TMAC Resources Inc.Dec 31, 2016 · On December 12, 2016, TMAC drew down the final available amount...

TMAC RESOURCES INC. Management’s Discussion and Analysis – December 31, 2016 1

TMAC Resources Inc.Management’s Discussion and AnalysisDecember 31, 2016(Expressed in Canadian dollars, except where otherwise indicated)


MANAGEMENT’S DISCUSSION AND ANALYSISPeriods Ended December 31, 2016

COMPANY OVERVIEW............................................................................................................. 3FOURTH QUARTER 2016 HIGHLIGHTS .................................................................................. 32016 OBJECTIVES.................................................................................................................... 42017 OUTLOOK ........................................................................................................................ 52017 OBJECTIVES.................................................................................................................... 6HOPE BAY ................................................................................................................................ 6EXPLORATION ........................................................................................................................20PERMITTING............................................................................................................................24FINANCIAL AND CORPORATE ...............................................................................................27LIQUIDITY AND CAPITAL RESOURCES.................................................................................38COMMITMENTS AND CONTINGENCIES ................................................................................39OUSTANDING SHARE, OPTIONS AND RESTRICTED SHARE RIGHTS DATA .....................40OFF-BALANCE SHEET ARRANGEMENTS .............................................................................40NON-IFRS MEASURES............................................................................................................40FINANCIAL INSTRUMENTS, CRITICAL ACCOUNTING ESTIMATES AND NEW ANDREVISED IFRSs .......................................................................................................................41INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLSAND PROCEDURES ................................................................................................................41INDUSTRY AND ECONOMIC FACTORS AFFECTING PERFORMANCE ...............................42RISKS AND UNCERTAINTIES .................................................................................................42NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION......................................42CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION ...........................43

This management’s discussion and analysis of the financial condition and results of operations (“MD&A”)of TMAC Resources Inc. (“TMAC” or the “Company”) was prepared to enable a reader to assess materialchanges in the financial condition and results of operations of TMAC as at December 31, 2016 and for thethree and twelve month periods ended December 31, 2016 and December 31, 2015. This MD&A isprepared as at February 23, 2017 and should be read in conjunction with TMAC’s audited financialstatements and notes thereto for the years ended December 31, 2016 and December 31, 2015, which areprepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by theInternational Accounting Standards Board (“IASB”) (the “Financial Statements”), available onwww.sedar.com. This MD&A contains forward-looking statements that are based on management’s currentexpectations, are not historical in nature and involve risks and uncertainties. Forward-looking statementsare not guarantees as to TMAC’s future results as there are inherent difficulties in predicting future results.Accordingly, actual results could differ materially from those expressed or implied in forward-lookingstatements (please see “Cautionary Note Regarding Forward-Looking Information” below). The Company’scommon shares (the “Common Shares”) trade on the Toronto Stock Exchange (the “TSX”) under the stocktrading symbol TMR. Additional information relevant to the Company’s activities, including TMAC’s annualinformation form (the “AIF”), can be found at the Company’s website www.tmacresources.com and onSEDAR at www.sedar.com.


COMPANY OVERVIEW

TMAC was incorporated on October 30, 2012, in the Province of Ontario, Canada, and is involvedin the exploration, evaluation and development of the Hope Bay mineral property in the KitikmeotRegion of Nunavut, Canada (“Hope Bay”). TMAC has a 100% interest in Hope Bay and in theElu property. The Company’s registered head office is 95 Wellington Street West, Suite 1010,Toronto, Ontario, Canada M5J 2N7.

TMAC's efforts are devoted to the exploration, evaluation and development of Hope Bay whichincludes much of the Hope Bay greenstone belt. TMAC completed a Preliminary Feasibility Study(the “PFS”), with an effective date of March 31, 2015, that demonstrated the technical feasibilityand commercial viability of three advanced projects at Hope Bay: Doris; Madrid; and Boston(collectively, the “Hope Bay Project” or the “Project”). Effective April 1, 2015, Doris transitionedfrom the exploration and evaluation stage to the development stage.

On July 7, 2015, the Company completed an initial public offering (the “IPO”) of Common Shareswhich began trading on the TSX. Additionally, on July 23, 2015, TMAC entered into a definitivecredit agreement (the “Credit Agreement”) with respect to a senior secured term loan facility foran aggregate principal amount of up to US$120 million, maturing on December 31, 2018 (the“Debt Facility”), and drew down the entire facility by the end of 2016. On July 19, 2016, TMACcompleted a bought deal financing for gross proceeds of $60 million (the “Bought DealFinancing”) for exploration and development of the zone below the dyke at Doris (“BTD” or “BTDZone”), equipment and site infrastructure costs related to the exploration and development of theBTD Zone and for general working capital. TMAC believes it has sufficient funds available fromexisting cash on hand at December 31, 2016 to maintain its mineral investments, fund itsexploration and evaluation and administration costs and to develop Doris for production all as perits “Path to Production” plan and its processing plant (the “Processing Plant”) commissioningplan.

TMAC is subject to risks and challenges similar to other companies in a comparable stage ofexploration and development. These risks include, but are not limited to, continuing losses,dependence on key individuals and the successful commissioning of the Hope Bay Project tosatisfy its commitments and continue as a going concern. These risks are included under theheadings “Risks and Uncertainties” and “Cautionary Note Regarding Forward-LookingStatements”.

Subsequent to year end, TMAC poured its first gold bar on February 9, 2017 and anticipatesachieving commercial production during the first quarter of 2017.

FOURTH QUARTER 2016 HIGHLIGHTS

Hope Bay Project Mining and mine development, productivity and ore production were on target. Mining and

mine development continued with 96,300 tonnes having been mined in the fourth quarter of2016. Ore production was 32,500 tonnes at an estimated grade of 13.8 grams of gold per tonne(“g/t”).

Including ore mined in late 2015 and ore mined by the previous operator, the ore stockpiles atDecember 31, 2016 are estimated to contain 121,600 tonnes of ore at a grade of 14.5 g/t, or56,500 ounces of gold of which 53,100 ounces of gold are recoverable at the estimatedrecovery rate of 94%.


The first phase of the Processing Plant, with a crushing and grinding circuit (a “Python”)designed to process 1,000 tonnes per day of ore (“tpd”), was successfully fabricated, deliveredand assembled in the completed building during 2016 allowing commissioning to begin inDecember 2016.

On September 26, 2016, the Nunavut Impact Review Board (“NIRB”) issued the final amendedProject Certificate for the Doris mine. On December 16, 2016, the Minister for Indigenous andNorthern Affairs Canada (“INAC”), approved TMAC’s amended Type A Water Licence (the“Water Licence”) for the Doris mine issued by the Nunavut Water Board (“NWB”) onNovember 4, 2016. The amended licence supports an extended mine life (from approximately1.5 years to the current reserve life of 6 years) at the Doris mine and an associated increasein tailings deposition from 458,000 tonnes to 2,500,000 tonnes into the tailings impoundmentarea (the “TIA”). The amended Water Licence was the last permit TMAC needed for productionof gold for the current known life of mine at Doris.

Submitted the draft environmental impact statement (“DEIS”) on Madrid and Boston.

Financial and Corporate On December 12, 2016, TMAC drew down the final available amount of $26.3 million (US$20.0

million) under the Debt Facility upon receiving waivers from the Lenders with regards to thereceipt by the Company of the amended Doris Water Licence, which was received within aweek thereafter.

2016 OBJECTIVES

TMAC achieved all of its objectives:

Hope Bay Project Delivered the Processing Plant and mobile equipment in the 2016 sealift. Erected the building that houses the Processing Plant (the “Mill Building”) and the installation

of associated services. Completed the installation of and initiated commissioning of the Processing Plant. Completed preparation of the TIA to receive tailings. Stockpiled, by December 31, 2016, 121,600 tonnes of ore with an estimated 56,500 ounces of

contained gold at 14.5 g/t that amounts to 53,100 ounces of recoverable gold at a 94% recoveryrate, which is more than the originally planned 110,700 tonnes of ore with an estimated 55,600ounces of contained gold at 15.6 g/t.

Obtained the amended Doris Project Certificate and Water Licence permits. Completed and submitted the DEIS. Deployed approximately $25 million of the net proceeds of $56.5 million from the Bought Deal

Financing in 2016, with the balance of approximately $31 million to be spent in 2017, for thedevelopment of a ramp to access, explore for and delineate potential Mineral Resources andMineral Reserves at the Doris BTD zone.

Financial and Corporate Borrowed all the funds under the Debt Facility, the last drawdown for which was on December

12, 2016.


2017 OUTLOOK

TMAC completed its first gold pour from its Doris mine on February 9, 2017. TMAC’s focus for2017 remains the orderly, but relatively quick, ramp up of gold production by the Processing Plant,the ramp up of underground production at Doris from the approximately 1,000 tpd to 2,000 tpdthat will be required to feed the current 1,000 tpd capacity crushing, grinding and flotationconcentrate producing circuit (a “Python”) and a second 1,000 tpd capacity Python planned fordelivery in the 2017 sealift. The key production statistics and expected expenditures in 2017 areprovided in Table 1 below.

Table 1: Summary of key production statistics and expected expenditures for 2017.

2017 ForecastOre mined (tonnes) 275,000Average grade mined (grams/tonne) 13Ore milled (tonnes) 325,000Gold sold (ounces) 130,000 – 140,000Cash cost per ounce sold (2) <US$600All-in sustaining cost per ounce sold (2) <US$750Capital expenditures:

Sustaining $15 millionPre-production and expansion $35 millionExploration and evaluation $22 million

1. CAD/USD exchange of 1.30.2. Refer to non-IFRS measures below.3. The PFS anticipated 136,000 ounces of gold recovered and sold.

The pre-production and expansion capital for 2017 includes the costs associated with, completingthe commissioning of the Processing Plant to commercial production, completing and installingthe second Python including its related equipment and infrastructure, the construction ofadditional site bed-space for 80 people and the development of the Doris North BTD zone that isdependent on further exploration success but is anticipated to be a future source of ore to feedthe expanding capacity of the Processing Plant. Pre-production and expansion capital in 2017 isforecast to be $35 million and includes a one-time charge of $8 million, payable to NunavutTunngavik Inc. in eight equal quarterly instalments, for achieving first gold production at HopeBay.

Sustaining capital expenditures are estimated to be $15 million and include costs for constructionactivities in the TIA, water discharge, surface equipment, an equipment wash-bay, final installationand commissioning of the last two generators at the power plant and other miscellaneous items.


2017 OBJECTIVES

Hope Bay Project Achieve commercial production of gold during the first quarter of 2017 and ramp up to full

production. Deliver, in the 2017 sealift, install and commission the second Python in the Processing Plant. Safely and successfully deliver consumables, materials, supplies and additional mobile

equipment in the 2017 sealift. Explore and develop the Doris North BTD zone for production by early 2018. Construct additional bed-space for 80 people at site. Commission of the last two generators at the power plant. Conduct 6,500 metres of surface drilling at Naartok. Reopen the Boston camp and conduct 7,500 metres of exploration drilling. Support the technical review of the Madrid-Boston DEIS and progress to submission

preparation of the final environmental impact statement (“FEIS”) and Type A Water LicenceApplication.

Obtain the Madrid Type B Water Licence to allow TMAC to move forward with development ofsurface infrastructure, underground advanced exploration and bulk sampling.

Financial and Corporate Commence monthly repayments of the Debt Facility on July 31, 2017.

HOPE BAY

Overview

Hope Bay, originally acquired from Newmont Mining Corporation (collectively with subsidiaries“Newmont”) in March 2013, is located approximately 685 kilometres (“km”) northeast ofYellowknife, Northwest Territories, and approximately 125 km southwest of Cambridge Bay, andeast of Bathurst Inlet, in the Kitikmeot region of western Nunavut, Canada (Figure 1). Hope Bayis approximately 160 km above the Arctic Circle, comprises an area of 1,101 km2 and forms onelarge contiguous block of land that is approximately 80 km by 20 km in extent. The Hope BayProject comprises the Doris, Madrid and Boston gold bearing mineral deposit trends. TMAC hasa 100% interest in Hope Bay (Figure 2).

In 2013, TMAC acquired from Newmont a 100% interest in the original Elu claims, a separategreenstone belt to the east of the Hope Bay claims covering 31,259 hectares. In June 2016,TMAC staked the extension of the Elu greenstone belt, comprising 37,214 hectares, therebylinking the Elu claims with the Hope Bay claims. The Elu claims now form a land package thatcomprises an area of 685 km2 and is approximately 80 km by 10 km in extent (Figure 2).


Figure 1: Hope Bay Project General Location Map.


Figure 2: Hope Bay and Elu properties mineral tenures.


Land tenure and mineral claims

On March 30, 2015, TMAC entered into a Mineral Exploration Agreement (“MEA”) granting TMACaccess to the Inuit-owned subsurface mineral rights administered by Nunavut Tunngavik Inc.(“NTI”). Also on March 30, 2015, TMAC entered into a Framework Agreement (the “FrameworkAgreement”) and an Inuit Impact Benefits Agreement (“IIBA”) administered by the Kitikmeot InuitAssociation (the “KIA”) for Inuit-owned surface access rights for the Hope Bay Project. Each ofthe MEA and Framework Agreement are for 20 year periods ending March 30, 2035.

The MEA requires annual rent payments to be made for the subsurface mineral rights and a 12%net profits interest royalty for the extraction of the minerals on Inuit-owned subsurface rightsanalogous to the Crown’s net profits interest royalty tax on Federal subsurface mineral rights. TheFramework Agreement requires payments of $1.0 million per annum, adjusted for inflation, and a1% net smelter return royalty on mineral production.

NTI owns approximately 50% of the subsurface mineral claims at Hope Bay with the other 50%owned by the Crown. While the ownership of mineral rights is associated with specific claims, itis distributed approximately as follows: Doris - 100% by NTI; Madrid - 50%/50% shared mineralrights between NTI and the Crown; Boston and southwards - 100% owned by the Crown (Figure2). As NTI is the owner of the Inuit owned subsurface mineral rights, royalty rates for the NTI’smineral rights are an annual 12% net profits interest royalty from any production, with thecalculation of the amount being subject to a limit in the allowable deductions per annum. Crownlands are subject to a sliding scale net profits interest royalty of up to 13%; however, unlike theNTI net profits royalty there is no limit to the allowable deductions. The Crown and NTI net profitsroyalties are mutually exclusive as they pertain to different claims; however, both will be includedin the provision for taxes for accounting purposes once production commences.

The majority of the Elu claims are on Inuit-owned lands that are not included in the Inuit-ownedsurface access rights provided through the Framework Agreement. The Crown owns 100% of theElu subsurface mineral claims.

Hope Bay Project infrastructure

The Roberts Bay port is on Arctic Ocean tidewater and is located approximately three km fromDoris. The Roberts Bay port facilities include a jetty, diesel fuel storage facilities, a gravel airstripand a large laydown area for equipment and supplies. Infrastructure at Doris includes a powerplant, Mill Building, Processing Plant, camp facilities, diesel fuel storage, helipads, administration,maintenance, warehouse and mine-dry buildings, an all year haul road from Roberts Bay to Dorisand through to Madrid and a permitted TIA (Figure 3).


Figure 3: Doris site proximity to the Roberts Bay port on Arctic Ocean tidewater and siteinfrastructure – August 2016.

Infrastructure at Boston includes a gravel airstrip, a summer camp, diesel fuel storage and aportable power plant.

The Hope Bay Project’s Path to Production overview

The Path to Production plan covered the 24-month period commencing January 1, 2015 andending December 31, 2016 and included expenditures related to the completion of construction,assembly and initial commissioning of the Processing Plant.

With the $9 million of funds raised from the flow through Common Share financing in March 2016(the “FT Financing”), the total estimated cash outflows, including working capital, for thecombined 2015 and 2016 years for the Path to Production plan increased from $325 million to$334 million. As at December 31, 2016, TMAC had incurred $350 million of expenditures underthe Path to Production, including $8 million of additional environmental bonding required underthe Doris Water Licence, and had completed over 98% of the scope of work with approximately$2 million left to be incurred. The cash outflows to complete the Path to Production plan are,therefore, expected to be approximately 3% higher than the $308 million budget andapproximately 5% in excess of the original $334 million when considering the additional cashdeposits required for environmental bonding. The project is essentially on target with respect tothe original Path to Production plan’s timing as TMAC envisions achieving commercial productionof gold during the first quarter of 2017. The Path to Production plan did not include the finalizationof commissioning and ramp up that is included in the capital expenditures detailed in the 2017outlook.


Table 2: Path to Production plan’s cash outflows for the period from January 1, 2015 to December31, 2016. TMAC has completed over 98% of the scope of work with approximately $2 million leftto incur.

Principal PurposePath to Production

2015-2016Incurred to

December 31, 2016$ million $ million

Hope Bay Project development costsDirect costs 145 151Indirect costs 20 20Capitalized pre-production operating costs 54 57

Hope Bay Project development sub-total 219 228Corporate, exploration, permitting and generalexpenditures related to the Hope Bay Project 89(1) 88

Path to Production development sub-total 308 316Collateral for Letters of Credit 26 34

Total 334(2) 350(1) Includes $9 million from the FT Financing completed March 18, 2016.(2) Comprises $325 million of the Path to Production and $9 million from the FT Financing.

The Path to Production development sub-total costs of $316 million to December 31, 2016, are3% over budget mainly due to additional expenditures incurred to complete all of the foundationwork on the Mill Building, additional installation costs of Processing Plant at site and additionalcosts for vessels for the 2016 sealift, partially offset by cost reductions in other areas includingmining. In addition, the letters of credit (the “Letters of Credit”) supporting environmentalrehabilitation bonding are $34 million instead of $26 million. The increase in environmentalbonding results from a number of factors essentially not within TMAC’s control (see EnvironmentalRehabilitation Bonding section below).

At December 31, 2016, TMAC had $63 million of cash and cash equivalents excluding restrictedcash of $45 million that is composed of a $10 million minimum cash balance in a segregatedaccount in accordance with the Debt Facility requirements and $35 million invested in guaranteedinvestment certificates set aside as collateral for the Letters of Credit that support environmentalrehabilitation bonding and provide security for compliance under various agreements with Inuitorganizations. The proceeds from the Bought Deal Financing are being used for the explorationand development of the BTD Zone; however, these funds also provide an additional cash cushionif needed.

First gold was poured on February 9, 2017 and TMAC expects to achieve commercial productionby the end of the first quarter of 2017.

Development

Doris underground

Table 3 details the production achieved to December 31, 2016 compared with the Path toProduction plan.


Table 3: Path to Production metrics to December 31, 2016.

Three months endedDecember 31, 2016

Twelve months endedDecember 31, 2016

Actual Plan Variance Actual Plan VarianceDevelopment:

Tonnes of ore mined 32,500 22,800 9,700 100,500 98,000 2,500Tonnes of waste mined 63,800 88,100 (24,300) 198,200 196,000 2,200Total tonnes mined 96,300 110,900 (14,600) 298,700 294,000 4,700

Metres advanced 1,679 1,411 268 5,297 5,072 225Average Au grade g/t 13.8 12.7 1.1 14.6 14.7 (0.1)Contained Au ounces 14,400 9,300 5,100 47,100 46,200 900

As at December 31, 2016Actual Plan Variance

Estimated Stockpile:(1)

Tonnes 121,600 110,700 10,900Average Au grade g/t 14.5 15.6 (1.1)Contained Au ounces 56,500 55,600 900

(1) Estimated ore stockpile on surface includes 12,700 tonnes of ore containing an estimated 5,600 ounces of gold (at a94% recovery rate is 5,300 ounces of recoverable gold), based on PFS estimates of the grade of the material mined,that had been brought to surface prior to underground development commencing in October 2015 (i.e., ore from testmining by TMAC in early 2015 and by Newmont in 2010 prior to TMAC’s acquisition of Hope Bay) and 8,500 tonnesof ore containing an estimated 3,800 ounces of gold mined from October 2015 to December 2015. The ore instockpile had 21,200 tonnes as at December 31, 2015, 8,500 tonnes more than the original plan of 12,700 tonnes,and 121,600 tonnes as at December 31, 2016, 10,900 tonnes more than the original plan of 110,700 tonnes.

Mine development rates improved to 19.4 metres per day at the end of the fourth quarter from18.0 metres per day in the third quarter and achieved year end targets including the start ofdevelopment of the BTD zone. Productivity in the fourth quarter continued to be above 0.5 metresper man-shift. Continued high productivity was achieved through revisions to the contractor’s staffstructure, the addition of OEM trainers and technicians to support equipment brought in with the2016 sealift that allowed for mining an expanded number of working faces, and the start oflonghole stoping ahead of plan.

The ore shape, measured by face and back mapping, is used to determine the relative grade ofthe diluted drift volume based on the block model ore grade. Longhole stope planning uses thedetailed vein model produced from the face and back mapping. Chip samples continue to becollected to improve the detailed grade determinations over the PFS block model. The detailedgeology of the face and back mapping along with chip samples are being used to develop anupdated resource model for the annual Mineral Resource and Mineral Reserve statement that istargeted for completion this coming June and every June going forward.

The difference in the grade mined during the three months ended December 31, 2016 of 13.9 g/tover the three months ended September 30, 2016 of 16.1 g/t reflects sill development in lowergrade stoping areas at the margins of the ore body as pre-production development of the abovethe dyke resources of Doris North is approaching completion. The grade in December was,however, 18.1 g/t and reflects the extraction of high grade drift and fill stopes in addition to thelower grade final sill development. Year to date grades of 14.6 g/t are in line with the target of


15.2 g/t considering the delay of high grade drift and fill stopes to 2017 in favour of long holestopes at lower cost.

CMAC bolting arms, introduced in May 2016, continue to improve productivity in narrow veinlateral development rounds, reducing labour costs for bolting and improving cycle times byeliminating the step of leveling the muck pile. A dual boom scissor deck mounted version of theCMAC bolting arms was delivered in the 2016 sealift and was in use in the fourth quarter.

Development through 2016 totalled 198,200 tonnes of ramp and stope access drifts including16,800 tonnes of BTD development. Ore stockpiled through 2016 totalled 121,600 tonnes of ore,with 4,500 tonnes of ore coming from longhole stopes and the balance coming from lateraldevelopment in ore and drift and fill stopes to create sufficient working faces and a stockpile thatwill facilitate providing the 1,000 tonnes of ore per day for the Processing Plant in 2017. Minedevelopment productivity in the fourth quarter of 2016 averaged over 0.56 metres per man-shiftincluding geology and technical services staff, compared with the PFS assumption of 0.25 metresper man-shift at full production. Direct productivity achieved was 0.63 metres per man-shift,highlighting the potential for continuing improvement over the PFS as more headings areactivated with similar levels of technical and supervisory personnel and scheduled maintenance.

Taking into account ore mined in late 2015 and ore mined by the previous operator, based on thePFS estimates of the grade of the material mined, the stockpile at December 31, 2016 is estimatedto contain 121,600 tonnes of ore at a grade of 14.5 g/t, or 56,500 ounces of gold of which 53,100ounces of gold are recoverable at the estimated recovery rate of 94%, compared with TMAC’sPath to Production plan that included having a gold ore stockpile of 110,700 tonnes containing55,600 ounces of gold (at 15.2 g/t). The contained ounces in the stockpile are slightly above thePath to Production plan. The sequence and order of mining changed from the original plan ashigh grade hinge stopes were converted from drift and fill to longhole mining methods. Thestockpile is to provide the Processing Plant with significant feed at start-up, ensure a smoothproduction ramp up to 1,000 tpd in 2017 and, following the delivery and installation of a secondGekko Systems Pty Ltd. fabricated Python to site in the 2017 sealift, to 2,000 tpd by the end of2017.

Three ore stockpiles (low, medium and high grades) were established to allow for future blendingof ore going into the Processing Plant. In addition, waste containing 3 to 4 g/t gold was segregatedfor early commissioning of the Processing Plant.

In 2017, equipment will be procured and commissioned to support the BTD zone expansion andto replace aging and rental surface equipment. A sand fill plant will be constructed to utilize coarsetailings for mine backfill.

Doris vent raise infrastructure

The air compressor system was replaced with distributed air compressors in the relatively stableunderground environment to improve reliability and reduce power consumption. The newcompressors were installed and commissioned in July 2016. The large central compressor systemwill be maintained as a backup for this critical site service. The mine heater system software wasmodified to increase reliability and reduce operating costs by adjusting system operations for therelatively low air volumes of 1,000 tonnes per day for 2017’s operations.


Camp capacity expansion

During the second quarter of 2016, TMAC converted a portion of the surplus administrationbuilding to single occupancy dormitory rooms adding 50 beds as well as refurbishing 10 roomspreviously used for storage to bring the total number of beds in the camp to 190, which is now themaximum occupancy of the entire Doris camp.

While the current camp has sufficient capacity to accommodate the personnel needed to operatethe Doris mine, the camp will be expanded in 2017 by the addition of 80 beds to have sufficientcapacity for additional personnel focused on future construction, exploration and operationsactivities at Hope Bay.

Mill Building constructionFigure 4: Mill Building construction and power plant completion to November 28, 2016, thebuilding cladding was completed and generators 7 & 8 placed on foundations.

Construction of the Mill Building was completed in coordination with the scheduled assembly ofProcessing Plant equipment in the fourth quarter of 2016. Grouting of equipment mounted on theslab and structural plinths was performed as installation was completed through the quarter. TheMill Building foundation work required significantly more concrete than had been planned due toinitial problems with the bedrock condition underneath the building and a significant number ofplinths that were necessitated by design changes in the Processing Plant foundations. Theamount of concrete used increased from approximately 1,500 cubic metres to approximately4,500 cubic metres. The additional plinth work will, however, provide future benefits inmaintenance and operating efficiencies.

Other site construction and support activities

The road to Quarry 3 and to the subaerial tailings deposition point at the TIA as well as earthworksto develop the tailings facilities were completed in the third quarter of 2016, finishing off the 2016


planned scope of work. Advancement of the road to the south dam to place the initial tailingsdischarge in a location more favorable for the long-term discharge plan resumed in the fourthquarter. A storage facility for 800 tonnes of ANFO within the TIA was commissioned to store the2016 sealift explosives delivery. The tailings and reclaim piping systems, including freezeprotections and spill containment for commissioning of the systems, were completed in earlyJanuary 2017.

Figure 5: TIA road development progress. The star indicates location at December 31, 2016 andthe vertical line just left of Quarry 3 was the extent of the planned 2016 scope of work. D2 is therevised location of the initial subaerial tailings discharge site. Solid lines show completed toDecember 31, 2016.

The TIA will be expanded in 2017 by the design and start of construction of the south tailings damwhile extending the deposition pipeline to the south. A raw water supply to the Processing Plantwill be installed to supplement reclaim water from the TIA. An ocean water discharge system willbe designed, procured and constructed to allow discharge from the TIA and underground minewhen required in the future.

The Doris airstrip that was extended from 900 metres length by 20 metres width to 1,500 metreslength by 40 metres width in 2015 will be further extended to 1,600 metres in length and a southapron added with aircraft de-icing capabilities to reduce potentials for weather delays and toincrease aircraft capacity during the warm summer months.

The power plant achieved commissioning of the final two generators of six required for 1,000 tpdof production on October 17, 2016. The 7th and 8th generators, required to increase production to2,000 tpd, were placed on their foundations and are being prepared for commissioning in 2017.


Figure 6: 6 of 8 generators in the power plant was fully commissioned October 17, 2016.Generators 7 and 8 were placed on pads to the right of the third chimney stack for commissioningin 2017.

Processing Plant engineering, fabrication and assembly

The Processing Plant, delivered to Hope Bay in late August 2016 in containers and as bulkequipment, were staged for assembly which began September 9, 2016. The motor control centres(“MCCs”) were shipped to site via C-130 Hercules aircraft in June. The MCCs were installed onthe mezzanine level earlier than the remaining Processing Plant equipment’s arrival to facilitatetheir installation prior to the roof being enclosed and to allow cabling installation to begin aheadof the sealift. The MCC installation saved at least four weeks of Processing Plant commissioningtime.

Assembly of the Processing Plant progressed on schedule with wet commissioning starting inDecember 2016, followed by rock in January 2017 and first gold production on February 9, 2017.The Processing Plant has two main production lines: the Python ore grinding line that producesgold through a gravity circuit and subsequent flotation; and, a concentrate treatment plant (“CTP”)that will treat both gravity and flotation concentrates. The PFS estimated the final gold recoveryrate of the Processing Plant to be 94% for Doris North ores.

The Processing Plant is expected to ramp up to 1,000 tpd throughput in the first quarter of 2017and be expanded to 2,000 tpd capacity once the second Python is fabricated, shipped in the 2017sealift and assembled in the fourth quarter. During the year ended December 31, 2016 theCompany advanced $13 million related to the fabrication of the second Python and expects toincur an additional $6 million in 2017 to complete the fabrication and install the second Python.


Figure 7: Processing Plant layout including the second Python train to be installed in late 2017.

Figure 8: Primary crusher accepting first ore feed on January 3, 2017


Figure 9: Python line secondary and tertiary crushing in operation on January 26, 2017.

Figure 10: Flotation and tailings pumping systems in operation on January 26, 2017.


Figure 11: Concentrate treatment systems being tested on January 26, 2017.

Figure 12: First TMAC gold bar HB0001 poured on February 9, 2017.


EXPLORATION

With the completion of the $9.0 million FT Financing and the $60.0 million Bought Deal Financing,the total exploration and geoscience budget for 2016 was increased to $17.1 million. The primaryobjective of the 2016 exploration and evaluation program was to support the advancement ofHope Bay through continued geological modelling, diamond drilling and metallurgical test workand resource definition at both Doris and Madrid. The 2016 exploration drilling programcomprised surface and underground diamond drilling targeting both near-term (one to three year)production areas and longer-term expansion of resources at Doris. The main objectives were tofacilitate detailed stope design within certain areas of the current Doris mine plan and topotentially add significant high-grade ounces of gold to the Doris Mineral Resource base, inparticular, below the diabase dyke on the BTD zone. A second objective of the 2016 explorationprogram was to continue to refine the geological understanding of the Madrid North deposit andcontinue to upgrade and expand the Naartok Mineral Resource. A third objective of the 2016exploration program was to undertake regional exploration work outside of the three knowndeposits at Doris, Madrid and Boston. The success of the underground BTD zone drilling duringthe second and third quarters of 2016 resulted in the decision to initiate undergrounddevelopment to provide appropriate drilling platforms and access to the Doris North BTD EastLimb mineralization.

The exploration and geoscience program for 2017 is designed to support several aspects ofexploration at Hope Bay ranging from immediate production support, through advancedexploration, to the generation of regional targets in preparation for drilling. A key strategy of theexploration program is to develop and maintain a project pipeline consisting of highly prospectiveexploration targets at various stages of evaluation. The primary objective, however, will be tocontinue to support infill and expansion diamond drilling, focused on the Doris North BTD zones.

Overview

A summary of the surface and underground drill programs for 2016 is provided in Table 4 below.

Table 4: Results of the surface and underground drill programs for the year ended December 31,2016 compared with the plan for 2016.

2016 Actual 2016 Plan VarianceSurface drilling (# metres)- Doris North and Connector zones 5,413 8,000 (2,587)- Madrid North 4,967 9,655 (4,688)- Regional exploration 2,967 4,380 (1,413)Total 13,347 22,035 (8,688)

Direct cost per metre ($)(1) 322 276 46All-in cost per metre ($)(1) 466 380 86

Underground drilling (# metres)- BTD Zone 13,812 24,000 (10,188)

Direct cost per metre ($)(1) 179 166 13All-in cost per metre ($)(1) 306 268 38

(1) Direct cost per metre and all-in cost per metre are non-IFRS measures (see Non-IFRS Measures below).


No surface or underground drilling was conducted during the fourth quarter of 2016. As of the endof July, all surface drilling had been suspended for the balance of 2016 to free up camp spaceduring the September sealift season and during assembly of the Processing Plant. Undergrounddiamond drilling on the BTD zone was also suspended until the BTD ramp development is ableto provide more efficient underground drilling platforms. Underground drilling on the BTD zonesis expected to resume in the first quarter of 2017.

Drilling costs per metre to December 31, 2016 were higher than had been planned for the fullyear due to the later than expected start-up of the drilling program and the absorption ofproportionately higher camp overhead costs per metre due to fewer metres being drilled.

Doris

Historical drilling that targeted the BTD zone had been limited by the few surface drilling platformsavailable to adequately drill from Doris Mountain north of the Doris camp infrastructure.Underground exploration drilling on the BTD zone commenced late in the first quarter of 2016from the underground exploration drift developed during the fourth quarter of 2015 and firstquarter of 2016. The exploration drift provided drilling platforms necessary to effectively test highpotential targets beneath the diabase dyke. Exploration drilling success on the Doris North BTDExtension and Doris North BTD East Limb gold mineralized zones (the initial results of which werein TMAC’s news release issued June 7, 2016) provided the confidence required to initiateunderground ramp development below the diabase dyke. A news release summarizing the BTDzone drilling results to date was issued on September 14, 2016.

Access development commenced in the fourth quarter of 2016 from the bottom of the Doris Northspiral haulage ramp and will proceed north towards the Doris North BTD East Limb and DorisNorth BTD Extension. Approximately 1,200 metres of ramp development are planned in 2017 toprovide additional drill platforms to further define the Doris North BTD East Limb and Doris NorthBTD Extension and to provide access to the Doris North BTD East Limb for lateral developmenton the vein (see Figure 13). Further exploration diamond drilling will begin late in the first quarterof 2017 as development progresses and drilling platforms become available. The Doris NorthBTD East Limb zone is sufficiently drilled to allow initial resource models to be estimated;however, the more complicated geometry of the Doris North BTD Extension zone will requireadditional infill drilling prior to resource modelling.

The spiral ramp used to exploit the known Doris deposit above the diabase dyke will be extendedto begin the access ramp to the BTD zone. The original exploration drift will be repurposed formining operations.

Of the net proceeds of approximately $56.5 million from the Bought Deal Financing, $24.9 millionwas spent in 2016 with the balance of $31.6 million expected to be spent in 2017 (Table 5 below).The 2017 diamond drilling program includes 16,000 metres of underground drilling at the BTDzone of Doris that will be completed from new platforms as the BTD development progresses andwill infill and expand the BTD East Limb and BTD Extension zones (Figure 13 below).


Table 5: BTD zone budgeted exploration and development cash outflows for the period fromJuly 19, 2016 to December 31, 2017.

Principal Purpose 2016-2017$ million

Exploration and development of the BTD zone at Doris 30.5Equipment and site infrastructure costs related to exploration anddevelopment of the BTD zone at Doris 14.5

General working capital, including diesel fuel 11.5Total 56.5

Figure 13: Doris North BTD zone location of the planned access ramp and additional explorationareas accessible for underground diamond drilling.

Reported intervals represent down-hole thickness; true width varies depending on dip of the drill hole. True widths are estimated to be approximately 50% to 85% of down holewidths. Composite intervals are based on geological observations. Gold values used to calculate composite intervals are uncut.

Reported historical drill hole intersections have been obtained from TMAC’ Hope Bay Drillhole Database which has been independently validated by Roscoe Postle AssociatesInc. and reported in Section 12 - Data Verification of the PFS dated May 28th, 2015.

Madrid

The objective of the 2016 Madrid exploration program was to further refine the geologicalunderstanding of the Madrid North deposits and continue to upgrade and expand the NaartokMineral Resource inventories. The 2016 drilling program targeted historical, near surfaceintersections, extending north-east from the Naartok West zone, that were not included in thecurrent Mineral Resources. The summer exploration diamond drilling program was completed bythe end of the second quarter and all assays received in the third quarter of 2016. Interpretationand geological modeling were completed in the fourth quarter and a news release was issuedsummarizing the results of the 2016 diamond drilling. Please see the news release datedNovember 3, 2016 entitled “TMAC Resources Intersects Near-Surface Gold MineralizationOutside of Current Mineral Resources at Madrid North” for the complete results of drilling and forthe additional disclosures required under National Instrument 43-101, Standards of Disclosure forMineral Projects (“NI 43-101”).


The 2017 diamond drilling program includes 6,500 metres of surface drilling at Naartok that willtarget further upgrading and expansion of the Naartok zone.

Boston

Equipment and supplies required to support the 2017 diamond drilling program will be mobilizedto the Boston site in the first quarter of 2017. The Boston camp facilities will be opened and re-commissioned in the second quarter in preparation for the diamond drilling program scheduledfor the third quarter. The 2017 diamond drilling program includes 7,500 metres of surface drillingat Boston that will target expansion and demonstration of the high-grade potential at Boston.

Regional Exploration

During the 2016 field season, 2,967 metres of diamond drilling were completed within threeregional target areas. Assay results from the regional program did not return ore grade goldintersections; however, drilling results have provided additional geological information that willhelp refine future targets in these areas.

The regional exploration program, funded from the FT Financing, was designed to advance highpriority exploration targets within the northern portion of Hope Bay. In addition to the completionof the airborne geophysical surveys earlier in 2016, a key component of the 2016 exploration fieldseason was the glacial till sampling program. Overburden Drilling Management collected a totalof 522 glacial till samples from high priority exploration target areas during the summer fieldseason. Final results were received in the fourth quarter of 2016 and a news release summarizingthe results of the 2016 gold in till program was issued. Please see the news release, datedDecember 22, 2016, entitled “TMAC Resources Provides Results of Regional Till SamplingProgram at Hope Bay” for the complete results of drilling and for the additional disclosuresrequired under NI 43-101. Interpretation of the results will provide valuable insights to furtherrefine and prioritize drill targets for the 2017 exploration program.

Elu

In 2013, TMAC acquired from Newmont a 100% interest in the original Elu claims, a separategreenstone belt to the east of the Hope Bay claims covering 31,259 hectares. In June 2016,TMAC staked an additional 37,214 hectares within the extension of the Elu greenstone beltthereby linking the Elu claims with the Hope Bay claims. The Elu claims now form a land packagethat comprises an area of 685 km2 and is approximately 80 km by 10 km in extent. The new Elulink claims were approved by the Nunavut mining recorder in the fourth quarter of 2016.Exploration on the Elu belt in 2017 will consist of geological mapping within the Elu link claimsand more detailed geological mapping on the main Elu belt, following up on anomalies identifiedin the 2015 airborne geophysical program.


PERMITTING

TMAC is in possession of Federal and Territorial approvals required to commence production atDoris. Since the acquisition of Hope Bay in March 2013, TMAC has operated in compliance withenvironmental requirements and has successfully administered a rigorous environmentalmonitoring and reporting program. The Company also maintains extensive data collectionprograms required to support the current permits and future permitting of additional mining areasincluding those at Madrid and Boston.

TMAC established an on-going permitting program to ensure long-term regulatory compliance ofmining activity at Hope Bay. The program has taken a three-pronged approach designed to:permit an increase in the tonnage and mine life at Doris; allow the Company to extract bulksamples from the Madrid South and Madrid North areas; and, extend commercial mining to theMadrid and Boston areas of Hope Bay. By the end of 2016, TMAC received importantamendments to both the Doris Mine Project Certificate from NIRB and the Type A Water Licencefrom NWB, satisfying the first of the three objectives.

Doris

Prior to TMAC’s acquisition of Hope Bay, a Project Certificate and Type A Water Licence hadbeen issued by NIRB and NWB, respectively, for all associated activities related to undergroundmining at Doris. The original Doris Project Certificate is for the life of the Doris mine while theDoris Water Licence is set to expire in August 2023. Together, these two permits allow for themining of up to 0.5 million tonnes from the Doris North deposit, milling, use of water, placementof tailings, and construction and operation of attendant infrastructure for Doris. In June 2015,TMAC applied for amendments to the existing Project Certificate and Type A Water Licence topermit the expansion of the Doris mine and deposition in the TIA of up to 2.5 million tonnes oftailings.

After undergoing rigorous review by government bodies and the public, via the respectiveprocesses of the NIRB and NWB, the Company’s applications were approved and an amendedProject Certificate was received on September 23, 2017 and an amended Doris Water Licencewas received on December 16, 2017. The Doris mine is now fully permitted for mining and oreprocessing at the Doris site at currently planned capacities.

An important aspect of the Water Licence deliberations is the provision of environmental securityfunds to the landowner, the KIA, and INAC, as the Crown’s representative, for the rehabilitationof the mine following closure in the event that the operator is unable or unwilling to carry out therehabilitation. As part of the Water Licence amendment application and review process, TMACproduced an estimate of the cost to reclaim the facilities at the end of operations. A second aspectof the security for rehabilitation is the determination of which party should hold the security. UnderTMAC’s Framework Agreement with the KIA, the KIA are entitled to hold security for therehabilitation of the land affected by the operations. INAC is entitled to hold security for therehabilitation of water affected by the operations. In the Water Licence, the NWB set the amountsto be held by KIA and INAC at $17.6 million and $13.1 million, respectively. TMAC deposited thefunds into certificates of deposits with large Canadian financial institutions and had Letters ofCredit issued to the KIA and INAC in satisfaction of the required bonding amounts.

Other permits include authorizations from the Department of Fisheries and Oceans (the “DFO”)(for the life of mine), a navigable waters permit from Transport Canada (for the life of mine) anda jetty lease from INAC for the Roberts Bay jetty which expires in July 2017. At the beginning of


July 2015, the Company provided INAC with a renewal advice for the jetty lease and TMAC doesnot anticipate any difficulties in obtaining the renewal. Further discussions have been held withINAC and the amendments to the applicable leases and permits will include updating the leaseon the current jetty as well as provisions covering the proposed in-water infrastructure associatedwith the saline water discharge pipeline into Roberts Bay. These permissions are expected to bein place by mid-2017.

Madrid and Boston and the remaining Hope Bay Belt

To carry out exploration in Nunavut, a Type B water licence is required from the NWB. TMACholds two Type B water licences: one for the Boston area at the southern end of the Hope Bayproperty, which permitted a 65-person camp, surface exploration and the extraction of a bulksample of ore by a previous owner that is currently stockpiled at the Boston site; and, one forexploration drilling over the Hope Bay greenstone belt. The Boston Type B licence is scheduledto expire in July 2017. In January 2017, TMAC initiated a renewal application for the licence withthe NWB and anticipates receiving the renewal prior to expiration. In the unlikely event that thisshould be delayed, there is provision in the legislation for temporary extensions.

Madrid advanced exploration application

The Company has submitted an application to NWB for a new Type B water licence for advancedexploration, including the collection of bulk samples from each of Madrid North and Madrid South.The NWB referred the application to the NIRB for screening. On June 24, 2016, NIRB determinedthat the Madrid advanced exploration project could proceed as an exception to the environmentalassessment of commercial mining of Madrid and Boston and returned the application back to theNWB for granting of the Type B water licence. After waiting for the completion of the Doris permitsamendments, TMAC restarted the Madrid Type B permit application process which has nowadvanced to the technical review stage. Assuming a successful review process, TMAC anticipatesthat the Madrid Type B water licence will be available in mid-2017.

Commercial mining at Madrid and Boston

The current long-term mining plan for Hope Bay includes the development of commercial miningoperations at the Madrid and Boston sites. The bulk sample program currently under permittingconsideration is an integral part of determining the viability of the Madrid deposits. For the Bostondeposits, it is anticipated that plans for commercial development would be derived from existingknowledge augmented by additional exploration undertaken in the future under the renewed TypeB water licence (see above).

From a permitting perspective, commercial mining at Madrid and Boston requires a two-stageprocess. The first stage involves initiating an environmental impact review process covering theproposed developments. TMAC has now completed the preparation of a DEIS and submitted itto NIRB on December 28, 2016. The DEIS and the attendant water licence application cover theanticipated development and associated impacts of extending commercial mining to the southernportion of Hope Bay to include mines at Madrid and Boston. TMAC anticipates that the DEIS willadvance through the technical review process so as to allow the Company to prepare the FEIS inlate 2017. Based on similar projects, the Company anticipates an approximately two-year reviewperiod from submission of the DEIS, through preparation, review and approval of the FEIS beforeproject certificates covering the southern developments are issued by NIRB. The second stageof the permitting process entails acquiring a Type A water licences from NWB to cover the


proposed mining operations. The Company anticipates receipt of the water licence approximatelyone year following receipt of the project certificate.

Environmental rehabilitation bonding

As part of TMAC’s purchase of Hope Bay in March 2013, the Company assumed environmentalrehabilitation responsibilities for Hope Bay. Newmont had certain financial institutions provideLetters of Credit to INAC, DFO and KIA for bonding of Hope Bay’s environmental rehabilitationliabilities on behalf of TMAC.

In mid-December 2015, TMAC issued Letters of Credit totalling $18.0 million, collateralized byrestricted cash deposits at major Canadian financial institutions, to replace the Letters of Creditmaintained by Newmont thereby terminating the Company’s obligations to Newmont. AdditionalLetters of Credit were issued on receipt of the amended Doris Water Licence as required by theenvironmental rehabilitation plan submitted as part of the Doris permits amendments application.The costs to fully rehabilitate the Hope Bay site post closure of all mining operations was specifiedin a December 2012 environmental report and totalled $26 million, of which $18 million wassecured through Letters of Credit. The amended NWB Water Licence increased the $26 millionamount to approximately $34 million. The $8 million increase from the 2012 to the 2016 estimateis a result of a number of factors including: a change from subaqueous to subaerial tailingsdepositions; an increase from 0.5 million tonnes to 2.5 million tonnes of tailings; the addition ofthe capability to discharge saline water by pipeline to Roberts Bay; and, a requirement to fullysecure a new camp at Doris to replace the existing camp in the future and remove both theexisting and the future new camp upon eventual cessation of all mining operations. TMAC is ofthe view that the $34 million environmental rehabilitation estimates are significantly higher thanwhat would normally be required for projects of this type thereby leading to approximately $8million more bonding than had been envisioned.

In addition to the Letters of Credit that TMAC maintains for environmental rehabilitation liabilities,pursuant to the Framework Agreement, TMAC is required to provide the KIA with additionalenvironmental rehabilitation assurance that, essentially, provides twice the amount of assurancerequired by the Federal regulators (“Overbonding”) on certain aspects of the Hope Bay Project’senvironmental rehabilitation, totalling $9.7 million (the “Overbonding Amount”). TheOverbonding Amount is secured by a general security agreement with the KIA (the “KIA GSA”).Pursuant to the Credit Agreement, the KIA GSA was subordinated to the Debt Facility. Also aspart of the Framework Agreement, TMAC agreed to provide the KIA with Letters of Credit equalto 5% of the Overbonding Amount in each calendar year to systematically replace the KIA GSA.The first such Letters of Credit, with a face amount of $0.4 million, was issued in April 2015. During2016, the Company transferred an additional $0.5 million to restricted cash pursuant to anOverbonding Amount. One year after commercial production is achieved, TMAC is required toprovide Letters of Credit in favour of the KIA for the full amount of any Overbondng requirements.The Letters of Credit are collateralized through cash deposits that are included in restricted cash.TMAC has entered into discussions with both the KIA and INAC in an attempt to resolve theOverbonding issue.


FINANCIAL AND CORPORATE

Bought Deal Financing

TMAC required funding to explore and develop the BTD zone, as the terms of the CreditAgreement restricted the use of the funds drawn under the Debt Facility to development andancillary activities on the Mineral Reserves above the diabase dyke. Accordingly, on July 19,2016, TMAC completed a Bought Deal Financing of 3,975,000 Common Shares, at a price of$15.10 per Common Share for gross proceeds of approximately $60.0 million. The net proceedsof $56.5 million from the Bought Deal Financing were used in 2016 and will be used in 2017 forthe development of an exploration ramp to access the BTD zone and explore for additional ouncesat the BTD zone as more fully described above.

At the same time as the Bought Deal Financing, Resource Capital Fund VI L.P. (“RCF”), a majorshareholder of the Company, sold 1,325,000 Common Shares through a secondary offering forgross proceeds of approximately $20.0 million. RCF granted the underwriters an over-allotmentoption to purchase an additional 795,000 Common Shares from RCF, which option was exercisedfor additional proceeds to RCF of approximately $12.0 million. RCF was solely responsible for allits expenses related to the secondary offering.

Flow-Through Financing

On March 18, 2016, the Company completed the FT Financing and issued 827,206 flow-throughCommon Shares of TMAC (the “Flow-Through Common Shares”) at a price of $10.88 per Flow-Through Common Share for gross proceeds of $9.0 million. The gross proceeds from the sale ofthe Flow-Through Common Shares will be used for expenditures which qualify as Canadianexploration expenses (“CEE”) (within the meaning of the Income Tax Act (Canada)). Newmontand RCF indirectly acquired 242,979 Common Shares and 250,227 Common Shares,respectively, of the FT Financing to hold at that time 29.4% and 35.4%, respectively, of theCompany’s then issued and outstanding Common Shares.

Debt Facility

On July 23, 2015, TMAC entered into a definitive Credit Agreement with a syndicate of lenders(the “Lenders”) led by Sprott Resource Lending Partnership (as Agent) and Morgan StanleyCapital Group Inc. with respect to the Debt Facility having an aggregate principal amount of up toUS$120 million and maturing on December 31, 2018. Advances under the Debt Facility bearinterest at 8.75% per annum, compounded and payable quarterly. Until September 30, 2017, theCompany has the option to pay interest in cash or defer such interest, in which case such interestwill continue to be outstanding and accrue interest at the same rate as the rate stipulated in theDebt Facility until paid in full. The Credit Agreement does not require TMAC to complete any goldor foreign exchange hedging. The Company can choose to prepay the Debt Facility prior toDecember 31, 2018, subject to defined prepayment fees if prepayment is made before July 23,2017.

As partial compensation for entering into the Credit Agreement, the Company issued the Lenders1,900,001 share purchase warrants (the “Warrants”), with each Warrant being exercisable forone Common Share at an exercise price of $7.50 per Common Share. The Warrants have a termof five years expiring on July 23, 2020 and can be accelerated by the Company in the event theclosing price per Common Share is higher than $15.00 for 20 consecutive trading days at anytime after July 23, 2016 which event occurred on August 23, 2016. The fair value of the Warrants


on the date of issuance was $2,936,000, calculated using the Black-Scholes option pricing model.516,167 Warrants were exercised during the three month period ended June 30, 2016, 600,000Warrants were exercised during the three month period ended September 30, 2016, leaving783,834 Warrants unexercised at December 31, 2016. On February 16, 2017, 350,000 Warrantswere exercised for total cash proceeds of $2.6 million leaving 433,834 Warrants unexercised atFebruary 23, 2017.

Also as partial compensation for entering into the Debt Facility, the Company issued the Lenderscall options for 12,000 ounces of gold at a strike price of US$1,140 per ounce with a term of fiveyears expiring July 23, 2020 (the “Gold Call Options”). The Company has the option to satisfyits obligations with respect to any Gold Call Options exercised prior to June 30, 2017 in cash orby way of an increase in the principal amount of the Debt Facility. The fair value of the Gold CallOptions on the date of issuance was $3.1 million calculated using the Black-Scholes option pricingmodel. The Gold Call Options are revalued every reporting period with any resultant fair valueadjustment recorded in the Statement of Profit or Loss. The fair value at December 31, 2016 wascalculated as $2.9 million and a loss of $0.2 million was recorded in the Statement of Profit orLoss for the year ended December 31, 2016 to record the fair value adjustment.

In addition to the Warrants and Gold Call Options, $3.6 million of transaction costs were incurredto date, including a $1.5 million (US$1.2 million) payment to the Lenders as an arrangement fee,plus legal, due diligence costs and other costs. The cash transaction costs, the $2.9 million fairvalue of the Warrants and the $3.1 million fair value for the Gold Call Options totalled $9.6 million.These costs will be recognized in the Statement of Profit or Loss over the term of the Debt Facility.The Credit Agreement provides for TMAC to pay the Lenders a fee on each of the first and secondanniversaries of the last drawdown date (each, an “Anniversary Date”), an amount equal to 1.0%of the outstanding balance of the Debt Facility on each such Anniversary Date, payable at TMAC’selection either in (i) cash, or (ii) Common Shares issued at a deemed price equal to a 5% discountto the volume weighted average trading price of the Common Shares on the TSX for the tentrading days immediately prior to the second business day prior to each applicable AnniversaryDate using the exchange rate on the third business day prior to each applicable Anniversary Date.

Monthly payments under the Credit Agreement will equal 1/22 of the total Debt Facilityoutstanding as at June 30, 2017 (including any capitalized interest and obligations in relation tothe Gold Call Options), and will be made beginning on July 31, 2017 and ending on November30, 2018, with a final payment equal to the remaining amount owed under the Debt Facility onDecember 31, 2018. The Debt Facility was secured by the date of the first drawdown by a firstranking charge over all of the Company’s present and subsequently acquired property, plant andequipment subject to certain limited exceptions.

By December 12, 2016, TMAC drew down the entire US$120.0 million Debt Facility as follows: February 10, 2016, $69.5 million (US$50.0 million) July 7, 2016, $45.5 million (US$35.0 million) September 26, 2016, $19.8 million (US$15.0 million) December 12, 2016, $26.3 million (US$20.0 million).

The Credit Agreement has certain financial covenants, including maintaining a $10.0 millionminimum cash balance and a $20.0 million minimum working capital balance, and othercustomary non-financial covenants. As of December 31, 2016, the Company is in compliance withthe covenants.


Results of operations

Table 6: Results of operations for the three months and twelve months ended December 31, 2016compared with the three and twelve months ended December 31, 2016.

$ Millions Three months ended Twelve months endedDec 31,

2016Dec 31,

2015Change Dec 31,

2016Dec 31,

2015Change

ExpensesSalaries and wages 2.3 1.1 1.2 6.8 3.2 3.6Share-based payments 0.7 0.5 0.2 2.8 2.5 0.3Professional fees and consulting 0.2 0.4 (0.2) 0.5 1.1 (0.6)Travel - - - 0.3 0.2 0.1Investor relations 0.1 - 0.1 0.5 0.1 0.4Office, regulatory and general 0.2 0.4 (0.2) 1.1 0.8 0.3

3.5 2.4 1.1 12.0 7.9 4.1Impairment of equipment andassets held for sale 2.0 1.4 0.6 2.0 1.4 0.6

Write down of obsolete inventory 2.3 - 2.3 2.3 - 2.3Loss on sale of equipment - 1.3 (1.3) - 1.3 (1.3)Loss before the following 7.8 5.1 2.7 16.3 10.6 5.7Finance income (0.2) (0.2) - (0.8) (0.6) (0.2)Finance expense 0.2 0.5 (0.3) 0.7 2.0 (1.3)Foreign exchange (loss) gain 3.8 - 3.8 1.2 (0.9) 2.1Fair value loss (gain) (2.0) (0.7) (1.3) 0.2 (0.4) 0.6Business development expenses - - - - 0.9 (0.9)Other (0.4) - (0.4) (0.3) 0.5 (0.8)Loss before income taxes for

the period 9.2 4.7 4.5 17.3 12.1 5.2Deferred income tax recovery (2.0) (1.5) (0.5) (4.1) (2.5) (1.6)Net loss and comprehensive

loss for the period 7.2 3.2 4.0 13.2 9.6 3.6

Results of operations for the three months ended December 31, 2016 and 2015

Net loss and comprehensive loss for the three months ended December 31, 2016 were $7.2million, compared with a net loss and comprehensive loss of $3.2 million for the three monthsended December 31, 2015. The reasons for the fluctuations in the three month periods aredescribed below.

Salaries and wages for the three months ended December 31, 2016 were $1.2 million higher thanthe comparable period in 2015. The expense was higher in 2016 due to the increase in the numberof corporate support personnel and compensation as the Company continues to ramp up thedevelopment of the Hope Bay Project towards achieving commercial production, anticipated tobe achieved during the first quarter of 2017.

Share-based payments relate to the expense for share purchase options (“Options”) which, forthe three months ended December 31, 2016, were $0.2 million higher than the comparable periodin 2015. Options granted in 2016 vest in three equal annual tranches commencing on the firstanniversary of the grant. Options granted during 2015 and earlier vest over a two-year term with


one-third vesting immediately and one-third vesting on each of the two subsequent anniversarydates of the grant. Share-based payments are recognized as the corresponding Options vest andare calculated using the Black-Scholes option pricing model. The revised vesting period for newOptions issued from 2016 onwards results in new Option grants being expensed over a longerperiod and reduces the expense recognized in the first year after granting the Options. Optionsgranted in 2016 were, however, at higher prices than in prior years due to the appreciation of theCompany’s share price. No new Options were granted during the fourth quarter of 2016.

The remaining general and administrative expenses represented regulatory compliance costs tooperate the Company, maintain the Toronto office and market the Company to existing andpotential investors. The aggregate differences between the three months ended December 31,2016 and December 31, 2015 was a reduction of $0.3 million mainly due to lower professionaland consulting fees in 2016.

Impairment of equipment and assets held for sale for the three months ended December 31, 2016was $2.0 million, compared with $1.4 million for the three months ended December 31, 2015. Theremaining $0.5 million of carrying value of the redundant camp at Becancour that had beenpartially impaired in 2015 was written down to $nil as there had not been an offer to purchase thecamp in 2016. The $1.5 million balance of the 2016 impairment charge is the write down of otherassets originally acquired by TMAC from Newmont upon purchase of Hope Bay in March 2013but now determined to be redundant.

Write down of obsolete inventory for the three months ended December 31, 2016 was $2.3 million,compared with $nil for the three months ended December 31, 2015. Materials and suppliesoriginally acquired by TMAC from Newmont upon purchase of Hope Bay in March 2013 that hadno turnover to date and certain other slow moving materials and supplies were written down asobsolete in the fourth quarter of 2016.

Loss on sale of equipment for the three months ended December 31, 2016 was $nil, comparedwith $1.3 million for the three months ended December 31, 2015. No equipment was sold in 2016while the redundant partially completed processing plant in Durban, South Africa (the “DurbanPlant”) was sold for a loss of $1.3 million in the fourth quarter of 2015.

Finance income for the three months ended December 31, 2016 was $0.3 million of which, $0.1million was capitalized as borrowing costs, resulting in net finance income of $0.2 millioncompared with $0.2 million of finance income for the three months ended December 31, 2015.No finance income was capitalized in the three months ended December 31, 2015 as there hadnot been a drawdown of the Debt Facility in 2015. Finance income was earned on the averagecash balances on hand during the respective periods.

Finance expense for the three months ended December 31, 2016 was $0.2 million, comparedwith $0.5 million for the three months ended December 31, 2015. Finance expense during thethree months ended December 31, 2016 includes the accretion of the provision for environmentalrehabilitation and interest charges on the Letters of Credit. Interest charges of $3.1 million andamortization of transaction costs of $0.8 million on the Debt Facility, totaling $3.9 million for thethree months ended December 31, 2016 were capitalized as borrowing costs. Finance expenseduring the three months ended December 31, 2015 includes the interest charged by Newmont tosupport the Letters of Credit and the accretion of the provision for environmental rehabilitation.The decrease in Newmont’s interest charges during the three months ended December 31, 2016,compared with the same period for 2015, was due to the issuance by TMAC in mid-December


2015 of replacement Letters of Credit resulting in the termination of the agreement with Newmontthat had provided support for the Letters of Credit.

Foreign exchange loss for the three months ended December 31, 2016 was $3.8 million. Aweakening Canadian dollar increases the amount of the Canadian dollar equivalent loan andresults in a foreign exchange loss on the revaluation of the Company’s US dollar borrowings underthe Debt Facility and will have an opposite, albeit smaller, effect on TMAC’s US dollar cashbalances resulting in a net foreign exchange loss. The opposite is true when the Canadian dollarstrengthens. In 2015, TMAC did not have any borrowings in US dollars.

Fair value loss (gain) results from the period to period change in the fair value of the Gold CallOptions issued under the Credit Agreement from. The fair value is primarily affected by changesin the price of gold in Canadian dollar terms; however, the other inputs into Black-Scholescalculations, including interest rates, volatility and time to maturity, also impact the fair value. Forthe three months ended December 31, 2016, the price of gold decreased resulting in a decreasein the Gold Call Options liability and the associated fair value gain. The price of gold alsodecreased during the comparable period in 2015.

Deferred income tax recovery for the three months ended December 31, 2016 of $2.0 millionrelates to the loss incurred in the period. The deferred income tax recovery for the three monthsended December 31, 2015 of $1.5 million included a recovery for the losses incurred during theperiod, partially offset by the expenditure of CEE for flow-through shares in the period.

Results of operations for the years ended December 31, 2016 and 2015

Net loss and comprehensive loss for the year ended December 31, 2016 were $13.2 million,compared with a net loss and comprehensive loss for $9.6 million for the year ended December31, 2015. The reasons for the fluctuations are described below.

Salaries and wages for the year ended December 31, 2016 were $3.6 million higher than thecomparable period in 2015. The expense was higher in 2016 due to the increase in the numberof corporate support personnel and compensation as the Company continues to ramp up thedevelopment of the Hope Bay Project towards commercial production, anticipated to be achievedduring the first quarter of 2017.

Share-based payments relate to the expense for Options which, for the year ended December31, 2016, were $0.3 million higher than the comparable period in 2015. The revised vesting periodfor new Options issued from 2016 onwards results in new Option grants being expensed over alonger period and reduces the expense recognized in the first year after granting the Options.Options granted in 2016, however, were at higher prices than in prior years due to the appreciationof the Company’s share price. In addition to the share-based payment expense, the Companycapitalized $0.3 million of share-based payments to property, plant and equipment in the yearended December 31, 2016 compared with $0.9 million in the year ended December 31, 2015.

The remaining general and administrative expenses represented regulatory compliance costs tooperate the Company, maintain and expand the Toronto office and market the Company toexisting and potential investors. The aggregate difference between the year ended December 31,2016 and the year ended December 31, 2015 was an increase of $0.2 million. The increase incosts for the year is due to regulatory compliance for an entire year as TMAC became a publiclytraded company in July 2015.


General and administrative expenses are not expected to be materially different in 2017.

Impairment of equipment and assets held for sale for the year ended December 31, 2016 was$2.0 million, compared with $1.4 million for the year ended December 31, 2015. The remaining$0.5 million of carrying value of the redundant camp at Becancour that had been partially impairedin 2015 was written down to $nil as there had not been offer to purchase the camp in 2016. The$1.5 million balance of the 2016 impairment charge is the write down of other assets originallyacquired by TMAC from Newmont upon purchase of Hope Bay in March 2013 but now determinedto be redundant.

Write down of obsolete inventory for the year ended December 31, 2016 was $2.3 million,compared with $nil for the year ended December 31, 2015. Materials and supplies acquired byTMAC from Newmont upon original purchase of Hope Bay in March 2013 that had no turnover todate and certain other slow moving materials and supplies were written down as obsolete inDecember 2016.

Loss on sale of equipment for the year ended December 31, 2016 was $nil, compared with $1.3million for the year ended December 31, 2015. No equipment was sold in 2016 while the DurbanPlant was sold for a loss of $1.3 million in the fourth quarter of 2015.

Finance income for the year ended December 31, 2016 was $0.9 million, of which, $0.1 millionwas capitalized as borrowing costs, resulting in net finance income of $0.8 million, compared with$0.6 million of finance income, for the year ended December 31, 2015. No finance income wascapitalized in the year ended December 31, 2015 as there had not been a drawdown of the DebtFacility in 2015. Finance income was earned on the average cash balances on hand during therespective periods.

Finance expense for the year ended December 31, 2016 was $ $0.7 million, compared with $2.0million, for the year ended December 31, 2015. Finance expense during the year endedDecember 31, 2016 includes the accretion of the provision for environmental rehabilitation andinterest charges on the Letters of Credit. Interest charges of $7.8 million and amortization oftransaction costs of $1.9 million on the Debt Facility, totalling $9.7 million, for the year endedDecember 31, 2016 were capitalized as borrowing costs. Finance expense during the year endedDecember 31, 2015 includes the interest charged by Newmont to support the Letters of Creditand the accretion of the provision for environmental rehabilitation. The decrease in Newmont’sinterest charges during the year ended December 31, 2016, compared with the same period for2015, was due to the issuance by TMAC in mid-December 2015 of replacement Letters of Creditresulting in the termination of the agreement with Newmont that had provided support for theLetters of Credit.

Foreign exchange loss for the year ended December 31, 2016 was $1.2 million, and resulted fromthe weakening of the Canadian dollar compared with the US dollar which impacts, partially offsetby the revaluation of the Company’s US dollar cash balances. A weakening Canadian dollarincreases the amount of the Canadian dollar equivalent loan and results in a foreign exchangeloss on the revaluation of the Company’s US dollar borrowings under the Debt Facility, and willhave an opposite, albeit smaller, effect on TMAC’s US dollar cash balances resulting in a netforeign exchange loss. The opposite is true when the Canadian dollar strengthens. In 2015, TMACdid not have any borrowings in US dollars and the foreign exchange gain was the result of anincrease in the US dollar relative to the Canadian dollar for the year.


Fair value loss (gain) results from the period to period change in the fair value of the Gold CallOptions issued under the Credit Agreement. The fair value is primarily affected by changes in theprice of gold in Canadian dollar terms; however, the other inputs into Black-Scholes calculations,including interest rates, volatility and time to maturity, also impact the fair value. For the yearended December 31, 2016, the price of gold increased from US$1,060 per ounce at December31, 2015 to US$1,146 per ounce at December 31, 2016 resulting in an increase in the Gold CallOptions liability and the associated fair value loss. The price of gold declined in the period fromthe date of issuance to the end of 2015 and resulted in a net gain.

Deferred income tax recovery for the year ended December 31, 2016 of $4.1 million relates to theloss incurred in the year. The deferred income tax recovery for the year ended December 31,2015 of $2.5 million included a recovery for the losses incurred during the respective periods,partially offset by the expenditure of CEE for flow-through shares.

Summary of quarterly results

Table 7: Summary of certain of the Company’s quarterly financial information for the eight quartersended December 31, 2016:$ Millions (exceptfor per share data)

Dec 312016

Sep 302016

Jun 302016

Mar 312016

Dec 312015

Sep 302015

Jun 302015

Mar 312015

Loss for the period 7.2 2.8 3.0 0.2 3.1 1.9 2.5 2.1Loss per share $0.09 $0.03 $0.04 $0.00 $0.04 $0.02 $0.05 $0.04Cash and cash

equivalents 62.5 92.0 37.2 83.7 44.1 85.0 23.4 59.1

Total assets 1,089.8 1,059.3 931.1 927.1 854.4 858.2 7059 701.5Deficit 35.2 28.0 25.2 22.2 22.0 19.0 17.1 14.6

The Company does not currently generate any revenue. To date, seasonality or commoditymarket fluctuations have limited direct impact on the Company’s results of operations.

TMAC’s loss in each period primarily reflected the level of general and administrative expenses,impairments and write downs, a foreign exchange gain of $3.5 million in the first quarter of 2016related to the Debt Facility and US Dollar denominated cash balances that was partially offset bya fair value loss of $1.5 million from the revaluation of the Gold Call Options in the same period,a $1.4 million impairment charge in the fourth quarter of 2015 for the redundant camp stored atBecancour, Quebec and a loss on the sale of the Durban Plant of $1.3 million in the fourth quarterof 2015. Cash balances fluctuated as a result of the various financings, offset by expenditures inthe period. Total assets increased primarily as a result of financings and expenditures on theHope Bay Project.

Financial position

Cash and liquidity

Cash and cash equivalents, exclusive of restricted cash, totalled $62.5 million as at December31, 2016 compared with $44.1 million at December 31, 2015. The increase in cash and cashequivalents resulted from the proceeds from the drawdowns on the Debt Facility, the FTFinancing, the Bought Deal Financing and the proceeds received from the exercise of Warrants,partially offset by expenses incurred to advance the development of Hope Bay.


The US and Canadian cash and cash equivalents are held on deposit with major Canadianfinancial institutions.

Amounts receivable

Receivables of $7.3 million as at December 31, 2016 were composed of $6.8 million of sales anddiesel fuel taxes receivables and $0.5 million of interest and other receivables, compared with$4.0 million as at December 31, 2015 that mainly related to sales and recoverable diesel fueltaxes. The increase in sales taxes receivable is due to purchases made during August andSeptember for the 2016, which refund was received in February 2017.

Ore in stockpiles

Ore in stockpiles of $24.9 million was transferred from development costs previously included inProperty, Plant and Equipment. The stockpile consists of 121,600 tonnes of ore containing 56,500ounces of gold at a grade of 14.5 g/t and a cost of $87 per tonne. The transferred amount includesactual costs incurred in 2015 and 2016 up to the point of stockpiling the ore and consists of on-site mining costs, underground longhole development costs, on-site general and administrativecosts, permitting and compliance costs and land management costs, as adjusted for abnormalitems.

Consumables, materials and supplies

The $52.8 million balance at December 31, 2016 included $19.4 million of diesel fuel, $1.1 millionof jet fuel and $32.3 million of spare parts and other materials and supplies, compared with the$26.5 million balance at December 31, 2015 that included $16.1 million of diesel fuel, $1.1 millionof jet fuel and $9.3 million of spare parts and other materials and supplies.

Spare parts and other materials and supplies consist of warehouse inventory and spare partsrequired for mining, development, exploration and processing activities. The majority of TMAC’sconsumables, materials and supplies are brought in during the annual sealift as it is the most costefficient transportation method for most goods to site.

Prepaid expenses

Prepaid expenses of $0.8 million as at December 31, 2016, compared with $2.1 million as atDecember 31, 2015, related to prepaid insurance and deposits for the work programs at HopeBay.

Equipment held for sale

A 56 room, 98-person, camp that was acquired as part of the purchase of the Hope Bay Projectfrom Newmont in 2013 remains stored at Becancour, Quebec. The redundant camp was not soldin the year and the Company fully impaired the asset in 2016.

Property, plant and equipment

Effective April 1, 2015, Doris transitioned from the exploration and evaluation stage to thedevelopment stage. All projects, other than Doris, are currently in the exploration and evaluationstage.


Table 8: Details of the Hope Bay Project’s capitalized expenditures:

BalanceDec 31, 2015 Additions

Transferand

impairmentBalance

Dec 31, 2016$millions $millions $millions $millions

Property 214.8 2.1 (0.4) 216.5Plant and equipment 296.2 72.2 (0.9) 367.5Mobile equipment 20.6 18.9 (0.6) 38.9Development and engineering 14.6 27.9 (24.5) 18.0Camp and logistics 32.7 27.0 - 59.7Drilling and assaying 40.4 8.9 - 49.3Environment 14.5 8.2 - 22.7Evaluation 2.3 - - 2.3Geology 4.6 3.7 - 8.3Share-based payments 1.6 0.3 - 1.9Environmental liability adjustment 7.1 (0.4) - 6.7Borrowing costs capitalized - 9.7 - 9.7Total 649.4 178.5 (26.4) 801.5

Property expenditures include land claim payments to the Federal government, the annualpayment to the KIA for surface access rights and property taxes paid to the Government ofNunavut.

Plant and equipment expenditures mainly consist of engineering and fabrication costs related tothe Processing Plant and the Mill Building, the costs to pour foundations and to erect the MillBuilding, the costs to assemble the Processing Plant within the Mill Building and the costs forcertain other infrastructure to connect the Processing Plant to the TIA and other facilities.

Mobile equipment expenditures relate to mobile equipment purchases required for the preparationof Doris for development prior to April 1, 2015 and for development work after March 31, 2015.

Development and engineering costs relate to an underground test mining project at Doris thatcommenced in the second quarter of 2015 and to development at Doris that commenced inearnest in the fourth quarter of 2015 and continues to date.

Camp and logistics costs relate to costs for running the camp, including diesel fuel used in thepower plant to generate electricity for the camp, transporting people, equipment and materials toand from site, and contractors’ costs for general site supervision, medical, catering, cleaning andwaste management services.

Drilling and assaying costs were incurred for drilling programs. Drilling costs mainly consist of drillcontractor costs and helicopter services for providing support to the drill crews, including themobilization of drill rigs.

Environment costs, primarily consisting of consulting and legal fees, were incurred to performcompliance activities to maintain permits and to support permitting activities to obtain additionalpermits.

Geology costs mainly consist of consulting fees and software expenditures to analyze and modeldrilling results.


Share-based payments relate to share-based payments for employees whose compensationcosts are capitalized to one of the other property, plant and equipment categories describedabove.

Environmental liability adjustments represent the change in the provision for environmentalliabilities due to changes in assumptions used to calculate the provision. The changes mainlyrelate to the discount and inflation rates used in the calculation of the liability.

Transfer and impairment represent the transfer of the ore in stockpiles inventory balance out ofproperty holding and development and engineering costs and the impairment of $1.5 million ofequipment originally purchased from Newmont as part of the acquisition of the Hope Bay Projectthat is in disrepair.

Goodwill

Goodwill of $80.6 million relates to the acquisition of Hope Bay in 2013 and was the result of therequirement under business combinations accounting to recognize a deferred income tax liabilityfor the difference between the fair value of the identifiable assets and liabilities and their tax baseat the date of acquisition.

Restricted cash

Restricted cash of $44.5 million as at December 31, 2016 comprises investments in guaranteedinvestment certificates to collateralize the Letters of Credit for the $34.5 million of environmentalrehabilitation liabilities and $10.0 million as a minimum cash balance requirement under the DebtFacility.

Other assets

Other assets of $15.0 million as at December 31, 2016 decreased from $28.5 million at December31, 2015 as a result of the transfer to property, plant and equipment of items previously classifiedas prepayments for long-lead items that had been completed and the transfer of the transactioncosts to the Debt Facility. The balance as at December 31, 2016 consists of: a $13.4 milliondeposit with Gekko for fabrication of the second Python line that is to be completed in 2017 andshipped to Hope Bay in the 2017 sealift for installation and commissioning in late 2017 and $1.6million of deposits for construction services.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities increased to $26.8 million at December 31, 2016 from$12.8 million at December 31, 2015. The increase is primarily due to the increase in constructionactivities in the fourth quarter of 2016 relating to installation, assembly and commissioningactivities of the Processing Plant.

Other liabilities

Other liabilities relate to the remaining unamortized premium attributable to the proceeds from theissuance of flow-through common shares.


Gold Call Options

The Gold Call Options were issued under the Credit Agreement and are carried at fair value. Fairvalue adjustments are recorded in the Statement of Profit or Loss. TMAC`s right to add the amountof any Gold Call Options exercised by the Lenders to the principal balance of the Debt Facilityends on June 30, 2017. Accordingly, the Gold Call Options were included in current liabilities in2016.

Provision for environmental rehabilitation

The provision for environmental rehabilitation balance as at December 31, 2016 of $24.9 millionincreased from the December 31, 2015 balance of $24.7 million due to an update of the estimatesused to calculate the underlying liability. There were no changes in the calculation assumptionsduring the year ended December 31, 2016.

Deferred tax

The deferred tax liability decreased to $67.9 million at December 31, 2016 from $71.4 atDecember 31, 2015, due to the deferred tax recovery recognized on the loss incurred in the year.The deferred tax impact of deductions available under the NTI net profits royalty has not beenrecognized. The deferred tax on these deductions will be recognized when NTI approves theamounts of acquisition and historical expenditures incurred in the production lease area.

Equity

Share capital increased to $830.2 million at December 31, 2016 from $755.9 million at December31, 2015 due to the completion of the Bought Deal Financing on July 19, 2016, the FT Financingon March 18, 2016, the exercise of 1.1 million Warrants and the exercise of options during theperiod.

Subsequent to year end, on February 16, 2017, 350,000 Warrants were exercised by a Lenderfor proceeds to TMAC of $2.6 million.

Related party transactions

Transactions with Newmont

Newmont is a related party as a result of its 29.0% ownership interest in TMAC’s Common Sharesat December 31, 2016. Newmont indirectly acquired 242,979 Common Shares of the Flow-Through Common Shares on March 18, 2016 to maintain its then current ownership at 29.4%.Newmont directly acquired 1,159,000 Common Shares from the Bought Deal Financing on July19, 2016 to maintain its then current ownership at 29.2%. In the twelve months ended December31, 2016, the Company paid Newmont $0.3 million (2015 - $0.8 million) related to financeexpenses for environmental rehabilitation bonding Letters of Credit supported by Newmont toDecember 2015. As TMAC had arranged for replacement Letters of Credit by the end of 2015,the $0.3 million paid in 2016 related to 2015’s costs and no finance expenses with Newmont wereincurred in 2016. No amounts were owing to Newmont at December 31, 2016 (2015 - $0.3 million).


Transactions with RCF

RCF is a related party as a result of its 30.7% ownership interest in TMAC’s Common Shares atDecember 31, 2016. RCF indirectly acquired 250,227 Common Shares of the Flow-ThroughCommon Shares on March 18, 2016 to maintain its then current ownership at 35.4%. RCF soldan aggregate of 2,110,000 of its Common Shares in TMAC in a secondary offering as part of theBought Deal Financing on July 19, 2016 to reduce its then current ownership of 35.1% to 30.9%.

LIQUIDITY AND CAPITAL RESOURCES

The Company has a development stage project and has not generated revenue or cash flow fromits mineral properties. To December 31, 2016, TMAC’s cash flow has primarily been generatedfrom the issuance of equity securities in private placements, the IPO, the Bought Deal Financingand from proceeds under the Debt Facility.

Working capital

Table 9: Working capital(1).

December31, 2016

December31, 2015 Change

$millions $millions $millionsCurrent assets

Cash and cash equivalents 62.5 44.1 18.4Receivables 7.3 4.0 3.3Consumables, materials and supplies 77.7 26.5 51.2Prepaid expenses and other assets 0.8 2.1 (1.3)

148.3 76.7 71.6Current liabilities

Trade and other payables 26.8 12.8 14.0Debt Facility 46.1 - 46.1Gold Call Options 2.9 - 2.9Other liabilities 0.8 - 0.8

76.6 12.8 63.8Working capital 71.7 63.9 7.8

(1) Working capital is not a recognized measure under IFRS (see Non-IFRS Measures below).

Cash on hand and working capital are expected to be sufficient in amount to complete thedevelopment of Doris for production, all rehabilitation and other bonding requirements, generaland administration costs and to continue to conduct planned exploration activities. Proceeds fromthe Bought Deal Financing are expected to be sufficient to fund most of the development of theBTD zone to the end of 2017. In addition, the working capital exceeds the $20.0 million minimumbalance required under the Debt facility by $51.7 million at December 31, 2016 (2015 - $43.9million).

Working capital requirements for 2017 will include the replenishment of consumables, materialsand supplies in the 2017 sealift to support the operations at 2,000 tpd during 2018 and additionalLetters of Credit of $7.2 million to be issued for security deposits related to Inuit organizations.


Operating activities

Cash used in operating activities totaled $76.1 for the year ended December 31, 2016, comparedwith cash used in operating activities of $8.3 million for the year ended December 31, 2015. Theincrease is mainly due to the acquisition of consumables, materials and supplies as part of the2016 sealift that will be used for operating activities in 2017 and the reclassification ofdevelopment costs to ore in stockpiles.

Investing activities

Investing activities, predominantly related to expenditures on the Hope Bay Project and postingof collateral for the Letters of Credit, resulted in cash outflows of $139.1 million for the year endedDecember 31, 2016, compared with $167.1 million for the year ended December 31, 2015. Theactivities relate to the Path to Production plan that covered the period from January 1, 2015 toDecember 31, 2016 and the BTD advanced exploration activities in 2016.

Financing activities

On March 18, 2016, TMAC completed a private placement of 827,206 Flow-Through CommonShares of TMAC at a price of $10.88 per Flow-Through Common Share for gross proceeds of$9.0 million.

In 2016, TMAC drew down the entire US$120.0 million Debt Facility.

On July 19, 2016, TMAC completed the Bought Deal Financing issuing 3,975,000 CommonShares at a price of $15.10 per Common Share for gross proceeds of $60.0 million.

COMMITMENTS AND CONTINGENCIES

Table 10: Commitments.

2017 2018 2019 2020 2021$millions $millions $millions $millions $millions

Contractual commitments 31.0 - - - -Debt Facility payments 52.7 130.0 - - -Rental and lease payments 0.5 0.4 0.4 - -

84.2 130.4 0.4 - -

Rental and lease payments mainly consist of office lease commitments for the Toronto office thatexpire in 2019. Contractual commitments include commitments for the Processing Plant andmobile equipment.

TMAC estimates the required annual landholding payments and environmental compliance workfor the Hope Bay Project to be approximately $1.7 million and $2.5 million, respectively. None ofthese payments are contractual commitments but are required to maintain the Company’s permitsand land tenure agreements in good standing. Certain areas of Doris are permitted as anoperating mine site resulting in environmental monitoring requirements and costs that are abovethose of an exploration-only or development-only site. On March 30, 2015, the landholdingagreements with the KIA and NTI were renewed for a 20-year term, effective that date.


The Company stores a redundant camp in Becancour, Quebec on a month to month basis for anapproximate cost of $10,000 per month. The stored camp has been written down to $nil.

The Company has not made any commitments for years including and subsequent to 2020.

OUSTANDING SHARE, OPTIONS AND RESTRICTED SHARE RIGHTS DATA

As at February 23, 2016, the Company had 83,947,105 Common Shares, 3,678,977 commonshare purchase options, 111,809 restricted share rights and 433,834 Warrants for a total of88,171,725 Common Shares outstanding on a fully-diluted basis.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements.

NON-IFRS MEASURES

The Company uses certain non-IFRS measures in this MD&A such as working capital, cash costper ounce sold (“Cash Cost”), all-in sustaining cost per ounce sold (“AISC”) and cost per metreof drilling. In the gold mining industry, these are common performance measures but may not becomparable to similar measures presented by other issuers as they have no standardizedmeaning under IFRS. The Company believes that, in addition to conventional measures preparedin accordance with IFRS, certain investors use this information to evaluate the Company’sperformance, profitability and ability to generate cash flow. Accordingly, it is intended to provideadditional information and should not be considered in isolation or as a substitute for measuresof performance prepared in accordance with IFRS.

Working capital

The Company calculates working capital as its current assets, excluding assets held for sale, lessits current liabilities. Management uses working capital as an internal measure to better assessperformance trends. Management understands that a number of investors and others that followthe Company’s business assess performance in this way. In addition, the Credit Agreement hasan event of default linked to a minimum working capital amount. For a calculation of theCompany’s working capital, please refer to the section entitled Liquidity and Capital Resources –Working Capital in this MD&A.

Cash cost per ounce of gold sold and all-in sustaining cost per ounce of gold sold

Cash Cost in 2017 will be based on cost of sales. It excludes, among other things, the impact ofnon-cash costs such as depreciation.

AISC includes both operating and sustaining capital expenditure as well as general andadministration and mine exploration and evaluation costs.

The Company provides Cash Cost and AISC as a key performance indicator to assess its profitpotential and performance relative to its peers. TMAC reports Cash Cost per ounce sold and AISCin accordance with the guidance published by the World Gold Council in June 2013.The mostdirect comparable measure to cash costs calculated in accordance with IFRS is cost of sales.


Cost per metre of drilling

Cost per metre includes all costs associated with the drilling activity. Management understandsthat a number of investors use this information to evaluate the Company’s drilling programs.Management uses this metric as an important tool to monitor drilling costs.

FINANCIAL INSTRUMENTS, CRITICAL ACCOUNTING ESTIMATES AND NEW ANDREVISED IFRSs

The discussion and analysis of TMAC’s financial condition and results of operations are basedupon its financial statements, which have been prepared in accordance with IFRS. Thepreparation of financial statements requires the Company to make estimates and judgments thataffect the reported amounts of assets and liabilities, revenues and expenses, and relateddisclosure of contingent assets and liabilities at the date of the financial statements. Actual resultsmay differ from these estimates under different assumptions or conditions.

The impact of financial instruments and areas involving a higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to the financial statementsare discussed in more detail in the Company’s audited annual financial statements for the yearended December 31, 2016 which are available on the Company’s websitewww.tmacresources.com and SEDAR at www.sedar.com.

In addition to the above, assumptions and estimates were made for the valuation of the Gold CallOptions and the Warrants using parameters available when the transactions were incurred andin determining the fair value adjustment of the Gold Call Options when the financial statementswere prepared.

INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS ANDPROCEDURES

As of December 31, 2016, TMAC’s design of internal controls over financial reporting adheres tothe Internal Controls – Integrated Framework (2013) issued by the Committee of the SponsoringOrganizations of the Treadway Commission.

The Company’s management, with the participation of its Chief Executive Officer and ChiefFinancial Officer, evaluated the effectiveness of TMAC’s internal controls over financial reportingand disclosure controls and procedures as at December 31, 2016. Based on that evaluation, theCompany’s Chief Executive Officer and Chief Financial Officer concluded that, as at the end ofthe year covered by this report, the Company’s internal controls over financial reporting anddisclosure controls and procedures were effective to provide reasonable assurance that theinformation required to be disclosed by the Company in reports it files is recorded, processed,summarized and reported within the appropriate time periods. There have been no materialchanges to the Company’s internal controls over financial reporting and disclosure controls andprocedures and their design remains effective.

TMAC’s management, including the Chief Executive Officer and the Chief Financial Officer, doesnot expect that its internal controls over financial reporting and disclosure controls and procedureswill prevent or detect all errors and frauds. A cost-effective system of internal controls, no matterhow well conceived or operated, can provide only reasonable, not absolute, assurance that theobjectives of the internal controls over financial reporting are achieved.


INDUSTRY AND ECONOMIC FACTORS AFFECTING PERFORMANCE

TMAC is a mineral exploration, evaluation and development entity whose activities include theselection, acquisition, exploration, evaluation and development of mineral properties. TheCompany’s current focus is to develop the Hope Bay Project. TMAC’s future performance islargely tied to the development of its property interests and other prospective businessopportunities and the overall financial markets. Financial markets for mineral companies havebeen and continue to be volatile, reflecting ongoing concerns about the stability of commodityprices. The Company’s financial success will be dependent upon the extent to which it canachieve milestones in developing the deposits at the Hope Bay Project or the economic viabilityof any new discoveries that it may make. The development of such assets may take years tocomplete and the resulting revenue, if any, is difficult to determine with any certainty. To date,TMAC has not generated any revenue. The sales value of any minerals mined by TMAC is largelydependent upon factors beyond its control, such as the sale or purchase of precious metals bycertain banks and financial institution, interest rates, exchange rates, inflation or deflation, globaland regional supply and demand, and the political and economic conditions of major preciousmetal producing and consuming countries throughout the world. There are significantuncertainties regarding the prices of precious metals and the availability of equity financing forthe purposes of exploration and development. Global commodity markets remain volatile anduncertain, which has contributed to difficulties in raising equity and borrowing funds. As a result,the Company may have difficulties raising equity financing, if needed, for the purposes ofexploring, evaluating and developing mineral properties, particularly without excessively dilutingthe interests of existing shareholders. These trends may limit the ability of TMAC to complete thedevelopment of and/or further explore or evaluate its current mineral exploration properties andany other property interests that may be acquired in the future.

RISKS AND UNCERTAINTIES

In addition to the risks noted above, risks related to Financial Instruments as set forth in theFinancial Statements and those risk factors described in the Company’s AIF, dated February 23,2017 and filed on SEDAR, should be given special consideration when evaluating trends, risksand uncertainties relating to the Company’s business.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Scientific and technical information contained in this document was reviewed and approved byDavid King, P.Geo., the Vice President, Exploration and Geoscience of TMAC, and PaulChristman, P.Eng., the Manager of Mining of TMAC, each of whom is a “qualified person” asdefined by NI 43-10.

Information of a scientific or technical nature in respect of the Hope Bay Project other than mineralreserve estimates for the stockpile and exploration information for exploration conducted in 2016and 2015 is based upon the PFS, entitled “Technical Report on The Hope Bay Project, Nunavut,Canada”, dated May 28, 2015, with an effective date of March 31, 2015, prepared by Graham G.Clow, P.Eng., Normand L. Lecuyer, P.Eng., Sean Horan, P.Geo., and Holger Krutzelmann,P.Eng., all of Roscoe Postle Associates Inc., Derek Chubb, P.Eng., of ERM Consultants CanadaInc., E. Maritz Rykaart, Ph.D., P.Eng., of SRK Consulting (Canada) Inc., and Timothy Hughes,FAusIMM, of Gekko Systems Pty Ltd., each of whom is “independent” and a “qualified person”as such terms are defined under NI 43-101.


Mineral reserve estimate for the stockpile

The mineral reserve estimate for the ore stockpiles has an effective date of December 31, 2016and is based on the estimated grade and recovery rate in the PFS for the portion of the Hope BayProject that was mined to produce the stockpile.

Exploration

For a complete description of TMAC’s sample preparation, analytical methods, data verificationand QA/QC procedures that were used in relation to the exploration information disclosed herein,refer to the PFS, as filed on TMAC's profile at www.sedar.com. For further details regarding 2016exploration activities, please refer to the Company’s news releases.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This MD&A contains “forward-looking statements” or “forward-looking information” within themeaning of applicable securities laws that are intended to be covered by the safe harbourscreated by those laws. “Forward-looking statements” or “forward-looking information” includestatements that use forward-looking terminology such as “may”, “will”, “expect”, “anticipate”,“envision”, “believe”, “continue”, “potential” or the negative thereof or other variations thereof orcomparable terminology. Such forward-looking information in this MD&A includes, withoutlimitation, any economic analysis or projection regarding the Hope Bay Project, including capitaland operating costs, cash flow amounts and timing, recoveries and estimated production amountsand timing, mineral reserve estimates, the completion of the development of the Hope BayProject, commercial production in the first quarter of 2017, the processing rates for the ProcessingPlant, cash flows being used to develop the rest of Hope Bay and the potential to discoveradditional mineralization to add to TMAC's mineral resources.

Forward-looking information is not a guarantee of future performance and is based upon a numberof estimates and assumptions of management, in light of management’s experience andperception of trends, current conditions and expected developments, as well as other factors thatmanagement believes to be relevant and reasonable in the circumstances, as of the date thestatements are made including, without limitation, assumptions about: favourable equity and debtcapital markets; the ability to raise any necessary additional capital on reasonable terms toadvance the development of the Hope Bay Project and pursue planned exploration; future pricesof gold and other metal prices; the timing and results of exploration and drilling programs; theaccuracy of any mineral reserve and mineral resource estimates; the geology of the Hope BayProject being as described in the PFS; the metallurgical characteristics of the Hope Bay Projectbeing suitable for the Processing Plant; the successful operation and ramp up of the ProcessingPlant; the successful completion of the TIA, production costs; the accuracy of budgetedexploration and development costs and expenditures, including to complete development of theinfrastructure at the Hope Bay Project; the price of other commodities such as diesel fuel; futurecurrency exchange rates and interest rates; operating conditions being favourable, includingwhereby the Company is able to operate in a safe, efficient and effective manner; political andregulatory stability; the receipt of governmental and third party approvals, licences and permitson favourable terms; obtaining required renewals for existing approvals, licences, permits andInuit agreements and obtaining all other required approvals, licences, permits and Inuitagreements on favourable terms; sustained labour stability; stability in financial and capital goodsmarkets; availability of equipment; positive relations with the KIA, NIRB, NWB, and NTI and otherlocal groups and the Company’s ability to meet its obligations under its property agreements withsuch groups; the Company’s ability to operate in the harsh northern Canadian climate; and


satisfying the terms and conditions of the Debt Facility. While the Company considers theseassumptions to be reasonable, the assumptions are inherently subject to significant business,social, economic, political, regulatory, competitive and other risks and uncertainties,contingencies and other factors that could cause actual actions, events, conditions, results,performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within thecontrol of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks,uncertainties and other factors which may cause the actual plans, intentions, activities, results,performance or achievements of the Company to be materially different from any future plans,intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation: general business, social, economic,political, regulatory and competitive uncertainties; differences in size, grade, continuity, geometryor location of mineralization from that predicted by geological modelling and the subjective andinterpretative nature of the geological modelling process; the speculative nature of mineralexploration and development, including the risk of diminishing quantities or grades ofmineralization and the inherent riskiness of inferred mineral resources; a material decline in theprice of gold; a failure to achieve commercial viability, despite an acceptable gold price, or thepresence of cost overruns which render the Hope Bay Project uneconomic; geological,hydrological and climatic events which may adversely affect infrastructure, operations anddevelopment plans, and the inability to effectively mitigate or predict with certainty the occurrenceof such events; credit and liquidity risks associated with the Company’s financing activities,including constraints on the Company’s ability to raise and expend funds as a result of operationaland reporting covenants associated with the Debt Facility and the risk that the Company will beunable to service its indebtedness; risks that the Company will not have sufficient funds to submitadditional cash collateralized letters of credit for future bonding and rehabilitation obligations; theCompany’s inability to raise sufficient funds to develop the Hope Bay Project into commercialproduction; delays in construction or development of the Hope Bay Project resulting from delaysin the performance of the obligations of the Company’s contractors and consultants, the receiptof governmental and third party approvals, licences and permits in a timely manner or to completeand successfully operate mining and processing components; the Company’s failure to accuratelymodel and budget future capital and operating costs associated with the development andoperation of the Hope Bay Project; difficulties with transportation and logistics relating to thedelivery of essential equipment and supplies to the Hope Bay Project, including by way of airliftand sealift, and the logistical challenges presented by the Hope Bay Project’s location in a remoteArctic environment; the Company’s failure to develop or supply adequate infrastructure to sustainthe development and operation of the Hope Bay Project, including the provision of reliable sourcesof electrical power, water, and transportation; adverse fluctuations in the market prices andavailability of commodities and equipment affecting the Company’s business and operations; theunavailability of specialized expertise in respect of operating in a remote, environmentally extremeand ecologically sensitive area such as in the Kitikmeot region of Nunavut; the Company’smanagement being unable to successfully apply their skills and experience and attract and retainhighly skilled personnel; the cyclical nature of the mining industry and increasing prices andcompetition for resources and personnel during mining cycle peaks; the Company’s failure tomaintain good working relationships with Inuit organizations; the Company’s failure to comply withlaws and regulations or other regulatory requirements; the Company’s failure to comply withexisting approvals, licences and permits, and Inuit agreements, and the Company’s inability torenew existing approvals, licences, permits and Inuit agreements or obtain required newapprovals, licences, permits and Inuit agreements on timelines required to support developmentplans; the Company’s failure to comply with environmental regulations, the tendency of such


regulations to become more strict over time, and the costs associated with maintaining andmonitoring compliance with such regulations; the adverse influence of third party stakeholdersincluding social and environmental non-governmental organizations; the adverse impact ofcompetitive conditions in the mineral exploration and mining business; the Company’s failure tomaintain satisfactory labour relations and the risk of labour disruptions or changes in legislationrelating to labour; the Company’s lack of operating history and no history of earnings; limits ofinsurance coverage and uninsurable risk; the adverse effect of currency fluctuations on theCompany’s financial performance; difficulties associated with enforcing judgements againstdirectors residing outside of Canada; conflicts of interest; the significant control exercised by RCFand Newmont over the Company; reduction in the price of Common Shares as a result of salesof Common Shares by existing shareholders; the dilutive effect of future acquisitions or financingactivities and the failure of future acquisitions to deliver the benefits anticipated; trading andvolatility risks associated with equity securities and equity markets in general; the Company’s notpaying dividends in the foreseeable future or ever; failure of the Company’s informationtechnology systems or the security measures protecting such systems; the costs associated withlegal proceedings should the Company become the subject of litigation or regulatory proceedings;costs associated with complying with public company regulatory reporting requirements; andother risks involved in the exploration, development and mining business generally, including,without limitation, environmental risks and hazards, cave-ins, flooding, rock bursts and other actsof God or natural disasters or unfavourable operating conditions. Although the Company hasattempted to identify important factors that could cause actual actions, events, conditions, results,performance or achievements to differ materially from those described in forward-lookinginformation, there may be other factors that cause actions, events, conditions, results,performance or achievements to differ from those anticipated, estimated or intended.

TMAC cautions that the foregoing list of important factors and assumptions is not exhaustive.Other events or circumstances could cause actual results to differ materially from those estimatedor projected and expressed in, or implied by, this forward-looking information. Forward-lookinginformation contained herein is made as of the date of this document and TMAC disclaims anyobligation to update or revise any forward-looking information, whether as a result of newinformation, future events or results or otherwise, except as required by applicable law. There canbe no assurance that forward-looking information will prove to be accurate, as actual results andfuture events could differ materially from those anticipated in such statements. Accordingly,readers should not place undue reliance on forward-looking information.

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TMAC Resources Inc.Dec 31, 2016 · On December 12, 2016, TMAC drew down the final available amount...

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