On behalf of the Board, I am pleased to report that Klondike Gold Corp. has fulfilled or is in the final stages of completing the priorities of a corporate strategy established shortly after I joined the company last winter.  As outlined in a previous letter, the priorities for 2012 were to advance exploration and consolidate ownership of core properties in Yukon and Southeastern British Columbia.  Another priority was to examine new opportunities in mining-friendly jurisdictions. Thanks to the dedication of the Klondike team, considerable progress was made on all these fronts in 2012.

Yukon's Klondike camp has long been a geological puzzle as to the elusive hard-rock source of the millions of ounces of placer gold recovered since the famous gold rush of 1897.  Klondike Gold Corp. was one of the first juniors to compile and digitize historic and recent geological data from the district and to integrate results of academic studies from leading universities. This information is helping to solve the geological puzzle through the development of the first geological model of a potential bulk-tonnage target for the Klondike.  The information and model were used to direct the Company's 2012 exploration season.  As reported in news releases throughout the year, excavation and trenching at or near historic hard-rock mine-sites have led to the discovery of previously unknown high-grade vein structures, notably at the flagship Lone Star Project.  These discoveries and the experience gained in the 2012 season have advanced our understanding of the potential source of the millions of ounces of placer gold recovered from the Klondike camp.

It is important to note that the Klondike district has produced more surface gold per square meter than any other world-class alluvial (or placer) gold camp in the world, with many placer mines continuing to produce gold on creeks draining our hard-rock claims.  Despite this remarkable distinction, the search for a primary resource is only starting to bear fruit.  In contrast, hard-rock mines have been placed into production in most other placer gold camps in the world.  This suggests that the Klondike has excellent potential for the discovery of new hard-rock mines.

Considerable progress was made at the Indian River Project thanks to a Joint Venture with an investment partner who financed the initial project.  The activation of the placer mine is now completed, with a mining facility built and tested and ready for a full season of operation in 2013.  Klondike Gold retains a 50% interest in the Indian River Project.

The take-over bid for Klondike Star Mineral Corporation is cleared for completion following submission to the SEC of the final audited financial statements by Klondike Star.  This take-over will consolidate our land positions in the Klondike into 100% owned status for Klondike Gold Corp. and will add over 400 claims to our land package in the district.

In Southeastern British Columbia an important objective in 2012 was to review and prioritize our 600-plus mineral titles covering more than 600,000 square kilometers.  This land package has been divided into 10 polymetallic (base and precious metals) properties and four gold properties.  Here, as in Yukon, ownership interests were consolidated whenever possible.  In addition, new claims were acquired to fill in gaps between claim blocks and consolidate areas of interest.

Klondike Gold Corp. recently announced plans to expand into a new and exciting gold project in Portugal, which should generate plenty of news for shareholders in the coming year.

I am pleased to report that the majority of funds spent in 2012 were in active field exploration while corporate operating costs were reduced.  All assets were advanced during the year, despite weak capital markets.  Our technical team is compiling the exploration results into internal data sets and will soon release the final exploration and assessment reports.  The team is energized, focused, confident and looking forward to a busy and productive year ahead.

We thank our team, shareholders and supporters and wish everyone a Happy Holiday season.

Yours truly,

Erich Rauguth

President and CEO