1.

Nature of Operations

Silverado Gold Mines Ltd. (“Silverado” or the “Company”) was incorporated under the laws of British Columbia, Canada in June 1963. The Company is engaged in the exploration of mineral properties in the State of Alaska, through its wholly- owned subsidiary, Silverado Gold Mines Inc. (incorporated under the laws of the State of Alaska, U.S.A. on May 29, 1981) and in the research and development of low-rank coal-water fuel as a replacement fuel for oil fired boilers and utility generators through its other wholly-owned subsidiary, Silverado Green Fuel, Inc. (incorporated under the laws of the State of Alaska, U.S.A. on August 14, 2006).

The Company is considered to be an Exploration Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities . Accumulated results of operations and cash flows are presented from December 1, 2001, the date the Company re-entered the exploration stage.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which implies that the Company would continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. As at August 31, 2011, the Company has a working capital deficiency of $2,912,329 and has accumulated losses of $108,448,881 since inception and its operations continue to be funded primarily from sales of its stock and the sale of gold extracted during exploration activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern, including completion of the acquisition, exploration and development of its mineral properties and completion of the research and development of its low-rank coal-water fuel project is dependent on the Company’s ability to obtain the necessary financing from sales of its stock and debt financings. The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company\'s plan for the 2011 exploration season for its Alaska operations is to drill further reserves and core analysis through a contracted diamond drill operation at the Nolan project and to use the Company\'s own smaller diamond drill core rig for preliminary exploration drilling on its Eagle Creek property 8 miles North of Fairbanks, Alaska. The Company intends to fund these activities through debt and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending November 30, 2011. There is no assurance that the Company will obtain the necessary financing to complete its objectives.