(An Exploration Stage Company) CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) For The Nine Months Ended September 30, 2013

Transcription

1 (An Exploration Stage Company) CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) For The Nine Months Ended September 30, 2013

2 NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument , Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements; they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The Company s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity s auditor.

3 Rye Patch Gold Corp. (An exploration stage company) Condensed Consolidated Interim Statements of Financial Position (Expressed in Canadian Dollars - unaudited) As at September 30, 2013 December 31, 2012 ASSETS Current assets Cash and cash equivalents $ 8,705,218 $ 1,867,832 Accounts receivable 21,011 88,156 Prepaid expenses 56,398 59,482 Deposits 10,551 10,467 8,793,178 2,025,937 Non-current assets Property, plant and equipment (note 4) 41,353 49,460 Mineral properties (note 5) 4,465,097 4,911,857 Reclamation bond (note 6) 281, ,685 4,788,246 5,234,002 TOTAL ASSETS $ 13,581,424 $ 7,259,939 LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 318,858 $ 724,681 Provisions for reclamation (note 7) 80,332 77,841 Due to related parties (note 10) 16,421 21, , ,465 Non-current liabilities Deferred revenue (note 5(a)) 5,853 5,664 TOTAL LIABILITIES 421, ,129 EQUITY Share capital (note 8) $ 31,700,768 $ 31,651,264 Foreign currency translation adjustment (149,721) (234,088) Reserves 4,505,484 4,233,299 Deficit (22,896,571) (29,220,665) TOTAL EQUITY 13,159,960 6,429,810 TOTAL EQUITY AND LIABILITIES $ 13,581,424 $ 7,259,939 Continuing operations and going concern (note 1) Commitments and contingencies (note 11) Events after the reporting period (note 15) The accompanying notes are an integral part of these condensed consolidated interim financial statements. They are signed on the Company's behalf by: APPROVED BY THE BOARD: /s/ Joe Kajszo Director /s/ William C. Howald Director

4 Rye Patch Gold Corp. (An exploration stage company) Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (Expressed in Canadian Dollars - unaudited) For the three months ended For the nine months ended September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012 (unaudited) (unaudited) (unaudited) (unaudited) MINERAL PROPERTY OPERATIONS Exploration costs (note 5) $ 304,526 $ 875,198 $ 585,348 $ 3,368, , , ,348 3,368,469 EXPENSES Accounting and audit (note 10) 38,064 43, , ,298 Depreciation 2,985 3,497 8,892 12,586 Insurance 7,994 7,525 21,342 22,027 Investor relations 32, , , ,835 Legal fees (note 10) 19, , , ,591 Management fees (note 10) 734,224 66, , ,772 Office and administration 46,604 86, , ,321 Rent 42,668 44, , ,213 Share-based payments (note 8) 109, , ,689 1,031,977 Travel 13,178 8,761 33,405 68,688 Transfer agent and filing fees 7,918 7,986 45,513 50,730 Wages and bonuses (note 10(e)) 317,484 67, , ,401 1,371, ,400 2,553,228 3,021,439 OTHER INCOME (EXPENSE) Interest income 15,748 10,617 20,087 31,936 Other revenue 25,135 4,430 37,649 13,280 Currency exchange loss (3,468) (12,320) (7,803) (13,434) Gain on disposal of mineral properties (note 5(f)) ,202,442 - Impairments (note 5(b)&(c) ) (789,705) - (789,705) - (752,290) 2,727 9,462,670 31,782 NET INCOME (LOSS) FOR THE PERIOD $ (2,428,731) $ (1,762,871) 6,324,094 (6,358,126) OTHER COMPREHENSIVE INCOME Foreign currency translation adjustment (205,809) (195,478) 84,367 (165,219) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD $ (2,634,540) $ (1,958,349) $ 6,408,461 $ (6,523,345) Basic earning (loss) (earning) per share for the period attributable to common shareholders (note 9) Diluted earning (loss) per share for the period attributable to common shareholders (note 9) $ (0.02) $ (0.01) $ 0.04 $ (0.05) $ (0.02) $ (0.01) $ 0.04 $ (0.05) The accompanying notes are an integral part of these condensed consolidated interim financial statements.

5 Rye Patch Gold Corp. (An exploration stage company) Condensed Consolidated Interim Statements of Changes in Shareholders Equity (Expressed in Canadian Dollars - unaudited) Share capital Reserves Number of shares Amount Share subscription Warrants Equity settled employee benefits Agent's options Total Foreign currency translation adjustment Deficit Total Balance at December 31, ,336,746 31,651,264 9 &11-1,875,998 2,107, ,793 4,233,299 (234,088) (29,220,665) 6,429,810 Shares issued for Exercise of options 110,000 49, (22,504) - (22,504) ,000 Share-based payments , , ,689 Net comprehensive income for the period ,367 6,324,094 6,408,461 Balance at September 30, ,446,746 $ 31,700,768 $ - $ 1,875,998 $ 2,379,693 $ 249,793 $ 4,505,484 $ (149,721) $ (22,896,571) $ 13,159,960 Balance at December 31, ,477,445 27,952,822 90,800 1,379,033 1,139, ,793 2,767,855 (132,362) (19,458,182) 11,220,933 Shares issued for - Private placement 7,796,301 3,352, , , ,898,150 Exercise of warrants 338, ,076 (30,800) (48,776) - - (48,776) ,500 Exercise of options 475, ,750 (60,000) - (145,250) - (145,250) ,500 Share issue costs - (301,793) (301,793) Share subscription , ,250 Share-based payments ,031,977-1,031, ,031,977 Net comprehensive loss for the period (165,219) (6,358,126) (6,523,345) Balance at September 30, ,086,746 $ 31,513,264 $ 11,250 $ 1,875,998 $ 2,025,756 $ 249,793 $ 4,151,547 $ (297,581) $ (25,816,308) $ 9,562,172 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

6 Rye Patch Gold Corp. (An exploration stage company) Condensed Consolidated Interim Statements of Cash Flows (Expressed in Canadian Dollars - unaudited) For the nine months ended September 30, 2013 September 30, 2012 Cash flows provided from (used by): OPERATING ACTIVITIES Net income (loss) for the period $ 6,324,094 $ (6,358,126) Adjustments for items not affecting cash: Depreciation 8,892 12,586 Share-based payments 294,689 1,031,977 Gain on disposal of mineral properties (10,202,442) - Impairment of mineral properties 789,705 - (2,785,062) (5,313,563) Net changes in non-cash working capital items: Accounts receivable 68,572 18,307 Prepaid expenses 3,385 (6,405) Deposits - (10,482) Accounts payable and accrued liabilities (424,599) 71,574 Due to related parties (5,925) 647 Net cash flows (used in) operating activities (3,143,629) (5,239,922) FINANCING ACTIVITIES Proceeds from share issuance, net of share issue costs 27,000 3,821,357 Share subscriptions received - 11,250 Net cash flows from financing activities 27,000 3,832,607 INVESTING ACTIVITIES Purchase of property, plant and equipment - (18,854) Mineral properties (464,611) (529,484) Reclamation bond - (100,257) Proceeds of the disposal of mineral properties 10,504,000 - Net cash flows from (used in) investing activities 10,039,389 (648,595) Effects of currency exchange rate changes on cash and cash equivalents (85,374) (14,497) Net increase (decrease) in cash and cash equivalents 6,837,386 (2,070,407) Cash and cash equivalents, beginning of period 1,867,832 7,360,494 Cash and cash equivalents, end of period $ 8,705,218 $ 5,290,087 Cash and cash equivalents consist of : Cash 4,890,823 3,640,087 Short-term deposits 3,814,395 1,650,000 $ 8,705,218 $ 5,290,087 Supplementary cash flow information Cash paid during the period for interest $ - $ - Cash paid during the period for income taxes $ - $ - Interest received $ 20,087 $ 31,936 Non-cash activities Transfer of reserve amounts upon exercise of warrants and options 22,504 - $ 22,504 $ - The accompanying notes are an integral part of these condensed consolidated interim financial statements.

7 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 1. CONTINUING OPERATIONS AND GOING CONCERN The Company was incorporated under the British Columbia Business Corporations Act on April 13, 2006 and its head office is located at Suite West Hastings Street, Vancouver, British Columbia. The Company is an exploration stage company, and its wholly owned subsidiary, Rye Patch Gold US Inc., is engaged principally in the acquisition and exploration of mineral properties in the State of Nevada, United States of America. The recovery of the Company s investment in its mineral properties is dependent upon the future discovery, development and sale of minerals, and the ability to raise sufficient capital to finance these activities, or the proceeds from the sale of these properties. These unaudited consolidated interim financial statements have been prepared on the basis that the Company is a going concern. This assumes that the Company will continue operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on obtaining additional financing through the issuance of debt or common shares. There is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These unaudited consolidated interim financial statements do not reflect the adjustments or reclassifications that would be necessary if the Company was unable to continue operations. 2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION These financial statements were authorized for issue on November 26, 2013 by the directors of the Company. Statement of compliance to International Financial Reporting Standards These condensed consolidated interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ) and interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ). These financial statements comply with International Accounting Standard 34, Interim Financial Reporting ( IAS 34 ). Basis of presentation These unaudited interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. This interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that this financial report be read in conjunction with the annual financial statements of the Company for the year ended December 31, However, this interim financial report provides selected significant disclosures that are required in the annual financial statements under IFRS. Certain amounts in prior periods have been reclassified to conform to the current period presentation. Page 7 of 27

8 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued) Basis of presentation (continued) These unaudited interim condensed consolidated financial statements follow the same accounting policies and methods of application as the annual audited consolidated financial statements for the year ended December 31, 2012, with the exception of the following new accounting standards and amendments which the Company adopted and are effective for the Company's interim and annual consolidated financial statements commencing January 1, IAS 1 Presentation of Financial Statements ( IAS 1 ) IAS 27 Separate Financial Statements ( IAS 27 ) IAS 28 Investments in Associates and Joint Ventures ( IAS 28 ) IFRS 7 Financial Instruments: Disclosures ( IFRS 7 ) IFRS 10 Unaudited interim condensed consolidated financial statements ( IFRS 10 ) IFRS 11 Joint Arrangements ( IFRS 11 ) IFRS 12 Disclosure of Interests In Other Entities ( IFRS 12 ) IFRS 13 Fair Value Measurement ( IFRS 13 ) The accounting standards and amendments to standards adopted by the Company that had an impact on financial results or require further explanation are explained as follows: IAS 1 was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with US GAAP standards. Items in other comprehensive income will be required to be presented in two categories: items that will be reclassified into profit or loss and those that will not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income remains unchanged. The adoption of the new standard did not have significant impacts to the consolidated statement of income (loss) and comprehensive income (loss). IAS 27 has the objective of setting standards to be applied in accounting for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulations, to present separate financial statements. The adoption of the new standard did not have significant impacts to the consolidated statements of financial position and the consolidated statement of income (loss) and comprehensive income (loss). IAS 28 prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IAS 28 applies to all entities that are investors with joint control of, or significant influence over, an investee (associate or joint venture). The adoption of the new standard did not have significant impacts to the consolidated statements of financial position and the consolidated statement of income (loss) and comprehensive income (loss). IFRS 7 was amended by the IASB in December 2011 to amend the disclosure requirements in IFRS 7 to require information about all recognised financial instruments that are offset in accordance with paragraph 42 of IAS 32 Financial Instruments: Presentation. The amendments also require disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32. Disclosures required under IFRS 7 have been included in Note 14. Page 8 of 27

9 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued) Basis of presentation (continued) IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that currently are special purpose entities in the scope of Standing Interpretations Committee Standard ( SICs ) 12. In addition, the consolidation procedures are carried forward substantially unmodified from IAS 27 Consolidated and Separate Financial Statements. In accordance with the transitional provisions of IFRS 10, the Company re-assessed the control conclusion for its investees at January 1, The Company made no changes as a result of this process in the current or comparative period. IFRS 11 replaces the guidance in IAS 31 Interests in Joint Ventures. Under IFRS 11, joint arrangements are classified as either joint operations or joint ventures. IFRS 11 essentially carves out of previously jointly controlled entities, those arrangements which although structured through a separate vehicle, such separation is ineffective and the parties to the arrangement have rights to the assets and obligations for liabilities and are accounted for as joint operations in a fashion consistent with jointly controlled assets/operations under IAS 31. In addition, under IFRS 11, joint ventures are stripped of the free choice of equity accounting or proportionate consolidation; these entities must now use the equity method. Upon application of IFRS 11, entities which had previously accounted for joint ventures using proportionate consolidation shall collapse the proportionately consolidated net asset value (including any allocation of goodwill) into a single investment balance at the beginning of the earliest period presented. The investment s opening balance is tested for impairment in accordance with IAS 28 Investments in Associates and IAS 36 Impairments of Assets. Any impairment losses are recognized as an adjustment to opening retained earnings at the beginning of the earliest period presented. The adoption of the new standard did not have significant impacts to the consolidated statements of financial position and the consolidated statement of loss and comprehensive loss. IFRS 12 requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. Disclosures arising from the adoption of IFRS 12 did not have significant impacts to the notes of the consolidated financial statements. IFRS 13 converges IFRS and US GAAP on how to measure fair value and the related fair value disclosures. The new standard creates a single source of guidance for fair value measurements, where fair value is required or permitted under IFRS, by not changing how fair value is used but how it is measured. The focus will be on an exit price. Disclosures required under IFRS 13 have been included in Note 14. Page 9 of 27

10 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 3. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE Standards issued but not yet effective up to the date of issuance of the Company s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective. As at September 30, 2013, the Company does not expect the impact of such changes on the financial statements to be material. IAS 32 (Amendment) Financial Instruments: Presentation IAS 32 was amended to clarify that an entity currently has a legally enforceable right to set-off financial assets and liabilities if that right is (1) not contingent on a future event; and (2) enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. These amendments are effective for annual periods beginning on or after January 1, 2014 with early application permitted. IFRS 9 Financial Instruments IFRS 9 is a new financial instruments standard that replaces IAS 39 Financial Instruments: Recognition and Measurement for classification and measurement of financial assets and fair value measurement of liabilities to address own credit risk. IFRS 9 is effective for annual periods beginning on or after January 1, 2015, with earlier adoption permitted. 4. PROPERTY, PLANT AND EQUIPMENT Computer equipment Computer software Exploration equipment Leasehold improvements Office furniture and equipment Cost As at December 31, 2012 $ 39,978 $ 7,316 $ 3,375 $ 25,254 $ 80,632 $ 156,555 Additions Currency translation adjustment ,323 2,276 Balance as at September 30, 2013 $ 40,573 $ 7,561 $ 3,488 $ 25,254 $ 81,955 $ 158,831 Depreciation As at December 31, 2012 $ (32,297) $ (3,657) $ (1,500) $ (20,516) $ (49,125) $ (107,095) Charged for the year (2,343) (1,409) (188) (711) (4,241) (8,892) Currency translation adjustment (522) (132) (52) - (785) (1,491) Balance as at September 30, 2013 $ (35,162) $ (5,198) $ (1,740) $ (21,227) $ (54,151) $ (117,478) Net book value As at December 31, 2012 $ 7,681 $ 3,659 $ 1,875 $ 4,738 $ 31,507 $ 49,460 As at September 30, 2013 $ 5,411 $ 2,363 $ 1,748 $ 4,027 $ 27,804 $ 41,353 Total Page 10 of 27

11 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES Acquisition costs Wilco-Newmont Property Gold Ridge Property Jessup Property Lincoln Hill Property Garden Gate Property LH Claims Others Total (Note 5a) (Note 5b) (Note 5c) (Note 5d) (Note 5e) (Note 5f) (Note 5g) Cumulative acquisition costs as at December 31, 2012 $ 970,385 $ 256,894 $ 2,086,102 $ 843,457 $ 271,990 $ 286,053 $ 196,976 $ 4,911,857 During the period: Holding costs 44,306 44,702 11,176 22,701 23,784-93, ,085 Land status - 1, ,125 Lease obligations 40,936-84,942 44, , ,815 Staking costs , ,586 Disposal (301,558) - (301,558) Impairment - (140,317) (649,388) (789,705) Total acquisition costs for the period 85,242 (94,592) (553,270) 69,095 23,784 (301,497) 144,586 (626,652) Foreign currency translation adjustment 32,964 10,106 76,017 28,622 9,239 15,444 7, ,892 Cumulative acquisition costs as at September 30, 2013 $ 1,088,591 $ 172,408 $ 1,608,849 $ 941,174 $ 305,013 $ - $ 349,062 $ 4,465,097 Page 11 of 27

12 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) Wilco-Newmont Property Gold Ridge Property Jessup Property Lincoln Hill Property Garden Gate Property LH Claims Others Total (Note 5a) (Note 5b) (Note 5c) (Note 5d) (Note 5e) (Note 5f) (Note 5g) Exploration expenditures (recovery) charged to operations Cumulative exploration expenditures on active properties charged to operations as at December 31, 2012 $ 5,499,699 $ 614,494 $ 803,417 $ 3,101,059 $ 3,506,933 $ 2,341,121 $ 1,192,346 $ 17,059,069 During the period: Assays 6,977 1,706-2, ,084 2,545 21,327 Consulting ,113-1,113 Drilling ,732 12,479 4,159 11,049 4, ,121 Geochemical Geological 56,782 29,136-17,658 12, ,300 27, ,769 Geophysical (256) Legal 227-1, ,526 Travel and overhead 13,610 6, ,224 5,542 12,541 15,720 60,962 Wages and salaries 16,664 14,412 1,707 42,444 15,610 70,827 42, ,100 Total exploration expenditures charged to operations during the period 94,503 67,082 15,753 74,254 46, ,535 88, ,348 Cumulative exploration expenditures on active properties charged to operations as at September 30, 2013 $ 5,594,202 $ 681,576 $ 819,170 $ 3,175,313 $ 3,553,373 $ 2,539,656 $ 1,281,127 $ 17,644,417 Page 12 of 27

13 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) a) Wilco - Newmont Property On December 15, 2005, North American Diversified Resources Corporation ( NADR ) and Newmont Mining Corporation ( Newmont ), the lessor of the property, entered into a Mining Lease and Sublease agreement (the Agreement ) on the Wilco Property claims in Pershing County, Nevada. On April 20, 2006, NADR assigned its rights and interests under the Agreement to the Company. In consideration of this assignment, the Company issued 4,500,000 shares to NADR and 500,000 shares to a third party identified by NADR. These shares were valued at $500,000. Neither party was related to the Company at the time of the acquisition. The Company also paid NADR US$150,000. The Company completed its obligations to make minimum exploration expenditures of US $3,000,000 on this property and earned its 100% interest in the property by December 31, Beginning on December 15, 2011, the sixth anniversary of the Agreement, and each anniversary date thereafter, the Company is also obligated to pay Newmont, an annual rent of US$84,714 in cash within 30 days of each anniversary date, if at least US$500,000 was not spent on the property in the preceding anniversary year. This annual rent will fluctuate with the Consumer Price Index. The Company is also obligated to pay the owner of certain mining claims a net smelter return ( NSR ) of between 2% and 5% (calculated based on the monthly price of gold), and advanced royalty payments of US$15,000 annually until 2010, and US$20,000 every year thereafter (paid up to date). Newmont may enter into a joint venture agreement with the Company at any time up to the date that is 120 days after the Company delivers a feasibility study to Newmont. If a joint venture commences, Newmont has the option of spending US$15,000,000 on the property by the 8th anniversary date of this agreement (Phase I Earn-In Expenditures). Newmont s initial interest in the joint venture will be 60%, and the Company s interest will be 40%, if Newmont makes the required expenditures. Newmont will earn an additional 10% interest if it notifies the Company within 90 days of completing the Phase 1 Earn-in Expenditures, and by spending an additional US$5,000,000. If a joint venture commences, the Company will not be required to make any further minimum expenditures on the property. If Newmont does not exercise the joint venture option, elects not to proceed with the joint venture after the joint venture agreement is signed or fails to complete the Phase 1 Earn-in Expenditures, then Newmont will sell its interest in the property to the Company for US$2,000,000, which may be partially payable in shares of the Company, at the discretion of the Company. Newmont s interest in the property will then be reduced to an NSR of 2% to 5%, calculated on a sliding scale depending on the price of gold at the time of production, in respect of gold, silver and platinum group metals production and a 3.5% NSR in respect of all other mineral production. The Newmont NSR will be offset by any other existing underlying NSRs, to a minimum of 2%. A portion of the property is also subject to a 2% NSR payable to Western States Minerals Corporation. The Company may terminate the Agreement at any time upon 60 days notice. Newmont may terminate the agreement on 60 days notice if the Company defaults on any of its obligations. In December 2006, the Company acquired additional mining claims to add to the Wilco-Newmont property, by way of staking. The Company owns 100% of these new claims. In October 2010, the Company staked an additional 6.5 square kilometers along the Oreana trend. On March 21, 2007, the Company signed a letter agreement with H&M Mining, Inc. to lease one of the mining claims in Pershing County, Nevada. The initial lease is for 20 years, subject to the Company s option to extend the lease for a further two 20 year periods. An NSR of 1% to 3%, depending on the price of gold at the time of production, is payable in respect of mineral production. All minimum payments made, and NSRs paid, can be applied to the option purchase price of US$1,000,000. The Company is obligated to make the following minimum payments pursuant to the agreement: Page 13 of 27

14 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) a) Wilco - Newmont Property (continued) US$ Amount Initial payment $10,000 Paid By March 21, 2008 $15,000 Paid By March 21, 2009 $20,000 Paid By March 21, 2010 $25,000 Paid By March 21, 2011 $40,000 Paid By March 21, 2012 and every year thereafter $40,000 Paid up to date On June 30, 2010, the Company entered into a geothermal lease agreement with Wilco Energy LLC, a nonrelated company, to lease to Wilco Energy LLC the geothermal rights on a portion of the property for US$34,100 (received) as an initial rental payment covering a period of three years with increases in rental payments in years four and six. If a geothermal field is identified within the project area, the Company will receive a gross proceeds royalty from the sale of electric power. Lease rental payments are creditable to the royalty. Wilco Energy LLC is obligated to spend a minimum of $200,000 on geothermal exploration within the project area before July 20, 2011 (spent). The initial term of the lease is for 15 years and can be extended for an additional 10 years at the option of Wilco Energy LLC. On March 16, 2011, the Company entered into a three year sand and gravel lease agreement with EP Minerals, LLC to lease a portion of the property for exploring for, developing, mining, processing and transporting sand and gravel. The annual rental payments are US$2,000. b) Gold Ridge Property In November 2006, the Company acquired, through staking, an area of lode mining claims in Pershing County, Nevada. In April 2009, the Company acquired, through staking, an additional area of lode mining claims. The Company owns 100% of these claims. During the nine months ended September 30, 2013, the Company decided not to continue exploration of the Red Hill Anomaly on the Gold Ridge Property but maintained the claim. As a result, the Company recorded an impairment provision of $140,317 to write-off the carrying value relating to the Red Hill Anomaly during the nine months ended September 30, c) Jessup Property On September 27, 2007, the Company acquired the Jessup project located in Churchill County, Nevada, from Midway Gold Corp. ( Midway ). The Jessup project is comprised of patented and unpatented mining claims held under various leases. During the nine months ended September 30, 2013, the Company terminated the Snowwave lease on the Jessup Property and recorded an impairment provision of $649,388 to write-off the carrying value relating to the Snowwave lease. Page 14 of 27

15 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) c) Jessup Property (continued) The underlying lease obligations on the unpatented claims are: US$ Amount Monthly requirements: In ,000/month Paid In ,000/month Paid In ,000/month Paid In 2010 and every month thereafter 9,000/month Paid up to date Annual requirements: In ,000 Paid In ,000 Paid In 2010, and every year thereafter 10,000 Paid up to date (See Note 15) The underlying lease obligation on the patented claim is: US$ Amount Annual requirements: In 2008 up to and including ,000 Paid In 2011 up to and including ,000 Paid up to date In 2016 up to and including ,000 In 2021 and every year thereafter 30,000 These claims are subject to production royalties ranging between 1% and 5%. A portion of the unpatented claims are also subject to a 1.6% NSR. The Company may also purchase some of the properties and portion of the production royalties for amounts ranging from between US$250,000 and US$3 million, depending on the property, when the option is exercised or the purchase is made. Page 15 of 27

16 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) d) Lincoln Hill Property On November 7, 2007, the Company entered into a Mining Lease agreement with Mountain Gold Exploration, Inc. ( MGE ) and Lane Griffin (collectively, the Lessors ) on Lincoln Hill property. The property is comprised of one patented lode claim and unpatented mining claims. The lease is for 20 years, renewable on certain conditions. The Company is required to make the following advanced royalty payments to the Lessors to be credited towards the Lessors NSR: US$ Amount Number of shares On signing the LOI Agreement 50, ,000 Paid and issued November , ,000 Paid and issued November , ,000 Paid and issued November , ,000 Paid and issued November , ,000 Paid and issued November , ,000 Paid and issued Each year thereafter 80,000 - In addition, the Company is required to make the following minimum exploration expenditures: US$ Amount By November ,000 Requirement met By November ,000 Requirement met By November ,000 Requirement met By November ,000 Requirement met By November ,000,000 Requirement met The Lessors retain a 4% NSR on the property, 1% of which the Company may purchase for US$1 million during the first seven years of the lease, and an additional 1% NSR which may be purchased for US$3 million during the first 10 years of the lease. The Lessors also reserve the right to explore for and mine certain other minerals on the property. On September 8, 2009, the Company signed an agreement to acquire additional mining claims in Pershing County, Nevada, for a total of US$41,000 payable as follows: US$ Amount Initial payment 3,000 Paid By September 8, ,000 Paid By September 8, ,500 Paid By September 8, ,000 Paid By September 8, ,500 Paid in full On September 10, 2013, the Company completed the payments totalling US$41,000 to the lessor and acquired the Raven et al claims. A Grant Bargain and Deed was signed and recorded transferring the ownership of the claims and granting a 4% net smelter return to the Grantor. In addition, the Company reimbursed the current property holders US$1,000 for the claim maintenance fees. Page 16 of 27

17 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) d) Lincoln Hill Property (continued) On October 21, 2011, the Company entered into a lease agreement with Nevada Land and Resource Company, LLC for three parcels of land in Pershing County, Nevada, totalling approximately 2.1 square kilometers for five years ending September 30, The underlying lease obligations are US$9,500 annually until September 30, e) Garden Gate Pass Property On October 1, 2010, the Company acquired the Garden Gate Pass property from Pyramid Lake LLC ( Pyramid Lake ). The project consists of unpatented lode claims and is located 12 kilometres (7 miles) south-southeast of Barrick Gold s Cortez Hills mine. The Company is required to make the following advanced royalty payments: US$ Amount Initial payment 40,000 Paid By October 1, ,000 Paid By October 1, ,000 Paid By October 1, 2013 and every year to ,000 Payment deferred at the request of Lessor By October 1, 2018 and every year thereafter 100,000 The Company controls 100% of the property subject to annual advance royalty payments and a 2% NSR payable to Pyramid Lake. f) LH Claims On June 25, 2013, the Company settled the legal dispute with Coeur. In settlement, the Company conveyed all of the disputed LH and OG unpatented lode mining claims (comprising 386 of the 410 LH claims and all three OG claims) to Coeur in return for the following: A cash payment to the Company of US$10,000,000 ($10,504,000); A net smelter returns production royalty equal to 3.4% of the gross revenue, less refining costs, of gold and silver produced and sold from the Rochester Mine covering 39.4 million ounces of silver equivalent (the NSR ); and The Blue Bird patented lode mining claim located adjacent to Lincoln Hill, about two miles west of Rochester. Page 17 of 27

18 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 5. MINERAL PROPERTIES (continued) f) LH Claims (continued) The Company elected to accept the Blue Bird patented lode mining claim, and Coeur has conveyed all rights and title to the property. As a result of the settlement, the Company recorded a gain on disposal of $10,202,442 on the Statement of Comprehensive Income (Loss). The gain on disposal was determined as follows: USD CAD Proceeds from disposal $ 10,000,000 $ 10,504,000 Less: Accumulated acquisition costs of LH claims at the date of disposal (287,089) (301,558) Gain on disposal $ 9,712,911 $ 10,202,442 To date, the Company has incurred legal fees relating to this matter of $1,322,902 (legal fees incurred for the nine months ended September 30, 2013 and 2012 are $100,198 and $481,137, respectively) and have been recorded as an expense on the Statement of Comprehensive Income (Loss). g) Others Patty Property On October 18, 2011, Rye Patch Gold US Inc. entered into an agreement with Barrick Gold, US Gold Corp and Chapleau Resources ( the Patty Joint Venture ) for the Patty project located in Eureka County, Nevada. The Patty project consists of 616 unpatented lode claims covering 53.1 square kilometres and is located immediately south of the Company s 100% owned Garden Gate Pass project. Under the terms of this agreement, Rye Patch Gold US Inc. has the right to earn a 60% undivided interest in the Patty project by spending US$5 million over a five year period, of which the first year s expenditure of US$500,000 is committed. In addition, Rye Patch Gold US Inc. will reimburse the Patty Joint Venture US$93,120 of lease payments and one half of federal claim rental fees paid by the Patty Joint Venture in After completion of the earn-in amount by Rye Patch Gold US Inc. and within 90 days of this completion, the Patty Joint Venture will have the right to back in to a 60% interest by expending US$15 million over a five year period, of which one-third will be paid in cash to the Company. After the completion of this back-in Rye Patch Gold US Inc. will control 40% of the mineral property. The Patty Joint Venture is required to spend a minimum of US$500,000 annually on the property until the commencement of production. The core Damale claims retain a 3% NSR and an annual 1,500 metre drill commitment, except for 2012, which requires a 3,300 metre drill commitment to be completed by December 31, South Coal Canyon In December 2010, the Company acquired, through staking, the South Coal Canyon property in Pershing County, Nevada. X Claims In January 2012, the Company acquired, through staking, the X Claims property in Pershing County, Nevada. Page 18 of 27

19 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 6. RECLAMATION BOND As of September 30, 2013, the Company had deposited US$273,615 (December 31, US$273,615) as reclamation bonds with the Bureau of Land Management of the United States Department of the Interior and the Department of Conservation & Natural Resources of the State of Nevada. 7. PROVISIONS FOR RECLAMATION As at September 30, 2013 and December 31, 2012, the present value of the expected future reclamation expenditures relating to exploration and evaluation activities that have occurred to date was US$78, SHARE CAPITAL AND RESERVES Authorized share capital Unlimited number of common shares without par value. Unlimited number of preferred shares without par value. Issued share capital At September 30, 2013 there were 146,446,746 issued and fully paid common shares (December 31, ,336,746). During the nine months ended September 30, 2013 a) 110,000 options were exercised for proceeds of $27,000. A fair value of $22,504 was transferred to share capital from reserves in connection with this exercise. During the nine months ended September 30, 2012 a) The Company completed a non-brokered private placement by issuing a total of 7,796,301 units ( Units ) at $0.50 per Unit for gross proceeds of $3,898,150. Each Unit consisted of one common share of the Company and one-half of one common share purchase warrant (each whole common share purchase warrant, a Warrant ). Each Warrant will entitle the holder thereof to purchase one common share of the Company at an exercise price of $0.75 for a period of 24 months from August 22, 2012 to August 27, For accounting purposes, the Company calculated the fair value of warrants issued with the private placement, using the Black-Scholes option pricing model, assuming a risk-free interest rate of 1.16% - 1.2%, an expected life of 2 years, an expected volatility of 85.60% % and an expected dividend yield of 0%, which totalled $545,741, and recorded these values as reserves. The value attributed to the warrants was based on their relative fair value as compared to the fair value of the common shares. The remaining balance of $3,352,409 was recorded as share capital. In addition, the Company incurred $301,793 in share issuance costs. b) 338,000 warrants were exercised for proceeds of $118,300. A fair value of $48,776 was transferred to share capital on the exercise of these warrants. c) 475,000 options were exercised for proceeds of $197,500. A fair value of $145,250 was transferred to share capital from reserves in connection with this exercise. Page 19 of 27

20 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 8. SHARE CAPITAL AND RESERVES (continued) Share purchase warrants During the nine months ended September 30, 2013, no warrants were granted, exercised or expired. During the nine months ended September 30, 2012, 338,000 warrants were exercised for proceeds of $118,300. In addition, the Company issued 3,898,151 warrants with an exercise price of $0.75 in conjunction with the private placement completed during the nine months ended September 30, As at September 30, 2013, 3,898,151 common share purchase warrants remain outstanding (December 31, ,898,151). The following summarizes information about share purchase warrants outstanding and exercisable at September 30, 2013: Expiry date Warrants outstanding Exercise price Estimated grant date fair value Weighted average remaining contractual life (in years) August 20, ,727,285 $ 0.75 $ 381, August 23, ,000, , August 27, , , ,898,151 $ 545, Share purchase options Effective September 5, 2006, the Company adopted a share purchase option plan. Under this plan, the Company may grant options of up to 10% of its outstanding common shares to its directors, officers, employees and consultants. The exercise price of the share purchase options will be no less than the closing price of the shares on the TSX Venture Exchange (the Exchange ) on the business day immediately before the date of granting of the option, unless the Exchange permits discounts, or allows some other minimum exercise price. During the nine months ended September 30, ,000 options were exercised for proceeds of $27, ,000 options granted to an employee and consultant of the Company were cancelled. 340,000 options with expiry date of June 10, 2013 expired unexercised. On July 12, 2013, The Company granted 1,670,000 options with an exercise price of $0.20 to its officers, directors, employees and consultants. The options are exercisable for a period of ten years. A quarter of the options granted vest six months from the date of grant and a quarter will vest every six months thereafter. Page 20 of 27

21 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 8. SHARE CAPITAL AND RESERVES (continued) Share purchase options (continued) During the nine months ended September 30, ,000 options were exercised for proceeds of $197,500. On January 18, 2012, the Company granted 2,230,000 options with an exercise price of $0.60 to its officers, directors and employees. The options are exercisable for a period of ten years. A quarter of the options granted vest six months from the date of grant and a quarter will vest every six months thereafter. On June 29, 2012, the Company extended the options with expiry date on June 29, 2012, which were granted to the investor relations consultant, to June 29, As a result of modifications, the Company recognized additional share-based payments of $62,229. The changes in options during the nine months ended September 30, 2013 were as follows: Number outstanding Weighted average exercise price Balance, December 31, ,030,000 $ 0.46 Granted 1,670, Expired (621,250) 0.40 Forfeited (18,750) 0.60 Exercised (110,000) 0.25 Balance, September 30, ,950,000 $ 0.39 The following summarizes information about stock options outstanding and exercisable at September 30, 2013: Expiry date Options outstanding Options exercisable Exercise price Estimated grant date fair value Weighted average remaining contractual life (in years) August 21, , ,000 $ 0.20 $ 152, December 13, , , , May 25, , , , June 29, , , , August 18, , , , September 12, , , , January 18, ,205,000 1,102, ,366, July 12, ,670, , ,950,000 3,177,500 $ 2,178, Page 21 of 27

22 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 8. SHARE CAPITAL AND RESERVES (continued) Share purchase options (continued) The estimated fair value of the options granted during the nine months ended September 30, 2013 was calculated using the Black-Scholes Option Pricing Model with the following assumptions: For the nine months ended September 30, 2013 September 30, 2012 Risk-free interest rate 2.19% 1.63% Expected annual volatility 94% 101% Expected life Expected dividend yield - - Weighted average share price $ 0.18 $ 0.62 Weighted average exercise price $ 0.20 $ 0.60 Weighted average grant date fair value per option $ 0.16 $ 0.56 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. During the nine months ended September 30, 2013, the Company recorded share-based payments expense of $294,689 (September 30, 2012 $1,031,977). 9. EARNINGS (LOSS) PER SHARE For the three months ended For the nine months ended September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012 Basic earnings (loss) per share: Net income (loss) for the period $ (2,428,731) $ (1,762,871) $ 6,324,094 $ (6,358,126) Weighted average number of common shares outstanding 146,446, ,673, ,381, ,359,428 Basic earnings (loss) per share: $ (0.02) $ (0.01) $ 0.04 $ (0.05) Diluted earnings (loss) per share: Net income (loss) for the period $ (2,428,731) $ (1,762,871) $ 6,324,094 $ (6,358,126) Weighted average number of common shares outstanding 146,713, ,673, ,648, ,359,428 Diluted earnings (loss) per share: $ (0.02) $ (0.01) $ 0.04 $ (0.05) Page 22 of 27

23 Rye Patch Gold Corp. (An exploration stage company) Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2013 (Expressed in Canadian Dollars - unaudited) 10. RELATED PARTY TRANSACTIONS Related party transactions are recorded at the exchange amount as agreed to by the parties. Related party transactions not otherwise disclosed in these financial statements were: a) The Company incurred legal fees of $130,658 (September 30, $94,217) with a legal firm in which the Company s Corporate Secretary is a partner. As at September 30, 2013, $nil (December 31, $607) was owed to this firm. b) The Company incurred accounting and administrative fees of $71,240 (September 30, $73,060) with a company of which the Company s Chief Financial Officer is a partner. As at September 30, 2013, $8,736 (December 31, $8,154) was owed to this company. c) The Company paid to a company controlled by its President $487,578 (September 30, $120,081) in management fees and $47,044 (September 30, $19,075) for administrative services included in office and administrative expenses. As at September 30, 2013, $7,685 (December 31, $13,182) was owed to this company. The Company management services contract is renewable automatically for consecutive one year terms, at US$160,000 per year. Fees payable on termination of services is 1.5 times the annual rate and fees payable on change of control is 3 times the annual rate. d) The Company paid $384,785 (September 30, $82,691) in management fees to a company controlled by its Chairman. As at September 30, 2013, $nil (December 31, $nil) was owed to this company. The management services contract is renewable automatically for consecutive one year terms, at US$110,000 per year. Fees payable on termination of services is 1.5 times the annual rate and fees payable on change of control is 3 times the annual rate. e) During the nine months ended September 30, 2013 (September 30, $nil), the Company paid $200,000 in fees to its directors. Key management personnel compensation For the nine months ended September 30, 2013 September 30, 2012 Salaries and management fees $ 1,074,261 $ 370,050 Directors' fees 200,000 - Share-based payments - management 156, ,425 Share-based payments - directors 54, ,204 $ 1,485,235 $ 1,011,679 Page 23 of 27