The following management's discussion and analysis of the consolidated operating results and financial condition of Allied Nevada Gold Corp. ("Allied Nevada") for the three and nine month periods ended September 30, 2009 have been prepared based on information available to us as of November 5, 2009. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of the Company for the year ended December 31, 2008 and the related notes thereto filed with the Company's annual report on Form 10-K, which have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States. All amounts stated herein are in U.S. dollars, unless otherwise noted.

                                   Operations

The Hycroft mine poured its first gold on December 7, 2008 and completed its
first full year of operations in the third quarter of 2009.

Key operating statistics for the three and nine months ended September 30, 2009
are as follows:



                                                Three months ended            Nine months ended
                                                September 30, 2009           September 30, 2009
Ore mined (tons)                                         3,218,760                    8,022,545
Waste mined (tons)                                       4,097,036                   13,019,577

Total material mined (tons)                              7,315,796                   21,042,122


Ore grade - gold (ounces per ton)                           0.0195                       0.0211
Ore grade - silver (ounces per ton)                         0.2241                       0.2200

Ounces sold - gold                                          20,620                       27,963
Ounces sold - silver                                        21,233                       32,427

Average realized price - gold                 $             955.17         $             949.94
Average realized price - silver               $              14.22         $              14.01

Average spot price - gold                     $             960.00         $             915.18
Average spot price - silver                   $              14.69         $              13.17

Cost of sales, net of byproduct
credits (thousands) (1)                       $              7,505         $             11,103
Cost of sales per gold ounce (1)              $                364         $                397

1. The term "cost of sales per gold ounce" is a non-GAAP financial measure. Please see the section titled Non-GAAP Measures.

Production continued to ramp up with approximately 19,000 ounces of gold produced in the third quarter of 2009 and the mine continues to work towards achieving "steady-state" production of approximately 8,300 ounces of gold per month. Third quarter production was adversely affected by the delayed receipt of approval to operate the newly constructed cells of the Brimstone leach pad expansion. Consequently, limited pad space availability resulted in ore being placed on the old area of the pad not receiving the optimal 90-day solution application before having fresh ore stacked on top. Once the newly constructed areas of pad were under leach, flushing of solution through the older areas began to allow proper percolation through the entire heap. We expect that when solution breaks through the material we will begin to see an increase in solution flow rates and grades.

While the mine did not achieve planned production for the quarter, management is confident that the mine will achieve these expected mining rates based on the Company's analysis to date of operational performance at Hycroft, which is confirmed by historical run of mine performance of 100,000 ounces per year. Project to date, at September 30, 2009, approximately 35,400 ounces of gold have been produced.

During the three and nine months ended September 30, 2009, there were approximately 3.2 million and 8.0 million tons of ore mined, and 4.1 million and 13.0 million tons of waste mined, respectively. The average gold grade was 0.0195 and 0.0211 ounces per ton during the three and nine months ended September 30, 2009, respectively. In the first nine months of 2009, higher than expected grades of both gold and silver placed on the pads more than compensates for lower than anticipated ore tonnage placed in the first quarter of 2009. During the first nine months of 2009, ore placed on the pad contained approximately 169,000 ounces of gold (which equates to approximately 96,000 ounces of recoverable gold).

Cost of sales per gold ounce1 decreased in the third quarter of 2009 to $364 per ounce as compared with $392 per ounce in the second quarter of 2009 for an average cost per gold ounce1 sold for the first nine months of 2009 of $397 per ounce. The decrease in average cost of sales per gold ounce1 in the third quarter is primarily attributed to higher recoverable ounces placed on the leach pad and the Merrill-Crowe refinery being brought into operation in the third quarter.

Currently, material being placed on the heap from the Brimstone pit is almost entirely acid-leached altered volcanic material, as compared with historic material, which only contained approximately 10% acid-leached alteration. Preliminary laboratory and bulk field testing indicates that gold recovery from acid-leached material may be up to 70% to 80% and may require slower solution application rates. As these are preliminary results and, generally, controlled laboratory tests often produce recoveries that are higher than those obtained in commercial production, management continues to assume the average recovery of 56.6%. We will continue testing and tracking of recoveries to provide better confidence as to overall recoveries for this type of mineralization. A new detailed geologic model prepared in the quarter showed that material mined for the remainder of 2009 will be predominantly acid-leached material.

Crushing Study Update

As announced on October 26, 2009, we have engaged Mine & Mill Engineering, Inc. to complete the basic engineering, which includes capital and operating cost estimates, for the proposed addition of a crushing system at Hycroft. This work, which we expect to be completed by the end of 2009, is intended to further develop our internal study which suggested the addition of a crushing system at Hycroft would be favorable for maximizing cash flow. A proposed crushing system is expected to consist of a three-stage crushing and screening plant, overland conveyors and a stacking tower. This system would be capable of crushing six million tons per annum, to a final product size of 80% passing 1/2 inch minus. Based on crusher circuit capacity and mining rates, we expect that approximately 60% of the ore mined each month would be crushed. Subject to additional metallurgical testing and final engineering, we anticipate that the purchase and installation of equipment would take place in 2010 for initial production in early 2011.

If we are able to achieve an average recovery rate of 68% for both run of mine and crushed ore and a continued 30% increase in tons mined, we believe that gold production at Hycroft could be increased by up to 45% in the first five years following full implementation of the crushing and conveying system.

Estimates for operating and capital costs in our internal study, as well as throughput and metals recovery rates are based on historic recovery and cost data and independent operating cost data in the region. The internal study used a capital cost estimate of approximately $25 million, an operating cost of $1.25 per ton of ore crushed, and an expected gold recovery of approximately 75%. The study indicated that if we were to selectively crush the higher grade ore, we might achieve gold grades that are up to 25% higher than the average gold grade of the deposit of 0.55 grams per tonne. The internal study used an assumed silver recovery of 10%.

Exploration Update

On September 3, 2009, Allied Nevada's Board of Directors approved a $6.4 million enhanced exploration program for 2009. Four drills are currently active at Hycroft, two reverse circulation and two core drills, with the goal of drilling approximately 40,000 meters in 2009.

The exploration program has been designed to upgrade oxide and sulphide resources to the reserve category, further increase the reserve and resource base, and provide data and material to aid in advancing optimization programs and completing a feasibility study for sulphide mineralization at Hycroft. For the remainder of 2009, drilling will focus on Vortex zone in-fill drilling, Vortex step-out drilling and testing selective geophysical anomalies. The program will also focus on collecting representative samples from various areas of the mine to complete further metallurgical testwork on oxide, sulphide and mixed mineralization. Additional targets to be assessed in 2009?10 include Cut-5 exploration, Bay Area & Boneyard delineation, silver delineation and Albert zone exploration. We believe that mineralization is open to the north, south, west and at depth. The next 16 months of this program involves drilling of approximately 122,000 meters.

We continue to evaluate opportunities to maximize the value of the regional exploration properties through joint ventures, royalties or the divestiture of exploration land packages controlled by the Company. While we have engaged in discussions with various parties from time to time, there are no agreements or commitments in place.

Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008

Allied Nevada had net income during the three months ended September 30, 2009 of $5.1 million compared to a net loss of $9.7 million during the same period of 2008. The net increase of $14.9 million is largely due to $20.0 million of revenue from the sale of gold and silver, a $2.2 million decrease in exploration and land holding costs, and a $2.3 million decrease in mine start-up costs compared to the same period in 2008, which was offset by $7.8 million of cost of sales and $1.2 million in stripping costs.

Revenue

During the three months ended September 30, 2009, the Company sold 20,620 ounces of gold at an average price of $955 per ounce for $19.7 million of revenue and 21,233 ounces of silver for approximately $0.3 million of revenue. There were no comparable sales of precious metals in the same period of 2008.

Cost of sales

Cost of sales consists of mining and process costs, together with normal stripping costs that are variable costs of production. For the three months ended September 30, 2009, cost of sales was $7.8 million for 20,620 ounces of gold sold at an average cost of $378 per ounce of gold. The $38 decrease in average cost per ounce of gold sold from the three months ended June 30, 2009 is primarily due to a continuation of the second quarter trend of both higher ore grades mined and ore tons mined compared to the first quarter, which reduced the average cost per ounce.

Stripping costs

Stripping costs represent costs incurred in excess of those considered to be normal and are expensed as incurred. For the three months ended September 30, 2009, stripping costs were $1.2 million. There were no comparable stripping costs in the same period of 2008.

Mine start-up costs

Mine start-up costs represent costs incurred to recommission the Hycroft Mine during 2008, prior to entering the production phase. There were no mine start-up costs in the three months ended September 30, 2009. Mine start-up costs were $2.3 million for the same period of 2008.

Depreciation and amortization

During the three months ended September 30, 2009, depreciation and amortization expense was $1.2 million compared to $0.3 million in the same period of 2008, substantially all of the $0.9 million increase was attributable to the depreciation of the mining equipment, amortization of royalty rights, mine development costs, the leach pad, and the Asset Retirement Cost (ARC) asset, based upon commencement of production at Hycroft.

Exploration and land holding costs

Exploration and land holding costs decreased to $2.1 million during the three months ended September 30, 2009, as compared with $4.3 million during the three months ended September 30, 2008. The decrease of $2.2 million is primarily due to $1.7 million for a third phase drilling program and a sulphide gold and silver resource development drilling program during the third quarter of 2009 compared to $3.8 million for drilling and exploration costs at Hycroft in connection with the exploration drilling program in the same period of 2008.

Accretion

Allied Nevada recorded accretion expense of $0.1 million during the third quarter of 2009 which was essentially the same as the third quarter of 2008. Accretion expense in the three months ended September 30, 2009 was based upon a risk-free credit adjusted rate of 6.6%.

Corporate general and administrative costs

Corporate general and administrative costs increased to $2.9 million in the third quarter of 2009, compared to $2.2 million for the same period in 2008. The increase of $0.7 million is primarily attributable to higher aggregate compensation to employees and directors and higher benefits and employee related costs associated with increased staffing levels compared to the 2008 period.

Interest income

Allied Nevada earned a nominal amount in interest income from both our liquid savings and restricted cash accounts during the third quarter of 2009 compared to $0.3 million during the same period in 2008. The decrease in interest on our liquid savings account is largely attributable to substantially lower interest rates despite higher average cash balances.

Interest expense

Allied Nevada incurred $0.6 million of interest expense during the third quarter of 2009 which was essentially the same as in the third quarter of 2008. Interest expense in both periods was primarily related to the March 2008 and March 2009 credit agreements with Ionic.

Gain (loss) due to change in value of equity-linked financial instruments

For the three month period ended September 30, 2009, the Company recognized a $42,000 non-cash gain due to a change in fair value of warrants, which are considered to be equity-linked financial instruments, as described in Note 13 and subject to the guidance of ASC 815-40. There was no comparable change in value of warrants in the same period of 2008.

Net foreign exchange gain (loss)

For the three month periods ended September 30, 2009, the Company recognized a net foreign exchange gain of $1.1 million compared to a foreign exchange loss of $0.1 million for the same period in 2008. The net increase in the foreign exchange is attributable to the change in exchange rates between the U.S. and Canadian dollar and the Company's average net Canadian dollar asset (liability) position for the third quarter of 2009 compared to the same period of 2008.

Other income (expense)

Other expense, net was $0.1 million for the three month period ended September 30, 2009 compared to a nominal amount of other income, net for the same period in 2008.

Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008

Allied Nevada had a net loss during the nine months ended September 30, 2009 of $9.3 million compared to a net loss of $26.5 million during the same period of 2008. The decrease in consolidated net loss of $17.2 million is largely due to $27.0 million of revenue from the sale of gold and silver, an $11.4 million decrease in exploration and land holding costs, and a decrease of $2.6 million in mine start-up costs, which was offset by $11.6 million of cost of sales, a loss of $5.2 million attributable to the change in fair value of equity-linked financial instruments (described in Note 13 to the Condensed Consolidated Financial Statements), and $5.1 million of stripping costs.

Revenue

During the nine months ended September 30, 2009, the Company sold 27,963 ounces of gold at an average price of $950 per ounce for $26.6 million of revenue and 32,427 ounces of silver for approximately $0.4 million of revenue. There were no comparable sales of precious metals in the same period of 2008.

Cost of sales

Cost of sales consists of mining and process costs, together with normal stripping costs that are variable costs of production. For the nine months ended September 30, 2009, cost of sales was $11.6 million for 27,963 ounces of gold sold at an average cost of $413 per ounce of gold. The $97 decrease in average cost per ounce of gold sold for the nine months ended September 30, 2009 compared to the six months ended June 30, 2009 is primarily due to a continuation of the second quarter trend of both higher ore grades mined and ore tons mined compared to the first quarter, which reduced the average cost per ounce. There was no comparable cost of sales in the same period of 2008.

Stripping costs

Stripping costs represent costs incurred in excess of those considered to be normal and are expensed as incurred. For the nine months ended September 30, 2009, stripping costs totaled $5.1 million. There were no comparable stripping costs in the same period of 2008.

Mine start-up costs

Mine start-up costs represent costs incurred to recommission the Hycroft Mine during 2008, prior to entering the production phase. There were no mine start-up costs in the nine months ended September 30, 2009. Mine start-up costs were $2.6 million for the same period of 2008.

Depreciation and amortization

During the nine months ended September 30, 2009, depreciation and amortization expense was $2.0 million compared to $0.5 million in the same period of 2008. Substantially all of the $1.5 million increase was attributable to the depreciation of the mining fleet and amortization of royalty rights, mine development costs, and the Asset Retirement Cost (ARC) asset, based upon commencement of production at Hycroft.

Exploration and land holding costs

Exploration and land holding costs decreased to $3.4 million during the nine months ended September 30, 2009, as compared with $14.8 million during the first three quarters of 2008. The decrease of $11.4 million is primarily due to the following:

• During the nine months ended September 30, 2009, we expensed $2.2 million for a third phase oxide reserve and resource drilling program and a sulphide gold and silver resource development drilling program compared to $11.8 million of drilling and exploration costs at Hycroft in connection with the first phase of the 2008 exploration drilling program in the same period of 2008.

• During the nine months ended September 30, 2008, we incurred $1.5 million in care and maintenance costs. As the Hycroft Mine was reactivated in the third quarter of 2008, there were no comparable costs for the nine months ended September 30, 2009.

Impairment of mineral interests

Allied Nevada incurred an impairment of $0.4 million for the nine month period ended September 30, 2008 relating to termination of royalty agreements and exploration rights on nine mineral properties by a joint venture partner in April 2008. There were no mineral interest impairments for the nine month period ended September 30, 2009.

Accretion

Allied Nevada recorded accretion expenses of $0.3 million during the first three quarters of 2009 which was virtually equivalent to the amount recorded in the same period of 2008. Accretion expense in the nine months ended September 30, 2009 was based upon a risk-free credit adjusted rate of 6.6%.

Corporate general and administrative costs

Corporate general and administrative costs increased to $8.3 million in the first three quarters of 2009, compared to $7.0 million for the same period in 2008. The increase is primarily attributable to higher aggregate compensation to employees and directors and higher benefits and employee related costs associated with increased staffing levels compared to the 2008 period.

Interest income

Allied Nevada earned a nominal amount in interest income from both our liquid savings and restricted cash accounts during the first three quarters of 2009 compared to $0.8 million during the same period in 2008. The decrease in interest on our liquid savings account is largely attributable to substantially lower interest rates, higher average cash balances.

Interest expense

Allied Nevada incurred $0.9 million of interest expense during the nine months ended September 30, 2009 compared to $1.8 million during the same period in 2008. The interest expense in both periods was largely related to the March 2008 and March 2009 credit agreements with Ionic. The interest expense in the 2009 period was net of $0.1 million capitalizable interest related to the leach pad expansion project and an increase of $0.2 million in interest paid for additional mining equipment under capital lease.

Gain (loss) due to change in value of equity-linked financial instruments

For the nine month period ended September 30, 2009, the Company recognized a $5.2 million non-cash loss due to a change in fair value of warrants, which are considered to be equity-linked financial instruments, as described in Note 13 and subject to the guidance of ASC 815-40. There was no comparable change in value of warrants in the same period of 2008.

Net foreign exchange gain (loss)

For the nine month periods ended September 30, 2009, the Company recognized a foreign exchange gain of $0.5 million compared to a nominal amount for the same period in 2008. The net gain increase is attributable to the change in exchange rates between the U.S. and Canadian dollar and the Company's average net Canadian dollar asset (liability) position for the first three quarters of 2009 compared to the same period of 2008.

Other income (expense)

Other expense, net was $0.1 million for the nine month period ended September 30, 2009 compared to other income, net of $0.2 million in the same period of 2008.

Financial Position, Liquidity and Capital Resources

Cash used in operations

Cash used in operations was $20.9 million for the nine months ended September 30, 2009, compared to $16.2 million in the same period of 2008. The increase of $4.7 million was primarily attributable to the following:

• In the nine months ended September 30, 2009, cash used to place ore on leach pads, produce precious metals inventory, and to acquire supplies inventory increased to $23.6 million, $2.1 million, and $0.4 million, respectively, compared to cash used to place ore on leach pads and to acquire supplies inventory of $1.7 million and $0.4 million, respectively, in the same period of 2008.

• The change in accounts payable balances resulted in a $6.5 million source of cash in the 2008 period compared to a $2.1 million source of cash in the 2009 period, resulting in a $4.4 million increase in cash used in operations.

• In 2008, amortization of deferred loan costs provided $1.7 million in cash compared to $0.1 million in the same period of 2009, resulting in a $1.6 million increase in cash used in operations.

• The above increases in cash used in operations were offset by a $17.2 million decrease in the net loss, a $5.2 million non-cash loss attributable to the change in fair value of equity-linked financial instruments, a decrease in cash used for accrued and other liabilities of $2.3 million, and an increase in depreciation and amortization of $1.5 million.

Cash used in investing activities

Cash used in investing activities was $6.0 million in the nine months ended September 30, 2009 compared to $38.6 million in the same period of 2008. The decrease of $32.3 million is largely due to the following:

• In the nine months ended September 30, 2009, we acquired $4.3 million of equipment compared to $25.2 million of equipment consisting primarily of the purchase of a used mining fleet in the same period of 2008.

• In the nine months ended September 30, 2009, we incurred $0.6 million in mine development costs attributable to proven and probable reserves at the Hycroft mine compared to $7.8 million in mine development costs incurred in the same period of 2008.

• In May 2008, the Company established a $6.8 million collateral account to support an additional surety bond in the amount of $6.8 million for the benefit of the Bureau of Land Management (BLM), which allowed the Company to resume mining operations at the Hycroft mine, compared to a $1.3 million collateral account required in the nine months ended September 30, 2009.

• During the nine months ended 2009, the Company entered capital leases for a haul truck and water truck for $2.8 million and $1.1 million, respectively, compared to two capital leases for a total of $2.2 million in mining equipment during the 2008 period. These amounts are reflected as non-cash financing and investing activities on our Condensed Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2009.

• In the nine months ended September 30, 2008, we received $1.0 million of proceeds from the sale of the Company's 50% interest in the Hamilton-Treasure Hill mineral property. There were no comparable sales of mineral properties in the same period of 2009.

Cash provided by financing activities

The net cash provided by financing activities was $108.8 million in the nine months ended September 30, 2009 compared to $67.2 million during the same period of 2008. The increase of $41.6 million in cash provided by financing activities is the result of the following factors:

• The Company issued 14,375,000 shares of common stock through an underwriting agreement in April 2008 and 11,500,000 shares of common stock through an underwriting agreement in August 2009, which resulted in cash proceeds of $74.4 million and $91.5 million, respectively. Allied Nevada incurred $5.2 million and $5.1 million of costs in connection with the April 2008 and August 2009 offerings, respectively.

• In the first three quarters of 2009, Allied Nevada received $19.4 million proceeds from the exercise of 3,780,850 warrants and $4.9 million proceeds from the exercise of options. There were no comparable warrant exercises and the Company received $0.3 million of proceeds from the exercise of options in the same period of 2008.

• During the nine months ended September 30, 2009, Allied Nevada borrowed $6.3 million from Ionic pursuant to a 2009 Credit Agreement and repaid $7.5 million, including deferred loan costs, for a net cash use of $1.1 million. During the nine months ended September 30, 2008, Allied Nevada borrowed $9.7 million from Ionic pursuant to a 2008 Credit Agreement and repaid $11.8 million, including deferred loan costs, for a net cash use of $2.1 million.

Liquidity and capital resources

Based upon our current operational assumptions and mine plans, we believe our cash on hand, anticipated operating cash flow from the Hycroft Mine, proceeds from the potential sale of mineral interests and advanced minimum royalty payments, if any, and the exercise of stock options will be adequate to meet our . . .