CRCUF Canagold Resources Ltd (QB)

ITEM 4. INFORMATION ON THE COMPANY

The Registrant is a Canadian mineral exploration company and is subject to National Instrument 43-101, a National Instrument adopted by all of the Securities Commissions in Canada that deals with standards of disclosure for mineral projects. It applies to all oral statements and written disclosure of scientific or technical information, including disclosure of a mineral resource or mineral reserve, made by or on behalf of a company in respect of its material mineral projects. In addition to other matters, it sets out strict guidelines for the classification of and use of the terms “mineral resource” and “mineral reserve” and it requires all technical disclosure on all material properties to be subject to review by a senior engineer or geoscientist in good standing with a relevant professional association. The full text of NI 43-101 can be found at http://www.bcsc.bc.ca/policy.asp?id=2884&scat=4&title=4%20-%20Distribution%20Requirements.

4.A History and Development of the Company

Incorporation and Reporting Status

The Registrant was incorporated under the laws of British Columbia, Canada, on January 22, 1987 under the name, “Canarc Resource Corp.”, by registration of its Memorandum and Articles with the British Columbia Registrar of Companies.

The Company was originally incorporated under the previous Company Act (British Columbia) and transitioned to the Business Corporations Act (British Columbia) in 2005; the Business Corporations Act (British Columbia) replaced the Company Act (British Columbia) on March 29, 2004.

The Registrant is a reporting company in British Columbia, Alberta, Saskatchewan, Ontario and Nova Scotia. The Registrant became a reporting issuer under the United States Securities Exchange Act of 1934, as amended, upon filing its registration statement on Form 20-F dated October 9, 1990 with the Securities and Exchange Commission.

Business Address

Office address:                                     #301 - 700 West Pender Street

Vancouver, British Columbia, Canada, V6C 1G8

Phone: (604) 685-9700

Registered address:                            #910 – 800 West Pender Street

Vancouver, British Columbia, Canada, V6C 2V6

Phone: (604) 685-6100

Introduction

The Registrant commenced operations in 1987 and, since inception, has been engaged in the business of the acquisition, exploration and, if warranted, development of precious metal properties. The Registrant currently owns or holds, directly or indirectly, interests in several precious metal properties, as follows:

-         New Polaris property (British Columbia, Canada),

-         Windfall Hills property (British Columbia, Canada),

-          FG Gold property (British Columbia, Canada), and

-          Fondaway Canyon property (Nevada, USA) which was acquired in March 2017,

of which the New Polaris property is the material mineral property of the Registrant.

In its consolidated financial statements prepared in accordance with IFRS, the Registrant has capitalized costs, net of recoveries and write-downs, of approximately $10.5 million in connection with the acquisition, exploration and development on its currently held properties as at December 31, 2016 and are summarized as follows for the past three fiscal years:

Further information and details regarding Canarc’s mineral property interests are provided in Item 4.D.

Developments over the Last Three Financial Years

Over the course of the past three years ended December 31, 2016 and to the date of this Form 20-F, the Registrant had been engaged in exploration and development of precious metal projects in Canada and previously in Mexico and more recently in the U.S. The major events in the development of the Registrant’s business over the last three years are set out below. Information and details regarding the Registrant’s properties are provided in Item 4.D.

Letter of Intent with Pan American Goldfields Ltd.

In February 2014, Canarc signed a Letter of Intent (the “LOI”) with Pan American Goldfields Ltd. (“Pan American”) with respect to a business combination whereby Canarc would acquire all of the outstanding common shares of Pan American (the “Transaction”). The main asset of Pan American was its interest in the La Cieneguita mine properties located in Chihuahua State, Mexico.

Pursuant to the terms of the LOI, Canarc had agreed to pay $100,000 to Pan American, following the approval of the Toronto Stock Exchange (the “TSX”); funds of $40,000 were advanced in April 2014 which bore an interest rate of 1% per month and were written off in September 2014 as collectability was doubtful.

In May 2014, as a result of its due diligence, the Company terminated the LOI with Pan American.

Share Exchange Agreement with Santa Fe Gold Corporation

On July 15, 2014, Canarc and Santa Fe Gold Corporation (“Santa Fe”) entered into a Share Exchange Agreement pursuant to which Santa Fe was to issue 66,000,000 shares of its common stock to Canarc, and Canarc was to issue 33,000,000 of its common shares to Santa Fe (the "Share Exchange"). Upon consummation of the Share Exchange, Santa Fe would own approximately 17% of Canarc's outstanding shares and Canarc would own approximately 34% of Santa Fe's outstanding common shares. On October 15, 2014, the conditions precedent set forth in the Share Exchange Agreement were not satisfied and the agreement terminated on that date.

Pursuant to the Share Exchange Agreement, in July 2014, Canarc advanced a promissory note loan of $200,000 to Santa Fe, which initially bore an interest rate of 12% per annum compounded monthly; both the principal and interest were due and payable on January 15, 2015, and any past due principal and interest bore an interest rate of 14%. In September 2014, further funds of $20,000 were advanced to Santa Fe under the promissory note. The promissory note receivable from Santa Fe along with accrued interest was determined to be impaired as collectability was doubtful, and was written off at December 31, 2014. In August 2015, Santa Fe filed voluntary petitions under Chapter 11 of the Bankruptcy Code in U.S. Bankruptcy Court for the District of Delaware, USA. In 2016, Canarc received notice for the distribution of funds from the bankruptcy estate of Santa Fe in which funds of $10,000 were received in 2017. Canarc continues with its efforts to collect the remaining balances owed by Santa Fe.

Pre-Development and Earn-In Binding Agreement with PanTerra Gold (British Columbia) Limited

On February 24, 2015, Canarc entered into a Pre-Development and Earn-In Binding Agreement (the “Earn-In Agreement”) with PanTerra Gold (British Columbia) Limited (“PanTerra”), a wholly-owned subsidiary of PanTerra Gold Limited pursuant to which PanTerra was granted a 30-month option to earn a 50% interest in the New Polaris project by spending a total of CAD$10 million in three stages of predevelopment activities including metallurgical test work, drilling, detailed mine planning, tailings dam design, environmental permitting, and completion of a definitive feasibility study. In Stage One, PanTerra shall spend CAD$500,000 for laboratory production of flotation concentrate followed by test work through the Glencore Technology Albion pilot plant and for comprehensive technical and economic review and commencement of environmental baseline data collection required for permitting. In Stage Two, PanTerra can earn a 20% interest in the New Polaris project by spending CAD$3.5 million in predevelopment expenditures which would include a 10,000 m drilling program and engineering and completion of field data required for environmental permitting. In Stage Three, PanTerra can earn an additional 30% interest in the project for a total interest of 50% by spending CAD$6 million in predevelopment expenditures which would primarily focus on the completion of a definitive feasibility study and would include further 10,000 m of infill drilling, additional metallurgical test work, and preliminary engineering. PanTerra can increase its interest in the New Polaris project to 51% by purchasing 1% from Canarc within six months of completion of the definitive feasibility study at a cost of 1% of the net present value established by the definitive feasibility study using a 10% discount rate.

Canarc received the CAD$500,000 for Stage One in 2015. As at December 31, 2016, funds of US$35,000 remain for Stage One expenditures as specified pursuant to the agreement between Canarc and PanTerra, which remaining funds were used to settle existing payables for Stage One expenditures in 2017.

In August 2015, PanTerra had informed Canarc that it will not be able to commit to further expenditures to commence Stage Two exploration and permitting work on Canarc’s New Polaris project until PanTerra received the approval from the Dominican Republic government for importing New Polaris gold concentrate into the country for processing. In September 2016, PanTerra provided 30-day notice of its intent to withdraw from the first option of the agreement, which agreement was effectively terminated on October 22, 2016.

Agreement for the Purchase of All the Shares of Oro Silver Resources Ltd. with Marlin Gold Mining Ltd. and

Purchase and Sale Agreement with Endeavour Silver Corp.

In July 2015, Canarc and Marlin Gold Mining Ltd. (“Marlin Gold”) entered into a letter of intent which resulted in the Agreement for the Purchase of All the Shares of Oro Silver dated October 8, 2015 (the “Share Purchase Agreement”), whereby Canarc acquired 100% of the shares of Marlin Gold’s wholly owned subsidiary, Oro Silver Resources Ltd. (“Oro Silver”), which indirectly owned 100% of the El Compas gold-silver project located in Zacatecas, Mexico, in exchange for the issuance to Marlin Gold of 19 million common shares of Canarc. Canarc’s acquisition of Oro Silver closed on October 30, 2015. The terms of the agreement included the following:

The closing of the Share Purchase Agreement resulted in Marlin Gold becoming an insider of Canarc by virtue of having more than 10% (ie. 10.79%) interest in Canarc as at the closing date of October 30, 2015.

The El Compas property is a fully permitted gold silver project located in Zacatecas, Mexico and is comprised of 24 concessions totaling 3,900 hectares.

In October 2015, Canarc commissioned Mining Plus Canada Consulting Ltd. (“Mining Plus”) to complete a NI 43-101 resource report and preliminary economic assessment for the El Compas project to determine the project’s potential viability which was completed in January 2016. Their technical report entitled “NI 43-101 Technical Report for the El Compas Project” (the “El Compas Technical Report”) was authored by J Collins PGeo, N Schunke PEng, S Butler PGeo, L Bascome MAIG and F Wright PEng, who are independent Qualified Persons as defined by NI 43-101, is dated January 19, 2016, and was prepared in compliance with NI 43-101.

In January 2016, Canarc signed a definitive agreement with the Zacatecas state government to lease and operate the permitted 500 tonne per day La Plata ore processing plant located in the city of Zacatecas, Mexico, approximately 20 kilometres from El Compas. Highlights of the lease agreement include the following:

• Lease term was 5 years with the right to extend for another 5 years;
• Canarc had assumed responsibility for the plant as of January 29, 2016;
• Plant was to be exclusively operated by Canarc’s Mexican subsidiary, Minera Oro Silver de Mexico SA de CV;
• Canarc was to pay a monthly lease payment of MXP 136,000;
• Grace period of 6 months was allowed for time for plant refurbishing;
• Power and water were available for plant operations;
• Plant capacity was 500 tonnes per day with the possibility to expand;
• Permitted tailings facilities had a capacity for approximately 1 million tonnes;
• Certain plant refurbishment costs was to be reimbursed to Canarc by lease payment offsets; and
• Canarc was to reserve up to 100 tonnes per day for toll mining of ore produced by local small miners.

In March 2016, Canarc entered into an indicative term sheet for up to $10 million in debt financing by way of a gold prepaid facility to develop the El Compas gold-silver project subject to a 60 day due diligence period which did not advance due to the subsequent sale of the project to Endeavour in May 2016.

On May 6, 2016, Canarc entered into a Purchase and Sale Agreement with Endeavour pursuant to which Canarc sold to Endeavour 100% of the shares of Canarc’s wholly-owned subsidiary, Oro Silver, which indirectly holds a 100% interest in the El Compas project in Zacatecas, Mexico, in consideration for 2,147,239 free-trading common shares of Endeavour, with an aggregate deemed value of CAD$10.5 million (the “Sale Transaction”). The Endeavour shares had a deemed price of CAD$4.89 per share, equal to the volume-weighted average trading price on the TSX for the 10 trading-day period immediately prior to May 6, 2016. As additional consideration, Endeavour assumed Canarc’s obligation to deliver an aggregate of 165 troy ounces of gold (or the US dollar equivalent) to Marlin in three equal payments of 55 troy ounces which are due in October 2016, 2017 and 2018. The foregoing gold delivery obligation was incurred by Canarc in connection with its acquisition of El Compas from Marlin. The Sale Transaction closed on May 27, 2016 at which time Canarc received 2,147,239 free-trading common shares of Endeavour with a fair value of CAD$3.99 per share at that date. In conjunction with the closing of the Sale Transaction with Endeavour, Mr. Akiba Leisman, Marlin’s nominee to Canarc’s Board, resigned as a Director of Canarc.

Option Agreement regarding the FG Gold Property with Eureka Resources, Inc.

On August 24, 2016, Canarc entered into the Option Agreement regarding the FG Gold Property with Eureka Resources, Inc., (“Eureka”) which closed on October 12, 2016. In consideration for the grant of the property option agreement, Canarc issued 250,000 common shares at a value of CAD$0.10 per share to Eureka, and subscribed to Eureka’s private placement for 750,000 units at a price of CAD$0.14 per unit for a total of CAD$105,000; each unit was comprised of one common share of Eureka and one-half of one common share purchase warrant with an exercise price of CAD$0.20 and expiry date of September 9, 2018. Canarc can earn up to a 75% interest in the FG gold property in two stages.

In the first stage, Canarc can earn an initial 51% interest over three years by:

In the second stage, Canarc can earn an additional 24% interest for a total interest of 75% over the following two years by:

If Canarc fails to satisfy the consideration necessary to exercise the second stage, then a joint venture will be deemed to have formed with Canarc having a 51% interest and Eureka with a 49% interest.

The FG Gold project is located in the historic Cariboo Gold Camp within the Quesnel Trough area of central British Columbia. Mineralization occurs as quartz veins and stringer zones containing coarse free gold and finer grained iron sulphides bearing gold in a broad shear zone conformable to bedding within deformed and metamorphosed Paleozoic sedimentary rocks. The property consists of 33 contiguous mineral claims totalling 10,400 hectares.

Purchase Agreement with American Innovative Minerals, LLC

On February 28, 2017, Canarc entered into the Letter Agreement with AIM and the AIM Securityholders to acquire either a direct or indirect 100% legal and beneficial interests in mineral resource properties located in Nevada, Idaho and Utah (USA) for a total purchase price of $2 million. Upon execution of the Letter Agreement, Canarc deposited $200,000 “in trust” towards the purchase price. The deposit was only refundable in limited circumstances including where Canarc determined adverse circumstances exist relating to status of title, material encumbrances, corporate standing, financial conditions, environmental liabilities, and litigation. Canarc had the option to either acquire AIM or acquire AIM’s interests in the mineral properties. Certain of the mineral properties are subject to royalties. There was a 30 day due diligence period. The Letter Agreement was to be replaced and superseded by the execution of a definitive agreement on or before March 31, 2017. On March 20, 2017, Canarc entered into the Membership Interest Purchase Agreement (the “AIM Agreement”) with the AIM Securityholders to purchase AIM, and closed the AIM Agreement on the same date.

AIM owns 10 gold properties in Nevada of which two properties (Fondaway Canyon and Dixie Comstock) contain historic gold resource estimates, and owns one gold property in Idaho, and has two royalty interests on other properties. These properties include the following:

Item 4.D provides further details regarding the Registrant’s mineral property interests.

Others

In November 2013, the TSX had advised Canarc that the TSX was reviewing the eligibility for continued listing on the TSX of the securities of Canarc pursuant to Part VII of the Toronto Stock Exchange Company Manual. Canarc was being reviewed under the Remedial Review Process and had been initially granted 120 days to comply with all requirements for continued listing with subsequent extensions to comply. Specifically Canarc needed to comply with expenditures of CAD$350,000 on exploration or development work on its mineral resource properties and with adequate working capital. For the nine months ended September 30, 2014, Canarc closed private placements for gross proceeds totalling CAD$3.26 million and completed its drilling program for the Windfall Hills property. In September 2014, the TSX confirmed that Canarc satisfied the TSX’s continued listing requirements.

In fiscal 2013, Canarc received demand loans of $126,000 from two directors, which were repayable on demand and bore an interest rate of 12% compounded monthly with interest payable semi-annually. In January 2014, Canarc repaid all principal and interest in full settlement of outstanding demand loans.

In January 2014, Canarc granted 500,000 stock options to an officer with an exercise price of CAD$0.05 and an expiry date of January 14, 2019, and which are subject to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest every six months thereafter.

On January 31, 2014, Canarc closed a non-brokered private placement for 18 million units at a price of CAD$0.05 per unit for gross proceeds of CAD$900,000, with each unit comprised of one common share and one-half of a whole common share purchase warrant. Item 5.B provides further details.

In March and April 2014, Canarc closed a private placement in two tranches totalling 19.6 million units at a price of CAD$0.10 per unit for gross proceeds of CAD$1.96 million with each unit comprised of one common share and one-half of a whole common share purchase warrant. Item 5.B provides further details.

On July 9, 2014, Canarc closed a private placement for 5 million units at CAD$0.08 per unit for gross proceeds of CAD$400,000. Each unit was comprised of one flow-through common share and one-half of a whole common share purchase warrant; each whole warrant is exercisable to acquire one non-flow through common share at an exercise price of CAD$0.15 per share until July 9, 2016. Funds of CAD$386,000 were expended for flow-through purposes in 2014 and 2015. Item 5.B provides further details.

In July 2014, Canarc granted 4,050,000 stock options to directors, officers and employees with an exercise price of CAD$0.10 and an expiry date of July 17, 2019, and which are subject to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest every six months thereafter.

In October 2014, Canarc received 1,074,000 shares from AzMet in settlement of debt owed to Canarc which Canarc had written off in 2013. In December 2014, AzMet consolidated its share capital on a 3-for-1 basis.

In May 2015, certain directors and officers of Canarc cancelled 3,360,000 stock options with exercise prices ranging from CAD$0.10 to CAD$0.145 and expiry dates from September 2015 to June 2017.

At Canarc’s annual general meeting in June 2015, disinterested shareholders passed two resolutions relating to shares for debt settlements to certain insiders of Canarc in which debts of up to CAD$63,520 owed to certain current and former directors would be settled by the issuance of up to 1.27 million shares and debts of up to CAD$127,400 owed to senior officers would be settled by the issuance of up to 2.55 million shares.

In August 2015, Canarc extended the expiry period of a total of 18.6 million warrants by a period of 18 months which were issued pursuant to two private placements which closed in 2014. Expiry dates for 951,250 warrants which were issued to insiders in those private placements were not extended. Item 5.B provides further details.

In September and October 2015, Canarc closed a non-brokered private placement in two tranches totalling 13.2 million units at a price of CAD$0.06 per unit for gross proceeds of CAD$790,000 with each unit comprised of one common share and one-half of one common share purchase warrant. Item 5.B provides further details.

On September 24, 2015, Canarc issued 2 million shares at a value of CAD$0.07 in settlement of partial salaries owed to certain officers and fees owed to directors in which the latter also forgave a certain portion of outstanding directors fees owed, resulting in a gain on debt settlement of $54,000.

In December 2015, Canarc granted 5,950,000 stock options to directors, officers and employees with an exercise price of CAD$0.06 and an expiry date of December 8, 2020 and which are subject to vesting provisions in which 25% of the options vest immediately on the grant date and 25% vest every six months thereafter.

In March 2016, Canarc closed a private placement in two tranches totalling 22.7 million units at a price of CAD$0.09 per unit for gross proceeds of CAD$2.04 million, with each unit comprised of one common share and one-half of one common share purchase warrant. Item 5.B provides further details.

In October 2016, Canarc received 576,503 common shares of AzMin, in which AzMet and AzMin completed a distribution by way of a reduction of AzMet’s paid up capital pursuant to Section 74 of the British Columbia Business Corporations Act whereby AzMet distributed all its 11 million common shares of AzMin to its shareholders on the basis of one AzMin share for every two AzMet shares held.

In 2016, Canarc granted the following stock options:

In February 2017, Canarc received regulatory approval for a normal course issuer bid to acquire up to 10.9 million its common shares, representing approximately up to 5% of its issued and outstanding common shares at that time. The bid commenced on February 8, 2017 and will terminate on February 7, 2018, or on such earlier date as the bid is complete. The actual number of common shares purchased under the bid and the timing of any such purchases will be at Canarc’s discretion. Purchases under the bid shall not exceed 86,128 common shares per day. Canarc will pay the prevailing market price at the time of purchase for all common shares purchased under the bid, and all common shares purchased by Canarc will be returned to treasury and cancelled.

As at April 21, 2017, Canarc had purchased an aggregate of 380,000 common shares for an aggregate purchase price of CAD$34,250, resulting in an average price of CAD$0.09 per share, and the cancellation of such shares will be completed in due course.

In March 2017, stock options for 500,000 common shares were cancelled for the exercise of share appreciation rights for 272,727 common shares.

In April 2017, Canarc closed a private placement for 3.8 million flow through common shares at a price of CAD$0.13 per share for gross proceeds of CAD$500,000. Finders fees include 6.5% cash and 6.5% finders fee warrants; each finder fee warrant is exercisable to acquire one non-flow through common share at an exercise price of CAD$0.15 and has an expiry date of April 21, 2019.

4.B      Business Overview

Nature of operations and principal activities

The Registrant’s principal business activities are the acquisition, exploration and development of mineral resource property interests. The Registrant is in the process of exploring and developing its mineral property interests and has not yet determined whether these mineral property interests contain reserves. The recoverability of amounts capitalized for mineral property interests is dependent upon the existence of economically recoverable reserves in its mineral resource properties, the ability of the Registrant to arrange appropriate financing to complete further work on its mineral property interests, confirmation of the Registrant’s interest in the underlying properties, the receipt of necessary permitting and upon future profitable activities on the Registrant’s mineral property interests or proceeds from the disposition thereof. The Registrant has incurred significant operating losses and currently has no operating revenues. The Registrant has financed its activities principally by the issuance of equity securities. The Registrant’s ability to continue as a going concern is dependent on continued financial support from its shareholders and other related parties, the ability of the Registrant to raise equity financing, and the attainment of profitable operations to fund its operations.

The Registrant and its management group have in the past been actively involved in the evaluation, acquisition and exploration of mineral properties in North, Central and South America. Starting with grass roots exploration prospects, it progressed to more advanced properties. To date, the Registrant has not received any operating revenues from its mineral property interests. The Registrant plans to continue exploring and developing its mineral property interests and, if appropriate, the Registrant intends to seek partners or buyers to purchase or to assist in further advancement (by way of joint venture or otherwise) of its mineral property interests. The Registrant seeks to identify properties with significant potential and to acquire those properties on the basis of property option agreements relying on the representations and warranties of the vendor as to the state of title, with limited or no title work being performed by the Registrant. Detailed title work is only undertaken once it has been determined that the property is likely to host a significant body of ore, which may not occur. Consequently, there is a significant risk that adverse claims may arise or be asserted with respect to certain of the Registrant’s mineral property interests. Items 3.D and 4.A provide further details.

Further information and details regarding the Registrant’s properties are provided in Item 4.D.

Sales and revenue distribution, sources and availability of raw materials, and marketing channels

As of the date of this annual report, the Registrant has not generated any operating revenues from its mineral property interests.

Competitive conditions

Significant competition exists for natural resource acquisition opportunities. As a result of this competition, some of which is with large, well established mining companies with substantial capabilities and significant financial and technical resources, the Registrant may be unable to compete for nor acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that the Registrant will be able to acquire any interest in additional projects that would yield reserves or results for commercial mining operations.

Government and environmental regulations

The Registrant’s operations are subject to governmental regulations in Canada and the USA and Mexico, where the Registrant had interests in mineral properties.

The exploration and development of a mining prospect are subject to regulation by a number of federal and state government authorities. These include the United States Environmental Protection Agency (“EPA”) and the United States Bureau of Land Management (“BLM”) as well as the various state environmental protection agencies. The regulations address many environmental issues relating to air, soil and water contamination and apply to many mining related activities including exploration, mine construction, mineral extraction, ore milling, water use, waste disposal and use of toxic substances. In addition, the Registrant is subject to regulations relating to labor standards, occupational health and safety, mine safety, general land use, export of minerals and taxation. Many of the regulations require permits or licenses to be obtained and the filing of Notices of Intent and Plans of Operations, the absence of which or inability to obtain will adversely affect the ability for us to conduct our exploration, development and operation activities. The failure to comply with the regulations and terms of permits and licenses may result in fines or other penalties or in revocation of a permit or license or loss of a prospect.

Mining Regulation

Federal

On lands owned by the United States, mining rights are governed by the General Mining Law of 1872, as amended, which allows the location of mining claims on certain federal lands upon the discovery of a valuable mineral deposit and compliance with location requirements. The exploration of mining properties and development and operation of mines is governed by both federal and state laws. Federal laws that govern mining claim location and maintenance and mining operations on federal lands are generally administered by the BLM. Additional federal laws, governing mine safety and health, also apply. State laws also require various permits and approvals before exploration, development or production operations can begin. Among other things, a reclamation plan must typically be prepared and approved, with bonding in the amount of projected reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released until that time. Local jurisdictions may also impose permitting requirements (such as conditional use permits or zoning approvals).

Nevada

In Nevada, initial stage surface exploration does not require any permits. Notice-level exploration permits (less than 5 acres of disturbance) are required (through the BLM) to allow for drilling. More extensive disturbance required the application for a receipt of a “Plan of Operations” from the BLM.

In Nevada, the Registrant is also required to post bonds with the State of Nevada to secure environmental and reclamation obligations on private land, with amount of such bonds reflecting the level of rehabilitation anticipated by the then proposed activities.

If the Registrant is successful in the future at discovering a commercially viable mineral deposit on our property interests, then if and when the Registrant commences any mineral production, the Registrant will also need to comply with laws that regulate or propose to regulate our mining activities, including the management and handling of raw materials, disposal, storage and management of hazardous and solid waste, the safety of our employees and post-mining land reclamation.

Environmental Regulation

The Registrant’s mineral projects are subject to various federal, state and local laws and regulations governing protection of the environment. These laws are continually changing and, in general, are becoming more restrictive. The development, operation, closure, and reclamation of mining projects in the United States requires numerous notifications, permits, authorizations, and public agency decisions. Compliance with environmental and related laws and regulations requires the Registrant to obtain permits issued by regulatory agencies, and to file various reports and keep records of our operations. Certain of these permits require periodic renewal or review of their conditions and may be subject to a public review process during which opposition to the Registrant’s proposed operations may be encountered. The Registrant is currently operating under various permits for activities connected to mineral exploration, reclamation, and environmental considerations. The Registrant’s policy is to conduct business in a way that safeguards public health and the environment. The Registrant believes that its operations are conducted in material compliance with applicable laws and regulations.

Changes to current local, state or federal laws and regulations in the jurisdictions where the Registrant operate could require additional capital expenditures and increased operating and/or reclamation costs. Although the Registrant is unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of our projects.

U.S. Federal Laws

The Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”), and comparable state statutes, impose strict, joint and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for the disposal of hazardous substances found at such sites. It is not uncommon for the government to file claims requiring cleanup actions, demands for reimbursement for government-incurred cleanup costs, or natural resource damages, or for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes, govern the disposal of solid waste and hazardous waste and authorize the imposition of substantial fines and penalties for noncompliance, as well as requirements for corrective actions. CERCLA, RCRA and comparable state statutes can impose liability for clean-up of sites and disposal of substances found on exploration, mining and processing sites long after activities on such sites have been completed.

The Clean Air Act (“CAA”), as amended, restricts the emission of air pollutants from many sources, including mining and processing activities. Any future mining operations by the Registrant may produce air emissions, including fugitive dust and other air pollutants from stationary equipment, storage facilities and the use of mobile sources such as trucks and heavy construction equipment, which are subject to review, monitoring and/or control requirements under the CAA and state air quality laws. New facilities may be required to obtain permits before work can begin, and existing facilities may be required to incur capital costs in order to remain in compliance. In addition, permitting rules may impose limitations on our production levels or result in additional capital expenditures in order to comply with the rules.

The National Environmental Policy Act (“NEPA”) requires federal agencies to integrate environmental considerations into their decision-making processes by evaluating the environmental impacts of their proposed actions, including issuance of permits to mining facilities, and assessing alternatives to those actions. If a proposed action could significantly affect the environment, the agency must prepare a detailed statement known as an Environmental Impact Statement (“EIS”). The United States Environmental Protection Agency (“EPA”), other federal agencies, and any interested third parties will review and comment on the scoping of the EIS and the adequacy of and findings set forth in the draft and final EIS. This process can cause delays in issuance of required permits or result in changes to a project to mitigate its potential environmental impacts, which can in turn impact the economic feasibility of a proposed project.

The Clean Water Act (“CWA”), and comparable state statutes, impose restrictions and controls on the discharge of pollutants into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. The CWA regulates storm water mining facilities and requires a storm water discharge permit for certain activities. Such a permit requires the regulated facility to monitor and sample storm water run-off from its operations. The CWA and regulations implemented thereunder also prohibit discharges of dredged and fill material in wetlands and other waters of the United States unless authorized by an appropriately issued permit. The CWA and comparable state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants and impose liability on parties responsible for those discharges for the costs of cleaning up any environmental damage caused by the release and for natural resource damages resulting from the release.

The Safe Drinking Water Act (“SDWA”) and the Underground Injection Control (“UIC”) program promulgated thereunder, regulate the drilling and operation of subsurface injection wells. The EPA directly administers the UIC program in some states and in others the responsibility for the program has been delegated to the state. The program requires that a permit be obtained before drilling a disposal or injection well. Violation of these regulations and/or contamination of groundwater by mining related activities may result in fines, penalties, and remediation costs, among other sanctions and liabilities under the SWDA and state laws. In addition, third party claims may be filed by landowners and other parties claiming damages for alternative water supplies, property damages, and bodily injury.

Nevada

Other Nevada regulations govern operating and design standards for the construction and operation of any source of air contamination and landfill operations. Any changes to these laws and regulations could have an adverse impact on our financial performance and results of operations by, for example, requiring changes to operating constraints, technical criteria, fees or surety requirements.

The current and anticipated future operations of the Registrant, including further exploration and/or production activities may require additional permits from governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Unfavourable amendments to current laws, regulations and permits governing operations and activities of mineral exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Registrant and could cause increases in capital expenditures which could result in a cessation of operations by the Registrant. To the best of its knowledge, the Registrant is operating in compliance with applicable laws.

We cannot predict the impact of new or changed laws, regulations or permitting requirements, or changes in the ways that such laws, regulations or permitting requirements are enforced, interpreted or administered. Health, safety and environmental laws and regulations are complex, are subject to change and have become more stringent over time. It is possible that greater than anticipated health, safety and environmental capital expenditures or reclamation and closure expenditures will be required in the future. We expect continued government and public emphasis on environmental issues will result in increased future investments for environmental controls at our operations.

Trends

The cumulative annual average for gold prices per ounce decreased from $1,266 in 2014 to $1,160 in 2015 and then increased to $1,251 in 2016 and closing at $1,282 on April 21, 2017. Gold prices did not achieve new highs in 2016 and 2015 relative to 2014. In 2014, gold prices per ounce reached an annual high of $1,385 in mid-March 2014, but only achieved annual highs of $1,296 in 2015 and $1,366 in 2016. The high for 2017 was $1,284 on April 13, 2017 which is still lower than the annual highs in the prior three years.

During the period from January 2014 to December 2016, the closing market price for Canarc’s shares increased from CAD$0.05 to CAD$0.08 – an increase of 60%, and the high of CAD$0.15 was on January 29, 2016. On April 21, 2017, the closing market share price was CAD$0.11. The lack of financing and the absence of a joint venture partner to advance the New Polaris gold project contributed to the ongoing weaknesses in the market price of Canarc’s shares in early 2014. The Share Exchange Agreement with Santa Fe in July 2014 provided market support but then weakened when the conditions precedent set forth in the agreement were not satisfied in October 2014. In February 2015, the Company entered into a Pre-Development and Earn-In Binding Agreement with PanTerra to advance the New Polaris project but PanTerra declared force majeure in August 2015 and requested an extension until PanTerra received approval from the Dominican Republic government for importing New Polaris gold concentrate into the country for processing. In September 2016, PanTerra provided 30-day notice of its intent to withdraw from the first option of the agreement, which agreement was effectively terminated on October 22, 2016. The market price of Canarc’s shares strengthened in the latter half of 2015 from the acquisition of the El Compas project and such strength continued into 2016 as the project progressed but weakened from the sale of the project to Endeavour even though Canarc realized significant gains from such transaction. Canarc’s share price again strengthened from the property option agreement with Eureka for the FG Gold property in August 2016 and the acquisition of AIM in March 2017. In February 2017, the normal course issuer bid provided a certain baseline support for its market price. Items 4.A and 4.D provide further details.

Risk factors in Item 3.D provide further details regarding competition and government regulations.

4.C      Organizational Structure

The Registrant carries on its business in large part through its subsidiaries. The Registrant has a number of direct or indirect wholly or majority owned subsidiaries of which the active subsidiaries are as follows:

New Polaris Gold Mines Ltd. (“New Polaris”) (formerly Golden Angus Mines Ltd. - name change effective April 21, 1997) is a corporation formed through the amalgamation of 2820684 Canada Inc. (“2820684”), a former wholly-owned subsidiary of the Registrant incorporated under the Canada Business Corporation Act on May 13, 1992, and Suntac Minerals Inc. The Registrant owns 100% of the issued and outstanding shares.

AIM U.S. Holdings Corp. is a corporation duly incorporated in the State of Nevada, USA, on March 14, 2017. The Registrant owns 100% of its issued and outstanding shares.

American Innovative Minerals, LLC (“AIM”) is a limited liability company existing pursuant to the laws of Nevada, USA, on January 20, 2011. The Registrant owns 100% membership interest in AIM.

Oro Silver Prestadora SA de CV is a company duly incorporated under the laws of Mexico on December 3, 2015. The Registrant owns 100% of its issued and outstanding shares.

4.D      Property, Plant and Equipment

¹ Subject to any royalties or other interests as disclosed below.

² Previously known as “Polaris-Taku”.

³ Net of recoveries and write-downs.

NOTE: All monetary figures are in terms of U.S.$ unless otherwise noted. See below for further details on each property.

The following is a more detailed description of the mineral properties listed above in which the Registrant has an interest.

Material Mineral Projects

We do not currently have any proven and probable reserves under Industry Guide 7 standards, See “Cautionary Note to United States Investors Concerning Reserve and Resource Estimates” above. The Company’s properties are currently in the exploratory stage. In order to determine if a commercially viable mineral deposit exists in any of such properties, further exploration work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility. The following is a discussion of the Company’s material mineral properties.

Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources . This section and certain related exhibits may use the terms “measured” and “indicated resources”. We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. See “Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates” at the beginning of this annual report.

Cautionary Note to U.S. Investors concerning estimates of Inferred Resources . This section and certain related exhibits may use the term “inferred resources”. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable. See “Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates” at the beginning of this annual report.

New Polaris Gold Project (British Columbia, Canada)

James Moors, P.Geo, who was Vice President Exploration of the Registrant at that time, was the Qualified Person for the purposes of the foregoing technical disclosure on the New Polaris Gold Project. The information in the following summary on the New Polaris Gold Project has been derived in part from and is partially based on the assumptions, qualifications and procedures set out in the Technical Report titled “Resource Potential, New Polaris Project” (the “New Polaris Technical Report”) dated March 14, 2007 and prepared by R.J. Morris, MSc, PGeo, of Moose Mountain Technical Services and G.H. Giroux, MASc, PEng, of Giroux Consultants Limited, who are independent Qualified Persons as defined by National Instrument 43-101 (“NI 43-101”) and was prepared in compliance with NI 43-101, to the best of the Registrant’s knowledge.

The following extracted from, or are accurate paraphrasing of, the executive summary, or other sections as indicated from the New Polaris Technical Report, the full copy of which is available online at www.sedar.com as filed on March 16, 2007. Defined terms and abbreviations used herein and not otherwise defined shall have the meanings ascribed to such terms in the New Polaris Technical Report.

Extract of Selected Sections of the Summary from the New Polaris Technical Report

Summary

New Polaris (formerly Polaris-Taku) is an early Tertiary mesothermal gold mineralized body located in northwestern British Columbia about 100 kilometres south of Atlin, BC and 60 kilometres northeast of Juneau, Alaska. The nearest roads in the area terminate twenty kilometers due south of Atlin and 10 kilometres southeast of Juneau. Access at the present time is by aircraft. A short airstrip for light aircraft exists on the property.

The deposit was mined by underground methods from 1938 to 1942, and from 1946 to early 1951, producing a total of 740,000 tonnes of ore at an average grade of 10.3g/t gold.

The property consists of 61 contiguous Crown-granted mineral claims and one modified grid claim covering 2,100 acres. All claims are 100% owned and held by New Polaris Gold Mines Ltd., a wholly owned subsidiary of Canarc Resource Corp., subject to a 15% net profit interest held by Rembrandt Gold Mines Ltd. Canarc can reduce this net profit interest to a 10% net profit.

The deposit is composed of three sets of veins (quartz-carbonate stringers in altered rock), the “AB” veins are northwest striking and southwest dipping, the “Y” veins are north striking and dipping steeply east and finally the “C” veins are east-west striking and dipping to the south to southeast at 65º to vertical. The “C” veins appear to hook around to the north and south into the other two sets of veins so that their junctions form an arc. The gold is refractory and occurs dominantly in finely disseminated arsenopyrite grains that mineralize the altered wallrock and stockwork veins. The next most abundant mineral is pyrite, followed by minor stibnite and a trace of sphalerite. The zones of mineralization range from 15 to 250 metres in length and 0.3 to 14 metres in width.

Canarc explored the “C” vein system between 1988 and 1997, and carried out infill drilling in 2003 through 2006, to better define the continuity and grade of the vein systems.

An updated resource estimate was prepared by Giroux Consultants Ltd. using ordinary kriging of 192 recent drillholes and 1,432 gold assay intervals constrained within four main vein segments as modeled in 3D by Canarc geologists. The total New Polaris database consists of 1,056 diamond drillholes with a total of 31,514 sample intervals.

The geologic continuity of the C vein has been well established through historic mining and diamond drilling. Grade continuity was quantified using a geostatistical method called the semivariogram, which measures distances (ranges) and directions of maximum continuity. The four principle veins in the semivariogram model produced ranges between 50 and 90 metres, both along strike and down plunge.

For this study, the classification for each resource block was a function of the semivariogram range. In general, blocks estimated using ¼ of the semivariogram range were classed as measured, blocks estimated using ½ of the semivariogram range were classed as indicated, and all other blocks estimated were classed as inferred.

The following tables list the undiluted resource e stimate, including the “C” vein west ( C W M ) from the – 9 0m elevation down, and the “C” vein east (C L OE and CHIE) from the – 1 35m elevation down (the ele v ations, –90m in the west, and –135m in the east, r epresent the lower elevations of previous mine development and production. The resource potential above these elevations has been discounted in this study, but are listed in the History item, Section 8).

Measured, undiluted resource

Indicated, undiluted resource

Measured + Indicated, undiluted resource

Inferred, undiluted resource

The deposit represents an important gold resource and follow-up work should include test mining and infill drilling.

Property Description and Location

“The N e w Polaris (fo r m er l y the Polaris-Taku m ine) p roper t y cons i sting of a gr o up of 6 1 contigu o us crown grants and one m o d ified grid claim totaling 1,196 ha (2 ,9 56 acres) located 96 km (60 m iles) south of Atlin, BC and 64 km (40 m il e s) northeast of Juneau, Alaska. Located at approx i mately 133º37’W L ong i tude and 58º42 ’ N Latitude, the deposit lies in clo s e p roxi m ity to the “Tulsequah C h ief” prop e rty of Redcorp on the east e rn flank of the Tulse q uah River Valley (F i gure 6 -1).

The claims are 100% owned and held b y New Polaris Gold Mines Ltd., a whol l y owned subsidiary of Canarc Resource Corp. sub j ect to a 15% net profit interest held by Re m b randt Gold Mines L t d. which Canarc h as the r i ght to reduce to 10%. The cla i ms locations are shown on Figure 6-2 while T a ble 6-1 s u mmarizes the clai m s shown on Figure 6-2. With the exception of the W.W.1 claim, the claims a re crown granted and are kept in g o od standing t h r o ugh a n nual t a x p a y m ents. The W.W.1 i s a m odified grid claim. The claim has sufficient work filed o n it to keep i t in g ood st a nding unt i l F ebruary 4, 201 5 . The crown granted claims were legally surv e y ed in 1 9 37. The m ineralized areas are shown on Figure 6-3 a nd 9- 2 , which shows the geolo g y of the proper t y o n t h e m ineral showings. T h e Polaris No. 1, Si l v er King No. 1, Silver King No. 5, Black Dia m ond, Llo y d and Ant Fraction crown grants include the surface rights. Surface rights for the re m ainder of the proper t y l ie with the Crown.

The location of the known m ineralization rel a tive to the outside bounda r y of the proper t y is shown on Figure 6-3 .

Mining of the AB V ein s y stem and to a le s ser extent the Y and C veins w as carried o u t during the 1 9 30s to ear l y 1 950s. Much o f the former infrastructure has been reclai m ed. A $200,000 recla m ation bond is in place and it is the w riter ’ s op i nion that this adequately covers the cost of recla i m i ng the original m ill site and infrastructure. At this t i me there i s no legal or regulato r y require m ent to re m ove or treat the tailings on the propert y . It is rec o mmended that sa m p ling of the tail i ngs and w a ter be carried o u t to deter m in e if there acid water o r conta m ina n ts draining f rom t h e tailings and m ine workings. As well, sa m p ling of water down stream fr o m the site to deter m ine if drain a ge form th e tailings and waste r o ck is aff e cting the water qu a li t y of Whitewater Creek or the Tulsequah River. If there is conta m ination of the wate r s do w n stre a m fr o m the was t e du m ps and tailings a mi t igation plan will be required. The cost of the mitigation will depend upon the level of conta m ination of the water down strea m .

Prior to commencing exploration on t h e proper t y a Notice of Work is req u ired to be sub m itted to the Mining a nd Minerals Department of the BC Ministry of Energy and Mines. Work can only commence o n ce a pproval has been received . ”

Location Map

Accessibility, Climate, Locate Resources, Infrastructure and Physiography

“The New Polaris project area lies on the eastern fla n k of the steep, rugged, Co a st Range Mountains. Relief is ext r e m e with elevations rang i ng from the sea level to 2,600 m etres.

Extensive re c ent glaciation was the dominant factor in top o gra p hic development. The Taku and Tu l sequah Rivers are the m ost p r o m inent topogra p hic feature of broad valley bounded by s teep m ountains. Numerous tributary streams flow from valleys filled with glaciers. The m ajority of the glaciers ar e fingers br an ching from the extensive Muir ice cap, lying to the northwest of the Taku River. The Tulsequah glacier, which te r m inat e s in the Tulse q uah valley a b out 16 kilo m etres north of the New Polaris m ine site, is one of the largest glaciers in the immediate a rea. It forms a dam c ausing a large lake in a tributa r y val l ey t h at breaks throu g h the ice barrier (Jakülhlaup) d u ring t h e spring thaw every year, f l oodi n g the T u lsequah and Taku vall e ys below for th r ee to five days.

S m all airc r aft provides access fr o m Atlin or Juneau. Ocean-going barges have been used in the past to acc e ss the si t e when heavier equip m ent is required. Redcorp Ventures Ltd. (Redcorp) has applied to co m p le t e a road to their project si t e, a cross the river a nd to the north, which could change the infrastructure to the site. The property can be operated y ear ro u nd, h o wever access would be d i fficult duri n g break up and freeze up.

The cl i mate is one of h e avy rainfalls du r ing the late s u mmer and fall m o nths, and c o m p aratively hea v y sn o wfall, inters p ersed with rain during t h e winter. The annual precipitation is approxi m a tely 1 . 5 m etres of which 0.7 m etres o ccurs as rai n fall. The snow seldom acc u m u lat e s to a depth greater than 1.5 m etr e s on the level. Winter t e m p eratur e s are not severe and rarely fall b e low –15 º C. Sum m er t e m p eratur e s, in July, average 10ºC with da y time t e mpera t ures re a ching the high 20 ’ s on occa s ion. The vegetation is t y pical of n o rthern te m p eratu r e rain forest, consisting pri m arily of fir, he m lock, spruce and cedar forest on t h e hillsides and aspen and alder groves i n the river valle y .”

History

Montgo m ery Consultants were c o mmissioned to conduct a Geostatistical Stu d y of the Geological Resource for the Polaris-Taku Deposit in 199 1 . G.H. Giroux carried out t his review and calculated a total resource o f 2 , 225,000 t ons grading 0.433 opt gold based on a geostatistical approach using a cut-off grade of 0.25 opt gold. These reserves were divided in t o 333 , 000 t o ns at 0.437 opt gold (pr o bable) and 1,8 9 2,0 0 0 tons at 0.432 o p t gold ( p ossible). The estimate discounted m uch of the reserves around t he old workings and did not i n clude dilution and m ini m u m m i ning width provisi on s. These estimates were based on bo t h old and new drilling and ext e nded th e resource base down to ro ugh l y 1200 feet BSL. T h is estimate d oes not m eet the definition require m ents of NI 43 – 101 for a resource. The Author has not done sufficient work to classify them as current reserves or resources and is not treating them as current. This estimate, t h erefore, should not be relied upon.

Watts, Griff i s , and McQuat were cont r acted to review the previous reserves in Augu s t 1992. Their review incorporated the r esidu a l rese r ves within t h e m ine wo rk ings, as estimated by Beacon Hill in 1989, in t o their ov e rall esti m ate of a total (diluted) m ineral resource of 1,6 0 0,0 0 0 t o ns at 0.46 o p t gol d . Th e ir estimations were based up o n a mini m um mining width of 5 feet or 15 % dilution a n d a cut-off grade of 0.25 o p t gold. The i m prov e ment in grade st e ms from the inclusion of new deeper holes that extend the known m ineralization to a depth of 1 2 0 0 feet BSL and exclusi o n of lower gra d e material previously included in the Montgo m e ry estimate. This est i ma t e does not meet the definition re q u ire m ents of NI 43 – 101 for a resource. The Author has not done sufficient work to cla ss ify them a s cu rrent reserv e s or r e sources and is not tr e ating th e m a s current. This esti m ate, therefore, should not be r e lied up o n.

Giroux was further contracted to provide resource updates t h roug h out 1 9 92 and in February 1995 he re-est i mate the r e s ources for the newly drilled portions of the "C" Zone. Recent drilling has also confi r med the existence of a new "North" Zone, which, although i t appears to be low grade (0. 18 opt gold) has exhibited possible significant widths in t h e order of 22 feet. Giroux has included estimations for this z o ne, which for purposes of this review h a ve been exc l uded due to grade. The r e sults of his r e-est i ma t e show that the "C" Vein discovered just prior to mine closure repr e sents a signif i cant new addition to th e resource base. He has estimated a total of 85,700 t ons grading 0.4 2 6 opt gold ( p robab l e) and 59 5 , 0 00 t o ns grad i ng 0 . 425 opt gold ( possib l e) for this z o ne below the 450 Level (elev. 313 ft BSL) and 1 0 00 feet BSL.

Most of this resource lies above 800 f e et BSL and within 200 f e et of the existing shaft botto m . The total resourc e s est i mated by Giroux to date are s u mmari z ed on Table 4.2. His e st i m a t es were in situ based on a 0.25 opt gold c u t-off and did not include dilution provisions as shown below and cons id ered to be relevant a s they are based on a significant a m ount of data and w e re independent l y calculated.

In order to summar i ze t h e variety of est i mations identified ab o v e; Godfrey Walton did the following: Beacon Hill estimation of residual reserves within and around the workings was totaled. To this total, the g e ostatistical resource estimation of Giroux was added after app l y i n g a ge n eral dilution f actor of 25% at zero grade to Giroux ' s figures for the " Y " Z o ne and 15% at zero grade for the "AB" and "C" Zones. The in-situ resource base is pres e ntly estima te d as 582,910 tons at 0.359 opt gold (Probable), and 2,614,210 tons at 0.3 6 3 opt g o ld ( Possible) including a p pr o p riate diluti o n factors. The dilution factors w ere est i mated b a sed on vein charact e risti c s. The "Y" veins are d es cribed as being hi g h g r ade, but narrow which makes them pr o n e to high di l u tion from over-break during mining as well as over mining. The "AB" v eins in-situ grade, as estimated by Giroux, alrea d y contains i n ternal dilut i on from a p arallel d y ke. To this total, Walton added overall additional d i lution of 15 %, whi c h, he felt, was appropriate, as the "C" vein would not e x perience m u ch diluti o n si n ce it is g e nerally t h ou g ht t o be fairly thick. This estimate does not m eet the definition requir e ments o f NI 43 – 101 for a resource. The Author has not done sufficient work to classify them as current r e serves or res o urces and is not treating them as current. This esti m ate, theref o re, should n o t be relied up o n.

In the Autho r ’s op i ni o n , t h e residual reserves in and around the w o rkings i n cl u d ed in the Beacon Hill esti m ation are unlike l y to contri b u t e significantly to a n y n e w m ining operation. For the m o st part it is in re mna n ts scat t ered a m ongst the old stopes and will be difficult to access and develop.”

Geological Setting

“The New Po laris Mine lies on the w estern edge of a large body of Upp e r Triass i c Stuhini Group volcanic rocks, which has been intruded by a Jurass i c-C r etaceous granodiorite body north of the mine. Older Triass i c volcanic rocks and earl i er sed i ments underlie the Stuhini v o lcanic rocks. The granod i orite is part of the Coast Plutonic C o m p lex (Figure 9-1).

The structur a l trend in the ar e a is northwest-southeast, paralleling m a jor faults and folds to the east a nd intrusive alignment to the west. T h e Triass i c volcanic rocks and older sed i m entary rocks have been folded and s h eared with the Stuhini Group rocks being deformed into broad t o isoclinal, d oub l y pl u ng i ng s y mmetrical folds with large a m plitudes.”

“Canarc h a s carried out extensive mapping of the Polaris-Taku property since the early1990 ’ s. The work has been done by a nu m ber of emplo y ees and contractors and is shown in Figure 9-2. The gold deposit is hosted within a n ass e mblage of m afic (basalt and andesite units) volcanic ro c k s altered to gree n schist met a m o rphic f a cies. The orientation of these units is inconclusive becau s e there are no marker beds in the sequence. It is thought t h at t h e units are steeply dipp i ng (70º t o 80 º ) t o the north based on the or i entation of the li m e stone/basalt interface at the s o uthern portion of the prop e rty.

A serpentinite unit is loc a ted to the northeast, which was identified in recent (1996 / 97) drilling and underground mapping. T h is unit a ppears to form th e eastern e x tent of the minerali z ation. The age relationship is unclea r , but it is ass u med th at the serp e ntinite is a later stage f ea ture possibly associa t ed w i th tectonism i n the area.

The ‘vein’ zones are struc t urally controlled shear zones and are t y pified by silicification and carbonatization cross cutting actual quartz - carbonate veins. T h ese zones have sharp contacts with the wall rock and form anasta m osing ribbons and dilations. Th ese zo n e s have been d e formed se v e r al t i mes, wh i ch m ak e s or ig inal textures difficult to deter m ine. The zones a r e generally tabular in geometry for m i n g en-echelon sheets within the m or e c o m p etent host lithologies.

All of the strata within the property have been subjected to compression, rot a tion and subsequent extension. T h e plu n ge of folds appe a rs to be var i able thou g h generally shallow. Small-sca l e isoc l inal folds strike north-northwesterly and p l unge moderately to the north. Numerous faults are found on the property, the m o re significant of which are discussed lat e r.

The possible extension of the Llewellyn fault, ter m ed the S o uth Llewellyn fault, continues south from the Chief Cross fault along m ine grid coordinate 4 400 East. Slightly north of Whitewater Creek it is offset to the west by an east- w est fa u lt, the 101 fault, to con t inue in a m o re southeast o r ientation of the opposi t e side of Whitewater Creek. This northwest-southeast orientation structure was n a med the Limest o n e Fault due to its bedding parallel a ttitude within a discontinuous li m estone/marble horizon. It marks the southwest bou n dary of t h e “mine w e dge”: the wedge shaped package of rock within which all past prod u ction to o k pl a ce. The nor t h ern bo u nda r y of the “ m ine wedge” is further defined as mentioned above b y the Whit e water Creek Schist Zone, a zone o f schistose ch lo rite-a m phibolite-serpentinite less than 300 feet thi c k. A co m p lex network of brittle faul t s is also found within t h is zone.

Three m ajor faults, N u m b ers 1 and 5, a nd an unnamed fault, lie within the m i ne wedge. The No.1 and No.5 faults strike northwes t -southeast, dipping a pproxi m ately 45º to the northeast, and are sub-parallel to the unnamed fault, which dips steeply to the southwest. The No.1 fault has reverse displacement of up to 100 feet while th e displac e ment of the No.5 fault i s poor l y defined. The s outhwest dippin g , u n named fault showed n o displac e ment, as it appar e ntly parallels the A-B v e in s y ste m . The m ined out ar ea s indicate the wedge shape, the pred o m in ant ori e ntations and continui t y of the zones, and the overall p l unge of t h e s y stem to the southeast. An early interpretation of the structure showed that various veins appear to m e et and form “ junction arcs” where both thickness and grade improve.

Deposit Types

The New Polaris deposit is classified as a m e sothe r m a l lode-go l d d e posit Hodgson, (1993).

“In general, it is quartz-vein-related, w ith associa t ed carbonatized wall rocks. T h e deposits are characterized by a high gold/silver ratio, great vertical continui t y with little vertical zonation, and a b r oad l y s y n-tecton i c ti m e of e m pla ce ment. They are commonly associa t ed w i th p y rite, ar s enop y rite, tourmaline and m o l y bdenit e . Minerali za tion may occur in any rock t y pe and ranges in fo r m fr o m veins, to veinlet s y stems, to disse m inated replac e ment zones. Most minerali z ed zones are hosted by and alwa y s related to steeply dipping reverse- or obliqu e -slip brittle-fracture to ductile-shear zones.”

“The exploration target o n the New Polaris project is orogenic lode go l d d e posits also known as Mesother m al v ein deposits. N u m erous exa m ples of this type of d eposit are known thr ou gh out the w o rk includi n g the Ca m b ell Red Lake deposits in Ontario and the Bralorne deposit in British Colu m bia. Past exploration studies have de m onstrated that the New Polaris vein s y stems have all of t h e attributes of the orogenic vein gold deposit including, but not li m ited to association with m ajor structural b r eak, quartz-carbonate vein associa t ion, low-sulphide assemblage of pyrite and a r senopyrite, chloritic and sericitically a ltered wall rocks and persistent gold m ineralization over a vertical distance of nearly 1 k m .”

The deposit t ype and m odel is considered appropria t e for a Mesother m al lode-gold de p o sit.

Mineralization

“Mineralization of the New Polaris deposit bears strong si m ilarities to m any Archean lode go l d de p o sits such as the arsenical gold ca m p of Red Lake, Ontario where the gold- bearing arseno p y rite is dis s e m inated in the a ltered rock and in quar t z-carbonate stringers.

The vein m ineralization c o nsists of arseno p y rite, p y r i te, stibnite a n d gold in a gangue of quartz and carbonates. The sulphide c ontent is u p to 10% with arsenop y rite the m o st abundant and p y rite the n e xt i m portant. Stibnite is fairly ab u ndant in some s p ecimens but overall co m p rises le s s then one-tenth of 1% of the vein m att e r. Alteration m ine r a l s include fuchsite, silica, p y r it e , sericite, carbonate and albite.

In general, the zones of mineralization r a nging fr o m 15 to 250 metres in length with widths up t o 14 m etres appear to ha v e been deposited on l y on the larger and stronger shears. Their walls pinch and swell showing consid e rable irregularity bo t h vert i cally and horizontal l y. Gold values in the veins have remarkable continui t y and unifo r mity, and are usually directly associated with the a m ount of arsenopyrite present. The pro m inent strike directions are north-south and north w est-southeast, which is interpreted to be within a m ajor shear zone. Up to 80% of the mine producti o n was from “structural knots” or what is now known as “C” zones. In detail the “C” zones are arcuate structures. Figure 11-1 shows a 3D view of the “C” vein s yste m .

The vein m ineralization has well m arked con t acts with the wall rock. The transition from mineralized to non m ineralized rock occurs over a few centi m eters. The m ineralization consists of at least 3 stages of quartz v e ining. The initial stage of quartz-ankerite introduced into the structure was acc o mpanied b y a p ervasive h y d r othermal alteration of the immediately surrounding w a ll rock. Arsenop y rite, p y rite and lesser stibnite were deposited with the alteration. Later stages of quartz-ankerite veini n g are barren and have the effect of diluting the gold grades in the structure. The sulphide minerals are very fine- grained and d isseminated in b o th t he wall rock and early quartz and ankerite veins. Free gold is extr e mely rare and to the end of 20 0 5 had not been recognized in co r e sa m ples. The m ajority of the gold occurs in arsenop y rite and to a lesser extent in p y rite and stibnite. Because there is n o visible gold and the host sulphides are very fine-grained and disse m inated there is little nugget effect and go l d values even over short intervals rarely exceed 1 opt.”