DONNERMETALSLTD. ManagementsDiscussionandAnalysis SixMonthsEndedAugust31,2011 DescriptionofBusiness DonnerMetalsLtd.(theCompany)wasincorporatedonJune28,2005,pursuanttotheBusinessCorporationsAct ofBritishColumbia.TheCompanyisareportingissuerinBritishColumbia,AlbertaandOntarioanditssharesare listedontheTSXVentureExchangeunderthesymbolDONrespectively.TheCompanyisengagedintheacquisition, exploration and development of zinc, copper and nickel properties in Quebec and Newfoundland and Labrador, Canadaandisconsideredtobeintheexplorationanddevelopmentstageasithasnotplacedanyofitsmineral propertiesintoproduction. TheCompanyispartytoanoptionandjointventureagreementandadevelopmentandoperatingagreementwith XstrataCanadaCorporationXstrataZincCanadaDivision(Xstrata)concerningcertainofXstratasholdingsin theMatagamiCamp,Quebec.Inaddition,theCompanyhasaprojectintheSouthVoiseyBayareaofLabrador, Newfoundland.The Companys primary focus is the Matagami Project, where the Company and Xstrata have discoveredtheBracemacͲMcLeoddepositwhichiscurrentlyunderdevelopment. Thefollowingmanagementsdiscussionandanalysis(MD&A)shouldbereadinconjunctionwiththeCompanys unauditedcondensedconsolidatedinterimfinancialstatementsforthethreeandsixmonthsendedAugust31, 2011andforthethreemonthsendedMay31,2011,whicharepreparedinaccordancewithInternationalFinancial ReportingStandards(IFRS),IFRS1FirstͲtimeadoptionofInternationalFinancialReportingStandards(IFRS1), andInternationalAccountingStandard34InterimFinancialReporting,asissuedbytheInternationalAccounting Standards Board. Previously, the Companys financial statements were prepared in accordance with Canadian generallyacceptedaccountingprinciples(CanadianGAAP). AdditionalinformationabouttheCompanymaybefoundonSEDARatwww.sedar.com.Additionalinformation relating to the Companys operations and activities can also be found by visiting the Companys website at www.donnermetals.com. TheeffectivedateofthisMD&AisOctober25,2011. RisksandUncertainties The Companys activities related to mineral exploration are considered to be very high risk.The Companys developmentactivitiesrelatedtotheBracemacͲMcLeodMinealsocarryrisksanduncertaintiestypicallypresentin thedevelopmentofmineraldeposits.Companiesinthisindustryaresubjecttomanyandvariedkindsofrisks, including but not limited to, environmental, commodity prices, political and economic, with some of the most significantrisksbeing: 1. Substantial expenditures are required to explore for mineral resources and the chances of identifying economicalreservesareextremelysmall; 2. Substantialexpendituresarerequiredtodevelopmineralreserves; 3. The junior resource market, where the Company raises funds, is extremely volatile and there is no guaranteethattheCompanywillbeabletoraisefundsasitrequiresthem; 4. AlthoughtheCompanyhastakenstepstoverifytitletothemineralpropertiesithasaninterestinoris earninginto,thereisnoguaranteethatthepropertywillnotbesubjecttotitledisputesorundetected defects;and 5. The Company is subject to the laws and regulations relating to environmental matters, including provisions relating to reclamation, discharge of hazardous material and other matters. The Company Page1of18 DONNERMETALSLTD. ManagementsDiscussionandAnalysis SixMonthsEndedAugust31,2011 conductsitsexplorationactivitiesincompliancewithapplicableenvironmentalprotectionlegislationand is not aware of any existingenvironmental problems related to itsproperties that may cause material liabilitytotheCompany. ForwardͲLookingStatements Certain phrases used in the public disclosure, including in this MD&A, of the Companies activities are forwardͲ looking statements. A review of forwardͲlooking statements can be found on the Companys web site at www.donnermetals.com. InformationcontainedintheCompanyspressreleases,websiteinformation,corporatedisplays,andpostingson SEDAR,amongotherscontainforwardlookinginformationandfutureͲorientedfinancialinformationregarding resultsandfinancialprojectionscontainedinthefeasibilitystudyontheBracemacͲMcLeoddeposit.Thisstudywas producedbyGenivarLimitedPartnership('Genivar')andXstratawhoiscurrentlyoperatingthePerseveranceMine andMatagamimillcomplex.Xstrataanditspredecessors(FalconbridgeLimited,NorandaInc.,amongothers)have beenoperatingatMatagamisince1963. TheforwardlookinginformationandfutureͲorientedfinancialinformationrelatedtothefeasibilitystudyare: 1. ForecastminingresourcesandreservesaredeterminedbystandardsgovernedunderNI43Ͳ101andthe experience of Xstrata as operators of the project. Measured and indicated resources and proven and probable mining reserves were prepared by Xstrata mining group. The proven and probable reserves calculated in the feasibility study include two levels of confidence (measured and indicated based on densityofdrillholeintercepts).FortheUpperBracemac,BracemacandBracemacKeyTuffitezones,as wellastheupperhalfoftheMcLeodzone,spacingofdrillinterceptsisapproximately25metres,whereas thespacingofdrillholeinterceptsinthelowerportionoftheMcLeodzoneisatapproximately50metres. Thereaderiscautionedthatgeometryofthemineralizedzoneandthedistributionofgradewithinthe zonemaycauseboththevolumeandgradeoftheminingreservetovary(eitherpositivelyornegatively) fromthecalculationunderthefeasibilitystudy. CutͲoff grade for mining reserves was established by natural cutͲoff (mineralized versus unmineralized rock)andonanetsmelterreturn(NSR)basis.TheuseofanNSRcutͲoffisforwardlookingasitrelieson future looking metal prices, mill recoveries and smelting and treatment charges. These are discussed below. InferredresourcesfortheMcLeodDeepZoneandtheWestMcLeodzonearereportedinthefeasibility studybutarenotacomponentofthefinancialanalysis.Thereaderiscautionedthatinferredresources have the lowest level of confidence under NI 43Ͳ101 and future upgrading of the resource or incorporationoftheseresourcesinfuturemineplanninghavenotbeenconsideredunderthefeasibility study. There is no certainty that these resources will be mined due to proximity to underground infrastructureplannedundertheBracemacͲMcLeodfeasibilitystudy. Resources and reserves canbe affected by obtaining grades different from expectedgrades, obtaining lower quantities of mineralization, encountering deposit geometries that vary from expectations and encounteringhigherthanexpectedminedilutionrates. 2. ForecastcapitalcostsunderthefeasibilitystudyhavebeenestimatedbyGenivarwiththeassistanceof Xstrata. Cost estimates are based on expected capital charges and pricing with support from Xstratas recent experience with the development of their wholly owned Perseverance deposit which was developed between 2006 and 2008. Realized capital costs for the BracemacͲMcLeod project can vary (either positively or negatively) on the actual realized costs of equipment and materials purchased, Page2of18 DONNERMETALSLTD. ManagementsDiscussionandAnalysis SixMonthsEndedAugust31,2011 developmentadvancementrate,andoverallefficiencyofthedevelopmentprocess.Groundconditionsin particularcanprofoundlyimpactcapitalcosts. 3. ForecastoperatingcostsareprovidedbyGenivarandestimatedonthebasisofXstratasexperiencewith current mine and mill operations at Matagami. Variables which may affect operating costs (either positivelyornegatively)aremineandmillefficiencies,metallurgicalvariationsaswellasmineproduction rates,ratesofmillthroughputandtransportationcharges. 4. Forecastmetalpricesoverthecurrent4yearlifeofmineforBracemacͲMcLeodarebasedonindustry consensuspricebasedonpublishedforecasts(BrookHunt,BloombergandCRU);theseforecastsdonot necessarilyreflectXstratasvisionoflongͲtermcommodityprices.Metalpricescanhaveaprofoundeffect (either positively or negatively) on the financial characteristics of the BracemacͲMcLeod deposit as describedunderthebasecaseanalysisinthefeasibilitystudy.Constantmetalpricesareforecastoverthe lifeofmine,howevertheseareexpectedtovaryovertheplannedproductionperiod.Metalpricesarenot inthecontrolofmineoperationsandaresubjecttochangesinworldwidesupplyanddemand. 5. Forecast mill recoveries are based on results of tests conducted at Xstratas Process Control Group in Sudbury,Canada.Parametersthatmayaffectmillrecoveries(eitherpositivelyornegatively)arechanges toexpectedmineralogicalcharacteristicsoforefromBracemacͲMcLeodandmillefficiencies. 6. Forecast treatment charges are based on industry consensus of anticipated treatment and refining charges (TC/RCs) over the life of mine (Brook Hunt, Bloomberg and CRU); these forecasts do not necessarilyreflectXstratasvisionoflongͲtermtreatmentandrefiningcharges.TC/RCscanvaryonthe basisofrealizedTC/RCcontractchargesoverthelifeofminewhicharenegotiatedonanannualbasis. 7. Forecast exchange rates are forecast over the current 4 year life of mine for BracemacͲMcLeod on industryconsensusratesandonpublishedforecasts(BrookHunt,BloombergandCRU).Exchangerates arenotinthecontrolofthemineandwillfluctuateonthebasisofforcesexternaltothosecontrolled underthemineoperation;theseforecastsdonotnecessarilyreflectXstratasvisionoflongͲtermforeign exchangerates. 8. Forecast mine production rates are determined by Genivar based on the reserve estimate and block model provided by Xstrata. Ground conditions, geometry of sulphide mineralization and changes in developmentpatternscanimpactmineproductionrates. 9. ForecastimpactsofpermittingonthedevelopmentandminingofBracemacͲMcLeodaredeterminedby GenivarwithinputbyXstrata.Permittingrequirementsarenotexpectedtochangeoverthelifeofmine basedoncurrentregulations.However,changesinenvironmentalandotherlawsandregulations,may impact construction and mining which could affect capital and