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KIRKLAND LAKE GOLD INC.

P.O. Box 370

Kirkland Lake, ON P2N 3J7

July 21, 2009                                                                                                       Symbol - TSX & AIM: KGI

FOURTH QUARTER NET INCOME OF $2.3 MILLION and YEAR END RESULTS, FISCAL 2009 

Kirkland Lake Gold Inc. ('Kirkland Lake' or the 'Company'), an operating and exploration gold mining company located in Ontario, Canada, has announced its results for the financial year ended April 30^th, 2009.   

Operational highlights 

• A strong fourth quarter saw gold production increase 102% to 20,411 ounces compared to the previous quarter (Q3/09: 10,081) and a 45% increase compared to Q4/08 (14,089 ounces), due to increased production from the South Mine Complex (SMC). 
• As a consequence of the decision to fast track the SMC into production, capital development increased by 93% to 5,960 feet (2008: 3,083 feet). This trend will continue in fiscal 2010 with a further 10,000 feet of development planned for the SMC.
• During fiscal 2009 and in advance of the anticipated increase in development and mining activity in the SMC, the Company invested $5.3 million in plant and machinery. 
• The exploration programme completed 139,000 feet of exploration drilling during the year on the SMC. Proven and probable reserves and measured and indicated resources in the SMC both increased by 28% and now stand at 1.41 million tons at a grade of 0.71 ounces of gold per ton (opt) for a total of 998,000. Inferred resources increased 6% to 704,000 tons at a grade of 0.84 opt or 590,000 ounces. The number of feet drilled was 16% lower than budgeted in order to expedite capital development required to increase ventilation. 

Harry Dobson, Kirkland Lake's Chairman, commented;

'Fiscal 2009's pivotal highlight was the hiring of new production leadership. Over 150 miners and underground workers were hired and put to work in the last two months of fiscal 2009 achieving successive monthly gold production records of 7377 ounces in March and 8916 ounces in April as mining commenced on the South Mine Complex. Expansion of the underground work force will continue over the next fiscal year and will ensure the Company is well positioned for a successful 2010 fiscal year in terms of target production of 90,000 to 100,000 ounces of gold, increased exploration and resulting stronger financial performance.' 

Financial highlights 

• Ounces sold in the fourth quarter increased 80% to 16,045 generating $18.2 million in revenues, $2.3 million of net income and $2.2 million in operating cash flow. The ounces produced in the fourth quarter and not sold will be sold in the first quarter of Fiscal 2010.  
• Gold revenues achieved during the fiscal year were $43.5 million, 5% higher than previous year (2008: $41.4 million), 
• Operating expenses increased to $47.5 million (2008: $39.6 million), an increase of 18%, primarily due to increases in mining costs, due to doubling of company mining personnel ($5.0 million), and materials ($2.4 million) required for the expanded mining plan in the main break and SMC. At the same time, contractor personnel utilized in mining were reduced from 50 to none.
• The number of employees rose 83% to 400 compared to fiscal 2008. This was due to a larger work force needed in order to expedite development and production from the SMC and to the replacement of contractors. The Company received the Angus Campbell Award for Safety for the second consecutive year, and also received the MASHA Award of Excellence for Safety in 2008.
• For the fiscal year the Company incurred a net loss for the year of $10,483,055 or $0.19 per share, which compares to a net loss of $3,345,980 or $0.06 per share in fiscal 2008
• Cash resources (including short term investments) as at April 30, 2009 were $25.4 million and are expected to be sufficient to fund the Company's planned exploration and development activities for the next 12 months. As at July 17, 2009, the Company had cash resources of $30.4 million.

'Further to the Company's news release of July 7^th where it reported an obstruction in the paste fill bore hole, a 3 inch diamond drill hole has successfully been drilled through the plug and the hole is now free draining,' said Brian Hinchcliffe, Company President. 'Additional steps will be taken to remove the remnants of the plug and return the borehole to operating condition which if all goes well the hole could be cleared, back in operating condition by the end of July but we are still evaluating the financial impact of this brief interruption to production and will update the market in due course. ' 

SELECTED FINANCIAL INFORMATION & REVIEW OF OVERALL PERFORMANCE

Financial Highlights (All amounts in 000s of Canadian Dollars, except shares and per share figures)	Year ended April 30,
	2009	2008	2007
Gold Sales (ounces) Average Price (per ounce)	43,545 $1,000	52,019 $797	50,890 $720
Revenue Operating Expenses Exploration Expenditure Net Income (loss) Per share (basic and diluted) Cash Flow from (used in) operating activities Cash Flow from financing activities Cash Flow (used in) investing activities Net increase (decrease) in cash Cash at end of period	43,542 47,536 3,652 (10,483) (0.19) (5,138) 13,079 (21,737) (13,796) 1,806	41,436 39,609   3,877 (3,346)   (0.06)   2,158 12,341 (25,171)  (10,672) 15,603	36,656 38,459 4,860 (8,383)   (0.16) (7,051) 31,329 (7,415) 16,863 26,275
Total Assets Total Liabilities Working Capital	100,896   14,127   26,358	91,521 10,053 30,056	80,769   9,143 26,216
Weighted average number of shares outstanding Dividends per share	56,349,826 NIL	55,470,107 NIL	52,947,013 NIL

For further information, please contact:  

Brian Hinchcliffe President Phone: 1 705 567 5208 Fax: 1 705 568 6444  E-mail: bhinchcliffe@klgold.com	Scott Koyich Investor Relations Phone: 1 403 215 5979 E-mail: info@klgold.com
Chelsea Hayes / Klara Kaczmarek Pelham Public Relations Phone: +44 (0) 20 7377 1524     E-mail: chelsea.hayes@pelhampr.com Email:  klara.kaczmarek@pelhampr.com	Katherine Roe / Ashton Clanfield NOMAD: Panmure Gordon (UK) Ltd. Phone: +44 20 7459 5744 Email: katherine.roe@panmure.com
Guy Wilkes Ocean Equities Ltd. Phone: +44 207 786 4370 E-mail:  guy.wilkes@oceanequities.co.uk
Website - www.klgold.com

About Kirkland Lake Gold Inc.

Kirkland Lake Gold Inc. is an operating and exploration gold mining company located in Ontario, Canada. Kirkland Lake Gold Inc. which includes the Macassa Mine and the 1,500 ton per day mill along with four former producing gold properties - Kirkland Lake, Teck-Hughes, Lake Shore and Wright Hargreaves. These properties, which have historically produced some 22 million ounces of gold, extend over seven kilometres between the Macassa Mine on the west and Wright Hargreaves on the east and, for the first time, are being developed and explored under one owner. This camp is located in the Southern Abitibi Greenstone Belt of Kirkland Lake, Ontario, Canada. The Company's corporate goal is to expand its gold reserves and reduce its operating costs to become a profitable gold producer. 

The Company's common shares trade on the TSX (Toronto Stock Exchange) and on the AIM (Alternative Investment Market) of the London Stock Exchange. 

The Company's senior management and Board of Directors have extensive experience in the natural resource and mining sectors that include exploration, mining and marketing, as well as experience in the legal and corporate finance areas.

Neither the Toronto Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed and neither accepts responsibility for the adequacy or accuracy of this news release.

Cautionary Note Regarding Forward Looking Statements

This Press Release may contain statements which constitute 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995 of the United States of America, including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business activities and operating performance of the Company. The words 'may', 'would', 'could', 'will', 'intend', 'plan', 'anticipate', 'believe', 'estimate', 'expect' and similar expressions, as they relate to the Company, or its management, are intended to identify such forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future business activities or performance and involve risks and uncertainties, and that the Company's future business activities may differ materially from those in the forward-looking statements as a result of various factors. Such risks, uncertainties and factors are described in the Company's periodic filings with the Securities and Exchange Commission, including the Company's annual report on Form 20-F and current report on Form 6-K, which may be viewed on EDGAR at www.sec.gov, and its periodic filings with the Canadian securities regulatory authorities, including the Company's Annual Information Form and quarterly and annual Management's Discussion & Analysis, which may be viewed on SEDAR at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements.

  

KIRKLAND LAKE GOLD INC.

FINANCIAL STATEMENTS

APRIL 30, 2009 AND 2008

(EXPRESSED IN CANADIAN DOLLARS)

  

PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Chartered Accountants
North American Centre
5700 Yonge Street, Suite 1900
North York, Ontario

Canada  M2M 4K7

Telephone: +1 416 218 1500

Facsimile: +1 416 218 1499

July 17, 2009

Auditors' Report

To the Shareholders of 

Kirkland Lake Gold Inc.

We have audited the balance sheets of Kirkland Lake Gold Inc. as at April 30, 2009 and 2008 and the statements of operations, comprehensive loss and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

(Signed) 'PricewaterhouseCoopers LLP'

Chartered Accountants, Licensed Public Accountants

  KIRKLAND LAKE GOLD INC.

BALANCE SHEETS

AS AT APRIL 30, 2009 AND 2008

(EXPRESSED IN CANADIAN DOLLARS)

	2009	2008
Assets
Current assets
Cash and cash equivalents	$1,806,199	$15,602,593
Short-term investments (Note 4)	23,638,142	15,389,118
Accounts receivable	4,162,458	2,081,795
Inventories (Note 5)	7,388,143	3,868,211
Prepaid expenses and deposits	448,946	305,292
	37,443,888	37,247,009
Security deposits	67,480	65,000
Restricted cash (Note 3)	4,734,556	4,677,597
Mineral properties (Note 6)	43,319,425	36,947,885
Property, plant and equipment (Note 7)	15,330,251	12,583,488
	$100,895,600	$91,520,979
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$11,085,540	$7,190,679
Asset retirement obligation (Note 8)	3,041,434	2,862,508
	14,126,974	10,053187
Shareholders' Equity
Capital stock (Note 9)
Authorized Unlimited common shares without par value Issued 58,548,898 (2008 - 55,703,312) common shares	165,755,459	153,421,306
Options (Note 10)	3,630,924	1,284,136
Warrants (Note 11)	1,499,541	677,891
Contributed surplus	3,079,066	2,797,768
Deficit	(87,196,364)	(76,713,309)
	86,768,626	81,467,792
	$100,895,600	$91,520,979

Operations, going concern, and measurement uncertainty (Note 1)

Commitments (Notes 3 and 16)

  KIRKLAND LAKE GOLD INC.

STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT

YEARS ENDED APRIL 30, 2009 AND 2008

(EXPRESSED IN CANADIAN DOLLARS)

	2009	2008
Revenue
Mining revenue	$43,542,037	$41,436,376
Expenses
Operating costs	40,243,583	33,993,402
Stock-based compensation for operational personnel	1,266,144	71,687
Amortization and depletion	4,275,829	3,885,635
Royalties	1,750,591	1,658,674
	47,536,147	39,609,398
	(3,994,110)	1,826,978
Other Expenses
General and administrative	2,107,021	2,227,796
Exploration	3,652,235	3,876,873
Interest and bank charges	40,222	74,401
Stock-based compensation (Note 10)	1,279,669	587,466
Interest and other income	(590,202)	(1,593,578)
	6,488,945	5,172,958
Loss and comprehensive loss for the year	(10,483,055)	(3,345,980)
Deficit -Beginning of year	(76,713,309)	(73,367,329)
Deficit - End of year	$(87,196,364)	$(76,713,309)
Basic and diluted loss per share	$(0.19)	$(0.06)
Weighted average number of shares outstanding	56,349,826	55,470,107

Operations, going concern, and measurement uncertainty (Note 1)

  KIRKLAND LAKE GOLD INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED APRIL 30, 2009 AND 2008

(EXPRESSED IN CANADIAN DOLLARS)

	2009	2008
Cash flows from (used in) operating activities
Loss for the year	$(10,483,055)	$(3,345,980)
Items not affecting cash and cash equivalents
Amortization and depletion	4,275,829	3,885,635
Unrealized losses on investments	125,754	-
Stock-based compensation	2,545,813	659,153
Asset retirement obligation	153,030	162,028
Gain on sale of equipment	-	(28,319)
	(3,382,629)	1,332,517
Changes in non-cash working capital items
Accounts receivable	(2,080,663)	(473,129)
Inventories	(3,423,297)	233,954
Prepaid expenses and deposits	(143,654)	(40,702)
Accounts payable and accrued liabilities	3,894,861	748,063
Security deposits	(2,480)	125,000
Interest on mine closure bond	-	231,874
	(5,137,862)	2,157,577
Cash flows used in investing activities
Purchase of property, plant and equipment	(5,316,227)	(3,433,642)
Proceeds from refund of mine closure bond	-	2,043,435
Proceeds from sale of property, plant and equipment	-	196,798
Purchase of short-term investments	(8,374,778)	(15,105,529)
Restricted cash	(56,959)	(4,677,597)
Additions to mineral properties	(7,989,509)	(4,194,828)
	(21,737,473)	(25,171,363)
Cash flows from financing activities
Net proceeds from issuance of capital stock and warrants	13,078,941	12,341,346
	13,078,941	12,341,346
Decrease in cash and cash equivalents	(13,796,394)	(10,672,440)
Cash and cash equivalents - Beginning of year	15,602,593	26,275,033
Cash and cash equivalents - End of year	$1,806,199	$15,602,593

Supplemental cash flow information (Note 18)

  KIRKLAND LAKE GOLD INC.

NOTES TO FINANCIAL STATEMENTS

APRIL 30, 2009 AND 2008

(EXPRESSED IN CANADIAN DOLLARS)

1.    Operations, going concern, and measurement uncertainty

Operations

Kirkland Lake Gold Inc. (the company) owns gold mining and milling operations in Kirkland Lake, Canada, which were inactive when acquired in December 2001.

Going concern

While the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations into the foreseeable future, certain historical adverse conditions and events, could cast significant doubt upon the validity of this assumption and hence the appropriateness of the use of accounting principles applicable to a going concern. 

During the years ended April 30, 2009 and 2008, the company incurred losses of $10.5 million and $3.3 million, respectively. Cash flow required for operating activities, including exploration costs charged to operations of $7.5 million, aggregated $3.0 million for the two years in total. The funds required to continue operations and exploration activities during this period have been financed primarily from the issue of equity.

At April 30, 2009, the company has working capital of $26.4 million. Management projects that these funds, together with cash flow from operations, will be sufficient to meet the company's obligations and capital expenditure plans for the next twelve months. Nevertheless, differences are likely to occur between actual results and those projected by management, and those differences may be material. It is possible that the operations will not generate sufficient cash flow for the company to continue in the normal course without funding being provided from outside sources.

Management has been successful in obtaining sufficient funding for the company's operating and capital exploration requirements in the past and will pursue additional funding in the future, if necessary. There is, however, no assurance that such funding will be available to the company, or that it will be available on terms which are acceptable to management. If this does not occur, the company may not be able to continue as a going concern.

These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary were the going concern assumption inappropriate, and these adjustments could be material.

Measurement uncertainty

The company's history of operating losses from mining operations indicate at April 30, 2009, that the recorded costs for mineral properties and related fixed assets may not be recoverable. Management estimates, using a constant gold price of $1,051 per ounce and operating costs similar to historical costs incurred over the past year, that annual production of approximately 72,000 to 80,000 ounces for each year would be required to cover costs of operations and estimated capital expenditures required for mining operations. To date the company has not been successful in achieving and sustaining this rate of production. In fiscal 2009 production was 48,012 ounces.

There is significant uncertainty associated with the ability of the company to achieve the increase in production or reduction in costs necessary to recover the carrying value of the mineral property and related assets. Gold price or Canadian/U.S. dollar exchange rate movements, the success

of the company in realizing the benefit of the production improvements noted above, changes in the costs of labour and the other costs or unforeseen production difficulties all would have an impact on the ability of the company to achieve its goals from operations. The amount of working capital currently available for use by the company could mean that a minor adverse development could have a significant impact on the company's operations and ability to recover costs.

2.    Significant accounting policies

Generally accepted accounting principles

These financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP).

Adoption of new accounting standards

Effective May 1, 2008, the company adopted Canadian Institute of Chartered Accountants ('CICA') Handbook Section 1400 General Standards of Financial Statement Presentation, CICA Handbook Section 3031, Inventories and CICA EIC 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. 

The initial adoption of these new standards had no material impact on the company's financial statements.

(a)    General Standards of Financial Statement Presentation

The new standard clarifies what constitutes fair presentation in accordance with Canadian generally accepted accounting standards, going concern assessment and disclosures and comparative information disclosures. This standard affected the company's disclosures but there is no effect on the company's financial position or results.

(b)    Inventories

The new standard prescribes inventory measurement and disclosure standards. This standard affected the company's disclosures but there is no effect on the company's financial position or results.

(c)    EIC 173

This guidance clarified that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance did not have any material impact on the company's financial position or results.

Future changes in significant accounting policies

The following Canadian accounting pronouncements were issued and not yet adopted by the company:

• CICA Handbook Section 1582, Business Combinations. The new standard prescribes how an organization recognizes, measures and discloses a business combination. This standard is not expected to have a significant impact on the company's financial position or results. This is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011.
  
• CICA Handbook Section 1601, Consolidated Financial Statements. The new section prescribes consolidation accounting standards. This standard is not expected to have a significant impact on the company's financial position or results. This is effective for fiscal years beginning on or after January 2011.
  
• CICA Handbook Section 1602, Non-Controlling Interests. The new section prescribes standards for the accounting for a non-controlling interest in business combination. This standard is not expected to have a significant impact on the company's financial position or results. This is effective for fiscal years beginning on or after January 2011.
  
• CICA Handbook Section 3064, Goodwill and Intangible Assets. The new section prescribes standards for the accounting for goodwill and intangible assets. This standard is not expected to have a significant impact on the company's financial position or results. This is effective for fiscal years beginning on or after October 2008.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, in particular in respect of property, plant and equipment, mineral properties, and asset retirement obligation, that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from these estimates and these differences could be material.

Financial instruments

All financial instruments included on the balance sheet are either classified as held for trading, held-to-maturity, available-for-sale, loans and receivables or other financial liabilities. Financial instruments classified as held to maturity, loans and receivables, and other financial liabilities are measured at amortized cost. Instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized on the statement of operations.

The company's financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, security deposits, restricted cash and accounts payable and accrued liabilities, as follows:

Cash and cash equivalents	Held for trading
Short-term investments
Mutual funds	Held for trading
Treasury bills	Held to maturity
Accounts receivable	Loans and receivables
Security deposits	Held to maturity
Restricted cash	Held for trading
Accounts payable and accrued liabilities	Other financial liabilities

Comprehensive income

Comprehensive income is the change in shareholder's equity during a period from transactions and events from sources other than the company's shareholders. The company reports a statement of operations, comprehensive income or loss and accumulated other comprehensive income or loss is added to the shareholders' equity section of the balance sheet when components to be recognized in the comprehensive income or loss exist. There were no material components to be recognized in comprehensive income or loss during the year. As a result, net loss for the period approximates comprehensive loss.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments with an initial maturity of 90 days or less at the date of acquisition.

Investments

The company holds investments in various funds of a fund company and Government of Canada Treasury Bills with maturity dates greater then 90 days at the date of acquisition but less then 365 days. 

Inventories

Dore bars and gold in process, and stockpiled ore are recorded at the lower of average production cost and net realizable value. Production costs include all direct costs plus an allocation of fixed costs associated with the mine site. The company uses a rolling period average cost to value the inventory of gold on hand. Mine operating supplies are valued at the lower of average cost and net realizable value as measured by replacement cost.

Mineral properties and deferred exploration costs

The company expenses exploration expenditures and near term ore development costs as incurred. Property acquisition costs and longer term development costs incurred to expand ore reserves are deferred and depleted on a units - of - production basis over proven and probable reserves which are currently accessible by the company. Management's estimate of gold price, recoverability, proven and probable reserves, operating, capital and reclamation costs are subject to risk and uncertainties affecting the recoverability of the company's investment in mineral properties. The company assesses capitalized costs for recoverability on an annual basis or more frequently if changes in circumstances suggest that possible impairment may exist. Where information is available and conditions suggest impairment, estimated future net cash flows are calculated using estimated future prices, reserves and operating, capital and reclamation costs on an undiscounted basis. If the net carrying value of the property exceeds the estimated future net cash flows, the property will be written down to fair value.

Property, plant and equipment

Property, plant and equipment costs are recorded at cost and amortized on a straight line basis over the following terms:

Computer equipment	3 years
Vehicles	5 years
Mine and mill equipment	10 years
Buildings	10 years
Capital spares	2 years

Asset retirement obligation

Future obligations to retire an asset or property are recognized and recorded as a liability at fair value as at the time the asset is acquired or the event occurs giving rise to such an obligation. At each reporting period, asset retirement obligations are increased to reflect the interest element (Accretion expense) considered in the initial fair value of the measurement of the liabilities. In addition, an asset retirement cost is added to the carrying amount of the related asset and amortized over the life of the asset. The capitalized asset retirement cost is amortized on the same basis as the related asset and along with the accretion expense, is included in net income.

Revenue recognition

Revenue is recognized on title transfer of the gold to purchasers which occurs when the gold is received by the purchaser. Adjustments to accounts receivable, if any, between the date of title transfer and the settlement date are recorded when determined.

The company from time to time enters into commodity contracts to minimize its exposure to fluctuations in the price of gold. Any gains or losses are recorded in revenue.

Foreign currency translation

The company generally seeks to sell its gold in Canadian dollars. To the extent these transactions are denominated in foreign currencies, they are translated into their Canadian dollar equivalents at exchange rates prevailing at the transaction date. Gains and losses arising from restatement of foreign currency monetary assets and liabilities and transactions are included in the statement of operations.

Income taxes

The company uses the liability method of accounting for future income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that are expected to be in effect in the periods in which the future income tax assets or liabilities are expected to be settled or realized. A valuation allowance is provided to the extent that it is more likely than not that future income tax assets will not be realized.

Stock based compensation

The company has a stock-based compensation plan which is described in Note 10.  The company accounts for stock options using the fair value method. Under this method, compensation expense for stock options granted is measured at fair value at the grant date using the Black-Scholes valuation model and recognized over the vesting period of the options granted. Consideration paid on the exercise of stock options is credited to capital stock.

Flow-through shares

The company from time to time issues flow through shares to finance a portion of its exploration program. Pursuant to the terms of flow through share agreements, the tax deductions associated with the expenditures are renounced to the subscribers. To recognize the foregone tax benefits, share capital is reduced and a future income tax liability is recognized as the related expenditures are renounced. This future income tax liability is then reduced by the recognition of previously unrecorded future income tax assets on unused taxes losses.

Loss per common share

Loss per share is calculated using the weighted average number of common shares issued and outstanding during the year.  

The company follows the treasury stock method in the calculation of diluted earnings per share. As the company is incurring losses, basic and diluted loss per share are the same since including the exercise of outstanding stock options and share purchase warrants in the diluted loss per share calculation would be anti-dilutive.

 

3.    Restricted cash

Restricted cash includes:

	2009	2008
Letters of Credit:
Ministry of Northern Development and Mines	$4,452,597	$4,452,597
Independent Electricity System Operator of Ontario	281,959	225,000
	$4,734,556	$4,677,597

Letters of credit are in place with the Ministry of Northern Development and Mines to cover the estimated total costs of reclamation and site restoration, as included in the filed reclamation and site restoration plan (Note 8), and with the Independent Electricity System Operator of Ontario to secure the provision of electricity.  

4.    Investments

Investments include:

	2009	2008
Government of Canada Treasury Bill bears interest at 0.65%, matures May 14, 2009	$4,999,286	$  -
Government of Canada Treasury Bill bears interest at 0.6%, matures May 14, 2009	9,999,577	-
Government of Canada Treasury Bill bears interest at 0.3%, matures June 11, 2009	1,504,795	-
Government of Canada Treasury Bill bears interest at 0.3%, matures June 11, 2009	5,003,994	-
Government of Canada Treasury Bill bears interest at 0.25%, matures July 23, 2009	1,998,660	-
Government of Canada Treasury Bill bears interest at 2.4%, matured July 24, 2008	-	15,131,534
Investment in mutual funds	131,830	257,584
	$23,638,142	$15,389,118

5.    Inventories

	2009	2008
Gold in process	$5,457,505	$2,672,260
Mine operating supplies	1,559,459	1,195,951
Surface stockpile	371,179	-
	$7,388,143	$3,868,211

6.    Mineral properties

The company's mineral properties comprise five contiguous mining properties in and around Kirkland Lake, Ontario.

	2009	2008
Balance - Beginning of year	$36,947,885	$34,364,062
Development and rehabilitation costs	8,077,906	4,322,324
Depletion	(1,706,366)	(1,738,501)
Balance - End of year	$43,319,425	$36,947,885

	COST	ACCUMULATED DEPLETION	2009
Acquisition allocation	$2,042,523	$263,886	$1,778,637
Underground development	46,568,756	7,416,747	39,152,009
Underground pumping	2,050,942	517,543	1,533,399
Mill and surface facilities	149,371	38,426	110,945
Lakeshore property	1,000,411	255,976	744,435
	$51,812,003	$8,492,578	$43,319,425

  

	COST	ACCUMULATED DEPLETION	2008
Acquisition allocation	$1,765,523	$195,149	$1,570,374
Underground development	38,767,850	5,895,405	32,872,445
Underground pumping	2,050,942	443,087	1,607,855
Mill and surface facilities	149,371	32,991	116,380
Lakeshore property	1,000,411	219,580	780,831
	$43,734,097	$6,786,212	$36,947,885

7.    Property, plant and equipment

	COST	ACCUMULATED AMORTIZATION	2009
Computer equipment	$780,226	$695,722	$84,504
Mine and mill equipment	25,202,263	10,245,820	14,956,443
Vehicles	129,493	108,912	20,581
Buildings	591,822	323,099	268,723
	$26,703,804	$11,373,553	$15,330,251

    

	COST	ACCUMULATED AMORTIZATION	2008
Computer equipment	$707,228	$578,070	$129,158
Mine and mill equipment	19,959,033	7,854,616	12,104,417
Vehicles	129,493	102,483	27,010
Buildings	591,822	268,919	322,903
	$21,387,576	$8,804,088	$12,583,488

8.    Asset retirement obligation

The company has filed a reclamation and site restoration plan in connection with the Kirkland Lake properties and these plans are currently being discussed with the Ontario Ministry of Northern Development and Mining (MNDM). The company's best estimate of the total costs of reclamation and site restoration at April 30, 2009 are $5,415,814 (2008 - $4,452,597) and financial assurance has been provided to the MNDM by way of a letter of credit in the amount of $4,452,597 (Note 3). 

A reconciliation for asset retirement obligation is as follows:

	2009	2008
Balance - Beginning of year	$2,862,508	$2,700,480
Accretion	153,030	162,028
Revisions in estimated cash flows	25,896	-
Balance - End of year	$3,041,434	$2,862,508

During 2009, the company reviewed total proven and probable reserves, which resulted in the extension of the remaining life of the mine and, consequently, the extension of the cash flow projection and reduction of the asset retirement obligations and mineral properties. Furthermore, the company's estimate of reclamation and site restoration costs increased in the year. The required financial assurance related to the increase in the cost estimate has not yet been provided to MNDM.

The company continues to correspond with the MNDM regarding the Wright Hargreaves property. The company has retained a consultant to assist in the identification of, if any, potential hazards and related obligations to the company. This process is currently ongoing, the outcome of which is currently indeterminable at this time.

The provision for asset retirement obligations is based on the following key assumptions.

• The total undiscounted cash flow as at April 30, 2009 is $5,415,814.

• The expected settlement to be in 2024.

• A credit adjusted risk free rate at which the estimated payments have been discounted of 6%.

• An inflation rate of 2%.

9.    Capital stock

	Number of Shares	Amount
Balance - April 30, 2007	$54,504,019	$140,926,034
Exercise of options	60,500	333,004
Exercise of warrants	670,924	7,639,865
Private placements	450,000	5,130,000
Shares issued to purchase mining claims	17,869	187,500
Share issuance costs	-	(117,206)
Share proceeds allocated to warrants	-	(677,891)
Balance - April 30, 2008	55,703,312	153,421,306
Exercise of options	10,000	42,362
Private placements	2,820,000	13,677,000
Shares issued to purchase mining claims	15,586	62,500
Share issuance costs	-	(626,059)
Share proceeds allocated to warrants	-	(821,650)
Balance - April 30, 2009	58,548,898	$165,755,459

(a)    On May 10, 2007, the company issued 12,940 common shares valued at $125,000 for the first tranche related to the purchase of the South Claims. On January 8, 2008 the company issued 4,929 shares valued at $62,500 for the second tranche related to the purchase of the South Claims.

(b)    On September 25, 2007 the company closed a brokered private placement of 450,000 units at a price of $11.40 per unit for gross proceeds of $5,130,000. Each unit consisted of one common share and one half of a share purchase warrant. Each whole warrant is exercisable to purchase a further common share at a price of $13.00 until September 25, 2009. The company incurred commissions, fees and legal costs totaling $117,206 in connection with this placement. The share purchase warrants issued as part of this placement have been recorded at a fair value of $677,891.

(c)    In February 2009 the company closed a non-brokered private placement in two tranches:

(i) On February 4, 2009 the company closed the first tranche of the private placement of 2,200,000 units at a price of $4.85 per unit for gross proceeds of $10,670,000. Each unit consisted of one common share and one quarter of a share purchase warrant. Each whole warrant is exercisable to purchase a further common share at a price of $5.50 until February 4, 2010. The company incurred commissions, fees and legal costs totaling $475,249 in connection with this tranche. The share purchase warrants issued as part of this tranche have been recorded at a fair value of $613,729 less allocated issuance costs.

(ii) On February 17, 2009 the company closed the second tranche of the private placement of 620,000 units at a price of $4.85 per unit for gross proceeds of $3,007,000. Each unit consisted of one common share and one quarter of a share purchase warrant. Each whole warrant is exercisable to purchase a further common share at a price of $5.50 until February 17, 2010. The company incurred commissions, fees and legal costs totaling $150,810 in connection with this tranche. The share purchase warrants issued as part of this tranche have been recorded at a fair value of $310,976 less allocated issuance costs.

10.    Options

The company has adopted a stock option plan which allows the company to grant options to directors, senior officers and employees of or consultants to the company or employees of a corporation providing management services to the company. The aggregate number of shares which may be subject to issuance pursuant to options granted under this plan is 3,500,000 shares.

The plan provides that the exercise price of an option granted under the plan shall not be less than the market price at the time of granting the option. Options have a maximum term of 10 years and terminate on the 90th day after the optionee ceased to be any of a director, officer, consultant or employee; on the 30th day after the optionee ceased to be an employee or consultant if the optionee was engaged in providing investor relations services for the company; or the earlier of the 90th day and the third month after the optionee ceased to be an employee or officer if the optionee is subject to the tax laws of the United States of America.

Notwithstanding that options can have a maximum term of 10 years it is presently the policy of the company to issue options for terms of five years.

The change in stock options during the years ended April 30 is as follows:

		2009		2008
	Number of shares	Weighted average exercise price	Number of shares	Weighted average exercise price
Options outstanding - Beginning of year	420,500	$7.51	561,000	$7.09
Granted	1,179,500	7.30	40,000	12.50
Exercised	(10,000)	2.80	(60,500)	4.69
Forfeited	(16,000)	7.90	(120,000)	8.65
Expired	(106,000)	4.55	-	-
Options outstanding - End of year	1,468,000	$7.62	420,500	7.51
Options exercisable - End of year	284,500	$8.65	258,000	$6.19

The following table summarizes information about stock options outstanding and exercisable at April 30, 2009:

Exercise price	Options outstanding	Options exercisable	Outstanding options weighted average remaining life (years)	Exercisable options weighted average remaining life (years)
$4.70	19,500	19,500	0.40	0.40
8.65	245,000	245,000	2.75	2.75
12.50	40,000	20,000	3.49	3.49
7.90	301,000	-	4.04	-
9.25	75,000	-	4.06	-
6.99	250,000	-	4.31	-
6.99	487,500	-	4.39	-
5.05	50,000	-	4.44	-
$4.70 - $12.50	1,468,000	284,500	3.94	2.64

The fair value of each option at the date of grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2009	2008
Expected life of options	3 - 5 years	5 years
Risk-free interest rate	3.58 - 3.98%	4.18%
Expected stock price volatility	53.3 - 64%	50%
Expected dividend yield	0%	0%

Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate.

The value ascribed to unexercised options recorded as a component of shareholders' equity is as follows:

	2009	2008
Balance - Beginning of year	$1,284,136	$674,137
Accretion of options granted	2,642,448	815,759
Exercise of options	(14,362)	(49,154)
Options expired	(281,298)	-
Options forfeited	-	(156,606)
Balance - End of year	$3,630,924	$1,284,136

11.    Warrants

The changes in warrants outstanding are as follows:

		2009		2008
	Number of warrants	Weighted average exercise price	Number of warrants	Weighted average exercise price
Warrants outstanding - Beginning of year	225,000	$13.00	670,924	$10.50
Issued	705,000	5.50	225,000	13.00
Exercised	-	-	(670,924)	10.50
Warrants outstanding - End of year	930,000	$7.31	225,000	$13.00

The value ascribed to unexercised warrants recorded as a component of equity is as follows:

	2009	2008
Balance - Beginning of year	$677,891	$595,163
Warrants issued in private placements	821,650	677,891
Exercise of warrants	-	(595,163)
Balance - End of year	$1,499,541	$677,891

12.    Financial instruments

The company's financial instruments consist of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, security deposits, accounts payable and accrued liabilities. At April 30, 2009, the carrying values of these instruments approximate their fair values based on the nature of these instruments. 

Interest Rate and Credit Risk

The company has significant cash and short-term investment balances. The company currently invests excess cash in fixed rate Government of Canada Treasury Bills with maturity dates of approximately 90 days. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and therefore bear minimal risk.

An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific accounts, historical trends and other information when necessary. As at April 30, 2009, there were no receivables past due.

There are no fixed, floating rate or interest free financial liabilities by way of borrowing. Deposits held with banks may exceed the amount of insurance provided on such deposits.  

Liquidity Risk

The company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at April 30, 2009, the company had a cash and cash equivalents and short term investments balance of $25,444,341 to settle financial liabilities of $11,085,540. All of the company's financial liabilities are current liabilities which will mature within one year of the balance sheet date. 

Currency Risk

Sales of gold dore bars and the majority of the company's expenses are incurred in Canadian Dollars therefore the company is substantially protected against movements in foreign exchange. The company's principal exchange rate risk relates to movements between the Canadian Dollar and US Dollar on the price of gold. 

Sensitivity Analysis

The carrying amount of financial instruments approximates their fair market value. The movement on cash and cash equivalents and short-term investments interest rates by a plus or minus 1% change would affect net loss by approximately $250,000. 

As at April 30, 2009, the company had an outstanding commodity contract with Johnson Matthey Plc. to fix the price of 727 ounces of gold at an average price of $1,103 per ounce to be delivered under this contract. Fair value was not significantly different from stated value when the gold was delivered on May 12, 2009. 

13.    Capital disclosures

The company's capital under management includes shareholders' equity of $86,768,626. The company's objectives when managing capital are:

 

14.    Related party transactions

The following related party transactions occurred during the year:

(a)The company paid office facilities and administration services in the amount of $42,000 (2008 - $42,000) to a company related by directors in common.

(b)At April 30, 2009, accounts payable included $nil (2008 - $3,947) owing to companies with directors in common. Amounts due to related parties are non-interest bearing and have no fixed terms of repayment.

These transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties.

15.    Income taxes

(a)Income taxes expenses vary from the amount that would be computed by applying the combined federal and provincial income tax rate of 31.33% (2008 - 33.20%) to loss before income taxes as follows:

	2009	2008
Loss before income taxes	$(10,483,055)	$(3,345,980)
Expected income taxes	$(3,284,341)	$(1,110,865)
Income tax benefit not recognized	2,453,916	891,005
Non-deductible items	830,425	219,860
	$-	$-

(b)Future income taxes reflect the net tax effects of non-capital loss carry-forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the company's future tax assets are as follows:

	2009	2008
Future income tax assets
Net operating loss carry-forwards	$12,820,684	$12,265,193
Mineral properties	1,689,380	614,349
Asset retirement obligation	821,187	772,877
Property, plant and equipment	2,949,239	2,265,152
Share issuance costs	415,245	597,211
	18,695,735	16,514,782
Less: Valuation allowance	(18,695,735)	(16,514,782)
Net future tax assets	$-	$-

(c)The company has non-capital losses, which may be carried forward and applied against taxable income in future years. These losses expire during the following years:

2010	$ 3,208,110
2014	17,920,438
2015	18,207,964
2026	1,870,252
2027	4,032,443
2028	2,244,809
	$47,484,016

16.    Commitments

As at April 30, 2009, capital commitments included:

Capital Commitments (All commitments in 000s of Canadian Dollars)	$000
Property, Plant and Equipment	883
Underground Development	496
Total	1,379

A net smelter royalty is payable on a sliding scale commencing at 2% if the price of gold sold is equal to or greater than US$300 per ounce and increasing to 4% if the price of gold sold is equal to or greater than US$500 per ounce. The royalty amount due is payable quarterly commencing on the third month anniversary of the commencement of commercial production from any of the properties and terminates upon a maximum aggregate payment of $15 million. During the year ended April 30, 2009, royalties under this agreement amounted to $1,737,346 (2008 - $1,651,354). Of the $15 million the company has paid $5,785,521.

An agreement between Queenston Mining Inc. and the company was formed in April 2007 to explore the Morgan property. The company has agreed to spend $770,000 on exploration for the fiscal year 2010. 

With regard to the Morgan purchase agreement, the company has completed the issuance of the third tranche of shares and made the third cash payment to the vendor of the South claims. The company issued 15,586 shares valued at $62,500 ($4.01 per share) and paid $62,500. To complete its purchase obligations, the company must issue a further $50,000 worth of shares and pay a further $50,000 to the vendor by January 15, 2010.

17.    Segmented information

The company has one operating segment consisting of a mining and milling operation located in Kirkland Lake, Canada. During the years ended April 30, 2009 and 2008 all of the company's capital assets, revenues earned and operations were in Canada, and all mining revenue was earned from one customer.

18.    Supplemental cash flow information

Cash and cash equivalents comprise cash on deposit with Canadian chartered banks, lines of credit and treasury bills.

During the years ended April 30, 2009 and 2008, the company conducted non-cash financing and investing activities as follows:

	2009	2008
Value assigned to options/warrant exercised	$14,362	$644,317
Issuance of shares for purchase of mineral properties	$62,500	$125,000

  MANAGEMENT'S DISCUSSION & ANALYSIS ('MD&A')

FOR THE YEAR ENDED APRIL 30, 2009

This MD&A is intended to help the reader understand Kirkland Lake Gold Inc. ('us', 'KGI' or 'the Company'), our operations and our present business environment. 

This MD&A has been prepared as of July 17, 2009 and covers the results of operations for the fourth quarter and year ended April 30, 2009. It is intended to supplement the audited Financial Statements and notes thereto which are expressed in Canadian Dollars and prepared in accordance with Canadian Generally Accepted Accounting Principles ('GAAP'). These statements together with the following MD&A are intended to provide investors with a reasonable basis for assessing the potential future performance. Additional information relating to the Company is available from the Company's Annual Information Form ('AIF') filed with the Canadian securities regulators on SEDAR at www.sedar.com. 

FORWARD LOOKING INFORMATION

Certain statements in this MD&A constitute 'forward looking statements'. While these statements are made as of the date hereof they refer to future events. Any forward looking statements are based upon reasonable assumptions, but no guarantees or assurances can be given that actual results will be consistent with such statements. 

Forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, but are not limited to, the following:

• Risks inherent in natural resource exploration, development and production 

• Lack of operating cash flow and the Company's reliance on additional capital

• Competition in the mineral exploration and mining industries 

• Governmental regulation and environmental liability

• Uncertainty of title of resource properties

• Results of legal claims made by or against the Company

A comprehensive list of the risks and uncertainties are set out in the Company's AIF. Readers should not place undue reliance on any forward looking statements. 

OUR BUSINESS

The Company is an operating gold mining company located in Kirkland Lake, Ontario, Canada which owns the Macassa Mine and Mill and four contiguous formerly producing gold mining properties. The Company's corporate goal is to expand its gold resources and reserves and reduce its operating costs to become a profitable gold producer. The Company's common shares trade on the TSX (Toronto Stock Exchange) and the AIM (Alternative Investment Market of the London Stock Exchange). 

OPERATIONS REVIEW - INCLUDING A REVIEW OF REVENUES AND COSTS 

The Company incurred a net loss for the year of $10,483,055 or $0.19 per share, which compares to a net loss of $3,345,980 or $0.06 per share in fiscal 2008. The income for the quarter ended April 30, 2009 of $2,349,177 or $0.04 per share, which compares with a net loss of $4,688,372 or $0.08 per share for the previous quarter and a net income of $905,772 or $Nil per share for the same quarter in fiscal 2008. The principal causes of these variations are discussed below.

(1)Compared to fiscal 2008:

(a)    Gold production was 48,012 ounces, a 2% (821 ounces) decrease compared to fiscal 2008. Head grade for the year was lower by 7% to 0.374 ounces per ton ('opt') of gold (2008: 0.401 opt). Sill development at edges and ends of the ore zones in the South Mine Complex ('SMC') and more long-hole mining in the plan at the beginning of the year caused the lower grade.

(b)    The level of lateral and vertical operating development increased 4% to 9,129 feet (2008: 8,817 feet). Operating development associated with the SMC (ore and waste) represented 64% (5,811 feet) of all operating development for fiscal 2009. This was an increase of 79% from the previous year (2008: 3,250 feet). The operating development is expected to continue to increase in fiscal 2010 by approximately 1,000 feet. 

(c)    Ore generated from the development, delineation, and production from the SMC throughout fiscal 2009 was 42,459 tons at an average grade of 0.55 opt for a total of 23,452 ounces of gold (2008: 21,856 tons; 0.67 opt; 14,646 oz). The contribution from this important new area represented only 32% of the tons milled, yet generated 47% of ounces recovered from the mill. The grade realized in the SMC was 50% higher than the annual head grade milled (0.55 opt versus 0.37 opt).

(d)    Capital development increased during fiscal 2009 by 93% to 5,960 feet (2008: 3,083 feet). This increase in capital development was required to bring more stopes into production from the main break, to develop a long term haulage drift from the SMC, to boost ventilation, and to support exploration activities. Capital development expenditure in fiscal 2010 will continue to increase with around 10,000 feet planned for the SMC. The majority of this development will be access ramp development.

(e)    The Company stopped the practice of emptying the muck pass at the 5743 Level to skip ore and waste separately from the 5300 Level. This was done to preserve the muck pass which becomes seismically active when empty, but is stable when full. Waste generated on the 5300 Level is being skipped with the ore and milled until the 5356 Haulage Ramp to the SMC is completed. The cost of milling the 5300 Level waste for less than two years is negligible compared to the cost of developing another method of handling the waste.

(f)    During fiscal 2009 and in advance of the anticipated increase in development and mining activity in the SMC, the Company invested $5.3 million in plant and machinery. Investments included underground locomotives, ore cars, scoop trams, and other mining equipment. 

(2)    Compared to the previous quarter (Q3/09) and the same quarter in the previous fiscal year (Q4/08).

(a)    Gold production was 20,411 ounces in the quarter, an increase of 102% compared to the previous quarter (Q3/09: 10,081) and a 45% increase compared to Q4/08 (14,089 ounces). Increased production from the SMC was the main factor contributing to this higher production

(b)    Once reconciled to eliminate the waste tonnage from 5300 level, the grade for the quarter was 0.42 (opt), a decrease of 11% compared to the previous quarter (Q3/09: 0.47 opt) as a result of mining in different areas of the SMC, and an increase of 5% from the same quarter in fiscal 2008 (0.40 opt). A total of 4,891 tons of underground waste were processed through the mill from the 5300 Level development. 

(c)    Operating lateral and vertical development decreased 23% to 1,978 feet from the previous quarter (Q3/09: 2,568 feet). Operating development was 4% higher than fourth quarter last year (Q4/08: 1,894 feet).

(d)    Operating development associated with the SMC (ore and waste) represented 39% (779 feet) of all operating development within the quarter. This development is expected to decrease in future quarters, mainly due to the completion of delineation silling on the ore zones.

(e)    Ore generated from production, development and delineation in the SMC throughout Q4/09 was 18,176 tons grading 0.63 opt with a recovery of 11,541 ounces. This represents an increase of 88% in ounces produced compared to the previous quarter (Q3/09: 6,147 oz). Ore generated from the Main Break area for the fourth quarter was 31,979 tons (Q4/08: 32,350 tons) at a grade of 0.30 opt.

(f)    Capital development increased by 13% to 2,096 feet (Q3/09: 1,850 feet). This represents an increase of 90% compared to Q4/08 (1,102 feet) and is due to long term access development associated with the development of the SMC and will continue in fiscal 2010. 

(g)    During the quarter significant development and infrastructure work was carried out on ventilation boosting stations on 4250 Level; 4500 Level; 4750 Level; 5025 Level and 5300 Level. A vent raise between the 5025 Level and the 5300 Level was completed. Ventilation was increased by 284% for the SMC on the 5025 Level and the 5300 Level.

(h)    The Company continued to rebuild scoops and other equipment required to support higher production forecast for fiscal 2010.

(i)    A total of 50,854 tons of ore were hoisted from underground operations, a 118% increase compared to the previous quarter (Q3/09: 23,311 tons). For the fourth quarter hoisted ore tons are up by 53% from same quarter last year (Q4/08: 33,166 tons).

(j)    As a proportion of total production, use of the longhole production mining methods increased 4% from 19% in Q3/09 to 23% in Q4/09. Development ore produced 12% of the ore tonnage in the fourth quarter compared to 34% in the previous quarter. Ore tons from mechanized and paste cut and fill mining methods was 64% in the fourth quarter versus 48% for the previous quarter. As the SMC moves from being developed to being mined, the ore from development and longhole will decline and ore tons from cut and fill will increase.

(k)    The drilling pattern for longhole mining in narrow vein stopes has been changed to reduce the dilution. Going forward only one longhole stope will be mined at a time so stopes can be mucked out as fast as possible. This should further reduce dilution from this method of mining and help to maintain grades at the mill.

  

SELECTED FINANCIAL INFORMATION & REVIEW OF OVERALL PERFORMANCE

Financial Highlights (All amounts in 000s of Canadian Dollars, except shares and per share figures)	Year ended April 30,
	2009	2008	2007
Gold Sales (ounces) Average Price (per ounce)	43,545 $1,000	52,019 $797	50,890 $720
Revenue Operating Expenses Exploration Expenditure Net Income (loss) Per share (basic and diluted) Cash Flow from (used in) operating activities Cash Flow from financing activities Cash Flow (used in) investing activities Net increase (decrease) in cash Cash and cash equivalents at end of period	43,542 47,536 3,652 (10,483) (0.19) (5,138) 13,079 (21,737) (13,796) 1,806	41,436 39,609   3,877 (3,346)   (0.06)   2,158 12,341 (25,171)  (10,672) 15,603	36,656 38,459 4,860 (8,383)   (0.16) (7,051) 31,329 (7,415) 16,863 26,275
Total Assets Total Liabilities Working Capital	100,896   14,127   26,358	91,521 10,053 30,056	80,769   9,143 26,216
Weighted average number of shares outstanding Dividends per share	56,349,826 NIL	55,470,107 NIL	52,947,013 NIL

(3) Compared to the year ended April 30, 2008:

a)    Gold revenues were 5% higher at $43.5 million (2008: $41.4 million).

b)    Operating expenses increased to $47.5 million (2008: $39.6 million), an increase of 20%, primarily due to increases in mining costs ($6.8 million), milling costs ($1.3 million), general site costs ($1.5 million), royalties ($0.1 million), amortization and depletion expenses ($0.4 million), and stock-based compensation ($1.2 million). These increases were offset by a decrease in inventory valuation levels ($3.4 million). 

The increase in mining costs was due to doubling of mining personnel ($5.1 million), and materials ($2.4 million) required for the expanded mining plan in the main break and SMC. These cost increases were offset by decreases in capital allocations ($0.5 million) and mining contractor costs ($0.2 million).

Milling costs increased $1.3 million due to a 27% ($0.4 million) increase in personnel. Materials also increased ($0.9 million) coinciding with higher reagent, grinding media, power and maintenance costs, associated with higher mill throughput.

General site labour costs increased 29% ($1.1 million) primarily due to higher personnel (including benefits and bonus) costs. Contract and consulting costs also increased ($0.2 million) due to environmental compliance and design work and reallocations of engineering and geology costs to capital reduced ($0.2 million).

Royalties increased ($0.1 million) as a consequence of higher gold prices offset by lower gold sales.

Amortization and depletion expense increased ($0.4 million) reflecting the on-going high level of investment in mine development and capital equipment. 

Stock-based compensation costs increased ($1.2 million) as a consequence of options being granted during the year.

c)    General and administrative expenses were $2.1 million (2008: $2.2 million). The decrease of $0.1 million was primarily due to the Company's ongoing commitment to reduce general and administrative expenses.

d)    Exploration costs were 6% lower at $3.7 million (2008: $3.9 million) reflecting a decrease in the activity in the Kirkland West zone, offset by an expansion of exploration drilling in the SMC.

e)    Capital spending on mine development was 79% higher at $7.5 million (2008: $4.2 million) as explained in paragraph (1) d.

f)    Capital spending on equipment increased $1.9 million (55%) to $5.3 million (2008: $3.4 million) as explained in paragraphs (1) f above. 

g)    Total spending including operating costs, capital spending and royalties increased $11.5 million to $54.8 million (2008: $43.3 million). 

h)    Other income decreased $1 million to $0.6 million (2008: $1.6 million) due to declining interest rates on bank balances and generally lower cash balances.

(4) In the fourth quarter and compared to the previous fiscal year:

a)    Gold revenues were 38% higher at $18.2 million (2008: $13.2 million).

b)    Operating expenses increased to $14.3 million (2008: $11.4 million), an increase of 25%. This increase in spending primarily reflects increases in mining costs ($4.1 million), mill processing ($0.6 million), general site expenses ($0.4 million), royalties ($0.2 million), stock based compensation ($0.8 million), amortization ($0.3 million) and offset in changes to gold inventory ($3.5 million). 

Increases in mining costs are primarily attributable to a 72% increase ($3.6 million) in personnel, material costs ($1.3 million) offset by a reduction ($0.6 million) in mining contractors and capital allocations ($0.2 million). These increases reflect the planned expansion of mining operations including the SMC.

Increases in mill processing costs are primarily attributable to a 14% increase ($0.1 million) in personnel and materials ($0.5 million). These increases reflect an increase in the planned mill throughput.

General site expenses increased primarily due to costs incurred on a dam stability study, a fish study, compliance requirements, sampling, and exploration consulting costs. This increase was offset by a decrease in capital allocations ($0.1 million).

Changes within royalties, stock-based compensation costs, and amortization and depletion expenses are consistent with those mentioned above in (3) b.

c)    General and administrative expenses were $0.1 million higher at $0.6 million (2008: $0.5 million) as a result of consulting, legal, and travel expenses.

d)    Exploration expenditure rose 25% or $0.2 million to $1.0 million (2008: $0.8 million) primarily as a result of the expanded drill program in the SMC.

e)    Capital spending on mine development increased $0.8 million to $2.6 million (2008: $1.8 million). This increase is explained in paragraphs (2) f and (2) g. 

f)    Capital spending on property and equipment increased $1.3 million to $1.7 million (2008: $0.4 million), largely as a result of projects explained in paragraph (2) h. 

g)    Total spending including operating costs, capital spending and royalties increased $3.7 million to $16.3 million (2008: 12.6 million), reflecting the ongoing significant investments taking place in the SMC and discussed above. 

h)    Other income decreased to $0.1 (2008: $0.4) a decrease of $0.3 due primarily to declining interest rates on bank balances and lower cash balances.

Summary of Quarterly Results

The quarterly results for the Company for the last eight fiscal quarters are set out in the following table.

 

Quarterly Results (All amounts in 000s of Canadian Dollars, except Loss per share figures)	4th Quarter	3rd   Quarter	2nd Quarter	1st Quarter
Fiscal 2009
Revenue	18,210	8,553	8,827	7,952
Net Income (Loss)	2,349	(4,688)	(4,790)	(3,354)
Earnings (Loss) per Share (Basic & Diluted)	0.04	(0.08)	(0.09)	(0.06)
Fiscal 2008
Revenue	13,198	9,576	7,362	11,300
Net Income (Loss)	906	(1,895)	(2,393)	36
Earnings (Loss) per Share (Basic & Diluted)	0.00	(0.02)	(0.04)	(0.00)

As a result of a 25% increase in the average price of gold sold between the fourth quarters of fiscal 2008 and 2009 combined with productivity improvements, the Company reported net income of $2.3 million in the fourth quarter of fiscal 2009.

Compared to fiscal 2008, the number of employees rose 83% to 400 (2008: 219). The number of people involved in production activities doubled from 147 to 294. The increase was attributable to the Company's decision to fast-track the SMC into production internally using its own labour force. Employee retention is also being enhanced by the introduction of personnel development plans and a number of retention schemes.

The need for a much larger work force in order to continue to develop and produce from the SMC has represented a significant expense and key management challenge requiring the Company to continue to work diligently regarding safety and training. Our goal is to maintain a high level of production to go hand-in-hand with safe work practices. The Company received the Angus Campbell Award for Safety for the second consecutive year, and also received the MASHA Award of Excellence for Safety in 2008.

Exploration Update

During the quarter four electric drills and two air machines were dedicated to exploration. Approximately 38,000 feet of exploration drilling was completed during the quarter. 

During the fiscal year 139,000 feet of exploration drilling was completed at a contract price of $18.64/ft. The number of feet drilled was 16% lower than budgeted and exploration development, including drifting and drill bay excavations, was delayed in order to expedite production development. This resulted in six exploration drills working on the property compared to a forecasted seven drills. In addition, production related work, including definition drilling requirements and technical holes, decreased the availability of certain exploration drills throughout the year.

A total of 581 feet of track drifting was completed along the South Claims agreement with Queenston Mining. This development facilitated exploration drilling on both the South Claims agreement as well as on the 100% owned Company property. Of the total years' drilling, 6% (8,700 feet) was completed on the South Claims agreement.

The SMC continues to expand as a result of exploration drilling throughout the year and a new geological model has been proposed to guide exploration going forward.

Qualified Persons

The scientific and technical results of the Company's exploration programs and operations disclosed in this MD&A have been reviewed, verified (including sampling, analytical and test data) and compiled by the Company's geological and production staff (which includes a 'qualified person' in each department, Stewart Carmichael P.Geo., the Company's Chief Exploration Geologist in respect of exploration results, and Steve Gray, P. Geo, the Company's Chief Production Geologist in respect of production results, for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects, of the Canadian Securities Administrators). They also supervised the preparation of the information that forms the basis of the technical disclosure in this MD&A.

OUTLOOK

The final quarter of fiscal 2009 was a key period in the development and evolution of the Company with a significant amount of effort going into recruitment, training, development, construction, and engineering and geological planning and design. The work of identifying, purchasing and deploying equipment suitable to increase production to the new annual target rate of between 90,000 to 100,000 ounces of gold was also a major area of activity in the fourth quarter. Increasing production levels particularly from the high grade SMC, and proceeding with our exploration programme remain key priorities for the Company.

See 'Forward Looking Information' for a description of the factors that may cause actual results to differ from this forecast. 

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

To date, the Company has relied significantly on private placement financings of equity securities to finance its operations. With current cash resources and expenses exceeding income at this stage, the liquidity risk could be material. A series of cost reduction measures as well as control process improvements have been implemented to tighten expenditure controls. However, success will depend, for the most part, upon increased production as well as the Company's ability to add geological reserves as cost effectively as possible. 

Sales of gold doré bars and the majority of the Company's expenses are incurred in Canadian Dollars therefore the Company is substantially protected against movements in foreign exchange. The Company's principal exchange rate risk relates to movements between the Canadian Dollar and US Dollar on the price of gold. 

Our holding of cash balances is kept under constant review and surplus funds are held on deposit at the best available market rates set by reference to the prevailing Prime Rate. There are no fixed, floating rate or interest free financial liabilities by way of borrowing. 

Cash resources, (cash, cash equivalents and short-term investments) were as follows: 

Resource	At April 30,
	2009	2008
Cash $CDN	1,806,199	15,582,337
Cash $US	0	20,256
Short-term Investments	23,638,142	15,389,118
Total	25,444,341	30,991,711

Interest received on Canadian Dollar deposits range from 0.00 - 3.00% per year. The Company also adopted a more conservative policy on cash management during the year resulting in predominantly all cash now being held in Canadian Government Treasury Bills.

There was an outflow of $5.1 million during the year in operating activities. This cash outflow was mainly a consequence of a $10.5 (2008: $3.3) million net loss arising from the planned expansion of mining operation particularly in the new SMC.

Cash flows applied to investing activities were $21.7 (2008: $25.2) million and was attributable to expenditures in mineral properties ($7.9 million), equipment ($5.3 million), restricted cash ($0.1 million) and a net investment in government treasury bills ($8.4 million).

Net proceeds from financing activities were $13.1 million (2008: $12.3) as a result of completing a private placement net of expenses during the fourth quarter.

The Company's cash resources (cash, cash equivalents and short-term investments) of $25.4 million are expected to be sufficient to fund the Company's planned exploration and development activities for the next 12 months. As at July 17, 2009, the Company had cash resources of $30.37 million.

Financial Instruments

The Company's financial instruments as at year end consist of cash and cash equivalents, short-term investments, security deposits, restricted cash, accounts receivable, accounts payable, and accrued liabilities. At April 30, 2009, the carrying values of these instruments approximate their fair values based on the nature of these instruments. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

As at year ended April 30, 2009, the Company had an outstanding commodity contract with Johnson Matthey Plc. to fix the price of 727 ounces of gold at an average price of $1,103.40 per ounce to be delivered under this contract. Fair value was not significantly different from stated value when the gold was delivered on May 12, 2009. 

Commitments

As at April 30, 2009, capital commitments included:

Capital Commitments  (All commitments in 000s of Canadian Dollars)	$000
Property, Plant and Equipment	883
Underground Development	496
TOTAL	1,379

A net smelter royalty is payable on a sliding scale commencing at 2% if the price of gold is equal to or greater than US$300 per ounce and increasing to 4% if the price of gold sold is equal to or greater than US$500 per ounce. The royalty amount due is payable quarterly commencing on the third month anniversary of the commencement of commercial production from any of the properties and terminates upon a maximum aggregate payment of $15 million. During the year ended April 30, 2009, royalties under this agreement with Kinross Gold Corp. amounted to $1,737,346 (2008: $1,651,354).

An agreement between Queenston Mining Inc. and the Company was formed in April 2007 to explore the Morgan property. The Company has agreed to spend $770,000 on exploration for the fiscal year 2010.

With regard to the Morgan purchase agreement, the Company has completed the issuance of the third tranche of shares and made the third cash payment to the vendor of the South Claims. The Company issued 15,586 shares valued at $62,500 ($4.01 per share) and paid $62,500. To complete its purchase obligations, the Company must issue a further $50,000 worth of shares and pay a further $50,000 to the vendor by January 15, 2010.

On February 1, 2008 the Company submitted a revised end of mine life closure plan to the Ministry of Northern Development & Mines ('MNDM') of the Province of Ontario. At the same time, the company put in place a letter of credit for $4,452,597 in favour of the MNDM which, in turn, refunded a mine closure bond for $2,235,829 on April 17, 2008.

A letter from the MNDM dated May 12, 2008 advised the Company that the amended closure plan which was submitted on February 1, 2008 did not address all of the prescribed requirements for a certified closure plan and that technical comments would be forthcoming.

On September 25, 2008 technical comments were received. The Company has embarked on a process, including engaging third party consultants, to compile the necessary data to respond to these comments.

The Wright Hargreaves property is not included in the amended closure plan nor is there any financial assurance in place. A letter from the MNDM dated October 27, 2008 requires that the Company provide a schedule to determine how and when any hazards on this property will be rehabilitated. In response to the MNDM request the Company issued a letter dated March 5, 2009 explaining that a consultant has been retained to assist in the identification of, if any, potential hazards and related obligations to the Company. This process is currently ongoing, the outcome of which is currently indeterminable at this time.

  

Related Party Transactions

Pursuant to an agreement between the Company and Ionic Management Corp. (formerly Quest Management Corp.), the Company pays $3,500 per month to Ionic in consideration of Ionic providing corporate and administrative services to the Company. During the quarter, the total fees paid to Ionic for services performed under the agreement were $10,500. Year to date, the total fees paid to Ionic were $42,000 (2008: $42,000). Ionic is a private management company and has one director (Brian E. Bayley) in common and a corporate secretary (Sandra Lee) in common with the Company. 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The details of the Company's accounting policies are presented in accordance with Canadian GAAP as set out in Note 2 to the financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The preparation of the Company's financial statements depend upon estimates of proven and probable reserves, measured and indicated mineral resources and recoverable ounces, assumptions of operating costs and future gold prices and possible values assigned to potential resources on exploration properties. Such estimates and assumptions affect the cost recovery of long-lived assets and the rate at which depletion and amortization are charged to earnings. In addition, management must estimate costs associated with mine reclamation and closure costs. 

The following estimates are considered by management to be the most critical for investors to understand some of the processes and reasoning that go into the preparation of the Company's financial statements, providing some insight also to uncertainties that could impact the Company's financial results. 

Going Concern

While the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations into the foreseeable future, certain historical adverse conditions and events, could cast significant doubt upon the validity of this assumption and hence the appropriateness of the use of accounting principles applicable to a going concern. 

During the years ended April 30, 2009 and 2008, the Company incurred losses of $10.5 million and $3.3 million, respectively. Cash flow required for operating activities, including exploration costs charged to operations of $7.5 million, aggregated $3.0 million for the two years in total. The funds required to continue operations and exploration activities during this period have been financed primarily from the issue of equity.

At April 30, 2009, the Company had working capital of $26.4 million. Management projects that these funds, together with cash flow from operations, will be sufficient to meet the Company's obligations and capital expenditure plans for the next twelve months. Nevertheless, differences are likely to occur between actual results and those predicted by management, and those differences may be material. It is possible that the operations will not generate sufficient cash flow for the Company to continue in the normal course without funding being provided from outside sources.

Management has been successful in obtaining sufficient funding for the Company's operating and capital exploration requirements in the past and will pursue additional funding in the future, if necessary. There is, however, no assurance that such funding will be available to the Company, or that it will be available on terms which are acceptable to management. If this does not occur, the Company may not be able to continue as a going concern.

These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary were the going concern assumption inappropriate, and these adjustments could be material.

Measurement Uncertainty

The Company's history of operating losses from mining operations indicate at April 30, 2009, that the recorded costs for mineral properties and related fixed assets may not be recoverable. Management estimates, using a constant gold price of $1,051 per ounce and operating costs similar to historical costs incurred over the past year, that annual production of approximately 72,000 to 80,000 ounces for each year would be required to cover costs of operations and estimated capital expenditures required for mining operations. To date, the Company has not been successful in achieving and sustaining this higher rate of production. In fiscal 2009 production was approximately 48,012 ounces. 

There is significant uncertainty associated with the ability of the Company to achieve the increase in production or reduction in costs necessary to recover the carrying value of the mineral property and related assets. Gold price or Canadian/U.S. dollar exchange rate movements, the success of the Company in realizing the benefit of the production improvements noted above, changes in the costs of labour, and the other costs or unforeseen production difficulties all would have an impact on the ability of the Company to achieve its goals from operations. The amount of working capital currently available for use by the Company could mean that a minor adverse development could have a significant impact on the Company's operations and ability to recover costs.

Mineral Reserves & Deferred Exploration Costs

The Company expenses exploration expenditures and near term ore development costs as incurred. Property acquisition costs and longer term development costs incurred to expand ore reserves are deferred and depleted on a units-of-production basis over proven and probable reserves which are currently accessible by the Company. Management's estimate of gold price, recoverability, proven and probable reserves, operating capital and reclamation costs are subject to risk and uncertainties affecting the recoverability of the Company's investment in mineral properties. The Company assesses capitalized costs for recoverability on an annual basis or more frequently if changes in circumstances suggest that possible impairment. Where information is available and conditions suggest impairment, estimated future net cash flows are calculated using estimated future prices, reserves and operating, capital and reclamation costs on an undiscounted basis. If the net carrying value of the property exceeds the estimated future net cash flows, the property will be written down to fair value.

Closure Costs

The Company has an obligation to reclaim its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. These estimates are recorded as a liability at their fair values in the periods in which they occur. If the estimate of reclamation costs proves to be inaccurate, the Company could be required to increase the provision for site closure and reclamation costs, which would increase the amount of future reclamation expense, resulting in a reduction in the Company's earnings and net assets.

Disclosure Controls and Procedures 

The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures as at the financial year ended April 30, 2009. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as at April 30, 2009 to provide reasonable assurance that material information relating to the Company would be made known to them by others within the Company.

Internal Control over Financial Reporting

As at the financial year ended April 30, 2009, the Chief Executive Officer and Chief Financial Officer evaluated the design and operating effectiveness of the Company's internal control over financial reporting. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operating effectiveness of internal control over financial reporting was effective as at April 30, 2009 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. During the year ended April 30, 2009, there has been no change in the Company's internal control over financial reporting that has materially affected the Company's internal control of financial reporting.

Adoption of International Financial Reporting Standards (IFRS)

The Canadian Accounting Standards Board (AcSB) and the Canadian Securities Administrators (CSA) have confirmed January 1, 2011 as the date IFRS will replace Canadian Generally Accepted Accounting Principles (Canadian GAAP) for publicly accountable, profit-oriented enterprises. This presents a change in the fundamental principles upon which financial reporting is conducted and requires significant analysis and planning to ensure a proper transition. The Company has started to assess the implications of this change, has completed a diagnostic review, and has started training key personnel on IFRS. The results of the assessment and key elements and timing of the plan will be discussed in greater detail as information becomes available.

CHANGES IN ACCOUNTING POLICIES

Effective May 1, 2008, the Company adopted Canadian Institute of Chartered Accountants ('CICA') Handbook Section 1400, General Standards of Financial Statement Presentation and CICA Handbook Section 3031, Inventories and CICA EIC 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities.

The initial adoption of these new standards had no material impact on the Company's financial statements.

(a)    General Standards of Financial Statement Presentation

The new standard clarifies what constitutes fair presentation in accordance with Canadian generally accepted accounting standards, going concern assessment and disclosures and comparative information disclosures. This standard affected the Company's disclosures but there is no effect on the Company's financial position or results.

b)    Inventories

The new standard prescribes inventory measurement and disclosure standards. This standard affected the Company's disclosures but there is no effect on the Company's financial position or results.

c)    EIC 173

This guidance clarified that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance did not have any material impact on the Company's financial position or results. 

Future changes in significant accounting policies

The following Canadian accounting pronouncements were issued and not yet adopted by the Company:

• CICA Handbook Section 1582, Business Combinations. The new section prescribes how an organization recognizes, measures and discloses and business combination. This standard is not expected to have a significant impact on the Company's financial position or results. This is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011.

• CICA Handbook Section 1601, Consolidated Financial Statements. The new section prescribes consolidation accounting standards. This standard is not expected to have a significant impact on the Company's financial position or results. This is effective for fiscal years beginning on or after January 1, 2011.

• CICA Handbook Section 1602, Non-Controlling Interests. The new section prescribes standards for the accounting for a non-controlling interest in business combination. This standard is not expected to have a significant impact on the Company's financial position or results. This is effective for fiscal years beginning on or after January 1, 2011.

• CICA Handbook Section 3064, Goodwill and Intangible Assets. The new section prescribes standards for the accounting for goodwill and intangible assets. This standard is not expected to have significant impact on the Company's financial position or results. This is effective for fiscal years beginning on or after October 2008.

OTHER MATTERS

Outstanding Share, Option & Warrant Data

As at the date of this MD&A the following securities are outstanding:

Security	Shares issued or Issuable	Weighted Average Exercise Price
Common Shares	58,548,899	--
Options	1,468,000*	$7.62
Warrants	930,000	$7.31

*if all options have fully vested

ENDFR URVORKARBUUR