Emergent Metals (EGMCF) 6-K Emgold - Form 6K

Emgold Mining Corporation

(An Exploration Stage Company)

Condensed Consolidated Interim Financial Statements

(expressed in United States Dollars)

(Unaudited)

September 30, 2011 and 2010

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying condensed consolidated interim financial statements of Emgold Mining Corporation have been prepared by and are the responsibility of Emgold Mining Corporation’s management.

Emgold Mining Corporation’s independent auditor has not performed a review of these condensed consolidated interim 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.

Emgold Mining Corporation

(An Exploration Stage Company)

Condensed Consolidated Interim Statements of Financial Position

(expressed in United States Dollars)

(Unaudited)

	September 30,			December 31,			January 1,
	2011			2010			2010
Assets
Current assets
Cash and cash equivalents	$	29,633		$	917,495		$	3,955
Accounts receivable		53,844			13,236			6,852
Due from related party (note 10)		39,997			166,757			-
Prepaid expenses and deposits		39,613			17,929			21,388
		163,087			1,115,417			32,195
Other assets		9,802			8,038			7,660
Marketable securities(note 4)		32,290			5,905			-
Property and equipment (note 5)		18,256			32,655			28,807
Mineral property interests (note 6)		1,021,820			1,087,420			1,067,707
	$	1,245,255		$	2,249,435		$	1,136,369
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	357,796		$	290,114		$	1,149,405
Due to related party (note 10)		494,355			289,965			757,022
Finance lease obligation  (note 7)		6,700			7,585			5,976
		858,851			587,664			1,912,403
Finance lease obligation (note 7)		-			4,737			13,306
Convertible preference shares		-			-			754,940
Warrant liability (note 8(a))		51,866			111,458			-
		910,717			703,859			2,680,649
Equity
Share capital (note 8(a))		41,490,268			41,490,268			38,891,718
Share subscriptions		212,541			--			--
Warrants (note8 (c))		1,222,488			1,271,008			112,355
Contributed surplus (note 8(b))		6,736,887			6,629,389			6,223,649
Deficit		(49,327,646	)		(47,845,089	)		(46,772,002	)
		334,538			1,545,576			(1,544,280	)
	$	1,245,255		$	2,249,435		$	1,136,369

Nature of Operations and Going Concern (note 1).

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Approved by the Board
"David Watkinson"	"Ken Yurichuk"
Director	Director

1

Emgold Mining Corporation

(An Exploration Stage Company)

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

for the three and nine months ended September 30,

(expressed in United States Dollars)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Expenses	2011			2010			2011			2010
Exploration and evaluation
costs (note 15)	$	565,599		$	93,310		$	1,043,897		$	416,033
Legal, accounting and audit		36,302			35,965			144,951			85,571
Stock-based compensation (note 8(b))		--			-			45,813			102,961
Salaries and benefits		54,364			38,270			161,620			150,462
Office and administration		27,623			29,647			50,675			128,958
Shareholder communications		5,895			28,811			36,065			66,974
Management and consulting fees		10,747			10,127			32,280			58,270
Unrealized loss on marketable
securities (note 4)	-				-			33,245			-
Finance expense		-			4,455			-			31,795
Gain on sale of property and equipment		-			(7,200	)		-			(43,200	)
Foreign exchange (gain) loss		(15,491	)		82,092			(20,796	)		61,514
Unrealized gain on warrant liability
(note 8(a))	-				-			(59,592	)		-
Amortization		4,640			4,355			14,399			14,285
Gain on settlement of debt		-			-			-			(77,197	)
Gain on settlement of preference shares		-			(178,120	)		-			(178,120	)
Interest income		-			(261	)		-			(261	)
Recovery of bad debt expense		-			(26,330	)		-			(136,187	)
	$	689,679		$	115,121		$	1,482,557		$	681,858
Loss before provision for income taxes		(689,679	)		(115,121	)		(1,482,557	)		(681,858	)
Provision forincome taxes		-			-			-			-
Net loss and comprehensive loss
for the period	$	(689,679	)	$	(115,121	)	$	(1,482,557	)		(681,858	)
Net loss per share - basic and diluted	$	(0.02	)	$	(0.01	)	$	(0.04	)	$	(0.04	)
Weighted average number of common
shares outstanding		38,552,444			21,662,578			38,552,444			19,436,486

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

2

Emgold Mining Corporation

(An Exploration Stage Company)

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

(expressed in United States Dollars)

(Unaudited)

	Share Capital													Accumulated						Total
	without par value													Other						Shareholder
	(Note 9)				Preference		Share					Contributed		Comprehensive						Equity
	Shares		Amount		Shares		Subscriptions		Warrants			Surplus		Loss			Deficit			(Deficiency)
Balance, January 1, 2010		16,894,310	$	38,891,718	$	-	$	-	$	112,355		$	6,223,649	$	-		$	(46,772,002	)	$	(1,544,280	)
Shares issued for property
acquisition		19,432		7,134		-		-		-			-		-			-			7,134
Shares issued on settlement of debt		608,135		73,886		-		-		-			-		-			-			73,886
Shares and warrants issued for settlement of
Dividends on preferences shares		3,208,418		517,151		-		-		479,587			-		-			-			996,738
Private placement		3,000,000		652,026		-		-		21,147			-		-			-			673,173
Private placement, less share issue
Costs	5,203,856			699,366		-		-		4,749			-		-			-			704,115
Stock-based compensation		-		-		-		-		-			102,961		-			-			102,961
Share subscriptions		-		-		-		85,540		-			-		-						85,540
Unrealized comprehensive loss for
the period	-			-		-		-		-			-		(1,068	)		-			(1,068	)
Net loss and comprehensive
loss for the period		-		-		-		-		-			-		-			(681,858	)		(681,858	)
Balance, September 30, 2010		28,934,151	$	40,841,281	$	-	$	85,540	$	617,838		$	6,326,610	$	(1,068	)	$	(47,453,860	)	$	416,341
Balance, January 1, 2011		38,552,444	$	41,490,268	$	-	$	-	$	1,271,008		$	6,629,389	$	-		$	(47,845,089	)	$	1,545,576
Share subscriptions		-		-		-		212,541		-			-		-			212,541
Warrants expired, unexercised										(48,520	)		48,520								--
Stock-based compensation		-		-		-		-		-			58,978		-			-			58,978
Net loss and comprehensive
loss for the period		-		-		-		-		-			-		-			(1,482,557	)		(1,482,557	)
Balance, September 30, 2011		38,552,444	$	41,490,268	$	-	$	212,541	$	1,222,488		$	6,736,887	$	-		$	49,327,646		$	334,538

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

3

Emgold Mining Corporation

(An Exploration Stage Company)

Condensed Consolidated Interim Statements of Cash Flows

for the three and nine months ended September 30,

(expressed in United States Dollars)

(Unaudited)

	September 30,			September 30,
	2011			2010
Cash flow from operating activities
Net loss and comprehensive loss for the period	$	(1,482,557	)	$	(681,858	)
Items not affecting cash
Amortization		14,399			14,285
Gain on sale of property and equipment		-			(43,200	)
Gain on settlement of debt		-			(77,197	)
Gain on settlement of convertible preferred shares		-			(178,120	)
Decrease in provision for doubtful accounts		-			(136,187	)
Effect of currency translation		5,274			(12,650	)
Foreign exchange		439			23,338
Stock based compensation		58,978			102,961
Unrealized gain on warrant liability		(59,592	)		-
Unrealized loss on marketable securities		33,245			-
Changes in non-cash operating working capital
Accounts receivable		(40,608	)		(38,340	)
Due to/from related parties		331,150			(80,395	)
Prepaid expenses and deposits		(21,684	)		7,835
Accounts payable and accrued liabilities		67,682			(190,140	)
		(1,093,274	)		(1,289,668	)
Cash flow from investing activities
Mineral property acquisition costs		-			(6,927	)
Proceeds from sale of equipment		-			43,200
Equipment additions		-			(19,803	)
Purchase of reclamation deposit		(1,507	)		--
Finance lease payments		(5,622	)		(5,159	)
		(7,129	)		11,311
Cash flow from financing activities
Common shares issued for cash		--			1,585,894
Share subscriptions received		212,541			85,540
		212,541			1,671,434
(Decrease) increase in cash		(887,862	)		393,077
Cash and cash equivalents, beginning of period		917,495			3,955
Cash and cash equivalents, end of period	$	29,633		$	397,032

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

4

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

1.       Nature of Operations and Going Concern

Emgold Mining Corporation (“the Company”) is incorporated under the British Columbia Corporations Act and the principal place of business is located at 1400-570 Granville Street, Vancouver, British Columbia, B6C 3P1.  The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral reserves that are economically recoverable.

The condensed consolidated interim financial statements were approved by the Board of Directors on November 29, 2011.

The Company’s continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interests or other interests.  The Company’s ability to continue as a going concern is dependent upon the continuing financial support of related parties and shareholders or obtaining other financing to continue exploration and/or development of its mineral property interests and to meet its administrative overhead costs.  The current equity and financial market conditions, the challenging environment for raising monies, and the low price of the Company’s common stock may make it difficult to obtain additional funding by private placements of shares.  While the Company is making its best efforts to achieve its plans by examining various financing alternatives including reorganizations, mergers, sales of assets, or other forms of equity financing, there is no assurance that any such activity will generate funds that will be available for operations.

2.       Summary of Significant Accounting Policies

(a)       Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”), and using accounting policies consistent with International Financial Reporting Standards (“IFRS”).  These are the Company's first condensed consolidated interim financial statements prepared in accordance with IFRS.  The accounting policies have been selected to be consistent with IFRS as is expected to be effective on December 31, 2011, the Company's first annual IFRS reporting date. Previously, the Company prepared its interim and annual financial statements in accordance with Canadian GAAP.   These condensed consolidated interim financial statements should be read in conjunction with the December 31, 2010 consolidated financial statements.

The adoption of IFRS resulted in changes to the accounting policies as compared with the most recent annual financial statements prepared under Canadian GAAP.  The accounting policies set out below have been applied consistently to all periods presented.  They also have been applied in the preparation of an opening IFRS statement of financial position as at January 1, 2010, as required by IFRS 1, First Time Adoption of International Financial Reporting Standards ("IFRS 1").   The impact of the transition from Canadian GAAP to IFRS is explained in note 14.

5

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(a)       Statement of compliance - continued

The standards and interpretations within IFRS are subject to change and accordingly, the accounting policies for the annual period that are relevant to these condensed consolidated interim financial statements will be finalized only when the first annual IFRS financial statements are prepared for the year ending December 31, 2011.

(b)       Basis of presentation

These condensed consolidated interim financial statements have been prepared on a historical cost basis, with the exception of financial instruments classified as at fair value through profit or loss and available-for-sale which are measured at fair value.

These condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Idaho-Maryland Mining Corporation, Emgold (US) Corp. and Golden Bear Ceramics Company.  All inter-company transactions are eliminated on consolidation.

(c)       Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit with banks and short-term interest-bearing investments with maturities of 90 days or less from the original date of acquisition.  Cash and cash equivalents are recorded at fair value and changes in fair value are reflected in the consolidated statements of loss and comprehensive loss.  The Company had $29,633 in cash and cash equivalents as at September 30, 2011.

(d) Financial instruments

Financial assets

Financial assets are classified as either financial assets at fair value through profit or loss (“FVTPL”), loans and receivables, held to maturity investments (“HTM”), or available for sale financial assets (“AFS”), as appropriate at initial recognition and, except in very limited circumstances, the classification is not changed subsequent to initial recognition. The classification is determined at initial recognition and depends on the nature and purpose of the financial asset.  A financial asset is derecognized when its contractual rights to the asset’s cash flows expire or if substantially all the risks and rewards of the asset are transferred.

Financial assets at FVTPL

A financial asset is classified as FVTPL when the financial asset is held for trading or it is designated upon initial recognition as an FVTPL.  A financial asset is classified as held for trading if (1) it has been acquired principally for the purpose of selling or repurchasing in the near term; (2) it is part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short term profit taking; or (3) it is a derivative that is not designated and effective as a hedging instrument.  Financial assets at FVTPL are carried in the consolidated statements of financial position at fair value with changes in fair value recognized in the consolidated statements of loss and comprehensive loss.  Transaction costs are expensed as incurred.  The Company has classified cash and cash equivalents and marketable securities as FVTPL.

6

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(d) Financial instrument - continued

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.  Loans and receivables are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost less losses for impairment.  The impairment loss of receivables is based on a review of all outstanding amounts at period end.  Bad debts are written off during the period in which they are identified.  Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs.  Gains and losses are recognized in the statements of loss and comprehensive loss when the loans and receivables are derecognized or impaired, as well as through the amortization process.  The Company has classified accounts receivable and due from related party as loans and receivables.

AFS financial assets

Non-derivative financial assets not included in the above categories are classified as AFS financial assets.  They are carried at fair value with changes in fair value generally recognized in other comprehensive loss and accumulated in the AFS reserve.  Impairment losses are recognized in the consolidated statements of loss and comprehensive loss.  Purchases and sales of AFS financial assets are recognized on settlement date with any change in fair value between trade date and settlement date being recognized in the AFS reserve.  On sale, the cumulative gain or loss recognized in other comprehensive income is reclassified from accumulated other comprehensive income.  The Company has not designated any of its financial assets as AFS.

Impairment of financial assets

The Company assesses at each reporting date whether a financial asset or a group of financial assets is impaired.  A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the asset’s original effective rate.

7

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(d) Financial instrument - continued

Impairment of financial assets - continued

The carrying amount of all financial assets, excluding accounts receivables, is directly reduced by the impairment loss.  The carrying amount of trade receivables is reduced through the use of an allowance account.  Associated allowances are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. Subsequent recoveries of amounts previously written off are credited against the allowance account.  Changes in the carrying amount of the allowance account are recognized in the statement of loss and comprehensive loss. A provision for impairment is made in relation to accounts receivable, and an impairment loss is recognized in the consolidated statement of loss and comprehensive loss when there is objective evidence that the Company will not be able to collect all of the amounts due under the original terms.  The carrying amount of the receivable is reduced through use of an allowance account.  With the exception of AFS equity instruments, if in a subsequent period the amount of impairment loss decreases and the decrease relates to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the statement of loss and comprehensive loss. On the date of impairment reversal, the carrying amount of the financial asset cannot exceed its amortized cost had the impairment not been recognized.

Effective interest method

The effective interest method calculates the amortized cost of a financial instrument asset or liability and allocates interest income over the corresponding period.  The effective interest rate is the rate that discounts estimated future cash receipts over expected life of the financial asset or liability, or where appropriate, a shorter period.  Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.

Financial Liabilities

Financial liabilities are classified as financial liabilities as FVTPL, or other financial liabilities, as appropriate upon initial recognition. A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. Subsequent to the initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.  The Company’s other financial liabilities include accounts payables and accrued liabilities and due to related party.

Financial liabilities are classified as FVTPL if they are acquired for the purpose of selling in the near term.  This category includes derivative financial instruments (including separated embedded derivatives) unless they are designated as effective hedging instruments.  Gains or losses on liabilities classified as FVTPL are recognized in the consolidated statement of loss and comprehensive loss.  The Company’s financial liabilities classified as FVTPL include the warrant liability.

8

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(d) Financial instrument - continued

Financial instruments carried at fair value

Financial instruments recorded at fair value on the condensed statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As of September 30, 2011 the fair value cash and cash equivalents and the marketable securities consisting of common shares (valued using quoted prices (unadjusted) from an active market) have been measured using level 1 inputs.  Marketable securities consisting of common share purchase warrants and the warrant liability, both instruments having their fair value determined using the Black-Scholes model, have been measured using level 3 inputs.

(e)       Property and equipment

Equipment is recorded at cost and amortization begins when the asset is put into service.  Amortization is recorded on a straight-line basis over five years for plant and field equipment, office furniture and equipment, research equipment and vehicles and over three years for computer hardware and software, and over the term of the lease for leasehold improvements.

(f)       Mineral property interests

Mineral property acquisition costs are capitalized and deferred until the mineral property to which they relate is placed into production, sold, allowed to lapse, or is determined to be impaired.  These costs are amortized on a units-of-production basis following commencement of commercial production or will be written off or down if the property is sold, allowed to lapse, or is determined to be impaired.

Mineral property acquisition costs include cash costs and the fair value of common shares, based on the trading price of the shares, issued for mineral property interests pursuant to the terms of the related property agreement.  Payments relating to a property acquired under an option or joint venture agreement, where payments are made at the sole discretion of the Company, are recorded as mineral property costs upon payment.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee a clear title.  Property title may be subject to unregistered prior agreements and regulatory requirements. Administrative, property investigation, and exploration and evaluation expenditures are expensed in the period incurred.

9

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(g)       Exploration and evaluation costs

Exploration and development expenditures are expensed until the Company has determined that the property is economically viable and a production decision is made.

(h)       Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss.  Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.  The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use.  An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. In addition, long-lived assets that are not amortized are subject to an annual impairment assessment.

(i)       Option and royalty agreements

Option payments and certain royalties are made at the discretion of the optionee and, accordingly, are accounted for on a cash basis.  Option payments received are treated as a reduction of the carrying value of the related mineral property until the Company’s option and royalty payments received are in excess of costs incurred and then are credited to operations.

(j)       Translation of foreign currencies

These condensed consolidated interim financial statements are presented in United States dollars (“$”), which is the Company’s functional and presentation currency.  References to Cdn$ represent Canadian dollars.  The functional currency for the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates.  Transactions entered into by the Company’s subsidiary in a currency other than the currency of the primary economic environment in which it operates (its "functional currency") are recorded at the rates ruling when the transactions occur except depreciation and amortization which are translated at the rates of exchange applicable to the related assets, with any gains or losses recognized in the consolidated statements of loss and comprehensive loss.  Foreign currency monetary assets and liabilities are translated at current rates of exchange with the resulting gain or losses recognized in the consolidated statements of comprehensive loss.  Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in statement of loss and comprehensive loss.  Non-monetary assets and liabilities are translated using the historical exchange rates.  Non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

10

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(k)       Flow-through common shares

Flow-through shares are a unique Canadian tax incentive.  They are the subject of specific guidance under US GAAP, but there is no equivalent IFRS guidance.  Therefore, the Company has adopted a policy whereby flow-through proceeds are allocated between the offering of the common shares and the sale of tax benefits when the common shares are offered.  The allocation is made based on the difference between the quoted price of the common shares and the amount the investor pays for the flow-through shares.  A liability is recognized for the premium paid by the investors and is then derecognized in the period of renunciation.  The recognition of a deferred income tax liability upon renunciation of the flow through expenditures is recorded as income tax expense in the period of renunciation.

(l)       Income taxes

Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in the statement of loss and comprehensive loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity.  In this case, the tax is also recognized in other comprehensive income or directly in equity.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.  The tax rates and tax laws used to compute current income tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or substantively enacted at the reporting date. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Deferred taxation is provided on all qualifying temporary differences at the reporting date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes.  Deferred tax assets are only recognized to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can be utilized.

Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.  Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

11

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(m)     Provisions and contingencies

Provisions are recognized when a legal or constructive obligation exists, as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation.  Where the effect is material, the provision is discounted using an appropriate current market-based pre-tax discount rate.  The increase in the provision due to passage of time is recognized as interest expense.

When a contingency substantiated by confirming events can be reliably measured and is likely to result in an economic outflow, a liability is recognized as the best estimate required to settle the obligation.  A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events, or where the amount of a present obligation cannot be measured reliably or will likely not result in an economic outflow.  Contingent assets are only disclosed when the inflow of economic benefits is probable.  When the economic benefit becomes virtually certain, the asset is no longer contingent and is recognized in the consolidated financial statements.

(n)       Loss per common share

Basic loss per share is computed by dividing the net loss applicable by the weighted average number of common shares outstanding during the reporting period.  Diluted loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares issued and outstanding during the reporting period and all additional common shares for the assumed exercise of options and warrants outstanding for the reporting period, if dilutive. The treasury stock method is used for the assumed proceeds upon the exercise of options and warrants that are used to purchase common shares at the average market price during the reporting period.  As the Company is incurring losses, basic and diluted loss per share are the same since including the exercise of outstanding options and share purchase warrants in the diluted loss per share calculation would be anti-dilutive.

(o)       Share-based payments

Equity-settled share-based payments for directors, officers and employees are measured at fair value at the date of grant and recorded as compensation expense in the financial statements. The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period based on the Company’s estimate of shares that will eventually vest.  The number of forfeitures likely to occur is estimated on grant date. Any consideration paid by directors, officers, employees and consultants on exercise of equity-settled share-based payments is credited to share capital.  Shares are issued from treasury upon the exercise of equity-settled share-based instruments

12

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

2.       Summary of Significant Accounting Policies - continued

(o)       Share-based payments - continued

Compensation expense on stock options granted to non-employees is measured at the earlier of the completion of performance and the date the options are vested using the fair value method and is recorded as an expense in the same period as if the Company had paid cash for the goods or services received.

When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a Black-Scholes valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

(p)       Significant accounting judgments and estimates

The preparation of these condensed consolidated interim financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated condensed interim financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the condensed interim financial statements, and may require accounting adjustments based on future occurrences.  Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods.  These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(q)       Critical accounting estimates

Significant assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

(i) the recoverability of costs incurred to purchase mineral property interests;

 (ii) the inputs used in accounting for share based payment transactions and in valuation of warrants included in marketable securities and warrant liability; and

(iii) management assumption of no material provisions or obligations, based on the facts and circumstances that existed during the period.

13

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

3.       Accounting Standards Issued But Not Yet Effective

The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective and determined that the following may have an impact on the Company:

IFRS 9 Financial instruments (“IFRS 9”) was issued by the IASB on November 12, 2009 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”).  IFRS 9 replaces the multiple rules in IAS 39 with a single approach to determine whether a financial asset is measured at amortized cost or fair value and a new mixed measurement model for debt instruments having only two categories: amortized cost and fair value.  The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets.  The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39.  IFRS 9 is effective for annual periods beginning on or after January 1, 2013.  The Company is currently evaluating the impact of IFRS 9 on its consolidated financial statements.

IFRS 10 Consolidated Financial Statements (“IFRS 10”) establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 supersedes IAS 27 “Consolidated and Separate Financial Statements” and SIC-12 “Consolidated – Special Purpose Entities” and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

IFRS 11 Joint Arrangements (“IFRS 11”) establishes principles for financial reporting by parties to a joint arrangement.  IFRS 11 supersedes the current IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Monetary Contributions by Venturers” and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”) applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity.  IFRS 12 is effective for annual periods beginning on or after January 1, 2013.  Earlier application is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

IFRS 13 Fair Value Measurements (“IFRS 13”) defines fair value, sets out in a single IFRS framework for measuring fair value and requires disclosures about fair value measurements.  IFRS 13 applies to IFRS that require or permit fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except in specified circumstances.  IFRS 13 is to be applied for annual periods beginning on or after January 1, 2013.  Earlier application is permitted.  The Company is currently evaluating the impact of this standard on its consolidated financial statements.

14

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

3.       Accounting Standards Issued But Not Yet Effective - continued

IFRS 7 Financial instruments: disclosures (“IFRS 7”).  The Accounting Standards Board ["AcSB"] approved the incorporation of the IASB's amendments to IFRS 7 Financial Instruments: Disclosures and the related amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards into Part I of the Handbook.  These amendments were made to Part I in January 2011 and are effective for annual periods beginning on or after July 1, 2011.  Earlier application is permitted. The amendments relate to required disclosures for transfers of financial assets to help users of the financial statements evaluate the risk exposures relating to such transfers and the effect of those risks on an entity's financial position.  The Company is currently evaluating the impact of IFRS 7 on its consolidated financial statements

4.       Marketable Securities

Pursuant to the terms of the Lease and Option to Purchase Agreement (note 6), on January 31, 2011, Valterra issued to the Company 50,000 units consisting of one common share and one share purchase warrant.  Each warrant entitles the holder to purchase one common share of Valterra at $0.10 for a five year period.  On the date of issue the common shares were valued at $3,268 and the warrants were valued at $1,637 using the Black-Scholes option pricing model with the following assumptions: 2 year term, 99% volatility, risk free interest rate of 1.64% and a dividend rate of Nil.  As at September 30, 2011, the common shares of Valterra were revalued at fair market value of $1,943 and the warrants of Valterra were revalued at $1,076 using the Black-Scholes option pricing model with the following assumptions: a 4.5 year term, 99% volatility, risk-free interest rate of 2.55% and a dividend rate of 0%, resulting in an unrealized loss of $1,343 for common shares and unrealized loss of $1,076 for warrants for the nine months ended September 30, 2011.

Pursuant to an amendment of the Lease and Option to Purchase Agreement (note 6), on February 11, 2011, Valterra issued to the Company 600,000 units consisting of one common share and one share purchase warrant.   Each warrant entitles the holder to purchase one common share of Valterra at $0.10 for a two year period.  On the date of issue the common shares were valued at $42,395 and the warrants were valued at $18,301 using the Black-Scholes option pricing model with the following assumptions: 2 year term, 99% volatility, risk free interest rate of 1.64% and a dividend rate of Nil.  As at September 30, 2011, the common shares of Valterra were revalued at fair market value of $24,168     and the warrants of Valterra were revalued at $5,103 using the Black-Scholes option pricing model with the following assumptions: a 1.5 year term, 99% volatility, risk-free interest rate of 1.64% and a dividend rate of 0%, resulting in an unrealized loss of $18,277 for common shares and $13,198 for warrants for the nine months ended September 30, 2011.

15

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

5.       Property and Equipment

September 30, 2011
			Accumulated		Net Book
	Cost		Depreciation		Value
Plant and field equipment	$	39,306	$	39,306	$	-
Office furniture and equipment		63,668		56,910		6,758
Computer hardware and software		80,002		68,504		11,498
Vehicle - held under capital lease		38,833		38,833		--
	$	221,809	$	203,553	$	18,256

December 31, 2010
			Accumulated		Net Book
	Cost		Depreciation		Value
Plant and field equipment	$	39,306	$	39,253	$	53
Office furniture and equipment		63,668		53,722		9,946
Computer hardware and software		80,002		63,171		16,831
Vehicle - held under capital lease		38,833		33,008		5,825
	$	221,809	$	189,154	$	32,655

6.       Mineral Property Interests

	September 30,		December 31,
	2011		2010
Mineral property acquisition costs
Idaho-Maryland Property, California	$	747,219		747,219
Buckskin Rawhide Property, Nevada		25,233		25,233
Stewart Property, British Columbia		199,667		199,667
Rozan Gold Property, British Columbia		49,701		115,301
	$	1,021,820	$	1,087,420

16

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

6.       Mineral Property Interests - continued

Idaho-Maryland Property, California

In fiscal 2002, the Company renegotiated a lease with the owners of the Idaho-Maryland Property (“I-M Property”) and surrounding areas in the Grass Valley Mining District, California.  All acquisition and exploration costs relating to the Idaho-Maryland Property were written off in fiscal 1999 and exploration costs on the property have been expensed since that date.

The owners granted to the Company the exclusive right and option to purchase all of the leased property.  The property is subject to a 3% Net Smelter Royalty (“NSR”) from production if the property is still being leased.  Any royalty payments made prior to exercising the purchase option may be deducted from the purchase price.  During the year ended December 31, 2010, the Company extended the lease and option agreement from February 1, 2011, for an additional two years to February 1, 2013.  Lease payments during the extension period will be $30,000 per quarter.    In conjunction with the extension, the lessors agreed to defer payments for 2010 totalling $120,000.  Under the terms of the deferral, this amount will now be added to the purchase price of the I-M Property, the first instalment of which becomes due on February 1, 2013.  The $120,000 will be subject to interest calculated at 5.25% compounded annually.

Provided that payments are kept current, the Company may purchase the property at any time.  The purchase price at February 1, 2013, would be $6,154,717, and is being increased by 3% each lease-year.  In April 2004, the Company acquired a parcel of land adjacent to other properties under option by the Company in Grass Valley, California from a non-related party, in addition to the purchase of mining rights from another non-related party on other claims for a total of $589,276 in mineral property acquisition costs.

In 2009, the Company entered into an agreement to acquire 7.13 acres of land known as the "Whisper Property".  Under the terms of the agreement, the Company agreed to a one-time share issuance of 280,823 common shares at a market price of Cdn$0.55 per share on the date of filing to the seller for the purchase of the Whisper Property.  No common shares were issued as bonuses, finder's fees or commissions in connection with this transaction.  The common shares issued pursuant to the agreement are subject to a hold period of four (4) months, plus one (1) day from the date of issuance.  A title search is required to transfer title.  The common shares have been issued from treasury and are reflected in the Company’s issued and outstanding shares, but have not been distributed to the seller pending title searches and final documentation.

17

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

6.       Mineral Property Interests - continued

Buckskin Rawhide Property, British Columbia

In January 2010 the Company completed a lease and option to purchase agreement to acquire 100% of the rights to the Buckskin Rawhide mineral claims, a gold prospect located near Fallon, Nevada.  The Company has agreed to lease the property from Nevada Sunrise, LLC subject to the following advance royalty payments: $10,000 annually for the years 2009 to 2011; $20,000 in 2012; $40,000 in 2013, and $60,000 from 2014 to 2019.  During the lease period, the Company may conduct exploration and, if warranted, complete a NI 43-101 compliant feasibility study.  On completion of the feasibility study, the Company may acquire 100% ownership of the property by paying Nevada Sunrise, LLC an additional amount of $250,000.  Nevada Sunrise, LLC is required to use these funds to purchase a retained 25% interest in the property from Maurice and Lorraine Castagne, pursuant to an underlying property agreement, and to transfer that title to the Company.  Upon commercial production and after acquisition of 100% interest in the property, Nevada Sunrise, LLC will be entitled to a 2.5% NSR on production from the property.  The annual lease payment of $10,000 due in December 2010 was paid by the issuance of 49,424 common shares.

Rozan Gold Property, British Columbia

In 2000, the Company entered into an option agreement to acquire the rights to the Rozan Gold Property, a prospect located in British Columbia.  The Company holds a 100% interest in the property, subject to a 3.0% NSR.  The Company has the right to purchase 66% of the royalty for the sum of Cdn$1,000,000 and has the first right of refusal to purchase the remaining 33%.

During the year ended December 31, 2010, the Company entered into a Lease and Option to Purchase Agreement (the “Agreement”) with Valterra Resource Corporation (“Valterra”).  The Agreement calls for cumulative work commitments of $1,000,000 over 5 years, with a commitment of $50,000 in 2010, $200,000 in 2011, and $250,000 in each of years 3 to 5.

The term of the Agreement is for a period of 5 years, with property payments of cash, common shares and 5-year warrants to be made by Valterra to the Company during the lease as follows:

	Period	CDN$Shares	5 Year Warrants
Signing	Nil	50,000	50,000
Year 1	$30,000	50,000	50,000
Year 2	$30,000	50,000	50,000
Year 3	$40,000	50,000	50,000
Year 4	$40,000	50,000	50,000
Year 5	$60,000	100,000	100,000
Total	$200,000	350,000	350,000

The price of the warrants will be equal to the price of the common shares at the time of issuance.

On January 31, 2011 the Company received the Year 1 share payment of 50,000 common shares and a warrant certificate representing 50,000 warrants and of Valterra Resource Corporation.

18

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

6.       Mineral Property Interests - continued

Rozan Gold Property, British Columbia - continue

On February 8, 2011 the Company signed an amendment agreement to the Agreement whereby the Company agreed to accept securities of Valterra in satisfaction of the $30,000 cash payment due on the effective date of the agreement.  Subsequent to this agreement, the Company received 600,000 Units of Valterra at a deemed price of $0.05 per Unit, each Unit comprising one common share of Valterra and one warrant, each such warrant exercisable to acquire one additional share at an exercise price of $0.10 per Share for a period of 24 months from the date of issue.

Upon completion of the lease payments and work commitments, Valterra will acquire the Rozan Property, subject to an underlying NSR.  Valterra will use its best efforts to complete a NI 43-101 resource estimate for the property by year 5, subject to results obtained from exploration and development work.

Under the agreement with Valterra, should the Company elect to acquire two thirds of the NSR currently held by the original optionors, or a 2% NSR, Valterra will have 30 days to exercise an option to obtain half of this interest (a 1% NSR) for Cdn$500,000.  The Company will use this payment as part of the required payment to acquire the 2% NSR from the original optionors and will then transfer the 1% NSR to Valterra.   Should Valterra elect not to exercise its option at this time, it shall retain a further option to acquire the 1% NSR from the Company at a future date for Cdn$750,000.  The Company will retain its first right of refusal with the original optionors to acquire the remaining 1% of their NSR, should they elect to sell it to a third party.  Should the Company obtain this 1% NSR, Valterra shall have first right of refusal if the Company elects to sell it to a third party.

Stewart Property, British Columbia

Pursuant to an option agreement entered into in 2001 and completed in 2008, the Company acquired the rights to the Stewart mineral claims, a prospect located close to Nelson in south eastern British Columbia.  The Company holds a 100% right, title and interest in and to the property, subject only to a 3% NSR payable to the optionors. The Company has the right to purchase 66% of the royalty for the sum of Cdn$1,000,000 and has the first right of refusal to purchase the remaining 33%.   The Company has staked six claims contiguous to the Stewart Property located in south-eastern British Columbia.

19

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

7.       Finance Lease Obligation

The Company leases a vehicle under a capital lease which expires in 2012 and bears simple interest at a rate of 8.69%.  At September 30, 2011, future minimum lease payments under capital leases are $6,700, including $270 of anticipated interest payments, payable at $697 monthly.

Payments under capital lease included above are as follows:

2011	$	2,094
2012		4,876
Total minimum payments		6,970
Less interest		(270	)
Finance lease obligation		6,700
Less:  Current portion		(6,700	)
Non-current portion	$	--

8.       Share Capital

Authorized

Unlimited Number of common shares without par value

Unlimited Number of preference shares without par value

(a)       Common shares, issued and fully paid

At the Annual and Special General Meeting of its shareholders held on September 18, 2009, the shareholders approved a special resolution to alter the Company’s authorized share structure by consolidating all of the issued and outstanding common shares without par value, of which 168,972,873 pre-consolidation common shares were issued, on the basis of ten (10) pre-consolidation common shares to one (1) post-consolidation common share, after adjusting for rounding, or 16,894,310 post-consolidation common shares.  In addition, the issued and outstanding Class A preference shares were consolidated on the same basis, resulting in 394,843 Class A preference shares, after consolidation.  The share consolidation of the common shares without par value and the Class A preference shares was effective December 21, 2009.  All periods presented have been retroactively adjusted to reflect this reverse split.

8.       Share Capital - continued

(a)       Common shares, issued and fully paid - continued

  Financing

  September 30, 2011

  There were no share capital transactions during the nine month period ending September 30,

  2011.

  2010

20

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

In April, 2010 the Company completed a non-brokered private placement raising gross proceeds of $750,000.  A total of 3,000,000 units were issued at a price of $0.25 per unit.  Each unit consists of one common share of the Company and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase, for a period of 24 months, one additional common share of the Company at a price of $0.35.  The shares and warrants issued in connection with this non-brokered private placement are subject to a minimum hold period of four months.  Finder's fees of $76,797 and 192,000 finder’s warrants were awarded in relation to the first tranche of the financing.  The finder’s warrants have the same terms as the warrants included in the units sold to purchasers except for an exercise price of $0.25.  The finder's warrants and share purchase warrants were valued using a Black Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.78%, volatility factors of 89% and an expected life of 2 years.  The total value ascribed to the finder’s warrants and share purchase warrants was $198,869.

On September 24, 2010, the Company completed a first tranche of a private placement, which comprised 5,203,856 units at a price of $0.14, comprising one common share and one warrant, exercisable for $0.35 for a period of 24 months.  Finder's fees of $15,680 and 112,000 finder’s warrants were awarded in relation to the first tranche of the financing.  The finder’s warrants have the same terms as the warrants included in the units sold to purchasers.  The finder’s warrants and share purchase warrants were valued using a Black-Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.35%, volatility factors of 94% and an expected life of 2 years.  The total value ascribed to the finder’s warrants and share purchase warrants was $149,353.

On October 14, 2010, the Company closed the second and final tranche of the non-brokered private placement, of 7,296,142 units.  Finder's fees of $75,673 and 540,491 finder's warrants were paid in relation to the second tranche of the financing.  Each finder's warrant entitles its holder to purchase, for a period of 24 months, one additional common share of the Company at a price of US$0.35.  In total, 12,499,998 units were issued at the price of $0.14 per unit to raise gross proceeds of approximately $1,750,000.  The shares, the warrants, the finder’s warrants and any common shares issued on exercise of the warrants or the finder's warrants were subject to a minimum hold period of four months.  The finder’s warrants and share purchase warrants were valued using a Black-Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.35%, volatility factors of 92% and an expected life of 2 years.  The total value ascribed to the finder’s warrants and share purchase warrants was $319,133.

21

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

8.       Share Capital - continued

(a)       Common shares, issued and fully paid - continued

On December 22, 2010 the Company completed a non-brokered private placement financing of 2,272,727 flow-through units at a price of Cdn$0.22 per unit for gross proceeds of Cdn$500,000. Each unit consists of one flow-through common share and one-half of one transferable non-flow-through share purchase warrant, totalling 1,136,363 warrants.  Each warrant is exercisable for a period of two years from the date of issue at a price of Cdn$0.30 per share.  The proceeds will be used for exploration projects in British Columbia.  Finder's fees of Cdn$35,000 and 159,090 finder's warrants were awarded in relation to the financing.  Each finder's warrant entitles its holder to purchase, for a period of 2 years, one additional common share of the Company at a price of US$0.30.  The Finder's Warrants and share purchase warrants were valued using a Black-Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.38%, volatility factors of 99% and an expected life of 2 years.  The total value ascribed to the finder's warrants and share purchase warrants was $103,022.

A finder’s fee of Cdn$35,000 was paid in association with this financing.  In addition, the Company has issued 159,090 warrants to the finder, which will entitle the finder to acquire the number of common shares of the Company at a price of Cdn $0.23 per share at any time, subject to a hold period, and from time to time, on or before December 21, 2012.

Under Canadian GAAP, the warrants were classified as equity and changes in fair value were not recognized.  In accordance with IFRS, an obligation to issue shares for a price that is not fixed in the Company's functional currency, and that does not qualify as a rights offering, must be classified as a derivative liability and measured at fair value with changes recognized in the statement of operations and comprehensive loss as they arise. This change in accounting treatment created a warrant liability at September 30, 2011 of $51,866, ($111,458 at December 31, 2010).  The warrants were valued using a Black-Scholes option pricing model, as at March 31, 2011 using the following assumptions: weighted average risk free interest rate of 1.38%, volatility factors of 99% and an expected life of 1.75 years.  An unrealized gain on warrant liability of $59,592 has been recorded on the condensed consolidated interim statements of loss and comprehensive loss for the nine month period ending September 30, 2011.

22

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

8.       Share Capital - continued

(b)       Stock options

The Company has a rolling stock option plan for its directors and employees to acquire common shares of the Company at a price determined by the fair market value of the shares at the date of grant.  The maximum aggregate number of common shares reserved for issuance pursuant to the plan is 10% of the issued and outstanding common shares.

				Weighted Average
	Number of			Exercise
	Options			Price (Cdn$)
Outstanding, December 31, 2009		1,288,250		$	3.85
Granted		2,078,998		$	0.25
Cancelled and forfeited		(243,250	)	$	5.55
Expired		(10,000	)	$	3.60
Balance, December 31, 2010 and
September 30, 2011		3,113,998		$	1.37

The following table summarizes information about the stock options outstanding at September 30, 2011:

	Number Outstanding		Weighted Average
Exercise	and Exercisable		Remaining
Price (Cdn$)	September 30, 2011		Contractual Life
$0.175		26,500	.03 years
$0.175		170,500	2.14 years
$0.175		85,500	2.78 years
$0.175		39,000	.15 years
$0.175		635,000	1.20 years
$0.175		97,500	1.62 years
$0.25		559,998	3.46 years
$0.25		1,500,000	4.19 years
		3,113,998	3.13 years

For the nine months ended September 30, 2011, a total of 405,700 incentive stock options granted to directors, officers, employees and consultants of the Company with exercise prices ranging from Cdn$1.00 to Cdn$10.00 were repriced to $0.175 per share. The expiry dates, ranging from October 12, 2011 to July 12, 2014, remain unchanged.

For the nine months ended September 30, 2011, the Company incurred stock-based compensation expense of $58,979 (September 30, 2010 - $102,961) of which $13,166

23

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

8.       Share Capital - continued

(September 30, 2010 - $Nil) is classified within exploration and evaluation costs.

(b)       Stock options - continued

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option valuation model with weighted average assumptions as follows:

	September 30,			December 31
	2011			2010
Risk-free interest rate		1.68	%		2.2	%
Expected life in years	2.18 years			3.8 years
Expected volatility		101	%		112.3	%
Weighted average fair value per
option granted	$	0.19		$	0.18

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions.  The Company’s stock options are not transferable and cannot be traded, thus the Black-Scholes model may over-estimate the actual value of the options that the Company has granted.  The Black-Scholes model also requires an estimate of expected volatility.  The Company uses historical volatility rates of the Company to arrive at an estimate of expected volatility.  Changes in the subjective input assumptions can impact the fair value estimate.

       (c)       Warrants

As at September 30, 2011, the following share purchase warrants were outstanding:

Number of Warrants		Exercise Price	Expiry Date
350,000	$	1.50	November 4, 2011
1,600,000	$	0.35	April 6, 2012
80,000	$	0.25	April 6, 2012
1,400,000	$	0.35	April 23, 2012
112,000	$	0.25	April 23, 2012
5,315,856	$	0.35	September 30, 2012
2,813,575	$	0.35	September 9, 2015
7,836,633	$	0.35	October 4, 2012
1,136,363	Cdn$	0.30	December 21, 2012
159,090	Cdn$	0.22	December 21, 2012
20,803,517

24

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

8.       Share Capital - continued

(c)       Warrants - continued

The following table summarizes warrant transactions for the year ended December 31, 2010 and the nine  month period ended September 30, 2011:

				Weighted Average
	Shares			Exercise Price
Balance, December 31, 2009		861,500		$	1.12
Issued		20,453,517		$	0.35
Balance, December 31, 2010		21,315,017		$	0.35
Expired		(511,500	)	$	1.60
Balance, September 30, 2011		20,803,517		$	0.37

9.       Related Party Transactions and Balances

	September 30,		December 31,
	2011		2010
Balance receivable from
Quorum Management (a)	$	-	$	124,605
Directors and officers		39,997		42,152
Total balance receivable from	$	39,997	$	166,757
Balances payable to
Quorum Management (a)	$	11,203	$	--
Directors and officers		483,152		289,965
Total balance payable from	$	494,355	$	289,965

25

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

9.       Related Party Transactions and Balances - continued

Related party transactions reflected in these condensed consolidated interim financial statements are as follows:

(a) In the nine months ended September 30, 2011, $119,702  (2010 nine months ended $97,450) in management, administrative, geological and other services were provided by Quorum Management and Administrative Services Inc. (“Quorum”), a private company held jointly by the Company and other public companies, to provide services on a full cost recovery basis to the various public entities currently sharing certain personnel costs, office space, and overhead with the Company.  Currently, the Company has a one/third interest in Quorum.  The Company advanced three months of funds to Quorum for future services.  Quorum held this advance as a deposit for each shareholder company as working capital.  As at December 31, 2008, we concluded that amounts advanced may not be recoverable in full, based on the financial position of Quorum at that time and its corresponding ability to continue to provide services to the Company.  Consequently, a provision of $321,839 was recorded.  Since the allowance was recorded, Quorum has continued to provide services.  A recovery of $77,045 was recorded in 2009.  At December 31, 2010, the Company determined that the full amount of the Quorum provision remaining of $124,605 was recoverable, and this amount was recorded as a credit in the statement of loss and comprehensive loss.   A distribution of income from Quorum in the nine months ended September 30, 2011 resulted in a credit to Emgold in the amount of $43,783.

(b) Consulting fees of $32,280 (2010 –nine  months ended $37,495) were paid or are accrued and payable to 759924 Ontario Ltd., a private company controlled by a director.

(c) Consulting fees of $Nil (2010 –nine months ended $20,775) were paid or are accrued and payable to Kent Avenue Consulting Ltd., a private company controlled by a director.

(d) Related party balances are non-interest bearing and are due on demand, with no fixed terms of repayment.  Transactions with related parties are recorded at the exchange amount, being the price agreed between the parties

(e) Related party balances are non-interest bearing and are due on demand, with no fixed terms of repayment.  Transactions with related parties are recorded at the exchange amount, being the price agreed between the parties.

26

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

10.       Supplementary Cash Flow Information - Non-Cash Transactions

	Nine months ended September 30,
	2011		2010
Financing and investing activities
Shares issued for mineral property interests	$	-	$	7,134
Shares issued for settlement of debt		-		73,886
Shares issued for conversion of accrued dividends
on preference shares		-		517,151
Warrants issued for conversion of accrued dividends		-
on preference shares				479,587
Shares issued on conversion of preference shares		-		72,574
Stock-based compensation		58,978		102,961
Finders’ warrants		-		287,891

27

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

11.       Management of Capital

The Company determines capital as its available working capital and assets that may be used for operations and exploration of its mineral property interests.  The Company’s objective in managing capital is to maintain adequate levels of funding to support permitting activities in California, maintain corporate and administrative functions necessary to support organizational management oversight, and obtain funding sufficient for advancing the Company’s other interests including the Buckskin Rawhide and Stewart properties.

The Company seeks to manage its capital structure in a manner that provides sufficient funding for operational activities.  Funds are primarily secured through equity capital obtained in private placements.  There can be no assurances that the Company will be able to continue raising capital in this manner.  The Company currently does not use other sources of financing that require fixed payments of interest and principal due to the lack of cash flow from current operations and is not subject to any externally imposed capital requirements.

The Company has in the past invested its capital in short-term investments to obtain adequate returns.  The investment decision is based on cash management to ensure working capital is available to meet the Company’s short-term obligations while maximizing liquidity and returns of unused capital.

Although the Company has been successful at raising funds in the past through the issuance of share capital, it is uncertain whether it will be able to continue this form of financing due to the current difficult conditions.  The Company currently does not have sufficient funds to complete its permitting activities, and will need to rely on equity financings, or forms of joint venture or other types of financing to continue the permitting process and commence exploration work and to meet its administrative overhead costs for the coming year.  Additional information relating to management of capital is disclosed in Note 1.

28

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

12.       Financial Instruments and Risk Management

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign currency risk and commodity and equity price risk).

Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors.  The Board of Directors also provides regular guidance for overall risk management.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations.  The Company’s maximum exposure to credit risk at the statement of financial position date under its financial instruments is summarized as follows:

	September 30, 2011
Accounts and other receivables -
Currently due	$	53,844
Past due by 90 days or less, not impaired		-
Past due by greater than 90 days, not impaired		-
		53,844
Cash		29,633
	$	83,477

Substantially all of the Company’s cash and cash equivalents are held with major financial institutions in Canada, and management believes the exposure to credit risk with such institutions is not significant.  Those financial assets that potentially subject the Company to credit risk are its receivables.  The Company has increased its focus on credit risk given the impact of the current economic climate.  The Company considers the risk of material loss to be significantly mitigated due to the financial strength of the major financial institutions where cash and term deposits are held.  The Company’s maximum exposure to credit risk as at September 30, 2011, is the carrying value of its financial assets.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities.  The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support normal operation requirements as well as the growth and development of its mineral property interests.  The Company coordinates this planning and budgeting process with its financing activities through the capital management process described in note 12, in normal circumstances.  Due to the lack of liquidity and anticipated working capital requirements within the next twelve months, management has increased its focus on liquidity risk given the impact of the current economic climate on the availability of finance.  During the year ended December 31, 2010, the Company was able to raise net proceeds of $2,753,281 in private placements.  In addition, the Company has negotiated debt settlements with two suppliers to remove $152,034 in current liabilities from the statement of financial position resulting in a gain on settlement of $77,197.  Further information regarding liquidity risk is set out in Note 1.

29

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

12.       Financial Instruments and Risk Management - continued

Liquidity risk - continued

The Company’s financial liabilities are comprised of its accounts payable and accrued liabilities and amounts due to related parties, the contractual maturities of which at September 30, 2011, are summarized as follows:

	September 30,
	2011
Accounts payable and accrued liabilities with contractual maturities -
Within 90 days or less	$	364,496
Due to related parties with contractual maturities
Within 90 days or less		494,355
	$	858,851

            •      Interest rate risk

The Company has no significant exposure at September 30, 2011, to interest rate risk through its financial instruments.

•     Price risk

The Company is exposed to price risk with respect to commodity and equity prices.  Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities.  Commodity price risk is remote since the Company is not a producing entity.  Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market.  The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.

The Company’s marketable securities consist of equity investments in one publicly listed entity.  Based on management’s knowledge and experience of the financial markets, the Company believes the following movements are “reasonably possible” over a twelve month period:

(i) A variance of 10% in the market value of the Company’s marketable securities would affect loss and comprehensive loss by $3,229.

•     Currency risk

The Company’s currency risk arises primarily with fluctuations in United States dollar and the Canadian dollar.  The Company has no revenue and any exposure to currency risk is related to expenditures by the Company in Canada, as a significant portion of operating expenses are payable in Canadian dollars.  The currency risk by the Company relates to unpaid liabilities of the Company payable in Canadian dollars.

30

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

12.       Financial Instruments and Risk Management - continued

•     Currency risk - continued

The Company has not hedged its exposure to currency fluctuations.  At September 30, 2011, the Company is exposed to currency risk through the following assets and liabilities denominated in Canadian dollars, but presented in United States dollar equivalents.

	September 30,
	2011
Canadian dollars
Cash	$	343
Accounts payable and accrued liabilities	$	(309,324	)

Based on the above net exposures at September 30, 2011, and assuming that all other variables remain constant a 10% appreciation or depreciation of the Canadian dollar against the United States dollar would result in an increase/decrease of $30,932 in the Company’s loss from operations.

13. IFRS Transition

As stated under Significant Accounting Policies (note 2), these are the Company’s first financial statements prepared in accordance with IFRS (International Financial Reporting Standards) as issued by the IASB.  The policies set out in the Significant Accounting Policies section have been applied in preparing the financial statements for the nine months ended September 30, 2011, the comparative information presented in these financial statements for the nine months ended September 30, 2010 and the year ended December 31, 2010 and in the preparation of an opening IFRS statement of financial position at January 1, 2010 (the Company’s date of transition).

The Company has followed the recommendations in IFRS-1 First-time adoption of IFRS, in preparing its transitional statements.

(a) IFRS Exemptions and Choices

The adoption of IFRS requires the application of IFRS 1, which provides guidance for an entity’s initial adoption of IFRS.  IFRS 1 generally requires retrospective application of IFRS as effective at the end of its first annual IFRS reporting period.  However, IFRS 1 also provides certain optional exemptions and mandatory exceptions to this retrospective treatment.

The Company has elected to apply the following optional exemptions in its preparation of an opening IFRS statement of financial position as at January 1, 2010, the Company’s "Transition Date":

• To apply IFRS 2 Share based Payments only to equity instruments that were issued after November 7, 2002 and had not vested by the Transition Date.

• To apply IFRS 3 Business Combinations prospectively from the Transition Date, therefore not restating business combinations that took place prior to the Transition Date.

31

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

13. IFRS Transition - continued

(a) IFRS Exemptions and Choices - continued

• Cumulative currency translation adjustment - IFRS 1 does not require a first-time adopter to apply IAS 21, The Effects of Changes in Foreign Exchange Rates, to cumulative currency translation adjustments that existed on the IFRS transition date.  The Company has elected to report only those cumulative currency translation adjustments arising after January 1, 2010.  All currency translation adjustments arising prior to January 1, 2010 are reflected in retained earnings in the January 1, 2010 statement of financial position, and will not be included in the gain or loss on subsequent disposals of foreign operations.

In preparing its opening IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and the additional notes that accompany the tables.

Mandatory exceptions to retrospective application

Estimates: Hindsight was not used to create or revise estimates and accordingly the estimates previously made by the Company under Canadian GAAP are consistent with their application under IFRS.

(b) Reconciliation from Canadian GAAP to IFRS

Recognition and measurement differences exist between Canadian GAAP and IFRS in certain areas. To illustrate the effects of these differences, certain financial statements previously reported under Canadian GAAP have been reconciled to the equivalent IFRS statements, and reconciling differences explained.  The adoption of IFRS has had no material impact on the cash flows of the Company, and as such, no reconciliation of prior period cash flow statements has been presented.

32

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

13. IFRS Transition - continued

(b)       Reconciliation from Canadian GAAP to IFRS - continued

Reconciliation of equity:

	September 30, 2010
	Canadian
	GAAP			Adjustments			IFRS
Assets
Current assets	$	468,384		$	-		$	468,384
Property and equipment, mineral property
interest and other non-current assets		1,076,248			-			1,076,248
Total assets	$	1,591,436		$	-		$	1,591,436
Liabilities
Total current liabilities	$	1,166,948		$	-		$	1,168,948
Long-term finance lease obligations		8,147			-			8,147
Total liabilities		1,175,095			-			1,175,095
Shareholders' deficiency
Share capital and share subscription (i and ii)		40,814,276			27,005			40,841,281
Share subscriptions		85,540			-			85,540
Warrants		617,838			-			617,838
Contributed surplus		6,344,938			(18,328	)		6,326,610
Accumulated comprehensive loss (iii)		(578,524	)		577,456			(1,068	)
Deficit (i, ii, iii,)		(46,867,727	)		(586,133	)		(47,453,860	)
		416,341			-			416,341
Total liabilities and shareholders' deficiency	$	1,591,436		$	-		$	1,591,436

33

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

13. IFRS Transition - continued

(b) Reconciliation from Canadian GAAP to IFRS - continued

Reconciliation of loss and comprehensive loss

	Three months			Nine months
	September 30,			September 30,
	2010			2010
Loss under Canadian GAAP	$	135,322		$	709,124
Accretion of debt component of preference
shares (i)		(635	)		(4,471	)
Foreign exchange on debt component of
preference shares (i)		14,824			11,055
Gain on settlement of convertible
preference shares (i)		(33,850	)		(33,850	)
Loss and comprehensive loss under IFRS	$	115,661		$	681,858

(i) The convertible preference shares were treated as a compound financial instrument with debt and equity components under Canadian GAAP.  Under IFRS these convertible preference shares are classified as a liability. The change in treatment reflects the IAS 32 requirement that when a derivative financial instrument gives one party a choice over how it is settled (e.g. the issuer or the holder can choose settlement net in cash or by exchanging shares for cash), it is a financial asset or a financial liability unless all of the settlement alternatives would result in it being an equity instrument.

The effects of this transitional change, as at September 30, 2010, resulted in a decrease in share capital in the amount of $72,574, a decrease in contributed surplus of $18,328 and a decrease in the deficit of $90,902.

 The effects of this transitional change, for the nine months ended September 30, 2010, resulted in a reduction of accretion on debt portion of convertible preference shares in the amount of $4,471 (three month period ended September 30, 2010  - reduction of $635), an increase in foreign exchange loss of $11,055 (three month period ended September 30, 2010  - increase of $14,824) and an increase in the gain on settlement of preferred shares in the amount of $33,850 (three month period ended September 30, 2010  - increase of  $33,850).

34

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

13. IFRS Transition - continued

(b) Reconciliation from Canadian GAAP to IFRS - continued

(ii) Under Canadian GAAP, the Company followed the recommendations of the Emerging Issues Committee (“EIC”) of the CICA with respect to flow-through shares, as outlined in EIC-146.  The application of EIC-146 required the recognition of the foregone tax benefit on the date the Company renounced the tax credits associated with the exploration expenditures, provided there is reasonable assurance that the expenditures will be made.  To recognize the foregone tax benefits to the Company, the carrying value of the shares issued is reduced by the tax effect of the tax benefits renounced to subscribers.

As part of the transition to IFRS the Company has adopted a policy to allocate the proceeds between the offering of the shares and the sale of tax benefits when the shares are offered. The allocation is made based on the difference between the quoted price of the shares and the amount the investor pays for the flow-through shares.  A liability is recognized for the premium paid by the investors.  The liability is reduced and the reduction of premium liability is recorded in other income on a pro-rata basis based on the corresponding eligible expenditures that have been incurred.

Further, the corresponding reduction of share capital in respect of flow-through share financing as previously recorded under Canadian GAAP is now recorded as an expense in the statement of net loss and comprehensive loss.

The effects of this transitional change resulted in an increase in share capital and deficit of $99,579 as at September 30, 2010.

(iii) Cumulative currency translation adjustment - IFRS 1 does not require a first-time adopter to apply IAS 21, The Effects of Changes in Foreign Exchange Rates, to cumulative currency translation adjustments that existed on the IFRS transition date.  The Company has elected to report only those cumulative currency translation adjustments arising after January 1, 2010.  All currency translation adjustments arising prior to January 1, 2010 are reflected in retained earnings in the January 1, 2010 statement of financial position, and will not be included in the gain or loss on subsequent disposals of foreign operations.

The effects of this transitional change resulted in a decrease in other accumulated comprehensive loss and an increase in deficit of $577,456 as at September 30, 2010.

35

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

14. Subsequent Events

Subsequent to the year end the Company announce that, subject to TSX Venture Exchange approval, the Company would carry out a non-brokered private placement of up to  10,000,000 units ("Units") at CDN $ 0.10 per Unit to raise up to CDN $ 1,000,000. Each Unit will consist of one common share ( a Share") of the Company and one non-transferable share purchase warrant (a "Warrant" ). Each Warrant will entitle the holder to purchase, for a period of 24 months, one additional Share at a price of CDN $ 0.15. The Shares issued in connection with this non-brokered private placement, including any issued on the exercise of the Warrants, will be subject to a minimum hold period of four months.

Finders's fees comprised of up to 8% cash and 8% in finder's warrants may be payable in connection with some or all of the offering in accordance with TSX-Venture Exchange policies. Each finder's warrant would be exercisable for one Share at a price of $ 0.15, for a period of 24 months from the date of issuance. Shares issued on the exercise of the finder's warrants would also be subject to a minimum hold period of four months.

On November 2, 2011 the Company announced that with the strength of investor interest, it has elected to increase the amount of its previously announced non-brokered private placement financing. The Company has elected to increase the offering from CDN $ 1,000,000 to a maximum of CDN $ 2,000,000. This will result in issuance of up to an additional 10,000,000 Units ( an aggregate of up to 20,000,000 Units ) at the price of CDN $ 0.10 per Unit.

On November 21, 2011 the Company announced the closing of the first tranche of its non-brokered private placement. A total of 11,620,000 Units were issued at the price of CDN $ 0.10 per Unit to raise CDN $ 1,162,000. Finder's fees of CDN $ 53,600 and 536,000 Finder's Warrants were awarded in relation to the first tranche of financing.

36

Emgold Mining Corporation

(An Exploration Stage Company)

Notes to Condensed Consolidated Interim Financial Statements

September 30, 2011

(expressed in United States Dollars)

(Unaudited)

15.           Exploration and Evaluation Costs

						Cumulative
						Total of
	Nine months ended		September30,			September 30,
	2011		2010			2011
Idaho - Maryland Property, California
Exploration cost
Assay and analysis	$	-	$	-		$	100,140
Community relations		-		-			80,561
Drilling		-		-			1,039,920
Geological and geochemical		254,316		242,469			4,642,479
Land lease and taxes		103,219		120,281			1,609,371
Consulting		-		-			209,713
Mine planning		244,536		58,634			4,687,374
Site activities		-		-			1,672,390
Stock-based compensation		13,166		-			616,109
Transportation		-		-			128,250
Incurred during the year		615,237		421,384			14,786,307
Buckskin Rawhide Property, Nevada
Exploration cost
Geological and geochemical		26,402		--			27,677
Consumable material		1,165		--			5,075
Incurred during the year		27,567		--			32,752
Rozan Gold Property, British Columbia
Exploration costs
Assay and analysis		-		-			11,803
Geological and geochemical		--		1,076			123,388
Drilling		-		-			64,050
Site-activities		-		256			22,044
Stock-based compensation		-		-			16,055
Trenching		-		-			4,666
Transportation		-		-			12,354
Assistance and recovery		-		(2,529	)		(7,322	)
Incurred during the year		--		(1,197	)		247,038

Stewart Property, British Columbia
Exploration cost		4,584		-			100,741
Assay and analysis
Drilling		321,087		-			851,143
Geological and geochemical		55,391		431			276,539
Site-activities		9,808		35			31,318
Stock-based compensation		-		-			16,055
Trenching		-		-			19,318
Transportation		10,223		-			56,061
Assistance and recovery		-		(4,620	)		(29,692	)
Incurred during the year		401,093		(4,154	)		1,321,483
Total exploration costs	$	1,043,897	$	416,033		$	16,387,580

37