were abandoned.  These claims form the basis of what is described below as the Lone Star Property on which, in 2004, Klondike Gold granted an option to Klondike Star to earn up to a 100% interest in the claims. Klondike Star conducted exploration programs on these claims during 2004 through 2007 and earned an undivided 55% interest in the claims. In 2008, Klondike Star was unable to raise further financing to continue the exploration of the claims and the interest in the claims remained at 55% Klondike Star and 45%  Klondike Gold.

In June, 2011, Klondike Star and Klondike Gold agreed to grant an option of the Lone Star Property to a private British Columbia company called Lonestar Gold Inc., to earn up to a 100% interest in the claims by carrying out certain exploration expenditures and issuing certain shares, all as more particularly described under the " Lone Star Property " below. The interest in the Lone Star Property is that the claims over lie the area in the Yukon containing the headwaters of several of the streams that were the major focus during the placer gold rush of the late 1890's. The exploration efforts have been carried out with a view to gaining an understanding and interpretation of the geological systems in the area to determine the hard rock source for the placer gold found in the streams. As part of the consideration for the grant of the option to Lonestar Gold Inc., Klondike Star and Klondike Gold were issued respectively 2,000,000 and 1,800,000 shares in the capital of Lonestar Gold Inc.

In the fall of 2011, Klondike Gold made an exempt take-over bid to the holders of shares of Lonestar Gold Inc. offering to exchange 3 common shares in the capital of Klondike Gold for each share of Lonestar Gold Inc. tendered to the offer. The offer was well received and Klondike Gold acquired all the remaining issued shares, other than the 2,000,000 held by Klondike Star - see " Lone Star Property - Interest in the Property " below for further particulars. As a result, Klondike Gold holds approximately 80% of the issued shares of Lonestar Gold Inc.

In June, 2012, Klondike Gold entered into a Royalty & Lease Agreement with Klondike Star whereby Klondike Star granted Klondike Gold an exclusive lease of the Indian River Property, a placer gold property situated in the Yukon Territory approximately thirty kilometres from the Lone Star Property. In addition to granting the lease, Klondike Star provided to Klondike Gold the water license and mining permit that had been issued to Klondike Star with respect to the property, and the extensive data from the exploration conducted previously on the property by Klondike Star. In consideration, Klondike Star is to receive a 5% gross overriding royalty on production from the property. For further particulars of the transaction see " Indian River Placer Property - Interest in the Property " below in this section.

Upon securing the lease of the Indian River Property, Klondike Gold agreed to enter into a joint venture with a private Yukon company, 46799 Yukon Inc. ("Yukon Inc.") for the further development of the property. Pursuant to the Joint Venture Agreement, to earn a fifty percent (50%) interest, Klondike Gold contributed the lease, water license, mining permit and exploration data to the joint venture and Yukon Inc. contributed $1,000,000 in funding to acquire equipment and provide working capital. Further particulars of the Joint Venture Agreement are set out below under the heading " Indian River Placer Property - Interest in the Property ".

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Properties

Although Klondike Gold has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee Klondike Gold’s title. Properties may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

Klondike Gold holds 20 mineral property interests, of which three are located in the Yukon Territory, fifteen in British Columbia, one in Ontario and one in Portugal. The bulk of these claims are held for future exploration and possible development and Klondike Gold may conduct minor work programs on them from time to time in order to satisfy the assessment work requirements of the jurisdictions in which they are situated in order to keep the claims in good standing. During 2012, Klondike Gold incurred exploration expenditures of $303,526 on programs to satisfy the assessment work requirements on certain of these claims to maintain them in good standing.  As these properties are simply being maintained for future consideration, no further disclosure regarding these properties is set out herein.

Klondike Gold's principal focus is on the exploration of the Lone Star Property situated in the Dawson Mining Division of the Yukon Territory, for which Klondike Gold provides further disclosure below.Klondike Gold has also entered into a joint venture for the exploration and development of the Indian River Placer Property situated in the Dawson Mining Division of the Yukon Territory, with respect to which, further information is also provided below.

Lone Star Property

Location and Access

The Lone Star Property is comprised of a group of 728 lode mineral claims (quartz claims) and 14 Crown Grants of mineral rights covering an area of 13,740 hectares located approximately 20 kilometres southeast of Dawson City, Yukon Territory in the Dawson Mining Division of the Yukon Territory. The claims cover the region from Eldorado Creek to Bonanza Creek and north to Boulder Creek, being much of the historic Klondike Gold Fields discovered in, and actively pursued since 1896.  Included herein as Figure 1 and Figure 2 are a location map and claims map for the Property. A list of the claims and Crown Grants setting out, amongst other things, their location date and expiry date is attached hereto as Exhibit "99.5".

The Klondike Gold Fields have been the target of prospectors and placer gold miners since 1896, therefore, the region is very accessible by road and trail. Dawson City is approximately 480 kilometres north from Whitehorse, the capital of the Yukon Territory, along the Klondike Highway, a completely sealed two-lane road. Dawson City offers normal town facilities such as hotels, restaurants, grocery, clothing and hardware stores, garage and engineering supplies and two bulk fuel depots. The Bonanza valley has summer maintained graded gravel road linking it with the Klondike Highway. Eldorado Creek has a gravel mining road running approximately 26 kilometres from Dawson City, and many of the ridges on the Property are traversed by four wheel drive trails.

Interest in the Property

Originally Klondike Gold held a 100% legal and beneficial interest in the Lone Star Property. Pursuant to an earn-in agreement granted by Klondike Gold, Klondike Star earned a 55% beneficial interest in the Property as a result of work it carried out on the Property between 2004 and 2007,. In June, 2011, Klondike Gold and Klondike Star agreed to collectively grant an option to Lonestar Gold Inc. ("Lonestar”) to acquire up to a 100% interest, legal and beneficial, in the Property. Lonestar is able to acquire its interest in the Property in increments by paying Klondike Gold and Klondike Star, according to their respective percentage of beneficial ownership, as follows:

First Option, 50% undivided interest in and to the Lone Star Property:

• Issue 4,000,000 common shares; (issued);

• Incur a minimum $750,000 in expenditures on the Lone Star Property on or before May 30, 2012 (completed);

• Incur an additional $2,000,000 in expenditures on the Lone Star Property on or before May 30, 2013 (completed);

• Issue on or before May 30, 2013, an equal number of shares issued by Lonestar for each equity financing conducted. (completed - no equity financings conducted).

Second Option, additional 25% undivided interest in and to the Lone Star Property:

• Incur an additional $15,000,000 in expenditures on the Lone Star Property on or before May 30, 2014

• Issue on or before May 30, 2014 an equal number of shares issued by Lonestar for each equity financing conducted.

• Incur an additional $8,000,000 in expenditures on the Lone Star Property on or before December 31, 2014

• Issue on or before December 31, 2014 an equal number of shares issued by Lonestar for each equity financing conducted.

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Third Option, additional 25% undivided interest in and to the Property:

• Complete a bankable feasibility study on the property on or before December 14, 2014

• Pay cash or in shares an amount calculated as: the number of total proven troy ounces of gold identified on the Property by a gold price factor.

On December 29, 2011, Klondike Gold completed an exempt take-over bid under Canadian securities laws to acquire a majority interest in the shares of Lonestar, a privately held British Columbia company. Klondike Gold invited the shareholders of Lonestar to tender their shares for purchase through the issuance of three Klondike Gold shares for each common share of Lonestar tendered and accepted by Klondike Gold. Klondike Gold issued 20,709,999 common shares in its capital to purchase the 6,903,333 common shares of Lonestar that were tendered and accepted by Klondike Gold. The acquisition increased Klondike Gold's holdings in the shares of Lonestar to 8,703,333 or approximately 80% of the issued share capital of Lonestar. Accordingly, Klondike Gold’s audited financial statements for the year ended February 29, 2012 provided in this Form F-4 include the financial position and operating results of Lonestar on a consolidated basis. Klondike Star did not tender its 2,200,000 shares in Lonestar to Klondike Gold's share exchange offer and, accordingly, holds the remaining approximately 20% interest in Lonestar.

Lonestar has provided notice to Klondike Gold and Klondike Star that it has completed the requirements pursuant to its option agreement to acquire a 50% interest in and to the Lone Star Property. Accordingly, at the date of this filing, the interests in the Property are: Lonestar 50%, Klondike Star 27.5% and Klondike Gold 22.5 %. Klondike Gold holds approximately 80% of the issued and outstanding shares of Lonestar and Klondike Star holds the remaining approximately 20%. Should Klondike Gold acquire control of Klondike Star pursuant to the share exchange offer set out herein, that would result in management of the Lone Star Property being consolidated in Klondike Gold.

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Claims Acquisition and Assessment Requirements

Quartz (or lode) claims in the Yukon Territory are acquired by staking the desired area with corner posts, then filing the claim for recording with the Department of Energy Mines and Resources for the Yukon Territory. If the filed claim is accepted for recording, the registered owner must carry out sufficient work each year thereafter, and file it as assessment work, or pay cash in lieu ($100 per claim), to maintain the claim in good standing. Quartz claims held by the same owner that are contiguous can be grouped so that work carried out on one claim can be applied to assessment requirements on any claim in the group. Excess work carried out in one year can be applied to qualify claims forward for up to four years.  With the work that has been carried out on the Lone Star Property, the Quartz claims have all been extended to at least 2017.

You cannot file assessment work with respect to Crown Grants, instead annual taxes must be paid to the Yukon Government of $100 per grant. The Lone Star Property includes 14 Crown Grants which are in good standing until May 2014. Any exploration work carried out on Crown Grants cannot be applied to Quartz claims.

Regulations and Permitting

Hard rock exploration in the Yukon is governed under the Quartz Mining Act (the "Act") and the Quartz Mining Land Use Regulation (the "Regulations") promulgated there under. The Act and the Regulations are administered by the Mining Land Use division of the Yukon Department of Energy, Mines and Resources.

The Lone Star Claim block is comprised of Quartz (hard rock) claims and Crown Grants. When exploring on Quartz claims the type of activity determines the level of permitting required. A Class 3 license is the highest level available for exploration activities.  

To obtain a Class 3 license, one must submit a proposal of work to the Yukon Environmental and Socio-economic Assessment Board (YESAB) which is responsible for implementing the Yukon Environmental and Socio-economic Assessment Act (YESAA) legislation and regulations. The Lone Star claim block exploration activities are covered under license LQ00128, which is valid from June 19, 2004 to June 18, 2014 and will cover the current exploration season.  Application for a new license is scheduled to begin in the fall of 2013. YESAB estimates that new applications can be processed in 42 days.

Prior to work being undertaken, a Pre-Season report must be submitted annually to the Mining Land Use office in the district in which the work is to take place two weeks before the commencement of exploration activities. Type of work activities and locations of proposed work are required.

Statements of Work detailing work activities and expenditures must be filed on claims prior to expiration deadlines.  This is to be followed with a detailed Assessment Report documenting results and conclusions based on exploration activities. All documentation and filings are required to have work applied to claims and to maintain their good standing.

In addition to a Class 3 License, the area covered by permit LQ00128 also has a Type B Water License, QZ04-067 which expires June 18, 2014.  This license was obtained from the Yukon Water Board and is pursuant to the Waters Act and Water Regulation . The license was obtained to facilitate the operation of a bulk sample mill and is beyond the scope of most exploration activities (and beyond the scope of 2013 exploration work). Most exploration activities satisfy requirements by submitting a Notice of Water Use to the Yukon Water Board.

Should Klondike Gold identify a mineral resource on the Property, complete a feasibility study that indicates that the identified minerals can be economically extracted and processed, and prepare a mining plan, Klondike Gold would then be in position to make application under the Act and Regulations for a mining permit for the Property. The time frame to secure such a permit is not predictable in advance, as the requirements to be satisfied will depend on the mineral resource to be extracted and the proposed mining and processing methods to be employed. The Yukon Government recognizes that mining forms a significant part of the economy of the Yukon Territory and encourages its development.

Lone Star Property Geology:

The Lone Star Ridge is underlain by quartz and feldspar augen-bearing quartz-muscovite schist (unit Psa) and muscovite-quartz schist (unit Psqm) of the Permian Klondike Schist Assemblage. This unit has a complex deformation history with at least four phases of deformation (D1-D4). The 2012 excavation of the Boulder Lode open cut has led to a significant increase in understanding the relationship between deformation and the gold mineralization.

In the Eldorado-Bonanza area the first phase of deformation consisting of ductile completely iscolinal folding is rarely observed. More common is the S2 i.e, compositional layering transposed by F2 folding. The attitude of S2 foliation in the Eldorado-Bonanza area describes a ridge scale macroscopic antiformal structure whose northeast limb is sheared by a thrust

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fault low on the northeast side of the Lone Star Ridge. This is indicated by sheared serpentinite, soapstone and graphitic phyllite encountered during the 2004 trenching and has been mapped as a thrust fault.

The third phase of deformation (D3) folds S2 with generally tight similar style folds with a northwest trend. Phase 4 deformation (D4) is conjugate angular kink folds and possible macroscopic warping (km scale) of the penetrative foliation. This produced pervasive folding and complex refolded folds which may appear as two conjugate sets: north to northeast and east to southeast.

Gold mineralization is in shallow dipping sheets. This shallow dipping system is somewhat similar to that of the Veronika, 27 Pup and Nugget prospects. How significant the gold mineralization disseminated in schist without veins is not certain at present. It is possible that the quartz vein system derived its material from a very local syngenetic source. This is consistent with observed syngenetic base metal and silver mineralization within the Klondike Schist. Interpretation of drill hole data and surface mapping has shown that the F3 and F4 folding of the quartzite/schist boundary produces an interference pattern of classical ‘egg carton’ geometry and that the enriched mineralization is contained within such a dome of undulating D2 and D3 folding on a 100 to 200 meter scale. This structural work may be used to guide future drilling in the immediate Lone Star area.

Moving southwest down slope towards Eldorado Creek the Buckland to Nugget trend consists of locally gold-bearing quartz veins cutting strongly deformed muscovite and muscovite-quartz schist (unit Psqm) of the Permian Klondike Schist Assemblage. This area contains significant high grade results from work by previous operators and Klondike Gold views the possibility of high grade quartz veins over this 1000 m strike length as being very positive.

The west side of Eldorado Creek is underlain by strongly deformed, blocky weathering, quartz augen-bearing quartz-muscovite-chlorite schist (unit Psa) with isoclinal infolds or interlayers of muscovite-quartz schist and carbonaceous phyllite (unit Psqm) and can be found from Adams Creek to the northwest down to Chief Gulch to the southeast. A number of narrow, southwest-dipping shear zones cut the schist as well as several small dykes of quartz-feldspar porphyry (unit eTqfp).

The Violet Ridge on the western boundary of the Lone Star Property contains several massive white quartz-barite veins cutting flaggy, quartz and feldspar augen-bearing, quartz-muscovite schist (unit Psa) of the Permian Klondike Schist Assemblage. The rock samples show quartz veining and stock working with common pyrite and limonite with local galena, chalcopyrite, and barite. The mineralization appears to be in at least two parallel trends with both yielding soil samples that are anomalous for gold and extending over four kilometres between the Violet and 310 Zones.

Work Completed up to and including 2011:

The Lone Star Property has a long history starting with the 1896 gold rush and contains many active placer claims. It also has two past producing mines, the Lone Star mine (Boulder Lode) which operated from 1911-1914 and the Violet mine which was active in 1907.

After the closing of the Lone Star mine in 1914, no significant work was done on the property until 1960-1961 when the claims were explored with bulldozer trenching and sampling as well as 180 m of diamond drilling and 84 m of churn drilling. Activity again ceased until 1980 when Klondike Ken Ventures Incorporated explored the property with geochemical sampling, a resistivity survey and trenching in 1980-81, geological mapping in 1983 and 1984 and geochemical sampling and rock sampling of nearby old workings in 1984. In 1985, Dawson Eldorado drilled 6 percussion holes (183 m). Between 1986 and 1994 first Arbor Recourses then Kennecott Canada Inc. as part of an option agreement with Arbor conducted exploration on the property. This included multiple geophysics grids and 196 drill holes consisting of 13,075 m of RC and percussion drilling and 8094 m of diamond drilling. In addition approximately 220 trenches were dug and over 4000 trench samples assayed as well as over 5000 soil samples across the property. The majority of the work was concentrated around the Boulder Lode and the Nugget to Buckland Zone between Gay Gulch and 27 Pup which accounted for 68 and 63 drill holes respectively.

In 1995 Kennecott terminated its option agreement with Arbor Resources who changed their name to Klondike Gold Corp. in 1996. Very little work was conducted on the property from 1996 to 2003 until Klondike Gold Corp entered into a joint venture with Klondike Star Mineral Corp. in 2004.

Between 2004 and 2008 Klondike Star drilled 66 diamond holes and 6 percussion holes totaling 9291 m. Fifty nine of the drill holes were located on the Lone Star Ridge in the Boulder Lode area while a further 7 holes tested the Buckland to Nugget trend. Approximately 35 trenches were dug and numerous historic trenches were cleaned out and re-assayed with over 1600 samples collected as well as over 2500 soil samples. The soil sampling was concentrated on the eastern part of the property in areas that had seen very little previous work. A bulk sampling program was also conducted on selected targets between 2005 and 2007 in areas identified by geologists as having anomalous mineralization. In order to compare the effectiveness of the bulk sampling each sample has a corresponding set of chip samples to test the difference between bulk and conventional sampling.

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In 2011 a limited exploration program was conducted by Klondike Gold and included trenching and soil and rock sampling along the Lone Star ridge road. In addition, select trenches and the historic Boulder Lode were examined to investigate the relationship of structure to gold grade. These studies led to the re-excavation of the Boulder Lode open cut in 2012 where an extensive sampling program of 314 channel samples identified mineralization in both the flat lying quartz veins and the host schist. The relationship between mineralization and the complicated structure of the area was also examined and a structural model was developed that may be used to guide future drilling in the immediate Lone Star area.

A limited drill program of four holes totaling 1381m was also conducted in addition to the 254 trench samples and 1306 soil samples. Much of the soil sampling was concentrated in the area surrounding the historic Violet mine where sharp soil anomalies delineate at least two parallel vein systems trending northwest in the direction of the 310 Zone over a distance of at least 3.6 km.

Work Completed in 2012:

The exploration on the Lone Star Property during 2012 used a systematic approach to evaluate the potential of known targets and explore for new gold mineralization. The winter 2012 data review brought together over 30 years of data into a usable format and drove 2012 exploration priorities.

There are four high priority targets on the Lone Star Property:

1) The Boulder Lode on top of Lone Star Ridge;

2) The Nugget to Buckland trend midway up Lone Star Ridge with possible extent of greater than 1.1 km and significant past high grade results;

3) The Violet Ridge trend with possible extent of 3.6 km from the historic Violet mine to the 310 Zone; and

4) The underexplored areas of the property which have significant extensive ongoing placer production.

New understanding of the mineralization at the Boulder Lode has been facilitated by the excavation and sampling of the 100 year old open cut in June 2012 and by structural and lithological mapping by academic consultants Dr. Doug Mackenzie, Dr. Jim Mortensen, and Dr. Timothy Liverton. This understanding of the Boulder Lode gives evidence for two complementary types of significant gold mineralization:

1) Shallow dipping stacked quartz vein system visible in the 2012 Boulder Lode excavation with local thickness of 8 plus metres. The results of channel and other sampling conducted indicate that this mineralization dips to the northeast into an area with very limited historical drilling and coincides with an area of favorable host lithology postulated by Dr. Jim Mortensen. Further investigation by drilling into the down dip extension of this mineralized unit is recommended.

2) Contouring and lithological mapping used previous drilling and trench data to generate an exploration model that shows gold enrichment in a subunit of the Klondike schist on the anticlines (structural high points) of undulating D ₃ and D ₄ folding on a 100 to 200 meter scale. Late D ₄ extensional deformation appears to have preferentially mineralized these anticlines. This has implications for new target areas to the east and north of the Boulder Lode.

Geotechnical drilling in the Pioneer Zone southeast of the Boulder Lode was conducted in April and May to increase geological understanding of the relationship of the Boulder Lode to the Pioneer as well as to test induced polarization geophysical anomalies to the north of the Pioneer Zone. The program provided insights for future exploration; a stronger IP anomaly north of 12DDH003 is a possible target when taken in context of new lithological and structural understanding of the Boulder Lode. The stronger of the two anomalies was not drilled due to access issues during the early spring thaw.

The Nugget to Buckland trend was investigated in 2012 through mapping and rock sampling. This investigation by Klondike Gold’s technical team has found that the trend of the upper Nugget Zone can be extended on surface. Results support future drilling to test the Nugget Zone at depth and along strike towards the Buckland Zone quartz veins. Active placer mining in Oro Grande Gulch suggests a source for gold in the area where the Buckland and Nugget Zones are assumed to intersect. Nugget and Buckland Zones have significant high grade results from work by previous operators.

The Violet Ridge trend from the historic Violet mine to the 310 Zone was explored by mapping, rock sampling, and soil sampling in 2012. The results of this work in addition to further research on historical results have better defined the Violet Ridge trend mineralization. The mineralization appears to be in at least two parallel trends, both yielding soil samples that are anomalous for gold. The veins have vertical extent of approximately 400 m in the area of the 310 Zone on the ridge down to the base of Nugget Gulch where the vein was observed to be steeply dipping to the northeast. The four plus kilometer extent and vertical extent of the Violet Ridge trend with the possibility of high grades make this an attractive target for Klondike Gold.

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The foregoing exploration was carried out at a cost of $2,197,405, of which $1,074,941 was incurred with respect to geology and mapping of the property and $875,599 was incurred in conducting drilling on the property. A further $41,595 was expended in locating and staking additional claims to expand Klondike Gold's holdings based on the interpretation of results received from the exploration programs.

The technical team has recognized that portions of the 137.6 km2 Lone Star Property remain under explored. The newly discovered Boy Zone 400 by 900 m soil anomaly illustrates the possibility of finding new zones on the Lone Star Property. Further promising early stage exploration target areas include:

1) The southeast portion of the property in the area of Little Blanche and Quartz Creek where there is significant and ongoing placer gold production.

2) Northwest of French Gulch to Adams Creek area along strike with the Violet Ridge trend where there has been little recent work and placer production that was some of the richest in the Klondike Gold Fields and continues to present.

Proposed 2013 Work Program

As seen in the description of the "Work Completed in 2012" above, there were a number of positive results obtained from the work carried out on the Lone Star Property along with the recognition of the technical team that a number of areas of the Property remain under explored. For the 2013 program, Klondike Gold intends to focus on following up on the results obtained from the areas set out below:  

1.

The Boulder lode excavation results warrant further trenching in the area and drilling.

2.

Violet ridge showed a possible extent of gold mineralisation of up to 3.5 km and this early prospect warrants further soil sampling, trenching, geophysics (mag/VLF) and drilling to confirm the extent and grade of the zone.

3.

Investigation of the Nugget and Buckland zones indicate that they may be continuous and grades of historical work are encouraging enough to conduct further trenching and confirmation drilling.

4.

The Boy soil anomaly results warrant trenching and confirmation drilling.

5.

Several other lesser prospects on the property warrant further prospecting, sampling and contingent trenching.

The 2013 budget and work program is designed to advance the trenching and geophysics recommendations arising from the 2012 work. Funds are on hand to carry out this work program. As part of a private placement of its securities undertaken in February 2013, Klondike Gold raised approximately $330,000 in subscriptions to the flow-through portion of the private placement. The funds raised from flow-through subscriptions must be used to incur Canadian Exploration Expenses as that term is defined for purposes of the Income Tax Act , Canada. The proposed work on the Lone Star Property, other than the academic involvement, would qualify as Canadian Exploration Expenses. Klondike Gold would supplement the flow-through funds from its general working capital to fully fund the proposed program.

The 2013 work program on the Lone Star Property has been developed and will be supervised by Iain Mitchell, B.Sc. Geology with Honors, who is the Resident Geologist for Klondike Gold.

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THE LONE STAR PROPERTY IS WITHOUT KNOWN RESERVES AND ANY PROPOSED WORK PROGRAM WILL BE AN EXPLORATORY SEARCH FOR GOLD.

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Indian River Placer Property

Location and Access

The Indian River Property is comprised of a group of 188 placer claims extending approximately 60 miles along the Indian River at the confluence with Montana Creek approximately 35 kilometers south east of Dawson City, in the Dawson Mining Division of the Yukon Territory. Included herein as Figure 3 is a location map also showing the claims comprising the Property. A list of the placer claims setting out, amongst other things, their location date and expiry date is attached hereto as Exhibit "99.6".

Access to the Property is by means of two and four-wheel drive trucks and passenger vehicles on roads suitable for all-weather travel during the primary April to November mining season. Travel time from Dawson City is approximately one hour. Dawson City is approximately 480 kilometres north from Whitehorse, the capital of the Yukon Territory, along the Klondike Highway, a completely sealed two-lane road. Dawson City offers normal town facilities such as hotels, restaurants, grocery, clothing and hardware stores, garage and engineering supplies and two bulk fuel depots.

Interest in the Property

Klondike Star is the registered owner of the Indian River Placer Property, subject to a gross royalty of five percent of any metal or mineral produce from the property, payable to the previous owners.  In June 2012, by way of a Royalty & Lease Agreement, Klondike Star granted an exclusive lease of the mining rights to the Indian River Placer Property to Klondike Gold and retained a further gross royalty of five percent of any metal or mineral produced from the Property. The agreement also provided that Klondike Gold could operate under the existing water license and mining permit held by Klondike Star and Klondike Star would also provide the extensive data on the Property that it acquire from the exploration and drilling work previously conducted on the Property. Klondike Gold agreed to commence work immediately on the Property. The lease is for a term of ten years or so long as Klondike Gold maintains commercial operations on the Property.

Effective July 18, 2012, Klondike Gold entered into a Joint Venture Agreement with a private company incorporated under the laws of the Yukon Territory, 46799 Yukon Inc. ("Yukon Inc."). Pursuant to the Joint Venture Agreement, Klondike Gold agreed to contribute the mining rights to the Indian River Property together with the water permit, mining permit and the extensive data it received under its agreement with Klondike Star. Yukon Inc. agreed to provide $1,000,000 in funds to purchase equipment and provide working capital to commence the development of the Property. In consideration for each of their contributions, Klondike Gold and Yukon Inc. each earned a 50% interest in the joint venture. Under the terms of the Joint Venture Agreement, Yukon Inc. has the right to appoint the operator of the joint venture and will receive back first from 75% of the net income from production, if any, the $1,000,000 it contributed. After each making its initial contribution, any further funds required to develop the Property will be the responsibility of each party as to its 50% interest. Should a party fail to contribute when required, its interest in the joint venture would be subject to dilution on an industry standard formula.

Coincident with signing the Joint Venture Agreement, Klondike Gold entered into an Option Agreement with Yukon Inc. whereby Klondike Gold granted Yukon Inc. the sole and exclusive option to acquire all of Klondike Gold's interest in the joint venture for a lump sum payment of $2,000,000. Yukon Inc. would assume the obligations to pay the underlying 10% gross royalties from production. Should Klondike Gold be successful with its share exchange offer and acquire control of Klondike Star and Yukon Inc. subsequently exercise its option, Klondike Gold has agreed with Yukon Inc. that the gross royalty on the Indian River Property will reduce to 6%.

Klondike Gold and Yukon Inc. incorporated a private Yukon company, KG46 Holding Inc. ("KG46"), owned 50% each by the joint venture parties. On July 26, 2012, Klondike Gold and Yukon Inc. entered into an Operating Agreement with KG46 whereby KG46 was appointed the operator of the Property under the joint venture. The operator will be an independent contractor and will report to and carry out the instructions received from the Management Committee as constituted pursuant to the Joint Venture Agreement.

Claims Acquisition and Assessment Requirements

Placer claims are granted under the Placer Mining Act (Yukon) (the "Placer Act") and the Placer Mining Land Use Regulation (the "Placer Regulation") promulgated thereunder. Ownership of a placer claim confers exclusive rights to the owner for exploration and mining of placer gold within the boundaries of the placer claim. Prospecting leases are granted under the Placer Act for the purpose of testing and prospecting ground for placer deposits. A prospecting lease does not confer a right to mine, but provides an exclusive right to the lease owner to convert the ground to placer claims within a maximum three-year time period.

To retain ongoing rights to a placer claim under Yukon law, the holder of a claim is required to pay cash or incur exploration expenditures that can be credited to the property as assessment work in the amount of $100 per claim annually. To retain the ongoing rights to a lease, the holder must carry out a minimum of $1,000 in expenditures for each mile of a lease each year

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and provide satisfactory proof of such expenditures to the Department of Energy Mines and Resources. If the expenditures are properly incurred, a lease can be extended twice for an additional year each time. During the term of a lease, the holder may at any time apply to convert the lease, or any part of it, to placer claims.

As with lode claims, placer claims, or placer leases, are acquired initially from the government by staking the desired area with two posts, then filing the claim, or lease, with the Mining Recorder`s Office of the Department of Energy Mines and Resources for the Yukon Territory.

Klondike Star owns 188 placer claims that have been leased to Klondike Gold and contributed by Klondike Gold to the joint venture. During the summer of 2012, the joint venture staked two placer leases covering a total of three miles adjacent to the previously drilled part of the Property. If these leases are converted by the joint venture, they will result in thirty-two placer claims to be added to the holdings.   

For purposes of the annual assessment work requirements to keep claims in good standing, claims held by one owner that are contiguous can be grouped and work conducted on any one claim in a group can be applied to any of the other claims in the group to ease the administration of the Property. Currently, the claims comprising the Property have had assessment work filed on them qualifying the claims until dates ranging from March 7, 2014 through to May 26, 2014.

Regulations and Permitting

Placer exploration and mining in the Yukon is governed under the Placer Act and the Placer Regulation. Placer mining involves the use of substantial amounts of water and, accordingly anyone applying for a mining permit, must also obtain a water licenselicense under the Waters Act (Yukon) and the Waters Regulation .  The granting of placer mining permits and related water licenselicenses is administered by the Yukon Water Board.

In 2008, Klondike Star applied for and was granted a Type B water use licenselicense for a placer mining undertaking under license number PM06-546 (the “Water License”) granting the right to use up to 36,000 cubic metres of water per day from Montana Creek, a tributary of the Indian River. Coincident with the grant of the water license, the Yukon Water Board also approved, under number AP06546, a Class 4 Placer Land Use Operating Plan (the “Placer Mining Permit”) for the placer claims held by Klondike Star. The Placer Mining Permit incorporates the operating conditions set out in the Placer Regulation. In considering approval of the Placer Mining Permit, the Yukon Water Board received and considered submissions from the Yukon Department of Energy Mines and Resources, Client Services and Inspections Branch; the Department of Energy, Mines and Resources, Mining Land Use Branch and Fisheries and Oceans Canada. The application was also required assessment under the Yukon Environmental and Socio-economic Assessment Act (“YESAA”). The YESAA Decision Document noted that the issue of the Water License was not contrary to the terms and conditions included in their Decision Document and they did not propose any alternative operating conditions to those set out in the Placer Regulation. The Water License and the Placer Mining Permit were effective April 21, 2008 and both expire on May 15, 2017.

Pursuant to the Placer Mining Permit, amongst other conditions applicable thereto, the operator on the Property must contact the Department of Energy, Mines and Resources, Client Services and Inspections Branch, very year before beginning operations on the Property and at least two weeks prior to leaving the site at the end of every season.

The operating conditions have very specific requirements regarding stripping of placer deposits and reclamation and re-vegetation of the Property on an ongoing basis. No bond was required to be posted in connection with the Placer Mining Permit.

Indian River Property Geology

The Indian River valley forms the southern edge of the boundary of the historic Klondike gold fields. The Indian River area is underlain by mainly Paleozoic metasedimantary rocks – Klondike Schist and Nasina Assemblage – and by metaigneous rocks belonging to the Yukon-Tanana Terrain. Minor amounts of ultramafic rocks believed to be part of the Slide Mountain Terrane also occur locally which were juxtaposed with the Yukon-Tanana Terrain by regional scale thrust faulting in Early Mesozoic time. Gold bearing quartz veins were emplaced during the early Cretaceous Period and then the area was unconformably overlain by post accretionary and volcanic rocks during the mid to late Cretaceous Period.

The sediments that lie unconformably over the Klondike Schist consist of a sequence of conglomerate, sandstone, carbonaceous shales and the occasional coal seam. These sediments are overlain and intruded by andesitic lavas. The sedimentary assemblage has been named the Indian River Formation and may be as old as mid Cretaceous Period. The intermediate volcanics are considered to be equivalent to the Carmacks Group, which are Late Cretaceous Period.

The Indian River area has undergone a period of uplift and erosion in the Pliocene Period but has not been glaciated since this event occurred.

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Klondike Star acquired the Property to explore for placer deposits of gold that have been formed by natural mechanical processes of erosion, often involving water and gravity. Placer gold consists of fragments of gold that have been eroded from their original hard rock sources. The fragments can range in size from large pieces (gold nuggets) to very fine grains of gold (flour gold). Gold has a specific gravity of 19.3 (it is 19.3 times heavier than water) which makes it heavier than most materials it is found with, such as quartz, which has a specific gravity of 2.7. Gold is highly resistant to weathering and is able to endure mechanical processes lasting thousands of years that resulted in the eventual deposition of gold at the bottom of the loose material it is found in on the earth’s surface. Because of the erosive effect of water on the hard rock it passes through, placer gold is often found in steam beds in areas of gold bearing rock.

From exploration conducted in the Indian River area, it is believed that the ancient Indian River flowed through the placer claims comprising the Property, but has now shifted locations to flow approximately one kilometer to the north. The old river bed forms what are referred to as bench placer deposits, or terraces, as they are found above and away from the existing stream channel.

The Indian River placer deposits are grouped into five classes based on thickness, grain size, composition, age and geomorphology.  The deposits along Montana Creek fall into the Placer Deposit type 4 which forms the fill of the creek valleys and is therefore assigned to the Local Creek Gravel unit.  The fill consists of about 2 m of slightly muddy sandy gravels and is dominated by igneous and metamorphic clasts.  The gravel is thought to be Pliestocene in age and represents paleofloodplain deposits of a creek.

The Indian River Placer Property covers over 60 miles of placer claims and leases along the southern edge of the Klondike placer mining region at the confluence of Indian River and Montana Creek, both placer gold producing drainages.

Although the placer claims forming the Property have never been mined, placer deposits in the Indian River watershed have been mined and re-mined on and off for more than a hundred years, making it one of construction, about 60% of the more important placer areas in the Yukon.

Work Completed up to and including 2011

Klondike Star acquired the Property in 2005, identified a target area on the Property and commenced a systematic drilling program with a track mounted auger drill to test the property for evidence of gold mineralization. The target area was wedge shaped starting at a width of 300 metres (984 feet) and broadening to a width of 1,500 metres (4,921 feet) and extended for a distance of three kilometres (1.9 miles). Klondike Star conducted the drilling along 15 lines 1,000 feet apart with the drill holes along each line being 100 feet apart. From 2005 through 2007, Klondike Star drilled 602 holes for a total of 4,566 metres (14,797 feet) over the Property. Gold mineralization was identified in nearly all the holes drilled in the target area.

Auger drilling is useful for determining if mineralization exists but it cannot be relied upon to yield accurate results regarding the concentration of gold in the holes. It is useful for determining the depth of overburden that will have to be removed to reach the layer of pay gravels and the depth of the pay gravels above the bed rock.

From its drilling results, Klondike Star was able to determine that gold values were unevenly, but consistently, recovered across the entire width and breadth of the target area, that the overburden was on the average 7.7 metres (25 feet) thick with the bottom 1.5 metres (5 feet) consisting of targeted pay gravels.  From gold samples recovered, Klondike Star was able to determine that the placer gold on the Property was 82% pure gold. The target zone remains open for expansion to the east and south.

With the extensive drilling results in hand, in 2008, Klondike Star made application for, and was granted, both a Water License and Placer Mining Permit for the Property. In 2008, Klondike Star exhausted its working capital and was unable to raise additional funds to finance further development of the Property.

Work Completed in 2012

After the formation of the Joint Venture to develop the Property, Yukon Inc. advanced the funds to acquire the necessary equipment to undertake the further development and, if warranted, mining of the Property. Most of the necessary equipment was located at a nearby placer operation that was shut down and all equipment offered for sale. The equipment was acquired for $525,000 (including taxes) and transported to the Property.  The Klondike Gold and Yukon Inc. formed a Yukon company, KG46 Holdings Inc., in which they each held a 50% interest, to be the operator of the joint venture. Work on the Property commenced in late July, 2012. A track-mounted auger drill was employed to assist with locating the camp infrastructure and for grade-control purposes. Two Caterpillar D9N bulldozers arrived on the property starting on-site preparation and overburden stripping while other mining and processing equipment was mobilized to the property. Stripped overburden gravels and sterile gravel layers where used to improve the internal road system and for building an 800 meter causeway to support a pipeline to carry water to the reservoir. A water reservoir and two settling ponds were excavated and the processing machinery put in place. 20,000 cubic metres of pay gravels from the areas excavated were processed, in order to provide silt to seal the settling ponds. A solid log kitchen/diner was constructed and the kitchen equipment installed. Bunk

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houses and a wash house purchased in Dawson City and Whitehorse were put in place and a septic-clearing system was completed to deal with waste disposal.The camp and processing facilities were completed and tested by early October. The Joint Venture recovered in the order of 6,000 grams of gold from the 20,000 cubic metres of material processed which was an average of .333 grams per cubic metre. When the camp was shut down and winterized, the Joint Venture had ramped up 10,000 cubic metres of gravel on a pad by the processing plant to be ready for the 2013 season and a further 25,000 cubic metres had been stripped and were ready to be extracted for processing.  

In addition to the $1,000,000 in funds provided by Yukon Inc., in completing this work, Klondike Gold advanced a total of $268,000 and the joint venture received in the order of $225,000 for the sale of the recovered gold.

The Planned Program for 2013

The operating plan for the 2013 work season is to continue with the stripping, extraction and processing of pay gravels from the Property that was started in the summer of 2012. To commence operations for 2013, the Operator has estimate that a $500,000 advance to be delivered to the Operator as to $250,000 by each of the Joint Venture parties will be required. The advance will be used to acquire additional equipment by purchase and/or lease and to provide start up working capital. The Operator has prepared an Operating Plan for 2013 which is set out below:

 
  Assumptions to 2013 Operation Plan:

1.

For purposes of the Operating Plan, revenue calculations are based on a gold price of $1,200 per ounce with the placer gold recovered being 80% pure, giving a net value of $960 per ounce of recovered gold.

2.

The assumed recovery rate is .333 grams of placer gold per cubic metre of gravels with 31.1 grams per ounce and at $960 per ounce gives a recovery per cubic metre of gravels of $10.28.

3.  

It is estimated that 200,000 cubic metres of gravel can be processed during the season.

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A crew attended at the camp at the end of April to commence the set up for the season, however, extreme snow conditions and unseasonably cold weather, which persisted through most of May, meant that the 2013 season  could not get underway until June. The facility is expected to be able to operate until mid to late September before being shut down and winterized.

There can be no certainty that the assumed values employed in preparing the operating Plan will be able to be realized by the Joint Venture in carrying out its operations for the season. In the past year the price of gold has experienced significant fluctuations and could experience further declines in its price. As stated earlier, placer gold deposits are known to render inconsistent values over a property. There can be no certainty that the Joint Venture will be able to recover the assumed rate of .333 grams of placer gold per cubic metre of gravels processed. With the possibility of machine break downs and unpredictability of freezing temperatures that could shut operations down earlier than planned, there can be no certainty that the operation will be able to process 200,000 cubic metres of gravels during the available season.

The Operation Plan will be carried out by KG46, the Operator for the Joint Venture. KG46 has assembled a crew that are all highly experienced in conducting placer mining operations in the Yukon, who will be working under the supervision of Marshall Mintz who has over 30 years’ experience in running placer operations in the Yukon and in South America. Geological over site, as required, is available from the geological staff of Klondike Gold.

THE INDIAN RIVER PROPERTY IS WITHOUT KNOWN RESERVES AND ANY PROPOSED WORK PROGRAM WILL BE AN EXPLORATORY SEARCH FOR GOLD.