met

XMET INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the Year Ended December 31, 2011

(Expressed in Canadian Dollars unless otherwise indicated)

Dated: April 26, 2012 INTRODUCTION

The following is Management’s Discussion and Analysis (“MD&A) of the financial condition and results of operations of Xmet Inc. (“Xmet”, the “Corporation”, or the “Company”) to enable a reader to assess the financial condition and results of operations of the Company for the year ended December 31, 2011. This MD&A has been prepared as at April 26, 2011 unless otherwise indicated. This MD&A should be read in conjunction with the Consolidated Financial Statements (“Financial Statements”) and Related Notes for the year ended December 31, 2011, which have been prepared in and are in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All monies are expressed in Canadian dollars unless otherwise indicated.

The Company’s head office and principal business address is Suite 2500, 120 Adelaide Street West, Toronto, Ontario M5H 1T1. Additional information relevant to the activities of the Company, including press releases has been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) – www.sedar.com.The Company is a reporting issuer in the provinces of British Columbia, Alberta and Ontario and trades on the TSX Venture Exchange, symbol XME-V.

MANAGEMENT’S RESPONSIBILITIES FOR FINANCIAL REPORTING AND CONTROLS

The Financial Statements have been prepared by management in accordance with International Financial Reporting Standards appropriate in the circumstances and have been approved by the Company’s board of directors (the “Board”). The integrity and objectivity of these Financial Statements are the responsibility of management. In addition, management is responsible for ensuring that the information contained in the MD&A is consistent where appropriate, with the information contained in the Financial Statements.

In support of this responsibility, the Company maintains internal and administrative controls to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company’s assets are properly accounted for and adequately safeguarded. The Financial Statements may contain certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis to ensure that the Financial Statements are presented fairly in all material respects.

The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board carries out this responsibility principally through its audit committee. The members of the audit committee are appointed by the Board and have sufficient financial expertise to assume this role with the Company. The majority of the audit committee members are not involved in the Company’s daily operations.

CORPORATE OVERVIEW On May 31, 2010, Xmet Inc. (“Xmet” or the “Corporation or the “Company”) completed the acquisition of On-Strike Gold Inc. (“On-Strike”) by way of a “three-cornered” amalgamation in which Eminence Capital II (OSG) Inc., (“Eminence”), a wholly-owned inactive subsidiary of the Corporation amalgamated with On-Strike to form Duquesne-Ottoman Mines Inc. (“DOM”). As a result DOM is now a wholly-owned subsidiary of Xmet, the legal parent and reporting Issuer.

Xmet was incorporated as Eminence Capital II Inc. under the Business Corporations Act (Ontario) on August 2, 2006 and classified as a “Capital Pool Company” as defined in Policy 2.4 of the TSX Venture Exchange (the “Exchange”). It did not own any material assets other than cash and its principal activities consisted of financing through an initial public offering, obtaining an initial listing of common shares on the Exchange, the identification of potential acquisitions, the negotiation of the Definitive Transaction Agreement with On-Strike and efforts to implement the Proposed Qualifying Transaction pursuant to the Capital Pool Company Program.

DOM (formerly “On-strike Gold Inc.”) was incorporated on November 13, 2009 under the Business Corporations Act (Ontario). It is engaged in the business of exploration and development of mineral properties in the Province of Quebec. DOM’s primary project is the Duquesne- Ottoman Project, consisting of a total of 60 claims covering an area of 928.6 hectares located approximately 40 kilometres north of the city of Rouyn-Noranda and 10 kilometres east of the village of Duparquet within the townships of Duparquet and Destor in the Province of Quebec.

Concurrent with a Change in Corporate Structure the Company elected to change its financial year-end from August 31 to December 31 for consistency with other publicly traded mining companies.

Xmet is a mineral exploration company engaged in the acquisition, exploration and development of early stage mineral resource properties in Canada. The Company’s current focus is on gold exploration with its current properties located in Quebec. The Company trades on the TSX Venture Exchange, symbol XME-V, and the OTCQX, symbol XMTTF.

RESULTS OF OPERATIONS – PROJECTS REVIEW

A –Duquesne-Ottoman Property, Quebec

Property Location and Description

The Duquesne-Ottoman (DO) property is located approximately 40 kilometres north of the city of Rouyn-Noranda and 10 kilometres east of the village of Duparquet within the townships of Duparquet and Destor in the province of Quebec (Figure 1).

The DO property is comprised of 20 claims known as Duquesne West Block and 40 claims, known as Ottoman Fault Block (more commonly referred to as Ottoman), and covers an area of 928.6 hectares. All claims are in good standing and held 100% by Duparquet Assets Inc.

Figure 1: Location of Duquesne-Ottoman property.

The DO property is accessible via a bush road south from Highway 393, approximately 4.5 kilometres west of Highway 101. A network of drill roads and all-terrain vehicle trails traverse the remainder of the property from east to west. The terrain in and around the property is undulating with rolling hills and low swampy ground. Relief across the area is less than 25 metres. The vegetation is mostly mature deciduous poplars with scattered spruce and pine with thick alder underbrush. The area was previously logged and parts of the property are currently being logged.

The property contains several small lakes and streams, which supply sufficient water for drilling, trenching and exploration work in general. A power line runs north, approximately one kilometre west of Route 101, on the adjoining Duquesne mine property, which lies 2.5 kilometres east of the property’s eastern boundary.

History

The Duquesne-Ottoman property has been the subject of documented exploration since 1927. Prior to Xmet’s involvement a total of 239 diamond drill holes totalling 65,063 m were documented on the Duquesne West block and an additional 8 holes totalling 3,106 m were reported on the Ottoman block. In 1983 Claremont Mines sunk an 80 foot (24 m) shaft on the Duquesne West block and reportedly produced a bulk sample in the order of 425 tons. The reported grade of the bulk sample was 0.11 opt Au (~3.8 g/t Au). The current property was consolidated in 1987 by Globex Mining Enterprises Ltd. (“Globex”) (Duquesne West block) and Geoconseil Jack Stock Ltd. (“GJSL”) (Ottoman block) and between 1990 and 2007 the property was successively optioned and explored by Noranda Mines Ltd. (1991-1992), Globex (1993- 1994), Santa Fe Canadian Mining Ltd. (1994-1996), Kinross Gold Corp. (2001-2003), Queenston Mining Inc. (“Queenston”) (2003-2004) and Diadem Resources Ltd (“Diadem”) (2006-2007). During this period 132 holes were drilled totalling 58,863 m, mainly on the Duquesne West block and with little work on the Ottoman block of claims.

Two previous resource estimates were prepared for the Duquesne-Ottoman Property prior to Xmet optioning the property. These estimates were prepared by previous operators over a period of years from 1997 to 2003. Neither of these were NI 43-101 compliant Mineral Resource estimates and the estimate prepared by Kinross was never released.

Although the previous estimates are useful in demonstrating the general potential of the Property, these estimates were based on data that do not include all currently available drilling and assumed gold prices and operating costs that are very different than might be expected at present and are therefore considered historical estimates and should not be relied upon.

Kinross prepared the resource estimate using two different assumptions - one called “conservative” with a 5 g/t Au cut-off and another “optimistic” case with a 4 g/t Au cut-off. For each case, estimates were made with uncut values and with top values cut at 30 g/t Au. For the 4.0 g/t Au cut-off case, the resource varies between 257,000 and 316,000 ounces using the cut and uncut values, respectively. All the estimated Resource ounces are considered inferred.

Since the Kinross resource estimate, two additional diamond drilling programs were undertaken on the property prior to Xmet signing an option agreement. A total of 32 diamond drill holes totalling 19,878 m were drilled, all on the Duquesne West block, and many of these holes were drilled on the extensions of the known mineralized zones but for which no resource has been estimated.

On 21 September, 2010 Xmet announced the results of an independent resource estimate on the Duquesne-Ottoman Property. The study identified a total inferred resource of 2,730,000 tonnes grading 6.00 g/t Au or 5.29 g/t using assays cut to 30 g/t Au for a total of 525,000 ounces or 465,000 ounces (cut). The bulk of the resource is found in two zones, namely the Liz and Fox which together comprise a total of 402,000 ounces (341,000 ounces with cut assays) at a grade of 7.95 g/t Au (5.93 g/t cut assays). These results have been superseded by a more recent resource estimate (see next section) and are therefore considered historical in nature and should not be relied upon.

In early September 2010, Xmet initiated a 13,000 metre diamond drilling program on the DO property. By the end of December 2010, 14 holes were completed totalling 5,993 metres of drilling. In addition, 7 holes totalling 4,100 metres, drilled by Clifton Star near the east boundary of the DO property, were recovered and integrated in to the DO drill hole database and used for the resource estimate. On 8 November 2010 Xmet filed the NI 43-101 compliant resource estimate report on Sedar.

Table 1 summarizes the significant results obtained from drilling in 2010. Intersections from drilling done by Clifton Star on the Nip Zone (see holes with DQ prefix) are included. All interestection are core length and true widths represent on average approximately 80% of posted intervals. Table 1: Summary of mineralized intersections of 2010 drilling, Duquesne-Ottoman Property.

Au (g/t) LENGTH Au (g/t) HOLE FROM (m) TO (m) ZONE (cut 30 (m) (uncut) g/t) DO-10-01 57.46 62.18 4.72 Shaft 1.45 1.45 DO-10-02 79.3 87.55 8.25 Liz 1.37 1.37 DO-10-02 166 172 6 S-Shaft 0.72 0.72 DO-10-02 232.54 235.92 3.38 Shaft 3.19 3.19 DO-10-03 100.39 104.48 4.09 Liz 0.91 0.91 DO-10-03 188.63 191.23 2.6 Shaft 1.74 1.74 DO-10-03 300.05 301.25 1.2 Fox 2.25 2.25 DO-10-04 576.72 577.92 1.2 Shaft 3.39 3.39 DO-10-04 671.45 675.35 3.56 Fox 2.17 2.17 DO-10-05 329.2 334.5 5.3 20-20 8.96 8.96 DO-10-06 631.5 634.5 3 Liz 0.02 0.02 DO-10-06 675 676.2 1.2 S-Shaft 0.28 0.28 DO-10-07 423.1 427.4 4.3 Shaft 0.61 0.61 DO-10-08 43.8 46.6 2.8 Shaft 2.41 2.41 DO-10-09 144.95 117.4 2.45 Shaft 0.96 0.96 DO-10-09 263.3 264.5 1.2 Fox 0.88 0.88 DO-10-10 97.1 100.25 3.15 Fox 0.79 0.79 DO-10-11 28.85 30 1.15 Shaft 0.90 0.90 DO-10-11 142.2 145.95 3.75 Fox 6.14 3.05 DO-10-12 20.4 23.55 3.15 Liz 0.54 0.54 DO-10-12 70.95 74.05 3.1 Shaft 3.22 3.22 DO-10-12 189.85 195.4 5.55 Fox 1.76 1.76 DO-10-13 447.5 448.1 0.6 Liz 0.20 0.20 DO-10-14 447 451.65 4.65 20-20 3.08 3.08 DQ09-09 305.5 318.7 13.2 Nip-Nord 6.76 6.31 DQ09-09 191 193 2 Nip-Sud 0.36 0.36 DQ10-14 148.5 153 4.5 Nip-Nord 2.95 2.95 DQ10-14 36.75 38.2 1.45 Nip-Sud 0.00 0.00 DQ10-15 198 201 3 Nip-Sud 0.12 0.12 DQ10-16 47 52.5 5.5 Nip-Nord 1.52 1.52 DQ10-17 101 117 16 Nip-Nord 3.04 3.04 DQ10-18 267 272.6 5.6 Nip-Nord 3.00 3.00 DQ10-18 136.5 138 1.5 Nip-Sud 0.11 0.11 DQ10-19 402 403.5 1.5 Nip-Nord 0.04 0.04 DQ10-19 325.8 327 1.2 Nip-Sud 0.50 0.50 DQ10-20 156 157.5 1.5 Nip-Nord 1.62 1.62 DQ10-20 72 73.5 1.5 Nip-Sud 0.11 0.11 DQ10-21 391.5 393 1.5 Nip-Nord 0.05 0.05 DQ10-21 267 268.5 1.5 Nip-Sud 0.40 0.40 DQ10-23 24 30 6 Nip-Nord 0.57 0.57

A helicopter airborne magnetic-electromagnetic survey was undertaken in late December 2010, but was postponed due to winter storms which prevented completion of this work prior to Xmas holidays; the survey was completed in early 2011. A ground geophysical 3-Dimensional down-hole IP survey was completed during the month of December at the Nip Zone. The purpose of the survey was to determine the 3 dimensional continuity of gold bearing sulphide mineralization identified by the Osisko drilling.

Exploration Highlights 2011

Table 2 summarizes the diamond drilling done on the Duquesne-Ottoman property since the start of the program and includes the holes drilled by Clifton Star on the Nip Zone near the eastern boundary (see collars with DQ09 and DQ10 prefixes).

Table 2: Summary of drilling by Xmet on the Duquesne-Ottoman Property.

DATE HOLE STARTED DATE ENDED CORE SIZE UTM_EAST UTM_NORTH ELEVATION AZIMUTH DIP DEPTH DO-10-01 09/09/2010 14/10/2010 NQ 640184 5372042 309.92 360 -50 246

DO-10-02 15/10/2010 22/10/2010 NQ 640235 5371960 308.14 4 -55 334

DO-10-03 22/09/2010 30/10/2010 NQ 640285 5371937 304.86 5 -54 390

DO-10-04 30/09/2010 01/11/2010 NQ 639885 5371617 291.62 6 -62 762

DO-10-05 25/09/2010 02/11/2010 NQ 641235 5371962 313.33 360 -52 573

DO-10-06 02/11/2010 08/11/2010 NQ 640035 5371600 294.96 12 -70 748

DO-10-07 02/11/2010 15/11/2010 NQ 640535 5371790 304.78 4 -65 593

DO-10-08 15/11/2010 17/11/2010 NQ 640585 5372058 330.49 360 -51 166

DO-10-09 17/11/2010 25/11/2011 NQ 640530 5372043 328.04 360 -50 288

DO-10-10 25/11/2010 27/11/2010 NQ 640085 5372108 316.47 1 -47 135

DO-10-11 26/11/2010 29/11/2010 NQ 639912 5372146 310.19 1 -50 285

DO-10-12 22/11/2010 01/12/2010 NQ 640090 5372020 311.3 360 -47 204

DO-10-13 08/12/2010 15/12/2010 NQ 639965 5371740 295.16 10 -73 553

DO-10-14 09/12/2010 05/01/2011 NQ 641217 5372000 316.7 360 -67 531

DO-11-15 03/01/2011 09/01/2011 NQ 639844 5371900 294.9 3 -58 483

DO-11-16 05/01/2011 09/09/2011 NQ 641285 5372070 322.2 360 -56 279

DO-11-17 10/01/2011 18/01/2011 NQ 641185 5372070 315 360 -56 276

DO-11-18 09/01/2011 22/01/2011 NQ 641312 5372020 318 360 -64 456

DO-11-19 19/01/2011 25/01/2011 NQ 639685 5372000 299.01 5 -74 411

DO-11-20 22/01/2011 03/02/2011 NQ 641168 5371935 313 360 -56 519

DO-11-21 25/01/2011 31/01/2011 NQ 639685 5372130 307.5 360 -45 135

DO-11-22 01/02/2011 04/02/2011 NQ 639770 5371980 300 3 -47 282

DO-11-23 03/02/2011 05/02/2011 NQ 640390 5371550 305 5 -70 1020

DO-11-24 03/02/2011 06/02/2011 NQ 641965 5372105 325 215 -50 162

DO-11-25 05/02/2011 08/02/2011 NQ 642002 5372158 325 215 -50 228

DO-11-26 08/02/2011 14/02/2011 NQ 641940 5372200 325 215 -50 120

DO-11-27 14/02/2011 18/02/2011 NQ 642060 5371828 325 358 -53 321

DO-11-28 18/02/2011 01/03/2011 NQ 641980 5371784 325 360 -60 480.55

DO-11-29 08/03/2011 18/03/2011 NQ 640025 5372236 316.6 360 -55 363

DO-11-30 18/03/2011 23/03/2011 NQ 640345 5371858 309.7 3 -56 342

DO-11-31 28/03/2011 05/04/2011 NQ 641094 5371910 310.1 2 -63 556.5

DO-11-32 06/04/2011 16/04/2011 NQ 641047 5371925 310.8 360 -57 450

DO-11-33 15/04/2011 20/04/2011 NQ 641141 5372012 316.2 355 -56 348

DO-11-34 12/09/2011 22/09/2011 NQ 640412 5371763 305 4 -68 591

DO-11-35 12/09/2011 13/09/2011 NQ 640817 5372064 318 340 -57 120

DO-11-36 14/09/2011 15/09/2011 NQ 640817 5372064 318 340 -63 150

DO-11-37 15/09/2011 15/09/2011 NQ 640807 5372090 318 340 -45 66

DO-11-38 16/09/2011 18/09/2011 NQ 640807 5372090 318 340 -63 84

DO-11-39 19/09/2011 19/09/2011 NQ 640785 5372083 318 340 -45 51

DO-11-40 19/09/2011 20/09/2011 NQ 640785 5372083 318 340 -63 81

DO-11-41 20/10/2011 22/09/2011 NQ 640793 5372056 318 340 -57 120

DO-11-42 22/09/2011 26/09/2011 NQ 640793 5372056 318 340 -65 150

DO-11-43 26/09/2011 27/09/2011 NQ 640771 5372051 318 340 -56 120

DO-11-44 28/09/2011 29/09/2011 NQ 640771 5372051 318 340 -65 150

DO-11-45 29/09/2011 03/10/2011 NQ 640762 5372078 318 340 -45 54

DO-11-46 30/09/2011 03/10/2011 NQ 640762 5372078 318 340 -63 81

DO-11-47 03/10/2011 04/10/2011 NQ 640745 5372043 318 340 -57 120

DO-11-48 04/10/2011 05/10/2011 NQ 640745 5372043 318 340 -65 130

DO-11-49 06/10/2011 06/10/2011 NQ 640739 5372069 318 340 -45 70.5

DO-11-50 06/10/2011 25/10/2011 NQ 640722 5372039 318 340 -60 120

DO-11-51 25/10/2011 26/10/2011 NQ 640722 5372039 318 340 -43 132

DO-11-52 26/10/2011 27/10/2011 NQ 640705 5372015 318 340 -49 150

DO-11-53 28/10/2011 29/10/2011 NQ 640705 5372015 318 340 -63 110.45

DO-11-54 30/10/2011 30/10/2011 NQ 640712 5372072 318 340 -48 60

DO-11-55 31/10/2011 10/11/2011 NQ 640452 5371700 306 10 -74 381

DO-11-55W 10/11/2011 16/11/2011 NQ 640452 5371700 306 10 -74 800

DO-11-56 31/10/2011 31/10/2011 NQ 640679 5372018 318 340 -62 111

DO-11-57 31/10/2011 01/11/2011 NQ 640679 5372018 318 340 -72 135

DO-11-58 02/11/2011 02/11/2011 NQ 640671 5372039 318 340 -45 60

DO-11-59 02/11/2011 02/11/2011 NQ 640671 5372039 318 340 -70 81

DO-11-60 07/11/2011 10/11/2011 NQ 640783 5372016 316 340 -61 171

DO-11-61 10/11/2011 11/11/2011 NQ 640751 5372018 316 340 -66 174.85

DO-11-62 12/11/2011 14/11/2011 NQ 640720 5371972 316 340 -60 201

DO-11-63 14/11/2011 16/11/2011 NQ 640280 5372013 310 2 -48 141

DO-11-64 16/11/2011 24/11/2011 NQ 640235 5371854 304 2 -57 222

DO-11-65 22/11/2011 27/11/2011 NQ 639825 5371717 292 360 -68 549

DO-11-66 24/11/2011 26/11/2011 NQ 640370 5371981 311 2 -42 250

DO-11-67 27/11/2011 10/12/2011 NQ 640020 5371748 298 8 -75 1002

DO-11-68 11/12/2011 15/12/2011 NQ 641885 5371782 332 1 -65 413

DO-11-69 15/12/2011 17/12/2011 NQ 641870 5371855 329 360 -42 213

DO-11-70 17/12/2011 24/12/2011 NQ 640461 5371809 310 12 -75 618

DO-12-71 31/01/2012 05/02/2012 NQ 640314 5371767 302 8 -68 381

DO-12-72 20/02/2012 06/03/2012 NQ 639995 5371908 300 12 -76 530.3

DO-12-73 06/03/2012 08/03/2012 NQ 640040 5371852 299 360 -72 283

- DQ09-09 18/03/2009 31/03/2009 NQ 642107 5371796 324.89 330.57 697 56.4 DQ10-14 17/02/2010 17/02/2010 NQ 642039 5371847 324.47 360 -45 524.3

DQ10-15 07/03/2010 10/03/2010 NQ 642038 5371801 323.35 360 -60 339

DQ10-16 22/03/2010 22/03/2010 NQ 642078 5371732 326.73 360 -45 273

DQ10-17 15/02/2010 22/02/2010 NQ 642082 5371849 323.19 360 -45 513

DQ10-18 22/02/2010 03/03/2010 NQ 642083 5371808 325.33 360 -55 369

DQ10-19 03/03/2010 08/03/2010 NQ 642087 5371765 325.7 360 -60 420

DQ10-20 26/02/2010 26/02/2010 NQ 642111 5371881 322.75 360 -45 318

DQ10-21 02/03/2010 05/03/2010 NQ 642003 5371797 322.94 360 -60 429

DQ10-23 08/03/2010 15/03/2010 NQ 642125 5371876 327.59 360 -45 288

DQ03-18EXT 04/03/2011 08/03/2011 NQ 640337 5371736 305.21 358 -59 660

DQ06-09EXT 23/09/2011 30/09/2010 NQ 640341 5371585 307.72 360 -75 983

DQ04-23W 30/09/2011 30/10/2011 NQ 640488 5371587 304.124 360 -70 834

Drilling recommenced during the first week of January 2011, with two drills active on the Duquesne- Ottoman property. The drill program continued to test gold zones for potential resource expansion, with shallow and moderate depth holes testing extensions of the current resource at the Fox zone. The eastern and western extension of the discovery area at the 20-20 Zone was also drill tested on 120m drill spacing to determine strike potential. The drilling program was completed by the 20th of April with 33 holes completed (plus 1 hole extension) and a total of 13,206.5 metres, of which 7,213.5 metres were drilled in 2011. The results for significant mineralized intersections for this program are summarized in table 3. All interestection are core length and true widths represent on average approximately 80% of posted intervals.

As a result of this program mineralization was expanded on the Fox Zone and new potential resource areas were established on the 20-20 and Nip Zones. Table 3: Summary of mineralized intersections of 2011 phase 1 drilling, Duquesne-Ottoman Property.

FROM LENGTH Au (g/t) Au (g/t) HOLE TO (m) ZONE (m) (m) (uncut) (cut 30 g/t) DO-11-15 172.6 175 2.4 Liz 0.15 0.15 DO-11-15 204.1 207 2.9 Shaft 2.38 2.38 DO-11-15 320.42 323.65 3.23 Fox 0.58 0.58 DO-11-16 271.5 272.7 1.2 20-20 0.32 0.32 DO-11-17 198.2 199.65 1.45 20-20 0.19 0.19 DO-11-18 453 456 3 20-20 0.74 0.74 DO-11-19 63.75 64.75 1 Liz 5.23 5.23 DO-11-19 196.9 199.65 2.75 Shaft 0.41 0.41 DO-11-19 349.75 351.9 2.15 Fox 3.45 3.45 DO-11-20 378.45 384.15 5.7 20-20 3.87 3.87 DO-11-22 117.2 118 0.8 Shaft 3.98 3.98 DO-11-22 204.3 206.55 2.25 Fox 0.70 0.70 DO-11-23 698.7 702.2 3.5 Liz 1.42 1.42 DO-11-23 976.7 981.5 4.8 Fox 3.78 3.78 DO-11-23 989.9 1013.9 24 ? 2.20 2.20 DO-11-27 86 86.8 0.8 South-Nip 0.54 0.54 DO-11-27 211.9 212.45 0.55 North-Nip 2.38 2.38 DO-11-28 368.4 370.2 1.8 North-Nip 0.50 0.50 DO-11-28 263.25 269.2 5.95 South-Nip 5.47 5.10 DO-11-29 306.35 308.5 2.15 Stinger 1.56 1.56 DO-11-30 182.6 186 3.4 Liz 1.39 1.39 DO-11-30 307.65 309.9 2.25 Shaft 0.72 0.72 DO-11-31 536.5 537.7 1.2 20-20 0.10 0.10 DO-11-32 394.9 397.3 2.4 20-20 0.76 0.76 DO-11-33 277.6 281.85 4.25 20-20 0.94 0.94 DQ03-18EXT 550.8 554.35 3.55 Fox 11.86 10.87

Ground geophysical data from the 3-Dimensional down-hole IP survey on the Nip Zone was processed during the month of January 2011. The purpose of the survey was to determine the 3 dimensional continuity of gold bearing sulphide mineralization identified in drill holes by Clifton Star. Three different chargeability trends were identified with suspected sulphide mineralization oriented northwest, northeast and east-west in the vicinity of the Nip zone. Drilling of these targets confirmed the presence of abundant sulfides which explain the IP anomalies but unfortunately the sulfides do not carry any significant gold. Stripping and Trenching

Stripping and initial channel sampling of the Shaft and 20-20 zones were completed in August along with extensions to the trenching on the Shaft Zone. Approximately 7,000 cubic metres of overburden were excavated initially in eight (8) trenches (approximately 75 metres long, 6 metres wide and 2 metres deep). The trenching program was designed to expose mineralization and structural controls at the 20- 20 and Shaft zones.

In the first phase eight trenches were completed and cleaned, four on each of the two zones. The two eastern trenches on the 20-20 Zone show intensively fractured, carbonated mafic pillowed flow in contact with the quartz-feldspar porphyry. At the Shaft Zone the vein trends N070 degrees and appears to correspond to the zone that was investigated in the early 1980’s by sinking a shallow shaft near high grade historic drill holes. Intense alteration and sulphide mineralization are consistent with features of the zones observed in drill core; channel samples have been shipped to the laboratory for rush analysis. In the second phase of trenching, the gold-bearing structures have been exposed along strike between the trenches to allow detailed sampling to confirm grade continuity along the veins and optimal drill hole spacing.

Shaft zone

On surface the Shaft Zone shows the general N285 Z shape contact between the North porphyry (QFP) to the north and the volcanic flows to the south. Many other smaller QFP (1 to 5 metres) that are mostly oriented N070 were also noted. These smaller dykes pinch and swell and lack lateral continuity. The mineralized zone, enclosed within a shear zone, seems to be parallel to one of the dykes striking N070. The better gold values are observed inside a shear within the QFP but the adjacent mafic volcanics can also carry elevated gold values where appropriately sheared, altered and mineralized.

The observed mineralized zone on surface that trends N070 is considered to be the Shaft zone. The N- shaft zone is interpreted to strike N090 so both zones are coalesce on trench 4 (to the east), whereas they are expected to be 30 metres apart on trench 1 (to the west). Table 4 and figures 2 and 3 show some of the better results intersected along the 130m length of anomalous gold zone which is open along strike.

Table 4: Summary of Significant Channel Sampling Results – Shaft Zone - Duquesne-Ottoman Property

Trench No. Zone Length (m) Au g/t

4 Shaft 2.9 4.6

4 Shaft 3.0 13.3

4 Shaft 2.8 5.58

4 Shaft 3.1 4.88

2 Shaft 3.8 4.73

Figure 2: Photo-Mosaic of Trench 4, Shaft Zone, looking north showing selected channel sampling results. The Shaft shear zone shows as iron-staining in andesite and QFP dues to oxidation of sulphides. North Porphyry outcrops in the back of the photo.

When the surface trenching along with the DDH sections are plotted together it becomes apparent that the N070 trending Shaft zone is nearly vertical. As a result of the trenching some drill hole intersections that were previously interpreted to belong to the N-Shaft Zone are now interpreted to be part of the Shaft Zone (see DQ-94-7, CW-8 and 94-1).

Figure 3: Map of trenching on Shaft Zone with some current and historic drill hole results.

Close to surface, the Shaft zone stays open to the east for at least 200m. Although the zone is open to the east of the trenches and probably intersects the North Porphyry dike, it is impossible at this point to do more trenches to the east due to proximity of the beaver dam and a creek that runs from it to the south. On the basis of alignment it appears that the Shaft zone may become the 20-20 Zone further to the east as the shear approaches the north contact of the North Porphyry.

20-20 zone

At 20-20, the two eastern-most trenches show intensively fractured, carbonated mafic pillowed volcanics in contact with the North Porphyry. The contact between the two units trends east-west and is offset by a fault oriented N030 showing a horizontal left-lateral displacement of a least 10m and probably more.

On the two most western trenches, the contact between a North Porphyry and a breccia unit is locally east-west trending. The breccia is not present on the two most eastern trenches.

None of the trenches on the 20-20 Zone exposed any gold-bearing mineralization, probably because the shear zone hosting the mineralization is located to the north of the trenches in a low-lying area. However the trenching was very successful at uncovering a hydrothermal breccia unit of unknown dimensions that shows very striking features included numerous fragments of fuschite-bearing rock (figure 4). No significant gold values were obtained from the breccia, possibly because the core of the pipe has not been exposed, and more work is required to better understand this very special feature.

Figure 4: Typical textures of porphyry breccia. Note fragments of green fuschite-altered mafic fragments in matrix (upper left) and as part of a porphyry fragment (lower left).

Resource Update

On September 8th, 2011 Xmet published the results of a new NI 43-101 compliant resource estimate for the Duquesne-Ottoman property. The Current Resource at Duquesne-Ottoman stands at 853,000 inferred ounces gold uncut at a grade of 6.36 g/t Au or 727,000 ounces gold at a grade of 5.42 g/t Au applying a gold top cut-off grade of 30 g/t (table 5). The resource estimate which was carried out by Watts, Griffis McOuat Limited (“WGM”) Consulting Geologists and Engineers of Toronto, Canada (WGM), used similar estimation parameters as used by John Reddick in the first NI 43-101 compliant resource estimate for the property. Details for the Mineral Resource estimate, using a cut-off grade of 3.0 g/t Au over a 2.5m minimum horizontal width, are outlined in the table and resource statement below. A location map of the deposits is attached to this press release (Figure 5).

Table 5: Duquesne-Ottoman Project –Inferred Mineral Resource, Effective Date September 8, 2011

Mineral Tonnes Grade Grade Uncut Contained Gold Contained Gold Resources (Millions) (g/t Au) (g/t Au) (Ounces Cut) (Ounces Uncut) Class

Inferred 4.171 5.42 6.36 727,000 853,000

1. The resources reported in this release occur in a number of closely spaced steeply dipping sub parallel zones. All drilling used for the estimate was completed in the period from 1994 to 2011. 2. Resources estimated using polygonal estimation methods on vertical longitudinal sections. A cutting factor of 30 g/t Au was applied. A cut-off grade of 3.0 g/t Au and a minimum horizontal width of 2.5m is based on possible underground mining and a recovery of 100% is assumed; 3. Figures may not total due to rounding; 4. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing, or other relevant issues; 5. The quantity and grade of reported Inferred Mineral Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an Indicated or Measured Mineral Resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured Mineral Resource category; 6. The Mineral Resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council December 11, 2005.

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Figure 5: Location of Gold Zones on Duquesne-Ottoman Property, Zones

WGM identified eight (8) zones hosting the gold mineralization, including three new zones discovered during the course of the Phase 1 drill program at Nip-Nord, Nip-Sud, and the 20-20 zone.

Table 6: Detailed Resource Estimate by Mineralized Zone for Duquesne-Ottoman Property, Effective Date September 8, 2011.

Average

Au g/t Au g/t Ounces Ounces Horizontal ZONE TONNES (Cut to 30 g/t Au) (Uncut) (Cut) (Uncut) Width (m)

Liz 1,343,000 4.64 4.64 200,000 200,000 7.26

Fox 921,000 7.43 9.54 220,000 282,000 5.43

Nip-Nord 361,000 5.92 6.13 69,000 71,000 5.79

Nip-Sud 129,000 6.51 21.13 27,000 88,000 2.86

South Shaft 162,000 6.08 6.29 32,000 33,000 3.14

Shaft 468,000 4.51 4.51 68,000 68,000 2.82

Stinger 365,000 3.90 3.90 46,000 46,000 5.87

20-20 422,000 4.80 4.80 65,000 65,000 6.23

TOTAL 4,171,000 5.42 6.36 727,000 853,000 5.71

The eight zones hosting the gold mineralization remain open at depth and in some cases along strike and up dip. A recent trenching program at the Shaft Zone reported significant gold mineralization on surface associated with major structures controlling the gold mineralization.

Resource Statement

A total of 22,749 samples in 135 drill holes, representing approximately 66,750 metres of drilling were used for the estimate. All the drilling used for the estimate was done in the period 1994- 2011. Additional historical drilling which could not be validated also occurs in the area of the resources. Earlier holes were drilled by Santa Fe Canadian Mining Ltd., Kinross Gold Corporation, Queenston Mining Inc. and Diadem Resources Ltd. The Mineral Resource is constrained by limiting intervals to interpreted, multiple zones that demonstrate continuity of mineralization along strike and down-dip between adjacent drill holes. Metal grades were interpolated using polygons with a maximum radius of 60m using a polygonal estimation method. Metal prices of US$960 per troy ounce of gold, based on the three year trailing average, were used MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011 to estimate cut-off grade values for the estimate. Individual zones were modelled that reflected the continuous nature of gold mineralization in a number of different zones.

Mineral Resources were classified as Inferred in each zone if:

a) the composited interval for a zone had a minimum grade of 3.0 gpt Au (cut) and a minimum horizontal width of 2.5 m; and either

b) a polygon meeting the above criteria was also contiguous with another polygon for the same zone that also met the minimum grade and width criteria; or

c) for isolated polygons; if they occurred up or down dip and along the interpreted plunge line of the zones.

Assay grades were composited to a minimum of 2.5m horizontal width based on the interpreted dip of the zones prior to resource estimation. Un-sampled intervals were included in the composites at nil grades. A top cut of 30 g/t Au was applied to the assays before calculation of composite grades on the basis of statistical analysis. The gold grade cut-off value, at 3.0 g/t Au, is based on the assumption that the deposit is of a potential size and nature to allow for possible underground mining. The cut-off value of 3.0 g/t Au was derived from recent technical reports filed on SEDAR and in-house technical data from RCI for similar deposit types. Specific Gravity used in these estimates was 2.70. Recoveries are assumed to be 100%.

Phase 2 Drilling

Drilling was re-started in September on the Duquesne-Ottoman property with 2 drills to test the down- plunge extension of the Shaft Zone beneath the stripping (figure 6) and to expand the resource of the Fox Zone with the objective of expanding the resource to beyond the million ounce threshold. By year end a total of 8,233.8 metres were completed in 37 holes and 1 wedged hole. Best results from this program are presented in table 7. All interestection are core length and true widths represent on average approximately 80% of posted intervals.

Drilling continued after the year-end holiday break but with 1 rig until March when drilling was stopped for breakup. Slow drilling during the winter resulted in a total of 1,194.3 metres of drilling completed in 3 holes bringing the project total to 73 holes plus 1 wedge hole and 2 hole extensions, totalling 24,285.2 metres and an additional 10 holes drilled by Clifton Star for 4,170.3 metres. An additional 6,000 metres of drilling is planned in 2012. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Figure 6: Longitudinal Section, near surface Shaft Zone.

Table 7: Summary of mineralized intersections of 2011 phase 2 drilling, Duquesne-Ottoman Property.

FROM LENGTH Au (g/t) Au (g/t) HOLE TO (m) ZONE (m) (m) (uncut) (cut 30 g/t) DO-11-34 388.12 389.32 1.2 Shaft 0.82 0.82 DO-11-34 521.8 525.2 3.4 Fox 0.54 0.54 DO-11-35 52.75 54.66 1.91 EShaft 0.34 0.34 DO-11-36 59.65 61.9 2.25 EShaft 0.02 0.02 DO-11-37 16.4 19.4 3 EShaft 3.80 3.80 DO-11-38 16.9 22 5.1 EShaft 11.66 8.77 DO-11-39 33.65 36.95 3.3 EShaft 3.27 3.27 DO-11-40 43.5 50.4 6.9 EShaft 4.13 4.13 DO-11-41 70.8 74.75 3.95 EShaft 5.60 5.60 DO-11-42 82.15 84.4 2.25 EShaft 0.85 0.85 DO-11-43 76.40 80.55 4.15 EShaft 1.55 1.55 DO-11-44 89.3 92.9 3.6 EShaft 2.02 2.02 DO-11-45 39 42.2 3.2 EShaft 1.94 1.94 DO-11-46 52.75 57.3 4.55 EShaft 5.18 5.18 DO-11-46 52.75 57.3 4.55 EShaft 5.18 5.18 DO-11-47 100 101.5 1.5 EShaft 2.11 2.11 DO-11-48 106.4 110.3 4.8 EShaft 2.59 2.59 DO-11-49 39.5 42.3 2.8 EShaft 3.63 3.63 DO-11-50 88.25 108.80 20.55 EShaft 0.75 0.75 DO-11-51 65.6 77.3 11.7 EShaft 4.00 4.00 MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

DO-11-52 102.5 104.8 2.3 EShaft 2.45 2.45 DO-11-53 105 106.2 1.2 EShaft 0.15 0.15 DO-11-54 28.8 32.8 4 EShaft 3.65 3.65 DO-11-55w 541.3 554.2 12.9 Shaft 0.36 0.36 DO-11-55w 681.6 683.6 2 Fox 0.22 0.22 DO-11-56 80.4 82.8 2.4 EShaft 0.01 0.01 DO-11-57 98.6 100.7 2.1 EShaft 0.00 0.00 DO-11-58 45.25 47.9 2.65 EShaft 0.18 0.18 DO-11-59 60.4 64 3.6 EShaft 0.44 0.44 DO-11-60 129.3 133.65 4.35 EShaft 3.40 3.40 DO-11-61 135.5 140.4 4.9 EShaft 4.40 4.40 DO-11-62 142.4 144.8 2.4 EShaft 0.01 0.01 DO-11-63 10 11.2 1.2 Liz 0.86 0.86 DO-11-63 103.20 116.40 13.20 Shaft 0.66 0.66 DO-11-64 186.4 199.9 13.5 Liz 1.01 1.01 DO-11-65 449.2 452.45 3.25 Liz 0.39 0.39 DO-11-65 545.4 549 3.6 Shaft 0.31 0.31 DO-11-66 48.3 49.5 1.2 Liz 0.15 0.15 DO-11-66 85.57 93.5 7.93 Shaft 0.39 0.39 DO-11-67 428.25 430.2 1.95 Liz 0.19 0.19 DO-11-67 584.5 587.5 3 Shaft 0.47 0.47 DO-11-67 670.15 672.25 2.1 Fox 0.75 0.75 DO-11-67 928.80 932.40 3.60 Stinger 2.96 2.96 DO-11-70 517.5 519.25 1.85 Fox 0.26 0.26 DQ04-23w 641.68 646.2 4.52 Shaft 0.72 0.72 DQ-04-23w 750.5 755 4.5 Fox 12.41 6.88 DQ06-09ext 957.9 962.2 4.3 Fox 1.57 1.57

Mineralization

The Duquesne-Ottoman Project hosts broad, structurally controlled zones (with sericite, carbonate, silica and hematite alteration) within which there are anomalous levels of gold mineralization that are associated with varying degrees of quartz-carbonate-pyrite alteration. The boundaries of the zones are not sharp and the intensity of alteration associated with them is quite variable. The zones can be difficult to define at high cut-off levels but are quite continuous at low cut-off levels which resulted in some differences between the interpretations for high grade zones completed by previous operators.

Within the zones single or multiple quartz-carbonate veins exist and, in some of the drill holes with better results there are a number of consecutive, well-mineralized assay intervals within a particular zone.

Gold mineralization has been interpreted as being hosted by seven Current Resource zones (and several other zones) that strike roughly east-west to north 70 degrees east and dip from 65˚ to 90˚ south. One of these zones, the Shaft Zone, has two minor sub parallel zones associated with it: the South Shaft and the North Shaft. From south to north the major zones are: MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

1. Liz Zone: striking parallel to sub-parallel to DPFZ and hosted by sheared and widely altered (carbonate-sericite) mafic volcanic with locally increased quartz-carbonate-pyrite alteration associated with better gold mineralization;

2. South Zone: poorly defined by drilling but similar to the Liz and possibly the faulted eastern extension of Liz;

3. Shaft Zone: generally occurs in east-west striking highly foliated mafic volcanic near the contact of massive and pillowed flows and felsic intrusive quartz-feldspar porphyries and syenite, (the South Porphyry in particular). Locally the zone cuts and is hosted by felsic intrusive;

4. Fox Zone: an east-west striking zone near or along the south contact of the North Porphyry but mostly occurring in altered mafic tuff;

5. 20-20 Zone: The 20-20 Zone is a mineralized E-W trending, subvertically dipping shear zone located along the northern margin of a large quartz feldspar porphyry intrusion adjacent to the southern margin of the Duparquet Formation, a Temiskaming-type metasedimentary basin. Gold mineralization occurs proximal to the contact within sericitized, hematized and brecciated quartz feldspar porphyry dikes. The geological and structural setting is remarkably similar to both the Beattie and Donchester gold deposits, currently being developed by Clifton Star Resources on claims adjacent to the Duquesne-Ottoman property;

6. East Stinger Zone: in and near the North Porphyry (actually appearing as a series of dykes on section) near the north contact of the porphyry adjacent to mafic intrusive; and

7. Nip Zones: The Nip Nord and Nip Sud zones are the western extension of the E-W trending Nipissing mineralized zone occurring on the adjacent Duquesne Mine property to the east currently being explored by the Clifton Star joint venture. The structures are parallel and dip sub vertically and crosscut regional stratigraphy at a low angle. Wide zones of gold bearing disseminated sulphide mineralization (up to 17m) are typically associated within sheared, silicified, and sericitized host rocks which commonly contain breccia fragments of other host rocks.

Adjacent Properties

In addition to the Current Resources estimated for the Duquesne-Ottoman property, adjacent properties also contain NI 43-101 compliant Current resources and in some cases historic, gold resources (figure 7).

Immediately adjacent to the northwest of Duquesne-Ottoman, Clifton Star Resources released a NI 43-101 compliant resource estimate on the Beattie property in May 2011 where the company reported a resource of 1.72 million ounces gold in-pit at 1.67 g/t Au in the inferred category. On the adjacent Donchester property the company reported on 28 February, 2012 an inferred resource of 1.05 million ounces gold at a grade of 3.06 g/t Au in the inferred category at a cut-off grade of 1.5 g/t Au.

The Central Duparquet Property contains a small historic resource of approximately 150,000 ounces of gold. Although of interest this resource has not been confirmed by a NI43-101 compliant estimate and should not MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011 be relied upon except as an indication of the potential of the Central Duparquet Property to host gold mineralization.

The Pitt property, located immediately adjacent to the southwest of the Duquesne-Ottoman property and immediately west of the Duquesne West block, is held by Brionor Resources Inc. On 20 June 2011 the company published the results of a NI 43-101 compliant resource estimate on the property and reported the presence of 151,000 ounces of gold at a grade of 7.83 g/t in the indicated category and an additional 106,000 ounces at 6.91 g/t Au in the inferred category.

Figure 7: Summary of Resources on Duquesne-Ottoman and adjacent properties. All numbers Current NI43-101 compliant resources unless specified as historic.

To the east, the Duquesne mine property is being explored by the Clifton Star Resources. The old Duquesne mine produced 70,000 ounces of gold during two periods. On 26 July 2011 Clifton Star Resource published a NI43-101 compliant resource of 199,000 ounces at a grade of 3.33 g/t gold of the indicated category along with 280,000 inferred ounces at a grade of 5.58 g/t Au.

To the northeast the Golconda zone (also called the Gurney zone), located on the Goldcop Resources property immediately to the northeast of Duquesne-Ottoman, a small historical resource of 60,000 ounces Au (non NI 43-101 compliant) has been estimated. The mineralized zone was delineated in drill hole and extends to within 100m of the property boundary. These ounces are for reference only and have not been confirmed by any NI43-101 compliant resource estimate and should not be relied upon.

Wherever there are references to historic resources, the resources are not considered Current and should only be used as an indication of mineralization potential. These resource estimates should not be relied upon. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Commitment and Budget

Planned exploration for 2012 on the Duquesne-Ottoman property will include 6,000m of diamond drilling along with detailed mapping of the property to better understand the structural controls on gold mineralization and the relationship between gold-bearing structures and the Duparquet basin. A minimum budget of $750,000 has been approved by management for this work.

OTHER XMET PROPERTIES

During the past year Xmet has undertaken target generation and property acquisition by staking in several areas of the Abitibi greenstone belt in Quebec. A total of 6 properties were acquired by staking and are wholly owned by Duquesne-Ottoman Mines Inc., Xmet’s wholly-owned Quebec subsidiary (figure 8).

Figure 8: Location of Xmet Properties in Quebec and compilation of Abitibi mining districts.

Authier Property, Quebec

Property Location and Description

The Authier Property is located mainly in Poularies and Privat townships in the western Abitibi Region of Quebec, approximately 60km northeast of Rouyn-Noranda. The property is composed of 82 exploration licenses totaling 3,743 hectares or 9,245 acres. The property is divided into three contiguous claim blocks, the Authier SE (51 claims), Authier NW (27 claims) and Authier Centre (4 claims). The claims are 100% owned by Xmet Inc. through its wholly-owned subsidiary Duquesnes-Ottoman Mines Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

History

Numerous exploration programs have been undertaken in the area of the claims since the first recorded work in 1950. Activities include drilling but also geological mapping, qualifying reports and numerous geophysical surveys including induced polarization surveys. Only 14 drill holes totaling 1,220 metres were collared on the current property. Two holes intersected significant mineralization. Hole L29 (GM-1739E) 7.23% Cu and 1.86 g/t Ag over 0.15 metres (figure 9).

Figure 9: Outline of Authier Property with geology and compilation.

Exploration Highlights

To date little work has been done on the property. In 2011 a reconnaissance mapping and prospecting program was undertaken to investigate the trace of the Macamic fault zone. The structure does not outcrop on the property and the area is covered by glacial outwash gravels and clay.

Mineralization

Several mineral occurrences have been highlighted on adjacent properties within the corridor of the Macamic Deformation Zone. The Lac Chavigny West showing: 4.11 g/t Au over 0.76 metres; The 88-04 showing: 1.2 g/t Au over 0.6 metres; Tousism showing: 10.2 g/t Au, 4.0 g/t Au and 2.15 g/t Au (all grab samples); Magoma showing: 5.8 g/t Au over 2.1 metres and 5.1 g/t Au over 4.8 metres; Chemin de Fer South: 77 g/t Ag, 1.15 % Pb, 0.12% Cu and 0.17 g/t Au (grab sample). All these numbers were taken from the Quebec Fiche de Gîtes mineral occurrences database. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Commitment and Budget

For 2012 a field program is planned to better understand the nature of the Macamic Fault and to map the volcanic stratigraphy of the Poularies volcanic complex. Approximately 3 weeks of field work is planned and a budget of $25,000 has been earmarked for this work.

Grasset Property, Quebec

Property Location and Description

The Grasset Property is located in the northern part of the Abitibi greenstone belt, approximately 50km west of Matagami, Quebec. The property is comprised of 128 contiguous exploration licenses totalling 7,040 hectares or 17,388.8 acres and 100% owned by Xmet Inc. through its wholly-owned subsidiary Duquesne- Ottoman Mines Inc.

History

The property has been subjected to relatively little exploration work. A total of 14 drill holes were collared on the claims between 1959 and 1987, for a total of 1,910 m. All of the holes were drilled from land and no holes were collared in Grasset Lake. Few geophysical surveys were undertaken, consisting mainly of magnetic/gradiometric and electromagnetic surveys.

Exploration Highlights

The property is located in a very promising regional context. The Detour-Sunday Lake deformation zone is interpreted to cross the claims near the south shore of Grasset Lake. This deformation corridor is host to major deposits such as Detour Lake (348 MT at 1.02 g/t Au; 16.5 million ounces Au) and new discoveries in Martinière (2.30 g/t Au over 28.40 metres) and Fenelon (88,390 T @ 10.91 g/t Au). Moreover, Balmoral Resources Inc. Recently announced, the discovery of a new zone on their Grasset Property (6.15 g/t Au over 4.04 metres and 4.18 g/t Au over 5.0 metres) is located 20 kilometres northwest of Xmet’s property (see Balmoral News Release dated 14 July 2011).

In early March 2012 a geophysical crew was mobilized onto the property to carry out an induced polarization survey over the interpreted trace of the Detour-Sunday Lake deformation zone. However only the western third of the program was completed when early and rapid onset of spring conditions forced work stoppage and postponement of the survey until next winter. Results of the completed part of the survey are currently being processed and are expected shortly. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Mineralization

Two mineral occurrences have been identified on the property. The Ingamar occurrence consisting of 0.93 g/t Au over 1.83 metres and the Harricana-Turgeon occurrence of 0.50% Cu over 1.0 metres, both of which are located along the south shore of the lake (figure 10). In addition, on the western shore of the lake, a few hundred metres from the property boundary a showing is reported to have assayed 5.5 g/t Au in grab sample.

Figure 10: Summary of historical results and geological compilation, Grasset Property.

Commitment and Budget

A budget of $160,000 was earmarked for the geophysical survey on Grasset Property. However only one third of the program has been completed to date and it is not certain that work will be able to resume in 2012.

Current planning calls for a few days of reconnaissance mapping and prospecting program to be carried out on the property along the shoreline of Grasset Lake. This will require fixed wing aircraft support, available in Matagami. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Livaudière Property, Quebec

Property Location and Description

The Livaudière Property is located at the northern limit of the Abitibi greenstone belt and approximately 40km northeast of Matagami, Quebec. The property is composed of 71 exploration licenses (claims) totaling 3,905 hectares (9,763 acres) and the claims are 100% owned by Xmet through its wholly owned subsidiary, Duquesne-Ottoman Mines Inc.

History

The property is located on the interpreted eastern extension of the Detour-Sunday Lake Deformation zone between the Temiskaming Type sedimentary rocks of the Matagami Group to the south and Opatica gneisses to the north. The claims are interpreted to cover deformed and altered mafic volcanic rocks.

The area was covered by an airborne INPUT electromagnetic/magnetic geophysical survey flown by Noranda Exploration in the early 80’s (figure 11). A series of scattered 3 to 6 channel anomalies occur over a 600m by 500m area were outlined by the survey and the anomalies were confirmed by a ground EM survey. However, the anomalies are covered by glacial till and do not outcrop. Noranda personnel spent a few days mapping the property noting the presence of weak mineralization but none of the INPUT anomalies were explained.

Figure 11: Livaudière Property and compilation with total field magnetics. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Exploration Highlights

The area of the property is underlain by mainly mafic volcanic rocks that are intruded by gabbro and tonalite dykes and cut by a later northeast trending diabase dike. No sediments were observed but Noranda reported the presence of thin cherty tuff layers.

A field validation visit in August of 2011 confirmed that the INPUT anomalies are located above 320m elevation, that is, above the clay layer of glacial lake Ojibway and may be effectively prospected using a Beep Mat. In addition till samples may be collected down ice from the anomalies. An access trail was prepared in the fall of 2011, in preparation for a spring 2012 field prospecting and sampling program.

Mineralization

The only known mineralization in the area is a historic mineral occurrence, located in the southeast corner of the property, reported to have returned 6% Cu in drill hole.

Commitment and Budget

A field prospecting and sampling program is planned for June 2012. Since the conductors are exposed under till and in the absence of clay, two Beepmat units will be used to try and uncover boulders from the glacial erosion of the conductive bodies. In case this is not successful basal till samples will be collected down-ice from the conductors to try and detect heavy minerals derived from the geophysical anomalies. A budget of $20,000 has been allocated for this work.

Chapais Area Properties; Lac Shortt and Daine, Quebec

Property Location and Description

The Lac Shortt and Daine properties are located in the northern part of the Abitibi greenstone belt approximately 100km west of Chibougamau, Quebec. The properties consist of 240 exploration licenses totaling 13,270 hectares or approximately 33,175 acres. The properties consists of 3 separate claim blocks that are 100%-owned by Xmet Inc through its wholly-owned Quebec subsidiary Duquesne-Ottoman Mines Inc (figure 12). MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Figure 12: Outline of Lac Shortt and Daine properties and regional compilation.

Exploration Highlights

No exploration has been undertaken to date by Xmet on these properties. The geology of the area is complex and the controls on gold mineralization are not well understood. The Lac Shortt deposit trends towards the northeast and is hosted by carbonatite and alkalic syenite intrusions and the distribution of these units is also not well understood at the regional-scale.

Some shallow drilling has been done on the properties, mainly followup testing of geophysical conductors with uniformly disappointing results. Future work will need to focus on structures and how these are related to gold mineralization at the Lac Shortt mine which has been the subject of several research theses.

Mineralization

There are no known gold or base metal mineralization known on either of the properties in the area but several old drill holes intersected barren sulfide horizons, the probable cause of many of the INPUT anomalies outlined on the claims. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Commitment and Budget

A regional compilation is planned for the area of the Lac Shortt and Daine properties to better understand the relationship between rock units, structures and gold mineralization. If the result of this work is favourable a limited reconnaissance field program shall be undertaken to investigate any targets highlighted by the compilation work. A budget of $20,000 has been allocated for the compilation and reconnaissance field program.

Roy-Portage Property, Quebec

The Roy-Portage property is located near Chibougamau, Quebec and less than a kilometre from the Roy Option Property, an option abandoned by Xmet (see below) (figure 13).

The property is 100% owned by Xmet and was staked by its wholly-owned affiliate, Duquesne-Ottoman Mines Inc. The property is comprised of 8 claims totalling 134.5 hectares. The claims are located immediately to the north of the old Portage Mine lease and are entirely covered by water. No work has been done on these claims to date but historical drilling on the southwest corner intersected 5.83 g/t Au and 1.15% Cu over 5.5m. Xmet plans on renewing these claims in 2012 and will conduct a thorough compilation of previous work in preparation for a possible drilling program the following winter if results are favorable. A $15,000 budget has been allocated for this project in 2012 that will include renewal costs.

Figure 13: Location of Roy-Portage property (UTM coordinates in NAD83, Zn18). MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Abandoned Properties

Roy Property, Quebec

The Roy Property, located in Roy Township, 10 kms east of the Town of Chibougamau, Quebec is situated in the heart of the historic Chibougamau mining camp and is adjacent to two old mining properties including the old Portage Mine.

Two styles of gold mineralization are known in the Chibougamau District. High grade shear zone hosted veins within the Doré Lake intrusive complex (“Portage style”) and low grade, bulk minable disseminated copper and gold mineralized zones in porphyry intrusions (“Porphyry style”). Both styles of mineralization have been reported on the Roy property.

The Roy Property was the object of a 2-hole, 816 metre diamond drilling program in 2011 to test the magnetic-IP anomaly located beneath Baie Machin on lake Chibougamau. The drilling confirmed the presence of a mineralized intrusion but the best intersection of 0.13% Cu over 59.2 m was considered insufficient to warrant further work and the option was abandoned (figure 14).

Figure 14: Geology Map of SE Corner of Roy Property with surface trace of Xmet Drill Holes and Summary of Results. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Buchans Junction Property

The Buchans Junction property is located 20km to the east of the historic, world-class Buchans mining camp and only a few kilometres to the northeast of the Mary March massive sulphide discovery made by Phelps Dodge.

High grade polymetallic volcanogenic massive sulphide (VMS) style mineralization occurs in the mid- Ordovician Buchans Group. Historical production from the Buchans Mines VMS high grade polymetallic ore included 16.2 Mt of 14.51% Zn, 1.33% Cu, 7.56% Pb, 126 g/t Ag and 1.37 g/t Au. Styles of mineralization include in situ ore, stockwork ore and transported ore. Massive sulphides can occur with hydrothermal vents located along syntectonic faults, diatreme bodies associated with sub-volcanic intrusives, and ore bearing slumps and ore grade debris flows associated with submarine canyon activity.

A 2-hole, 569.4 metre diamond drilling program was carried out on the Buchans Junction property to test for possible massive sulfide mineralization associated with an EM conductor in the first case and a soil geochemical anomaly in the second (figure 15). Neither hole intersected any significant mineralization an pursuant to this the option was relinquished.

Figure 15: Total Magnetic Field, geology, soil anomalies and drill holes, Buchans Junction Property. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

QUALIFIED PERSONS

The property update information in this document has been reviewed and approved by Charles Beaudry, M.Sc., P.Geo., géo, President and Chief Operating Officer for the Company and Qualified Person as defined by National Instrument (NI) 43-101.

RESULTS OF OPERATIONS - FINANCIAL PERFORMANCE

Fourth Quarter - Three-Months Ended December 31, 2011

For the three month period ended December 31, 2011, the Company posted a comprehensive gain of $554,739(2010: $765,311). The activity was comprised of the following expenditures: General and administrative expenses of $176,330 (2010: $148,396), Professional fees of $102,005 (2010: $67,849), Management fees of $40,500 (net $(4,224) after re allocation of geological fees to exploration) (2010: $59,412), stock based compensation expense of $37,123 (2010: $17,230) and amortization of $10,419 (2010: $8,095), partially offset by interest revenue of $3,461 (2010: $3,788) and deferred income tax recovery of $898,858 (2010: $Nil).

Exploration activity for the three month period ended December 31, 2011 totaled $996,998 (2010: $676,389) with $246,917 (2010: $235,890) of these expenditures recoverable through the Quebec exploration refund program.

Year Ended December 31, 2011

For the year ended December 31, 2011, the Company posted a comprehensive loss of $578,572(2010: $1,991,696). The activity was comprised of the following expenditures: Professional fees of $304,014 (2010: $552,609), Management fees of $175,289 (2010: $119,412), general and administrative expenses of $555,190 (2010: $359,299), stock based compensation expense of $111,207 (2010: $301,650) and amortization of $24,459 (2010: $40,477), partially offset by interest revenue of $26,280 (2010: $3,788) and deferred income tax recovery of $898,858 (2010: expense of $(153,960)). The Company abandoned two properties and wrote-off exploration expenditures of $333,511 (2010: $Nil). The Company is involved in early stage exploration projects and holds no interests in producing or commercial ore deposits. The Company generates no sources of revenue from its mineral properties.

Exploration activity for the year ended December 31, 2011 totaled $2,960,594 (2010: $1,482,968) with $705,219 (2010: $500,693) of these expenditures recoverable through the Quebec exploration refund program. The Company wrote down $333,551 in exploration and evaluation assets (2010: $Nil).

The Company is currently well-financed to carry out its near-term exploration activities. A total of $2,717,957 gross proceeds were raised in 2011 through two private placements. The first in March and the second in November. (See Liquidity and Capital Resources section).

Unrestricted cash was $403,773 at December 31, 2011 (2010: $537,449) while funds earmarked for flow- through funded activities were $1,000,517 (2010: $2,524,759) for a total of $1,404,290 (2010: $3,062,208) cash and cash equivalents. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

SELECTED FINANCIAL RESULTS

Selected Period Information

Quarter ended Quarter ended Quarter ended Quarter ended December 31, 2011 September 30, 2011 June 30, 2011 March 31, 2011 Net Revenues $ 3,461 $ 5,021 $ 8,949 $ 8,849

Expenses (Recovery) (551,278) 250,023 549,748 357,359

Net Loss (Gain) (554,739) 245,002 539,799 348,510

Deficit, end of period 2,786,985 2,873,647 2,628,645 2,088,846

Basic and fully diluted $( 0.01) $ 0.005 $0.01 $0.01 loss (gain) per share

Total assets $6,043,531 $4,997,621 $5,159,149 $ 5,811,105

Quarter ended Quarter ended Period ended

December 31, 2010 September 30, 2010 November 13, 2009 to June 30, 2010 Net Revenues $ 3,788 $ - $ -

Expenses 769,099 497,726 728,646

Net Loss 765,311 497,726 728,646

Deficit, end of period 2,208,413 $1,443,144 $776,311

Basic and fully diluted $0.016 $0.02 $0.102 loss per share

Total assets $ 4,730,242 $ 4,994,080 $ 5,247,436

(1)No further comparative information is available as the combined business was formed May 31, 2010. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Selected Annual Financial Information

Period from Period from Annual/Period Year Ended October 1, 2010 to November 13, 2009 to Information December 31, 2011 December 31, 2010 September 30, 2010 Cash & cash equivalents & $ 1,404,290 $ 3,062,208 $ 4,055,005 restricted cash

Total Assets $ 6,043,531 $ 4,730,242 $ 4,994,080 Shareholders’ Equity $ 5,690,817 $ 4,466,644 $ 4,746,606 Statement of Operations, Comprehensive Loss and Deficit Data Total Revenue 26,280 3,788 -0- Total Expenses $ 604,852 $ 769,099 $ 1,226,372 Loss for the year/period 578,572 $ 765,311 $ 1,226,372

QUALIFYING TRANSACTION

On May 19, 2010, DOM and Eminence entered into a Definitive Transaction Agreement (the “Agreement”) relating to Eminence’s Proposed Qualifying Transaction (“QT”) under the Policies of the Exchange. Pursuant to the terms of the Agreement, on May 31, 2010 Eminence acquired all of On-Strike’s issued and outstanding common shares in exchange for common shares from treasury of Xmet on a one-for-one basis which resulted in the Company issuing 17,190,000 common shares to the former shareholders of DOM. On June 4, 2010, Eminence filed Articles to effect a change of name to Xmet Inc.

Pursuant to the Agreement the Company filed articles of amendment on May 21, 2010 to effect a stock split on the issued and outstanding common shares at a ratio of 1:1.0952903; resulting in 5,000,000 common shares outstanding prior to the completion of the QT and a proportionate increase in the number of stock options outstanding. The exercise price of the stock options was subject to a proportionate decrease with other terms of exercise remaining unchanged from the original issue.

Upon completion of the QT, the former shareholders of DOM owned approximately 75% of the issued and outstanding common shares of the reporting issuer on a fully diluted basis. Accordingly the QT resulted in a reverse acquisition of the Company. Under reverse acquisition accounting, DOM is deemed to be the acquirer of the Company, and Xmet is the acquiree; Xmet continues to be a reporting issuer and the legal parent. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

In accordance with IFRS 3, Business Combinations, the substance of the transaction was a reverse acquisition of a non-operating company. For purposes of this standard, the transaction does not constitute a business combination since Xmet did not meet the definition of a business under the standard. As the nature of such occurrence is that of a capital transaction, no goodwill or intangibles were recognized as part of the purchase price allocation. Xmet’s deficit and share capital were eliminated upon consolidation. The contributed surplus balance remained as it was attributable to continued stock options exercisable into common shares of the reporting issuer. Transactions of this nature are to be measured and accounted for in accordance with IFRS 2.

IFRS 2, Share-based Payments, applies to transactions whereby an entity grants equity instruments and cannot identify specifically some or all of the goods or services received in return. Since DOM shareholders have issued shares with a value in excess of the net assets received, IFRS 2 would indicate that the difference is recognized in comprehensive loss as reverse acquisition issue cost.

The fair value of the consideration is determined based on the percentage of ownership the legal parent’s shareholders have in the combined entity after the reverse acquisition transaction. In conjunction with the newly structured company, on May 31, 2010, a concurrent offering of non-flow-through shares was completed, with each unit priced at $0.20. Each unit included a common share purchase warrant which was valued at $0.0471. Applying the residual method, a common share was thus worth $0.1528. Based on 22,190,000 common shares outstanding, the total market capitalization of the combined entity was $3,390,632. Thus the value associated with the 23% common share interest held by pre-existing Xmet shareholders was $779,845.

The amount assigned as a reverse acquisition issue cost is $468,077, being the difference between the fair value of the consideration, $779,845, and the net identifiable assets of Xmet acquired. Under IFRS, this amount is included in the statement of loss and comprehensive loss.

Consideration $ 779,845 Net assets acquired, including cash of $246,215 311,768

Unidentifiable assets acquired, being share listing expense $ 468,077

Transactions costs of the QT were charged to operations as incurred. The application of IFRS 2 to this transaction resulted in an IFRS transition adjustment as at and for the year ended December 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES From November 13, 2009 (date of incorporation) to February 28, 2010, On-Strike completed three private placements for aggregate gross proceeds totalling $362,000 ($299,575 net of fees, commissions and other costs). As at February 28, 2010, Eminence had working capital of $432,268 which was sufficient for Eminence to meet its obligations and meet its objective to complete a Qualifying Transaction. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

On May 31, 2010, the Corporation completed a brokered private placement for gross proceeds of $5,297,764. The Corporation issued an aggregate of 15,015,685 flow-through units at $0.24 (per “Flow- Through Unit”) for gross proceeds of $3,603,764. Each unit consists of one Common Share and one half warrant with each whole warrant entitling the holder thereof to acquire one Common Share at a price of $0.30 for a period of one year with a step-up to $0.40 in the second year. The Corporation also issued an aggregate of 8,470,000 non-flow through units at $0.20 per unit (a “Hard Dollar Unit”) for aggregate gross proceeds of $1,694,000, with each unit consisting of one Common Share and one Warrant with the same exercise terms as the Flow-Through Units.

These placements were brokered and pursuant to an agency agreement, cash commissions totalling $492,630 were paid out of the proceeds. A total of 647,000 Broker Warrants for Hard Dollar Units were issued to acquire up to 647,000 common shares exercisable at $0.20 per broker warrant. A total of 758,961 Broker Warrants for Flow-Through Units were issued to acquire up to 758,961 common shares, with 267,294 exercisable at $0.24 per broker warrant and 491,667 exercisable at $0.30 per broker warrant; all broker warrants expire May 31, 2012.

On March 4, 2011, the Company completed a non- brokered private placement through the issuance of 6,070,000 Non-Flow Through Units at $0.20 per unit for aggregate gross proceeds of $1,517,500, with each Unit consisting of one common share and one warrant. Each warrant entitles the holder to acquire one common share at $0.30 in the first year expiring on March 4, 2012. In connection with the private placement broker warrants to acquire up to 177,800 Units that include one common share and one warrant exercisable at $0.25 expiring March 4, 2012.

Cash share issue costs totalling $55,577 for commissions and legal fees were charged to shareholders’ equity as share issue costs.

On November 30, 2011, the Company completed a private placement through the issuance of

i. 7,146,860 Flow-Through Common Shares at $0.14 per share for gross cash proceeds of $1,000,560. 388,194 non-transferable compensation warrants were issued exercisable at $0.14 per compensation warrant to acquire 388,194 Common Shares expiring on November 30, 2012. ii. 1,538,000 Non-Flow Through Common Shares at $0.13 per share for aggregate gross proceeds of $199,940. 123,040 non-transferable compensation warrants were issued exercisable at $0.13 per compensation warrant to acquire 123,040 Common Shares expiring on November 30, 2012.

Cash share issue costs totalling $72,030 for finder’s fees were charged to shareholders’ equity as share issue costs. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

At December 31, 2011, the Company had positive working capital of $2,818,981. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The Company has no regular cash flow however management anticipates that it has sufficient funding for its near-term exploration activities and that it will be able to raise sufficient cash to fund its acquisition and exploration programs and operations in the future. However there can be no assurance of future financings.

GOING CONCERN

At present, the Company’s operations do not generate cash flow and its financial success is dependent on management’s ability to discover economically viable mineral deposits. The mineral exploration process can take many years and is subject to factors that are beyond the Company’s control. In order to continue as a going concern and to meet its corporate objectives, which primarily consist of exploration work on its mineral properties, the Company will require additional financing through debt or equity issuances or other available means. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. Management believes it will be able to raise equity capital as required in the long term, but recognizes there will be risks involved that may be beyond their control. The annual and interim financial statements do not include any adjustments to the recoverability and classification of reduced asset amounts and classification of liabilities that might be necessary should the Company be unable to continue operations. These adjustments could be material. The Company is not subject to material externally-imposed capital constraints.

Share Capital

At April 26, 2012, the Company had the following outstanding share capital data: • 60,430,545 issued and outstanding common shares • 5,560,000 stock options at $0.10 -$0.30, expiring June 4, 2011 to August 17, 2020 • 15,977,843 subscriber warrants exercisable at $0.40 expiring on May 31, 2012 • 1,405,961 brokers warrants exercisable at $0.20 per warrant for non-flow through units and $0.24 to $0.30 for flow-through units expiring on May 31, 2012. • 123,040 compensation warrants exercisable at $0.13 per warrant, expiring on November 30, 2012 • 388,194 compensation warrants exercisable at $0.14 per warrant, expiring on November 30, 2012

OFF SHEET BALANCE ARRANGEMENTS

The Company currently has no off-balance sheet arrangements or obligations other than mineral property option payments and exploration expenditures commitments.

PROPOSED TRANSACTIONS

The Company may from time to time acquire or dispose of property assets as exploration results, opportunities, competitive nature of the business, venture-capital and management may determine. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

ASSESSMENT OF RECOVERABILITY OF MINERAL PROPERTY COSTS

The Company’s recorded value of its exploration properties is based on historic costs that expect to be recovered in the future. The Company’s recoverability evaluation is based on market conditions for minerals, underlying mineral resources associated with the properties and future costs that may be required for ultimate realization through mining operations or by sale.

ASSESSMENT OF RECOVERABILITY OF FUTURE INCOME TAX ASSETS

In preparing the financial statements, the Company is required to estimate its income tax obligations. The process involves estimating the actual tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The Company assesses, based on all available evidence, the likelihood that the future income tax assets will be recovered from future taxable income and, to the extent that recovery cannot be considered “more likely than not”, a valuation allowance is changed in a period, an expense or benefit must be included within the tax provision on the income statement.

ESTIMATE OF STOCK BASED COMPENSATION AND ASSOCIATED ASSUMPTIONS

On May 31, 2010, a total of 3,600,000 stock options were granted to directors and officers of the Company, exercisable at $0.20 per share, for five years, 2,700,000 stock options vested immediately and 900,000 vested over two years.

On August 17, 2010, a total of 210,000 stock options were granted to employees of the Company, exercisable at $0.19 per share for ten years, and vesting over two years.

On September 21, 2010, 200,000 stock options were granted to an officer of the Company, exercisable at $0.30 per share for five years, and vesting over two years.

On November 12, 2010, 50,000 options were granted to an employee of the Company, exercisable at $0.24 per share for ten years, and vesting over five years.

On April 4, 2011, 250,000 options were granted to directors and key management of the Company, exercisable at $0.20 per share for five years, and vesting over two years.

On June 27, 2011, 50,000 options were granted to an employee of the Company, exercisable at $0.20 per share for ten years, and vesting over five years.

On March 29, 2012, 700,000 options were granted to directors and key management of the Company, exercisable at $0.10 per share for five years.

These options were granted pursuant to the Company’s Stock Option Plan.

In addition, 226,177 stock options previously granted by Eminence, expired July 17, 2010. A further 500,000 stock options granted to former directors and officers of Eminence, expire June 26, 2013. During the period ended December 30, 2010, 100,000 options were cancelled. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

ASSESSMENT OF RECOVERABILITY OF GST/HST RECOVERABLE

The carrying amount of sales taxes recoverable is considered representative of its respective value. The Company assesses the likelihood that these receivables will be recovered and, to the extent that recovery is considered doubtful a provision for doubtful accounts is considered.

COMMITMENTS AND CONTINGENCIES

A summary of the Company’s outstanding mineral property commitments, pursuant to property option agreements, as at April 27, 2012 is as follows:

Duquesne Year Cash Payments Exploration

2012 100,000

2013 200,000 1,285,595

2014 200,000 2,500,000

2015 200,000 2,500,000

2016 3,000,000

2017 3,000,000

$ 6,700,000 $ 6,285,595

As at April 27, 2012, the Company has met all its ongoing obligations to maintain its rights and interests in the Company’s mineral properties. The commitments become due on the anniversary date of the agreement in the calendar year indicated. Should the Company fail to meet its commitments; its right to the underlying property option granted will be foregone.

Contingencies

The company is exposed to contingent losses and gains related to environmental matters discussed under Risks, and other various claims and lawsuits pending for and against the company in the ordinary course of business. Prediction of the outcome of contingencies (i.e., being likely, unlikely or undeterminable), determination of whether accrual or disclosure in the consolidated financial statements is required and estimation of potential financial effects are matters for judgment. While the amount recorded in the financial statements may not be material, the potential for large liabilities exists and therefore these estimates could have a material impact on our consolidated financial statements. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

RELATED PARTY TRANSACTIONS

Commencing June 1, 2010, certain officers, directors and companies controlled by officers and directors of the Company are charging management, advisory, accounting and exploration service fees to the Company. Technical consulting services are capitalized to the projects where applicable and the non-technical charges are expensed. The monthly charge for these services is currently approximately $40,000. Management believes these transactions to be in the normal course of business and measure them at the exchange amount which is the amount of consideration established and agreed to by the related parties.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. A summary of the significant accounting policies used in the preparation of our financial statements is included in note 3 of the consolidated financial statements for the year ended December 31, 2011. The measurement of certain assets and liabilities is dependent upon future events whose outcome will not be fully known until future reporting periods. Therefore, the preparation of the consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results will vary from those estimated. Certain accounting policies are critical to understanding our reported financial results. These critical policies, which affect the significant areas involving management estimates, are described here.

Stock based compensation and other stock based payments

Under IFRS, graded vesting awards are accounted for as through each instalment is a separate award. IFRS does not provide for an election to treat the instruments as a pool and recognize expense on a straight line basis. Straight line basis is permissible under Canadian GAAP. Under IFRS, the estimate of the number of equity settled awards that vest are adjusted to the actual number that vests, unless forfeitures are due to market-based conditions. There is no choice to accrue compensation costs as if all instruments granted were expected to vest and recognize the effect of the forfeitures as they occurred as elected by the Company under Canadian GAAP. The effects of these differences are not material given the limited number of equity settled awards issued by the company to date. Accordingly no related adjustment is provided for in the reconciliations

Income Tax

The Company accounts for income taxes in accordance with the asset and liability method. Under this method, future income tax assets and liabilities are determined based on temporary differences between financial reporting and income tax bases of assets and liabilities, using substantively enacted tax rates in effect for the period in which the differences are expected to reverse. Future income tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, it is more likely than not that they will be realized.

Flow-through common share financings require the Company to spend an amount equivalent to the gross proceeds of the share issuance on Canadian qualifying exploration. The Company has indemnified the holders of such shares for any tax and other costs payable by them in the event the Company has not made the required exploration expenditures resulting in a proportional disallowed personal tax deduction. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Exploration and evaluation expenditures (“E&E”)

E&E assets consist of exploration and mining concessions, options and contracts. Acquisition and leasehold costs and exploration costs are capitalized and deferred until such time as the property is put into production or the properties are disposed of either through sale or abandonment. These assets are not depreciated as they are currently not in use.

E&E costs consist of: • Acquisition of exploration properties (staking only) • Gathering exploration data through topographical and geological studies; • Exploratory drilling, trenching and sampling; • Determining the volume and grade of the resource; • Test work on geology, metallurgy, mining, geotechnical and environmental; and • Conducting engineering, marketing and financial studies.

Proceeds received from the sale of any interest in a property are first credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the property and deferred exploration costs are written off to operations.

Where an indicator of impairment exists, a formal estimated recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is determined as the amount that would be obtained from the sale of the assets in an arm’s length transaction between knowledgeable and willing parties.

CHANGES IN ACCOUNTING POLICIES

The preparation of financial statements in conformity with International Financial Reporting Standards appropriate in the circumstances and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant areas where management judgment is applied are mining asset valuations, stock-based compensation and future income taxes. Actual results could differ from those estimates and such differences could be material.

FUTURE CHANGES in ACCOUNTING POLICIES as per recent accounting announcements

Standards issued but not yet effective up to the date of issuance of the company’s financial statements are listed below. This listing is of the standards and interpretations issued, which the company reasonably expects to be applicable at a future date. The company intends to adopt those standards when they become effective. The company does not expect the impact of such changes on the financial statements to be material. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

IFRS 9 Financial Instruments: Classification and measurement

IFRS 9, as issued, reflects the first phase of the International Accounting Standards Board's ("IASB’s") work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after January 1 2013. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and de-recognition. The adoption of the first phase of IFRS 9 may have an effect on the classification and measurement of the company’s financial assets

IFRS 10 Consolidated Financial Statements

IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS 10 replaces SIC-12 Consolidation - Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. The standard is effective for annual periods beginning on or after January 1, 2013.

IFRS 11 Joint Arrangements

IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers. The standard is effective for annual periods beginning on or after January 1, 2013.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with an entity’s interests in other entities. The standard is effective for annual periods beginning on or after January 1, 2013.

IFRS 13 Fair Value Measurement

IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transactions between market participants, at the measurement date. It also establishes disclosures about fair value measurement. The standard is effective for annual periods beginning on or after January 1, 2013. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

IAS 1 Presentation of Financial Statements (Amended)

The amendments retain the option to present profit or loss and other comprehensive income either in one continuous statement or in two separate but consecutive statements. Items of other comprehensive income are required to be grouped into those that will and will not be subsequently classified to profit or loss. Tax on items of other comprehensive income is required to be allocated on the same basis. The measurement and recognition of items of profit or loss and other comprehensive income are not affected by the amendments. The amendment is effective for annual periods beginning on or after July 1, 2012.

IAS 19 Employee Benefits (Amended)

The amendments require the recognition of changes in the defined benefit obligation and in plan assets when those changes occur, eliminating the corridor approach and accelerating the recognition of past service costs. The amendment is effective for annual periods beginning on or after January 1, 2013.

IAS 27 Separate Financial Statements (Amended)

IAS 27 was re-issued by the IASB on May 12, 2011 in order to conform to changes as a result of the issuance of IFRS 10, IFRS 11, and IFRS 12. IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements as the consolidation guidance will now be included in IFRS 10. The amendment is effective for annual periods beginning on or after January 1, 2013.

IAS 28 Investment in Associates and Joint Ventures (Amended)

IAS 28 was re-issued by the IASB on May 12, 2011 in order to conform to changes as a result of the issuance of IFRS 10, IFRS 11, and IFRS 12. IAS 28 continues to prescribe the accounting for investments in associates, but is now the only source of guidance describing the application of the equity method. The amended IAS 28 will be applied by all entities that are investors with joint control of, or significant influence over, an investee. The amendment is effective for annual periods beginning on or after January 1, 2013.

Evaluation of Disclosure Controls and Procedures

Management has established processes to provide them sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the audited consolidated financial statements do not contain any untrue statement of material fact, or omit to state a material fact required to be stated, or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the audited consolidated financial statements, and (ii) the audited consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flow of the Company, as of the date of and for the periods presented.

In contrast to the certificate required for non-venture issuers under National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of: (i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and (ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in the certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports.

Risk factors

The following discussions review a number of important risks which management believes could impact the Company’s business. There are other risks, not identified below, which currently, or may in the future exist in the Company’s operating environment.

Capital Needs The exploration, development, mining and processing of the Company’s properties will require substantial additional financing. The only current source of future funds available to the Company is the sale of additional equity capital. There is no assurance that such funding will be available to the Company or that it will be obtained on terms favourable to the Company or will provide the Company with sufficient funds to meet its objectives, which may adversely affect the Company’s business and financial position. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration, development or production on any or all of the Company’s properties or even a loss of property interest.

Stage of Exploration The Company's properties are in the exploration stage and to date none of them have a proven ore body. The Company does not have a history of earnings or the provision of return on investment, and in future there is no assurance that it will produce revenue, operate profitably or provide a return on investment.

Exploration and Mining Risks The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Currently, there are no known bodies of commercial ore on the mineral properties of which the Company intends to acquire an interest and the proposed exploration program is an exploratory search for ore. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are other risks involved in the conduct of exploration programs. The Company, from time to time, increases its internal exploration and operating expertise with due advice from consultants and others as required. The economics of developing gold and other mineral properties is affected by many factors including the cost of operations, variation of the grade of ore mined and fluctuations in the price of any minerals produced. There are no underground or surface plants or equipment on the Company’s mineral properties. Programs conducted on the Company's mineral property would be an exploratory search for ore. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Titles to Property While the Company has diligently investigated title to the various properties in which it has interest, and to the best of its knowledge, title to those properties are in good standing, this should not be construed as a guarantee of title. The properties may be subject to prior unregistered agreements or transfer, or native or government land claims, and title may be affected by undetected defects.

Permits and Licenses The Company’s operations may require licenses and permits from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.

Metal Prices The price of the Company’s common shares, its financial results, exploration and development activities have been, or may in the future be, adversely affected by declines in the price of gold and/or other metals. Gold prices fluctuate have historically fluctuated widely and are affected by numerous factors beyond the Company's control, including international, economic and political trends, expectations for inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and worldwide production levels. The effect of these factors on the price of precious and base metals, and therefore the economic viability of the Company’s exploration projects, cannot accurately be predicted. Xmet does not have a hedging policy and has no present intention to establish one. Accordingly, Xmet has no protection from declines in mineral resource prices.

Competition The mining industry is intensely competitive in all its phases. The Company competes with many companies possessing greater financial resources and technical facilities than itself for the acquisition of mineral interests as well as for recruitment and retention of qualified employees.

Uninsured Hazards Hazards such as unusual geological conditions are involved in exploring for and developing mineral deposits. The Company may become subject to liability for pollution or other hazards, which cannot be insured against or against which the Company may elect not to insure because of high premium costs or other reasons. The payment of any such liability could result in the loss of Company assets or the insolvency of the Company.

Key Employees Management of the Company rests on a few key officers, the loss of any of whom could have a detrimental effect on its operations

Conflicts of Interest Certain directors or proposed directors of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the business of acquiring, developing and exploiting natural resource properties. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

Environmental Regulations The Company's operations are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation provides for restrictions and prohibitions of spills, release or emission of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which could result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require submissions to and approval of environmental impact assessments. Environmental legislation is evolving in a manner, which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations. The Company intends to fully comply with all environmental regulations.

Governmental Regulation Exploration activities on the Company’s properties are affected to varying degrees by: (i) government regulations relating to such matters as environmental protection, health, safety and labour; (ii) mining law reform; (iii) restrictions on production, price controls, and tax increases; (iv) maintenance of claims; (v) tenure; and (vi) expropriation of property. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company’s operations. Changes in such regulation could result in additional expenses and capital expenditures, availability of capital, competition, reserve uncertainty, potential conflicts of interest, title risks, dilution, and restrictions and delays in operations, the extent of which cannot be predicted.

The Company is at the exploration stage on all of its properties. Exploration on the Company’s properties requires responsible best exploration practices to comply with company policy, government regulations, maintenance of claims and tenure. The Company is required to be registered to do business and have a valid prospecting license (required to prospect or explore for minerals on Crown Mineral Land or to stake a claim) in any Canadian province in which it is carrying out work.

Mineral exploration primarily falls under provincial jurisdiction. However, the Company is also required to follow the regulations pertaining to the mineral exploration industry that fall under federal jurisdiction, such as the Fish and Wildlife Act.

If any of the Company’s projects are advanced to the development stage, those operations will also be subject to various laws and regulations concerning development, production, taxes, labour standards, environmental protection, mine safety and other matters.

Canada Revenue Agency and provincial agencies No assurance can be made that Canada Revenue Agency and provincial agencies will agree with the Company's characterization of expenditures as Canadian exploration expenses or Canadian development expense or the eligibility of such expenses as Canadian exploration expense under the Income Tax Act (Canada) or any provincial equivalent. MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011

INVESTOR RELATIONS

Inflection Capital has been retained to conduct the Company’s investor relations program. The Company maintains a website at www.xmet.ca which serves as an additional source of information for its investors.

CHANGE IN CORPORATE STRUCTURE AND NOTICE OF CHANGE OF YEAR-END

Pursuant to the requirements of Section 4.8 and 4.9 of National Instrument 51-102 – Continuous Disclosure Obligations the Company filed a Notice of Change in Corporate Structure and Notice of Change in Year-End. This Notice provided the particulars of the Company’s recent reverse take-over transaction (Note 4) and advised of the Company’s intent to change its financial year-end from August 31 to December 31 for consistency with other publicly-traded mining companies.

Cautionary Note Regarding Forward-Looking Statements

Certain of the statements made and information contained herein is “forward-looking information” . These statements relate to future events or the Company’s future performance. All statements, other than statements of historical fact, may be forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates”, “plans”, “budget”, “scheduled”, “continue”, “estimates”, “forecasts”, “expect”, “is expected”, “project”, “propose”, “potential”, “targeting”, “intends”, “believes” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, or “will be taken”, “occur” or “be achieved” or the negative connotation thereof. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement. In particular, this MD&A contains forward-looking statements, pertaining to the following: capital expenditure programs, development of resources, treatment under governmental and taxation regimes, expectations regarding the Company’s ability to raise capital, expenditures to be made by the Company on its properties and work plans to be conducted by the Company. With respect to forward-looking statements listed above and contained in the MD&A, the Company has made assumptions regarding, among other things: • uncertainties relating to receiving exploration permits; • the impact of increasing competition; • unpredictable changes to the market prices for minerals; • exploration and developments costs for its properties; • availability of additional financing and opportunities for acquisitions or joint-venture partners; • anticipated results of exploration and development activities; and • the Company’s ability to obtain additional financing on satisfactory terms.

The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this MD&A and audited Condensed Consolidated Financial Statements and Notes to the Financial Statements as at December 31, 2011 which can be found on SEDAR website (www.sedar.com): volatility in the market price for minerals; uncertainties associated with estimating resources; geological, technical, drilling and processing problems; MANAGEMENT’S DISCUSSION AND ANALYSIS met For the Year Ended December 31, 2011 liabilities and risks, including environmental liabilities and risks, inherent in mineral and oil and gas operations; fluctuations in currencies and interest rates; incorrect assessments of the value of acquisitions; unanticipated results of exploration activities; competition for, amongst other things, capital, undeveloped lands and skilled personnel; lack of availability of additional financing and farm-in or joint venture partners and unpredictable weather conditions. Although the Company has attempted to identify important factors that could cause results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Readers are cautioned that the foregoing lists of factors are not exhaustive. Forward looking statements are made as of the date hereof and accordingly are subject to change after such date. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement. The Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.

OUTLOOK AND STRATEGY

Xmet’s Strengths: • Seasoned management and exploration team • Well financed for near term • Value added from increased exploration activity on neighbouring properties • Favourable mining and exploration logistics- historic camps, prior resources reported, good roads • Stable dollar and political environment • Abundant workforce available near the Projects

Xmet’s Challenges: • Effective management of cash and capital • Need for positive exploration results • Dependent on buoyant commodity price to attract and maintain investor support