1. WESDOME GOLD MINES LTD.
2012 ANNUAL REPORT

2. message
to shareholders
Contents 2012 was a year of steady improvement at Wesdome.
Despite the headwinds of persistent industry-wide challenges,
“2012 demonstrated
a good bounce back
Message to Shareholders..................................... 1
your management has made consistent progress in delivering
on our long-term strategy, while increasing gold production to
from a challenging
Mishi Property.... ................................................... 2
2012 Highlights..................................................... 4 55,800 ounces. 2011 and provided
Reserves and Resources..................................... 5
Our new Mishi Mine came onstream on time and on budget, us confidence that
Management’s Discussion and Analysis.............. 6
and reserves at Mishi increased 35% net of depletion. Its cash flow growth will
Management’s Responsibility for
Financial Statements........................................... 16
. recovered grades came in 15% higher than expected at 2.3 g/t. continue.”
Independent Auditors’ Report............................. 17
At our Eagle River Miine, recovered grades increased towards
Consolidated Statements of Financial Position. 18 ... ~ Donovan Pollitt
Life-of-Mine average grades, with higher grades forecast for the
Consolidated Statements of Income (Loss)
and Comprehensive Income (Loss).................... 19 next three years.
Consolidated Statements of
At our Kiena Mine, a restructuring of operations yielded
Total Equity......................................................... 20
Consolidated Statements of Cash Flows. ........... 21 .
tangible cost savings, yet margins continued to contract due
Notes to the to falling grades. On March 7, 2013, we made a tough decision
Consolidated Financial Statements.................... 22
. and suspended Kiena operations effective June 30, 2013,
Corporate Information........................................ 36 when operations will be placed on care and maintenance.
Management believes that Kiena remains a good quality long-
term asset, which will benefit from further exploration and
development in an environment of higher gold prices and less challenging labour markets.
Wesdome has been mining
gold in Canada for 25 years. Our focus is on the Eagle River and Mishi Mines, where cash flow generation and return on capital are strong.
As we enter a higher-grade mining sequence at Eagle River, and Mishi ore stockpiles grow at our Eagle River
Its philosophy has been to Mill, our top priority is upgrading our mill’s infrastructure to increase throughput and efficiency.
build up long-term, sustainable
At the Mishi Mine we have worked through the early benches with higher stripping ratios in 2012 and have
operations with only modest great confidence in the potential of Mishi to drive production growth over the longer term. Its capital intensity
initial capital costs. This long-term is much lower than underground mining and recovered grades compare favourably with our resource model.
view has enabled the Company We have commenced studies to select a new tailings management site in order to mine Mishi with higher
to acquire significant property intensity. We are also examining our options to increase milling capacity at our Wawa operations.
and infrastructure assets in two At Eagle River we have begun conceptual studies of shaft-deepening options as it becomes increasingly
proven gold mining districts. In evident that significant mineralization extends to depths of more than 1,000 metres. We are working to improve
our Eagle River mining infrastructure cost-effectively, pursuing capital investments in a disciplined manner.
2012, surface mining at Mishi
commenced. This new mine At the end of fiscal 2012, your Company’s cash and bullion position was virtually unchanged year-over-year.
During the year we paid down approximately $4.0 million of long-term debt and have kept the share count
displays good growth potential constant, as it has remained over the past five years. We are convinced that our focus on our most productive
with low capital expenditure assets will improve the Company’s ability to generate free cash flow and stronger earnings going forward.
requirements. As we develop Although the market’s confidence in the gold mining industry is now fragile, the demand for gold – and its
surface mining expertise and price – remain strong. We are confident that the current disconnect between market behaviour and your
experience, other substantial Company’s sound fundamentals will shake out over time.
assets like Moss Lake become In the meantime, we assure fellow shareholders that we have taken concrete, consistent steps to ensure that
Wesdome Gold Mines will grow and prosper over the short, medium and long-term.
more relevant. We see very good,
low risk potential for growth On behalf of the Board of Directors,
through astute investments in
exploration, development and
infrastructure.
Donovan Pollitt, P.Eng., CFA
President and CEO
March 14, 2013
WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 1

3. MISHI MISHI
PROPERTY PROPERTY
Drilling Bench 2995 – January, 2013 Ribbon Cutting – May 30, 2012
The Mishi Mine commenced commercial production on January 1, 2012. In 2012, we mined
102,000 tonnes of ore, milled 65,000 tonnes at a recovered grade of 2.3 gAu/tonne and built a
stockpile of 37,000 tonnes at 2.0 g/t at our mill. With the incorporation of a 200 metre long eastern
pit extension into the reserves, the current life-of-mine stripping ratio decreases to 2.7:1. As mining
advances, stripping ratios, and therefore costs, decline dramatically. In 2012, production essentially
offset direct costs plus about 2,000 ounces of gold were sitting in ore stockpiles at the mill. We have
completed the first year with better than expected grades and expanded reserves to 10 years at
current production rates of 9,000 tonnes per month.
We are now focused on improving the reliability, efficiency and capacity of our mill. This work is
ongoing and represents our easiest route to increasing production over the short-term. Furthermore,
we have commenced studies to select a new tailings management site with a view towards
increasing capacity. Mishi Reserves and Resources justify this longer term view.
The Mishi property was purchased in 1998 for $1.4 million. It produced seasonally in 2002, 2003,
2004 and 2007. With higher gold prices in 2010 studies indicated significant resources and 5 years
of reserves. Permitting, geotechnical, hydrogeological and pre-strip groundwork activities were
completed in 2011. Historic production to December 31, 2012, is 200,000 tonnes at 3.2 gAu/tonne
for 20,000 ounces produced.
We congratulate our team for exceeding grade expectations in the first year of production at a new
operation. The surface mining expertise we develop here is very relevant to other substantial assets
like Moss Lake.
2 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 3

4. 2012 RESERVES AND
Highlights RESOURCES
RESERVES ESTIMATES* December 31, 2012
Category Tonnes Grade Contained Gold
(gAu/tonne) (ounces)
Eagle River
Proven 108,000 10.0 35,000
Probable 327,000 10.0 105,000
Proven + Probable 435,000 10.0 140,000
Mishi
Proven 150,000 1.9 9,000
Probable 950,000 2.3 70,000
Proven + Probable 1,100,000 2.2 79,000
Total 219,000
n New Mishi Mine in production * On March 7, 2013, the Company announced suspension of mining at Kiena.
RESOURCES ESTIMATES* December 31, 2012
Accordingly, the existing Mineral Reserves were reclassified as Mineral Resources.
n Revenues of $92.3 million All resource estimates at Kiena employ dilution factors of 10 to 25%.
n Cash flow from operations* of $12.1 million or $0.12 per share (*prior to working capital adjustments) Category Tonnes Grade Contained Gold
All Mineral Reserves and Mineral Resources estimates have been made in accordance
with the Standards of the Canadian Institute of Mining, Metallurgy and Petroleum and
n Pre-tax earnings of $2.1 million prior to one-time non-cash charge (gAu/tonne) (ounces) National Instrument 43-101.
All Mineral Resources are in addition to Mineral Reserves except for the Mishi Mine
n Cash and bullion at market at year-end of $19.5 million where Mineral Reserves are a subset of Mineral Resources.
Eagle River Mineral Resources are not in the current mine plan and therefore do not have
n Bullion inventory of 8,965 ounces at year end Indicated 48,000 16.8 26,000 demonstrated economic viability.
As per section 4.2 (b)(ii) of National Instrument 43-101, the change in mineral reserves
Inferred 204,000 7.1 46,000
New Mishi Mine in production and resources for the Eagle River, Kiena and Mishi Mines does not constitute a material
Grades 15% higher than modeled
k change in the affairs f the Company. For the Eagle River Mine refer to the Technical
o
Report filed on SEDAR, dated December, 2005, by Strathcona Mineral Services Ltd. For
Reserves increase 35%
k Kiena the Kiena Mine refer to the Technical Report ated April 15, 2005, by Geologica Groupe
d
Conseil, also filed on SEDAR.
200m east extension planned
k Measured 717,000 3.2 74,000
The Mishi Mine Mineral Resource estimates were completed by InnovExplo Inc. in a
37,000 tonnes (approx 2,000 ounces) stockpiled at mill
k Indicated 3,045,000 3.5 341,000 43-101 Technical Report dated August 25, 2010, and filed on SEDAR. The initial Mishi
Life-of-Mine stripping ratio now 2.7:1
k Mineral Reserves estimates ere compiled in a 43-101 Report by InnovExplo Inc. dated
w
Measured + Indicated 3,762,000 3.4 415,000 January 12, 2011, and also filed on SEDAR.
k years reserves at current rates
10
At Mishi, Proven Reserves include broken ore, stockpiles and one 5 metre bench (Bench
Eagle River Mishi – OPEN PIT
2995). A 1.0 gAu/tonne cut-off grade is employed.
Grades improve 35%
k Mishi Resources are based on InnovExplo’s 2010 model employing a 1.0 gAu/tonne
Measured 186,000 2.7 16,000 cut-off grade. This has been adjusted to reflect production, broken ore and stockpiles
Higher grade mining sequence projected 2013 – 2015
k mined in 2012 to Bench 3000. ctual ore broken amounted to 95,881 tonnes compared
A
Drilling extends resources to 1,000m depth
k Indicated 4,888,000 2.1 333,000 to 95,200 tonnes in the model. This is clearly a robust and reliable model to date and is
carried forward subject to production reconciliation.
Measured + Indicated 5,074,000 2.1 349,000
Kiena Qualified Persons for the Mineral Reserves and Mineral Resources estimates as per
k Operations to be suspended by June 30, 2013 43-101 are as follows:
k Drilling continues to identify new zones Inferred 764,000 2.4 59,000 Eagle River: George N. Mannard, P.Geo., Vice President Exploration, Wesdome Gold
Mines Ltd.
k Significant resources and exploration merit future work
Kiena: Marc Ducharme, P.Geo., Chief Exploration Geologist, Kiena Mine, Wesdome Gold
Going Forward MISHI – UNDERGROUND Mines Ltd.
Focus on cash flow from Eagle River and Mishi
k Indicated 567,000 4.5 82,000 Mishi Reserves: Daniel Lapointe, P.Geo., Mishi Superintendent, and George Mannard,
P.Geo., Vice President Exploration, both Wesdome Gold Mines Ltd.
Invest in milling infrastructure, capacity, efficiency and reliability
k Inferred 437,000 5.8 81,000 Mishi Resources: Based on a Resource Estimate by Karine Brosseau, P.Eng. and Carl
Examine material handling systems options for future development at depth at Eagle River
k Pelletier, P.Geo., InnovExplo Inc., independent consultants, dated August 25, 2010.
Disciplined capital allocation towards best margin, higher return projects
k This estimate has been reconciled to eflect 2012 production and stockpiles by Daniel
r
Total Measured + Indicated 872,000 Lapointe, P.Geo., Mishi Superintendent, Wesdome Gold Mines Ltd.
Strategic acquisitions and dispositions potential
k
INFERRED 186,000 The Company is a Producing Issuer as per national Instrument 43-101 section 5.3.
4 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 5

5. MANAGEMENT’S MANAGEMENT’S DISCUSSION AND ANALYSIS
DISCUSSION AND ANALYSIS
In general, the mining industry has been stretched due to unprecedented activity. We see contractor and materials
availability starting to ease. Large international capital projects have been suspended and tight risk capital markets
have inhibited competing exploration and development projects from junior companies.
FOR THE YEAR ENDED DECEMBER 31, 2012
The market’s confidence in the gold mining industry is currently very fragile following a string of high-profile cost
overruns, foreign mining policy misadventures, and executive ousters. Demand for gold remains strong, prices remain
This Management’s Discussion and Analysis (“MD&A”) dated March 14, 2013, should be read in conjunction with
strong and the underlying fundamentals to support continued strength have never been more favourable.
Wesdome Gold Mines Ltd.’s (“Wesdome” or “the Company”) audited consolidated financial statements for the year
ended December 31, 2012, and their related notes which have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
SELECTED ANNUAL INFORMATION
This MD&A contains “forward-looking statements” that are subject to risk factors set out in the cautionary statement
(in thousands except income per common share) 2012 2011
below. All figures are in Canadian dollars unless otherwise stated. Additional information on Wesdome, including
current and previous years’ Annual Information Forms (“AIF”) and other corporate information, can be found at www. Total revenue $ 92,308 $ 79,643
wesdome.com or www.sedar.com. Wesdome trades on the Toronto Stock Exchange under the symbol “WDO”. The Net (loss) income (45,253) 240
Company’s head office is at 8 King Street East, Suite 1305, Toronto, Ontario, Canada. Income (loss) per common share (0.44) 0.00
Total assets 108,850 151,823
Long term financial liabilities 8,968 2,433
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, constitute “forward-looking statements” and are based on RESULTS OF OPERATIONS
expectations, estimates and projections as at the date of this MD&A. The words ”believe”, “expect”, “anticipate”, Three Months Ended Dec 31 Twelve Months Ended Dec 31
“plan”, “intend”, “continue”, “estimate”, “may”, ”will”, “schedule” and similar expressions identify forward-looking 2012 2011 2012 2011
statements. The Company cautions the reader that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of Wesdome to be Eagle River Mine Complex
materially different from the Company’s estimated future results, performance or achievements expressed or implied Eagle River Mine
by the forward-looking statements and the forward-looking statements are not guarantees of future performance.
Tonnes milled 36,940 48,639 155,020 182,449
Factors that could cause results or events to differ materially from current expectations expressed or implied are
Recovered grade (g/t) 7.0 5.2 6.5 4.8
inherent to the gold mining industry and include, but are not limited to, those discussed in the section entitled “Risks
and Uncertainties”. The Company does not intend, and does not assume any obligation to update these forward- Production (oz) 8,314 8,104 32,223 28,231
looking statements, whether as a result of new information, future events or results or otherwise except as required by Mishi Mine (commercial production commenced January 1, 2012)
applicable laws. Tonnes milled 11,919 - 64,915 -
Recovered grade (g/t) 1.5 - 2.3 -
Production (oz) 562 - 4,776 -
OVERALL PERFORMANCE
Surface stockpile (tonnes) 37,301 - 37,301 -
The Company owns and operates the Eagle River Mine Complex in Wawa, Ontario and the Kiena Mine Complex in Total Eagle River Complex
Val-d’Or, Quebec. On January 1, 2012, the Mishi Mine in Wawa commenced commercial production. The Eagle River Production (oz) 8,876 8,104 36,999 28,231
and Mishi Mines feed a common mill and are referred to as the Eagle River Complex. The Eagle River Mine has been in Sales (oz) 7,500 5,000 36,400 29,000
continuous production since commercial production commenced January 1, 1996. It has produced 919,086 ounces to
date. The Kiena Mine was purchased by the Company in 2003. It restarted commercial production on August 1, 2006. Bullion revenue ($000)† 12,709 8,598 60,545 44,613
It was previously in production from 1982 – 2002. To date the Kiena Mine has produced 1,749,705 ounces of gold. Mining and processing costs ($000) 11,460 5,604 44,759 29,448
Mine operating profit ($000)* 1,249 2,994 15,786 15,165
At December 31, 2012, the Company had $13.9 million in working capital, which includes 8,965 ounces of gold bullion in
Gold price realized ($Cdn/oz) 1,695 1,717 1,661 1,536
inventory. In 2012, revenue exceeded mining and processing costs by $15.8 million, $11.2 million in capital costs were
incurred and $4.1 million of debt was retired. Cash flow from operations totalled $12.1 million and the net loss was $45.3 Kiena Mine Complex
million. The net loss is entirely attributable to non-cash impairment charges – a $60.9 million write-down to the carrying Tonnes milled 70,279 56,414 265,872 255,311
value of the Kiena Mine Complex – and another non-cash write-down of $1.0 million for an exploration property option Recovered grade (g/t) 2.2 2.5 2.2 2.4
which was allowed to lapse in Q2 of 2012. Without these one-time events, pre-tax earnings would be $2.1 million. Production (oz) 4,869 4,618 18,814 19,516
Sales (oz) 5,000 5,000 19,100 23,000
In 2012, production increased 17% to 55,813 ounces of gold and gold sales increased 7% to 55,500 ounces compared
to 2011. Mining and processing costs increased 17% to average $1,385 per ounce for the year on production basis, and Bullion revenue ($000)† 8,498 8,608 31,763 35,030
at year end the Company had a bullion inventory of 8,965 ounces of gold. Mining and processing costs ($000) 6,970 8,676 31,780 35,568
Mine operating profit (loss) ($000 * 1,528 (68) (17) (538)
On March 7, 2013, the Company announced the suspension of operations at the Kiena Mine Complex. This will
preserve and improve the Company’s financial position, allowing capital allocation to projects with the best shorter term Gold price realized ($Cdn/oz) 1,700 1,717 1,658 1,519
returns to shareholders. Kiena remains a good long-term investment but our mining development sequence got tight to Total Mine Operations
maintain an economic scale production rhythm at the current grades. Production (oz) 13,745 12,722 55,813 47,747
Sales (oz) 12,500 10,000 55,500 52,000
Favourable external factors which influence results are continued low interest rates, currency debasement and general
Bullion inventory (oz) 8,965 8,652 8,965 8,652
distrust in financial institutions and economic policy. Negative external conditions included a stronger Canadian dollar
and a continued shortage of experienced mine operators, professional staff, and technical services which has proven Bullion revenue ($000)† 21,207 17,206 92,308 79,643
inflationary in our industry in general. We believe these demands will ease as risk capital has dried up and regional Mining and processing costs ($000) 18,430 14,280 76,539 65,016
competing capital projects run their courses or cease being funded.
Mine operating profit ($000)* 2,777 2,926 15,769 14,627
Gold price realized ($Cdn/oz) 1,697 1,717 1,660 1,529
6 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT
†
Bullion revenue includes minor by product silver sales.
WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 7

6. MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS
* The Company has included in this report certain non-IFRS performance measures, including mine operating profit and mining and At Eagle River, recovered grades improved 35% to 7.0 gAu/tonne, yet mill throughput declined 24% to 36,940 tonnes.
processing costs to applicable sales. These measures are not defined under IFRS and therefore should not be considered in isolation or Mill throughput was challenged by an unprecedented series of mechanical failures that were very frustrating and costly.
as an alternative to or more meaningful than, net income(loss) or cash flow from operating activities as determined in accordance with
IFRS as an indicator of our financial performance or liquidity. The Company believes that, in addition to conventional measures prepared in These events likewise affected Mishi throughput and recovered grades during the quarter. As previously mentioned, we
accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow. are investing in equipment, infrastructure and human resources to increase the mill’s efficiency, capacity and reliability.
Mine operating profit excludes the following specific items included as operating expenses on the Consolidated Statements of Income: Kiena posted a steady, uneventful quarter of production with sales of 5,000 ounces of gold (same as in 2011) and
Depletion, Production royalties, Corporate and general, Share-based compensation and Amortization of capital assets.
contributed $1.53 million of the fourth quarter’s $2.78 million mine operating profits.
In 2012, bullion sales exceeded mining and processing costs resulting in a mine operating profit, or gross margin, of
$15.8 million. In addition to these direct operating costs, additional cash costs, including royalty payments, corporate
LIQUIDITY AND CAPITAL RESOURCES
and general costs and interest payments amounted to $4.8 million.
At December 31, 2012, the Company had working capital of $13.9 million compared to $7.2 million at December 31, 2011.
At the Eagle River Mine, grades steadily improved as we worked our way through a heavily diluted sequence of stopes
During fiscal 2012, capital expenditures totalled $11.2 million compared to $19.3 million in 2011. Capital expenditures were
and development ore. In 2012, recovered grades were 35% higher than in 2011 and forward development in the 811
concentrated in minesite development, mine and mill infrastructure.
Zone reflects the start of a higher grade mining sequence expected to last through 2015.
On May 24, 2012, the Company completed a $7,021,000 placement of unsubordinated convertible debentures. The term
The new Mishi Mine commenced commercial production on January 1, 2012. In 2012, we mined 102,216 tonnes of
is 5-years bearing interest at 7% per annum payable semi-annually and convertible into common shares at $2.50 per
ore and 1,213,664 tonnes of waste for a stripping ratio of 11.9:1. With the incorporation of a 200 metre long east pit
common share. The net proceeds of $6,821,000, along with cash at hand, were used to redeem existing convertible
extension into the mine plan, the current life-of-mine stripping ratio decreases to 2.7:1. In 2012, mill availability was
debentures in the amount of $10,931,000 that matured on May 31, 2012. This resulted in the Company paying down $4.1
less than expected. Over the year we averaged 625 tonnes per day and we were planning for 900 tonnes per day.
million in debt.
Considerable efforts have been made to debottleneck processes, update equipment and human resources and
improve reliability and throughput. This work is ongoing and represents our easiest route to increasing production
The result of this financing is that interest costs moving forward will decline and working capital improved by moving the
growth over the short term. Mishi reserves and resources justify a longer term view. We have commenced studies to
liability component to long term liabilities from short term liabilities.
select a new tailings management facility, with a view towards increasing our milling capacity.
The Company traditionally maintains an inventory of refined gold bullion. At December 31, 2012, this liquid asset
We have substantially worked our way through the high strip early stages of the Mishi Mine, stockpiled over 37,000
consisted of 8,965 ounces of gold with a market value of $14.9 million. The bullion inventory is carried at the lower of
tonnes of ore at the mill and increased our reserve life to 10 years at current rates. The fact that the first year’s
cost or market, in this case at a cost of $13.3 million.
production returned better grades than estimated gives us great optimism in the potential of this asset to drive a longer
term vision and support key infrastructure investments.
Additionally, the Mishi ore stockpile at the mill, which totals 37,301 tonnes, is carried in inventory at a cost of
$3.2 million, or $85 per tonne.
The Kiena Mine in Val d’Or continued to operate on very thin margins. The last two years have been marginal in both
grade and production. Mining viability, reserve and resource estimates are acutely leveraged and reliant on external
Management believes we have sufficient liquidity to carry out our mining, development and exploration programs
factors, particularly the gold price. Despite this, we keep identifying new zones with limited drilling enforcing the view of
and prefers not to dilute shareholders’ interest with equity issues. The Kiena mining suspension will help preserve our
this property’s outstanding exploration potential. On March 7, 2013, the Company opted to suspend mining at Kiena by
financial position and improve return on capital.
June 30, 2013. Salvage mining of developed reserve blocks will continue, after which the infrastructure will be placed on
care and maintenance status. The decision was made in context of optimizing returns of capital allocated amongst all
With current gold prices, operations are capable of generating cash flow as they have in the past.
our operating mines and projects. Management does not favour equity financing options under current fragile market
conditions to fund further exploration and development work at this point at Kiena.
The following table shows the timing of cash outflows relating to contractual obligations going forward.
In summary, 2012 demonstrated a good bounce back from a challenging 2011 and provided us the confidence that this
production growth can continue.
Payments Due by Period (in thousands)
Contractual Obligations Total < 1 year 1 – 2 years 3 – 5 years After 5 years
Equipment leases $ 1,616 $ 921 $ 695 - -
SUMMARY OF QUARTERLY RESULTS Convertible debentures 9,149 491 983 7,675 -
2012 $ 10,765 $ 1,412 $ 1,678 $ 7,675 -
(in thousands except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Total revenue $ 21,207 $ 23,108 $ 25,948 $ 22,045
Net (loss) income (46,464) 819 700 (308) OFF-BALANCE SHEET ARRANGEMENTS
(Loss) earnings per share – basic and diluted (0.46) 0.01 0.01 (0.00)
There are no off-balance sheet arrangements.
2011
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter TRANSACTIONS WITH RELATED PARTIES
Total revenue $ 17,206 $ 19,623 $ 19,220 $ 23,594
Net income (loss) 496 (1,616) (1,094) 2,454 Key management personnel and director compensation comprised of the following:
Earnings (loss) per share – basic and diluted 0.00 (0.01) (0.01) 0.02
Three months ended Dec 31 Twelve months ended Dec 31
2012 2011 2012 2011
FOURTH QUARTER Salaries and short-term employee benefits $ 311 $ 355 $ 1,212 $ 1,266
Post employment benefits 11 15 46 44
During the fourth quarter, 2012, combined operations produced 13,745 ounces of gold and 12,500 ounces were sold
at an average realized price of $1,697 per ounce. This represents an 8% increase in production and a 25% increase in
Fair value of share-based compensation 76 60 415 493
ounces sold compared to the fourth quarter of 2011, while realized gold prices were similar. $ 398 $ 430 $ 1,673 $ 1,803
In fiscal 2012, the Company paid $55,500 in directors’ fees (2011: $23,900) to companies whose managing partners are
directors of the Company.
8 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 9

7. MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS
OUTLOOK estimate of the present value of the future decommissioning obligation. The actual future expenditures may differ
from the amounts currently provided.
Management believes the suspension and salvage operations at Kiena will enhance the Company’s cash flow
generating capacity. (iv) Share-based payments
The determination of the fair value of share-based compensation is not based on historical cost, but is derived
Currently forecast production for 2013 is 55,000 ounces. We continue to expect the Eagle River Mine to produce about based on subjective assumptions input into an option pricing model. The model requires that management make
41,000 ounces and the Mishi Mine about 9,000 ounces. We believe Kiena will contribute about 5,000 ounces by the forecasts as to future events, including estimates of the average future hold period of issued stock options before
time mining activities are suspended in June, 2013. exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using
historical volatility as a reference); and the appropriate risk-free rate of interest. Stock-based compensation
incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from the
expected rate.
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures The resulting value calculated is not necessarily the value that the holder of the option could receive in an arm’s
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the length transaction, given that there is no market for the options and they are not transferable. It is management’s
reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience view that the value derived is highly subjective and dependent entirely upon the input assumptions made.
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results could differ from these estimates. (v) Deferred taxes
Preparation of the consolidated financial statements requires an estimate of income taxes in each of the
The areas which require management to make significant judgments, estimates and assumptions in determining jurisdictions in which the Company operates. The process involves an estimate of the Company’s current tax
carrying values include, but are not limited to: exposure and an assessment of temporary differences resulting from differing treatment of items, such as
depreciation and depletion, for tax and accounting purposes. These differences result in deferred tax assets and
(i) Reserves liabilities that are included in the Company’s consolidated statements of financial position.
Proven and probable reserves are the economically mineable parts of the Company’s measured and indicated
mineral resources that have been incorporated into the mine plan. The Company estimates its proven and An assessment is also made to determine the likelihood that the Company’s deferred tax assets will be recovered
probable reserves and measured and indicated and inferred mineral resources based on information compiled by from future taxable income.
appropriately qualified persons. The information relating to the geological data on the size, depth and shape of the
ore body requires complex geological judgments to interpret the data. The estimation of future cash flows related Judgment is required to continually assess changing tax interpretations, regulations and legislation, to ensure
to proven and probable reserves is based upon factors such as estimates of foreign exchange rates, commodity liabilities are complete and to ensure assets are realizable. The impact of different interpretations and applications
prices, future capital requirements and production costs along with geological assumptions and judgments made in could be material.
estimating the size and grade of the ore body.
(vi) Recoverability of mining properties
Changes in the proven and probable reserves or measured, indicated and inferred mineral resources estimates The Company’s management reviews the carrying values of its mining properties on a regular basis to determine
may impact the carrying value of mining properties and equipment, depletion, impairment assessments and the whether any write-downs are necessary. The recovery of amounts recorded for mining properties depends on
timing of decommissioning and remediation obligations. confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain
the necessary financing to complete the development, and future profitable production or proceeds from the
(ii) Depletion disposition thereof. Management relies on life-of-mine (“LOM”) plans in its assessments of economic recoverability
Mining properties are depleted using the unit-of-production method (“UOP”) over a period not to exceed the and probability of future economic benefit. LOM plans provide an economic model to support the economic
estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves and extraction of reserves and resources. A long-term LOM plan and supporting geological model identifies the drilling
measured and indicated resources. and related development work required to expand or further define the existing ore body.
Mobile and other equipment is depreciated, net of residual value over the useful life of the equipment but does not (vii) Exploration and evaluation expenditures
exceed the related estimated life of the mine based on proven and probable reserves and measured and indicated Judgment is required in determining whether the respective costs are eligible for capitalization where applicable,
resources. and whether they are likely to be recoverable by future exploration, which may be based on assumptions about
future events and circumstances. Estimates and assumptions made may change if new information becomes
The calculation of the UOP rate, and therefore the annual depletion expense, could be materially affected by available.
changes in the underlying estimates. Changes in estimates can be the result of actual future production differing
from current forecasts of future production, expansion of mineral reserves through exploration activities, (viii) Equity component of convertible debentures
differences between estimated and actual costs of mining and differences in the gold price used in the estimation The convertible debentures are classified as liabilities, with the exception of the portion relating to the conversion
of mineral reserves. feature, resulting in the carrying value of the liability being less than its face value. The discount is being accreted
over the term of the debentures, utilizing the effective interest method which approximates the market rate at the
Significant judgment is involved in the determination of useful life and residual values for the computation of date the debentures were issued. Management uses its judgment to determine an interest rate that would have
depletion and no assurance can be given that actual useful lives and residual values will not differ significantly from been applicable to non-convertible debt at the time the debentures were issued.
current assumptions.
(ix) Inventory – ore stockpile
(iii) Provision for decommissioning obligations Expenditures incurred and depletion of assets used in mining and processing activities are deferred and
The Company assesses its provision for decommissioning on an annual basis or when new material information accumulated as the cost of ore maintained in stockpiles. These deferred amounts are carried at the lower of cost
becomes available. Mining and exploration activities are subject to various laws and regulations governing the or NRV. Impairments of ore in stockpiles resulting from NRV impairments are reported as a component of current
protection of the environment. In general, these laws and regulations are continually changing and the Company period costs.
has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting
for decommissioning obligations requires management to make estimates of the future costs the Company The allocation of costs to ore in stockpiles and the determination of NRV involve the use of estimates. There is a
will incur to complete the decommissioning work required to comply with existing laws and regulations at each high degree of judgment in estimating future milling costs, future milling levels, prevailing and long-term gold and
mining operation. Also, future changes to environmental laws and regulations could increase the extent of silver prices, and the ultimate estimated recovery for ore.
decommissioning work required to be performed by the Company. Increases in future costs could materially
impact the amounts charged to operations for decommissioning. The provision represents management’s best
10 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 11

8. MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL INSTRUMENTS – DISCLOSURES AND PRESENTATION (c) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of
Financial instruments disclosures requires the Company to provide information about: a) the significance of financial changes in market interest rates.
instruments for the Company’s financial position and performance and, b) the nature and extent of risks arising from
financial instruments to which the Company is exposed during the period and at the statement of financial position Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest
date, and how the Company manages those risks. rate risk. The Company’s cash and cash equivalents include highly liquid investments that earn interest
at market rates and interest paid on the Company’s convertible debentures is based on a fixed interest
Financial Instruments – Fair Values rate. Fluctuations in market rates of interest do not have a significant impact on the Company’s results of
Following is a table which sets out the fair values of recognized financial instruments using the valuation methods and operations due to the short term to maturity of the investments held.
assumptions described below:
2) Liquidity Risk
(in thousands) 2012 2011 Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company
Carrying Fair Carrying Fair manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing
Value Value Value Value activities. The Company believes it has access to sufficient capital through internally generated cash flows and
equity and debt capital markets. Senior management is also actively involved in the review and approval of
Financial Liabilities
planned expenditures.
Other financial liabilities:
Convertible 7% debentures - - $ 10,726 $ 11,040 The following table shows the timing of cash outflows relating to payables and accruals, mining taxes, capital
Convertible 7% debentures – new issues $ 7,021 $ 7,021 - - leases and convertible debentures:
Determination of Fair Value December 31, 2012 <1 Year 1-2 Years 3-5 Years Over 5 Years
The fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm’s length Payables & accruals $ 13,996 - - -
transaction between willing parties. The Company uses the following methods and assumptions to estimate fair value
Finance leases $ 921 $ 695 - -
of each class of financial instruments for which carrying amounts are included in the consolidated balance sheets as
follows:
Convertible debentures $ 491 $ 983 $ 7,675 -
Cash and cash equivalents and restricted funds – The carrying amounts approximate fair values due to the short December 31, 2011 <1 Year 1-2 Years 3-5 Years Over 5 Years
maturity of these financial instruments. Payables & accruals $ 8,944 - - -
Finance leases $ 997 $ 854 - -
Receivables – The carrying amounts approximate fair values due to the short maturity of these financial Convertible debentures $ 11,377 - - -
instruments.
3) Credit Risk
Other financial liabilities – Payables and accruals and the convertible 7% debentures are carried at amortized cost. Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument
The carrying amount of payables and accruals approximates fair value due to the short maturity of these financial fails to meet its contractual obligation. The Company minimizes its credit risk by selling its gold exclusively to
instruments. The fair value of the convertible 7% debentures is based on the quoted market price. financial institutions with forty-eight hour terms of settlement. The Company’s accounts receivable consist
primarily of government refunds and credits. The Company estimates its maximum exposure to be the carrying
The fair value hierarchy for financial instruments measured at fair value is Level 1 for marketable securities. The value of cash and cash equivalents, accounts receivable and funds held against standby letters of credit.
Company does not have Level 2 or Level 3 inputs.
The Company manages credit risk by maintaining bank accounts with Schedule 1 Canadian banks and
Financial Risk Management investing only in Guaranteed Investment Certificates. The Company’s cash is not subject to any external
The Company is exposed to a number of different risks arising from normal course business exposures, as well as limitations.
the Company’s use of financial instruments. These risk factors include: (1) market risks relating to commodity prices,
foreign currency risk and interest rate risk; (2) liquidity risk; and, (3) credit risk. The Board of Directors has overall
responsibility for the establishment and oversight of the Company’s risk management framework and establishes and RISKS AND UNCERTAINTIES
monitors risk management policies to: identify and analyze the risks faced by the Company; to set appropriate risk
limits and controls; and to monitor risks and adherence to market conditions and the Company’s activities. The operations of the Company are speculative due to the high risk nature of its business which is the operation,
exploration and development of mineral properties. In addition to risks described elsewhere herein, shareholders
1) Market Risk should note the following:
Market risk is the risk or uncertainty arising from possible market price movements and their impact on the
future performance of the business. The market price movements that could adversely affect the value of the Nature of Mineral Exploration
Company’s financial assets and liabilities include commodity price risk, foreign currency exchange risk and The exploration for and development of mineral deposits involves significant financial risks which even a combination
interest rate risk. of careful evaluation, experience and knowledge may not eliminate. While the discovery of an orebody may result in
substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses
(a) Commodity price risk may be required to establish ore reserves, to develop metallurgical processes and to construct mining and processing
The Company’s financial performance is closely linked to the price of gold which is impacted by world facilities at a site. It is impossible to ensure that the exploration programs planned by the Company will result in a
economic events that dictate the levels of supply and demand. The Company had no gold price hedge profitable commercial mining operation.
contracts in place as at or during the years ended December 31, 2012 and 2011.
Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are the
(b) Foreign currency exchange risk particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices which are
The Company’s revenue is exposed to changes in foreign exchange rates as the Company’s primary highly cyclical and government regulations. The exact effect of these factors cannot be accurately predicted, but the
product, gold, is priced in U.S. dollars. The Company had no forward exchange rate contracts in place and combination of these factors may result in the Company not receiving an adequate return on invested capital.
no foreign currency holdings as at or during the years ended December 31, 2012 and 2011.
12 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 13

9. MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS
Mining Risks and Insurance Insurance
The business of mining is generally subject to a number of risks and hazards, including environmental hazards, The Company carries insurance to protect against certain risks in such amounts as it considers adequate. Risks not
industrial accidents, labour disputes, encountering unusual or unexpected geologic formations, cave-ins, flooding insured against include environmental pollution, mine flooding or other hazards against which such companies cannot
and periodic interruptions due to inclement or hazardous weather conditions. Such risks could result in damage to, insure or against which they may elect not to insure.
or destruction of, mineral properties or producing facilities, personal injury, environmental damage, delays in mining,
monetary losses and possible legal liability. Insurance against environmental risks (including potential for pollution or Additional Funding Requirements
other hazards as a result of disposal of waste products occurring from exploration and production) is not generally Further exploration on, and development of, the Company’s mineral resource properties, will require additional capital.
available to the Company or to other companies within the industry. In addition, a positive production decision on any of the Company’s development projects would require significant
capital for project engineering and construction. Accordingly, the continuing development of the Company’s properties
Government Regulations and Environmental Matters will depend upon the Company’s ability to either generate sufficient funds internally or to obtain financing through the
The Company’s activities are subject to extensive federal, provincial and local laws and regulations controlling not joint venturing of projects, debt financing, equity financing or other means. Although the Company has been successful
only the mining of and exploration for mineral properties, but also the possible effects of such activities upon the in the past in obtaining financing through the sale of equity securities and the issuance of debt instruments, there can
environment. Permits from a variety of regulatory authorities are required for many aspects of mine operation and be no assurance that it will obtain adequate financing in the future.
reclamation. Future legislation and regulations could cause additional expense, capital expenditures, restrictions
and delays in the development of the Company’s properties, the extent of which cannot be predicted. In the context
of environmental permitting, including the approval of reclamation plans, the Company must comply with known SUMMARY OF SHARES ISSUED
standards, existing laws and regulations which may entail greater or lesser costs and delays depending on the nature
of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. It is As of March 14, 2013, the Company’s share information is as follows:
possible that the costs and delays associated with compliance with such laws, regulations and permits could become Common shares issued 101,879,659
such that the Company would not proceed with the development or operation of a mine. Common share purchase options 1,793,000
In Ontario, the Company has obtained approval for its closure plan for the Eagle River Mill, Eagle River Mine and the
Mishi-Magnacon Complex and has provided security of approximately $0.9 million to cover estimated rehabilitation MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
and closure costs. In Quebec, the Company has obtained approval for its closure plan for the Kiena Mine and Milling
Complex and has provided security of approximately $1.0 million to cover estimated rehabilitation and closure costs. In Disclosure Controls and Procedures
the event of any future expansion or alteration of a mine on the Eagle River property or the Kiena Mine, the Company In accordance with the requirements of National Instrument 52-109 “Certification of Disclosure in Issuers’ Annual and
would likely be required to amend its closure plans and could also be required to provide further security. Interim Filings”, the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial
Officer (“CFO”), have evaluated the effectiveness of the Company’s disclosure controls and procedures. Based
Reliance on Management upon the results of that evaluation, the Company’s CEO and CFO have concluded that as at December 31, 2012, the
The Company is heavily reliant on the experience and expertise of its executive officers. If any of these individuals Company’s disclosure controls and procedures to provide reasonable assurance that the information required to be
should cease to be available to manage the affairs of the Company, its activities and operations could be adversely disclosed by the Company in reports it files is recorded, processed, summarized and reported within the appropriate
affected. time periods and forms were effective.
Economic Conditions Internal Control over Financial Reporting
General levels of economic activity and recessionary conditions may have an adverse impact on the Company’s Internal control over financial reporting (“ICFR”) is a process designed to provide reasonable assurance regarding the
business. reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
applicable Canadian GAAP. Internal control over financial reporting should include those policies and procedures that
Mineral Resource and Mineral Reserve Estimates establish the following:
There are numerous uncertainties inherent in estimating mineral resources and mineral reserves, including many • maintenance of records in reasonable detail, that accurately and fairly reflect the transactions and dispositions of
factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral our assets
resources and mineral reserves estimate is a function of the quality of available data and of the assumptions made • reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
and judgements used in engineering and geological interpretation. Differences between management’s assumptions, in accordance with applicable Canadian GAAP
including economic assumptions such as metal prices and market conditions, could have a material effect in the future • receipts and expenditures are only being made in accordance with authorizations of management and the Board
on the Company’s financial position and results of operations. of Directors
• reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
Competition our assets that could have a material effect on the financial instruments
The mining industry is intensely competitive in all of its phases, and the Company competes with many companies
possessing greater financial resources and technical facilities in its search for, and the acquisition of, mineral The Company’s management, with the participation of the CEO and CFO, assessed the effectiveness of the Company’s
properties as well as the recruitment and retention of qualified employees with technical skills and experience in the internal controls over financial reporting and concluded that as at December 31, 2012, the Company’s internal control
mining industry. There can be no assurance that the Company will be able to compete successfully with others in over financial reporting was effective.
acquiring mineral properties, obtaining adequate financing and continuing to attract and retain skilled and experienced
employees. Limitations of Controls and Procedures
The Company’s management, including the CEO and CFO, believe that any disclosure controls and procedures or
Conflicts of Interest internal control over financial reporting, no matter how well conceived and operated can provide only reasonable, not
Certain officers and directors of the Company are, or may be, associated with other companies that acquire interests in absolute, assurance that the objectives of the control system are met. Further, the design of a control system must
mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors are required reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest costs. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that any design will
which they may have in any project or opportunity of the Company. Not every officer or director devotes all of their time not succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent
and attention to the affairs of the Company. limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
14 WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT WESDOME GOLD MINES LTD. 2012 ANNUAL REPORT 15