Claude Resources Inc. Q3 2012 MD&A and Financial Statements
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    Claude Resources Inc. Q3 2012 MD&A and Financial Statements Claude Resources Inc. Q3 2012 MD&A and Financial Statements Document Transcript

    • MANAGEMENT’S DISCUSSION AND ANALYSIS & CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2012FOR FURTHER INFORMATION PLEASE CONTACT:Marc Lepage, Manager, Investor RelationsClaude Resources Inc.200, 224 – 4th Avenue SouthSaskatoon, Saskatchewan Phone: (306) 668-7505Canada S7K 5M5 Fax: (306) 668-7500ir@clauderesources.com www.clauderesources.comTRADING SYMBOLS:TSX – CRJNYSE MKT - CGR
    • MANAGEMENT’S DISCUSSION AND ANALYSISThe following Management’s Discussion and Analysis (“MD&A”) of the consolidated operating andfinancial performance of Claude Resources Inc. (“Claude” or the “Company”) for the three and ninemonths ended September 30, 2012 with the corresponding periods of 2011 is prepared as ofNovember 7, 2012. This discussion is the responsibility of Management and has been prepared usingInternational Financial Reporting Standards (“IFRS”), as issued by the International AccountingStandards Board. This discussion should be read in conjunction with the Company’s September 30,2012 condensed consolidated interim financial statements and notes thereto and the Company’s 2011annual MD&A and 2011 audited consolidated financial statements and notes thereto. The Board ofDirectors has approved the disclosure presented herein. All amounts referred to in this discussionare expressed in Canadian dollars, except where otherwise indicated.OVERVIEWClaude Resources Inc., incorporated pursuant to the Canada Business Corporations Act, is a gold producerwith shares listed on both the Toronto Stock Exchange (TSX-CRJ) and the NYSE MKT (NYSE MKT-CGR). The Company is also engaged in the exploration and development of gold mineral reserves andmineral resources. The Company’s entire asset base is located in Canada.The Company’s revenue generating asset is the 100 percent owned Seabee Gold Operation, located innorthern Saskatchewan, which includes 35,600 acres (14,400 hectares) and is comprised of five mineralleases and extensive surface infrastructure. Claude also owns 100 percent of the Amisk Gold Project innortheastern Saskatchewan. The Amisk Gold Project is located 20 kilometres southwest of Flin Flon,Manitoba and hosts the Amisk Gold Deposit and a large number of gold occurrences and prospects. At99,800 acres (40,400 hectares), this gold and silver exploration property is one of the largest land positionsin the Flin Flon mineral district. Claude also owns 100 percent of the Madsen Property located in the RedLake gold camp of northwestern Ontario. The Madsen Project comprises over 10,000 acres (4,000hectares) and boasts historical production in excess of 2.4 million ounces, making it the third largest goldproducer in the Red Lake camp in Ontario, Canada. Infrastructure includes a fully functional 500 ton perday mill, a 4,125 foot deep shaft and permitted tailings facility. (1)The Company’s Seabee, Amisk and Madsen properties contain large, long life mineral resources in thepolitically safe jurisdiction of Canada. All three properties, and their related deposits, contain over onemillion ounces of gold in the ground inventory and have significant leverage to the price of gold andprovide valuable long-term opportunities for the Company and its shareholders. Management intends tofurther develop shareholder value by maintaining and advancing these projects in a financially prudentmanner, which will include the monitoring of the attractiveness of these projects and the evaluation ofalternatives to improve their economics.PRODUCTION, EXPLORATION, AND FINANCIAL HIGHLIGHTSSeabee Gold Operation Production • Q3 2012 production of 15,073 ounces (Q3 2011: 11,324 ounces). Year to date, production was 36,813 ounces (YTD 2011: 33,487 ounces). • For fiscal 2012, the Company expects to meet its production forecast of 48,000 to 50,000 ounces. • The Company is reviewing its operating processes and procedures to identify and implement efficiencies designed to increase production and lower operating costs. In addition to outside consultants being engaged to provide feedback and recommendations, a change in several mine management positions has taken place including safety, engineering, capital planning, supply chain management and environmental. Furthermore, a reduction in unit cash costs is also anticipated from a combination of higher grade ore at Seabee Deep and the L62 Zone and the effects of the shaft extension commissioning. • Completion of the Seabee Mine Shaft Extension Project, originally scheduled to be completed
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 2 during the fourth quarter of 2012, has been deferred until the first quarter of 2013 in order to reduce interruption to operations. Down time is anticipated to be reduced from 40 days to approximately 20 days. • L62 Zone has been accessed and development is active on three levels. Development tonnage was accessed during the third quarter and production tonnage is scheduled for the fourth quarter. • Occupancy in newly upgraded Seabee Camp Facilities occurred during the third quarter. • During 2012, $18.0 million was budgeted in underground development, including access to the L62 Zone and advancement towards the Santoy Gap, to increase the number of working faces in 2013.Exploration • Claude continued its extensive exploration programs at the Seabee, Amisk and Madsen Properties during the first nine months of 2012. • At the Seabee Gold Operation, the Company has completed approximately 40,000 metres of regional drilling and 44,000 metres of underground drilling year to date in 2012. • During the third quarter, exploration continued at Santoy Gap with one rig performing infill and step-out drilling. Santoy Gap drill results, released during the third quarter, extended the mineralized system up-dip, along strike to the north and at depth as well as confirmed continuity within the existing mineral resource. A highlight included drill hole JOY-12-677 which returned the widest intercept to date, 14.58 grams of gold per tonne over 29.74 metres, confirming a high grade core that hosts multiple vein sets over combined widths of between 20 and 30 metres. Results from this drilling will be included in the 2012 resource update which will be available in the first quarter of 2013. • Following on the discoveries of the L62 Zone and Santoy Gap, the inferred resource base at Seabee Gold Operation increased 236 percent and demonstrates the potential to add ounces that exists at the Seabee Gold Operation. The L62 Zone and Santoy Gap deposits are in close proximity to current mining infrastructure and will be integrated into an updated life of mine plan. • At the Amisk Gold Project, work on an external Preliminary Economic Assessment and an evaluation of the underground potential and detailed (as well as reconnaissance) exploration, continued during the third quarter. • Madsen exploration, which included two underground rigs and one surface rig, was completed in the third quarter. Testing focused on the 8 Zone Trend as well as the McVeigh and Austin Tuff depth continuity. Results are anticipated during the fourth quarter.Financial • Net profit of $3.0 million, or $0.02 per share, for the three months ended September 30, 2012 (Q3 2011 – net profit of $2.6 million, or $0.02 per share). Year to date, net profit was $3.1 million, or $0.02 per share (YTD 2011 – $9.7 million, or $0.06 per share). • Cash flow from operations before net changes in non-cash operating working capital (2) of $8.6 million, or $0.05 per share, for the three months ended September 30, 2012, up 54 percent from $5.6 million, or $0.03 per share, for the three months ended September 30, 2011. Year to date, cash flow from operations before net changes in non-cash operating working capital was $16.4 million, or $0.09 per share (YTD 2011 - $17.6 million, or $0.11 per share). • Gold sales during the three months ended September 30, 2012 of 14,088 ounces at an average price of $1,663 (U.S. $1,671) for revenue of $23.4 million (Q3 2011 - 10,898 ounces at an average price of $1,670 (U.S. $1,704) for revenue of $18.2 million). Year to date, sales of 35,941 ounces at an average price of $1,657 (U.S. $1,654) generated revenue of $59.6 million (YTD 2011 – 32,777 ounces at an average price of $1,518 (U.S. $1,553) for revenue of $49.8 million). • Total Canadian dollar cash cost per ounce of gold (2) for the third quarter of 2012 increased six percent to CDN $920 (U.S. $924) per ounce from the third quarter of 2011 (Q3 2011: CDN $871 (U.S. $888)), primarily as a result of the higher operating costs period over period. Third quarter cash cost per ounce did improve over the first two quarters of the year (Q1 2012: CDN $1,236 (U.S. $1,234); Q2 2012: CDN $1,082 (U.S. $1,071)). Year to date, total cash cost per ounce ofClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 3 CDN $1,059 (U.S. $1,057) per ounce was 28 percent higher than the cash cost per ounce of CDN $828 (U.S. $847) reported during the first nine months of 2011.OUTLOOKLooking forward, the Company will continue to: i) Pursue best practices in the areas of safety, health and the environment; ii) Increase production and improve unit operating costs at the Seabee Gold Operation by investing in capital projects and equipment to further develop satellite deposits; iii) Sustain or increase reserves and resources at the Seabee Gold Operation through further exploration and development; iv) Advance the Companys 100 percent owned Madsen Exploration Project; and v) Complete a Preliminary Economic Assessment on the Amisk Gold Project.OperatingThe Company expects to meet its forecast gold production of 48,000 to 50,000 ounces at the SeabeeOperation. Unit costs for 2012 are estimated to be about 10 percent higher than 2011 unit cash costs of$908 CDN.CapitalCapital expenditures during 2012 include continued investment at Madsen and expected upgrades at theSeabee Gold Operation, including expansion to the Seabee Central Milling Facility, extension of theSeabee Shaft and expansion of the Seabee Gold Operation’s Camp Facilities.Capital expenditures at the Seabee Gold Operation in 2012 are estimated to total approximately $45.0million, funded from a combination of cash on hand, operating cash flow and demand loans.During the first half of each year, the Company’s cash outflow is significant because of the Seabee GoldOperation’s annual winter ice road resupply which includes restocking diesel, propane and other largeconsumables as well as the continued upgrading of the mining fleet and mine infrastructure. At currentgold prices and forecast production, Management believes that operating cash flows alone will not besufficient to fund the 2013 Winter Ice Road resupply requirements at the Seabee Gold Operation, theCompany’s debenture redemption in May of 2013 or continued exploration at the Seabee, Amisk andMadsen Properties. Accordingly, the Company expects that a combination of operating cash flows, debtfinancing and / or an equity issue may be required to provide sufficient funding.ExplorationAt the Seabee Gold Operation, the Company has drilled 40,000 metres regionally and 44,000 metresunderground year to date in 2012. At Madsen, 19,000 metres were completed. Results from Claude’sunderground and surface exploration, which focused on continued testing of the 8 Zone Trend as well asthe McVeigh and Austin Tuff depth continuity, are expected during the fourth quarter. Finally, at theAmisk Gold Project, Claude will update its National Instrument 43-101 resource calculation and conduct aPreliminary Economic Assessment.Continued success from the Company’s exploration programs should serve to: • further extend the mine life at Seabee; • potentially improve the project economics at the Company’s Amisk and Madsen Projects; and • further increase the Company’s total resource base.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 4MINING OPERATIONS RESULTSSeabee Gold OperationAt the Seabee Gold Operation, Claude is focused on executing the expansion of its production profile andlowering unit costs over the next several years by maximizing gold output from the near surface Santoy 8and Santoy Gap deposits as well as increasing margins at the Seabee Mine via the shaft extension projectwhich will provide more efficient transportation of ore and waste from the Seabee Deep and L62 deposits.The Company is also continuing with its review of operating processes and procedures to identify andimplement efficiencies designed to increase production and lower operating costs. In addition to outsideconsultants being engaged to provide feedback and recommendations, a change in several minemanagement positions has taken place including safety, engineering, capital planning, supply chainmanagement and environmental.For the three months ended September 30, 2012, Claude milled 66,173 tonnes at a grade of 7.34 grams ofgold per tonne (Q3 2011 – 66,722 tonnes at 5.51 grams of gold per tonne). Produced ounces increased 33percent period over period (Q3 2012 - 15,073; Q3 2011 – 11,324 ounces), a result of higher grade from theSeabee Mine and L62.Year to date, the Company milled 205,537 tonnes at a grade of 5.83 grams of gold per tonne (YTD 2011 –182,725 tonnes at a grade of 5.97 grams of gold per tonne). Year to date, produced ounces were 36,813(YTD 2011 – 33,487 ounces), with mill recoveries relatively unchanged period over period, the increase inounces is attributable to increased tonnes milled offset by slightly lower grade.Table 1: Seabee Gold Operation Quarterly Production and Cost Statistics Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Tonnes Milled 66,173 66,722 205,537 182,725Head Grade (grams per tonne) 7.34 5.51 5.83 5.97Recovery (%) 96.5% 95.8% 95.5% 95.5%Gold Produced (ounces) 15,073 11,324 36,813 33,487Gold Sold (ounces) 14,088 10,898 35,941 32,777Production Costs (CDN$ million) $13.0 $9.5 $38.1 $27.1Cash Operating Costs (CDN$/oz) (2) $920 $871 $1,059 $828Cash Operating Costs (U.S.$/oz) (2) $924 $888 $1,057 $847Seabee MineDuring the third quarter of 2012, 11,442 ounces were produced from ore extracted from the Seabee Mine(Q3 2011 – 7,350 ounces). This increase was attributable to a 53 percent increase in grade.Year to date, the Seabee Mine produced 25,367 ounces (YTD 2011 – 23,241 ounces). This increase wasattributable to an eight percent increase in grade.Table 2: Seabee Mine Production Statistics Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Tonnes Milled 38,270 37,981 114,344 113,172Tonnes per Day 416 413 417 415Head Grade (grams per tonne) 9.64 6.29 7.21 6.69Gold Produced (ounces) 11,442 7,350 25,367 23,241Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 5At the L62 Zone, the series of intercepts with above average true widths and economic gold gradesrepresent a near term opportunity to improve operating margins at the Seabee Operation. These interceptsare near existing underground infrastructure. Production from the L62 Zone was initiated during the thirdquarter with long hole development anticipated during the fourth quarter.Santoy 8 MineClaude views the Santoy 8 Mine as a key driver in the expansion of the Seabee Gold Operation and inlowering unit operating costs and increasing production over the life of mine plan.Feedstock from the Santoy 8 Mine produced 3,631 ounces of gold during the three months endedSeptember 30, 2012 (Q3 2011 – 3,974 ounces). Quarter over quarter, Santoy 8 results were attributable toslight decreases in tonnes per day and grade. Year to date, the Santoy 8 Mine produced 11,446 ounces ofgold (YTD 2011 – 10,246). Year to date, results were attributable to increased tonnes per day from Santoy8 partially offset by a decrease in grade. Santoy 8 tonnage throughput per day was in line withManagement’s expectation for the third quarter and year to date.Table 3: Santoy 8 Mine Production Statistics Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Tonnes Milled 27,903 28,741 91,193 69,553Tonnes per Day 303 312 333 255Head Grade (grams per tonne) 4.19 4.49 4.10 4.80Gold Produced (ounces) 3,631 3,974 11,446 10,246Capital ProjectsMillThe Seabee Gold Operation’s Mill consists of a two stage crushing circuit, a three stage grinding circuit,followed by leaching. The Mill has been expanded to a peak capacity of 1,050 tonnes, with the operationcapable of sustaining approximately 850 tonnes per day on average under the Seabee Gold Operation’scurrent Life of Mine Plan. During the first half of 2012, major upgrade work on the #1 regrind ball milland an upgrade to the CIP tanks was completed. An eight day planned shutdown, originally scheduled forthe third quarter, was completed early in the fourth quarter. Stockpiling of ore occurred during theshutdown and full year production numbers are not anticipated to be impacted.Further expansions to the Mill are being evaluated to accommodate future sustained capacity andproduction increases expected from the L62 Zone and the Santoy Gap deposit.Shaft ExtensionDuring 2011, the Company commenced a shaft extension at the Seabee Mine which will see the shaftdeepened from 600 metres to 980 metres. The shaft extension project was undertaken to provide moreefficient transportation of ore and waste from underground to surface. With a combination of higher gradeore at Seabee Deep and the L62 Zone, it is anticipated that the shaft extension will provide a reduction inunit cash costs due to lower material movement costs.On the vertical development portion of the extension, the Company has completed the majority of miningand timbering, with the pillar between the new and existing shaft remaining to be blasted. On thehorizontal development portion of the extension, the Company has completed 620L, 720L, 860L, 1000Lshaft bottom, the 950L rock breaker and the 975L loading pocket excavations.The shaft extension is currently in the construction phase which involves the grizzly construction, rockbreaker set up and loading pocket installation. The final phase of the shaft extension project is the upgradeClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 6to the hoist automation, shaft fibre cable installation and the shaft plug removal. These portions of the shaftextension, originally scheduled for completion during the latter half of 2012, have been deferred until thefirst quarter of 2013 in order to reduce interruption to operations from 40 days to approximately 20 days.CampIn order to accommodate the increased workforce at the Seabee Gold Operation, the Company’s Board ofDirectors approved upgrades to Seabee’s camp facilities. Modular accommodation facilities werepurchased and transported to the Seabee Gold Operation over the annual winter ice road with installationcompleted early in the second quarter. In addition to the modular facilities, on site construction of othernew accommodations began during the first quarter with occupancy beginning late in the third quarter.EXPLORATION RESULTSClaude continued to advance its exploration and development strategy during the third quarter of 2012.Exploration at the Seabee Gold Operation focused on expanding and delineating the L62 and Santoy Gapdeposits and advancing several regional targets. At the Amisk Gold Project, exploration during the yearcontinued to expand and confirm the National Instrument 43-101 open-pit resource estimate. At Madsen,the Company completed its three-rig, surface and underground drill program during the third quarter. Theprogram focused on evaluating the 8 Zone Trend, the Austin and McVeigh Tuff and the Main MadsenTrend below the 4,000 foot level. Assays are pending with results anticipated during the fourth quarter.All exploration activities were carried out under the direction of Qualified Person, Brian Skanderbeg, P.Geo., Senior Vice President and Chief Operating Officer.Seabee Gold OperationThe Seabee Gold Operation is located northeast of La Ronge, Saskatchewan and is host to the producingSeabee and Santoy 8 Mines as well as the L62 Zone, Santoy Gap and Regional exploration targets.Figure 1: Seabee Property regional map showing significant gold deposits and occurrences.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 7Santoy RegionGold mineralization at the Santoy Region is hosted in siliceous, shear structures with sulfide-chlorite-quartzveins and in silicified granitoid sills. The mineralized lenses dip moderately to steeply eastward and areamenable to bulk mining techniques. Gold mineralization of the Santoy 8 ore lens occurs over a strikelength of 600 metres, a depth of 500 metres and remains open along strike and down plunge to the north.The Santoy 8E ore lens has been intercepted over a strike length of 200 metres, depth of 250 metres andremains open along strike and down plunge to the north. The true thickness of the Santoy 8 deposits variesfrom 1.5 metres to 15 metres.The Santoy Gap deposit is located 400 to 900 metres north of underground infrastructure, immediately onstrike and adjacent to the Santoy 8 Mine. The Company’s 2012 exploration program focused onaggressively exploring the Santoy Gap deposit and its relationship to the Santoy 8 ore body to depths up to750 metres. Infill and exploration drilling continued to confirm and expand the Santoy Gap system.A total of 71 holes and 35,000 metres have been completed in and around the Santoy Gap during 2012. Allof the infill holes completed during 2012 returned economic visible gold-bearing intercepts greater than orconsistent with that of Santoy Gap’s existing resource. Drilling intercepted multiple high-grade intervals,significantly expanding the strike length, width and depth of the mineralized system.Results of note from 2012 Santoy Gap drilling include: • 6.91 grams of gold per tonne over 16.73 metres (JOY-12-636); • 14.58 grams of gold per tonne over 29.74 metres (JOY-12-677); and • 13.81 grams of gold per tonne over 20.29 metres (JOY-12-679).JOY-12-677 and JOY-12-679 are 40 and 75 metres along strike from the previously released JOY-11-556that returned 19.10 grams of gold per tonne over 20.48 metres (see Claude Resources Inc. news releasesdated November 15, 2011 and February 13, 2012). These results confirm a high grade core, hostingmultiple vein sets over combined widths of between 20 and 30 metres.Figure 2: Santoy Region Composite Longitudinal Section.The system remains open in most directions and an exploration drift from the existing Santoy 8infrastructure has been initiated to allow for underground infill drilling and initial bulk sampling.Additional highlights from drilling completed in 2012 are outlined below:Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 8 Table 4: Highlights from 2012 Santoy Gap drilling Grade Hole ID Easting Northing From (m) To (m) Width (m) (g/t) JOY-12-622 599436 6170747 403.57 405.29 4.81 1.72 And 722.00 723.00 6.20 1.00 JOY-12-624 599148 6170973 519.71 520.43 7.87* 0.72 JOY-12-630 598791 6170890 272.27 272.77 13.60 0.50 JOY-12-636 599035 6170957 415.77 432.50 6.91 16.73 JOY-12-638 599035 6170957 398.00 400.30 13.94 2.30 JOY-12-643 598950 6170670 181.75 183.57 41.88 1.82 JOY-12-648 599073 6170506 61.92 62.42 17.25 0.50 And 158.00 159.00 11.45 1.00 JOY-12-657 599124 6170848 322.24 322.79 23.20* 0.55 JOY-12-661 599124 6170848 345.20 345.70 14.90 0.50 JOY-12-664 599080 6170572 135.14 135.64 15.45* 0.50 JOY-12-665 599094 6170889 378.25 380.00 13.84 1.75 JOY-12-666 599000 6170595 143.29 143.95 20.30* 0.66 JOY-12-667 599000 6170595 124.57 126.24 10.75* 1.67 JOY-12-670 599010 6170745 253.59 255.97 11.50 2.38 JOY-12-674 599207 6170942 520.15 526.45 4.67 6.30 And 566.25 567.25 49.50 1.00 JOY-12-677 599154 6170781 321.04 350.78 14.58 29.74 JOY-12-678 598827 6170985 230.50 231.50 50.30 1.00 JOY-12-679 599155 6170775 343.99 364.28 13.81 20.29 JOY-12-682 599155 6170775 374.60 375.60 27.20 1.00 And 385.20 386.00 5.88 0.80 And 400.80 405.50 11.07 4.70 Note: * Partial result, certain assays within zone are pending. Composites were calculated using a 3 g/t Au cut-off grade and may include internal dilution.Figure 3: Santoy Gap 2012 DrillingClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 9Additional drilling was completed late in the third quarter with results pending. All 2012 drill results willbe incorporated into an updated National Instrument 43-101 resource statement during the first quarter of2013.L62 ZoneThe L62 Zone is located approximately 200 metres from existing Seabee Underground infrastructure onmultiple levels. Exploration of this Zone defined a resource base between 500 and 1,000 metres belowsurface. The deposit remains open up dip and will be evaluated further late in the fourth quarter of 2012and during the first quarter of 2013.Figure 4: Seabee Mine Composite Longitudinal Section (L62 Zone Discovery)Seabee RegionalExploration of the Seabee Regional area has included work in the Pine, Pigeon and Laonil Lake areas.Grass roots work has focused on examining these prospective regional structures.Amisk Gold ProjectThe potential of the Amisk Gold Project continues to be critically evaluated by the Company. The AmiskGold Project is located in the Flin Flon-Snow Lake Greenstone Belt. The project is host to the Amisk GoldDeposit as well as a large number of gold occurrences and prospects. During the third quarter, work on theexternal Preliminary Economic Assessment at Amisk continued, including a technical site visit and anevaluation of the potential production rate. Results from the Preliminary Economic Assessment areexpected late in the fourth quarter or early in the first quarter of 2013. An evaluation of the undergroundClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 10potential and detailed (as well as reconnaissance) exploration of the deposit also continued during the thirdquarter.During the third quarter, on the Company’s newly acquired claims and western block of the Amisk GoldProject, reconnaissance work occurred with the goal of identifying similarities to Amisk’s historicalgeology and for potential drill targets.Figure 5: Amisk Gold ProjectResults from a summer historic core sampling program and 2011 and 2012 drilling expanded themineralized system and confirmed grade continuity of the resource model. Gold and silver mineralizationis associated with a sequence of quartz porphyritic, rhyolitic lapilli tuffs and flows hosting disseminationsand stringers of pyrite, sphalerite, galena, tetrahedrite and chalcopyrite. Drilling has intercepted themineralized system over a strike length of 1,200 metres, width of 400 metres and depths of in excess of 600metres. The system remains open to the southwest, southeast, northwest and at depth. In an effort tounderstand the geology of the region better, further mapping of Amisk’s conceptual pit continued duringthe third quarter.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 11Figure 6: Cross Section A-A’ of the Amisk Gold PropertyThe Company’s 2011 and 2012 drill programs at Amisk focused specifically on testing the limits of themineralized footprint north of the current pit outline, targeting depth extension below the pit bottom andinfill drilling to evaluate potential upgrade of categories in the resource estimate completed by SRK.Drilling successfully confirmed continuity of gold mineralization within the northern and eastern portion ofthe deposit as well as demonstrated the potential for expansion to the east and southeast.Mineralization intercepted in the drilling is consistent with the current resource model and is associatedwith a sequence of quartz porphyritic, rhyolitic lapilli tuffs and basaltic tuffs and argillite hostingdisseminations, stringers and semi-massive intervals of pyrite, sphalerite, galena, tetrahedrite, pyrrhotiteand chalcopyrite. Drill hole AL-11-319 confirmed continuity of gold mineralization within thesoutheastern portion of the deposit as well as demonstrated the potential for expansion to the east andsoutheast.Mineralization intercepted in the drilling is consistent with the current resource model and is associatedwith a sequence of quartz porphyritic, rhyolitic lapilli tuffs and basaltic tuffs hosting disseminations andstringers of pyrite, sphalerite, galena, tetrahedrite and chalcopyrite. The program tested from surface to inexcess of 700 metres depth and was designed to expand the limits of the Amisk Gold deposit as well asinfill within the northern and eastern portion of the deposit.In addition to focusing on growth of the gold and silver resource base, the presence of significant grades ofzinc and lead in the hanging wall will continue to be evaluated during 2012.During the third quarter of 2011, the Company reported positive metallurgical testwork results at the AmiskGold Project. Initial metallurgical testing indicates that gold and silver mineralization is amenable toconventional cyanide leaching. Results from testing on three composite samples from the Amisk GoldDeposit have returned an average of 89.4 percent recovery for gold, ranging from 85.2 percent to 91.7percent and an average of 80.8 percent recovery for silver, ranging from 66.4 percent to 92.8 percent.Detailed results are presented in the table below.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 12Table 5: Metallurgical Testwork Results, Amisk Gold Project Recovery Size Grade (Cyanidation) Fraction Au Ag Au (%) Ag (%) P 80 (um)*Composite ID (g/T) (g/T)Low Grade 0.50 7.4 89.8 70.9 72Medium Grade 0.85 9.2 85.2 88.9 146Medium Grade 0.85 9.2 89.1 84.8 117Medium Grade 0.85 9.2 91.0 92.8 72High Grade 1.68 8.4 91.7 66.4 92* Denotes size fraction of grind that 80 percent of material passed.Work on an external Preliminary Economic Assessment continued during the third quarter. Lookingforward at Amisk, exploration will focus on expansion of the open pit resource, completion of preliminaryeconomic studies and further evaluation of the underground potential.Madsen ProjectAt the Madsen Project, exploration efforts continued to focus on the 8 Zone Trend which hosts the past-producing 8 Zone and is highly prospective for future high grade discoveries. Drilling was completed latein the third quarter, with visible gold noted in several of the drill targets. Assays from Phase II drilling arepending and are anticipated to be released during the fourth quarter.Figure 7: Madsen Longitudinal SectionClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 13Figure 8: Madsen Property OverviewPhase II underground drilling commenced from the 16th level which provides the ideal drill platform toexplore both at depth as well as the strike potential of the 8 Zone Trend. A total of 14,800 metres and 9holes, targeting the 8 zone plunge and strike continuity as well as sub-parallel footwall structures, werecompleted in 2011. Drill holes targeting the plunge continuity of the 8 Zone include MUG-11-12, 14 (14b)and 16. Drill hole 14b and drill hole 16, the deepest hole ever completed on the Madsen property,intercepted silicified and visible gold-bearing, basalt and returned 8.06 grams of gold per tonne over 2.02metres and 5.69 grams of gold per tonne over 2.14 metres, respectively. These intercepts extend the 8 Zonesystem 250 metres down plunge from previous drilling to approximately 1,600 metres below surface. Thesystem continues to remain open down plunge and will be the target of future drilling.Drill holes targeting the strike continuity of the 8 Zone included MUG-11-10, 11, 13, 15, 17 and 19. Drillhole 13 and drill hole 17 intercepted silicified, biotite-altered basalt and returned 15.70 grams of gold pertonne over 2.00 metres and 53.70 grams of gold per tonne over 0.70 metres, approximately 950 metresbelow surface. These intercepts are in the hanging-wall of the 8 Zone system and interpreted to correlatewith and be an extension of the McVeigh Tuff, located approximately 650 metres up-dip. The McVeighTuff hosts a current Indicated Resource of 115,000 ounces at 9.59 grams of gold per tonne and has seenvery limited drill testing below 350 metres. In addition to the McVeigh mineralization, the 8 Zonestructure is developed in all holes completed along strike and is characterized by anomalous gold associatedwith biotite-altered, variably silicified basaltic and ultramafic lithologies.Table 6: Highlights from Phase II of the Madsen Underground 8 Zone Drill ProgramHole ID Width (m) Au (g/t) Elevation * ZoneMUG-11-13 2.00 15.70 927 McVeighMUG-11-14 2.00 6.27 1,051 McVeighMUG-11-14b 2.02 8.06 1,543 8 ZoneMUG-11-16 2.14 5.69 1,595 8 Zone FWClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 14Table 6: Highlights from Phase II of the Madsen Underground 8 Zone Drill ProgramHole ID Width (m) Au (g/t) Elevation * ZoneMUG-11-17 0.70 53.70 927 McVeigh and 2.00 5.64 1,079 McVeigh ∗ Elevation presented as metres below surface. Composites calculated using a 3 grams per tonne Au cut-off grade. Reported width is drilled length and interpreted to represent 75 - 85 percent of true width. Note, hole MUG-11-14 was lost with hole MUG-11-14b wedged off and completed.Results obtained from 2011 and 2012 drilling provide encouragement for the Company’s continuation ofPhase II of the 8 Zone program in 2012 and continue to demonstrate that the 8 Zone is a high grade goldsystem that has strong vertical continuity and remains open at depth and along strike to the northeast.Furthermore, the discovery of economic grades and widths hosted within the depth continuity of theMcVeigh Tuff opens up significant exploration potential. The Company is currently developing its 2013exploration program for the project.Quality Assurance and Quality Control ProceduresRigorous quality assurance and quality control procedures have been implemented including the use ofblanks, standards and duplicates. Geochemical analyses were submitted to ALS Chemex in Vancouver,British Columbia and or the Seabee minesite lab. The former laboratory is ISO approved. Core sampleswere analyzed by a 30 gram gold fire assay with an atomic absorption and gravimetric and or screen firefinish.MINERAL RESERVES AND MINERAL RESOURCESThe Mineral Reserves and Mineral Resources estimates are conducted under the direction of QualifiedPersons Brian Skanderbeg, P.Geo., Senior Vice President and Chief Operating Officer and Peter Longo,P.Eng., Vice President Operations.Seabee Gold OperationDrill results from Santoy Gap and from the L62 Zone will further drive resource growth at the SeabeeOperation. An updated National Instrument 43-101 resource statement is expected during the first quarter2013.Since discovery during the second quarter of 2011, the L62 Zone has been the focus of an aggressiveexploration program and has grown rapidly. The L62’s high grade results obtained from drilling completedbetween September and December 2011 were incorporated into and had a material impact on the SeabeeMine’s updated National Instrument 43-101 resource calculation as at December 31, 2011 (Please seeClaude news release “Claude Resources Inc. Increases Inferred Resource Base 236 Percent at Seabee GoldOperation” dated March 14, 2012).At December 31, 2011, proven and probable reserves in the Seabee Gold Operation were 2,059,000 tonnes,grading 5.37 grams per tonne or 355,600 ounces of gold. At December 31, 2011, the Company’s mineralresources at its Seabee Gold Operation included Measured and Indicated Mineral Resources of 70,700ounces and Inferred Mineral Resources totalling 873,400 ounces.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 15 Table 7: Seabee Gold Operation Mineral Reserves and Mineral Resources Proven and Probable Reserves December 31, 2011 December 31, 2010 Projects Tonnes Grade (g/t) Ozs Tonnes Grade (g/t) Ozs Seabee 1,062,900 6.58 224,900 887,100 6.69 190,800 Santoy 8 997,100 4.08 130,600 1,079,900 4.66 161,900 Totals 2,059,900 5.37 355,600 1,967,100 5.58 352,600 Measured and Indicated Mineral Resources Projects Tonnes Grade (g/t) Ozs Tonnes Grade (g/t) Ozs Seabee 127,400 4.65 19,000 - - - Santoy 8 12,600 5.04 2,000 - - - Porky Main 160,000 7.50 38,600 160,000 7.50 38,600 Porky West 111,000 3.10 11,000 111,000 3.10 11,000 Totals 410,900 5.35 70,600 271,000 5.70 49,600 Inferred Mineral Resources Projects Tonnes Grade (g/t) Ozs Tonnes Grade (g/t) Ozs Santoy Gap 2,321,000 6.63 495,000 - - - Seabee 813,900 6.83 178,800 705,500 6.33 143,600 Santoy 8 850,000 5.46 149,300 384,800 5.35 66,200 Porky Main 70,000 10.43 23,500 70,000 10.43 23,500 Porky West 138,300 6.03 26,800 138,300 6.03 26,800 Totals 4,193,200 6.48 873,400 1,298,600 6.23 260,100For the above table of reserves, the following mining and economic factors have been applied: • Mineral reserves and mineral resources were estimated by Claude personnel and audited by SRK in 2011. • Mineral reserves and mineral resources estimates have been completed in accordance with CIM Standards and are reported in accordance with Canadian Securities Administrators’ National Instrument 43-101. Mineral resources are exclusive of mineral reserves. • Seabee reserves and resources are estimated at a cut-off grade of 4.57 grams of gold per tonne and Santoy 8 and Santoy Gap reserves and resources are estimated at a cut-off grade of 3.0 grams of gold per tonne. • Cut-off grades were calculated using a two year trailing price of Can. $1,400 per ounce of gold, a U.S./CDN$ exchange rate of 1:1 and overall ore mining and processing costs based on actual historical operating costs. • All figures are rounded to reflect the relative accuracy of the estimates. Totals may not represent the sum of the parts due to rounding. • Mineral resources are not mineral reserves and do not have demonstrated economic viability. • L62 mineral reserves and mineral resources are included in the Seabee totals.Amisk Gold ProjectAt the Amisk Gold Project, Claude’s independent National Instrument 43-101 compliant resourcecalculation outlines an Indicated Resource of 921,000 ounces of 0.95 grams of Au Eq per tonne and anInferred Resource of 645,000 ounces at 0.70 grams of Au Eq per tonne.Table 8: Amisk Gold Project Consolidated Mineral Resource Statement* Quantity Grade (g/tonne) Contained Ounces (000’s)Resource Class (000’s tonnes) Au Ag Au Eq Au Ag Au EqIndicated 30,150 0.85 6.17 0.95 827 5,978 921Inferred 28,653 0.64 4.01 0.70 589 3,692 645* Reported at a cut-off of 0.40 grams of gold equivalent (Au Eq) per tonne using a price of U.S. $1,100 per ounce of gold and U.S. $16per ounce of silver inside a conceptual pit shell optimized using metallurgical and process recovery of 87 percent, overall ore miningand processing costs of U.S. $15 per tonne and overall pit slope of 50 degrees. All figures are rounded to reflect the relative accuracyof the estimates. Mineral resources are not mineral reserves and do not have demonstrated economic viability.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 16An updated NI 43-101 resource statement, inclusive of all drilling completed to the end of 2011, isanticipated to be completed in conjunction with the Company’s Preliminary Economic Assessment for theAmisk Gold Project.Madsen Exploration ProjectDuring 2010, SRK finalized an independent National Instrument 43-101 mineral resource evaluation forthe Madsen Mine. This mineral resource evaluation was based on historical exploration and mining data,Phase I underground drilling results up to September 27, 2009 and geological and resource modeling. Theresource evaluation was undertaken on the four separate zones, Austin, South Austin, McVeigh and 8 Zonethat comprise the Madsen Gold Mine. The National Instrument 43-101 Technical Report was filed onJanuary 20, 2010.Table 9: Consolidated Mineral Resource Statement (1) for the Madsen Mine, Ontario Resource Grade Grade Contained Zone Tonnes Class (g/tonne) (oz/ton) Gold (oz) Indicated Austin 1,677,000 7.92 0.23 427,000 South Austin 850,000 9.32 0.27 254,000 McVeigh 374,000 9.59 0.28 115,000 8 Zone 335,000 12.21 0.36 132,000 Total 3,236,000 8.93 0.26 928,000 Inferred Austin 108,000 6.30 0.18 22,000 South Austin 259,000 8.45 0.25 70,000 McVeigh 104,000 6.11 0.18 20,000 8 Zone 317,000 18.14 0.53 185,000 Total 788,000 11.74 0.34 297,000Note: mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures have been rounded toreflect the relative accuracy of the estimates. Reported at a cut-off grade of 5.0 g/t gold based on U.S. $1,000 per troy ounce of goldand gold metallurgical recoveries of 94 percent.FINANCIAL RESULTS OF OPERATIONSHighlightsTable 10: Highlights of Financial Results of Operations Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Revenue $ 23,422 $ 18,203 $ 59,565 $ 49,764Divided by ounces sold 14,088 10,898 35,941 32,777Average Realized Price per Ounce (CDN$) $ 1,663 $ 1,670 $ 1,657 $ 1,518Production costs $ 12,955 $ 9,488 $ 38,070 $ 27,143Divided by ounces sold 14,088 10,898 35,941 32,777Total cash costs per ounce (CDN$) $ 920 $ 871 $ 1,059 $ 828Net Cash Margin per Ounce Sold (CDN$) $ 743 $ 799 $ 598 $ 690Depreciation and depletion $ 4,172 $ 2,895 $ 11,324 $ 7,463Gross profit $ 6,295 $ 5,820 $ 10,171 $ 15,158Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 17Table 10: Highlights of Financial Results of Operations Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Net profit $ 2,958 $ 2,643 $ 3,146 $ 9,656Earnings per share (basic and diluted) $ 0.02 $ 0.02 $ 0.02 $ 0.06The increase in production costs, partially offset by increased ounces sold, has negatively impacted net cashmargin per ounce sold period over period and year over year. The Company intends to improveprofitability of the Seabee Gold Operation through a combination of improved grade control, cost controlsand developing the production profile at lower cost satellite ore bodies, including Santoy 8 and eventuallythe Santoy Gap deposit. Also, in addition to external consultants being engaged to provide feedback andrecommendations on improving operational efficiencies reducing unit operating costs, the Companyanticipates that the continued contribution of the Santoy 8 Project (including the Santoy Gap deposit),contribution of ore from the L62 Zone and completion of the shaft extension will be positive catalysts inimproving production and lowering overall unit operating costs at the Seabee Gold Operation.Figure 9: Average Gold Price Realized (CDN$) Figure 10: Cash Cost and Margin Realized (CDN$) Per Ounce Sold Per Ounce SoldNet ProfitFor the three months ended September 30, 2012, the Company recorded net profit of $3.0 million, or $0.02per share. This compares to a net profit of $2.6 million, or $0.02 per share, for the three months endedSeptember 30, 2011. Year to date, the Company recorded net profit of $3.1 million, or $0.02 per share(YTD 2011 - $9.7 million, or $0.06 per share).RevenueGold revenue from the Company’s Seabee Gold Operation for the three months ended September 30, 2012increased 29 percent to $23.4 million from $18.2 million reported for the three months ended September30, 2011. With consistent Canadian dollar gold prices realized period over period (Q3 2012 - $1,663 (U.S.$1,671); Q3 2011 - $1,670 (U.S. $1,704)), this increase in gold revenue was attributable to a 29 percentimprovement in gold sales volume (Q3 2012 – 14,088 ounces; Q3 2011 – 10,898 ounces).Year to date, gold revenue increased 20 percent to $59.6 million from the $49.8 million reported in the firstnine months of 2011. This increase was attributable to a nine percent improvement in Canadian dollar goldprices realized: YTD 2012 - $1,657 (U.S. $1,654); YTD 2011 - $1,518 (U.S. $1,553) and a 10 percentincrease in gold sales volume (YTD 2012 – 35,941 ounces; YTD 2011 – 32,777 ounces) period overperiod.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 18Production CostsFor the three months ended September 30, 2012, mine production costs of $13.0 million (Q3 2011 - $9.5million) were 37 percent higher period over period. Year to date, mine production costs were $38.1 million(YTD 2011 - $27.1 million), an increase of 41 percent. These increases were primarily attributable toincreased personnel, wage increases and increases in mining and maintenance costs.Total Canadian dollar cash cost per ounce of gold (2) for the third quarter of 2012 increased six percent toCDN $920 (U.S. $924) per ounce from the third quarter of 2011 (Q3 2011: CDN $871 (U.S. $888)),primarily as a result of the higher operating costs period over period. Year to date, total cash cost perounce of CDN $1,059 (U.S. $1,057) per ounce were 28 percent higher than the cash cost per ounce of CDN$828 (U.S. $847) reported during the first nine months of 2011.Depreciation and DepletionFor the three months ended September 30, 2012, depreciation and depletion was $4.2 million (Q3 2011 -$2.9 million), up 45 percent period over period. Year to date, depreciation and depletion was $11.3million, a 51 percent increase over the $7.5 million reported for the first nine months of 2011. For thequarter and year to date, these results are attributable to an increase in tonnes throughput and an increase inthe Seabee Operation’s asset base.General and Administrative ExpenseGeneral and administrative expense in the three months ended September 30, 2012 increased to $1.7million, up 42 percent from the $1.2 million reported for the third quarter of 2011. For the first ninemonths of 2012, general and administrative costs of $6.1 million were 42 percent higher than the $4.3million reported for the nine months ended September 30, 2011. The variances noted below primarily relateto increases in personnel, stock-based compensation and professional fees.Table 11: Corporate General and Administrative Expense Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Direct administration $ 1,261 $ 937 $ 4,241 $ 3,074Stock-based compensation 359 276 1,654 1,201Deferred share units 43 - 236 -Total General and Administrative $ 1,663 $ 1,213 $ 6,131 $ 4,275Finance ExpenseFinance expense includes interest expense, accretion expense and derivative gains or losses (if any). Forthe three months ended September 30, 2012, finance expense was $0.4 million, down 82 percent from the$2.2 million reported for the third quarter of 2011. Year to date, finance expense was $1.1 million, down59 percent from the $2.7 million reported from the comparative period of 2011. The decreases wereattributable to the Company settling certain out-of-the-money derivative instruments during the thirdquarter of 2011.Finance and Other IncomeFinance and other income consists of interest income, production royalties pursuant to the Red Miletransactions and other income. For the three months and nine months ended September 30, 2012, financeand other income was relatively unchanged from the comparative periods of 2011.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 19Deferred Income Tax ExpenseDeferred income tax expense for the three months ended September 30, 2012 was $1.3 million and year todate, Deferred income tax expense was $1.7 million (YTD Q3 2011 - $nil). These increases areattributable to increased profitability of the Company in Q3 2012 compared to Q2 2012. The Company didnot have any expense or recovery in the comparable periods of 2011 as there was no deferred tax asset orliability recorded.Liquidity and Financial ResourcesThe Company monitors its spending plans, repayment obligations and cash resources on a continuous basiswith the objective of ensuring that there is sufficient capital within the Company to meet businessrequirements, after taking into account cash flows from operations and the Company’s holdings of cash andcash equivalents and short-term investments. The Company’s typical cash requirement over the first andsecond quarters of each year is significant because of the Seabee Gold Operation’s winter ice roadresupply, which includes restocking diesel, propane and other large consumables as well as the continuedinvestment in maintenance and growth capital relating to the mining fleet and mine infrastructure.The Company had cash and cash equivalents of $0.06 million at September 30, 2012 (December 31, 2011 -$2.5 million of cash and cash equivalents and short-term investments of $33.2 million).At September 30, 2012, the Company had a working capital deficiency of $(3.4) million (December 31,2011 - surplus of $42.4 million). Included in the working capital calculation at September 30, 2012 aredemand loans and outstanding debentures totaling $6.1 million and $9.6 million, respectively. Demandloans have been classified as current liabilities due to their demand feature. As the debenture is due in lessthan one year, its balance has been classified as a current liability.Table 12: Working Capital and Current Ratio September 30 December 31 Percent 2012 2011 ChangeCurrent assets $ 22,744 $ 52,004 (56)Current liabilities $ 26,113 $ 9,606 172Working capital $ (3,369) $ 42,398 (108)Current ratio 0.9 5.4 (83)InvestingMineral property expenditures during the nine months ended September 30, 2012 were $52.3 million, a$14.8 million increase from the comparable period in 2011. Year to date, expenditures were comprised ofSeabee Mine and Shaft development of $17.7 million, exploration costs (focusing on the Santoy Gap,Seabee North, Amisk and Madsen exploration projects) of $16.9 million and property, plant and equipmentadditions of $17.7 million. Property, plant and equipment additions include mining equipment, campinfrastructure and tailings management facility expansion. The Company utilized its cash on hand andshort-term investments to fund these additions.FinancingFinancing activities during the first nine months of 2012 included the issuance of 338,676 common shares(Q3 2011 – 235,614) pursuant to the Company’s Employee Share Purchase Plan and 75,402 commonshares (Q3 2011 – 168,667) pursuant to the Company’s Stock Option Plan.During the first nine months of 2012, the Company repaid $3.7 million of its demand loans and capitalleases outstanding. The proceeds and repayments of demand loans relate to production equipment at theSeabee Gold Operation.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 20Capital StructureThe Company’s objective when managing capital is to safeguard its ability to continue as a going concernso that it can continue to provide adequate returns to shareholders and benefits to other stakeholders. TheCompany manages the capital structure and makes adjustments to it in light of changes in economicconditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capitalstructure, the Company may issue new shares, sell assets or incur debt. The Company is not subject toexternally imposed capital requirements.The Company utilizes a combination of short-term and long-term debt and equity to finance its operationsand exploration.The Capital structure of the Company is as follows:Table 13: Schedule of Capital Structure of the CompanyCapital Structure September 30 December 31 Interest Maturity 2012 2011Demand loan 4.575% Nov/2012 $ 163 $ 896Demand loans Prime + 1.50% Jan-Apr/2015 5,918 -Debenture 12.00% May/2013 9,608 9,452Total debt $ 15,689 $ 10,348Shareholders’ equity 188,872 172,895Debt to equity 8.31 % 5.99 %Financial and Other InstrumentsIn the normal course of its operations, the Company is exposed to gold price, foreign exchange, interestrate, liquidity, equity price and counterparty risks. The overall financial risk management program focuseson preservation of capital and protecting current and future Company assets and cash flows by reducingexposure to risks posed by the uncertainties and volatilities of financial markets.The Company may use derivative financial instruments to hedge some of its exposure to fluctuations ingold prices and foreign exchange rates. The Company does not acquire, hold or issue derivatives for tradingpurposes. The Company’s management of financial risks is aimed at ensuring that net cash flows aresufficient to meet all its financial commitments as and when they fall due and to maintain the capacity tofund its forecast project development and exploration strategies.The value of the Company’s mineral resources is related to the price of gold and the outlook for thismineral. Gold and precious metal prices historically have fluctuated widely and are affected by numerousfactors outside of the Company’s control, including, but not limited to, industrial and retail demand, centralbank lending, forward sales by producers and speculators, levels of worldwide production, short-termchanges in supply and demand because of speculative hedging activities and certain other factors relatedspecifically to gold. The profitability of the Company’s operations is highly correlated to the market priceof gold. If the gold price declines below the cost of production at the Company’s operations, for aprolonged period of time, it may not be economically feasible to continue production.The Company’s revenues from the production and sale of gold are denominated in U.S. dollars. However,the Company’s operating expenses are primarily incurred in Canadian dollars and its liabilities areprimarily denominated in Canadian dollars. The results of the Company’s operations are subject tocurrency risks. The operating results and financial position of the Company are reported in Canadiandollars in the Company’s consolidated financial statements.The Company did not have any derivative instruments outstanding at September 30, 2012 or September 30,Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 212011.The Company’s main interest rate risk arises from interest earning cash deposits that expose the Companyto interest rate risk. No hedging programs were implemented by the Company to manage interest rate riskduring 2012.The Company’s liquidity position is managed to ensure sufficient liquid funds are available to meet itsfinancial obligations in a timely manner. The Company manages liquidity risk by continuously monitoringforecast and actual cash flows and ensuring that the Company has the ability to access required funding.The Company is exposed to equity securities price risk arising from investments classified on the balancesheet as available-for-sale. Investments in equity securities are approved by the Board on a case-by-casebasis. All of the Company’s available-for-sale equity investments are in junior resource companies listed onthe TSX Venture Exchange.The Company is exposed to counterparty risk which is the risk that a counterparty will not complete itsobligations under a financial instrument resulting in a financial loss for the Company. The Company doesnot generally obtain collateral or other security to support financial instruments subject to credit risk;however, the Company only deals with credit worthy counterparties. Accounts receivable compriseinstitutions purchasing gold under normal settlement terms of two working days. Counterparty risk underderivative financial instruments is to reputable institutions. All significant cash balances are on deposit withhigh-rated banking institutions. The carrying amount of financial assets recorded in the financial statementsrepresents the Company’s maximum exposure to credit risk without taking account of the value of anycollateral or other security obtained.Contractual ObligationsAt September 30, 2012, with the exception of the increase in the Company’s demand loans, there were nosignificant changes to the Company’s contractual obligations from those reported in the Management’sDiscussion and Analysis for the year ended December 31, 2011.STATEMENTS OF FINANCIAL POSITIONTable 14: Select Statement of Financial Position Data September 30 December 31 Percent 2012 2011 ChangeTotal assets $ 229,549 $ 207,887 10Non-current liabilities $ 14,564 $ 25,386 (43)The Company’s total assets were $229.5 million at September 30, 2012, compared to $207.9 million atDecember 31, 2011. The $21.6 million net increase was comprised primarily of increases of: $8.4 million inInventories, attributable to the Company’s annual winter road resupply at the Seabee Gold Operation; and $54.2million in Mineral properties attributable to Seabee Mine development and Shaft extension, exploration costs(focusing on the Santoy Gap, Seabee North, Amisk and Madsen exploration projects) and additions toproperty, plant and equipment. These increases were offset by decreases of: $35.6 million in cash and cashequivalents and short term investments, attributable to the Company’s annual winter road resupply andinvestment in exploration and Seabee capital projects; $2.2 million in account receivable, attributable to thetiming of gold sales and receipt of funds; $1.0 million in Deferred income tax asset attributable to a change inthe Company’s deferred tax base; and $2.3 million in Investments due to the disposition of certain of theCompany’s available for sale securities and a decrease in the market value of the remainder these securities.Total liabilities were $40.7 million at September 30, 2012, up $5.7 million from December 31, 2011. Thisresult was attributable to a $2.1 million increase in accounts payable and accrued liabilities, attributable tothe timing and payment of expenditures relating to consumables at the Seabee Gold Operation; a netincrease of $3.7 million in the Company’s current and non-current loans and borrowings attributable toClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) Page 22 demand loans obtained to fund a portion of the capital equipment resupply at the Seabee Gold Operation; and an increase of 0.6 million in Deferred tax liability attributable to a change in the Company’s deferred tax base. Shareholders’ equity increased by $16.0 million to $188.9 million at September 30, 2012, from $172.9 million at December 31, 2011. This variance is attributable to an increase in Share capital of $12.7 million due to the issuance of Company stock pursuant to the acquisition of St. Eugene, an increase of $1.3 million to contributed surplus, a $3.1 million decrease to Accumulated deficit; and a $1.1 million decrease to Accumulated other comprehensive income (loss). Comprehensive income consists of net income, together with certain other economic gains and losses that are collectively referred to as “other comprehensive income (loss)” or “OCI” and are excluded from the income statement. During the period ended September 30, 2012, other comprehensive income decreased to a loss of $0.5 million (December 31, 2011 – comprehensive income of $0.6 million) due to the Company’s disposition of certain available-for-sale securities. KEY SENSITIVITIES Earnings from Claude’s gold operation are sensitive to fluctuations in both commodity and currency prices. The key factors and their approximate effect on earnings, earnings per share and cash flow, based on assumptions comparable to first quarter 2012 actuals, are as follows: Gold For a U.S. $10 movement in gold price per ounce, earnings and cash flow will have a corresponding movement of CDN $0.5 million, or $0.00 per share. For a $0.01 movement in the US$/CDN$ exchange rate, earnings and cash flow will have a corresponding movement of $0.8 million, or $0.00 per share. SELECTED QUARTERLY FINANCIAL DATATable 15: Summary of select financial and operating data for the Company’s last eight quarters Sept 30 June 30 Mar 31 Dec 31 Sept 30 Jun 30 Mar 31 Dec 31 2012 2012 2012 2011 2011 2011 2011 2010Tonnes milled (c) 66,173 72,808 66,556 74,456 66,722 65,502 50,501 57,155Grade processed (grams per tonne) 7.34 5.45 4.74 4.97 5.51 6.26 6.20 7.54Ounces produced (c) 15,100 12,200 9,600 11,300 11,300 12,600 9,500 13,200Ounces sold (b) 14,100 12,300 9,500 11,900 10,900 12,400 9,500 10,800Gold sales ($ millions) 23.4 20.1 16.1 19.9 18.2 18.2 13.3 14.9Net profit (loss) ($ millions) 3.0 0.7 (0.5) (0.2) 2.6 5.2 1.8 4.1Net profit (loss) per share (a) 0.02 0.00 (0.00) 0.00 0.02 0.03 0.01 0.03Average realized gold price (CDN$ per ounce) 1,663 1,633 1,681 1,678 1,670 1,469 1,408 1,378Average realized gold price (US$ per ounce) 1,671 1,616 1,679 1,641 1,704 1,518 1,428 1,361Cash cost per ounce (CDN$ per ounce) (d) 920 1,082 1,236 1,130 871 717 924 597Cash cost per ounce (US$ per ounce) (d) 924 1,071 1,234 1,105 888 741 938 589Cash flow from operations before net 8.6 5.3 2.6 7.2 5.7 8.3 3.6 7.7changes in non-cash operating workingcapital ($ millions) (d)Cash flow from operations per share 0.05 0.03 0.02 0.04 0.03 0.05 0.03 0.06Weighted average shares outstanding 173,746 173,741 170,481 164,351 163,911 155,275 140,361 136,081(basic)CDN$/US$ Exchange 0.9949 1.0101 1.0012 1.0230 0.9804 0.9676 0.9861 1.0128 (a) Basic and diluted, calculated based on the number of shares issued and outstanding during the quarter. Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 23(b) Statistics in 2010 exclude ounces sold from the Santoy 8 Project, which was not yet in commercial production.(c) Statistics in 2010 include ounces produced and tonnes milled from the Santoy 8 Project, which was not yet in commercial production.(d) Denotes a non-IFRS performance measure. For an explanation of non-IFRS performance measures, refer to the “Non-IFRS Performance Measures” section of this MD&A.The financial results for the last eight quarters reflect the following general trends: improved averagerealized gold price (which has improved gold revenue and net profit (loss)); lower grade attributable tomore feedstock from the Santoy 8 ore body; and increasing cash cost per ounce.ACCOUNTING ESTIMATESCertain of the Company’s accounting policies require that Management make decisions with respect to theformulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenuesand expenses. For a discussion of those estimates, please refer to the Company’s Management’s Discussionand Analysis for the year ended December 31, 2011, available at www.sedar.com.FUTURE ACCOUNTING PRONOUNCEMENTSCertain new accounting standards and interpretations have been published that are not mandatory for theSeptember 30, 2012 reporting period: • IFRS 9, Financial Instruments: effective for accounting periods commencing on or after January 1, 2015. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. • IFRS 10, Consolidated Financial Statements, was issued by the IASB in May 2011 and is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its financial statements. • IFRS 11, Joint Arrangements, was issued by the IASB in May 2011 and is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The extent of the impact of adoption of IFRS 11 has not yet been determined by the Company. • IFRS 12, Disclosure of Interests in Other Entities, was issued by the IASB in May 2011 and is effective for the Company beginning on January 1, 2013. It is expected that IFRS 12 will increase the current level of disclosure related to the Company’s interests in other entities upon adoption. • In May 2011, the IASB published IFRS 13, Fair Value Measurement, which is effective prospectively for annual periods beginning on or after January 1, 2013. The extent of the impact of adoption of IFRS 13 has not yet been determined. • In June 2011, the IASB issued IAS 1, Presentation of Items of OCI: Amendments to IAS 1 Presentation of Financial Statements. The amendments stipulate the presentation of net profit and OCI and also require the Company to group items within OCI based on whether the items may be subsequently reclassified to profit or loss. Amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. The Company does not expect the adoption of the amendments to this standard to have a material impact on its financial statements. • In May 2011, the IASB issued amendments to IAS 28, Investments in Associates and Joint Ventures, which are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company does not expect the amendments to IAS 28 to have a material impact on the financial statements. • In December 2011, the IASB published Offsetting Financial Assets and Financial Liabilities and issued new disclosure requirements in IFRS 7, Financial Instruments: Disclosures. The amendments to IAS 32 clarify that if an entity currently has a legally enforceable right to set-off if that right is not contingent on a future event, and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments to IAS 32 also clarify when a settlement mechanism provides for net settlement or gross settlement that is equivalent to net settlement. The amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position, or subject to master netting arrangements or similar arrangements. TheClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 24 effective date for the amendments to IAS 32 is annual periods beginning on or after January 1, 2014. The effective date for the amendments to IFRS 7 is annual periods beginning on or after January 1, 2013. These amendments are to be applied retrospectively. The Company does not expect the amendments to have a material impact on the financial statements.BUSINESS RISKSRisks and uncertainties related to economic and industry factors are described in detail in the Company’sAnnual Information Form (available at www.sedar.com) and remain substantially unchanged.OUTSTANDING SHARE DATAThe authorized share capital of the Company consists of an unlimited number of common shares and twoclasses of unlimited preferred shares issuable in series. At September 30, 2012, there were 173,745,564common shares outstanding. This compares to 164,630,231 common shares outstanding at December 31,2011.During the first nine months of 2012, the Company issued 414,078 common shares pursuant to theCompany’s Employee Share Purchase Plan and the Company’s Stock Option plan. An additional8,701,255 shares were issued as consideration for Claude’s acquisition of St. Eugene (please see Claudenews release “Claude Resources Inc. Completes Acquisition of St. Eugene Mining Corporation Limited”dated February 2, 2012). At November 7, 2012, there were 173,745,564 common shares of the Companyissued and outstanding.OUTSTANDING STOCK OPTIONS AND WARRANTSAt September 30, 2012, there were 6.8 million director, officer and key employee stock options outstandingwith exercise prices ranging from $0.50 to $2.38 per share. This compares to 5.5 million director, officerand key employee stock options outstanding at December 31, 2011 with similar prices.Table 16: Schedule of Outstanding Stock Options and Weighted Average Exercise Price September 30, 2012 December 31, 2011 Weighted Weighted Average Average Number Exercise Price Number Exercise Price Beginning of period 5,484,250 $1.57 3,916,737 $ 1.15 Options granted 1,721,290 1.08 2,478,768 2.06 Options exercised (75,402) 0.78 (648,667) 0.75 Options forfeited (281,611) 1.82 (241,876) 1.86 Options expired (30,000) 1.71 (20,712) 1.04 End of period 6,818,527 1.45 5,484,250 $1.57Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) Page 25 For options outstanding at September 30, 2012, the range of exercise prices, the number vested, the weighted average exercise price and the weighted average remaining contractual life are as follows: Table 17: Schedule of Outstanding Stock Options by Price Range Options Outstanding Options Exercisable Weighted Weighted Weighted Weighted Average Average Average Average Option Price Per Remaining Exercise Remaining Exercise Share Quantity Life Price Quantity Life Price $0.50 - $1.00 1,164,845 6.34 $0.73 798,179 6.15 $0.76 $1.01 - $1.50 2,643,731 6.11 1.20 2,199,898 6.04 1.19 $1.51 - $2.00 2,442,000 7.32 1.86 1,423,000 6.30 1.80 $2.01 - $2.38 567,951 8.07 2.30 338,903 7.78 2.26 6,818,527 6.75 $1.45 4,759,980 6.26 $1.38 At September 30, 2012, there were 2.7 million common share purchase warrants outstanding. Each common share purchase warrant entitles the holder to acquire one common share of the Company at prices determined at the time of issue. The range of exercise prices and dates of expiration of the warrants outstanding are as follows:Table 18: Schedule of Warrants Outstanding Number Number Exercise Outstanding at Outstanding at Price Expiry Date December 31, 2011 Granted Expired September 30, 2012 $ 1.60 May 22, 2013 1,693,200 - - 1,693,200 $ 0.90 November 16, 2012 1,023,000 - - 1,023,000 $ 1.77 April 7, 2012 - 319,545 319,545 - $ 1.77 April 12, 2012 - 10,257 10,257 - $ 3.17 March 31, 2012 - 79,980 79,980 - $ 4.44 March 31, 2012 - 443,812 443,812 - 2,716,200 853,594 853,594 2,716,200 The warrants granted during 2012 relate to outstanding warrants assumed as part of the St. Eugene acquisition completed in the first quarter. FOOTNOTES (1) Historically, Madsen results have been reported in ounces per ton and feet (Imperial). (2) See description and reconciliation of non-IFRS measures in the “Non-IFRS Performance Measures and Reconciliations” section of this MD&A. NON-IFRS PERFORMANCE MEASURES AND RECONCILIATIONS The Company utilizes non-IFRS financial measures as supplemental indicators of operating performance and financial position. These non-IFRS financial measures are used internally by the Company for comparing actual results from one period to another. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow. Accordingly, such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 26Cash Flow from Operations before Net Changes in Non-Cash Operating Working CapitalThe Company uses Cash Flow from Operations before Net Changes in Non-Cash Operating WorkingCapital as a supplemental measure of its financial performance. The Company uses this measure to analyzethe cash generated by its operations. These measures are not necessarily indicative of operating profit orcash flow from operations as determined under IFRS. Investors are cautioned that the above measures maynot be comparable to similarly titled measures of other companies.Table 19: Calculation of Cash Flow from Operations before Net Changes in Non-Cash Operating Working Capital Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011 Net Profit $ 2,958 $ 2,643 $ 3,146 $ 9,656 Adjustments for non-cash items: Depreciation and depletion 4,172 2,895 11,324 7,463 Finance expense 97 96 291 263 Finance and other income (472) (282) (1,123) (827) Loss (Gain) on investments 174 - (620) (109) Stock-based compensation 359 276 1,654 1,201 Deferred income tax expense 1,274 - 1,728 - $ 8,562 $ 5,628 $ 16,400 $ 17,647Weighted Average shares outstanding (basic) 173,746 163,911 172,660 153,268Weighted Average shares outstanding 173,819 166,759 173,094 157,193(diluted)Per share cash flows from operating activities $ 0.05 $ 0.03 $ 0.09 $ 0.12(basic)Per share cash flows from operating activities $ 0.05 $ 0.03 $ 0.09 $ 0.11(diluted)Cash Cost Per OunceThe Company reports its cash costs on a per-ounce basis, based on uniform standards developed by theGold Institute, an independent researcher and evaluator of the gold market and gold industry. Managementuses this measure to analyze the profitability, compared to average realized gold prices, of the Seabee GoldOperation. Investors are cautioned that the above measures may not be comparable to similarly titledmeasures of other companies, should these companies not follow Gold Institute standards.Table 20: Total Cash Cost per Gold Ounce Sold Three months ended Nine months ended Sept 30 Sept 30 Sept 30 Sept 30 2012 2011 2012 2011Production cost (CDN$) 12,955 9,488 38,070 27,143Divided by ounces sold 14,088 10,898 35,941 32,777Total cash cost per ounce (CDN$) 920 871 1,059 828CDN$ Exchange Rate 0.9949 0.9804 1.0021 0.9779Total cash cost per ounce (US$) 924 888 1,057 847Net Cash MarginThe Company uses net cash margin, which represents realized price per ounce less net cash costs perounce. This measure is used by Management to analyze profitability trends and to assess the cash-generating capability from the sale of gold on a consolidated basis in each reporting period, expressed on aClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 27unit basis. Management believes that this measurement illustrates the performance of the Company’sbusiness on a consolidated basis and enables investors to better understand Claude’s performance incomparison to other gold producers who present results on a similar basis and is an important indicator ofexpected performance in future periods.The Company’s net cash margin is intended to provide additional information, does not have anystandardized meaning prescribed by IFRS and should not be considered in isolation or as a substitute formeasures of performance prepared in accordance with IFRS. This measure is not necessarily indicative ofoperating profit or cash flow from operations as determined under IFRS. Other companies may calculatenet cash margin differently. This non-IFRS measure is calculated from realized gold price per ounce andtotal cash costs per ounce, as determined in the net cash cost reconciliation. Net cash margin could also bederived from realized price per ounce and net cash costs per ounce.DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTINGAs at September 30, 2012, we evaluated our disclosure controls and procedures as defined in the rules ofthe U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators. Thisevaluation was carried out under the supervision and participation of Management, including the Presidentand Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the President andChief Executive Officer and Chief Financial Officer concluded that the design and operation of thesedisclosure controls and procedures were effective.Management is responsible for establishing and maintaining adequate internal control over financialreporting. Internal control over financial reporting, no matter how well designed, has inherent limitationsand can only provide reasonable assurance with respect to the preparation and fair presentation of publishedfinancial statements. Under the supervision and with the participation of the President and Chief ExecutiveOfficer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of itsinternal control over financial reporting based on the framework in Internal Control – IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based onthis evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded thatinternal control over financial reporting is effective as at September 30, 2012.We have assessed the impact of the IFRS transition on our internal control over financial reporting and onour disclosure controls and procedures. Changes in accounting policies or business processes may requireadditional controls or procedures to ensure the integrity of our financial disclosures. The transition to IFRShas not required any changes in our internal controls over financial reporting or our disclosure controls andprocedures that have materially affected them or are reasonably likely to materially affect them.No significant changes were made in our internal controls over financial reporting during the period endedSeptember 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting.CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING RESOURCE ESTIMATESResource EstimatesThe resource estimates in this Management’s Discussion and Analysis were prepared in accordance withNational Instrument 43-101, adopted by the Canadian Securities Administrators. The requirements ofNational Instrument 43-101 differ significantly from the requirements of the SEC. In this Management’sDiscussion and Analysis, the Company uses certain terms such as “measured”, “indicated” and “inferred”resources. Although these terms are recognized and required in Canada, the SEC does not recognize them.The SEC permits U.S. mining companies, in their filings with the SEC, to disclose only those mineraldeposits that constitute “reserves”. Under U.S. standards, mineralization may not be classified as a reserveunless the determination has been made that the mineralization could be economically and legally extractedat the time the determination is made. U.S. investors should not assume that all or any portion of ameasured or indicated resource will ever be converted into “reserves”. Further, “inferred resources” have aClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 28great amount of uncertainty as to their existence and whether they can be mined economically or legally,and U.S. investors should not assume that “inferred resources” exist or can be legally or economicallymined, or that they will ever be upgraded to a more certain category.Compliance with Canadian Securities RegulationsThis quarterly report is intended to comply with the requirements of the Toronto Stock Exchange andapplicable Canadian securities legislation, which differ in certain respects from the rules and regulationspromulgated under the United States Securities Exchange Act of 1934, as amended (“Exchange Act”), aspromulgated by the SEC.U.S. investors are urged to consider the disclosure in our Annual Report on Form 40-F, File No. 001-31956, as filed with the SEC under the Exchange Act, which may be obtained from the Company (withoutcost) or from the SEC’s Web site: http://sec.gov/edgar.shtml.CAUTION REGARDING FORWARD-LOOKING INFORMATIONAll statements, other than statements of historical fact, contained or incorporated by reference in thisMD&A and constitute “forward-looking information” within the meaning of applicable Canadiansecurities laws and “forward-looking statements” within the meaning of the United States Private SecuritiesLitigation Reform Act of 1995 (referred to herein as “forward-looking statements”). Forward-lookingstatements include, but are not limited to, statements with respect to the future price of gold, the estimationof mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount ofestimated future production, costs of production, capital expenditures, costs and timing of the developmentof new deposits, success of exploration activities, permitting time lines, currency exchange ratefluctuations, requirements for additional capital, government regulation of mining operations,environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations oninsurance coverage. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”,“estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes”, or the negativeconnotation thereof or variations of such words and phrases or state that certain actions, events or results,“may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative connotationthereof.All forward-looking statements are based on various assumptions, including, without limitation, theexpectations and beliefs of management, the assumed long-term price of gold, that the Company willreceive required permits and access to surface rights, that the Company can access financing, appropriateequipment and sufficient labour, and that the political environment within Canada will continue to supportthe development of mining projects in Canada.Forward-looking statements are subject to known and unknown risks, uncertainties and other factors thatmay cause the actual results, level of activity, performance or achievements of Claude to be materiallydifferent from those expressed or implied by such forward-looking statements, including but not limited to:actual results of current exploration activities; environmental risks; future prices of gold; possible variationsin ore reserves, grade or recovery rates; mine development and operating risks; accidents, labour issues andother risks of the mining industry; delays in obtaining government approvals or financing or in thecompletion of development or construction activities; and other risks and uncertainties, including but notlimited to those discussed in the section entitled “Business Risk” in this MD&A. These risks anduncertainties are not, and should not be construed as being, exhaustive.Although Claude has attempted to identify important factors that could cause actual results to differmaterially from those contained in forward-looking statements, there may be other factors that cause resultsnot to be as anticipated, estimated or intended. There can be no assurance that such statements will proveto be accurate, as actual results and future events could differ materially from those anticipated in suchstatements. Accordingly, readers should not place undue reliance on forward-looking statements.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 29Forward-looking statements in this MD&A are made as of the date of this MD&A, being November 7,2012 and, accordingly, are subject to change after such date. Except as otherwise indicated by Claude,these statements do not reflect the potential impact of any non-recurring or other special items that mayoccur after the date hereof. Forward-looking statements are provided for the purpose of providinginformation about management’s current expectations and plans and allowing investors and others to get abetter understanding of our operating environment.Claude does not undertake to update any forward-looking statements that are incorporated by referenceherein, except in accordance with applicable securities laws.The forward-looking statements contained in this Management’s Discussion and Analysis areexpressly qualified by these cautionary statements.ADDITIONAL INFORMATIONAdditional information related to the Company, including its Annual Information Form (Form 40-F in theU.S.), is available on Canadian (www.sedar.com) and U.S. (www.sec.gov) securities regulatory authorities’websites. Certain documents are also available on the Company’s website at www.clauderesources.com.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 30CONVERSION MULTIPLESFor ease of reference, the following factors for converting metric measurements into imperial equivalentsare provided:To Convert from Metric To Imperial Multiply Metric Units byMetres Feet (ft.) 3.281Kilometres (km) Miles 0.621Tonnes Tons (2,000 pounds) 1.102Grams Troy Ounces 0.032Hectares Acres 2.471GLOSSARY OF FINANCIAL TERMSCurrent ratio = (current asset / current liabilities)Debt to capital = (total debt – cash and cash equivalents) / (total debt – cash and cash equivalents + totalshareholders’ equity)Working capital = (current asset – current liabilities)GLOSSARY OF TECHNICAL TERMSAlteration – any change in the mineral composition of a rock brought about by physical or chemicalmeans.Assaying - laboratory examination that determines the content or proportion of a specific metal (i.e.: silver)contained within a sample. Technique usually involves firing/smelting.Au Eq (“gold equivalent”) – a measure of contained metal expressed in equivalent gold grade.Biotite – a widely distributed and important rock-forming mineral of the mica group.Brecciated – broken into sharp-angled fragments surrounded by finer-grained material.Bulk Sample – a collection of representative mineralized material whose location, geologic character andmetal assay content can be determined and then used for metallurgical or geotechnical testing purposes.Chalcopyrite - a sulphide mineral of copper and iron.Chlorite – a group of platy, monoclinic, usually greenish minerals.Chloritic alteration – the replacement by, conversion into, or introduction of chlorite into a rock.Core Samples - the cylindrical form of rock called “core” that is extracted from a diamond drill hole.Mineralized sections are separated and these samples are sent to a laboratory for analysis.Cross-cut - a horizontal opening driven from a shaft or haulage drift at an oblique or right angle to thestrike of a vein or other orebody.Cut-off Grade - the lowest grade of mineralized material that qualifies as a reserve in a deposit (i.e.:contributing material of the lowest assay that is included in a reserve estimate).Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 31Diamond Drilling – a type of rotary drilling in which diamond bits are used as the rock-cutting tool toproduce a recoverable drill core sample of rock for observation and analysis.Dip – the angle that a structural surface, a bedding or fault plane makes with the horizontal, measuredperpendicular to the strike of the structure.Drift - a horizontal underground opening that follows along the length of a vein or rock formation.Duty to Consult - governments in Canada may have a duty to consult with and potentially accommodateAboriginal groups prior to making decisions which may impact lands and resources subject to establishedor potential treaty or Aboriginal rights, title or other claims. These governments, in turn, may delegateprocedural aspects of this duty to industry.Exploration – work involved in searching for ore, from prospecting to diamond drilling or driving a drift.Fault – a fracture or break in rock along which there has been movement.Feasibility Study – a comprehensive technical and economic study of the selected development option fora mineral project that includes appropriately detailed assessments of realistically assumed mining,processing, metallurgical, economic, marketing, legal, environmental, social and governmentalconsiderations together with any other relevant operational factors and detailed financial analysis, that arenecessary to demonstrate at the time of reporting that extraction is reasonably justified (economicallymineable). The results of the study may reasonably serve as the basis for a final decision by a proponent orfinancial institution to proceed with, or finance, the development of the project. The confidence level of thestudy will be higher than that of a Prefeasibility Study.Fire Assay - the assaying of metallic minerals by use of a miniature smelting procedure with variousagents.Footwall - the rock on the underside of a vein or ore structure.Fracture – a break or crack in rock.Geophysical Survey - a scientific method of prospecting that measures the physical properties of rockformations. Common properties investigated include magnetism, specific gravity, electrical conductivityand radioactivity.Grade – the metal content of rock with precious metals, grade can be expressed as troy ounces or gramsper tonne of rock.Granitoid – a light-coloured, plutonic rock with quartz between 20 and 60 percent.Head Grade – the average grade of ore fed into a mill.Hydrothermal – the products or the actions of heated waters in a rock mass such as a mineral depositprecipitating from a hot solution.Igneous – a primary type of rock formed by the cooling of molten material.Indicated Mineral Resource – is that part of a Mineral Resource for which quantity, grade or quality,densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow theappropriate application of technical and economic parameters, to support mine planning and evaluation of theeconomic viability of the deposit. The estimate is based on detailed and reliable exploration and testinginformation gathered through appropriate techniques from locations such as outcrops, trenches, pits, workingsand drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 32Inferred Mineral Resource – is that part of a Mineral Resource for which quantity and grade or quality canbe estimated on the basis of geological evidence and limited sampling and reasonably assumed, but notverified, geological and grade continuity. The estimate is based on limited information and sampling gatheredthrough appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.Lens - a body of ore that is thick in the middle and tapers towards the ends.Lithostructural – an assemblage of rocks that is unified on the basis of structural and lithological features.Mafic - igneous rocks composed mostly of dark, iron and magnesium-rich minerals.Measured Mineral Resource - is that part of a Mineral Resource for which quantity, grade or quality,densities, shape, and physical characteristics are so well established that they can be estimated withconfidence sufficient to allow the appropriate application of technical and economic parameters, to supportproduction planning and evaluation of the economic viability of the deposit. The estimate is based ondetailed and reliable exploration, sampling and testing information gathered through appropriate techniquesfrom locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough toconfirm both geological and grade continuity.Metallurgy – the study of the extractive processes which produce minerals from their host rocks.Mill - A processing facility where ore is finely ground and thereafter undergoes physical or chemicaltreatment to extract the valuable metals.Mineral – a naturally formed chemical element or compound having a definitive chemical composition andusually a characteristic crystal form.Mineralization – a natural concentration in rocks or soil of one or more minerals.Mineral Reserve – the economically mineable part of a Measured or Indicated Mineral Resourcedemonstrated by at least a Prefeasibility Study. This study must include adequate information on mining,processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowancesfor losses that may occur when material is mined.Mineral Resource – a concentration or occurrence of natural, solid, inorganic, or fossilized organicmaterial in or on the Earth’s crust in such form and quantity and of such a grade or quality that it hasreasonable prospects for economic extraction. The location, quantity, grade, geological characteristics, andcontinuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence andknowledge.Ounces - Troy ounces of a fineness of 999.9 parts per 1,000 parts.Ore - Rock, generally containing metallic or non-metallic minerals, which can be mined and processed at aprofit.Ore Body - A sufficiently large amount of ore that can be mined economically.Plunge - the vertical angle a linear geological feature makes with the horizontal plane.Porphyry - any igneous rock in which relatively large crystals are set in a fine-grained groundmass.Prefeasibility Study – a comprehensive study of the viability of a mineral project that has advanced to astage where the mining method, in the case of underground mining, or the pit configuration, in the case ofan open pit, has been established, and where an effective method of mineral processing has beendetermined. This study must include a financial analysis based on reasonable assumptions of technicalClaude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 33engineering, operating, and economic factors, which are sufficient for a Qualified Person acting reasonably,to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.Probable Mineral Reserve – the economically mineable part of an Indicated, and in some circumstances,a Measured Mineral Resource, demonstrated by at least a Prefeasibility Study. This study must includeadequate information on mining, processing, metallurgical, economic and other relevant factors thatdemonstrate, at the time of reporting, that economic extraction can be justified.Proven Mineral Reserve – the economically mineable part of a Measured Mineral Resource demonstratedby at least a Prefeasibility Study. This study must include adequate information on mining, processing,metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economicextraction is justified.Pulp - a mixture of ground ore and water.Pyrite - an iron sulphide mineral (FeS2), the most common naturally occurring sulphide mineral.Pyrrhotite - a bronze-colored, often magnetic iron sulphide mineral.Qualified Person – an individual who is an engineer or geoscientist with at least five (5) years ofexperience in mineral exploration, mine development, mine operation, project assessment or anycombination of these; has experience relevant to the subject matter of the mineral project and technicalreport; and is a member in good standing of a professional association.Quartz – crystalline silica; often forming veins in fractures and faults within older rocks.Raise - a vertical or inclined underground working that has been excavated from the bottom upward.Sericite – a fine-grained potassium mica found in various metamorphic rocks.Shear Zone - a zone in which shearing has occurred on a large scale so that the rock is crushed andbrecciated.Showing - surface occurrence of mineral.Shrinkage Stoping – any mining method in which broken ore is temporarily retained in the stope toprovide a working platform and/or to offer temporary support to the stope walls during active mining.Sill - an intrusive sheet of igneous rock of roughly uniform thickness that has been forced between thebedding planes of existing rock; the initial horizontal drift along the strike of the ore vein.Specific Gravity - the ratio between the weight of a unit volume of a substance and that of a unit volume ofwater.Stope - an underground excavation from which ore has been extracted, either above or below a level. Accessto stopes is usually by way of adjacent raises.Stratigraphy – the sequence of bedded rocks in a particular area.Tailings - Tailings consist of ground rock and process effluents that are generated in a mine processing plantor mill. Mechanical and chemical processes are used to extract gold from mine ore and produce a wastestream known as tailings. This process of product extraction is never 100 percent efficient, nor is it possible toreclaim all reusable and expended processing reagents and chemicals. The unrecoverable and uneconomicmetals, minerals, chemicals, organics and process water are discharged, normally as slurry, to a final storagearea commonly known as a Tailings Management Facility (TMF) or Tailings Storage Facility (TSF).Claude Resources Inc.
    • Q3 2012 Management’s Discussion and Analysis(in thousands of CDN dollars, except as otherwise noted) Page 34Till - is unsorted glacial sediment. Its content may vary from clays to mixtures of clay, sand, gravel andboulders. This material is typically derived from the subglacial erosion and incorporated by the moving ice ofthe glaciers of previously available unconsolidated sediments.Tonne – a metric ton or 2,204 pounds.Trenching - the process of exploration by which till is removed from a trench cut from the earth’s surface.Vein – a thin, sheet-like, cross-cutting body of hydrothermal mineralization, principally quartz.Waste – barren rock in a mine, or mineralized material that is too low in grade to be mined and milled at aprofit.Working interest or WI - means the interest held by Claude in property. This interest normally bears itsproportionate share of capital and operating costs as well as royalties or other production burdens. Theworking interest percentage is expressed before royalty interests.Claude Resources Inc.
    • CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2012FOR FURTHER INFORMATION PLEASE CONTACT:Marc Lepage, Manager, Investor RelationsClaude Resources Inc.200, 224 – 4th Avenue SouthSaskatoon, Saskatchewan Phone: (306) 668-7505Canada S7K 5M5 Fax: (306) 668-7500ir@clauderesources.com www.clauderesources.comTRADING SYMBOLS:TSX – CRJNYSE MKT - CGR
    • NOTICE OF AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTSUnder National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interimfinancial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewedby an auditor.The Management of Claude Resources Inc. is responsible for the preparation of the accompanying unaudited interimconsolidated financial statements. The unaudited interim consolidated financial statements are considered by Management topresent fairly the financial position, operating results and cash flows of the Company.The Companys independent auditor has not performed a review of these financial statements, in accordance with standardsestablished by the Canadian Institute of Chartered Accountants. These unaudited interim consolidated financial statementsinclude all adjustments, consisting of normal and recurring items that Management considers necessary for a fair presentationof the consolidated financial position, results of operations and cash flows. Neil McMillan Rick Johnson, CA Chief Executive Officer Chief Financial OfficerDate: November 7, 2012 Page 35
    • Condensed Consolidated Interim Statements of Financial Position(In Thousands of Canadian Dollars - Unaudited) SEPTEMBER 30 DECEMBER 31 2012 2011 NoteAssetsCash and cash equivalents $ 56 $ 2,529Short-term investments - 33,168Accounts receivable 536 2,714Inventories 6 21,767 13,366Prepaid expenses and deposits 385 227Current assets 22,744 52,004Mineral properties 203,999 149,794Deferred income tax asset - 998Investments 7 569 2,854Deposits for reclamation costs 8 2,237 2,237Non-current assets 206,805 155,883Total assets $ 229,549 $ 207,887LiabilitiesAccounts payable and accrued liabilities $ 7,914 $ 5,737Loans and borrowings 10 17,322 3,015Net royalty obligation 9 877 854Current liabilities 26,113 9,606Loans and borrowings 10 648 11,238Deferred income tax liability 607 -Net royalty obligation 9 3,461 4,435Decommissioning and reclamation 8 9,848 9,713Non-current liabilities 14,564 25,386Shareholders equityShare capital 193,189 180,531Contributed surplus 6,103 4,796Accumulated deficit (9,925) (13,071)Accumulated other comprehensive income (loss) (495) 639Total shareholders equity 188,872 172,895Total liabilities and shareholders equity $ 229,549 $ 207,887See accompanying notes to condensed consolidated interim financial statements.On behalf of the Board:Ted J. Nieman Ronald J. Hicks, CAChairman Chairman, Audit Committee Page 36
    • Condensed Consolidated Interim Statements of Income(In Thousands of Canadian Dollars, except per share amounts - Unaudited) Three Months Ended Nine Months Ended SEPTEMBER 30 SEPTEMBER 30 2012 2011 2012 2011 NoteRevenue $ 23,422 $ 18,203 $ 59,565 $ 49,764Mine Operating: Production costs 12,955 9,488 38,070 27,143 Depreciation and depletion 4,172 2,895 11,324 7,463 17,127 12,383 49,394 34,606Gross profit 6,295 5,820 10,171 15,158 General and administrative 1,663 1,213 6,131 4,275 Finance expense 439 2,191 1,083 2,731 Finance and other income (213) (227) (1,297) (1,395) (Gain) loss on investments 174 - (620) (109) 2,063 3,177 5,297 5,502Profit before income tax 4,232 2,643 4,874 9,656Deferred income tax expense 1,274 - 1,728 -Net profit $ 2,958 $ 2,643 $ 3,146 $ 9,656Net earnings per share Basic and diluted 12 Net earnings $ 0.02 $ 0.02 $ 0.02 $ 0.06 Basic 173,746 163,911 172,660 153,268 Diluted 173,819 166,759 173,094 157,193See accompanying notes to condensed consolidated interim financial statements.Condensed Consolidated Interim Statements of Comprehensive Income(In Thousands of Canadian Dollars - Unaudited) Three Months Ended Nine Months Ended SEPTEMBER 30 SEPTEMBER 30 2012 2011 2012 2011Net profit $ 2,958 $ 2,643 $ 3,146 $ 9,656Other comprehensive income (loss) Loss (gain) on available-for-sale securities transferred to profit 174 - (620) (109) Unrealized gain (loss) on available-for-sale securities (248) 24 (514) (2,137)Other comprehensive income (loss) (74) 24 (1,134) (2,246)Total comprehensive income $ 2,884 $ 2,667 $ 2,012 $ 7,410See accompanying notes to condensed consolidated interim financial statements. Page 37
    • Condensed Consolidated Interim Statements of Shareholders Equity(In Thousands of Canadian Dollars - Unaudited) Three Months Ended Nine Months Ended SEPTEMBER 30 SEPTEMBER 30 2012 2011 2012 2011Share Capital Balance, beginning of period $ 193,189 $ 178,991 $ 180,531 $ 122,751 Common shares and warrants issued - 198 12,392 56,189 Transfers from contributed surplus - 7 266 256 Balance, end of period $ 193,189 $ 179,196 $ 193,189 $ 179,196Contributed Surplus Balance, beginning of period $ 5,744 $ 3,765 $ 4,796 $ 3,089 Stock-based compensation 359 276 1,654 1,201 Transfers to share capital - (7) (266) (256) Other - - (81) - Balance, end of period $ 6,103 $ 4,034 $ 6,103 $ 4,034Accumulated Deficit Balance, beginning of period $ (12,883) $ (15,512) $ (13,071) $ (22,525) Net profit 2,958 2,643 3,146 9,656 Balance, end of period $ (9,925) $ (12,869) $ (9,925) $ (12,869)Accumulated Other Comprehensive Income (Loss) Balance, beginning of period $ (421) $ 483 $ 639 $ 2,753 Other comprehensive income (loss) (74) 24 (1,134) (2,246) Balance, end of period $ (495) $ 507 $ (495) $ 507Shareholders equity, end of period $ 188,872 $ 170,868 $ 188,872 $ 170,868See accompanying notes to condensed consolidated interim financial statements. Page 38
    • Condensed Consolidated Interim Statements of Cash Flows(In Thousands of Canadian Dollars - Unaudited) Three Months Ended Nine Months Ended SEPTEMBER 30 SEPTEMBER 30 2012 2011 2012 2011Cash flows from (used in) operating activities Net profit $ 2,958 $ 2,643 $ 3,146 $ 9,656 Adjustments for non-cash items: Depreciation and depletion 4,172 2,895 11,324 7,463 Finance expense 97 96 291 263 Finance and other income (472) (282) (1,123) (827) Gain (loss) on investments 174 - (620) (109) Stock-based compensation 359 276 1,654 1,201 Deferred income tax expense 1,274 - 1,728 - Net changes in non-cash operating working capital: Accounts receivable 5,047 (6,496) 2,178 (7,807) Inventories 4,222 1,941 (8,083) (8,296) Prepaid expenses and deposits (142) 26 (158) 358 Accounts payable and accrued liabilities (3,714) (593) 2,177 3,013Cash provided by operating activities 13,975 506 12,514 4,915Cash flows from investing activities: Additions to mineral properties (11,236) (11,110) (52,251) (37,525) Restricted cash - - - 4,389 Decrease (increase) in investments 244 12,028 33,333 (23,852)Cash from (used in) investing activities (10,992) 918 (18,918) (56,988)Cash flows from financing activities: Proceeds from issue of common shares and warrants, net of issue costs - 198 371 56,189 Debenture redemption - - - (87) Bank indebtedness (1,625) - - - Demand loans: Proceeds - - 7,224 - Repayments (820) (402) (2,040) (1,365) Obligations under finance lease: Proceeds - - - 4,077 Repayments (482) (683) (1,624) (1,948)Cash from (used in) financing activities (2,927) (887) 3,931 56,866Increase (decrease) in cash and cash equivalents 56 537 (2,473) 4,793Cash and cash equivalents, beginning of period - 10,657 2,529 6,401Cash and cash equivalents, end of period $ 56 $ 11,194 $ 56 $ 11,194See accompanying notes to condensed consolidated interim financial statements. Page 39
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted1. Corporate Information:Claude Resources Inc. (“Claude” or the “Company”) is a company domiciled in Canada. The address of the Company’sregistered office is at 1500, 410 – 22nd Street East, Saskatoon, Saskatchewan, S7K 5T6. Its principal office is located at200, 224 – 4th Avenue South, Saskatoon, Saskatchewan, S7K 5M5.Claude Resources Inc. is a gold producer whose shares are listed on both the Toronto Stock Exchange (TSX-CRJ) andthe NYSE MKT (NYSE MKT-CGR). The Company is also engaged in the exploration and development of goldmineral reserves and mineral resources. The Company’s entire asset base is located in Canada. Its revenue generatingasset is the 100 percent owned Seabee Gold Operation, located in northern Saskatchewan. Claude also owns 100percent of the Amisk Gold Project in northeastern Saskatchewan and 100 percent of the Madsen Property in the RedLake gold camp of northwestern Ontario.2. Basis of Preparation:STATEMENT OF COMPLIANCEThese unaudited condensed consolidated interim financial statements for the period ended September 30, 2012 havebeen prepared in accordance with International Accounting Standard 34 (“IAS 34”), Interim Financial Reporting.These unaudited condensed consolidated interim financial statements do not include all of the information required forfull annual financial statements and should be read in conjunction with the Company’s 2011 annual financial statementsprepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the InternationalAccounting Standards Board (“IASB”).These unaudited condensed consolidated interim financial statements were authorized for issue by the Company’sBoard of Directors on November 7, 2012.BASIS OF MEASUREMENTThese unaudited condensed consolidated interim financial statements have been prepared on the historical cost basisexcept for derivative financial instruments and available-for-sale financial assets, which are measured at fair value.FUNCTIONAL CURRENCYThese unaudited condensed consolidated interim financial statements are presented in Canadian dollars, which is theCompany’s functional currency. All financial information presented in Canadian dollars has been rounded to thenearest thousand, except per share amounts or as otherwise noted.USE OF ESTIMATES AND JUDGMENTSThe preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity withIFRS requires Management to make judgments, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets andliabilities at the date of the consolidated financial statements. Significant judgments, estimates and assumptions arerelated to the useful lives and recoverability of mineral properties and deferred income tax assets, valuation ofinventory, provisions for decommissioning and reclamation, financial instruments and mineral reserves.Although these estimates are based on Management’s best knowledge of the amount, events or actions, actual resultsultimately may differ from those estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimates are revised and in any future periods affected.The accounting judgments, estimates and assumptions, and their application to accounting policies, that have the mostsignificant effect on the amounts recognized in the unaudited condensed consolidated interim financial statements of theCompany are consistent with those outlined in the Company’s annual consolidated financial statements and notesthereto for the year ended December 31, 2011. Page 40
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted3. Significant Accounting Policies:These unaudited condensed consolidated interim financial statements are prepared using accounting policies consistentwith the Company’s annual consolidated financial statements and notes thereto for the year ended December 31, 2011.The accounting policies utilized by Management for the Company and its wholly owned subsidiaries have been appliedconsistently to all periods presented in these unaudited condensed consolidated interim financial statements, unlessotherwise indicated.4. Accounting Standards:Future Changes in Accounting PoliciesFinancial InstrumentsIFRS 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 uses a single approach to determine whethera financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach inIFRS 9 is based on how an entity manages its financial instruments in the context of its business model and thecontractual cash flow characteristics of the financial assets. The new standard also requires a single impairment methodto be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on orafter January 1, 2015. The Company is currently evaluating the impact of IFRS 9 on its financial statements.Consolidated Financial StatementsIn May 2011, the IASB issued IFRS 10, Consolidated Financial Statements. This new standard defines the principle ofcontrol and establishes control as the basis for determining which entities are included in consolidated financialstatements. The principle of control is based on three criteria: power over the investee; exposure to variable returnsfrom involvement in the investee; and the ability of the investor to use its power to affect the amount of its returns. Thestandard requires control of an investee to be reassessed when the facts and circumstances indicate that there have beenchanges to one or more of the criteria for determining control. This new standard supersedes the requirements relatingto consolidated financial statements in IAS 27, Consolidated and Separate Financial Statements (as amended in 2009)and SIC-12, Consolidation – Special Purpose Entities. IFRS 10 is effective for the Company beginning on January 1,2013, with early adoption permitted. The Company does not expect the adoption of this standard to have a materialimpact on its financial statements.Joint ArrangementsIFRS 11, Joint Arrangements, was issued by the IASB in May 2011 and is effective for annual periods beginning on orafter January 1, 2013 with early adoption permitted. Under IFRS 11, joint arrangements are classified as either jointoperations or joint ventures. Parties to a joint operation retain the rights and obligations to individual assets andliabilities of the operation, while parties to a joint venture have rights to the net assets of the venture. Any arrangementwhich is not structured through a separate entity or is structured through a separate entity but such separation isineffective such that the parties to the arrangement have rights to the assets and obligations for the liabilities will beclassified as a joint operation. Joint operations shall be accounted for in a manner consistent with jointly controlledassets and operations whereby the Company’s contractual share of the arrangement’s assets, liabilities, revenues andexpenses are included in the consolidated financial statements. Any arrangement structured through a separate vehiclethat does effectively result in separation between the Company and the arrangement shall be classified as a joint ventureand accounted for using the equity method of accounting. Under the existing IFRS standard, the Company has theoption to account for any interests it has in joint ventures using proportionate consolidation or equity accounting. Theextent of the impact of adoption of IFRS 11 has not yet been determined by the Company.Disclosure of Interests in Other EntitiesIn May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities. This new standard requires enhanceddisclosures about an entity’s interest in subsidiaries, joint arrangements, associates and unconsolidated structuredentities. IFRS 12 contains new disclosure requirements for interests the Company has in subsidiaries, jointarrangements, associates and unconsolidated structured entities. Required disclosures aim to provide readers of thefinancial statements with information to evaluate the nature of and risks associated with the Company’s interests in Page 41
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedother entities and the effects of those interests on the Company’s financial statements. IFRS 12 is effective for theCompany beginning on January 1, 2013. It is expected that IFRS 12 will increase the current level of disclosure relatedto the Company’s interests in other entities upon adoption.Fair Value MeasurementIn May 2011, the IASB published IFRS 13, Fair Value Measurement, which is effective prospectively for annualperiods beginning on or after January 1, 2013. IFRS 13 replaces fair value measurement guidance contained inindividual IFRSs, providing a single source of fair value measurement guidance. The standard provides a framework formeasuring fair value and establishes new disclosure requirements to enable readers to assess the methods and inputsused to develop fair value measurements and for recurring valuations that are subject to measurement uncertainty, theeffect of those measurements on the financial statements. The Company intends to adopt IFRS 13 prospectively in itsfinancial statements for the annual period beginning on January 1, 2013. The extent of the impact of adoption of IFRS13 has not yet been determined.Presentation of Financial StatementsIn June 2011, the IASB issued an amendment to IAS 1, Presentation of Items of OCI: Amendments to IAS 1Presentation of Financial Statements. The amendments stipulate the presentation of net profit and OCI and also requirethe Company to group items within OCI based on whether the items may be subsequently reclassified to profit or loss.Amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. The Company does notexpect the adoption of the amendments to this standard to have a material impact on its financial statements.Investments in Associates and Joint VenturesIn May 2011, the IASB issued amendments to IAS 28, Investments in Associates and Joint Ventures, which areeffective for annual periods beginning on or after January 1, 2013 with early adoption permitted. Amendments to IAS28 provide additional guidance applicable to accounting for interests in joint ventures or associates when a portion of aninterest is classified as held for sale or when the Company ceases to have joint control or significant influence over anassociate or joint venture. When joint control or significant influence over an associate or joint venture ceases, theCompany will no longer be required to re-measure the investment at that date. When a portion of an interest in a jointventure or associate is classified as held for sale, the portion not classified as held for sale shall be accounted for usingthe equity method of accounting until the sale is completed at which time the interest is reassessed for prospectiveaccounting treatment. The Company does not expect the amendments to IAS 28 to have a material impact on thefinancial statements.Offsetting Financial Assets and LiabilitiesIn December 2011, the IASB published Offsetting Financial Assets and Financial Liabilities and issued new disclosurerequirements in IFRS 7 Financial Instruments: Disclosures. The amendments to IAS 32 clarify that an entity currentlyhas a legally enforceable right to set-off if that right is not contingent on a future event, and enforceable both in thenormal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. Theamendments to IAS 32 also clarify when a settlement mechanism provides for net settlement or gross settlement that isequivalent to net settlement. The amendments to IFRS 7 contain new disclosure requirements for financial assets andliabilities that are offset in the statement of financial position, or subject to master netting arrangements or similararrangements. The effective date for the amendments to IAS 32 is annual periods beginning on or after January 1,2014. The effective date for the amendments to IFRS 7 is annual periods beginning on or after January 1, 2013. Theseamendments are to be applied retrospectively. The Company does not expect the amendments to IAS 32 to have amaterial impact on the financial statements.5. Determination of Fair Values:A number of the Company’s accounting policies and disclosures require the determination of fair value, for bothfinancial and non-financial assets and liabilities. Fair values have been determined for measurement and or disclosurepurposes based on the methods described below. When applicable, further information about the assumptions made indetermining fair values is disclosed in the notes specific to that asset or liability. Page 42
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedInvestments in Equity SecuritiesThe fair value of the Company’s available-for-sale financial assets is determined by reference to their quoted closingbid price at the reporting date.DerivativesThe fair value of the Company’s forward exchange contracts are estimated based on appropriate price modelingcommonly used by market participants. Such modeling uses discounted cash flow analysis with observable marketinputs including future interest rates, implied volatilities and the credit risk of the Company or the counterparties asappropriate, with resulting valuations periodically validated through third-party or counterparty quotes.Share-based payment transactionsThe fair value of issuances under the Company’s employee share purchase plan, and stock option plan are measuredusing the Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exerciseprice of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expecteddue to publicly available information), weighted average expected life of the instruments (based on historicalexperience and general option holder behavior) and the risk-free interest rate (based on government bonds).6. Inventories:Details of the Company’s inventories are as follows: SEPT 30 DEC 31 2012 2011 Gold in-circuit (1) (2) $ 3,556 $ 3,128 Stockpiled ore (1) (2) 506 265 Materials and supplies (3) 17,705 9,973 Inventories $ 21,767 $ 13,366 (1) For the period ended September 30, 2012, depreciation and depletion of $1.1 million is included in the above noted balances (December 31, 2011 - $0.7 million). (2) For the year ended December 31, 2011, the Company wrote-down $0.5 million of gold inventory. (3) There was no write-down or reversal of write-down of materials and supplies inventory for the period ended September 30, 2012. For the year ended December 31, 2011, the Company wrote-down $0.2 million of materials and supplies inventory.7. Investments: SEPT 30 DEC 31 2012 2011 Available-for-sale securities, beginning of year $ 2,854 $ 4,328 Disposition of available-for-sale securities (1,713) (197) Acquisition of available-for-sale securities (1) 146 1,131 Permanent write-down of available-for-sale securities (174) (74) Unrealized gain (loss) on available-for-sale securities (544) (2,334) Available-for-sale securities, end of period $ 569 $ 2,854 (1) The acquisition in 2012 occurred during the first quarter and related to shares in a public company received as part of the Company’s acquisition of St. Eugene Mining. The acquisition in 2011 related to shares in a public company received as settlement for Claude’s disposition of a mineral property interest.At September 30, 2012, the Company reviewed its portfolio of available-for-sale securities in order to assess whetherthere was objective evidence of impairment. Factors considered in the Company’s assessment included the length oftime and extent which to fair value was below cost and current conditions specific to the investment. Utilizing these Page 43
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedfactors, the Company determined that certain of its available-for-sale securities had objective evidence of impairmentand were written down.By holding these available-for-sale securities, the Company is exposed to various risk factors including market pricerisk and liquidity risk (Note 13).8. Decommissioning and reclamation:The Company’s decommissioning and reclamation costs consists of reclamation and closure costs. Mineral propertyobligations were determined using discount rates ranging from 1.73 to 3.35 percent. Expected undiscounted paymentsof future obligations are $11.1 million over the next 7 to 16 years. Year to date, an accretion expense component of$0.1 million has been charged in the period ending September 30, 2012, augmented by revisions made to thedecommissioning and reclamation costs, resulting in an increase in the overall carrying amount of the provision.Changes to the provision during the period ended September 30, 2012 are as follows: SEPT 30 DEC 31 2012 2011 Decommissioning and reclamation provision, beginning of year $ 9,713 $ 4,810 Accretion 134 166 Revisions due to change in estimates and discount rate 1 4,737 Decommissioning and reclamation provision, end of period $ 9,848 $ 9,713As required by regulatory authorities, the Company has provided letters of credit as security for reclamation related tothe Madsen and Seabee properties in the amounts of $0.7 million (December 31, 2011 - $0.7 million) and $1.5 million(December 31, 2011 - $1.5 million), respectively. As security for these letters of credit, the Company has providedinvestment certificates in the amount of $2.2 million (December 31, 2011 - $2.2 million).9. Net Royalty Obligation:(a) Royalty AgreementsDuring each of 2004, 2005, 2006 and 2007, the Company entered into separate Royalty Agreements (“Agreements”)whereby it sold a basic royalty on a portion of the gold production at its Seabee Gold Operation. The Companyreceived cash consideration consisting of royalty income, indemnity fee income and interest income.Under the terms of the Agreements, the Company is required to make royalty payments at fixed amounts per ounce ofgold produced; these amounts vary over the term of the respective Agreements. A portion of the cash received at theinception of the respective agreements was placed with a financial institution; in return, the Company received arestricted promissory note. Interest earned from the restricted promissory notes and a portion of the principal must beused to fund the expected basic royalty payments during the first ten years of each agreement. Over the life of theroyalty agreements, interest earned and principal from the restricted promissory notes will be sufficient to fund theexpected basic royalty payments.The Company and all of the counterparties have the legal right of offset and the intention to settle on a net basis. Assuch, the Company has presented these transactions on a net basis on the Statements of Financial Position. 2004 2005 2006 2007 Note Agreement Agreement Agreement Agreement TotalRestricted PromissoryNotes Principal Balance (1) (b) 6,863 14,508 36,684 26,055 84,110 Interest receivable (1) 309 542 1,600 1,136 3,587 Interest Rate 6 percent 6 percent 7 percent 7 percent Maturity DEC 10, FEB 15, FEB 15, FEB 15, 2014 2015 2016 2017 Page 44
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted 2004 2005 2006 2007 Note Agreement Agreement Agreement Agreement TotalRoyalty Payments Royalty Rate per ounce $13.29 to $23.15 to $61.59 to $35.34 to of gold produced (2) $24.53 $112.45 $198.95 $147.05 Royalty payable (b) 228 486 1,591 1,122 3,427 (current) (1) Royalty obligation (b) 7,043 14,791 36,745 26,194 84,773 payable (long-term) (1)Net Profit Interest (c) - - - - - Applicable years 2010-2014 2011-2015 2012-2016 2013-2017 Percent 2.50, 3.00 or 1.00, 2.00 or 3.75, 4.00 or 3.50, 3.70 or 4.00 3.00 4.25 3.90 Price of gold thresholds $800, $900 $875, $975, $1,250, or $1,200 $1,075 or $1,175 or $1,500 or $1,275 $1,375 $1,675 (1) At September 30, 2012. (2) Over the remaining life of the respective agreements.(b) Net Royalty ObligationThe following schedule outlines the different components of the transaction that are presented net on the Company’sconsolidated Statements of Financial Position: SEPT 30 DEC 31 2012 2011 Current portion Assets Interest receivable on Restricted promissory notes $ 3,587 $ 4,953 Liabilities Current portion of deferred revenue 1,037 996 Interest payable on royalty obligations 3,427 4,811 $ 4,464 $ 5,807 Net royalty obligation (current) (877) (854) Long-term portion Assets Restricted promissory notes $ 84,110 $ 84,037 Liabilities Deferred revenue 2,798 3,586 Royalty obligation 84,773 84,886 $ 87,571 $ 88,472 Net royalty obligation (long-term) (3,461) (4,435) Net royalty obligation $ (4,338) $ (5,289) Page 45
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedThe interest income and the indemnity fees received by the Company are being amortized into income over theprepayment period and the life of the respective agreements. The interest income and the indemnity fees are nettedagainst interest expense and are reflected in “Financing expense” on the consolidated statement of income.(c) NPI PaymentIn addition to the royalty, the Company granted a net profit interest (“NPI”) of varying percentages, payable only ifgold prices exceed a pre-determined threshold. Prior to any NPI payment, the Company is entitled to first recover theNPI expenditures (including capital expenditures), working capital, operating losses, interest charges and assetretirement obligations relating to the production of ore at the Seabee Operation. These expenditures are calculated on acumulative basis from the commencement of the individual agreements. At September 30, 2012, the cumulative carryforward amounts remained in a deficiency position under each of the agreements and no payments are expected during2012 or 2013.(d) Call and PutUnder certain circumstances, a 100 percent owned subsidiary of Claude will have the right to purchase (“Call”) theequity of the holder of the royalties or right to receive the royalties at an amount no greater than the fair market valuethereof at the time of the Call. The Call price will be paid from the balance owing to the Company under thepromissory notes. Under certain circumstances, the purchaser of the royalties will have the right to sell (“Put”) theirinterest in the royalty to the Company at an amount no greater than the fair market value thereof at the time of the Put.However, such right is subject to the subsidiary of Claude’s pre-emptive right to exercise the Call in advance of any Putbeing exercised and completed.10. Loans and Borrowings:This note provides information about the contractual terms of the Company’s interest-bearing loans and borrowings, which aremeasured at amortized cost. For more information about the Company’s exposure to interest rate and liquidity risk, see Note13. SEPT 30 DEC 31 2012 2011 Current liabilities Demand loans (a) $ 6,081 $ 896 Current portion of finance lease liabilities (b) 1,633 2,119 Debenture (c) 9,608 - $ 17,322 $ 3,015 Non-current liabilities Finance lease liabilities (b) $ 648 $ 1,786 Debenture (c) - 9,452 $ 648 $ 11,238(a) Demand LoansTerms and conditions of the Company’s outstanding demand loans are as follows: SEPT 30 DEC 31 2012 2011 Demand loan, repayable in monthly payments of $ 163 $ 896 $83,371 including interest at 4.575 percent, due November 2012 Demand loans, repayable in consecutive monthly 5,918 - blended payments of $214,893 including interest at prime plus 1.50 percent, due between January and April 2015 Page 46
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 $ 6,081 $ 896The demand loans are secured by a general security agreement covering all assets of the Company.(b) Finance Lease LiabilitiesObligations under finance leases bear interest between 5.4 percent and 8.0 percent per annum, are due from 2013 to2014 and are secured by the leased equipment. The estimated principal repayments on the leases are as follows: 2012 -$1,633; and 2013 - $648. Present Value of Interest Future Value of Minimum Lease Minimum Lease Payments Payments SEPT 30 SEPT 30 SEPT 30 2012 2012 2012 Less than one year $ 1,633 $ 80 $ 1,713 Between one and five years 648 9 657 More than five years - - - $ 2,281 $ 89 $ 2,370 Present Value of Interest Future Value of Minimum Lease Minimum Lease Payments Payments DEC 31 DEC 31 DEC 31 2011 2011 2011 Less than one year $ 2,119 $ 154 $ 2,273 Between one and five years 1,786 58 1,844 More than five years - - - $ 3,905 $ 212 $ 4,117The Company’s finance leases are secured by a general security agreement.(c) DebentureThe debenture bears a 12 percent annual interest rate, is due May 23, 2013 and requires monthly interest only payments. Uponentering into the debenture indenture agreement, debenture holders received warrants in the amount of 10 percent of thedebenture purchase (Note 11). Each warrant entitles the holder to acquire one common share of the Company at an exerciseprice of $1.60 per common share until May 23, 2013. The value of the warrants associated with the debenture on the date ofissuance was $0.6 million.During 2009, the Company repaid $8.3 million of the outstanding debentures, representing principal plus unpaid interestthereon up to the repayment date. During 2011, the Company repaid $0.1 million of the outstanding debentures, representingprincipal plus unpaid interest thereon up to the repayment date. A total of $9.8 million in face value of debentures remainoutstanding at September 30, 2012.The balance of the debentures outstanding is amortized using the effective interest rate method at an effective rate of 14.7percent over the remaining term of the debentures. SEPT 30 DEC 31 2012 2011 Debenture payable, beginning of year $ 9,452 $ 9,344 Amortized cost of debenture redemption - (87) Page 47
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 Amortization of debt issue costs 156 195 Debenture payable, end of period $ 9,608 $ 9,452 Debenture payable, current portion $ 9,608 $ - Debenture payable, long-term portion $ - $ 9,452As at September 30, 2012, the Company’s outstanding debentures are due in less than one year. As such, this balancehas been classified as a current liability.The debentures are secured by a general security agreement covering all of the Companys assets, except those subordinated tobank debt.(d) OtherThe Company has a $5.0 million operating line of credit which bears interest at prime plus 1.125 percent; the prime rateat September 30, 2012 was 3 percent. These funds are available for general corporate purposes.11. Share Capital:AUTHORIZEDThe authorized share capital of the Company consists of an unlimited number of common shares and two classes ofunlimited preferred shares issuable in series.The first preferred shares are issuable in series and rank ahead of the second preferred shares and the common shares inrespect of dividend payment, dissolution or any other distribution of assets. The other rights, privileges, restrictions andconditions attached to each series of the first preferred shares are fixed by the Board of Directors at the time of creationof such series.The second preferred shares are issuable in series and rank ahead of the common shares in respect of dividend payment,dissolution or any other distribution of assets. The other rights, privileges, restrictions and conditions attached to eachseries of the second preferred shares are fixed by the Board of Directors at the time of creation of such series.The common shares of the Company are entitled to vote at all meetings of the shareholders and, upon dissolution or anyother distribution of assets, to receive such assets of the Company as are distributable to the holders of the commonshares.Issue of Shares:During the first nine months of 2012, the Company issued 338,676 and 75,402 common shares pursuant to theCompany’s Employee Share Purchase Plan and the Company’s Stock Option plan, respectively. The Company alsoissued an additional 8,701,255 common shares pursuant to a Plan of Arrangement whereby Claude acquired all of theoutstanding common shares of St. Eugene Mining Corporation Limited that it did not already own.The Company has the following equity-settled plans:Employee Share Purchase Plan (“ESPP”)The ESPP was established to encourage employees to purchase Company common shares. Under the plan, eligible employeesmay contribute up to five percent of their basic annual salary and the Company shall contribute common shares in an amountequal to 50 percent of the employee’s contribution. Shares of the Company are issued to employees based on a weighted averagemarket price over a specific period. The maximum number of common shares of the Company available for issue under thisESPP is five percent of the Company’s common shares outstanding.During the third quarter of 2012, compensation expense recognized in respect of the ESPP was $0.07 million (Q3 2011 - Page 48
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted$0.04 million). Year to date, the compensation expense recognized in respect of the ESPP was $0.2 million (YTD 2011 - $0.1million). This compensation expense has been included in General and administrative expense in the Consolidated Statementsof Income.Stock Option PlanThe Company has established a stock option plan under which options may be granted to directors, officers and keyemployees. The maximum number of common shares available for option under the stock option plan is nine percent of theCompany’s common shares outstanding. Options granted have an exercise price of the Company’s prior day’s closing pricequoted on the TSX for the common shares Claude. All options are settled by physical delivery of shares. Vesting periods ofoptions granted under the Company’s stock option plan vary on a grant by grant basis, at the discretion of the Company’sBoard of Directors. Grants to Employees have a term to expiry of 7 to 10 years and typically have a vesting term of 3 to 5years. Grants to Directors have a term to expiry of 7 to 10 years and vest immediately.Options outstanding under this plan at September 30, 2012 and December 31, 2011 and their weighted average exerciseprices are as follows: Weighted Weighted SEPT 30 Average DEC 31 Average 2012 Exercise 2011 Exercise Options Price Options Price Beginning of period 5,484,250 $ 1.57 3,916,737 $ 1.15 Options granted 1,721,290 1.08 2,478,768 2.06 Options exercised (75,402) 0.78 (648,667) 0.75 Options forfeited (281,611) 1.82 (241,876) 1.86 Options expired (30,000) 1.71 (20,712) 1.04 End of period 6,818,527 $ 1.45 5,484,250 $ 1.57The weighted average share price at the date of exercise for share options exercised during the first nine months of 2012was $1.02 (December 31, 2011: $1.84).For director and employee options outstanding at September 30, 2012, the range of exercise prices, the weightedaverage exercise price and the weighted average remaining contractual life are as follows: Options Outstanding Options Exercisable Weighted Weighted Weighted Average Weighted Average Average Exercise Average ExerciseOption Price Per Share Quantity Remaining Life Price Quantity Remaining Life Price$0.50 - $1.00 1,164,845 6.34 $0.73 798,179 6.15 $0.76$1.01 - $1.50 2,643,731 6.11 1.20 2,199,898 6.04 1.19$1.51 - $2.00 2,442,000 7.32 1.86 1,423,000 6.30 1.80$2.01 - $2.38 567,951 8.07 2.30 338,903 7.78 2.26 6,818,527 6.75 $1.45 4,759,980 6.26 $1.38The foregoing options have expiry dates ranging from November 29, 2012 to December 8, 2021.The weighted average fair value of stock options granted during the nine months ended September 30, 2012 was $1.08and was estimated using the Black-Scholes option pricing model with assumptions of a 5.46 year weighted averageexpected option life, a two to four percent expected forfeiture rate, 65 percent to 76 percent volatility (YTD Q3 2011 –68 percent to 74 percent) and interest rates ranging from 1.1 percent to 1.8 percent (YTD Q3 2011 – 2.2 percent to 3.1percent).For the period ended September 30, 2012, the compensation expense recognized in respect of stock options was $0.3million (Q3 2011 - $0.2 million). Year to date, the compensation expense recognized in respect of stock options was Page 49
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted$1.4 million (YTD Q3 2011 - $1.1 million). This compensation expense has been included in General andadministrative expenses in the Consolidated Statements of Income.The expected volatility used in the Black-Scholes option pricing model is based on the historical volatility of theCompany’s shares.The Company has the following cash-settled plan:Deferred Share Unit PlanThe Company offers a deferred share unit (“DSU”) plan to non-employee Directors. A DSU is a notional unit thatreflects the market value of a single common share of Claude. 50 percent of each Director’s annual retainer is paid inDSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the Company’sBoard of Directors. The redemption amount will be based upon the weighted average of the closing prices of thecommon shares of Claude on the TSX for the last 20 trading days prior to the redemption date multiplied by the numberof DSUs held by the Director.At September 30, 2012, total DSUs held by participating Directors was 283,791 (December 31, 2011 – nil).Year to date, the compensation expense recognized in respect of DSUs was $0.2 million (YTD 2011 - $nil). Thiscompensation expense has been included in General and administrative expenses in the Consolidated Statements ofIncome.Other:Schedule of Warrants OutstandingAt September 30, 2012, there were 2.7 million common share purchase warrants outstanding. Each common sharepurchase warrant entitles the holder to acquire one common share of the Company at prices determined at the time ofissue. The range of exercise prices and dates of expiration of the common share purchase warrants outstanding are asfollows: Number Number Outstanding at Outstanding at Price Expiry Date DEC 31, 2011 Granted Expired SEPT 30, 2012$ 1.60 May 22, 2013 1,693,200 - - 1,693,200$ 0.90 November 16, 2012 1,023,000 - - 1,023,000$ 1.77 April 7, 2012 - 319,545 319,545 -$ 1.77 April 12, 2012 - 10,257 10,257 -$ 3.17 March 31, 2012 - 79,980 79,980 -$ 4.44 March 31, 2012 - 443,812 443,812 - 2,716,200 853,594 853,594 2,716,200The warrants granted during 2012 relate to outstanding warrants assumed as part of the St. Eugene acquisitioncompleted in the first quarter.The range of exercise prices and dates of expiration of the common share purchase warrants outstanding at December31, 2011 were as follows: Number Number Outstanding at Outstanding at Price Expiry Date DEC 31, 2010 Exercised Expired DEC 31, 2011$ 1.60 May 22, 2013 1,809,500 116,300 - 1,693,200$ 0.83 April 9, 2011 139,321 139,321 - -$ 0.90 November 16, 2012 2,600,000 1,577,000 - 1,023,000$ 1.75 December 30, 2011 6,000,000 - 6,000,000 - 10,548,821 1,832,621 6,000,000 2,716,200 Page 50
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted12. Earnings Per Share:Basic earnings per share: Three Months Ended Nine Months Ended SEPT 30 SEPT 30 SEPT 30 SEPT 30 2012 2011 2012 2011 Net profit attributable to common shareholders $ 2,958 $ 2,643 $ 3,146 $ 9,656 Weighted average number of common shares outstanding (basic) 173,746 163,911 172,660 153,268 Basic net earnings per share $ 0.02 $ 0.02 $ 0.02 $ 0.06Diluted earnings per share: Three Months Ended Nine Months Ended SEPT 30 SEPT 30 SEPT 30 SEPT 30 2012 2011 2012 2011 Net profit attributable to common shareholders $ 2,958 $ 2,643 $ 3,146 $ 9,656 Weighted average number of common shares outstanding 173,746 163,911 172,660 153,268 Dilutive effect of warrants - 1,344 109 2,112 Dilutive effect of stock options 73 1,504 325 1,813 73 2,848 434 3,925 Weighted average number of common Shares outstanding (diluted) 173,819 166,759 173,094 157,193 Diluted net earnings per share $ 0.02 $ 0.02 $ 0.02 $ 0.0613. Financial Instruments:The Company is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities.The overall financial risk management program focuses on preservation of capital and protecting current and futureCompany assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financialmarkets.The Company’s Board of Directors has responsibility to ensure that an adequate financial risk management policy isestablished and to approve the policy.The Company’s Audit Committee oversees Management’s compliance with the Company’s financial risk managementpolicy, approves financial risk management programs, and receives and reviews reports on management compliancewith the policy.The types of risk exposures and the way in which such exposures are managed are as follows:Credit Risk – The Company’s credit risk is primarily attributable to its liquid financial assets including cash and cashequivalents, receivables, and commodity and currency instruments. The Company limits exposure to credit risk onliquid financial assets through maintaining its cash and cash equivalents and reclamation deposits with high-creditquality financial institutions. Sales of precious metals are to entities considered to be credit worthy, as evaluatedthrough the Company’s risk management program, which includes an evaluation of new and existing customers andquarterly monitoring.Liquidity Risk – The Company ensures that there is sufficient capital in order to meet short term business requirements,after taking into account cash flows from operations and the Company’s holdings of cash and cash equivalents. TheCompany believes operating cash flows will be sufficient to fund the continued exploration at Madsen and Amisk andongoing capital improvements at the Seabee properties for the next twelve months. The Company’s cash is invested in Page 51
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedbusiness accounts with quality financial institutions and is available on demand.Market Risk – Market risk is the potential for loss from adverse changes in the market value of financial instruments.The level of market risk that the Company is exposed to varies depending on the composition of its derivativeinstrument portfolio, as well as current and expected market conditions. The significant market risk exposures to whichthe Company is exposed are Foreign exchange risk, Commodity price and Interest rate risk. These are discussed furtherbelow:Foreign exchange risk – The results of the Company’s operations are subject to currency risks. The Company’srevenues from the production and sale of gold are denominated in U.S. dollars. However, the Company’s operatingexpenses are primarily incurred in Canadian dollars and its liabilities are primarily denominated in Canadian dollars.The Company is not exposed to material foreign exchange risk on its financial instruments.Interest rate risk – In respect to the Company’s financial assets, the interest rate risk mainly arises from the interest rateimpact on our cash and cash equivalents, reclamation deposits and debt. In respect to financial liabilities, one of theCompany’s demand loans carries a floating interest rate with the balance of Company debt at fixed interest rates. Whenpossible, the Company will fix its interest costs to avoid variations in cash flows. Due to the greater proportion of fixedrate debt, a one percent change in interest rates would not materially impact earnings or cash flows.Commodity price risk – The value of the Company’s mineral resources is related to the price of gold and the outlookfor this mineral. Gold and precious metal prices historically have fluctuated widely and are affected by numerousfactors outside of the Company’s control, including, but not limited to, industrial and retail demand, central banklending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply anddemand because of speculative hedging activities and certain other factors related specifically to gold. The profitabilityof the Company’s operations is highly correlated to the market price of gold. If the gold price declines below the costof production at the Company’s operations, for a prolonged period of time, it may not be economically feasible tocontinue production. The Company is not exposed to material commodity price risk on its financial instruments.For a $10 US$ movement in gold price per ounce, earnings and cash flow will have a corresponding movement of CDN$0.5 million, or $0.00 per share.Fair Value - The Company has various financial instruments comprised of cash and cash equivalents, receivables, shortand long-term investments, restricted promissory notes, reclamation deposits, demand loans, accounts payable andaccrued liabilities, long-term debt, and royalty obligations.For disclosure purposes, all financial instruments measured at fair value are categorized into one of three hierarchylevels, described below. Each level is based on the transparency of the inputs used to measure the fair values of assetsand liabilities: Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement ofFinancial Position, are as follows: SEPT 30 DEC 31 2012 2011 Carrying Estimated Carrying Estimated Value Fair Value Value Fair ValueLoans and receivables Cash and cash equivalents $56 $56 $2,529 $2,529 Short-term investments (1) - - 33,168 33,168 Page 52
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Accounts receivable (3) 536 536 2,714 2,714Available-for-sale financial assets Investments (1) 569 569 2,854 2,854Held-to-maturity Deposits for reclamation costs 2,237 2,237 2,237 2,237Other financial liabilities Demand loans 6,081 6,081 896 896 Accounts payable 7,914 7,914 5,737 5,737 Net royalty obligations 4,338 4,338 5,289 5,289 Debenture (1) 9,608 9,751 9,452 9,751 (1) Based on quoted market prices – Level 1 (2) Based on models with observable inputs – Level 2 (3) At September 30, 2012, there were no receivables that were past due or considered impaired.14. Capital Management:The Company’s objective when managing its capital is to safeguard its ability to continue as a going concern so that it canprovide adequate returns to shareholders and benefits to other stakeholders. The Company defines capital that it manages asthe aggregate of its equity attributable to owners of the Company, which is comprised of issued capital, contributed surplus,accumulated deficit and accumulated other comprehensive income (loss).The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and therisk characteristics of the underlying assets and the Company’s working capital requirements. In order to maintain or adjustthe capital structure, the Company (upon approval from its Board of Directors, as required) may issue new shares throughprivate placements, sell assets or incur debt. The Board of Directors reviews and approves any material transaction out of theordinary course of business, including proposals on acquisitions, major investments, as well as annual capital and operatingbudgets. The Company believes that this approach, given the relative size of the Company, is reasonable. There were nochanges in the Company’s approach to capital management during the nine months ended September 30, 2012. The Companyis not subject to externally imposed capital requirements.The Company utilizes a combination of short-term and long-term debt and equity to finance its operations and exploration. SEPT 30 DEC 31 Interest Maturity 2012 2011Demand loan 4.575% Nov/2012 $ 163 $ 896Demand loans Prime + 1.50% Jan – 5,918 - Apr/2015Debenture 12.00% May/2013 9,608 9,452Total debt $ 15,689 $ 10,348Shareholders’ equity 188,872 172,895Debt to equity 8.31 % 5.99 %The Company is bound by and has met all covenants, if any, on these credit facilities.15. Comparative Figures:Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentation. Page 53
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted1. Corporate Information:Claude Resources Inc. (“Claude” or the “Company”) is a company domiciled in Canada. The address of the Company’sregistered office is at 1500, 410 – 22nd Street East, Saskatoon, Saskatchewan, S7K 5T6. Its principal office is located at200, 224 – 4th Avenue South, Saskatoon, Saskatchewan, S7K 5M5.Claude Resources Inc. is a gold producer whose shares are listed on both the Toronto Stock Exchange (TSX-CRJ) andthe NYSE MKT (NYSE MKT-CGR). The Company is also engaged in the exploration and development of goldmineral reserves and mineral resources. The Company’s entire asset base is located in Canada. Its revenue generatingasset is the 100 percent owned Seabee Gold Operation, located in northern Saskatchewan. Claude also owns 100percent of the Amisk Gold Project in northeastern Saskatchewan and 100 percent of the Madsen Property in the RedLake gold camp of northwestern Ontario.2. Basis of Preparation:STATEMENT OF COMPLIANCEThese unaudited condensed consolidated interim financial statements for the period ended September 30, 2012 havebeen prepared in accordance with International Accounting Standard 34 (“IAS 34”), Interim Financial Reporting.These unaudited condensed consolidated interim financial statements do not include all of the information required forfull annual financial statements and should be read in conjunction with the Company’s 2011 annual financial statementsprepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the InternationalAccounting Standards Board (“IASB”).These unaudited condensed consolidated interim financial statements were authorized for issue by the Company’sBoard of Directors on November 7, 2012.BASIS OF MEASUREMENTThese unaudited condensed consolidated interim financial statements have been prepared on the historical cost basisexcept for derivative financial instruments and available-for-sale financial assets, which are measured at fair value.FUNCTIONAL CURRENCYThese unaudited condensed consolidated interim financial statements are presented in Canadian dollars, which is theCompany’s functional currency. All financial information presented in Canadian dollars has been rounded to thenearest thousand, except per share amounts or as otherwise noted.USE OF ESTIMATES AND JUDGMENTSThe preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity withIFRS requires Management to make judgments, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets andliabilities at the date of the consolidated financial statements. Significant judgments, estimates and assumptions arerelated to the useful lives and recoverability of mineral properties and deferred income tax assets, valuation ofinventory, provisions for decommissioning and reclamation, financial instruments and mineral reserves.Although these estimates are based on Management’s best knowledge of the amount, events or actions, actual resultsultimately may differ from those estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimates are revised and in any future periods affected.The accounting judgments, estimates and assumptions, and their application to accounting policies, that have the mostsignificant effect on the amounts recognized in the unaudited condensed consolidated interim financial statements of theCompany are consistent with those outlined in the Company’s annual consolidated financial statements and notesthereto for the year ended December 31, 2011. Page 40
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted3. Significant Accounting Policies:These unaudited condensed consolidated interim financial statements are prepared using accounting policies consistentwith the Company’s annual consolidated financial statements and notes thereto for the year ended December 31, 2011.The accounting policies utilized by Management for the Company and its wholly owned subsidiaries have been appliedconsistently to all periods presented in these unaudited condensed consolidated interim financial statements, unlessotherwise indicated.4. Accounting Standards:Future Changes in Accounting PoliciesFinancial InstrumentsIFRS 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 uses a single approach to determine whethera financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach inIFRS 9 is based on how an entity manages its financial instruments in the context of its business model and thecontractual cash flow characteristics of the financial assets. The new standard also requires a single impairment methodto be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on orafter January 1, 2015. The Company is currently evaluating the impact of IFRS 9 on its financial statements.Consolidated Financial StatementsIn May 2011, the IASB issued IFRS 10, Consolidated Financial Statements. This new standard defines the principle ofcontrol and establishes control as the basis for determining which entities are included in consolidated financialstatements. The principle of control is based on three criteria: power over the investee; exposure to variable returnsfrom involvement in the investee; and the ability of the investor to use its power to affect the amount of its returns. Thestandard requires control of an investee to be reassessed when the facts and circumstances indicate that there have beenchanges to one or more of the criteria for determining control. This new standard supersedes the requirements relatingto consolidated financial statements in IAS 27, Consolidated and Separate Financial Statements (as amended in 2009)and SIC-12, Consolidation – Special Purpose Entities. IFRS 10 is effective for the Company beginning on January 1,2013, with early adoption permitted. The Company does not expect the adoption of this standard to have a materialimpact on its financial statements.Joint ArrangementsIFRS 11, Joint Arrangements, was issued by the IASB in May 2011 and is effective for annual periods beginning on orafter January 1, 2013 with early adoption permitted. Under IFRS 11, joint arrangements are classified as either jointoperations or joint ventures. Parties to a joint operation retain the rights and obligations to individual assets andliabilities of the operation, while parties to a joint venture have rights to the net assets of the venture. Any arrangementwhich is not structured through a separate entity or is structured through a separate entity but such separation isineffective such that the parties to the arrangement have rights to the assets and obligations for the liabilities will beclassified as a joint operation. Joint operations shall be accounted for in a manner consistent with jointly controlledassets and operations whereby the Company’s contractual share of the arrangement’s assets, liabilities, revenues andexpenses are included in the consolidated financial statements. Any arrangement structured through a separate vehiclethat does effectively result in separation between the Company and the arrangement shall be classified as a joint ventureand accounted for using the equity method of accounting. Under the existing IFRS standard, the Company has theoption to account for any interests it has in joint ventures using proportionate consolidation or equity accounting. Theextent of the impact of adoption of IFRS 11 has not yet been determined by the Company.Disclosure of Interests in Other EntitiesIn May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities. This new standard requires enhanceddisclosures about an entity’s interest in subsidiaries, joint arrangements, associates and unconsolidated structuredentities. IFRS 12 contains new disclosure requirements for interests the Company has in subsidiaries, jointarrangements, associates and unconsolidated structured entities. Required disclosures aim to provide readers of thefinancial statements with information to evaluate the nature of and risks associated with the Company’s interests in Page 41
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedother entities and the effects of those interests on the Company’s financial statements. IFRS 12 is effective for theCompany beginning on January 1, 2013. It is expected that IFRS 12 will increase the current level of disclosure relatedto the Company’s interests in other entities upon adoption.Fair Value MeasurementIn May 2011, the IASB published IFRS 13, Fair Value Measurement, which is effective prospectively for annualperiods beginning on or after January 1, 2013. IFRS 13 replaces fair value measurement guidance contained inindividual IFRSs, providing a single source of fair value measurement guidance. The standard provides a framework formeasuring fair value and establishes new disclosure requirements to enable readers to assess the methods and inputsused to develop fair value measurements and for recurring valuations that are subject to measurement uncertainty, theeffect of those measurements on the financial statements. The Company intends to adopt IFRS 13 prospectively in itsfinancial statements for the annual period beginning on January 1, 2013. The extent of the impact of adoption of IFRS13 has not yet been determined.Presentation of Financial StatementsIn June 2011, the IASB issued an amendment to IAS 1, Presentation of Items of OCI: Amendments to IAS 1Presentation of Financial Statements. The amendments stipulate the presentation of net profit and OCI and also requirethe Company to group items within OCI based on whether the items may be subsequently reclassified to profit or loss.Amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. The Company does notexpect the adoption of the amendments to this standard to have a material impact on its financial statements.Investments in Associates and Joint VenturesIn May 2011, the IASB issued amendments to IAS 28, Investments in Associates and Joint Ventures, which areeffective for annual periods beginning on or after January 1, 2013 with early adoption permitted. Amendments to IAS28 provide additional guidance applicable to accounting for interests in joint ventures or associates when a portion of aninterest is classified as held for sale or when the Company ceases to have joint control or significant influence over anassociate or joint venture. When joint control or significant influence over an associate or joint venture ceases, theCompany will no longer be required to re-measure the investment at that date. When a portion of an interest in a jointventure or associate is classified as held for sale, the portion not classified as held for sale shall be accounted for usingthe equity method of accounting until the sale is completed at which time the interest is reassessed for prospectiveaccounting treatment. The Company does not expect the amendments to IAS 28 to have a material impact on thefinancial statements.Offsetting Financial Assets and LiabilitiesIn December 2011, the IASB published Offsetting Financial Assets and Financial Liabilities and issued new disclosurerequirements in IFRS 7 Financial Instruments: Disclosures. The amendments to IAS 32 clarify that an entity currentlyhas a legally enforceable right to set-off if that right is not contingent on a future event, and enforceable both in thenormal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. Theamendments to IAS 32 also clarify when a settlement mechanism provides for net settlement or gross settlement that isequivalent to net settlement. The amendments to IFRS 7 contain new disclosure requirements for financial assets andliabilities that are offset in the statement of financial position, or subject to master netting arrangements or similararrangements. The effective date for the amendments to IAS 32 is annual periods beginning on or after January 1,2014. The effective date for the amendments to IFRS 7 is annual periods beginning on or after January 1, 2013. Theseamendments are to be applied retrospectively. The Company does not expect the amendments to IAS 32 to have amaterial impact on the financial statements.5. Determination of Fair Values:A number of the Company’s accounting policies and disclosures require the determination of fair value, for bothfinancial and non-financial assets and liabilities. Fair values have been determined for measurement and or disclosurepurposes based on the methods described below. When applicable, further information about the assumptions made indetermining fair values is disclosed in the notes specific to that asset or liability. Page 42
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedInvestments in Equity SecuritiesThe fair value of the Company’s available-for-sale financial assets is determined by reference to their quoted closingbid price at the reporting date.DerivativesThe fair value of the Company’s forward exchange contracts are estimated based on appropriate price modelingcommonly used by market participants. Such modeling uses discounted cash flow analysis with observable marketinputs including future interest rates, implied volatilities and the credit risk of the Company or the counterparties asappropriate, with resulting valuations periodically validated through third-party or counterparty quotes.Share-based payment transactionsThe fair value of issuances under the Company’s employee share purchase plan, and stock option plan are measuredusing the Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exerciseprice of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expecteddue to publicly available information), weighted average expected life of the instruments (based on historicalexperience and general option holder behavior) and the risk-free interest rate (based on government bonds).6. Inventories:Details of the Company’s inventories are as follows: SEPT 30 DEC 31 2012 2011 Gold in-circuit (1) (2) $ 3,556 $ 3,128 Stockpiled ore (1) (2) 506 265 Materials and supplies (3) 17,705 9,973 Inventories $ 21,767 $ 13,366 (1) For the period ended September 30, 2012, depreciation and depletion of $1.1 million is included in the above noted balances (December 31, 2011 - $0.7 million). (2) For the year ended December 31, 2011, the Company wrote-down $0.5 million of gold inventory. (3) There was no write-down or reversal of write-down of materials and supplies inventory for the period ended September 30, 2012. For the year ended December 31, 2011, the Company wrote-down $0.2 million of materials and supplies inventory.7. Investments: SEPT 30 DEC 31 2012 2011 Available-for-sale securities, beginning of year $ 2,854 $ 4,328 Disposition of available-for-sale securities (1,713) (197) Acquisition of available-for-sale securities (1) 146 1,131 Permanent write-down of available-for-sale securities (174) (74) Unrealized gain (loss) on available-for-sale securities (544) (2,334) Available-for-sale securities, end of period $ 569 $ 2,854 (1) The acquisition in 2012 occurred during the first quarter and related to shares in a public company received as part of the Company’s acquisition of St. Eugene Mining. The acquisition in 2011 related to shares in a public company received as settlement for Claude’s disposition of a mineral property interest.At September 30, 2012, the Company reviewed its portfolio of available-for-sale securities in order to assess whetherthere was objective evidence of impairment. Factors considered in the Company’s assessment included the length oftime and extent which to fair value was below cost and current conditions specific to the investment. Utilizing these Page 43
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedfactors, the Company determined that certain of its available-for-sale securities had objective evidence of impairmentand were written down.By holding these available-for-sale securities, the Company is exposed to various risk factors including market pricerisk and liquidity risk (Note 13).8. Decommissioning and reclamation:The Company’s decommissioning and reclamation costs consists of reclamation and closure costs. Mineral propertyobligations were determined using discount rates ranging from 1.73 to 3.35 percent. Expected undiscounted paymentsof future obligations are $11.1 million over the next 7 to 16 years. Year to date, an accretion expense component of$0.1 million has been charged in the period ending September 30, 2012, augmented by revisions made to thedecommissioning and reclamation costs, resulting in an increase in the overall carrying amount of the provision.Changes to the provision during the period ended September 30, 2012 are as follows: SEPT 30 DEC 31 2012 2011 Decommissioning and reclamation provision, beginning of year $ 9,713 $ 4,810 Accretion 134 166 Revisions due to change in estimates and discount rate 1 4,737 Decommissioning and reclamation provision, end of period $ 9,848 $ 9,713As required by regulatory authorities, the Company has provided letters of credit as security for reclamation related tothe Madsen and Seabee properties in the amounts of $0.7 million (December 31, 2011 - $0.7 million) and $1.5 million(December 31, 2011 - $1.5 million), respectively. As security for these letters of credit, the Company has providedinvestment certificates in the amount of $2.2 million (December 31, 2011 - $2.2 million).9. Net Royalty Obligation:(a) Royalty AgreementsDuring each of 2004, 2005, 2006 and 2007, the Company entered into separate Royalty Agreements (“Agreements”)whereby it sold a basic royalty on a portion of the gold production at its Seabee Gold Operation. The Companyreceived cash consideration consisting of royalty income, indemnity fee income and interest income.Under the terms of the Agreements, the Company is required to make royalty payments at fixed amounts per ounce ofgold produced; these amounts vary over the term of the respective Agreements. A portion of the cash received at theinception of the respective agreements was placed with a financial institution; in return, the Company received arestricted promissory note. Interest earned from the restricted promissory notes and a portion of the principal must beused to fund the expected basic royalty payments during the first ten years of each agreement. Over the life of theroyalty agreements, interest earned and principal from the restricted promissory notes will be sufficient to fund theexpected basic royalty payments.The Company and all of the counterparties have the legal right of offset and the intention to settle on a net basis. Assuch, the Company has presented these transactions on a net basis on the Statements of Financial Position. 2004 2005 2006 2007 Note Agreement Agreement Agreement Agreement TotalRestricted PromissoryNotes Principal Balance (1) (b) 6,863 14,508 36,684 26,055 84,110 Interest receivable (1) 309 542 1,600 1,136 3,587 Interest Rate 6 percent 6 percent 7 percent 7 percent Maturity DEC 10, FEB 15, FEB 15, FEB 15, 2014 2015 2016 2017 Page 44
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted 2004 2005 2006 2007 Note Agreement Agreement Agreement Agreement TotalRoyalty Payments Royalty Rate per ounce $13.29 to $23.15 to $61.59 to $35.34 to of gold produced (2) $24.53 $112.45 $198.95 $147.05 Royalty payable (b) 228 486 1,591 1,122 3,427 (current) (1) Royalty obligation (b) 7,043 14,791 36,745 26,194 84,773 payable (long-term) (1)Net Profit Interest (c) - - - - - Applicable years 2010-2014 2011-2015 2012-2016 2013-2017 Percent 2.50, 3.00 or 1.00, 2.00 or 3.75, 4.00 or 3.50, 3.70 or 4.00 3.00 4.25 3.90 Price of gold thresholds $800, $900 $875, $975, $1,250, or $1,200 $1,075 or $1,175 or $1,500 or $1,275 $1,375 $1,675 (1) At September 30, 2012. (2) Over the remaining life of the respective agreements.(b) Net Royalty ObligationThe following schedule outlines the different components of the transaction that are presented net on the Company’sconsolidated Statements of Financial Position: SEPT 30 DEC 31 2012 2011 Current portion Assets Interest receivable on Restricted promissory notes $ 3,587 $ 4,953 Liabilities Current portion of deferred revenue 1,037 996 Interest payable on royalty obligations 3,427 4,811 $ 4,464 $ 5,807 Net royalty obligation (current) (877) (854) Long-term portion Assets Restricted promissory notes $ 84,110 $ 84,037 Liabilities Deferred revenue 2,798 3,586 Royalty obligation 84,773 84,886 $ 87,571 $ 88,472 Net royalty obligation (long-term) (3,461) (4,435) Net royalty obligation $ (4,338) $ (5,289) Page 45
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedThe interest income and the indemnity fees received by the Company are being amortized into income over theprepayment period and the life of the respective agreements. The interest income and the indemnity fees are nettedagainst interest expense and are reflected in “Financing expense” on the consolidated statement of income.(c) NPI PaymentIn addition to the royalty, the Company granted a net profit interest (“NPI”) of varying percentages, payable only ifgold prices exceed a pre-determined threshold. Prior to any NPI payment, the Company is entitled to first recover theNPI expenditures (including capital expenditures), working capital, operating losses, interest charges and assetretirement obligations relating to the production of ore at the Seabee Operation. These expenditures are calculated on acumulative basis from the commencement of the individual agreements. At September 30, 2012, the cumulative carryforward amounts remained in a deficiency position under each of the agreements and no payments are expected during2012 or 2013.(d) Call and PutUnder certain circumstances, a 100 percent owned subsidiary of Claude will have the right to purchase (“Call”) theequity of the holder of the royalties or right to receive the royalties at an amount no greater than the fair market valuethereof at the time of the Call. The Call price will be paid from the balance owing to the Company under thepromissory notes. Under certain circumstances, the purchaser of the royalties will have the right to sell (“Put”) theirinterest in the royalty to the Company at an amount no greater than the fair market value thereof at the time of the Put.However, such right is subject to the subsidiary of Claude’s pre-emptive right to exercise the Call in advance of any Putbeing exercised and completed.10. Loans and Borrowings:This note provides information about the contractual terms of the Company’s interest-bearing loans and borrowings, which aremeasured at amortized cost. For more information about the Company’s exposure to interest rate and liquidity risk, see Note13. SEPT 30 DEC 31 2012 2011 Current liabilities Demand loans (a) $ 6,081 $ 896 Current portion of finance lease liabilities (b) 1,633 2,119 Debenture (c) 9,608 - $ 17,322 $ 3,015 Non-current liabilities Finance lease liabilities (b) $ 648 $ 1,786 Debenture (c) - 9,452 $ 648 $ 11,238(a) Demand LoansTerms and conditions of the Company’s outstanding demand loans are as follows: SEPT 30 DEC 31 2012 2011 Demand loan, repayable in monthly payments of $ 163 $ 896 $83,371 including interest at 4.575 percent, due November 2012 Demand loans, repayable in consecutive monthly 5,918 - blended payments of $214,893 including interest at prime plus 1.50 percent, due between January and April 2015 Page 46
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 $ 6,081 $ 896The demand loans are secured by a general security agreement covering all assets of the Company.(b) Finance Lease LiabilitiesObligations under finance leases bear interest between 5.4 percent and 8.0 percent per annum, are due from 2013 to2014 and are secured by the leased equipment. The estimated principal repayments on the leases are as follows: 2012 -$1,633; and 2013 - $648. Present Value of Interest Future Value of Minimum Lease Minimum Lease Payments Payments SEPT 30 SEPT 30 SEPT 30 2012 2012 2012 Less than one year $ 1,633 $ 80 $ 1,713 Between one and five years 648 9 657 More than five years - - - $ 2,281 $ 89 $ 2,370 Present Value of Interest Future Value of Minimum Lease Minimum Lease Payments Payments DEC 31 DEC 31 DEC 31 2011 2011 2011 Less than one year $ 2,119 $ 154 $ 2,273 Between one and five years 1,786 58 1,844 More than five years - - - $ 3,905 $ 212 $ 4,117The Company’s finance leases are secured by a general security agreement.(c) DebentureThe debenture bears a 12 percent annual interest rate, is due May 23, 2013 and requires monthly interest only payments. Uponentering into the debenture indenture agreement, debenture holders received warrants in the amount of 10 percent of thedebenture purchase (Note 11). Each warrant entitles the holder to acquire one common share of the Company at an exerciseprice of $1.60 per common share until May 23, 2013. The value of the warrants associated with the debenture on the date ofissuance was $0.6 million.During 2009, the Company repaid $8.3 million of the outstanding debentures, representing principal plus unpaid interestthereon up to the repayment date. During 2011, the Company repaid $0.1 million of the outstanding debentures, representingprincipal plus unpaid interest thereon up to the repayment date. A total of $9.8 million in face value of debentures remainoutstanding at September 30, 2012.The balance of the debentures outstanding is amortized using the effective interest rate method at an effective rate of 14.7percent over the remaining term of the debentures. SEPT 30 DEC 31 2012 2011 Debenture payable, beginning of year $ 9,452 $ 9,344 Amortized cost of debenture redemption - (87) Page 47
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 Amortization of debt issue costs 156 195 Debenture payable, end of period $ 9,608 $ 9,452 Debenture payable, current portion $ 9,608 $ - Debenture payable, long-term portion $ - $ 9,452As at September 30, 2012, the Company’s outstanding debentures are due in less than one year. As such, this balancehas been classified as a current liability.The debentures are secured by a general security agreement covering all of the Companys assets, except those subordinated tobank debt.(d) OtherThe Company has a $5.0 million operating line of credit which bears interest at prime plus 1.125 percent; the prime rateat September 30, 2012 was 3 percent. These funds are available for general corporate purposes.11. Share Capital:AUTHORIZEDThe authorized share capital of the Company consists of an unlimited number of common shares and two classes ofunlimited preferred shares issuable in series.The first preferred shares are issuable in series and rank ahead of the second preferred shares and the common shares inrespect of dividend payment, dissolution or any other distribution of assets. The other rights, privileges, restrictions andconditions attached to each series of the first preferred shares are fixed by the Board of Directors at the time of creationof such series.The second preferred shares are issuable in series and rank ahead of the common shares in respect of dividend payment,dissolution or any other distribution of assets. The other rights, privileges, restrictions and conditions attached to eachseries of the second preferred shares are fixed by the Board of Directors at the time of creation of such series.The common shares of the Company are entitled to vote at all meetings of the shareholders and, upon dissolution or anyother distribution of assets, to receive such assets of the Company as are distributable to the holders of the commonshares.Issue of Shares:During the first nine months of 2012, the Company issued 338,676 and 75,402 common shares pursuant to theCompany’s Employee Share Purchase Plan and the Company’s Stock Option plan, respectively. The Company alsoissued an additional 8,701,255 common shares pursuant to a Plan of Arrangement whereby Claude acquired all of theoutstanding common shares of St. Eugene Mining Corporation Limited that it did not already own.The Company has the following equity-settled plans:Employee Share Purchase Plan (“ESPP”)The ESPP was established to encourage employees to purchase Company common shares. Under the plan, eligible employeesmay contribute up to five percent of their basic annual salary and the Company shall contribute common shares in an amountequal to 50 percent of the employee’s contribution. Shares of the Company are issued to employees based on a weighted averagemarket price over a specific period. The maximum number of common shares of the Company available for issue under thisESPP is five percent of the Company’s common shares outstanding.During the third quarter of 2012, compensation expense recognized in respect of the ESPP was $0.07 million (Q3 2011 - Page 48
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted$0.04 million). Year to date, the compensation expense recognized in respect of the ESPP was $0.2 million (YTD 2011 - $0.1million). This compensation expense has been included in General and administrative expense in the Consolidated Statementsof Income.Stock Option PlanThe Company has established a stock option plan under which options may be granted to directors, officers and keyemployees. The maximum number of common shares available for option under the stock option plan is nine percent of theCompany’s common shares outstanding. Options granted have an exercise price of the Company’s prior day’s closing pricequoted on the TSX for the common shares Claude. All options are settled by physical delivery of shares. Vesting periods ofoptions granted under the Company’s stock option plan vary on a grant by grant basis, at the discretion of the Company’sBoard of Directors. Grants to Employees have a term to expiry of 7 to 10 years and typically have a vesting term of 3 to 5years. Grants to Directors have a term to expiry of 7 to 10 years and vest immediately.Options outstanding under this plan at September 30, 2012 and December 31, 2011 and their weighted average exerciseprices are as follows: Weighted Weighted SEPT 30 Average DEC 31 Average 2012 Exercise 2011 Exercise Options Price Options Price Beginning of period 5,484,250 $ 1.57 3,916,737 $ 1.15 Options granted 1,721,290 1.08 2,478,768 2.06 Options exercised (75,402) 0.78 (648,667) 0.75 Options forfeited (281,611) 1.82 (241,876) 1.86 Options expired (30,000) 1.71 (20,712) 1.04 End of period 6,818,527 $ 1.45 5,484,250 $ 1.57The weighted average share price at the date of exercise for share options exercised during the first nine months of 2012was $1.02 (December 31, 2011: $1.84).For director and employee options outstanding at September 30, 2012, the range of exercise prices, the weightedaverage exercise price and the weighted average remaining contractual life are as follows: Options Outstanding Options Exercisable Weighted Weighted Weighted Average Weighted Average Average Exercise Average ExerciseOption Price Per Share Quantity Remaining Life Price Quantity Remaining Life Price$0.50 - $1.00 1,164,845 6.34 $0.73 798,179 6.15 $0.76$1.01 - $1.50 2,643,731 6.11 1.20 2,199,898 6.04 1.19$1.51 - $2.00 2,442,000 7.32 1.86 1,423,000 6.30 1.80$2.01 - $2.38 567,951 8.07 2.30 338,903 7.78 2.26 6,818,527 6.75 $1.45 4,759,980 6.26 $1.38The foregoing options have expiry dates ranging from November 29, 2012 to December 8, 2021.The weighted average fair value of stock options granted during the nine months ended September 30, 2012 was $1.08and was estimated using the Black-Scholes option pricing model with assumptions of a 5.46 year weighted averageexpected option life, a two to four percent expected forfeiture rate, 65 percent to 76 percent volatility (YTD Q3 2011 –68 percent to 74 percent) and interest rates ranging from 1.1 percent to 1.8 percent (YTD Q3 2011 – 2.2 percent to 3.1percent).For the period ended September 30, 2012, the compensation expense recognized in respect of stock options was $0.3million (Q3 2011 - $0.2 million). Year to date, the compensation expense recognized in respect of stock options was Page 49
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted$1.4 million (YTD Q3 2011 - $1.1 million). This compensation expense has been included in General andadministrative expenses in the Consolidated Statements of Income.The expected volatility used in the Black-Scholes option pricing model is based on the historical volatility of theCompany’s shares.The Company has the following cash-settled plan:Deferred Share Unit PlanThe Company offers a deferred share unit (“DSU”) plan to non-employee Directors. A DSU is a notional unit thatreflects the market value of a single common share of Claude. 50 percent of each Director’s annual retainer is paid inDSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the Company’sBoard of Directors. The redemption amount will be based upon the weighted average of the closing prices of thecommon shares of Claude on the TSX for the last 20 trading days prior to the redemption date multiplied by the numberof DSUs held by the Director.At September 30, 2012, total DSUs held by participating Directors was 283,791 (December 31, 2011 – nil).Year to date, the compensation expense recognized in respect of DSUs was $0.2 million (YTD 2011 - $nil). Thiscompensation expense has been included in General and administrative expenses in the Consolidated Statements ofIncome.Other:Schedule of Warrants OutstandingAt September 30, 2012, there were 2.7 million common share purchase warrants outstanding. Each common sharepurchase warrant entitles the holder to acquire one common share of the Company at prices determined at the time ofissue. The range of exercise prices and dates of expiration of the common share purchase warrants outstanding are asfollows: Number Number Outstanding at Outstanding at Price Expiry Date DEC 31, 2011 Granted Expired SEPT 30, 2012$ 1.60 May 22, 2013 1,693,200 - - 1,693,200$ 0.90 November 16, 2012 1,023,000 - - 1,023,000$ 1.77 April 7, 2012 - 319,545 319,545 -$ 1.77 April 12, 2012 - 10,257 10,257 -$ 3.17 March 31, 2012 - 79,980 79,980 -$ 4.44 March 31, 2012 - 443,812 443,812 - 2,716,200 853,594 853,594 2,716,200The warrants granted during 2012 relate to outstanding warrants assumed as part of the St. Eugene acquisitioncompleted in the first quarter.The range of exercise prices and dates of expiration of the common share purchase warrants outstanding at December31, 2011 were as follows: Number Number Outstanding at Outstanding at Price Expiry Date DEC 31, 2010 Exercised Expired DEC 31, 2011$ 1.60 May 22, 2013 1,809,500 116,300 - 1,693,200$ 0.83 April 9, 2011 139,321 139,321 - -$ 0.90 November 16, 2012 2,600,000 1,577,000 - 1,023,000$ 1.75 December 30, 2011 6,000,000 - 6,000,000 - 10,548,821 1,832,621 6,000,000 2,716,200 Page 50
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted12. Earnings Per Share:Basic earnings per share: Three Months Ended Nine Months Ended SEPT 30 SEPT 30 SEPT 30 SEPT 30 2012 2011 2012 2011 Net profit attributable to common shareholders $ 2,958 $ 2,643 $ 3,146 $ 9,656 Weighted average number of common shares outstanding (basic) 173,746 163,911 172,660 153,268 Basic net earnings per share $ 0.02 $ 0.02 $ 0.02 $ 0.06Diluted earnings per share: Three Months Ended Nine Months Ended SEPT 30 SEPT 30 SEPT 30 SEPT 30 2012 2011 2012 2011 Net profit attributable to common shareholders $ 2,958 $ 2,643 $ 3,146 $ 9,656 Weighted average number of common shares outstanding 173,746 163,911 172,660 153,268 Dilutive effect of warrants - 1,344 109 2,112 Dilutive effect of stock options 73 1,504 325 1,813 73 2,848 434 3,925 Weighted average number of common Shares outstanding (diluted) 173,819 166,759 173,094 157,193 Diluted net earnings per share $ 0.02 $ 0.02 $ 0.02 $ 0.0613. Financial Instruments:The Company is exposed in varying degrees to a variety of financial instrument related risks by virtue of its activities.The overall financial risk management program focuses on preservation of capital and protecting current and futureCompany assets and cash flows by reducing exposure to risks posed by the uncertainties and volatilities of financialmarkets.The Company’s Board of Directors has responsibility to ensure that an adequate financial risk management policy isestablished and to approve the policy.The Company’s Audit Committee oversees Management’s compliance with the Company’s financial risk managementpolicy, approves financial risk management programs, and receives and reviews reports on management compliancewith the policy.The types of risk exposures and the way in which such exposures are managed are as follows:Credit Risk – The Company’s credit risk is primarily attributable to its liquid financial assets including cash and cashequivalents, receivables, and commodity and currency instruments. The Company limits exposure to credit risk onliquid financial assets through maintaining its cash and cash equivalents and reclamation deposits with high-creditquality financial institutions. Sales of precious metals are to entities considered to be credit worthy, as evaluatedthrough the Company’s risk management program, which includes an evaluation of new and existing customers andquarterly monitoring.Liquidity Risk – The Company ensures that there is sufficient capital in order to meet short term business requirements,after taking into account cash flows from operations and the Company’s holdings of cash and cash equivalents. TheCompany believes operating cash flows will be sufficient to fund the continued exploration at Madsen and Amisk andongoing capital improvements at the Seabee properties for the next twelve months. The Company’s cash is invested in Page 51
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise notedbusiness accounts with quality financial institutions and is available on demand.Market Risk – Market risk is the potential for loss from adverse changes in the market value of financial instruments.The level of market risk that the Company is exposed to varies depending on the composition of its derivativeinstrument portfolio, as well as current and expected market conditions. The significant market risk exposures to whichthe Company is exposed are Foreign exchange risk, Commodity price and Interest rate risk. These are discussed furtherbelow:Foreign exchange risk – The results of the Company’s operations are subject to currency risks. The Company’srevenues from the production and sale of gold are denominated in U.S. dollars. However, the Company’s operatingexpenses are primarily incurred in Canadian dollars and its liabilities are primarily denominated in Canadian dollars.The Company is not exposed to material foreign exchange risk on its financial instruments.Interest rate risk – In respect to the Company’s financial assets, the interest rate risk mainly arises from the interest rateimpact on our cash and cash equivalents, reclamation deposits and debt. In respect to financial liabilities, one of theCompany’s demand loans carries a floating interest rate with the balance of Company debt at fixed interest rates. Whenpossible, the Company will fix its interest costs to avoid variations in cash flows. Due to the greater proportion of fixedrate debt, a one percent change in interest rates would not materially impact earnings or cash flows.Commodity price risk – The value of the Company’s mineral resources is related to the price of gold and the outlookfor this mineral. Gold and precious metal prices historically have fluctuated widely and are affected by numerousfactors outside of the Company’s control, including, but not limited to, industrial and retail demand, central banklending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply anddemand because of speculative hedging activities and certain other factors related specifically to gold. The profitabilityof the Company’s operations is highly correlated to the market price of gold. If the gold price declines below the costof production at the Company’s operations, for a prolonged period of time, it may not be economically feasible tocontinue production. The Company is not exposed to material commodity price risk on its financial instruments.For a $10 US$ movement in gold price per ounce, earnings and cash flow will have a corresponding movement of CDN$0.5 million, or $0.00 per share.Fair Value - The Company has various financial instruments comprised of cash and cash equivalents, receivables, shortand long-term investments, restricted promissory notes, reclamation deposits, demand loans, accounts payable andaccrued liabilities, long-term debt, and royalty obligations.For disclosure purposes, all financial instruments measured at fair value are categorized into one of three hierarchylevels, described below. Each level is based on the transparency of the inputs used to measure the fair values of assetsand liabilities: Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement ofFinancial Position, are as follows: SEPT 30 DEC 31 2012 2011 Carrying Estimated Carrying Estimated Value Fair Value Value Fair ValueLoans and receivables Cash and cash equivalents $56 $56 $2,529 $2,529 Short-term investments (1) - - 33,168 33,168 Page 52
    • Claude Resources Inc.Notes to the Condensed Consolidated Interim Financial StatementsFor the nine months ended September 30, 2012 and 2011Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted SEPT 30 DEC 31 2012 2011 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Accounts receivable (3) 536 536 2,714 2,714Available-for-sale financial assets Investments (1) 569 569 2,854 2,854Held-to-maturity Deposits for reclamation costs 2,237 2,237 2,237 2,237Other financial liabilities Demand loans 6,081 6,081 896 896 Accounts payable 7,914 7,914 5,737 5,737 Net royalty obligations 4,338 4,338 5,289 5,289 Debenture (1) 9,608 9,751 9,452 9,751 (1) Based on quoted market prices – Level 1 (2) Based on models with observable inputs – Level 2 (3) At September 30, 2012, there were no receivables that were past due or considered impaired.14. Capital Management:The Company’s objective when managing its capital is to safeguard its ability to continue as a going concern so that it canprovide adequate returns to shareholders and benefits to other stakeholders. The Company defines capital that it manages asthe aggregate of its equity attributable to owners of the Company, which is comprised of issued capital, contributed surplus,accumulated deficit and accumulated other comprehensive income (loss).The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and therisk characteristics of the underlying assets and the Company’s working capital requirements. In order to maintain or adjustthe capital structure, the Company (upon approval from its Board of Directors, as required) may issue new shares throughprivate placements, sell assets or incur debt. The Board of Directors reviews and approves any material transaction out of theordinary course of business, including proposals on acquisitions, major investments, as well as annual capital and operatingbudgets. The Company believes that this approach, given the relative size of the Company, is reasonable. There were nochanges in the Company’s approach to capital management during the nine months ended September 30, 2012. The Companyis not subject to externally imposed capital requirements.The Company utilizes a combination of short-term and long-term debt and equity to finance its operations and exploration. SEPT 30 DEC 31 Interest Maturity 2012 2011Demand loan 4.575% Nov/2012 $ 163 $ 896Demand loans Prime + 1.50% Jan – 5,918 - Apr/2015Debenture 12.00% May/2013 9,608 9,452Total debt $ 15,689 $ 10,348Shareholders’ equity 188,872 172,895Debt to equity 8.31 % 5.99 %The Company is bound by and has met all covenants, if any, on these credit facilities.15. Comparative Figures:Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentation. Page 53