MAINTAINING WATER QUALITY AT KETTLE RIVER-BUCKHORN

We continue to be strongly committed to protecting water quality and working with the regulatory authorities to maintain the highest environmental standards at our Kettle River-Buckhorn mine. Heavy spring run-off in 2012 and 2013 presented many challenges due to limited outfall capacity for discharge of treated water. The Company took several steps to improve the water management system, including additional monitoring, lining of the mine sumps to reduce infiltration from the mine, changes in snow management, increase in water treatment capacity, and made an application for increased outfall capacity.

In 2012, the Washington State Department of Ecology (WDOE) issued a Notice of Violation and penalty of $395,000 to Crown Resources Corp. for alleged water management issues occurring in 2011 and 2012. Crown subsequently appealed both the NOV and penalty. In June 2013, the Company entered into a Settlement Agreement with the WDOE resolving its appeal and agreeing to a fine of $80,000, and to contribute $180,000 for non-related environmental projects in the vicinity of the mine. An agreement was also reached to implement a variety of source control and other measures aimed at eliminating compliance concerns.

In early 2014, after a lengthy permit renewal process, WDOE issued a new permit for Buckhorn. Buckhorn already operates within some of the most stringent permitted levels for any mining operation in the world, but the conditions of the renewed permit are unworkable in a number of areas. For example, the new permit sets a limit on the outfall capacity from the water treatment plant that is lower than the capacity needed to treat water volumes encountered during spring thaw – leaving us with insufficient capacity to dewater the mine as the permit itself requires. We repeatedly raised concerns on these and other points during the permitting process. Unfortunately, the contradictions and problems we raised were not addressed and, thus, we have had no choice but to appeal the permit to the Pollution Control Hearings Board.