**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-KSB**





ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      Year Ended December 31, 2007


Commission
      File Number: 1-12401





**WITS
      BASIN PRECIOUS MINERALS INC.**


(Exact
      Name of Small Business Issuer as Specified in its Charter)








MINNESOTA
            
            84-1236619(State
                or Other Jurisdiction of
            
            (I.R.S.
                Employer Identification Number)Incorporation
                or Organization)





900
      IDS CENTER, 80 SOUTH EIGHTH STREET, MINNEAPOLIS, MINNESOTA 55402-8773


(Address
      of Principal Executive Offices)





Issuer’s
      telephone number including area code: (612) 349-5277





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act:





COMMON
      STOCK, $0.01 PAR VALUE


Title
      of
      Class





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days. Yes xNo o





Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B contained herein, and will not be contained, to the best of registrant’s
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB
      o.





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act. Yes oNo
x





The
      Company’s revenues for its most recent fiscal year: None.





The
      aggregate market value of the Company’s common stock held by non-affiliates as
      of March 31, 2008 was approximately $25,000,000, based on the closing sale
      price
      as reported on the OTCBB for the Company’s common stock on March 31, 2008.





On
      March
      31, 2008, there were 120,140,866 shares of common stock issued and outstanding,
      which is the Company’s only class of voting stock.





Documents
      Incorporated by Reference: None.





Traditional
      Small Business Disclosure Format: Yes oNo x





WITS
      BASIN PRECIOUS MINERALS INC.





Annual
      Report on Form 10-KSB


For
      the
      Year Ended December 31, 2007


Table
      of
      Contents




PART
                I
            
            PageItem
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Properties
            25Item
                3.
            Legal
                Proceedings
            26Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            26PART
                IIItem
                5.
            Market
                for Common Equity and Related Shareholder Matters
            27Item
                6.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            28Item
                7.
            Financial
                Statements
            36Item
                8.
            Disagreements
                with Accountants on Accounting and Financial Disclosure
            37Item
                8A(T).
            Controls
                and Procedures
            37Item
                8B.
            Other
                Information
            39PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            40Item
                10.
            Executive
                Compensation
            42Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Shareholder Matters
            46Item
                12.
            Certain
                Relationships and Related Transactions
            48Item
                13.
            Exhibits
            51Item
                14.
            Principal
                Accountant Fees and Services
            56Signatures
            57





SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
      Annual Report on Form 10-KSB contains both historical statements and statements
      that are forward-looking in nature. Historical statements are based on events
      that have already happened. Certain of these historical events provide some
      basis to our management, with which assumptions are made relating to events
      that
      are reasonably expected to happen in the future. Management also relies on
      information and assumptions provided by certain third party operators of our
      projects as well as assumptions made with the information currently available
      to
      predict future events. These future event predictions, or forward-looking
      statements, include (but are not limited to) statements related to the
      uncertainty of the quantity or quality of probable ore reserves, the
      fluctuations in the market price of such reserves, general trends in our
      operations or financial results, plans, expectations, estimates and beliefs.
      You
      can identify forward-looking statements by terminology such as “may,” “could,”
“should,” “anticipate,” “believe,” “estimate,” “continue,” “expect,” “intend,”
“plan,” “predict,” “potential” and similar expressions and their variants. These
      forward-looking statements reflect our judgment as of the date of this Annual
      Report with respect to future events, the outcome of which is subject to risks,
      which may have a significant impact on our business, operating results and/or
      financial condition. Readers are cautioned that these forward-looking statements
      are inherently uncertain. Should one or more of these risks or uncertainties
      materialize, or should underlying assumptions prove incorrect, actual results
      or
      outcomes may vary materially from those described herein. We undertake no
      obligation to update forward-looking statements. The risks identified in the
      section following Item 1 entitled “RISK FACTORS,” among others, may impact
      forward-looking statements contained in this Annual Report.


3


**PART
      I**





**ITEM
      1. BUSINESS**





**OVERVIEW**





Wits
      Basin Precious Minerals Inc. (with its subsidiaries “we,” “us,” “our,” “Wits
      Basin” or the “Company”) is a minerals exploration and development company based
      in Minneapolis, Minnesota. As of December 31, 2007, we hold interests in mineral
      exploration projects in South Africa, Colorado and Mexico.





·
            We
                hold a 35 percent equity interest in Kwagga Gold (Barbados) Limited
                (“Kwagga Barbados”), which, through its wholly owned subsidiary Kwagga
                Gold (Proprietary) Limited, holds mineral exploration rights in South
                Africa. This project is referred to as the “FSC Project” and is located
                adjacent to the historic Witwatersrand Basin. The last completed
                drillhole
                on the FSC project occurred in 2005. On December 12, 2007, we entered
                into
                an agreement with AfriOre International (Barbados) Limited (“AfriOre”),
                the holder of the other 65 percent of Kwagga Barbados, whereby we
                may
                acquire all of AfriOre’s interest in Kwagga Barbados. See the “Our
                Exploration Projects” section that follows for more detail as to the FSC
                Project, including a discussion regarding a letter of intent we have
                entered into with respect to our rights to acquire the 65 percent
                interest
                in Kwagga Barbados held by AfriOre.




·
            On
                September 20, 2006, we executed a formal asset purchase agreement
                relating
                to the purchase of assets of the Hunter GoldMining
                Corporation, a corporation incorporated under the laws of British
                Columbia, Canada, which assets include the Bates-Hunter Mine, a prior
                producing gold mine from the 1860’s until the 1930’s located in Central
                City, Colorado. On January 28, 2008, we executed a fourth amendment
                to the
                formal purchase agreement, including an amendment to change the closing
                date from March 31, 2008 to June 30, 2008. We are continuing with
                a
                defined work program, which includes dewatering the existing mine
                shaft
                and performing a surface drilling program. See the “Our Exploration
                Projects” section that follows for detailed information regarding the
                Bates-Hunter Mine, including the fourth amendment to the formal asset
                purchase agreement.





·
            On
                October 31, 2007, we executed an amendment to the formal joint venture
                agreement with Journey Resources Corp., a corporation formed under
                the
                laws of the Province of British Columbia (“Journey”) and Minerales Jazz
                S.A. De C.V., a corporation duly organized pursuant to the laws of
                Mexico
                and a wholly owned subsidiary of Journey. Pursuant to the terms of
                the
                amendment, we own a 50 percent undivided beneficial interest in “located
                mineral claims” in the property known as the Vianey Mine Concession
                located in the State of Guerrero, Mexico (“Vianey”). In addition to
                located mineral claims, our interest includes all surface rights,
                personal
                property and permits associated with Vianey and all other claims,
                leases
                and interests in minerals acquired within two kilometers of the external
                perimeter of Vianey.  All work being performed at Vianey is under the
                supervision of Journey, which mainly consists of cleaning the site
                for a
                future work program. See the “Our Exploration Projects” section that
                follows for detailed information regarding the Vianey Mine, including
                the
                amendment to the formal joint venture agreement.





Additionally,
      we have made approximately $7,000,000 in advance payments on two equity
      investments to acquire interests in the following mining projects located in
      the
      People’s Republic of China (the “PRC”): (i) a nickel mining operation referred
      to as the Xing Wang Mine and (ii) the iron ore mining properties of Nanjing
      Sudan Mining Co., Ltd. (which includes Maanshan Zhaoyuan Mining Co. Ltd., and
      Xiaonanshan Mining Co., Ltd.) and Changjiang Mining Company Limited. Further
      due
      diligence and the satisfaction of certain conditions are required before we
      can
      proceed with completing the acquisition of **** either
      of
      these PRC projects.


4


As
      of
      December 31, 2007, we do not directly own any mining permits, we possess only
      a
      few pieces of equipment and we employ insufficient numbers of personnel
      necessary to actually explore and/or mine for minerals. Therefore, we are
      substantially dependent on the third party contractors we engage to perform
      such
      operations. As of the date of this Annual Report, we do not claim to have any
      mineral reserves on our properties.





**OUR
      HISTORY**





We
      were
      originally incorporated under Colorado law in December 1992 under the name
      Meteor Industries, Inc. In conjunction with our April 2001 merger with activeIQ
      Technologies Inc., we reincorporated under Minnesota law and changed our name
      to
      Active IQ Technologies, Inc. In June 2003, following our transaction to acquire
      the rights to the FSC Project, we changed our name to Wits Basin Precious
      Minerals Inc., in order to further associate our corporate name with our new
      business model.





Until
      March 14, 2003, we provided industry-specific solutions for managing, sharing
      and collaborating on business information on the Internet through our Hosted
      Solutions Business and until April 30, 2003, we provided accounting software
      through our Accounting Software Business. We sold substantially all of the
      assets relating to our Hosted Solutions and Accounting Software Businesses
      as of
      such dates and as a result, we became an exploratory stage company effective
      May
      1, 2003. As of the date of this Annual Report, we have only one operating
      segment, that of minerals exploration, and we will continue reporting as an
      exploration stage company until such time as an economic mineral deposit is
      discovered or we otherwise complete acquisitions or joint ventures with business
      models that have revenues.





**OUR
      EXPLORATION PROJECTS**





**KWAGGA
      GOLD (BARBADOS) LIMITED and the FSC PROJECT**





Overview





On
      June
      4, 2003, Hawk Uranium Inc., (f/k/a Hawk Precious Minerals Inc.) a corporation
      formed under the laws of the Providence of Ontario, Canada (“Hawk”), AfriOre
      International (Barbados) Limited, a corporation formed under the laws of
      Barbados (“AfriOre”), and AfriOre’s wholly owned subsidiary, Kwagga Gold
      (Proprietary) Limited, a corporation formed under the laws of the Republic
      of
      South Africa (“Kwagga (Proprietary)”), entered into a Heads of Agreement whereby
      Hawk could earn an interest in exploration rights in certain lands located
      in
      the region adjacent to the main Witwatersrand Basin in the Republic of South
      Africa, referred to as the “FSC Project.” The Heads of Agreement required a
      total investment of $3,500,000 from Hawk to acquire a 50 percent equity
      ownership of Kwagga (Proprietary).





On
      June
      26, 2003, we acquired Hawk’s interest and rights to the Heads of Agreement. On
      August 27, 2004, we entered into a new shareholders agreement, as amended August
      30, 2004, with AfriOre and its wholly owned subsidiary, Kwagga Gold (Barbados)
      Limited, a corporation formed under the laws of Barbados (“Kwagga (Barbados)”).
      The new shareholders agreement superseded the Heads of Agreement. Kwagga
      (Barbados) is the parent and holding company of Kwagga (Proprietary). By
      September 2004, we had invested an aggregate of $2.1 million and became a 35
      percent minority shareholder of Kwagga Barbados. The $2.1 million had been
      expended in the drilling of two holes, completed by August 2005.





On
      December 12, 2007, we entered into a new agreement, the Sale of Shares Agreement
      with AfriOre and Kwagga (Barbados), which specifies terms and conditions by
      which we may acquire the remaining 65 percent equity interest of Kwagga
      (Barbados). In order for us to acquire the remaining 65 percent interest, all
      of
      the following must occur: (1) on or before June 14, 2008 (or such extended
      date
      as agreed to by the parties), South Africa’s Minister of Minerals and Energy,
      who oversees the Department of Minerals and Energy (the “DME”), must consent in
      writing to the change in the controlling interest in Kwagga (Proprietary) as
      per
      South African law; (2) we must incur certain exploration expenditures in the
      aggregate amount of at least $1.4 million (this with the initial $2.1 million
      investment attains the $3.5 million investment necessary to acquire a 50 percent
      ownership level) as required in the shareholders agreement; and (3) we must
      pay
      to AfriOre an amount equal to $1.162 million on the earlier of (a) December
      31,
      2008 or (b) within three months following the final date of the completion
      of
      the required $1.4 million exploration expenditures. The closing of this
      transaction will occur three business days following the receipt of the DME
      consent, at which time we will acquire the remaining 65 percent interest and
      simultaneously grant to AfriOre a security interest in that 65 percent interest
      as collateral. Such security interest will not be released by AfriOre until
      such
      time as we incur the exploration expenditures and make the $1.162 million
      payment. The August 27, 2004 shareholders agreement remains in full force and
      effect until receipt of the DME consent, but upon receipt of the DME consent,
      such shareholders agreement will be superseded by the Sale of Shares Agreement.
      In the event the parties do not obtain the DME consent, the Sale of Shares
      Agreement will lapse and the terms and conditions set forth therein will be
      null
      and void and of no further force or effect.


5





As
      additional consideration for entering into the Sale of Shares Agreement, AfriOre
      will be entitled to a two percent gross royalty on all sales of gold and any
      other minerals by the Company relating to the FSC project. We may buy back
      one
      percent of the two percent gross royalty for a one-time cash payment of $2
      million upon delivery of a bankable feasibility study.




In
      connection with the Sale of Shares Agreement, we entered in an operating
      agreement with Kwagga (Proprietary), whereby we will serve as the manager of
      exploration, evaluation, development and mining of those mineral properties
      to
      which Kwagga (Proprietary) holds rights (the properties and valid prospecting
      permits cover approximately 230,000 acres). Under that operating agreement,
      we
      will be compensated for our management services according to the accounting
      procedure set forth in the operating agreement. We may terminate the operating
      agreement for any reason upon three months’ notice to Kwagga
      (Proprietary).





On
      March
      3, 2008, we entered into a letter of intent with Communications DVR Inc.
      (“DVR”), a capital pool company listed on the TSX Venture Exchange (TSXV:
      DVR.P). Under the terms of the letter of intent, it is anticipated that DVR
      will
      acquire and assume all of our rights and obligations under the Sale of Shares
      Agreement in exchange for 22 million common shares of DVR (the “DVR
      Transaction”). DVR currently has 3,765,000 common shares issued and outstanding
      and at the request of DVR, trading of DVR common shares has been halted and
      will
      remain so until receipt by the TSX Venture Exchange of all requisite
      documentation in connection with this proposed DVR Transaction and satisfaction
      of related conditions.





The
      closing of the proposed DVR Transaction is subject to a number of other
      conditions including, but not limited to the following: (1) obtaining all
      necessary regulatory approvals, including the approval by the TSX Venture
      Exchange of the DVR Transaction, which is intended to qualify as DVR's
      qualifying transaction for purposes of the rules of the TSX Venture Exchange
      and
      as a result of which DVR would cease to be a capital pool company and would
      become a regularly-listed company on the TSX Venture Exchange, (2) DME and
      other
      necessary third party consents, (3) the negotiation and execution of definitive
      agreements, (4) board of director approval, (5) the completion of necessary
      financing and (6) other conditions typical of a transaction of this nature.





Upon
      completion of the DVR Transaction, the parties anticipate that DVR will have
      approximately 34,590,000 common shares issued and outstanding on a non-diluted
      basis, and its officers are expected to include H. Vance White, as Chief
      Executive Officer, and Dr. Clyde Smith, as President. We also anticipate that
      Mr. White, Dr. Smith and Mr. King will serve on the board of DVR.





Creating
      a vehicle that is focused on the 65 percent interest in the FSC project is
      part
      of an overall strategy to allow management to be single minded as well as having
      access to one of the largest mining capital markets in the
      world.


6


Previous
      Exploration Efforts





The
      geological model was developed by AfriOre, affiliates of AfriOre and academic
      geologists from Witwatersrand University.




map





In
      October 2003, AfriOre commissioned the first drillhole, which was completed
      on
      June 8, 2004. This drillhole, BH47, was drilled in the western structural block
      to a depth of 2,984 meters (approximately 9,800 feet) and intersected a well
      developed succession of lower Proterozoic rocks before it was terminated in
      a
      zone of shearing. Although BH47 was not successful in intersecting any gold
      bearing mineralization reefs to the depths drilled, it did confirm the existence
      of the overlying cover rock stratigraphies, similar to those in the main
      Witwatersrand Basin, thereby confirming the initial geological
      model.





In
      October 2004, the South African Department of Minerals and Energy granted
      permission to prospect on newly acquired areas of the FSC Project, which had
      been defined as drillhole BH48. That second drillhole, BH48 (which was completed
      in August 2005) was drilled to a depth of 2,559 meters (approximately 8,400
      feet) and intersected over 600 meters of quartzites, below cover rocks which
      included a relatively thin succession of Transvaal Supergroup sedimentary rocks
      (160 meters) and Ventersdorp Supergroup lavas (132 meters) below the Karoo
      Supergroup rocks. The quartzites have been positively identified as
      Witwatersrand rocks, both through stratigraphic correlation and age dating
      analysis. Although the age dating determinations indicated an age of the
      quartzites in accordance with that of the Witwatersrand Supergroup, expert
      consultants engaged by AfriOre correlated the quartzites with the West Rand
      Group of the Witwatersrand Supergroup. Also identified in BH48 were a number
      of
      bands of pyrite mineralization which, while returning assays results with
      negligible amounts of gold, nevertheless were consistent with similar features
      encountered throughout the rocks in the main Witwatersrand
      Basin.


7


Our
      Exploration Plans





The
      FSC
      project is significant because for the first time all the historical data
      previously held by independent sources has been acquired and interpreted
      together. Part of the data that AfriOre has acquired and compiled from
      independent sources includes:


·
            Government
                aeromagnetic and gravimetric data.


·
            66
                regional drillholes of which 37 define the FSC basin and 7 intersected
                Witwatersrand rocks within the FSC
                basin.


·
            736
                line kilometers of seismic data.





Six
      potential sites for proposed future drilling have been identified for
      consideration. It has been recommended that additional seismic and drillhole
      information be purchased from a third party to enhance the
      interpretation in the exploration area prior to siting the drillholes.





A
      preliminary estimate of costs associated with the next phase of exploration
      has
      been calculated and includes the purchase of data from other drilling companies
      and the drilling of a single drillhole with associated costs. The actual costs
      will be dependent on the depth of drilling, with a 2,000 meter hole estimated
      at
      $622,000 and a 3,200 meter hole estimated at $957,790 based on estimates made
      in
      March 2007. We anticipate that costs will have generally increased since the
      estimate.





It
      is
      anticipated that the next round of exploration funding will be financed upon
      completion of the proposed DVR Transaction. In the event that the DVR
      Transaction is not closed, alternate sources of financing will be
      sought.





**BATES-HUNTER
      MINE**





Overview





On
      January 21, 2005, we acquired an option to purchase all of the outstanding
      capital stock of the Hunter Gold Mining Corporation (a corporation incorporated
      under the laws of British Columbia, Canada) including its wholly owned
      subsidiary Hunter Gold Mining, Inc., (a Colorado corporation). On July 21,
      2006,
      we executed a stock purchase agreement with the parties to the option intended
      to supersede the option agreement. On September 20, 2006, we executed a
      formal asset purchase agreement (as amended on October 31, 2006, March 1, 2007
      and May 31, 2007) to purchase the Bates-Hunter Mine on different economic terms
      than previously agreed upon in the stock purchase agreement or option. The
      formal asset purchase agreement is by and among the Company and Hunter Gold
      Mining Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining
      Corp., a Colorado corporation, and George Otten, a resident of Colorado
      (collectively the “Sellers”) for the purchase of the following assets: the
      Bates-Hunter Mine (this was a prior producing gold mine when operations ceased
      during the 1930’s), a water treatment plant, mining properties, claims, permits
      and all ancillary equipment.





On
      January 28, 2008, the parties to the formal asset purchase agreement entered
      into a fourth amendment relating to the modification or amendment of certain
      terms, including without limitation: (i) the incorporation of an acknowledgement
      of the parties that we have incurred approximately $2,500,000 in due diligence
      costs; (ii) an amendment to change the closing date of the formal asset purchase
      agreement from March 31, 2008 to June 30, 2008 (and to change the date upon
      which either party may terminate the agreement in the event a closing has not
      occurred as of such date to June 30, 2008); and (iii) an amendment to the
      purchase price whereby all payments of principal and interest under such note
      can be deferred until the earlier of production on the property or January
      2010.





At
      a
      formal closing, we shall deliver to the Sellers **** (i)
      a
      note payable to Sellers in the original principal amount of $6,750,000 Canadian
      Dollars, (ii) a deed of trust with George Otten as trustee for the Sellers
      securing the note payable, and (iii) 3,620,000 shares of our unregistered and
      restricted $.01 par value common stock. Furthermore, we would still be required
      to provide the following additional compensation: (i) a warrant to purchase
      up
      to 100,000 shares of our common stock, at an exercise price equal to the average
      prior 30-day sale price of our common stock; (ii) a two percent net smelter
      return royalty on all future production, with no limit; (iii) a one percent
      net
      smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a
      fee
      of $300,000, payable in cash or common stock at our election.


8





At
      December 31, 2007, Kenneth Swaisland, who previously assigned us certain
      rights relating to the Bates-Hunter property, held the right to receive a
      warrant to purchase up to 1 million shares of our common stock at an exercise
      price equal to the average prior 30-day sale price of our common stock, to
      be
      granted upon closing of our purchase of the Bates-Hunter mine. In January 2008,
      we entered into an agreement with Mr. Swaisland to that allowed him the
      right-to-purchase 125,000 shares of our unregistered common stock at $0.20
      per
      share and provided for the issuance of a new three-year warrant to purchase
      up
      to 875,000 shares of our common stock at $0.20 per share in exchange for the
      termination of his right to receive the 1 million share warrant. In February
      2008, Mr. Swaisland purchased the 125,000 shares for $25,000 and we finalized
      the agreement by issuing a three-year warrant to purchase 875,000 shares with
      an
      exercise price of $0.20 per share.





The
      Bates-Hunter Mine is located about 35 miles west of Denver, Colorado and is
      located within the city limits of Central City while the mill lies about one
      mile to the north in Black Hawk. The Central City mining district lies on the
      east slope of the Front Range where elevations range from 8,000 in the east
      to
      9,750 feet in the west. Local topography consists of gently rolling hills with
      local relief of as much as 1,000 feet.





The
      mine
      site is located in the middle of a residential district within the city limits
      of Central City and is generally zoned for mining or industrial use. The
      Bates-Hunter shaft is equipped with a two-compartment, 85 foot tall steel
      headframe and a single drum hoist using a one inch diameter rope to hoist two
      ton skips from at least 1,000 feet deep. Permit M-1990-41 covers the
      Bates-Hunter Mine and the Golden Gilpin Mill and is in good standing. Colorado
      permitting regulations allow for transfer of ownership or relocating the mine
      within 90 to 120 days based on technical considerations only. A state-of-the-art
      water treatment plant has been constructed adjacent to the mine headframe.
      This
      is a significant asset given the mine site location and environmental concerns.
      Substantial water rights are attached to the mine permits. There is ample water
      to meet both present and future project needs. The Water Discharge Permit
      #0043168 was in good standing until July 31, 2007, and currently is under
      renewal. Transfer of permit ownership requires an amendment showing the new
      owner and takes about 30 days to process.





map





Geology





The
      regional geology of the Central City district is not “simple” but the economic
      geology is classically simple. The Precambrian granites and gniesses in the
      area
      were intensely fractured during a faulting event resulting in the emplacement
      of
      many closely spaced and roughly parallel veins. The veins are the result of
      fracture filling by fluids that impregnated a portion of the surrounding
      gneisses and granites with lower grade gold concentrations “milling ore” and
      usually leaving a high grade “pay streak” of high grade gold sulphides within a
      quartz vein in the fracture. There are two veins systems present, one striking
      east-west and the other striking sub parallel to the more predominant east-west
      set. These veins hosted almost all of the gold in the camp. The veins vary
      from
      2 to 20 feet in width and dip nearly vertical. Where two veins intersect, the
      intersection usually widens considerably and the grade also increases, sometimes
      to bonanza grades. In the Timmins camp, this same feature was described as
      a
“blow out” and resulted in similar grade and thickness increases. The Bates vein
      in the area of the Bates-Hunter has been reported to have both sets of veins
      and
      extremely rich “ore” where the two veins intersected. These veins persist to
      depth and consist of gold rich sulphides that include some significant base
      metal credits for copper and silver.


9





Previous
      Exploration Efforts





The
      following is based on the information from a report titled “Exploration and
      Development Plan for the Bates-Hunter Project,” prepared by Glenn R. O’Gorman,
      P. Eng., dated March 1, 2004.





Lode
      gold
      was first discovered in Colorado in 1859 by John H. Gregory. The first veins
      discovered were the Gregory and the Bates. This discovery started a gold rush
      into the area with thousands of people trying to stake their claims. The Central
      City mining district is the most important mining district in the Front Range
      mineral belt. Since 1859, more than 4,000,000 ounces of gold have been mined
      from this district. Over 25% of this production has come from the area
      immediately surrounding the Bates-Hunter Project. Although the Bates vein was
      one of the richest and most productive in the early history of the area, it
      was
      never consolidated and mined to any great depth.





The
      majority of production on the claims occurred during the period prior to 1900.
      Technology at that time was very primitive in comparison to today's standards.
      Hand steel and hand tramming was the technology of the day. The above
      limitations coupled with limited claim sizes generally restricted mining to
      the
      top few hundred feet on any one claim.





During
      the early 1900’s cyanidation and flotation recovery technologies were developed
      along with better hoists and compressed air operated drills. Consolidation
      of
      land was a problem. Production rates were still limited due to the lack of
      mechanized mucking and tramming equipment. Issues that were major obstacles
      prior to the 1900’s and 1930’s are easily overcome with modern
      technology.





Colorado
      legislated their own peculiar mining problem by limiting claim sizes to 500
      feet
      in length by 50 feet wide and incorporated the Apex Law into the system as well.
      A typical claim was 100 to 200 feet long in the early days. This resulted in
      making it extremely difficult for any one owner to consolidate a large group
      of
      claims and benefit from economies of scale. The W.W.II Production Limiting
      Order
      # 208 effectively shut down gold mining in the area and throughout Colorado
      and
      the United States in mid 1942.





Historical
      production records indicate that at least 350,000 ounces of gold were recovered
      from about half of the Bates Vein alone to shallow depths averaging about 500
      feet below surface.





GSR
      Goldsearch Resources drilled two reverse circulation holes on the property
      in
      1990. The first hole did not intersect the Bates Vein. However, the second
      drilled beneath the Bates-Hunter shaft bottom intersected the Bates Vein at
      about 900 feet below surface. The drill cuttings graded 0.48 oz. Au/ton over
      10
      feet. This drillhole intersected three additional veins as well with significant
      gold assays.





In
      2006
      and 2007, we completed a total of 7,739 feet of diamond drilling in seven holes
      despite the extreme winter conditions in the Colorado mountains and difficulties
      with the drilling contractor’s proficiency, both which significantly slowed the
      surface drilling progress. Several narrow intervals of potential ore grade
      gold
      values were intersected. Three-dimensional computer modeling of the data from
      the drillholes has allowed the identification of additional drill targets for
      2008. Mine de-watering has recently reached a depth of approximately 410 feet
      below the mine shaft collar.


10


Our
      Exploration Plans





We
      have
      conducted a detailed and comprehensive exploration program on the Bates-Hunter
      property consisting of the following: de-watering the shaft; underground and
      surface geologic mapping, sampling, and assaying; a detailed surface survey
      of
      claims and outcropping veins; computer modeling with state-of the
      three-dimensional art software; surface drilling of deep holes to test selected
      targets below the 750 foot depth of previous mining. Once de-watering has
      exposed a suitable level, underground diamond drilling of targets in veins
      adjacent to the Bates Vein will be undertaken.





We
      have
      engaged a new drilling contractor for the drilling of BH08-09, which is now
      being drilled toward what we perceive as a quality target and it is expected
      that this hole will be completed in April 2008.





**VIANEY
      MINE CONCESSION**





On
      June
      28, 2006, we entered into an option agreement with Journey Resources
      Corporation, a corporation duly organized pursuant to the laws of the Providence
      of British Columbia, and its wholly-owned subsidiary Minerales Jazz S.A. de
      C.V., a corporation duly organized pursuant to the laws of Mexico (collectively,
      as “Journey”), to acquire an undivided 50 percent interest in certain mining
      claims comprising the Vianey Mine concession (“Vianey”) located in Guerrero
      State, Mexico. On December 18, 2006, we entered into a formal joint venture
      agreement with Journey and through the issuance of 500,000 shares of our common
      stock and a $500,000 work program expenditure payment, we acquired a 25 percent
      interest in Vianey.





In
      January 2007, we paid $100,000 of an additional $500,000 required for work
      program expenditures to Journey and issued an additional 500,000 shares of
      our
      common stock as partial payment to acquire an additional 25 percent interest
      in
      Vianey. On October 31, 2007, we executed an amendment to the formal joint
      venture agreement with Journey, whereby we issued 1,600,000 shares of our
      unregistered common stock to Journey in lieu of the final $400,000 work program
      expenditure payment due under the amendment. As a result, we now hold a 50
      percent interest in Vianey.





The
      Vianey Mine is located in the north-central part of the state of Guerrero,
      which
      lies in the southern part of Mexico. It is about 250 kilometers by road south
      of
      Mexico City and 160 kilometers north of Acapulco. The mine is situated within
      the Morelos National Mining Reserve on the southwestern flank of the southern
      Sierra Madre Occidental province that extends north-northwest to the border
      between Sonora and Arizona, and east-southeast to Oaxaca State. The region
      is
      characterized by moderately steep rolling hills with alternating valleys of
      gentle gradient. Elevations in the area range from 450 to 850m above sea level.
      A major drainage system, the Balsas River, flows generally east to west through
      the region, about 2.5 km south of the site. The concession constitutes 44
      contiguous hectares, centered on UTM coordinates 431,330m E, 1,987,020m N (WGS
      84, Zone 14), or -99.6485 degrees E, 17.9704 degrees N.





Road
      access is good via highway 95, then 15 kilometers by gravel road. The concession
      exists in the municipality of Cocula, 1.6 km southeast of the small town of
      Atzcala, where labor suitable for exploration and limited mining can be found.
      Supplies and equipment are available in the towns of Mezcala and Chilpancingo,
      the capital of Guerrero, located on the main highway approximately 8 and 48
      km
      south of the property respectively. A major power line passes near the property
      and electrical power is available at the mine.


11




map





In
      Mexico, all minerals are held in trust for the people of Mexico by the national
      government. Surface rights can be held by the government, local communities
      (“ejidos”), or privately held by companies or individuals. Under the mining
      regulations, there are no provisions for patent to mineral lands in Mexico.
      The
      granting of permission for an individual, a cooperative, or a commercial company
      to acquire rights to explore for, and ultimately for extracting minerals from
      the ground, is governed by legislation administrated by the government of
      Mexico.





The
      Mexico mining code of 1990 was revised in June 1992, and its current enabling
      regulations were issued by the President of Mexico in 1999. The government,
      under the mining code, can grant to individuals and Mexican corporations mining
      concessions with the right to explore and extract mineral resources.





“Concessions”
      refer to mining lots, the perimeter and name of which is determined by the
      applicant, and which are granted on “free” land (“tierra libre”). An exploration
      concession is valid for a period of six years; an exploitation concession for
      fifty years. Exploitation concessions can be renewed once for an additional
      fifty years, if requested before the end of the expiration of the original
      concession. The concession relating to Vianey consists of 44 hectares held
      under
      the exploitation concession (Number 164151, Exp. No. 5929, issued March 5,
      1979
      and will expire, unless renewed, in 2029) pursuant to the laws of Mexico.
      Minerales Jazz SA de C.V., (the wholly-owned subsidiary of Journey) exercised
      a
      lease with option to purchase the property held between Minera LMX SA de C.V.,
      and Minera Chilpancingo SA de C.V., and the owner of the concession. The
      property is owned 100 percent by Minerales Jazz SA de C.V., with no royalty,
      back-in rights, or other encumbrance.


12





The
      main
      obligations which arise from a mining concession, and which must be kept current
      to avoid its cancellation, are (i) the performance of assessment work, (ii)
      the
      payment of mining taxes (technically called “duties”), and (iii) compliance with
      environmental laws.





The
      Mining Law (in Mexico) establishes that minimum amounts of funds for assessment
      work be spent in performing exploration work (in the case of exploration
      concessions) or exploration and/or exploitation work (in the case of
      exploitation concessions); in the latter case the sales of minerals from the
      mine may be substituted in lieu of the equivalent amount of minimum
      expenditures. A report must be filed in May of each year regarding the work
      done
      during the previous calendar year.





Mining
      duties must be paid in advance in January and July of each year, and they are
      based on the type of concession, on the surface area of the concession and
      the
      number of years that have elapsed since the date of issue. Environmental laws
      require the filing and approval of an environmental impact statement for all
      exploitation work, and for exploration work that does not fall within the
      threshold of a standard issued by the federal government for mining exploration.





Potential
      environmental impacts and social impacts to communities affected by future
      land
      disturbance and mining activities are reviewed by the environmental protection
      sector of the government. There are no known or observed environmental
      liabilities respecting the Vianey or the land adjacent to it.





Geology





The
      property is located in the Sierra del Sur Metallogenic Province in the Guerrero
      Gold and Massive Sulfide Belts. This province is characterized by Cretaceous
      sedimentary and volcanic rocks intruded by Lower Tertiary intermediate
      composition stocks. It hosts intrusive associated gold-copper-silver deposits.
      To the west, the massive sulfide belt hosts several silver-lead-zinc and copper
      deposits.





The
      Vianey is located in the Morelos-Guerrero Basin of Cretaceous age, mostly
      composed of a folded and faulted limestone sequence up to 2500 meters thick,
      intruded by granodiorite and monzonite plutons, which are responsible for
      development of silver-lead-zinc mineralization in veins, skarn and breccia
      bodies. Various types of deposits occur in this geological context, i.e.
      mesothermal lenses, veins and breccias (Vianey Mine), iron- and gold-bearing
      skarns, disseminated iron-gold-copper or hydrothermal veins and epithermal
      gold-mercury deposits.





The
      Vianey property is underlain by limestones, limestone breccias, calcareous
      and
      carbonaceous siltstones, and argillites intruded locally by felsic dikes and
      plugs with affiliated skarn. The local stratigraphy consists of limestone
      underlain by limy siltstone of undetermined thickness, but known to exceed
      2500
      meters thick. These rocks are part of regionally extensive shallow marine
      sedimentary sequence that form an elliptical exposure of Cretaceous carbonate
      lithologies known as the Morelos-Guerrero Basin.





The
      Vianey Mine carbonate sequence is intruded by granodiorite and monzonite
      plutons, dikes, sills and irregular plugs. These intrusive masses are intimately
      associated with mineral deposits throughout the region. The carbonate
      stratigraphy in the Vianey Mine region is broadly folded and domed. Major folds,
      with amplitudes of fifty- to hundreds of meters are common. Drag folds and
      distortions of the bedded rocks are common in the underground exposures at
      the
      property.





Various
      types of mineralization occur as a result of the interplay between stratigraphy,
      structure, and proximity to intrusive centers in the district. The different
      types of deposits known to occur are as follows:





·
            Lenses,
                veins, mantos or breccias containing silver and poly-metallic Pb-Zn-Cu
                (Vianey deposit)


·
            Skarn
                zones and replacement concentrations or iron and gold (Nukay
                deposit)


·
            Disseminated
                and hydrothermal vein type Fe-Au-Cu (La Subsida
                deposit)


·
            Epithermal
                and hot springs deposits of mercury (Hg) and gold (Brasil and Laguna
                deposits)


13


Mineralization
      at the Vianey Mine includes veins, breccias, lens and mantos of silver - and
      poly-metallic (Pb-Zn) mineralization with local concentrations of gold and
      copper. The veins and breccia zones predominate in apparent importance. Most
      of
      the veins are localized along NW-SE trending structures and E-W structures;
      the
      lenses occur in fault zones and as sulfide concentrations with calcite, gypsum
      and quartz between some bedding planes.





Previous
      Exploration Efforts





The
      Vianey Mine has been operated intermittently on a small-scale basis since the
      1400’s. More recently, the mine is said to have been in almost continuous
      production since about 1976 by Compania Minera de Chilpancingo S.A., and
      operated until 1996 on a small scale with short breaks, extracting 200 to 300
      tonnes per month.





Underground
      workings put in by Compania Minera de Chilpancingo S.A., and its predecessors,
      amounts to seven levels, several winzes, two shafts and numerous stopes. The
      portal is approximately 540 meters above sea level, which penetrates into the
      mountain about 100 meters in an easterly direction.





Minera
      LMX SA de C.V., a former subsidiary of LMX Resources Ltd., took over the Vianey
      operations in 1996 and started various exploration and development works. The
      first phase of exploration was conducted in the mine by P.H. Consultants Ltd
      of
      Val d’Or, Quebec, in order to determine what resources were still contained in
      the old workings. A total of 252 meters of vertical fan drilling was completed
      from drill station one, 276 channel samples were taken, and 433 additional
      samples were obtained. All samples were analyzed for 38 minerals by a
      combination of fire assay, ICP, and aqua regia-AA methods by Bondar Clegg
      Laboratories.





A
      second
      phase of exploration completed in November 1996 accomplished 2,173 meters of
      underground core drilling from drill stations one through six. The second phase
      drilling further delineated the mineralized zones identified by the first
      program and resulted in the partial definition of a new breccia chimney called
      the Twilight Zone.





In
      May
      1997, Minera LMX started a third phase to verify and expand previous findings
      and to mine accessible reserves for direct shipping. After stockpiling about
      940
      tonnes of material from underground development work, the company abruptly
      closed the operation and the third drilling program was interrupted shortly
      after it was initiated.





The
      property was sold to the Chief Geologist of Minera LMX, who later defaulted
      on a
      property payment and a legal battle ensued. After several years of inactivity,
      the legal matters were settled and Minerales Jazz SA de CV acquired 100 percent
      interest in the property, free of royalties and encumbrances, with a cash
      payment in 2004, but did not conduct any physical exploration of the property.





As
      reported in the Blakestad Report, there are many issues related to the
      resource/reserve calculations reported from these prior drilling phases which
      may not meet the requirements of National Instrument 43-101. The calculations,
      however, were performed by a qualified person (P. J. Hawley) with intimate
      experience with the property and its mineralization. The results of exploration
      to date and the evaluations serve to form a basis for recommending aggressive
      exploration of the Vianey Mine.





A
      total
      of 12 diamond drillholes were drilled in during 2006-2007. In some cases these
      holes were incorrectly located and in some cases they were terminated prior
      to
      intersecting target zones. The target zones were projected to depth from the
      lowest levels of the mine at -75 meters below surface.





Our
      Exploration Plans





An
      abundance of data has been generated on the Vianey Mine over the years. All
      available data is now being compiled and entered into a three-dimensional model
      prior to conducting the next phase of exploration work on the project. This
      model includes geologic and assay data plotted on underground survey and
      drillhole information.


14


Journey
      is the operator of the Vianey project. Journey’s consulting geologist and
      Qualified Person is now Philip van Angeren. The previous consultant on the
      project, Rodney Blakestad, recommended a 2006 surface drill program to test
      the
      down-dip continuity of the principal veins; technical and drilling difficulties
      resulted in the fact that none of the 12 holes drilled reached sufficient depths
      to test the veins at deeper levels. We have recently requested that Journey
      proceed to (1) acquire significant additional claims surrounding the current
      property, (2) acquire available underground survey data, (3) acquire available
      additional underground geologic and assay data developed during previous
      programs, (4) enter all available underground data into a suitable computer
      software program, (5) complete underground industry-standard channel sampling
      to
      confirm data contained in Hawley’s resource and reserve calculation report.
      Following completion of this work, we look forward to planning the next stage
      of
      exploration or development on the Vianey project.





**TRANSACTIONS
      IN HONG KONG AND THE PEOPLE’S REPUBLIC OF CHINA**





China
      Global Mining Resources Limited





In
      November and December 2006, SSC Mandarin Group Limited, a British Virgin Islands
      corporation with a principal place of business in Hong Kong (“SSC Mandarin
      Group”), introduced us to various potential mining opportunities located in the
      People’s Republic of China (the “PRC”). From January through June 2007, we made
      loans in the aggregate amount of approximately $7.8 million to SSC Mandarin
      Group, which were used by SSC Mandarin Group to acquire interests in certain
      mining properties (which are described below) located in the PRC through SSC
      Mandarin Group’s wholly owned subsidiary, China Global Mining Resources Limited,
      a British Virgin Islands corporation (“CGMR”). The loans to CGMR were made out
      of the proceeds from the China Gold, LLC convertible promissory notes (see
      Note
      9 - Convertible Notes Payable in the financial statements). In partial
      consideration for the loans, we received two promissory notes of CGMR in the
      respective amounts of $2 and $5 million. CGMR’s obligations under the notes were
      secured by its rights under various acquisition and other agreements, including
      a supply agreement relating to forty tonnes of nickel, that CGMR had entered
      into relating to the mining opportunities (as discussed below). Additionally,
      an
      aggregate of $500,000 of the amounts loaned to SSC Mandarin Group were used
      to
      acquire interests in two entities from SSC Mandarin Group, SSC Mandarin Africa
      ($400,000) and SSC-Sino Gold ($100,000), which are described below. The
      remaining $300,000 was expensed for due diligence activities relating to the
      acquisition of mining interests. Norman D. Lowenthal, a director of ours,
      serves as Vice Chairman of SSC-Sino Gold and as a director of SSC Mandarin
      Africa, and until June 2007 served as Chairman of SSC Mandarin Financial, all
      of
      which are affiliates of SSC Mandarin Group.





On
      March
      28, 2007, we entered into separate Sale of Shares and Claims Agreements with
      SSC
      Mandarin Group whereby we acquired CGMR and a Hong Kong entity of the same
      name,
      China Global Mining Resources Limited. The Hong Kong entity does not hold any
      assets, but was formed for the right to use the corporate name in Hong Kong.
      Due
      to technical deficiencies in the original Sale of Shares and Claims Agreements,
      we and SSC Mandarin Group re-executed the agreements on July 27, 2007 to resolve
      the deficiencies in the original agreements, and on August 1, 2007 paid the
      nominal purchase price of $10,000 Hong Kong dollars (US$1,317) for each
      corporation as required under the Sale of Shares and Claims Agreements.
      Effective August 1, 2007, we reclassified the $7 million in promissory notes
      received from CGMR as “Advance payments on equity investments” in our financial
      statements to reflect the status of CGMR as our wholly owned subsidiary.





At
      the
      time of the acquisition of CGMR, it held rights to acquire interests in a nickel
      and various iron ore mining properties located in the PRC. As of December 31,
      2007, we hold only the right or option to acquire and do not hold title to
      any
      of these properties, therefore, we have recorded these as advanced payments
      until such time as we complete a transaction. In the event we determine that
      such a transaction will not occur, we will seek to collect our advance payments
      or consider available alternatives.


15


*Nickel –
      Shanxi Hua Ze Nickel Smelting Co.*





CGMR
      is a
      party to that certain Joint Venture Agreement with Shanxi Hua Ze Nickel Smelting
      Co. (“Shanxi Hua Ze”) dated April 14, 2007, as supplemented on June 6, 2007,
      pursuant to which the parties contemplate a joint venture relating to the Xing
      Wang Mine, a nickel mine located in the Qinghai province of the PRC. Pursuant
      to
      the agreement, CGMR would receive a 25% interest in the joint venture in
      consideration of its contribution of approximately 425 million Chinese Renminbi,
      or RMB, (approximately US$52 million) to the joint venture, such contribution
      to
      be used for the development and improvement of the mining property and
      production facility, the repayment of loans and settlement of other outstanding
      payables and other purposes. Shanxi Hua Ze would receive 75% of the joint
      venture in consideration of its contribution of the mine and related assets.
      Upon the acquisition by the joint venture of additional land with an additional
      200,000 tonnes of nickel, CGMR would be required to contribute an additional
      155
      million RMB (approximately US$19 million). In consideration of this additional
      contribution, CGMR would receive an additional 15% of the equity interest in
      the
      joint venture, resulting in a holding of 40% of the joint venture at such time.
      CGMR further has the right to acquire an additional 40% interest in the joint
      venture from Shanxi Hua Ze if it contributes an additional 580 million RMB
      (approximately US$71 million) on or before June 15, 2008. To date, the parties
      have been unable to meet the agreed upon timetables for contributions due to
      the
      inability to obtain the necessary permits for the joint venture. We are
      currently exploring our options with respect to this project.





As
      a
      condition to the Joint Venture Agreement, CGMR also entered into a Supply
      Contract with Shanxi Hua Ze to purchase forty tonnes of electrolytic nickel
      (greater than 99% grade) for US$2 million, which payment also served as a
      prepayment of the initial contribution outlined in the Joint Venture Agreement.
      CGMR’s obligations under the Joint Venture Agreement are subject to the receipt
      of certain government approvals. The nickel to be acquired under the Supply
      Contract has been prepaid, and accordingly CGMR is entitled to receive the
      40
      tonnes of nickel pursuant to the terms of any future purchase orders relating
      to
      such nickel. CGMR’s rights under the Supply Contract serve as security for the
      loan to CGMR in the amount of $2 million. Based on current market prices for
      nickel, we believe that the 40 metric tonnes of nickel is worth approximately
      $1.2 million. In the event the transaction is not completed, there can be no
      assurance, however, that CGMR will be able to recover the $2 million advance
      on
      a timely basis, or at all.





*Iron
      Ore – Nanjing Sudan Mining Co., Ltd.*





CGMR
      is a
      party to that certain Equity and Asset Transfer Heads of Agreement, dated May
      4,
      2007 (the “Nanjing Heads of Agreement”) with Maanshan Zhaoyuan Mining Co., Ltd.,
      Xiaonanshan Mining Co., Ltd., and two individual sellers (collectively, the
      “Sellers”), pursuant to which CGMR holds a right to acquire 100% of Nanjing
      Sudan Mining Co., Ltd. (which holds a processing plant), two iron ore mining
      properties located in the PRC (Maanshan Zhaoyuan Mining Co. and Xiaonanshan
      Mining Co.) and related assets for a purchase price of $66 million, to be paid
      in cash or shares of stock of a listed company, as agreed by the parties. Of
      this amount, CGMR has paid an aggregate of 40 million Hong Kong Dollars
      (approximately $5 million US) in the form of two deposits to be credited against
      the purchase price. The consummation of the transaction is subject to the
      completion of definitive agreements, receipt of various governmental approvals,
      the completion by and satisfaction of due diligence by CGMR, and satisfaction
      of
      certain indicated iron ore reserve requirements, among other conditions, which
      have not been fulfilled as of March 31, 2008. Additionally, in the event the
      transaction is consummated, CGMR will be required to enter into an eight-year
      management services contract with one of the sellers. The Nanjing Heads of
      Agreement calls for the completion of definitive documents and the receipt
      of
      necessary government approval by May 30, 2007, but the parties have verbally
      extended the applicable timetable due to a difficulty in obtaining the necessary
      permits.





Subsequent
      to our fiscal year end, on January 25, 2008, the Company, CGMR and the Sellers
      entered into a letter agreement establishing a purchase price and payment
      schedule relating to Nanjing Heads of Agreement. Under the Nanjing Heads of
      Agreement, the purchase price for the assets was dependent upon proven tonnage
      of the Maanshan and Xiaonanshan mines. The letter agreement sets the purchase
      price at 620,000,000 RMB (approximately $86 million US), and requires that
      CGMR
      pay the purchase price in accordance with the following schedule: (1) 25% within
      30 days following the verification that a permit has been obtained with respect
      to Xiaonanshan Mining Company; (2) 50% within 30 days of verification of a
      permit for additional reserves contiguous to the Xiaonanshan mine; and (3)
      25%
      within 30 days following the verification of a permit for Maanshan Zhaoyuan
      Mining Co. On March 24, 2008, the parties further amended the terms of Nanjing
      Heads of Agreement to include a production incentive whereby we would be
      required to issue a substantial number of our unregistered shares of common
      stock to the sellers upon the achievement of certain performance criteria
      relating to the delivery of iron ore within certain stated time frames. Based
      on
      our discussions with the Sellers, we anticipate the permits relating to the
      Xiaonanashan Mining Company will be obtained in the first half of 2008, at
      which
      time our obligation to pay 25% of the purchase price as set forth in the letter
      agreement will arise. We are in the process of obtaining third-party financing
      to assist us in proceeding with this transaction.


16





At
      the
      time of our acquisition of CGMR, it had advanced an aggregate of $5 million
      to
      the Sellers which may be applied by CGMR against the purchase price. In the
      event the transaction is not completed, there can be no assurance that CGMR
      will
      be able to recover the $5 million advance on a timely basis, or at all.





*Iron
      Ore – Yun County Changjiang Mining Company Ltd.*





CGMR is
      also
      party to that certain Equity Transfer Heads of Agreement (“Changjiang Heads of
      Agreement”) dated May 4, 2007 with three individual sellers, whereby CGMR holds
      a right to acquire a 95% equity interest in Yun County Changjiang Mining Company
      Limited (“Changjiang”), which holds licenses to explore for iron ore in the
      Hubei province of the PRC, for an aggregate of $57 million. The purchase price
      is to be paid by up to $15 million in cash and the remainder in shares of stock
      of a listed company. Two of the sellers, holding an aggregate of 90% of the
      interest in Changjiang), are parties to the Nanjing Heads of Agreement. Under
      the Changjiang Heads of Agreement, CGMR is required to arrange for a loan to
      Changjiang in the amount of $10 million, such loan to be secured by the capital
      stock of Changjiang. Additionally, in the event CGMR and Changjiang enter into
      an exclusive supply agreement relating to the purchase by CGMR of iron ore
      from
      Changjiang, CGMR will also be required to arrange for an additional loan to
      Changjiang, the amount of such loan to be determined based on the reserves
      of
      iron ore located on the related mining properties, but not to exceed 1.2 billion
      RMB. The consummation of the transaction is subject to the completion of
      definitive agreements, receipt of various governmental approvals, the completion
      by and satisfaction of due diligence by CGMR, and satisfaction of certain
      indicated iron ore reserve requirements, among other conditions. Additionally,
      in the event the transaction is consummated, CGMR will be required to enter
      into
      an eight-year management services contract with one of the sellers. As of
      December 31, 2007, no funds have been advanced for this project. The resources
      that will be required to complete this transaction are substantial, and greater
      than we can currently support. Accordingly, we are seeking an industry partner
      to assist us in completing this transaction.





Agreement
      to acquire interest in SSC Mandarin Africa (Proprietary)
      Limited





On
      March
      28, 2007, we entered into a Sale of Shares and Claims Agreement with SSC
      Mandarin Financial Services Limited (“SSC Mandarin Financial”) and SSC Mandarin
      Africa (Proprietary) Limited, a company incorporated under the laws of the
      Republic of South Africa (“Mandarin Africa”), relating to the acquisition of a
      40% equity interest in Mandarin Africa for a purchase price of US$400,000.
      The
      purchase price was paid on February 14, 2007. Due to technical deficiencies
      in
      the original agreement, we and SSC Mandarin Financial re-executed the agreement
      on July 27, 2007 to resolve the deficiencies in the original agreement. SSC
      Mandarin Financial is an affiliate of SSC Mandarin Group. Norman D. Lowenthal,
      a
      director of ours, served as Chairman of SSC Mandarin Financial until June 2007,
      and remains a director of Mandarin Africa.





Mandarin
      Africa’s only asset was a two-year Collaboration Agreement with Kumba Iron Ore
      (an affiliate of Anglo American PLC) dated August 4, 2006, whereby Mandarin
      Africa could potentially earn a finders fee with respect to any PRC iron ore
      mining projects it introduced to Kumba that Kumba subsequently acquired.
      Subsequent to December 31, 2007, we were informed by Kumba Iron Ore that it
      had
      no interest in reviewing any iron ore projects for the near term, and that
      it
      would not pursue any properties potentially subject to the Collaboration
      Agreement. Furthermore, we are unable to consummate our acquisition of the
      40%
      equity interest in Mandarin Africa and obtain a stock certificate representing
      such interest as we have learned that SSC Mandarin Financial is unable to
      transfer the interest as agreed. Therefore, we expensed the entire $400,000
      representing the investment, effective December 31, 2007, and claim not to
      hold
      any ownership in Mandarin Africa.


17


Agreement
      to acquire option to acquire an interest in SSC-Sino Gold Consulting Co.
      Limited





On
      March
      28, 2007, we entered into an Option Agreement (the “Option Agreement”) with SSC
      Mandarin Financial and SSC-Sino Gold Consulting Co. Limited, a company
      incorporated under the laws of the PRC (“SSC-Sino Gold”), pursuant to which we
      acquired, for US$100,000, a three-year option to purchase a 60% equity interest
      in SSC-Sino Gold for an exercise price of US$5,000,000. Norman D. Lowenthal,
      one
      of our directors, was then and continues to serve as Vice Chairman of SSC-Sino
      Gold. We paid the purchase price on March 22, 2007. Due to technical
      deficiencies in the original agreement, the parties re-executed the agreement
      on
      July 27, 2007 to resolve the deficiencies in the original agreement. SSC-Sino
      Gold holds rights to acquire an 80% interest in Tongguan Taizhou Gold Mining
      Co., Ltd., which holds licenses relating to a gold mine located in the Shaanxi
      province of the PRC.





On
      October 15, 2007, we received a notice of termination of the Sale of Shares
      and
      Claims Agreements with SSC Mandarin Group relating to the acquisition of CGMR
      (as discussed above), whereby SSC Mandarin Group alleged that the parties agreed
      to certain amended terms to the Sale of Shares and Claims Agreements, and that
      we had breached those amended terms. In an effort to resolve the potential
      dispute with SSC Mandarin Group, on December 12, 2007, we entered into a
      Termination of Option Agreement (the “Termination Agreement”) with SSC
      Mandarin Group, CGMR, and China Global Mining Resources Limited (Hong Kong),
      whereby we relinquished our right to purchase a 60% equity interest in SSC-Sino
      Gold under the Option Agreement. Under the Termination Agreement, we agreed
      to
      pay SSC Mandarin Group within 60 days an aggregate of 3,850,000 Hong Kong
      Dollars (approximately $500,000 US) as reimbursement for expenses incurred
      by
      SSC Mandarin Group for the wholly-foreign owned enterprises (“WFOE”) established
      for the iron ore projects (Maanshan and Changjiang). Additionally, we and SSC
      Mandarin Group have agreed to offset other payment obligations to one another
      on
      the later of 90 days and the date we complete due diligence and obtain the
      necessary title and permits for the iron ore projects. These offsets currently
      result in an obligation of the Company to pay SSC Mandarin Group approximately
      an additional $750,000, but we believe that we are entitled to additional
      offsets from SSC Mandarin Group in an amount equal to or greater than
      $750,000.





Due
      to
      the termination of the Option Agreement, effective December 31, 2007, we have
      expensed the entire $100,000 representing the purchase price of the option
      and
      do not claim to hold any ownership in developments in the Tongguan Taizhou
      Gold
      Mining Co.





Proposed
      Merger Transaction with Easyknit Enterprises





In
      an
      effort to finance our potential transactions in the PRC through access to the
      capital markets in Hong Kong, on April 20, 2007, we entered into an Agreement
      and Plan of Merger and Reorganization (the “Merger Agreement”) with Easyknit
      Enterprises Holdings Limited, a Bermuda corporation with its principal place
      of
      business in Hong Kong that is listed on the Hong Kong Stock Exchange (SEHK:
      0616) (“Easyknit”), and Race Merger, Inc., a Minnesota corporation and wholly
      owned subsidiary of Easyknit (“Merger Sub”). Pursuant to the Merger Agreement,
      the parties contemplated the merger of Merger Sub with and into the Company,
      with the Company constituting the surviving corporation to the merger and a
      wholly owned subsidiary of Easyknit following completion of the merger.





In
      the
      course of due diligence on the proposed merger transaction, on August 15, 2007,
      we filed a declaratory judgment action in the District Court in the Fourth
      Judicial District of the State of Minnesota against Easyknit and Race Merger
      seeking a declaration by the court that we were entitled to terminate the Merger
      Agreement pursuant to its terms based on our conclusion, determined in our
      sole
      and absolute discretion, that the merger transaction was not in the best
      interests of our shareholders based on our due diligence findings. We also
      asserted alternative grounds that there existed a material adverse change in
      the
      financial condition of Easyknit. On October 15, 2007, Easyknit filed an Answer
      and Counterclaim seeking a declaration by the court that it was entitled to
      a
      $30 million termination fee in the event we terminated the Merger Agreement
      or
      it terminated the Merger Agreement based on our alleged breach of contract.


18


On
      November 1, 2007, we terminated the Merger Agreement. On December 18, 2007,
      we
      entered into a Settlement Agreement and General Release (the “Settlement
      Agreement”) with Easyknit, whereby the parties agreed to dismiss with prejudice
      and release each other from all claims, counterclaims and defenses that touched
      upon or arose out of the parties’ Merger Agreement or which were asserted or
      could have been asserted in the litigation between the parties venued in the
      District Court in the Fourth Judicial District of the State of
      Minnesota.





**INDUSTRY
      BACKGROUND**





The
      exploration for and development of mineral deposits involves significant capital
      requirements. While the discovery of an ore body may result in substantial
      rewards, few properties are ultimately developed into producing mines. Some
      of
      the factors involved in determining whether a mineral exploration project will
      be successful include, without limitation:





·
            competition;


·
            financing
                costs;


·
            availability
                of capital;


·
            proximity
                to infrastructure;


·
            the
                particular attributes of the deposit, such as its size and grade;


·
            political
                risks, particularly in some emerging third world countries;
                and


·
            governmental
                regulations, particularly regulations relating to prices, taxes,
                royalties, infrastructure, land use, importing and exporting of gold,
                environmental protection matters, property title, rights and options
                of
                use, and license and permitting
                obligations.





All
      of
      which leads to a speculative endeavor of very high risk. Even with the formation
      of new theories and new methods of analysis, unless the minerals are simply
      lying exposed on the surface of the ground, exploration will continue to be
      a
“hit or miss” process.





**PRODUCTS
      AND SERVICES**





As
      of
      December 31, 2007, we hold interests in three exploration projects: the
      Bates-Hunter Mine in Colorado, the Vianey Mine Concession in Mexico and the
      FSC
      Project located in South Africa. Additionally, we hold rights to acquire
      interests in certain mining properties in the People’s Republic of
      China **.**





**EXPLORATION
      AND DEVELOPMENT EXPENSES**





If
      we
      acquire a project that has no revenue, exploration expenses will be charged
      to
      expense as incurred.





**EMPLOYEES**





As
      of
      December 31, 2007, under the Wits Basin parent corporation, we employ four
      individuals - our chief executive officer, our president, our chief financial
      officer and our president of Asia operations. Gregory Gold Producers (our wholly
      owned subsidiary) employs 11 mine related employees at the Bates-Hunter Mine.
      None of our employees are represented by a labor union and we consider our
      employee relations to be good.


19


**FINANCIAL
      INFORMATION IN INDUSTRY SEGMENTS**





During
      the year ended December 31, 2007, our continuing operations included one
      reportable segment: that of minerals exploration.





**AVAILABLE
      INFORMATION**





We
      make
      available free of charge, through our Internet web site www.witsbasin.com,
      our
      annual report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports
      on Form 8-K, and amendments to those reports filed or furnished pursuant to
      Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
      after we electronically file such material, or furnish it to the Securities
      and
      Exchange Commission. You can also request a free copy of the above filings
      by
      writing or calling us at:





Wits
      Basin Precious Minerals Inc.


Attention:
      Mark D. Dacko, Secretary


900
      IDS
      Center, 80 South 8 th Street


Minneapolis,
      Minnesota 55402-8773


(612)
      349-5277





**RISK
      FACTORS**





**RISKS
      RELATING TO OUR COMMON STOCK**





**TRADING
      OF OUR COMMON STOCK IS LIMITED.**





Trading
      of our common stock is conducted on the National Association of Securities
      Dealers’ Over-the-Counter Bulletin Board, or “OTC Bulletin Board.” This has an
      adverse effect on the liquidity of our common stock, not only in terms of the
      number of shares that can be bought and sold at a given price, but also through
      delays in the timing of transactions and reduction in security analysts’ and the
      media’s coverage of us. This may result in lower prices for our common stock
      than might otherwise be obtained and could also result in a larger spread
      between the bid and asked prices for our common stock.





**BECAUSE
      IT IS A “PENNY STOCK” IT CAN BE DIFFICULT TO SELL SHARES OF OUR COMMON
      STOCK.**





Our
      common stock is a “penny stock.” Broker-dealers who sell penny stocks must
      provide purchasers of these stocks with a standardized risk disclosure document
      prepared by the SEC. This document provides information about penny stocks
      and
      the nature and level of risks involved in investing in the penny stock market.
      A
      broker must also give a purchaser, orally or in writing, bid and offer
      quotations and information regarding broker and salesperson compensation, make
      a
      written determination that the penny stock is a suitable investment for the
      purchaser, and obtain the purchaser’s written agreement to the purchase. The
      penny stock rules may make it difficult for you to sell your shares of our
      stock. Because of the rules, there is less trading in penny stocks. Also, many
      brokers choose not to participate in penny stock transactions. Accordingly,
      you
      may not always be able to sell our shares of common stock publicly at times
      and
      prices that you feel are appropriate.





**A
      SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK ARE HELD IN RESERVE FOR VARIOUS
      AGREEMENTS AND THEIR ISSUANCE COULD DEPRESS THE PRICE OF OUR
      SECURITIES.**





The
      issuance of a substantial number of shares of our common stock in the public
      market could adversely affect the market price for our common stock and make
      it
      more difficult for you to sell our securities at times and prices that you
      feel
      are appropriate. As of March 27, 2008, we had 120,140,866 shares of common
      stock, 690,000 Class A Redeemable Warrants and 7,726,200 Class C Redeemable
      Warrants issued and outstanding. Furthermore, we have reserved for issuance
      13,643,500 shares of common stock issuable upon the exercise of stock options,
      18,569,038 shares of common stock issuable upon the exercise of warrants,
      approximately 48,000,000 shares of common stock issuable upon the conversion
      of
      convertible debt, and may be required to issue up to an aggregate of 51,000,000
      shares of common stock under various agreements that have not closed as of
      April
      3, 2008, subject in most cases to the satisfaction of certain conditions under
      the respective agreements.


20





**RISKS
      RELATING TO OUR FINANCIAL CONDITION**





**WE
      CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND OPERATIONS, DEBT REDUCTION OR
      POTENTIAL ACQUISITIONS DURING 2008.**





As
      of
      March 28, 2008, we had only approximately $475,000 of cash and cash equivalents
      on hand. Since we do not expect to generate any revenue from operations in
      2008,
      we will be required to raise additional capital in financing transactions in
      order to satisfy our expected cash expenditures. Included in the expected cash
      expenditures is approximately $10,500,000 in short-term debt that will become
      due May 31, 2008, assuming some or all of such debt is not converted into equity
      prior to such date. Accordingly, we will require additional funds during the
      second quarter of 2008.





We
      continue to seek additional opportunities relating to our mining operations,
      and
      our ability to seek out such opportunities, perform due diligence, and, if
      successful, acquire such properties or opportunities requires additional
      capital. We expect to raise such additional capital by selling shares of our
      capital stock or by borrowing money. However, we currently have only a limited
      number of available shares of common stock authorized for issuance, and will
      require shareholder approval to increase our authorized capitalization to raise
      such additional capital. Additionally, such additional capital may not be
      available to us at acceptable terms or at all. Further, if we increase our
      capitalization and sell additional shares of our capital stock, your ownership
      position in our Company will be subject to dilution. In the event that we are
      unable to obtain additional capital, we may be forced to cease our search for
      additional business opportunities, reduce our operating expenditures or to
      cease
      operations altogether.





**WE
      HAVE NO OPERATING ASSETS.**





After
      we
      completed the sales of our Hosted Solutions Business and our Accounting Software
      Business in 2003, we became an exploration stage company and do not anticipate
      having any revenues from operations until an economic mineral deposit is
      discovered or unless we complete other acquisitions or joint ventures with
      business models that produce such revenues. As of March 28, 2008 we hold certain
      rights in three projects: FSC Project located in South Africa., the Bates-Hunter
      Mine in Colorado and the Vianey Concession in Mexico. None of these projects
      may
      ever produce any significant mineral deposits.





**WE
      ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE.**





Since
      becoming an exploration stage company in May 2003 through December 31, 2007,
      we
      have incurred an aggregate net loss of $39,368,792. We expect operating losses
      to continue for the foreseeable future and may never be able to operate
      profitably.





**OUR
      INDEPENDENT AUDITORS HAVE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS
      A
      GOING CONCERN.**





We
      have
      had net losses for each of the years ended December 31, 2007 and 2006, and
      we
      have an accumulated deficit as of December 31, 2007. Since the financial
      statements for each of these periods were prepared assuming that we would
      continue as a going concern, in the view of our independent auditors, these
      conditions raise substantial doubt about our ability to continue as a going
      concern. Furthermore, since we do not expect to generate any significant
      revenues for the foreseeable future, our ability to continue as a going concern
      depends, in large part, on our ability to raise additional capital through
      equity or debt financing transactions. If we are unable to raise additional
      capital, we may be forced to discontinue our business.


21


**CERTAIN
      OF OUR AGREEMENTS REQUIRE PAYMENTS IN FOREIGN CURRENCIES AND ARE SUBJECT TO
      EXCHANGE RATE FLUCTUATIONS.**





Certain
      of our acquisition agreements (including certain of those we hold through our
      subsidiary, China Global Mining Resources) and other agreements we have entered
      require payments in foreign currencies, including Chinese Renminbi, or RMB.
      It
      is possible that we will enter into other agreements for future acquisitions
      or
      work relating to our various mining interests that will require payment in
      currencies other than the U.S. Dollar. Fluctuations in exchange rates, in
      particular between the U.S. Dollar and other currencies, any affect the actual
      amounts of these payments and potentially may be in excess of the amounts we
      have budgeted for payment of these fees and other payments.





**RISKS
      RELATING TO OUR BUSINESS**





**SINCE
      BECOMING ENGAGED IN THE MINERAL EXPLORATION BUSINESS IN JUNE 2003, WE HAVE
      RELIED ON AN EXCLUSION FROM THE DEFINITION OF “INVESTMENT COMPANY” IN ORDER TO
      AVOID BEING SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940. TO THE EXTENT THE
      NATURE OF OUR BUSINESS CHANGES IN THE FUTURE, WE MAY BECOME SUBJECT TO THE
      REQUIREMENTS OF THE INVESTMENT COMPANY ACT, WHICH WOULD LIMIT OUR BUSINESS
      OPERATIONS AND REQUIRE US TO SPEND SIGNIFICANT RESOURCES IN ORDER TO COMPLY
      WITH
      SUCH ACT.**





The
      Investment Company Act defines an “investment company,” among other things, as
      an issuer that is engaged in the business of investing, reinvesting, owning,
      holding or trading in securities and owns investment securities having a value
      exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items
      and securities issued by the federal government. Because the value of our
      interest in the FSC Project has in the past exceeded 40
      percent of our unconsolidated assets, excluding cash and government securities, we
      have
      met this threshold definition of “investment company” during such time. However,
      the Investment Company Act also excludes from this definition any person
      substantially all of whose business consists of owning or holding oil, gas
      or
      other mineral royalties or leases or fractional interests therein, or
      certificates of interest or participation relating to such mineral royalties
      or
      leases. Based on an opinion of
      counsel, we believed
      that we satisfied this exclusion from the definition of
“investment company” for mineral companies for the period from June 26, 2003
      through August 29, 2004. If our reliance on the mineral company exclusion from
      the definition of investment company during this period was misplaced, we may
      have been in violation of the Investment Company Act, the consequences of which
      can be significant. For example, investment companies that fail to register
      under the Investment Company Act are prohibited from conducting business in
      interstate commerce, which includes selling securities or entering into other
      contracts in interstate commerce. Section 47(b) of the Investment Company Act
      provides that a contract made, or whose performance involves, a violation of
      the
      act is unenforceable by either party unless a court finds that enforcement
      would
      produce a more equitable result than non-enforcement. Similarly, a court may
      not
      deny rescission to any party seeking to rescind a contract that violates the
      Investment Company Act, unless the court finds that denial of rescission would
      produce more equitable result than granting rescission. Accordingly, for
      example, certain investors who purchase our securities during any period in
      which we were required to register as investment company may seek to rescind
      their subscriptions.





We
      further believe that we have continued to qualify for the mineral company
      exclusion from August 30, 2004 through the date of this Annual Report and are
      not
      therefore subject to the requirements of the Investment Company Act of 1940.
      If
      in the future the nature of our business changes such that the mineral company
      exception to the threshold definition of investment company is not available
      to
      us, we will be required to register as an investment company with the SEC.
      The
      ramifications of becoming an
      investment company, both in terms of the restrictions it would have on our
      Company and the cost of compliance, would be significant. For example, in
      addition to expenses related to initially registering as an investment company,
      the Investment Company Act also imposes various
      restrictions with regard to our ability to enter into affiliated transactions,
      the diversification of our assets and our
      ability to borrow money. If we became subject to the Investment Company Act
      at
      some point in the future, our ability
      to continue pursuing our business plan would be severely limited as it would
      be
      significantly more difficult for us to raise additional capital in a manner
      that
      would comply with the requirements of the Investment Company Act. To the extent
      we are unable to raise additional capital, we may be forced to discontinue
      our
      operations or sell or otherwise dispose of our mineral assets.


22





**LAWS
      GOVERNING MINERAL RIGHTS OWNERSHIP HAVE CHANGED IN SOUTH AFRICA.**





The
      South
      African mining industry has undergone a series of significant changes
      culminating in the enactment of the Mineral and Petroleum Resources Development
      Act No. 28 of 2002 (“the Act”) on May 1, 2004. The Act legislates the abolition
      of private mineral rights in South Africa and replaces them with a system of
      state licensing based on the patrimony over minerals, as is the case with the
      bulk of minerals in other established mining jurisdictions such as Canada and
      Australia. On May 3, 2004 the Department of Minerals and Energy (the “DME”)
      announced that it was seeking legal advice on the implications of the Act in
      light of South Africa’s international agreements.





Holders
      of old-order mining rights, of the type held by Kwagga (Proprietary), are
      required within five years of the May 1, 2004 commencement date, to apply for
      conversion of their old order rights into new order mining rights in terms
      of
      the Act. Old order mining rights will continue to be in force during the
      conversion period, subject to the terms and conditions under which they were
      granted. Once a new order right is granted, security of tenure is guaranteed
      for
      a period of up to 30 years, subject to ongoing compliance with the conditions
      under which the right has been granted. A mining right may be renewed for
      further periods of up to 30 years at a time, subject to fulfillment of certain
      conditions.





In
      order
      to be able to convert old order mining rights to new order mining rights, a
      holder must primarily: apply in the correct form for conversion at the relevant
      office of the DME before May 1, 2009; submit a prescribed social and labor
      plan;
      and undertake to “give effect to” the black economic empowerment and
      socio-economic objectives of the Act (the “Objectives”) and set out the manner
      in which it will give effect to the Objectives.





In
      general, the Objectives are embodied in the broad-based socio-economic
      empowerment charter which was signed by the DME, the South African Chamber
      of
      Mines and others on October 11, 2002 (the “Charter”), and which was followed on
      February 18, 2003 by the release of the appendix to the Charter known as the
      Scorecard. The Charter and Scorecard have since been published for information
      during August 2004. The Charter is based on seven key principles, two of which
      are focused on ownership targets for historically disadvantaged South Africans
      (“HDSAs”) and beneficiation, and five of which are operationally oriented and
      cover areas focused on improving conditions for HDSAs.




Regarding
      ownership targets, the Charter (as read with the Scorecard) requires each mining
      company to achieve the following HDSA ownership targets for the purpose of
      qualifying for the grant of new order rights: (i) 15% ownership by HDSAs in
      that
      company or its attributable units of production by May 1, 2009, and (ii) 26%
      ownership by HDSAs in that company or its attributable units of production
      by
      May 1, 2014. The Charter states that such transfers must take place in a
      transparent manner and for fair market value. It also states that the South
      African mining industry will assist HDSA companies in securing financing to
      fund
      HDSA participation, in the amount of ZAR100 billion within the first five years.
      The Charter does not specify the nature of the assistance to be
      provided.




At
      present, the financial implications and market-related risks brought about
      by
      the various pieces of the new legislation (including the Mineral and Petroleum
      Royalty Bill) cannot be assessed. It is not clear when the next draft of the
      Mineral and Petroleum Royalty Bill will be released. The Government has,
      however, indicated that no royalties will be payable until 2009. Material
      impacts on both the ownership structure and operational costs at the FSC Project
      are possible. Kwagga (Barbados) and AfriOre continue to explore their options
      and monitor the implementation and interpretation of the Act and the progress
      of
      other ancillary regulations and legislation.


23


**DUE
      TO LEGISLATION ENACTED IN SOUTH AFRICA, KWAGGA (PROPRIETY) WILL BE REQUIRED
      TO
      SELL A SUBSTANTIAL AMOUNT OF ITS STOCK, WHICH WOULD DILUTE OUR EQUITY POSITION
      IN KWAGGA.**





Kwagga
      (Barbados) and AfriOre are actively engaged in discussions with DME officials
      and others to ensure that Kwagga (Barbados) fulfills the ownership requirements
      for conversion under the Act; however, the finalization of the means of
      achieving that end will require greater certainty regarding the operation and
      interpretation of the Act and pending related legislation.





In
      accordance with the Broad-Based Socio-Economic Empowerment Charter for the
      South
      African mining industry and under the terms of the new shareholders agreement,
      as amended August 30, 2004, Kwagga (Propriety) will offer up to 28 percent
      of
      its capital stock at fair market value to a HDSA investor group. Any investment
      by such a group will dilute our ownership of Kwagga (Propriety) and,
      accordingly, the right to receive profits generated from the FSC Project, if
      any.





**CERTAIN
      OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST WITH REGARD TO CERTAIN
      TRANSACTIONS THAT WE MAY ENTER.**





H.
      Vance
      White, who is the Chairman of our Board of Directors, is both an officer and
      director of Hawk Uranium Inc., (f/k/a Hawk Precious Minerals Inc.) a junior
      exploration company, and a partner in Brooks & White Associates, an
      unincorporated Canadian partnership that provides management, financial and
      investor relations services to junior mineral resource exploration companies.
      Additionally, Norman D. Lowenthal was the Chairman of SSC Mandarin Financial
      Services Ltd for the period 2001 to 2007, and continues to serve as a director
      of SSC-Sino Gold Consulting Co Ltd, which is an advisor to the Government
      operated association of China gold mines via the China Gold Bureau. As a result
      of their positions with other companies that may, from time to time, compete
      with us, Messrs. White and Lowenthal may have conflicts of interest to the
      extent the other companies with which they are affiliated acquire rights in
      exploration projects that may be suitable for us to acquire.





**THE
      OPERATORS OF OUR EXPLORATION PROJECTS MAY NOT HAVE ALL NECESSARY TITLE TO THE
      MINING EXPLORATION RIGHTS.**





We
      expect
      that Kwagga (Barbados), Kwagga (Propriety), Hunter Gold and Journey will have
      good and proper right, title and interest in and to the respective mining
      exploration rights they currently own, have optioned or intend to acquire and
      that they will explore and develop. Such rights may be subject to prior
      unregistered agreements or interests or undetected claims or interests, which
      could materially impair our ability to participate in the development of our
      projects. The failure to comply with all applicable laws and regulations,
      including failure to pay taxes and to carry out and file assessment work, may
      invalidate title to portions of the properties where the exploration rights
      are
      held.





**WE
      WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE TO FUND OUR CURRENT EXPLORATION
      PROJECT INTERESTS OR TO ACQUIRE INTERESTS IN OTHER EXPLORATION
      PROJECTS.**





Substantial
      additional financing will be needed in order to fund beyond the current
      exploration programs underway or to potentially complete further acquisitions
      or
      complete other acquisitions or joint ventures with other business models. Our
      means of acquiring investment capital is limited to private equity and debt
      transactions. We have no significant sources of currently available funds to
      engage in additional exploration and development. Without significant additional
      capital, we will be unable to fund exploration of our current property interests
      or acquire interests in other mineral exploration projects that may become
      available. See “—Risks Relating to Our Financial Condition – We Currently
      Do Not Have Enough Cash to Fund Operations During 2008.”


24


**OUR
      PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN MINERAL PRICES.**





The
      profitability of the exploration projects could be significantly affected by
      changes in the market price of minerals. Demand for minerals can be influenced
      by economic conditions, attractiveness as an investment vehicle and the relative
      strength of the US Dollar and local investment currencies. Other factors include
      the level of interest rates, exchange rates, inflation and political stability.
      The aggregate effect of these factors is impossible to predict with accuracy.





In
      particular, mine production and the willingness of third parties such as central
      banks to sell or lease gold affects the supply of gold. Worldwide production
      levels also affect mineral prices. In addition, the price of gold has on
      occasion been subject to very rapid short-term changes due to speculative
      activities. Fluctuations in gold prices may adversely affect the value of any
      discoveries made at the sites with which we are involved.





**MINERAL
      EXPLORATION IS EXTREMELY COMPETITIVE.**





There
      is
      a limited supply of desirable mineral properties available for claim staking,
      lease or other acquisition in the areas where we contemplate participating
      in
      exploration activities. We compete with numerous other companies and
      individuals, including competitors with greater financial, technical and other
      resources than we possess, in the search for and the acquisition of attractive
      mineral properties. Our ability to acquire properties in the future will depend
      not only on our ability to develop our present properties, but also on our
      ability to select and acquire suitable producing properties or prospects for
      future mineral exploration. We may not be able to compete successfully with
      our
      competitors in acquiring such properties or prospects.





**THE
      NATURE OF MINERAL EXPLORATION IS INHERENTLY RISKY.**





The
      exploration for and development of mineral deposits involves significant
      financial risks, which even experience and knowledge may not eliminate,
      regardless of the amount of careful evaluation applied to the process. Very
      few
      properties are ultimately developed into producing mines .
      Whether
      a gold or other mineral deposit will become commercially viable depends on
      a
      number of factors, including:





·
            financing
                costs;


·
            proximity
                to infrastructure;


·
            the
                particular attributes of the deposit, such as its size and grade;
                and


·
            governmental
                regulations, including regulations relating to prices, taxes, royalties,
                infrastructure, land use, importing and exporting and environmental
                protection.





The
      outcome of any of these factors may prevent us from receiving an adequate return
      on invested capital.





**ITEM
      2. PROPERTIES**





Our
      corporate office is located at 900 IDS Center, 80 South Eighth Street,
      Minneapolis, Minnesota 55402-8773, in which we occupy approximately 160 square
      feet of office space, together with the use of related adjacent common areas,
      pursuant to a lease agreement that expires May 31, 2008, which requires monthly
      payments of $1,261. We believe that our current facilities are adequate for
      our
      current needs.





**ITEM
      3. LEGAL PROCEEDINGS**





None. ****


25


**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.


26


**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR COMMON EQUITY AND RELATED SHAREHOLDER
                MATTERS**





**PRICE
      RANGE OF COMMON STOCK**





Our
      common stock is quoted on the OTCBB under the symbol “WITM.” As of March 31,
      2008 the last closing bid price of our common stock as reported by OTCBB was
      $0.25 per share. The following table sets forth for the periods indicated the
      range of high and low bid prices of our common stock:





**Period**
            
            **High**
            
            **Low**Quarter
                Ended March 31, 2006
            
            $
            0.46
            
            $
            0.20Quarter
                Ended June 30, 2006
            
            $
            0.29
            
            $
            0.14Quarter
                Ended September 30, 2006
            
            $
            0.20
            
            $
            0.10Quarter
                Ended December 31, 2006
            
            $
            0.27
            
            $
            0.08Quarter
                Ended March 31, 2007
            
            $
            1.26
            
            $
            0.26Quarter
                Ended June 30, 2007
            
            $
            1.27
            
            $
            0.76Quarter
                Ended September 30, 2007
            
            $
            0.98
            
            $
            0.21Quarter
                Ended December 31, 2007
            
            $
            0.30
            
            $
            0.15





The
      quotations from the OTCBB above reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not reflect actual
      transactions.





**RECORD
      HOLDERS**





As
      of
      March 24, 2008, there were approximately 210 record holders of our common stock,
      excluding shareholders holding securities in “street name.” Based on securities
      position listings, we believe that there are approximately 4,400 beneficial
      holders of our common stock in “street name.”





**DIVIDENDS**





We
      have
      never paid cash dividends on our common stock and have no present intention
      of
      doing so in the foreseeable future. Rather, we intend to retain all earnings
      to
      provide for the growth of our Company. Payment of cash dividends in the future,
      if any, will depend, among other things, upon our future earnings, requirements
      for capital improvements and financial condition.





**RECENT
      SALES OF UNREGISTERED SECURITIES**





In
      addition to the sales of unregistered securities that we reported in Quarterly
      Reports on Form 10-QSB and Current Reports on Form 8-K during fiscal year 2007,
      we made the following sales of unregistered securities during the quarter ended
      December 31, 2007.





In
      October 2007, we executed an amendment to the joint venture agreement with
      Journey Resources Corporation relating to our option to earn the final undivided
      25 percent interest in the Vianey Mine, whereby we issued 1,600,000 shares
      of
      our unregistered common stock to Journey in lieu of the $400,000 payment due
      under the agreement.





From
      September to December 2007, through a private placement of units of our
      unregistered securities (each unit consisting of one share of our unregistered
      common stock and a five-year warrant to purchase one share of common stock
      at an
      exercise price of $0.25 per share) we sold 2,400,000 units at a price per unit
      of $0.25, resulting in gross proceeds of $600,000 less offering costs of
      $30,000.


27


In
      November and December 2007, through a private placement of our securities,
      we
      sold 2,193,334 shares of our common stock at $0.15 per share, resulting in
      gross
      proceeds of $329,000 less offering costs of $15,465.





In
      December 2007, we entered into agreements with two consultants for services
      in
      public and investor relations and issued an aggregate of 550,000 shares of
      our
      unregistered common stock.





Except
      as
      noted above, sales of the securities identified above were made pursuant to
      privately negotiated transactions that did not involve a public offering of
      securities and, accordingly, we believe that these transactions were exempt
      from
      the registration requirements of the Securities Act pursuant to Section 4(2)
      thereof and rules promulgated thereunder. Based on representations from the
      above-referenced investors, we have determined that such investors were
“accredited investors” (as defined by Rule 501 under the Securities Act) and
      were acquiring the shares for investment and not distribution, and that they
      could bear the risks of the investment and could hold the securities for an
      indefinite period of time. The investors received written disclosures that
      the
      securities had not been registered under the Securities Act and that any resale
      must be made pursuant to a registration or an available exemption from such
      registration. All of the foregoing securities are deemed restricted securities
      for purposes of the Securities Act.





**ITEM
              6.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





The
      following discussion should be read in conjunction with the Financial Statements
      of the Company and notes thereto included elsewhere in this Annual Report.
      See
“—Financial Statements.”





Readers
      are cautioned that the following discussion contains certain forward-looking
      statements and should be read in conjunction with the “Special Note Regarding
      Forward-Looking Statements” appearing at the beginning of this Annual
      Report.





As
      of
      December 31, 2007, we hold interests in mineral exploration projects in South
      Africa, Colorado and Mexico.





We
      hold a
      35 percent equity interest in Kwagga Gold (Barbados) Limited (“Kwagga
      Barbados”), which, through its wholly owned subsidiary Kwagga Gold (Proprietary)
      Limited, holds mineral exploration rights in South Africa. This project is
      referred to as the “FSC Project” and is located adjacent to the historic
      Witwatersrand Basin. The last completed drillhole on the FSC project occurred
      in
      2005. In February 2007, Lonmin Plc announced that it acquired all of the equity
      interest of AfriOre International (Barbados) Limited (“AfriOre”). AfriOre is the
      holder of the other 65 percent of Kwagga Barbados. On December 12, 2007, we
      entered into an agreement whereby we may acquire all of AfriOre’s interest of
      Kwagga Barbados. Lonmin Plc is a primary producer of Platinum Group Metals
      (PGMs) with its headquarters in London. See the “Our Exploration Projects”
section appearing elsewhere in this Annual Report for information about events
      that have occurred subsequent to December 31, 2007.




On
      September 20, 2006, we executed a formal asset purchase agreement relating
      to
      the purchase of assets of the Hunter Gold  Mining
      Corporation, a corporation incorporated under the laws of British Columbia,
      Canada, which assets includes the Bates-Hunter Mine, a prior producing gold
      mine
      from the 1860’s until the 1930’s located in Central City, Colorado. On January
      28, 2008, we entered into a fourth amendment to the asset purchase agreement,
      whereby, among other modifications or amendments, the closing date is now June
      30, 2008 and the entire purchase price is to be paid in a promissory note
      to be issued at closing. We are continuing with a defined work program, which
      includes dewatering the existing mine shaft and performing a surface drilling
      program.





On
      October 31, 2007, we executed an amendment to the formal joint venture agreement
      with Journey Resources Corp., a corporation formed under the laws of the
      Province of British Columbia (“Journey”) and Minerales Jazz S.A. De C.V., a
      corporation duly organized pursuant to the laws of Mexico and a wholly owned
      subsidiary of Journey. Pursuant to the terms of the amendment, we own a 50
      percent undivided beneficial interest in “located mineral claims” in the
      property known as the Vianey Mine Concession located in the State of Guerrero,
      Mexico (“Vianey”). In addition to located mineral claims, our interest includes
      all surface rights, personal property and permits associated with Vianey and
      all
      other claims, leases and interests in minerals acquired within two kilometers
      of
      the external perimeter of Vianey.  All work being performed at Vianey is
      under the supervision of Journey, which mainly consists of cleaning the site
      for
      a future work program.


28





On
      April
      20, 2007, we entered into an Agreement and Plan of Merger and Reorganization,
      as
      amended on May 21, 2007 (as amended, the “Merger Agreement”) with Easyknit
      Enterprises Holdings Limited, a Bermuda corporation with its principal place
      of
      business in Hong Kong and listed on the Hong Kong Stock Exchange (SEHK: 0616),
      and Race Merger, Inc., a Minnesota corporation and wholly owned subsidiary
      of
      Easyknit (collectively “Easyknit”). On August 15, 2007, we filed a declaratory
      judgment action in the District Court in the Fourth Judicial District of the
      State of Minnesota against Easyknit pursuant to which we sought a declaration
      by
      the court that we were entitled to terminate the Merger Agreement. On
      October 15, 2007, Easyknit filed a counterclaim against us, seeking our
      payment of a termination fee. On November 1, 2007, we formally terminated the
      merger transaction. On December 18, 2007, the parties entered into a Settlement
      Agreement and General Release whereby all parties agreed to dismiss with
      prejudice and release each other from all claims, counterclaims and defenses
      that arose out of the Merger Agreement.





**RESULTS
      OF OPERATIONS**





**FOR
      THE YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR ENDED DECEMBER 31,
      2006.**





Revenues





We
      had no
      revenues from continuing operations for the years December 31, 2007 and 2006.
      Furthermore, we do not anticipate having any future revenues until an economic
      mineral deposit is discovered or unless we make further acquisitions or complete
      other mergers or joint ventures with business models that produce such results.





Operating
      Expenses





General
      and administrative expenses were $6,953,591 for 2007 as compared to $4,963,481
      for 2006. After we completed the sale of our Hosted Solutions and Accounting
      Software Businesses, we became an exploratory stage company effective May 1,
      2003, and all prior operating expenses associated with these two business models
      are included in discontinued operations. Of the $6,953,591 recorded for general
      and administrative expenses in 2007, approximately $2,251,780 relates to our
      due
      diligence processes on China mining properties (travel and visa requirements,
      site visits and significant costs with consultants), $2,353,642 relates to
      public relations services, consulting fees and shareowner services and
      $1,299,005 relates to non-cash charges for options, warrants and common stock
      issuances and/or modifications. Of the $4,963,481 recorded for 2006,
      approximately $3,996,000 relates to public relations services, consulting fees
      and shareowner services. We anticipate that our operating expenses will increase
      over the next fiscal year due to our continued plans for
      exploration.





Exploration
      expenses relate to the issuance of stock and warrants for acquiring mining
      rights, and expenditures being reported on the work-in-process from the project
      operators. We anticipate the rate of spending for fiscal 2008 exploration
      expenses should increase.


29





Components
      of exploration expenses are as follows:




Years
                Ended December 31,
            
            May 1, 2003
              (inception) toDecember
                31,2007
            
            2006
            
            2007Expenditures
                related to Bates-Hunter
            
            $
            1,938,387
            
            $
            1,235,965
            
            $
            3,660,507Expenditures
                related to Vianey
            
            
            136,820
            
            
            508,286
            
            
            645,106Expenditures
                related to other projects
            
            
            89,701
            
            
            —
            
            
            309,524Issuance
                of shares and warrant expense (1)
            
            
            590,583
            
            
            213,978
            
            
            909,314Issuance
                of shares to Hawk USA
            
            
            —
            
            
            —
            
            
            4,841,290$
            2,755,491
            
            $
            1,958,229
            
            $
            10,365,741





(1)
      During 2007, we issued 2,100,000 shares of common stock valued at $560,000
      to
      obtain the rights to the Vianey project and 100,000 shares of common stock
      valued at $27,000 to a vendor for extending payment terms for drilling services
      and recorded $3,583 in warrant expense for Bates-Hunter consultants. During
      2006, we issued 650,000 shares of common stock valued at $192,000 to obtain
      the
      rights to the Vianey project, 40,000 shares of common stock valued at $12,800
      to
      obtain the rights to the MacNugget Claims and warrants to purchase 150,000
      shares of common stock to two Bates-Hunter consultants and recorded $9,178
      in
      warrant expense.





Depreciation
      for 2007 was $16,050 as compared to $21,214 for 2006, which represents
      straight-line depreciation of fixed assets purchased for work being performed
      at
      the Bates-Hunter. We will recognize depreciation expense in 2008 similar to
      those of 2007 on the fixed assets already purchased and possibly will be adding
      additional assets to the Company.





We
      have
      incurred costs for the uncompleted and terminated merger with Easyknit totaling
      $1,238,619 for the year ended December 31, 2007. These costs represent fees
      charged by our Hong Kong and US attorneys, various Hong Kong advisors and other
      litigation costs.





For
      the
      year ended December 31, 2006, we recorded a loss on impairment of Kwagga
      (Barbados) of $120,803. That amount represented the ending cash balance in
      Kwagga (Barbados) as reported at December 31, 2005. During 2006, we determined
      that our initial $2.1 million investment in Kwagga (Barbados) represented a
      passive equity position in a non-controlled foreign corporation and we lacked
      significant influence to control the operational and financial decisions of
      Kwagga (Barbados). Accordingly, we decided that the appropriate accounting
      for
      this investment was on the cost method of accounting. This investment was
      determined to not meet the guidance under the equity method of accounting
      according to Accounting Principles Board No. 18, “The Equity Method of
      Accounting for Investments in Common Stock.” In order for us to initiate a new
      drillhole at the FSC Project, we were required to provide $500,000 to engage
      the
      driller and since our resources for this project would not allow for that amount
      of capital, we re-evaluated that those funds may never be utilized and therefore
      took a permanent write down of the remaining funds.




We
      have
      recorded gains of $95,820 on the sale of two mining projects for the year ended
      December 31, 2007. (1) In June 2003, we acquired the Holdsworth Project from
      Hawk Uranium Inc. (f/k/a Hawk Precious Minerals Inc.) (“Hawk”), which we
      assigned its historical value of $17,235, which was expensed as exploration
      activities. The rights we held allowed us to explore only through a limited
      surface depth, with the remaining below-surface rights belonging to Hawk. We
      had
      not expended any funds on Holdsworth since its acquisition. On September 19,
      2007, we sold all of our rights and claims in Holdsworth back to Hawk for
      $50,000 Canadian (US$47,260). (2) In June 2006, we acquired a 50 percent
      interest in five mining claims (the “MacNugget Claims”) held by Hawk in
      consideration of the issuance of 40,000 shares of our common stock (valued
      at
      $12,800) to Hawk, which was expensed as exploration activities. Then in November
      2006, we both sold a portion of the MacNugget Claims to MacDonald Mines
      Exploration Ltd., (“MacDonald”), whereby MacDonald became a 51 percent owner in
      the MacNugget Claims and the operator of the project. Other than the common
      stock issued to Hawk in June 2006, we had not incurred any other expenses
      related to this project. On October 1, 2007, we transferred our 24.5% interest
      in the MacNugget Claims to both Hawk and MacDonald for an aggregate sale price
      of $50,000 Canadian (US$48,560).


30


Other
      Income and Expenses





Our
      other
      income and expense consists of interest income, interest expense and gains
      from
      sale of marketable investment. Net other income for 2007 was $70,117, which
      included a $65,580 gain from sale of marketable investments and $4,537 of
      interest income, and $31,122 of interest income for 2006. Interest expense
      for
      2007 was $1,061,383 and for 2006 it was $1,858,082. Interest
      expense relates primarily to interest on significant new debt, extensions to
      debt agreements and additional rights granted to the promissory note
      holders. Components of interest expense for 2007 were: $529,294 in principal loan
      interest and $532,089 representing the amortization of original issue discount
      relating to the issuance of common stock and warrants in connection with notes
      payable (as described below). Components of interest expense for 2006 were:
      $40,450 in principal loan interest and $1,817,632 representing the amortization
      of original issue discount relating to the issuance of common stock and warrants
      in connection with notes payable.





**LIQUIDITY
      AND CAPITAL RESOURCES**





Liquidity
      is a measure of an entity’s ability to secure enough cash to meet its
      contractual and operating needs as they arise. We have funded our operations
      and
      satisfied our capital requirements primarily through the sale of securities
      and
      debt financing. We do not anticipate generating sufficient net positive cash
      flows from our operations to fund the next twelve months. For the years ended
      December 31, 2007 and 2006, we had net cash used in operating activities of
      $6,666,746 and $3,567,731, respectively.




We
      had a
      working capital deficit of $11,393,352 at December 31, 2007, compared to $40,333
      at December 31, 2006. Cash and equivalents were $130,481 at December 31, 2007,
      representing an increase of $44,571 from the cash and equivalents of $85,910
      at
      December 31, 2006.





As
      of
      April 1, 2006, we had promissory notes in the aggregate principal amount of
      $1,100,000 payable to three lenders. We paid the obligations under the three
      promissory notes in May 2006. The notes had accumulated an aggregate of $69,239
      in interest payable. We paid $3,353 in cash to one note holder and paid the
      remaining $65,886 by the issuance of 329,432 shares (valued at $0.20 per share)
      of our common stock.





On
      April
      28, 2006, we completed a round of financing through the exercise of issued
      and
      outstanding warrants (the “Exercise Offer”) to certain warrant holders who
      qualified as accredited investors. For each two warrants exercised by a warrant
      holder, the warrant holder received two shares of common stock and a new
      three-year warrant (Class C Redeemable Warrant) with an exercise price of $0.50
      per share. Certain of the warrant holders were offered a limited time reduction
      of the exercise price (in which the warrants were originally price from $5.50
      to
      $0.75 per share) of $0.25 per share.  We accepted subscription
      agreements to exercise 15,577,401 common stock purchase warrants and received
      approximately $3.84 million in cash (which includes $307,600 for which we
      accepted, in lieu of cash, a secured promissory note, which accrued interest
      of
      five percent per annum, and was paid in February 2007 along with the $10,323
      of
      interest receivable). No placement agents or broker/dealers were utilized.





On
      June
      28, 2006, we entered into an option agreement with Journey Resources
      Corporation, a corporation duly organized pursuant to the laws of the Providence
      of British Columbia, and its wholly-owned subsidiary Minerales Jazz S.A. de
      C.V., a corporation duly organized pursuant to the laws of Mexico (collectively
      as “Journey”), to acquire an undivided 50 percent interest in certain mining
      claims comprising the Vianey Mine concession (“Vianey”) located in Guerrero
      State, Mexico. On December 18, 2006, we entered into a formal joint venture
      agreement with Journey and through the issuance of 500,000 shares of our common
      stock and a $500,000 payment, we acquired a 25 percent interest in Vianey.
      In
      January 2007, we paid $100,000 of an additional $500,000 required payment and
      issued an additional 500,000 shares of our common stock in partial payment
      to
      acquire an additional 25 percent interest in Vianey. On October 31, 2007, we
      executed an amendment to the formal joint venture agreement with Journey,
      whereby we issued 1,600,000 shares of our unregistered common stock to Journey
      in lieu of the final $400,000 payment due under the amendment.


31


On
      September 20, 2006, we executed a formal asset purchase agreement (as amended
      on
      October 31, 2006, March 1, 2007 and May 31, 2007) to purchase the Bates-Hunter
      Mine on different economic terms than previously agreed upon. The formal asset
      purchase agreement is by and among Wits Basin and Hunter Gold Mining
      Corporation, Hunter Gold Mining Inc., Central City Consolidated Mining Corp.,
      a
      Colorado corporation, and George Otten, a resident of Colorado (collectively
      the
“Sellers”). On January 28, 2008, the parties to the formal asset purchase
      agreement entered into a fourth amendment relating to the modification or
      amendment of certain terms, including without limitation: (i) the incorporation
      of an acknowledgement of the parties that we have incurred approximately
      $2,500,000 in due diligence costs; (ii) an amendment to change the closing
      date
      of the formal asset purchase agreement from March 31, 2008 to June 30, 2008
      (and
      to change the date upon which either party may terminate the agreement in the
      event a closing has not occurred as of such date to June 30, 2008); and (iii)
      an
      amendment to the purchase price to provide that all payments of principal and
      interest under such note can be deferred until the earlier of production on
      the
      property or January 2010. At the closing, we shall deliver to the
      Sellers **** (i)
      a
      note payable to Sellers in the original principal amount of $6,750,000 Canadian
      Dollars, (ii) a deed of trust with George Otten as trustee for the Sellers
      securing the note payable, and (iii) 3,620,000 shares of our unregistered and
      restricted $.01 par value common stock. Furthermore, we would still be required
      to provide the following additional compensation: (i) a warrant to purchase
      up
      to 100,000 shares of our common stock, at an exercise price equal to the average
      prior 30-day sale price of our common stock; (ii) a two percent net smelter
      return royalty on all future production, with no limit; (iii) a one percent
      net
      smelter return royalty (up to a maximum payment of $1,500,000); and (iv) a
      fee
      of $300,000, payable in cash or common stock at our election.




By
      December 31, 2006, we had received subscription exercise forms with a total
      value of $515,000 from 11 shareholders for the exercise of 2,060,000 stock
      purchase warrants, all with an exercise price of $0.25 per share, issued in
      connection with our private placement of 16,600,000 units in January 2005.
      All
      of these shareholders paid their respective subscription subsequent to December
      31, 2006.




In
      December 2006, a consultant exercised a stock option held into shares of common
      stock. The 200,000 stock option was issued in October 2005 with an exercise
      price of $0.15 per share. The $30,000 cash exercise amount was paid in February
      2007.





Under
      the
      provisions of the Loan Agreement with Pacific Dawn Capital, Pacific Dawn Capital
      had the right to purchase shares of our common stock (based on a $0.20 per
      share
      purchase price) in an amount equal to the principal balance of the promissory
      note issued pursuant to the Loan Agreement. Of the available right to purchase
      option of 2,000,000 shares available, Pacific Dawn purchased 1,000,000 shares
      of
      common stock in December 2006. Pacific Dawn provided $120,000 in December 2006
      and $80,000 in January 2007.





During
      2006, other investors exercised on an aggregate of 1,475,000 stock purchase
      warrants with an exercise price of $0.25 per share and received 1,475,000 shares
      of common stock. We received $368,750 in proceeds.





In
      January 2007, we issued 300,000 shares of our unregistered common stock to
      Relevant Marketing, LLC, a consultant, who exercised a stock purchase warrant
      (issued in April 2005 with an original exercise price of $0.50 per share),
      subsequently re-priced to $0.15 per share. Relevant Marketing paid $15,000
      in
      March 2007 and the remaining balance in November 2007.  The president of
      Relevant Marketing is the step-daughter of our CEO, Stephen D.
      King.





In
      February 2007, in consideration of a $700,000 loan from Andrew Green, we issued
      a promissory note in the principal amount of $700,000 to Mr. Green. The
      promissory note had a maturity date of March 31, 2007, and bore interest at
      a
      rate of 6% per annum. The promissory note was paid in full by March 29, 2007
      along with the accrued interest of $3,912. Under the terms of the promissory
      note, and as additional consideration for the loan, the Company reduced the
      exercise price of certain warrants to purchase an aggregate of 3,550,000 shares
      of our common stock from $0.12 to $0.09125 and extended the expiration date
      of
      an outstanding right to purchase up to 3,000,000 shares of the Company’s common
      stock at a price per share of $0.20 from March 31, 2007 to December 31,
      2007.


32


In
      January 2007, we issued to Andrew Green, a significant shareholder, 1,250,000
      shares of common stock pursuant to his exercise of stock purchase warrants
      with
      an exercise price of $0.12 per share and we received $150,000 in proceeds.
      In
      March 2007, we issued to Mr. Green (1) 3,550,000 shares of common stock pursuant
      to his exercise of his remaining outstanding warrants with the reduced exercise
      price of $0.09125 per share and we received $323,937 in proceeds and (2)
      1,450,000 shares of common stock pursuant to his exercise of his
      right-to-purchase option at $0.20 per share and we further received $290,000
      in
      proceeds. In June 2007, we issued to Mr. Green 1,550,000 shares of common stock
      pursuant to his exercise of his right-to-purchase option at $0.20 per share
      and
      we received $310,000 in proceeds.





In
      April
      2007, in consideration of a $625,000 loan from Andrew Green, we issued a
      promissory note to Mr. Green in the principal amount of $625,000. The promissory
      note had a maturity date of May 28, 2007, and bore simple interest at a rate
      of
      12% per annum and was repaid in June 2007.




On
      April
      10, 2007, we entered into a Convertible Note Purchase Agreement with China
      Gold,
      LLC, a Kansas limited liability company (“China Gold”), whereby we agreed to
      offer and sell, and China Gold agreed to purchase, an aggregate of $12,000,000
      in convertible secured promissory notes over 12 months, with up to an additional
      $13,000,000 in convertible secured promissory notes to be issued at the
      discretion of both parties. The issuance and sale of convertible secured
      promissory notes under the Convertible Note Purchase Agreement was subject
      to
      certain conditions, including Wits Basin having a sufficient number of
      authorized and unissued shares available to permit the conversion of the
      outstanding promissory notes issued to China Gold. Promissory notes issued
      under
      the Convertible Note Purchase Agreement had a five-year term, bear interest
      at a
      rate of 8.25%, and are convertible at the option of the holder, after the
      expiration of 120 days from the date of issue, into shares of our common stock
      at a conversion price of $1.00 per share. The notes are also subject to
      automatic conversion in certain conditions. On April 10, 2007, we issued and
      sold the initial promissory note under the Convertible Note Purchase Agreement
      in the aggregate amount of $3,000,000, with a purchase discount of $60,000
      (“Note 1”). Additionally, on May 7, 2007, we offered and sold to China Gold an
      additional convertible secured promissory note under the Convertible Note
      Purchase Agreement in the aggregate amount of $2,000,000, with a purchase
      discount of $40,000 (“Note 2”).





On
      June
      19, 2007, we entered into an Amendment to Convertible Note Purchase Agreement
      with China Gold, whereby the parties amended the terms of the Convertible Note
      Purchase Agreement discussed above (as amended, the “Purchase Agreement”) to (a)
      clarify that the obligations of the parties under the Purchase Agreement to
      sell
      and purchase convertible notes under the Purchase Agreement shall terminate
      at
      the earlier of (i) April 10, 2008 and (ii) the date of effectiveness of our
      proposed merger with Easyknit, (b) to provide us an opportunity to prepay our
      obligations under notes issued under the Purchase Agreement, in which case
      China
      Gold would be entitled to a purchase right to acquire shares of our common
      stock
      at equivalent terms to its rights to otherwise convert the notes issued under
      the Purchase Agreement, and (c) extend certain registration rights of China
      Gold.





Furthermore,
      on June 19, 2007, we sold China Gold an additional note under the Purchase
      Agreement in the principal amount of $4,000,000, with a purchase discount of
      $80,000 (“Note 3”). Note 3 bears interest at a rate of 8.25% per annum, and is
      convertible at the option of China Gold into shares of our common stock at
      a
      conversion price of $1.00 per share, subject to anti-dilutive adjustments.
      Additionally, the outstanding balance on the Notes was subject to automatic
      conversion in the event we completed the proposed merger transaction with
      Easyknit. Note 3 is payable in full at the earlier of maturity or at such time
      that we and our subsidiaries receive financing in the aggregate amount of at
      least $50,000,000 from a third party. The maturity date of Note 3 was September
      17, 2007, but was subject to extensions upon our request for additional periods
      of thirty (30) days, but in no event later than December 31, 2007, provided
      that
      at the time of each such extension we and Easyknit had not terminated the
      proposed merger. In the event the merger was terminated after September 17,
      2007, our obligations under Note 3 were to become due and payable upon the
      expiration of fifteen (15) days following demand of China Gold. We also provided
      China Gold demand and piggyback registration rights relating to the resale
      of
      the shares of common stock issuable upon conversion of Note 3.


33


On
      July
      9, 2007, we sold China Gold an additional note under the Purchase Agreement
      in
      the principal amount of $800,000, with a purchase discount of $16,000 (“Note 4”
and collectively with Note 1, Note 2 and Note 3, the “Notes”). Note 4 bears
      interest at a rate of 8.25% per annum, and is convertible at the option of
      China
      Gold into shares of our common stock at a conversion price of $1.00 per share,
      subject to anti-dilutive adjustments. Additionally, the outstanding balance
      on
      Note 4 was subject to automatic conversion in the event we completed the
      proposed merger transaction with Easyknit. Note 4 is payable in full at the
      earlier of maturity or at such time that we and our subsidiaries receive
      financing in the aggregate amount of at least $50,000,000 from a third party.
      The maturity date of Note 4 was October 7, 2007, but was subject to extensions
      upon our request for additional periods of thirty (30) days, but in no event
      later than December 31, 2007, provided that at the time of each such extension
      we and Easyknit had not terminated the proposed merger. In the event the merger
      was terminated after October 7, 2007, our obligations under Note 4 were to
      become due and payable upon the expiration of fifteen (15) days following demand
      of China Gold. We also provided China Gold demand and piggyback registration
      rights relating to the resale of the shares of common stock issuable upon
      conversion of Note 4.




In
      the
      event the Company and/or any of our majority-owned subsidiaries receive, at
      a
      time when any Notes remain outstanding, cumulative financing in the form of
      cash
      or immediately available funds from one or more third parties in the aggregate
      amount of at least $50,000,000 from and after June 19, 2007, (a “Substantial
      Financing”), the
      outstanding Notes issued under the Purchase Agreement shall
      be
      due and payable out
      of
      the proceeds from such Substantial Financing. In the event such prepayment
      of
      any or all outstanding Notes, the respective Holder of each such prepaid Note
      shall be entitled to receive from the Company, from the date of such prepayment
      until the earlier of (i) immediately prior to the proposed Easyknit merger
      or
      (ii) five (5) years from the date of such prepayment, at a purchase price of
      $1.00 per share, the right to purchase the number of shares of our common stock
      equal to the amount prepaid on such Note divided by $1.00.





On
      October 31, 2007, we entered into a letter agreement with China Gold whereby
      the
      parties amended the maturity date on each of the Notes to February 29, 2008.
      As
      additional consideration, we agreed to reduce the conversion price applicable
      to
      the Notes from $1.00 to $0.50 per share and to reduce the purchase price
      applicable to certain purchase rights of China Gold under the Notes from $1.00
      to $0.50 per share. The letter agreement further gives us an option to obtain,
      at our sole discretion, an extension of the maturity dates of the respective
      Notes to May 31, 2008 in consideration for a further reduction in the conversion
      price applicable to the Notes and the purchase price relating to purchase rights
      provided under the Notes from $0.50 to $0.25 per share. We exercised our right
      to extend the maturity date to May 31, 2008 by giving notice to China Gold
      in
      February 2008.





As
      of
      December 31, 2007, we have issued an aggregate of $9,800,000 of Notes under
      the
      Purchase Agreement and have received net proceeds of $9,604,000, less $196,000
      paid to an affiliate of China Gold in the form of a loan discount fee. We also
      agreed to pay $40,000 in accountable expenses of China Gold with respect to
      Notes issued under the Purchase Agreement.





On
      April
      20, 2007, we entered into the Merger Agreement with Easyknit and Race Merger,
      Inc. On August 15, 2007, we filed a declaratory judgment action in the
      District Court in the Fourth Judicial District of the State of Minnesota against
      Easyknit pursuant to which we were seeking a declaration by the court that
      we
      were entitled to terminate the Merger Agreement. On October 15, 2007, Easyknit
      filed a counterclaim against us, seeking our payment of a termination fee.
      On
      November 1, 2007, the Company terminated the merger transaction. On December
      18,
      2007, the parties entered into a Settlement Agreement and General Release
      whereby all parties agreed to dismiss with prejudice and release each other
      from
      all claims, counterclaims and defenses that arose out of the Merger Agreement.
      We have recorded $1,238,619 of direct merger expenses for the year ended
      December 31, 2007.


34


On
      August
      1, 2007, we paid the purchase price of 10,000 Hong Kong dollars (US$1,317)
      for
      each of the following corporations: China Global Mining Resources
      Limited, a British Virgin Islands corporation (“CGMR”) and a Hong
      Kong shell corporation with the same name. CGMR has entered into two agreements:
      one to acquire Shanxi Hua Ze Nickel Smelting Co. and one to acquire Nanjing
      Sudan Mining Co. Ltd. Prior to our acquisition of CGMR in 2007, we loaned CGMR
      $2 million that was used toward the acquisition of Shanxi Hua Ze and $5 million
      that was used toward the acquisition of Nanjing Sudan Mining Co. As of December
      31, 2007, we hold only the right or option to acquire and do not hold title
      to
      any of these properties, therefore, we have recorded these as advanced payments
      until such time as we complete a transaction. In the event we determine
      that such a transaction will not occur, we will seek to collect our advance
      payments or consider available alternatives.





In
      September 2007, in consideration of a new $100,000 loan from Pacific Dawn,
      we
      issued a promissory note in the principal amount of $100,000 to Pacific Dawn.
      The promissory note had an original maturity date of October 21, 2007, and
      bears
      interest at a rate of 5% per annum. Under the terms of the promissory note
      and
      as additional consideration for the loan, we reduced the exercise price of
      a
      right-to-purchase option held by Pacific Dawn of up to 1,000,000 shares of
      our
      common stock from $0.20 to $0.15 per share and extended the expiration date
      from
      December 31, 2007 to December 31, 2008 of said rights. In December 2007, we
      memorialized an extension to the maturity date from October 21, 2007 to January
      21, 2008 and provided a further price reduction of his right-to-purchase from
      $0.15 to $0.10 per share.





In
      September 2007, in consideration of an unsecured $50,000 loan from Mrs. Nancy
      White, a Canadian citizen and the mother of H. Vance White, our Chairman, we
      issued a promissory note in the principal amount of $50,000 to Mrs. White.
      The
      promissory note had an original maturity date of December 21 2007, and bears
      interest at a rate of 10% per annum. In December 2007, we negotiated an
      extension on the maturity date to be January 11, 2008. Under the terms of the
      promissory note and as additional consideration for the initial loan, we issued
      a warrant to purchase up to 100,000 shares of our common stock, with an original
      exercise price of $0.27 per share, to expire October 3, 2009. As additional
      consideration for the extension of the maturity date, we agreed to a reduction
      in the exercise price of the warrant from $0.27 per share to $0.20 per
      share.





From
      September to December 2007, through a private placement of units of our
      unregistered securities (each unit consisting of one share of our unregistered
      common stock and a five-year warrant to purchase one share of common stock
      at an
      exercise price of $0.25 per share) we sold 2,400,000 units at a price per unit
      of $0.25, resulting in gross proceeds of $600,000.





In
      November 2007, in consideration of an unsecured loan from Shirley Co. LLC,
      a
      Colorado limited liability company, we received net proceeds of $100,000 and
      issued a promissory note in the principal amount of $110,000 to Shirley Co.
      The
      promissory note has a maturity date of February 11, 2008, and bears interest
      at
      a rate of 10% per annum. Under the terms of the promissory note and as
      additional consideration for the loan, we issued a warrant to purchase up to
      100,000 shares of our common stock at $0.20 per share with an expiration date
      of
      November 12, 2009.





In
      November and December 2007, through a private placement of our securities,
      we
      sold 2,193,334 shares of our common stock at $0.15 per share, resulting in
      gross
      proceeds of $329,001.





In
      December 2007, in consideration of an unsecured loan from an unaffiliated third
      party, we received net proceeds of $100,000 and issued a convertible promissory
      note in the principal amount of $110,000. The promissory note has a maturity
      date of March 31, 2008, and bears interest at a rate of 10% per annum.
      Furthermore, the note holder has the right to convert any portion of the
      principal or interest of the outstanding note into shares of our common stock
      based on a conversion rate equal to $0.20 per share.





During
      fiscal 2007, we issued 3,791,460 shares of our unregistered common stock
      pursuant to the exercise of warrants as follows:


(1)
            Two
                lenders exercised warrants into 1,800,000 shares with exercise prices
                of
                $0.12 and $0.40 per share related to promissory notes and we received
                gross proceeds of $440,000;


(2)
            An
                individual private placement holder exercised his Class C Redeemable
                Warrant into 62,500 shares at $0.50 per share and we received
                $31,250;


35


(3)
            We
                issued 1,200,000 shares of our unregistered common stock to William
                Green,
                upon his exercise of a warrant at $0.12 per share, for proceeds of
                $144,000. Mr. Green is our President of Asia Operations and the brother
                of
                Andrew Green;


(4)
            Four
                consultants exercised warrants into an aggregate of 330,000 shares
                with a
                range of exercise prices from $0.12 to $0.30 per share and we received
                gross proceeds of $83,600; and


(5)
            We
                issued 398,960 shares to two consultants, who, pursuant to a cashless
                exercise clause, surrendered 251,040 of the available shares to pay
                for
                the exercise, with a range of exercise prices from $0.25 to $0.75
                per
                share.





We
      have
      recorded gains of $95,820 on the sale of two mining properties for the year
      ended December 31, 2007. (1) In June 2003, we acquired the Holdsworth Project
      from Hawk Uranium Inc. (f/k/a Hawk Precious Minerals Inc.) (“Hawk”), which we
      assigned its historical value of $17,235. The rights we held allowed us to
      explore only through a limited surface depth, with the remaining below-surface
      rights belonging to Hawk. We had not expended any funds on the Holdsworth since
      its acquisition. On September 19, 2007, we sold all of our rights and claims
      in
      the Holdsworth back to Hawk for $50,000 Canadian (US$47,260). (2) In June 2006,
      we acquired a 50 percent interest in five mining claims (the “MacNugget Claims”)
      held by Hawk in consideration of the issuance of 40,000 shares of our common
      stock (valued at $12,800) to Hawk. Then in November 2006, we both sold a portion
      of the MacNugget Claims to MacDonald Mines Exploration Ltd., (“MacDonald”),
      whereby MacDonald became a 51 percent owner in the MacNugget Claims and the
      operator of the project. Other than the common stock issued to Hawk in June
      2006, we had not incurred any other expenses related to this project. On October
      1, 2007, we transferred our 24.5% interest in the MacNugget Claims to both
      Hawk
      and MacDonald for an aggregate sale price of $50,000 Canadian (US$48,560).
      Vance
      White, our Chairman, is the President of Hawk.





Summary





Our
      existing sources of liquidity will not provide cash to fund operations for
      the
      next twelve months. As of the date of this Annual Report, we have estimated
      our
      cash needs over the next twelve months to be approximately $14,000,000 (which
      includes approximately $10,700,000 due under our short-term convertible
      promissory notes assuming some or all of such notes are not converted into
      equity prior to maturity, $1,000,000 for Bates-Hunter, $400,000 for Vianey
      and
      $150,000 for FSC). Additionally, should any projects or mergers be completed
      during 2008, additional funds will be required. We will continue our attempt
      to
      raise additional capital. Some of the possibilities available to us are through
      private equity transactions, to develop a credit facility with a lender or
      the
      exercise of options and warrants. However, such additional capital may not
      be
      available to us at acceptable terms or at all. In the event that we are unable
      to obtain additional capital, we would be forced to reduce operating
      expenditures and/or cease operations altogether.





Foreign
      Exchange Exposure





Since
      our
      entrance into the metals and minerals arena, we have had very limited dealings
      with foreign currency transactions, even though most of our transactions have
      been with foreign entities. Most of the funds requests have required US Dollar
      denominations. Even though we may not record direct losses due to our dealings
      with market risk, we have an associated reduction in the productivity of our
      assets.





**ITEM
              7.**
            **FINANCIAL
                STATEMENTS**





The
      Financial Statements of the Company, the accompanying notes and the report
      of
      independent registered public accounting firm are included as part of this
      Form
      10-KSB beginning on page F-1, which follows the signature page.


36


**ITEM
              8.**
            **DISAGREEMENTS
                WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None.




**ITEM8A(T).**
            **CONTROLS
                AND PROCEDURES**





(a)
      Evaluation of Disclosure Controls and Procedures.





We
      maintain disclosure controls and procedures designed to provide reasonable
      assurance that information required to be disclosed in our reports filed
      pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), is recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s rules and forms, and that
      such information is accumulated and communicated to our management, including
      our Chief Executive Officer and Chief Financial Officer as appropriate, to
      allow
      timely decisions regarding required disclosure. A control system, no matter
      how
      well conceived and operated, can provide only reasonable, not absolute,
      assurance the objectives of the control system are met.





As
      of
      December 31, 2007, our management, with the participation of our Chief Executive
      Officer and Chief Financial Officer, carried out an evaluation of the
      effectiveness of our disclosure controls and procedures as such term is defined
      in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that the Company’s
      disclosure controls and procedures were not effective as of December 31, 2007,
      because of the identification of the material weaknesses in internal control
      over financial reporting described below. Notwithstanding the material
      weaknesses that existed as of December 31, 2007, our Chief Executive Officer
      and
      Chief Financial Officer have each concluded that the consolidated financial
      statements included in this Annual Report on Form 10-KSB present fairly, in
      all
      material respects, the financial position, results of operations and cash flows
      of the Company and its subsidiaries in conformity with accounting principles
      generally accepted in the United States of America (“GAAP”). We are currently
      taking steps to remediate such material weakness as described
      below.





Since
      we
      do not have a formal audit committee, our Board of Directors oversees the
      responsibilities of the audit committee. The Board is fully aware that there
      is
      lack of segregation of duties due to the small number of employees dealing
      with
      general administrative and financial matters.





(b)
      Management’s Report on Internal Control over Financial Reporting.





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is a
      set of processes designed by, or under the supervision of, a company’s principal
      executive and principal financial officers, to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with GAAP and includes
      those policies and procedures that:





·
            Pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect our transactions and dispositions of our
                assets;





·
            Provide
                reasonable assurance our transactions are recorded as necessary to
                permit
                preparation of our financial statements in accordance with GAAP,
                and that
                receipts and expenditures are being made only in accordance with
                authorizations of our management and directors;
                and





·
            Provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial
                statement.


37


Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. It should be noted that any system of internal
      control, however well designed and operated, can provide only reasonable, and
      not absolute, assurance that the objectives of the system will be met. Also,
      projections of any evaluation of effectiveness to future periods are subject
      to
      the risk that controls may become inadequate because of changes in conditions,
      or that the degree of compliance with the policies or procedures may
      deteriorate.





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we conducted an assessment of
      the
      effectiveness of our internal control over financial reporting based on criteria
      established in “Internal Control-Integrated Framework” issued by the Committee
      of Sponsoring Organizations of the Treadway Commission (COSO), as of December
      31, 2007.





A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of annual or interim financial statements will not be prevented
      or
      detected. In connection with the assessment described above, management
      identified the following control deficiencies that represent material weaknesses
      at December 31, 2007:





·
            Management
                did not design and maintain effective control relating to the quarter
                end
                closing and financial reporting process due to lack of evidence of
                review
                surrounding various account reconciliations and properly evidenced
                journal
                entries. Due to the Company’s limited resources, the Company has
                insufficient personnel resources and technical accounting and reporting
                expertise to properly address all of the accounting matters inherent
                in
                the Company’s global financial transactions. Numerous GAAP audit
                adjustments were made to the financial statements for the year ended
                December 31, 2007. Additionally, the Company does not have a formal
                audit
                committee with a financial expert, and thus the Company lacks the
                board
                oversight role within the financial reporting
                process.





·
            The
                Company’s small size and “one-person” office prohibits the segregation of
                duties and the timely review of financial data and banking information.
                The Company has very limited review procedures in
                place.





·
            During
                2007, the Company entered into several material acquisition transactions
                without timely obtaining the appropriate signed agreements, stock
                certificates and board approval prior to releasing cash funds called
                for
                by the transaction.





As
      a
      result of these material weaknesses described above, management has concluded
      that, as of December 31, 2007, our internal control over financial reporting
      was
      not effective based on the criteria in “Internal Control-Integrated Framework”
issued by COSO.





We
      intend
      to initiate measures to remediate the identified material weaknesses through
      various means including, but not necessarily limited to, the
      following:





·
            Applying
                a more rigorous review of the quarterly close processes to ensure
                that the
                performance of the control is evidenced through appropriate documentation
                which is consistently maintained.





·
            Evaluating
                necessary changes to our process of advancing funds relating to purchase
                agreements and the establishment of a formalized process to ensure
                key
                controls are identified, control design is appropriate, and appropriate
                evidentiary documentation is maintained throughout the
                process.





·
            Establishing
                a more formal review process by the board members to reduce the risk
                of
                fraud and financial misstatements.





During
      the fiscal quarter ended December 31, 2007, there was no change in our internal
      control over financial reporting (as defined in Rule 13a-15(f) under the
      Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial
      reporting.


38


This
      Annual Report does not include an attestation report of our independent
      registered public accounting firm regarding internal control over financial
      reporting. Management’s report was not subject to attestation by our independent
      registered public accounting firm pursuant to temporary rules of the SEC that
      permit us to provide only management’s report in this annual
      report.





**ITEM8B.**
            **OTHER
                INFORMATION**





None.


39




**PART
      III**





**ITEM 9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
                COMPANY**





Set
      forth
      below are the names of all directors and executive officers of the Company,
      their respective ages and all positions and offices with the Company held by
      each person as of March 28, 2008:





Name
            
            Age
            
            Positions
                with the CompanyH.
                Vance White
            
            63
            
            ChairmanStephen
                D. King
            
            51
            
            Chief
                Executive Officer and DirectorDr.
                Clyde L. Smith
            
            71
            
            PresidentMark
                D. Dacko
            
            56
            
            Chief
                Financial Officer, Secretary and DirectorNorman
                D. Lowenthal
            
            70
            
            DirectorJoseph
                Mancuso
            
            66
            
            Director





H.
      Vance
      White was elected Chairman of the Board effective September 15, 2006 and has
      served as a director since June 26, 2003. Mr. White also served as our Chief
      Executive Officer from June 26, 2003 to September 15, 2006. Since January 2003,
      Mr. White has also served as President of Hawk Precious Minerals Inc., a Toronto
      based mineral exploration company. Since April 2001, Mr. White has also been
      a
      partner in Brooks & White Associates, an unincorporated partnership
      providing management, financial and/or investor relations services to junior
      companies primarily in the natural resources sector. Since 1989 to present,
      Mr.
      White serves on the board of directors of Kalahari Resources Inc., a
      publicly-held Junior Canadian Resources company. Since September 1979 to
      present, Mr. White has served as President and Director of Brewis & White
      Limited, a private family investment company. From January 1991 to July 1998
      he
      was the Franchisee for Alarm Force Industries in the Collingwood, Grey-Bruce
      Regions of Central Ontario, a provider of residential and commercial monitored
      alarm systems monitoring. From August 1993 to March 1995, Mr. White was the
      President of Amarado Resources Inc., a predecessor company of AfriOre Limited
      and a Director from August 1993 to June 1997. From September 1983 to September
      1995, Mr. White was President of Mid-North Engineering Services, a company
      providing services and financing to the junior mining sector prior to which
      he
      was President and Director of the Dickenson Group of Companies, gold producers
      in the Red Lake gold mining camp of North Western Ontario, Canada. Mr. White
      has
      been involved with the natural resource industry for over 30 years and intends
      to devote approximately 40-50 percent of his time to the affairs of our
      Company.





Stephen
      D. King was appointed Chief Executive Officer effective September 15, 2006
      and
      has served as a director since July 8, 2004. Mr. King also served as our
      President from May 15, 2006 to September 15, 2006. Since October 2000, Mr.
      King
      has served as President of SDK Investments, Inc., a private investment firm
      located in Atlanta, Georgia specializing in corporate finance and investing.
      He
      has served as President, from January 1994 until July 2000 and Chairman until
      October 2000, of PopMail.com, inc., a publicly traded company with businesses
      in
      the hospitality and Internet sectors. Mr. King has no prior experience in the
      precious mineral exploration or mining industry.





Dr.
      Clyde
      L. Smith was appointed President effective September 15, 2006. Since 1970,
      Dr.
      Smith has been sole owner and operator of CL Smith Consultants, an independent
      geological consulting firm. Dr. Smith holds a B.A. from Carleton College, a
      M.Sc. from the University of British Columbia, and a Ph.D. from the University
      of Idaho. He is a registered Professional Engineer with the Association of
      Professional Engineers and Geoscientists of British Columbia. Dr. Smith has
      founded or co-founded five exploration companies and is responsible for the
      discovery of four deposits: the Jason lead-zinc-silver deposit, Yukon Territory,
      Canada; the Santa Fe gold deposit, Nevada; the North Lake gold deposit,
      Saskatchewan, Canada; and the Solidaridad gold-silver-copper deposit,
      Mexico.





Mark
      D.
      Dacko was appointed to our board of directors on June 26, 2003. Since March
      2003, Mr. Dacko has also served as Chief Financial Officer and Secretary and
      he
      served as our Controller from February 2001 to March 2003. Prior to joining
      the
      Company, Mr. Dacko was Controller for PopMail.com, inc., a publicly held
      email/marketing services and restaurant company, from January 1999 until January
      2001. From November 1994 to December 1998, Mr. Dacko was Controller for
      Woodroast Systems, Inc., a publicly held restaurant company based in
      Minneapolis, Minnesota. Mr. Dacko has no prior experience in the precious
      mineral exploration or mining industry.


40





Norman
      D.
      Lowenthal was appointed to our board of directors on September 4, 2003. Mr.
      Lowenthal is the past Chairman of the Johannesburg Stock Exchange, for the
      years
      1997 to 2000. Since April 1997 to the present, he has served as a member of
      the
      Securities Regulation Panel of South Africa. Mr. Lowenthal was the Chairman
      of
      SSC Mandarin Financial Services Ltd for the period 2001 to 2007. Mr.
      Lowenthal continues to serve as a director of SSC-Sino Gold Consulting Co Ltd,
      which is an advisor to the Government operated association of China gold mines
      via the China Gold Bureau, and of SSC Mandarin Africa (Proprietary) Limited.
      We
      have entered into agreements with SSC Mandarin Financial, SSC-Siro Gold
      Consulting and SSC Mandarin Africa, as well as SSC Mandarin Group Limited,
      an
      affiliate of all three entities, during 2007. Mr. Lowenthal is as Vice-Chairman
      of the Taylor Companies, a private bank located in Washington, D.C., serving
      since 2002. Mr. Lowenthal has been involved in the mining industry since 1960.
      He has served as chairman of several listed companies in this field, including
      in particular, gold and diamond producing companies.





Joseph
      Mancuso was appointed to our board of directors on September 22, 2007. In 1977,
      Mr. Mancuso founded The Chief Executive Officers Club, Inc., a non-profit
      organization with chapters in the United States and abroad that is dedicated
      to
      the continuing education of entrepreneurial managers, and has served as its
      Chief Executive Officer since that time. In 1977, Mr. Mancuso also founded
      the
      Center for Entrepreneurial Management, Inc., a non-profit organization. Mr.
      Mancuso received a Ph. D. in Educational Administration from Boston University,
      an MBA from the Harvard Business School, and a degree in Electrical Engineering
      degree from Worcester Polytechnic Institute in Massachusetts.





There
      is
      no family relationship between any director and executive officer of the
      Company.





**CODE
      OF ETHICS**





The
      Company has adopted a Code of Ethics that applies to its principal executive
      officer, principal financial officer, controller and persons performing similar
      functions. The Code of Ethics is available on its website at www.witsbasin.com.
      If we make any substantive amendments to the Code of Ethics or grant any waiver
      from a provision of the Code of Ethics to an executive officer or director,
      we
      will promptly disclose the nature of the amendment or waiver by filing with
      the
      SEC a current report on Form 8-K.





**SECTION
      16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
      directors and persons who own more than 10% of our outstanding common stock
      to
      file reports of ownership and changes in ownership with the Securities and
      Exchange Commission and to furnish copies of these reports to us. Based solely
      on a review of the copies of the Forms 3, 4 and 5 and amendments that we have
      received, we believe that all such forms required during 2006 and 2007 were
      filed on a timely basis, except for the following:





Joseph
      Mancuso filed a Form 4 on October 2, 2007 relating to a transaction on September
      24, 2007.





**AUDIT
      COMMITTEE AND FINANCIAL EXPERT**





The
      Company does not have a formal audit committee. Our Board of Directors as a
      group acts in the capacity as the audit committee. There were no audit committee
      meetings held during 200 7.
      Financial information relating to quarterly reports was disseminated to all
      board members for review. The audited financial statements for the years ended
      December 31, 2007 and 2006 were provided to each member of the board in which
      any concerns by the members were directed to management and the auditors.


41





**ITEM
      10. EXECUTIVE COMPENSATION**





**SUMMARY
      COMPENSATION TABLE**





The
      following table summarizes the compensation earned for services rendered in
      all
      capacities by our chief executive officer and the other highest-paid executive
      officers whose total compensation for the fiscal years ended December 31, 2007
      and 2006 that exceeded $100,000. No other executive officer of ours received
      compensation in excess of $100,000 during fiscal year 2007.





Annual
                CompensationOption
            
            All
                OtherName
                and Principal Position
            
            Year
            
            Salary
            
            Bonus
            
            Awards(1)
            
            Compensation
            
            Total
                ($)Chief
                Executive OfficerStephen
                D. King(2)
            
            
            2007
            
            $
            60,000
            
            $
            —
            
            $
            420,345
            
            $
            171,745
            (3)
            $
            652,0902006
            
            $
            37,500
            
            $
            75,000
            (4)
            $
            —
            
            $
            192,183
            (5)
            $
            304,683PresidentDr.
                Clyde Smith(6)
            
            
            2007
            
            $
            120,000
            
            $
            —
            
            $
            122,874
            
            $
            —
            
            $
            242,8742006
            
            $
            35,000
            
            $
            —
            
            $
            122,873
            
            $
            —
            
            $
            157,873Chief
                Financial OfficerMark
                D. Dacko(7)
            
            
            2007
            
            $
            120,000
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            120,0002006
            
            $
            120,000
            
            $
            10,000
            
            $
            —
            
            $
            —
            
            $
            130,000President
                of Asia OperationsWilliam
                Green(8)
            
            
            2007
            
            $
            103,288
            
            $
            —
            
            $
            601,922
            
            $
            —
            
            $
            705,2102006
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —




(1)
            Amount
                reflects the dollar amount recognized for financial statement reporting
                purposes for the fiscal years ended December 31, 2007 and 2006 in
                accordance with SFAS 123(R) of stock option awards, and may include
                amounts from awards granted in and prior to fiscal years 2007 and
                2006.
                Assumptions used in the calculation of this amount for employees
                are
                identified in Note 13 to our annual financial statements for the
                years
                ended December 31, 2007 and 2006 included elsewhere in this Annual
                Report.


(2)
            Mr.
                King was appointed Chief Executive Officer effective September 15,
                2006
                and served as our President from May 15, 2006 to September 15,
                2006.


(3)
            Includes
                the following compensation: (i) $51,745 in reimbursements to Mr.
                King for
                administrative assistance obtained by Mr. King for his Atlanta office;
                and
                (iii) $120,000 paid to Corporate Resource Management, Inc., an entity
                wholly owned by Deb King, the spouse of Mr. King, pursuant to a consulting
                agreement with Corporate Resource Management relating to its services
                to
                the Company to provide investment banking services relating to the
                purchase and sale of mining related
                assets.


(4)
            Relating
                to a one-time bonus paid to Mr. King for his efforts relating to
                our April
                2006 warrant call.


(5)
            Includes
                the following compensation: (i) $80,000 received pursuant to a consulting
                agreement dated January 27, 2005 with Mr. King for consulting services
                relating to strategic merger, acquisition and corporate advice with
                regard
                to the Company’s Colorado mining opportunities, (ii) $37,183 in
                reimbursements to Mr. King for administrative assistance obtained
                by Mr.
                King for his Atlanta office; and (iii) $75,000 paid to Corporate
                Resource
                Management, Inc., an entity wholly owned by Deb King, the spouse
                of
                Stephen D. King, pursuant to a consulting agreement with Corporate
                Resource Management relating to its services to the Company to provide
                investment banking services relating to the purchase and sale of
                mining
                related assets.


42


(6)
            Mr.
                Smith was appointed President effective September 15,
                2006


(7)
            Mr.
                Dacko was appointed Chief Financial Officer and Secretary effective
                June
                26, 2003.


(8)
            Mr.
                Green was hired as our President of Asia Operations effective February
                19,
                2007.




**EXECUTIVE** **EMPLOYMENT
      AGREEMENTS**





Pursuant
      to a letter agreement with Dr. Smith dated September 14, 2006 and amended
      September 21, 2006, Dr. Smith is entitled to receive an
      annual
      salary of $120,000. Additionally, Dr. Smith was granted an option to purchase
      up
      to 1,500,000 shares of common stock (the “Standard Options”) and an option to
      purchase up to 500,000 shares of common stock (the “Incentive Based Stock
      Options”), each an exercise price of $0.31 per share (the closing sale price of
      our common stock as reported on the OTCBB on the day of grant). The Standard
      Options vest as follows: 300,000 vested immediately and 300,000 vest each
      anniversary thereafter (September 15, 2007, 2008, 2009 and 2010). The Incentive
      Based Stock Options vest in equal parts annually over five years, with the
      first
      100,000 vesting on September 15, 2007), subject to the Company’s satisfaction of
      certain criteria set by our Chief Executive Officer relating to our exploration
      projects. The agreement with Dr. Smith is at-will, and does not have any term
      of
      employment.





Mr.
      King,
      our Chief Executive Officer is entitled to a monthly salary of $5,000. On March
      9, 2007, we issued a ten-year option to Stephen D. King to purchase 3,000,000
      shares of the Company’s common stock at an exercise price of $1.02 per share,
      the fair market value of the Company’s common stock on the date of grant, in
      consideration for his services as Chief Executive Officer. The option vests
      in
      six equal annual installments commencing on the first anniversary of the grant
      date. The option shall be accelerated upon the completion of each material
      acquisition of mining related assets by the Company, with the then last
      remaining annual installment to immediately vest, at such time the board of
      directors of the Company, in its sole discretion, to determine whether an
      acquisition is “material.” In the event the Company attempts to obtain listing
      of its common stock on a stock exchange and such stock exchange, as a condition
      to listing, requires that the Company reduce the number of shares issued to
      Mr.
      King pursuant to the option, the Company shall be entitled to reduce the number
      of unvested shares available to Mr. King as necessary to obtain listing on
      that
      exchange.





Mr .
      Dacko,
      our Chief Financial Officer, is entitled to a monthly salary of $10,000. Neither
      Mr. King nor Mr. Dacko have a formal employment agreement with the
      Company.





On
      February 19, 2007, we entered into an employment agreement with William Green
      as
      President of Asia Operations. The term of the agreement is for a period of
      three
      years, and is terminable by either party with one year written notice. Under
      the
      agreement, Mr. Green is entitled to a base salary of $10,000 per month and
      standard benefits provided by the Company to its management team. Additionally,
      the Company has agreed to pay Mr. Green an advance of $10,000 and reimburse
      him
      for certain expenses in excess of such amount relating to his relocation to
      Hong
      Kong. The Company further issued Mr. Green a ten-year option to purchase up
      to
      2,500,000 shares of the Company’s common stock at an exercise price of $0.43 per
      share, the fair market value of the Company’s common stock on the date of grant.
      The option shall vest in three installments as follows: (i) with respect to
      1,000,000 shares vested in February 2007; (ii) with respect to an additional
      500,000 shares on (A) the earliest of the first anniversary of the effective
      date or (B) the achievement of a milestone, as determined by the board of
      directors or (C) the termination of Mr. Green’s employment; and (iii) with
      respect to the remaining 1,000,000 shares on the earlier of (a) the time the
      Company achieves certain performance criteria to be established by the Company’s
      board of directors or (b) the third anniversary of the option grant. The
      employment agreement further provides standard confidentiality and one-year
      non-competition and non-solicitation provisions. Mr. Green is a sibling of
      Andrew Green, a significant shareholder of the Company.





Except
      as
      reported above, we have not
      entered into any severance or change of control provisions with any of our
      executive officers.


43


**OUTSTANDING
      EQUITY AWARDS TABLE**





No
      options were exercised by our named executive officers during the year ended
      December 31, 2007. The following table sets forth information of outstanding
      option awards held by named executive officers as of December 31,
      2007.





**Name**
            
            **Number
                of**
              **Securities**
              **Underlying
                Unexercised**
              **Options**
              **Exercisable**
            
            **Number
                of Securities Underlying Unexercised Options**
              **Unexercisable**
            
            **Equity Incentive
                Plan Awards; Number of Securities Underlying Unexercised Unearned
                Options**
            
            **Option**
              **Exercise**
              **Price**
            
            **Option**
              **Exercise**
              **Date**Stephen
                King
            
            
            250,000
            (1)
            
            —
            
            
            —
            
            $
            0.40
            
            
            07/08/14250,000
            (2)
            
            —
            
            
            —
            
            $
            0.26
            
            
            05/02/15200,000
            (3)
            
            —
            
            
            —
            
            $
            0.15
            
            
            10/20/15—
            
            
            3,000,000
            (4)
            
            —
            
            $
            1.02
            
            
            03/09/17Clyde
                Smith
            
            
            600,000
            (5)
            
            900,000
            (5)
            
            —
            
            $
            0.31
            
            
            09/15/16100,000
            (6)
            
            —
            
            
            400,000
            (6)
            $
            0.31
            
            
            09/15/16Mark
                Dacko
            
            
            40,000
            (7)
            
            —
            
            
            —
            
            $
            2.75
            
            
            02/05/11350,000
            (8)
            
            —
            
            
            —
            
            $
            0.56
            
            
            07/09/13125,000
            (9)
            
            —
            
            
            —
            
            $
            0.23
            
            
            12/29/14250,000
            (2)
            
            —
            
            
            —
            
            $
            0.26
            
            
            05/02/15200,000
            (3)
            
            —
            
            
            —
            
            $
            0.15
            
            
            10/20/15William
                Green
            
            
            1,500,000
            (10)
            
            —
            
            
            1,000,000
            (10)
            $
            0.43
            
            
            02/19/17





(1)
            Options
                vested in portions of 125,000, 62,500 and 62,500 on July 8, 2004,
                January
                8, 2005 and July 8, 2005,
                respectively.


(2)
            Options
                vested in their entirety on May 2, 2005.


(3)
            Options
                vested in their entirety on October 20, 2005.


(4)
            Options
                vest in equal portions of 500,000 annually commencing on March 9,
                2008.
                The last outstanding tranche to vest shall accelerate immediately
                upon
                completion of each material acquisition of mining related assets
                by the
                Company, as determined in the discretion of the Board of Directors.


(5)
            Options
                vest in equal portions of 300,000 annually commencing on September
                15,
                2007.


(6)
            Options
                vest in equal portions of 100,000 annually commencing on September
                15,
                2007 subject to the achievement of objective criteria determined
                by the
                Board of Directors from time to time with respect to each year prior
                to
                the commencement of such year.


(7)
            Options
                vested in portions of 10,000, 15,000 and 15,000 on May 5, 2001, February
                5, 2002 and February 5, 2003, respectively.


(8)
            Options
                vested in portions of 175,000, 87,500 and 87,500 on July 9, 2003,
                January
                9, 2004 and July 9, 2004.


(9)
            Options
                were granted by our Board of Directors for Mr. Dacko’s voluntary deferment
                of salary for a six-month period during 2004. Options vested December
                29,
                2004.


(10)
            Options
                vest in three installments as follows: (i) with respect to 1,000,000
                shares at such time Mr. Green relocates to Hong Kong and establishes
                a
                home office for the Company in Hong Kong; (ii) with respect to an
                additional 500,000 shares on (A) the earlier of the first anniversary
                of
                the effective date or (B) the achievement of a milestone, as determined
                by
                the Board of Directors or (C) the termination of Executive's employment
                with the Company; and (iii) with respect to the remaining 1,000,000
                shares
                on the earlier of (A) the time the Company achieves certain performance
                criteria to be established by the Board of Directors or (B) the third
                anniversary of the option grant. Options relating to (i) and (ii)
                have
                vested as of December 31, 2007.




44


**DIRECTOR
      COMPENSATION**





Non-employee
      directors of our Company are reimbursed for all reasonable and necessary costs
      and expenses incurred in connection with their duties as directors. In addition,
      we issue options to our directors as determined from time to time by the Board.
      In 2007, no option awards were issued to our non-employee directors, except
      as
      set forth below.





On
      January 27, 2005, the Board authorized a consulting agreement with Mr. King.
      The
      agreement was for consulting services to provide strategic merger, acquisition
      and corporate advice with regard to the Company’s Colorado mining opportunities,
      as well as other consulting services. Under this agreement, we paid Mr. King
      $80,000 in fiscal 2006. This agreement was terminated by the parties upon Mr.
      King’s appointment as our President in May 2006.





In
      consideration of Mr. Mancuso’s agreement to serve on the board, and his future
      service on the board, on September 24, 2007, we awarded Mr. Mancuso a ten-year
      option to purchase up to 2,000,000 shares of our common stock at an exercise
      price of $0.30 per share, the closing price of our common stock on the prior
      business day. The option vests in equal biannual installments of 250,000 shares
      each over four years, the first installment vested March 24, 2008.





Members
      of our board who are also employees of ours receive no compensation for their
      services as directors.




The
        following table sets forth the compensation earned by each of our non-employee
        directors for the year ended December 31, 2007:
 
 **Name**
              
              **Option
                  Awards**
              
              
              
              **Total**H.
                  Vance White
              
              $
              --
              
              
              
              
              $
              --Norman
                  D. Lowenthal
              
              $
              --
              
              
              
              
              $
              --Joseph
                  Mancuso
              
              $
              14,809
              
              
              (1
              )
              $
              14,809
 
 (1)  Amount
        reflects the dollar amount recognized for financial statement reporting purposes
        for the fiscal year ended December 31, 2007 in accordance with SFAS 123(R)
        of
        stock option awards, relating to stock option grants to purchase shares of
        our
        common stock, at an exercise price equal to the fair market value of our
        common
        stock on the dates of grant, to Mr. Mancuso, a non-employee director.
        Assumptions used in the calculation of this amount for non-employees are
        identified in Note 13 to our financial statements for the year ended December
        31, 2007 included elsewhere in this Annual Report.


45


**ITEM 11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                SHAREHOLDER MATTERS**





The
      following information sets forth the number and percentage of shares of the
      Company’s common stock owned beneficially, as of March 31, 2008, by any person,
      who is known to the Company to be the beneficial owner of five percent or more
      of the Company’s common stock, and, in addition, by each director and each
      executive officer of the Company, and by all directors and executive officers
      as
      a group. Information as to beneficial ownership is based upon statements
      furnished to the Company by such persons.





**Name
                and Address**
            
            **Amount of Beneficial Ownership (1)**
            
            **Percentage of Class**H.
                Vance White
            
            
            4,932,500
            (2)
            
            4.180
                South 8thStreet, Suite 900Minneapolis,
                MN 55402Stephen
                D. King
            
            
            3,200,000
            (3)
            
            2.680
                South 8thStreet, Suite 900Minneapolis,
                MN 55402Mark
                D. Dacko
            
            
            965,000
            (4)
            
            *80
                South 8thStreet, Suite 900Minneapolis,
                MN 55402Clyde
                L. Smith
            
            
            700,000
            (4)
            
            *80
                South 8thStreet, Suite 900Minneapolis,
                MN 55402Norman
                D. Lowenthal
            
            
            1,000,000
            (5)
            
            *Private
                Bag X60Saxonwold,
                2132 South AfricaJoseph
                Mancuso
            
            
            277,200
            (6)
            
            *80
                South 8thStreet, Suite 900Minneapolis,
                MN 55402William
                Green
            
            
            2,200,000
            (7)
            
            1.880
                South 8thStreet, Suite 900Minneapolis,
                MN 55402All
                directors and officers as a group (7 persons)
            
            
            13,274,700
            
            
            10.3Andrew
                Green
            
            
            6,550,000
            
            
            5.55101
                Creek RoadCincinnati,
                OH 45242Thomas
                Brazil
            
            
            8,185,367
            (8)
            
            6.717
                Bayns Hill RoadBoxford,
                MA 01921Pacific
                Dawn Capital
            
            
            7,169,976
            (9)
            
            5.82566
                W. Woodland DriveAnaheim,
                CA 92801







*
            represents
                less than 1 percent.





(1)
            Except
                as otherwise indicated, each person possesses sole voting and investment
                power with respect to the shares shown as beneficially
                owned.





(2)
            Includes
                1,450,000 shares issuable upon the exercise of options that are currently
                exercisable. Also includes 3,242,500 shares held by Hawk Uranium
                USA, Inc.
                (f/k/a Hawk Precious Minerals USA, Inc.), a wholly owned subsidiary
                of
                Hawk Uranium Inc. (f/k/a Hawk Precious Minerals Inc.), and 240,000
                shares
                held by Hawk Uranium Inc., of which Mr. White is a director and executive
                officer.


46




(3)
            Includes
                1,200,000 shares issuable upon the exercise of options that are currently
                exercisable and 2,000,000 shares issuable upon exercise of certain
                warrants.
                All options and warrants have been transferred into the name of Mr.
                King’s
                spouse.





(4)
            Represents
                shares issuable upon the exercise of options that are currently
                exercisable.





(5)
            Includes
                700,000 shares issuable upon the exercise of options that are currently
                exercisable and 100,000 shares issuable upon exercise of certain
                warrants.





(6)
            Includes
                250,000 shares issuable upon the exercise of options that are currently
                exercisable. All options have been transferred into the name of Mr.
                Mancuso’s daughter.





(7)
            Includes
                1,000,000 shares issuable upon the exercise of an option that is
                currently
                exercisable.





(8)
            Includes
                2,918,000 shares issuable upon the exercise of certain warrants (held
                in
                the name of Boston Financial Partners, Inc., which is owned and controlled
                by Mr. Brazil). Also includes 91,500 shares owned by Mr. Brazil’s spouse.
                Mr. Brazil disclaims beneficial ownership of the shares held by his
                wife.





(9)
            Includes
                (i) 2,666,667 shares issuable upon the exercise of certain warrants
                and
                (ii) 1,000,000 shares of common stock Pacific has the right to acquire
                at
                $0.10 per share on or prior to December 31, 2008, pursuant to the
                terms of
                previous financing agreements.




**EQUITY
      COMPENSATION**





The
      following table sets forth certain information regarding equity compensation
      plan information as of December 31, 2007:




Number
                of securitiesremaining available forfuture
                issuance underequity
                compensationNumber of securities to
            
            Weighted-average
            
            plans
                (excludingbe issued upon exercise
            
            exercise price of
            
            securities
                reflected inPlan
                category
            
            of
                outstanding options
            
            outstanding options
            
            column
                (a))(a)
            
            
            
            (b)Equity
                compensationplans
                approved bysecurity
                holders (1)
            
            
            4,759,500
            
            $
            0.42
            
            
            1,814,000Equity
                compensationplans
                not approved bysecurity
                holders
            
            
            8,900,000
            
            $
            0.58
            
            
            2,850,000
            (1)Total
            
            
            13,659,500
            
            $
            0.53
            
            
            4,664,000





(1)
      Includes 450,000 securities approved by written board action on July 8, 2003
      from the 2000 Director Stock Option Plan (a Plan previously approved by
      shareholders) but not yet presented for shareholder approval.


47





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





The
      following describes certain relationships and related transactions that we
      have
      with persons deemed to be affiliates of ours. We believe that each of the
      transactions described below were on terms at least as favorable to our Company
      as we would have expected to negotiate with unaffiliated third
      parties.





Hawk
      Uranium Inc. (f/k/a Hawk Precious Minerals Inc.)





On
      May
      15, 2006, we entered into a management services agreement with Hawk, whereby
      Hawk provided certain management and administrative services to the Company.
      The
      term of the agreement was until December 31, 2006 and required a $50,000
      payment. H. Vance White, our Chairman, is the President of Hawk.





On
      June
      29, 2006, we executed a Memorandum of Agreement between the Company and Hawk
      (the “Hawk Memorandum”). Under the terms of the Hawk Memorandum, we acquired a
      50 percent interest in MacNugget Claims located in northern Ontario, held
      entirely by Hawk by issuing Hawk 40,000 shares of our common stock, valued
      at
      $12,800. Then on November 30, 2006, both parties executed a second agreement
      in
      which we both sold a portion of the MacNugget Claims to MacDonald Mines
      Exploration Ltd., whereby MacDonald became a 51 percent owner in the MacNugget
      Claims and the operator of the project and Hawk and the Company retained a
      24.5%
      interest in the MacNugget Claims.





In
      August
      2007, we entered into a new management services agreement with Hawk, which
      requires a US$100,000 payment, which has been accrued but not paid as of
      December 31, 2007. The Hawk agreement expired on December 31, 2007.





On
      September 19, 2007, we sold all of our rights and claims in the Holdsworth
      Project to Hawk for $50,000 Canadian (US$47,260). We acquired the Holdsworth
      Project from Hawk in June 2003. The rights we held allowed us to explore only
      through a limited surface depth, with the remaining below-surface rights
      belonging to Hawk. We had not expended any funds on the Holdsworth since its
      acquisition. We’ve retained a one percent gross gold royalty for any gold
      extracted from the limited surface depth and Hawk retains the right to purchase
      one half of the royalty from us for $500,000 Canadian. We have estimated that
      the value of the one percent royalty is immaterial and therefore have not
      recorded the possibility of a future gain.





On
      October 1, 2007, we sold our 24.5% interest in the MacNugget Claims to both
      Hawk
      and MacDonald for an aggregate sale price of $50,000 Canadian (US$48,560).
      Other
      than the common stock issued to Hawk in June 2006, we have not incurred any
      other expenses related to this project.





Andrew
      Green





In
      April
      2006, we entered into an amendment to a note with Andrew Green (pertaining
      to a
      November 1, 2005 loan and security agreement, which allow us to draw up to
      an
      aggregate of $600,000 and required no payments until the maturity date of April
      30, 2006) extending the maturity date for an additional 30 days. In
      consideration of this extension, we issued 60,000 shares of our common stock
      and
      we entitled Mr. Green the option, at any time on or prior to August 31, 2006,
      to
      purchase shares of our common stock at a price of $0.20 per share, in an amount
      equal to, but not greater than, the final principal and interest balance of
      the
      note.





In
      May
      2006, we made a $600,000 principal payment and paid the accrued interest of
      $44,091 by the issuance of 220,456 shares (valued at $0.20 per share) of our
      common stock.





In
      August
      2006, we executed a standby joint venture financing agreement with Mr. Green.
      The agreement contemplated Mr. Green’s future participation in joint venture or
      financing arrangements for the purposes of financing mineral exploration
      projects. As consideration for Mr. Green’s agreement to review and consider
      projects presented by us, Mr. Green’s right-to-purchase up to 3,000,000 shares
      of our common stock at a purchase price per share of $0.20, as provided pursuant
      to April 2006 amendment, was extended from August 31, 2006 to March 31, 2007.
      This modification was valued and recorded at $273,000.


48





In
      February 2007, in consideration of a new $700,000 loan to the Company from
      Mr.
      Green, we issued a promissory note in the principal amount of $700,000 to Mr.
      Green. The promissory note had a maturity date of March 31, 2007, and bore
      interest at a rate of 6% per annum. The promissory note was paid in full on
      March 29, 2007 along with accrued interest of $3,912. Under the terms of the
      new
      promissory note and as additional consideration for the loan, we reduced the
      exercise price of certain of his pre-existing warrants to purchase up to an
      aggregate of 3,550,000 shares of our common stock from $0.12 to $0.09125 and
      extended the expiration date of his right-to-purchase of up to 3,000,000 shares
      of common stock at a price per share of $0.20 from March 31, 2007 to December
      31, 2007. The fair value of these equity modifications totaling $202,844 was
      recorded as a discount to the note and was amortized over the term of the
      note.





In
      April
      2007, in consideration of a new $625,000 loan from Mr. Green, we issued a
      promissory note to Mr. Green in the principal amount of $625,000. The promissory
      note bore simple interest at a rate of 12% per annum and was paid in full in
      June 2007 along with $11,096 of interest.




Andrew
      Green is the brother of William Green, our President of Asia
      Operations.




Corporate
      Resource Management, Inc.





The
      Company entered into a consulting agreement with Corporate Resource Management,
      Inc., a Minnesota corporation (“CRM”), effective May 15, 2006. CRM is an entity
      wholly owned by Deb King, the spouse of Stephen D. King (at which time he was
      our president and board member). CRM provides the Company with investment
      banking services relating to the purchase and sale of mining related assets.
      The
      terms of the agreement include the following: (i) a two-year initial term with
      the right to terminate with a 30-day written notice, subject to a $75,000
      termination fee payable to CRM if terminated by the Company without cause,
      (ii)
      a fee of $10,000 per month, plus reimbursement of normal out-of-pocket expenses,
      and (iii) commissions of up to two percent of the value of the transaction
      upon
      successful closings of any asset transactions during the term of the agreement
      and for a period of one year following termination. During fiscal 2007 and
      2006,
      we paid $120,000 and $75,000, respectively, pursuant to the terms of the
      consulting agreement.





Stephen
      D. King





On
      January 27, 2005, the Board authorized a consulting agreement with Stephen
      D.
      King, at the time a director, and who currently serves as our Chief Executive
      Officer and as a director. The agreement was for consulting services to provide
      strategic merger, acquisition and corporate advice with regard to the Company’s
      Colorado mining opportunities, as well as other consulting services. Under
      this
      agreement, we paid Mr. King $80,000 in fiscal 2006. Upon acceptance of Mr.
      King’s employment as the Company’s President in March 2006, the agreement was
      terminated.





In
      fiscal
      year 2005, pursuant to certain secured convertible promissory notes with Pacific
      Dawn Capital, LLC and Andrew Green, Mr. King, who only served as a board member
      at that time, provided a personal guaranty for the repayment of these notes.
      In
      exchange for agreeing to personally guaranty our obligations under the Pacific
      Note, we issued Mr. King a two-year warrant to purchase 1,000,000 shares of
      our
      common stock at a price of $0.15 per share and in exchange for agreeing to
      personally guaranty our obligations under the Green Note, we issued Mr. King
      a
      two-year warrant to purchase 1,000,000 shares of our common stock at a price
      of
      $0.15 per share. The fair value of these warrants was valued at $70,913. Mr.
      King subsequently assigned both of the warrants to his spouse. The warrants
      had
      expiration dates of October 13 and November 4, 2007. In October 2007, the
      Company’s board of directors authorized an extension of the expiration dates,
      granting a one-year extension and the Company recorded a non-cash expense of
      $139,054 relating to the extension.


49


Relevant
      Marketing LLC, dba Lighthouse Communications





The
      Company utilizes the services of Lighthouse Communications as its primary
      investor and public relations management consultant. The president of Relavent
      Marketing is the step-daughter of our CEO, Stephen D. King. For the years ended
      December 31, 2007 and 2006, we paid $120,650 and $0, respectively for services
      provided.





Boston
      Financial Partners, Inc.





Effective
      June 1, 2006, we engaged Boston
      Financial Partners, Inc., as a non-exclusive consultant, to provide assistance
      to the Company in various matters pertaining to corporate growth, strategic
      planning, public relations and marketing services. As consideration for the
      services, we paid a one-time fee of $100,000 and
      issued (i) 625,000 shares of our common stock valued at $212,500 and (ii) a
      two-year warrant to purchase up to 1,000,000 shares of our common stock, at
      an
      exercise price of $0.62 per share, valued at $304,802. Boston Financial Partners
      is controlled by Thomas Brazil, a greater than five percent beneficial
      shareholder of the Company’s securities.





On
      April
      13, 2007, entered into a new six-month consulting agreement with Boston
      Financial Partners, Inc., as a non-exclusive consultant, to provide assistance
      to the Company in various matters pertaining to corporate growth, strategic
      planning, public relations and marketing services. As consideration for the
      services, we agreed to pay a fee of $100,000. As of December 31, 2007, we have
      paid $36,400 towards this fee.





In
      May
      2007, the Company’s board of directors authorized an extension of the expiration
      dates on two warrants held by Boston Financial Partners, granting a 30-day
      extension. The warrants are: (1) to purchase 500,000 shares at $1.00 per share
      expiring on May 25, 2007 and (2) to purchase 880,000 shares at $1.00 per share
      expiring on May 25, 2007, both obtained in 2001. Then in June 2007, the board
      further authorized a six month extension, until December 31, 2007. Furthermore,
      on December 28, 2007, the board further authorized a one-year extension, until
      December 31, 2008. The Company recorded a non-cash expense of $815,758 relating
      to the extensions.





In
      October 2007, the Company’s board of directors authorized an extension of the
      expiration dates on two other warrants held by Boston Financial Partners,
      granting a one-year extension. The warrants are: (1) to purchase 442,000 shares
      at $0.50 per share expiring on October 14, 2007 and (2) to purchase 96,000
      shares at $0.50 per share expiring on October 24, 2007, both obtained as part
      of
      the Company’s 2003 private placement. No non-cash compensation charge was
      recorded due to the Company providing this modification as an incentive to
      raise
      capital and not for any services in return.





Norman
      D. Lowenthal





Mr.
      Lowenthal was the Chairman of SSC Mandarin Financial Services Ltd for the period
      2001 to 2007 and continues to serve as a director of SSC-Sino Gold Consulting
      Co
      Ltd, which is an advisor to the Government operated association of China gold
      mines via the China Gold Bureau, and SSC Mandarin Africa. We have entered into
      transactions with SSC Mandarin Financial Services, SSC-Sino Gold Consulting,
      SSC
      Mandarin Africa and SSC Madarin Group Limited, an affiliate of all three
      entities, during 2007.





**DIRECTOR
      INDEPENDENCE**





In
      determining whether the members of our Board are independent, we have elected
      to
      use the definition of “independence” set forth by Section 121 of the Listing
      Standards for the American Stock Exchange (“AMEX”), although we are not
      currently listed on AMEX, whereby a majority of the members of a listed
      company’s board of directors must qualify as “independent” as determined by the
      board. Consistent with these considerations, and after review of all relevant
      transactions or relationships between each director, or any of his family
      members, and Wits Basin Precious Minerals Inc., its senior management and its
      independent registered public accounting firm, the Board has determined that
      only Joseph Mancuso is currently independent within the meaning of the
      applicable listing standard of AMEX.


50




**ITEM
      13. EXHIBITS**





The
      following exhibits are filed as part of this Annual Report on Form 10-KSB,
      or
      are incorporated herein by reference.





3.1
            Amended
                and Restated Articles of Incorporation (effective as of September
                24,
                2007) (incorporated by reference to Exhibit 3.1 to the Company’s Current
                Report on Form 8-K filed on September 27, 2007).3.2
            By-Laws
                (incorporated by reference to Exhibit 3.2 to Form 10-KSB for the
                year
                ended December 31, 2004 (File No. 1-12401)).4.1
            Form
                of Common Stock certificate (incorporated by reference to Exhibit
                4.1 to
                the Company’s Form S-2 filed on November 26, 2003 (File No.
                333-110831)).4.2
            Form
                of Warrant issued to Boston Financial Partners, Inc., (incorporated
                by
                reference to Exhibit 4.1 of the Company’s Form 8-K filed July 13,
                2006).4.3
            Form
                of Class C Redeemable Warrant (incorporated by reference to Exhibit
                4.7 to
                the Company’s Form SB-2 filed on Form SB-2 filed on July 14, 2006 (File
                No. 333-135765)).4.4**
            Form
                of Warrant to purchase 3,000,000 shares of common stock issued to
                Platinum
                Long Term Growth V, LLC.4.5**
            Form
                of Warrant to purchase 2,100,000 shares of common stock issued to
                Platinum
                Long Term Growth V, LLC.10.1
            Stock
                Option Agreement (incorporated by reference to Exhibit 6.1 to Company’s
                Form 1-A (File No. 24D-3802 SML)).10.2
            1997
                Incentive Plan (incorporated by reference to Exhibit 10.23 to Company’s
                Form 10-K for the year ended December 31, 1996 (File No.
                0-27968)).10.3
            1999
                Employee Stock Option Plan, as amended (incorporated by reference
                to
                Exhibit 10.1 of the Company’s Form 8-K filed September 18,
                2006).10.4
            2000
                Director Stock Option Plan, as amended (incorporated by reference
                to
                Exhibit 4.1 to Company’s Form S-8 filed November 19, 2003 (File No.
                333-110590)).10.5
            2001
                Employee Stock Option Plan, as amended (incorporated by reference
                to
                Exhibit 10.2 to the Company’s Form 8-K filed January 18,
                2006).10.6
            2003
                Director Stock Option Plan (incorporated by reference to Exhibit
                4.2 to
                Company’s Form S-8 filed November 19, 2003 (File No.
                333-110590)).10.7
            2007
                Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed on March 15,
                2007).10.8
            Join
                Venture and Joint Contribution Agreement dated June 26, 2003 by and
                among
                the Company, Hawk Precious Minerals Inc. and Hawks Precious Minerals
                USA,
                Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K
                filed July 1, 2003).10.9
            Shareholders
                Agreement by and among AfriOre International (Barbados) Limited,
                the
                Company, and Kwagga Gold (Barbados) Limited, dated August 27, 2004
                (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed
                September 1, 2004).10.10
            Amendment
                to Shareholders Agreement by and among AfriOre International (Barbados)
                Limited, the Company, and Kwagga Gold (Barbados) Limited, dated August
                30,
                2004 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K
                filed September 1, 2004)


51





10.11
            Proposal
                by and among the Company, Hunter Gold Mining Corporation, Hunter
                Gold
                Mining, Inc., and Ken Swaisland, dated September 16, 2004 (incorporated
                by
                reference to Exhibit 10.1 of the Company’s Form 8-K filed September 16,
                2004).10.12
            Assignment
                of Purchase Option Agreement by and between the Company and Kenneth
                Swaisland, dated August 12, 2004 (incorporated by reference to Exhibit
                10.24 to Form 10-KSB for the year ended December 31, 2004 (File No.
                1-12401)).10.13
            Letter
                Agreement dated December 2, 2003 by and between Ken Swaisland and
                Hunter
                Gold Mining Corporation regarding purchase and sale of shares of
                Hunter
                Gold Mining Corporation (incorporated by reference to Exhibit 10.24
                to the
                Company’s Form SB-2 filed on February 14, 2005 (File No.
                333-122338)).10.14
            Letter
                Agreement dated December 31, 2005 by and between the Company and
                Hunter
                Gold Mining Corporation regarding amending the option agreement for
                the
                purchase of the shares of Hunter Gold Mining Corporation (incorporated
                by
                reference to Exhibit 10.1 of the Company’s Form 8-K filed January 18,
                2006).10.15
            Consulting
                Agreement by and among the Company and Corporate Resource Management,
                Inc., dated May 15, 2006 (incorporated by reference to Exhibit 10.1
                to
                Form 10-QSB for the quarter ended March 31, 2006 (File No.
                1-12401)).10.16
            Option
                Agreement by and between the Company, Journey Resources Corporation
                and
                Minerales Jazz S.A. de C.V., dated June 28, 2006 (incorporated by
                reference to Exhibit 10.1 of the Company’s Form 8-K filed June 30,
                2006).10.17
            NI
                43-101 Technical Report Pertaining To: The Vianey Mine - Guerrero
                State,
                Mexico (dated of October 18, 2004 and revised March 10, 2005) prepared
                by
                Rodney A. Blakestad J.D., C.P.G. (incorporated by reference to Exhibit
                10.2 of the Company’s Form 8-K filed June 30, 2006).10.18
            Consulting
                Agreement by and among the Company and Boston Financial Partners,
                Inc.,
                dated June 1, 2006 (incorporated by reference to Exhibit 10.1 of
                the
                Company’s Form 8-K filed July 13, 2006).10.19
            Warrant
                Agreement between the Company and American Stock Transfer & Trust
                Company, dated June 28, 2006 (incorporated by reference to Exhibit
                10.32
                to the Company’s Form SB-2 filed on Form SB-2 filed on July 14, 2006 (File
                No. 333-135765)).10.20
            Standby
                Joint Venture Financing Agreement by and among the Company and Andrew
                Green dated August 18, 2006 (incorporated by reference to Exhibit
                10.1 of
                the Company’s Form 8-K filed August 23, 2006).10.21
            Employment
                Offer Letter by and among the Company and Dr. Clyde L. Smith dated
                September 14, 2006 (incorporated by reference to Exhibit 10.2 of
                the
                Company’s Form 8-K filed September 18, 2006).10.22
            Employee
                Stock Option Vesting Correction Letter by and among the Company and
                Dr.
                Smith dated September 21, 2006 (incorporated by reference to Exhibit
                10.1
                of the Company’s Amendment to Form 8-K filed September 21,
                2006).10.23
            Asset
                Purchase Agreement by and among the Company and Hunter Gold Mining
                Corporation, a British Columbia corporation, Hunter Gold Mining Inc.,
                a
                Colorado corporation, Central City Consolidated Mining Corp., a Colorado
                corporation and George Otten, a resident of Colorado, dated September
                20,
                2006, (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K
                filed September 25, 2006).


52





10.24
            Joint
                Venture Agreement dated December 18, 2006, by and among the Company,
                Journey Resources Corp., and Minerales Jazz S.A. De C.V. (incorporated
                by
                reference to Exhibit 10.1 of the Company’s Form 8-K filed December 19,
                2006).10.25
            Employment
                Agreement between the Company and William Green dated February 19,
                2007
                (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
                on Form 8-K filed on February 23, 2007).10.26
            Stock
                Option Agreement between the Company and William Green dated February
                19,
                2007 (incorporated by reference to Exhibit 10.2 to the Company’s Current
                Report on Form 8-K filed on February 23, 2007).10.27
            Promissory
                Note dated February 23, 2007 issued in favor of Andrew Green (incorporated
                by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
                filed on February 23, 2007).10.28
            Stock
                Option Agreement between the Company and Stephen D. King dated March
                9,
                2007 (incorporated by reference to Exhibit 10.2 to the Company’s Current
                Report on Form 8-K filed on March 15, 2007).10.29
            Convertible
                Notes Purchase Agreement dated April 10, 2007 by and between the
                Company
                and China Gold, LLC (incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed on April 16,
                2007).10.30
            Agreement
                and Plan of Merger and Reorganization dated April 20, 2007 by and
                among
                the Company, Easyknit Enterprises Holdings Limited and Race Merger,
                Inc
                (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
                on Form 8-K filed on April 26, 2007).10.31
            Amendment
                #1 to Agreement and Plan of Merger and Reorganization dated May 21,
                2007
                (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
                on Form 8-K filed on May 25, 2007).10.32
            Amendment
                to Convertible Notes Purchase Agreement, dated June 19, 2007, by
                and
                between the Company and China Gold, LLC (incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25,
                2007).10.33
            Form
                of Secured Convertible Note of the Company to be issued pursuant
                to
                Convertible Notes Purchase Agreement dated April 10, 2007 (incorporated
                by
                reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
                filed on April 16, 2007).10.34
            Form
                of Secured Convertible Note #3 dated June 19, 2007 issued to China
                Gold,
                LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current
                Report on Form 8-K filed on June 25, 2007).10.35
            Pledge
                Agreement dated April 10, 2007 by and between the Company and China
                Gold,
                LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current
                Report on Form 8-K filed on April 16, 2007).10.36
            Guaranty
                of Wits-China Acquisition Corp. dated April 10, 2007 in favor of
                China
                Gold, LLC (incorporated by reference to Exhibit 10.3 to the Company’s
                Current Report on Form 8-K filed on April 16, 2007).10.37
            Security
                Agreement dated June 19, 2007 by and between the Company and China
                Gold,
                LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current
                Report on Form 8-K filed on June 25,
                2007).


53





10.38**
            Sale
                of Shares and Claim Agreement dated July 27, 2007 by and between
                the
                Company, SSC Mandarin Group Limited and China Global Mining Resources
                Limited, British Virgin Islands.10.39**
            Sale
                of Shares and Claim Agreement dated July 27, 2007 by and between
                the
                Company, SSC Mandarin Group Limited and China Global Mining Resources
                Limited, Hong Kong.10.40**
            Sale
                of Shares and Claim Agreement dated July 27, 2007 by and between
                the
                Company, SSC Mandarin Financial Services Limited and SSC Mandarin
                Africa
                (Proprietary) Limited.10.41**
            Option
                Agreement dated July 27, 2007 by and between the Company, SSC Mandarin
                Financial Services Limited and SSC-Sino Gold Consulting Co.
                Limited.10.42**
            Joint
                Venture Agreement dated April 14, 2007 by and between Shanxi Hua
                Ze Nickel
                Smelting Co. and China Global Mining Resources Limited.10.43**
            Supplemental
                Agreement to Joint Venture Agreement, dated June 6, 2007 by and between
                Shanxi Hua Ze Nickel Smelting Co. and China Global Mining Resources
                Limited.10.44**
            Supply
                Contract dated June 15, 2007 by and among China Global Mining Resources
                Limited, Shaanxi Hua Ze Nickel and Cobalt Metals Co., Ltd. and Shaanxi
                Xingwang Import & Export Limited.10.45**
            Equity
                Transfer Heads of Agreement dated May 4, 2007 by and among China
                Global
                Mining Resources Limited, Lu Benzhao, Lu Nan and Jin Yao
                Hui.10.46**
            Equity
                Transfer Heads of Agreement dated May 4, 2007 by and among China
                Global
                Mining Resources Limited, Lu Benzhao, Lu Nan, Nanjing Sudan Mining
                Co.,
                Ltd., Maanshan Zhaoyuan Mining Co., Ltd. and Xiaonanshan Mining Co.
                Ltd.10.47
            Bill
                of Sale dated September 19, 2007 by and among Active Hawk Minerals,
                LLC (a
                wholly owned subsidiary of the Company) and Hawk Uranium Inc., for
                the
                sale of the Holdsworth Project (incorporated by reference to Exhibit
                10.1
                to Form 10-QSB for the quarter ended September 30, 2007 (File No.
                1-12401)).10.48
            Transfer
                Agreement dated October 1, 2007 by and among the Company, Hawk Uranium
                Inc. and MacDonald Mines Exploration Ltd., for the sale of the MacNugget
                Claims (incorporated by reference to Exhibit 10.2 to Form 10-QSB
                for the
                quarter ended September 30, 2007 (File No. 1-12401)).10.49
            Amendment
                to Joint Venture Agreement dated October 31, 2007 by and among the
                Company, Journey Resources Corp., and Minerales Jazz S.A. De C.V.,
                whereby
                we issued 1,600,000 shares of common stock in lieu of the $400,000
                exploration work payment (incorporated by reference to Exhibit 10.3
                to
                Form 10-QSB for the quarter ended September 30, 2007 (File No.
                1-12401)).10.50
            Letter
                Agreement dated October 31, 2007 by and among the Company and China
                Gold,
                LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current
                Report on Form 8-K filed on November 5, 2007).10.51
            Sale
                of Shares Agreement between and among the Company, AfriOre International
                (Barbados) Limited and Kwagga Gold (Barbados) Limited, dated December
                12,
                2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current
                Report on Form 8-K filed on December 18, 2007).10.52
            Operating
                Agreement between the Company and Kwagga Gold (Proprietary) Limited,
                dated
                December 12, 2007 (incorporated by reference to Exhibit 10.2 to the
                Company’s Current Report on Form 8-K filed on December 18,
                2007).




54




10.53
            Termination
                Agreement by and among the Company, SSC Mandarin Group Limited, China
                Global Mining Resources, BVI, China Global Mining Resources, HK,
                SSC
                Mandarin Financial Services Limited and SSC - Sino Gold Consulting
                Co., Ltd. dated December 12, 2007 (incorporated by reference to Exhibit
                10.3 to the Company’s Current Report on Form 8-K filed on December 18,
                2007).21**
            Subsidiaries
                of the Registrant.23.1**
            Consent
                of Carver Moquist & O’Connor, LLC24**
            Power
                of Attorney (included on the signature page hereto).31.1**
            Certification
                by Chief Executive Officer.31.2**
            Certification
                by Chief Financial Officer.32.1**
            Certification
                by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2**
            Certification
                by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





**
      Filed
      herewith electronically




55


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





On
      January 10, 2008, our Board of Directors ratified the engagement of Carver
      Moquist & O’Connor, LLC (“CMO”) to audit our financial statements for the
      year ended December 31, 2007 and on February 8, 2007, our Board ratified the
      engagement of CMO to audit our financial statements for the year ended December
      31, 2007.





**AUDIT
      FEES:**


The
      aggregate fees billed for professional services rendered by CMO for the audit
      of
      the Company's annual financial statements and review of financial statements
      included in the Company's Form 10-KSB and 10-QSB for 2007 and 2006, and services
      that are normally provided by the accountant in connection with statutory and
      regulatory filings or engagements was $86,947 for the year ended December 31,
      2007 and $77,912 for the year ended December 31, 2006.





**AUDIT
      RELATED FEES:**


There
      were no fees billed in each of the last two fiscal years for assurance and
      related services by the principal accountant that are reasonably related to
      the
      performance of the audit or review of the Company's financial statements.





**TAX
      FEES:**


There
      were no fees billed in each of the last two fiscal years for professional
      services rendered by the principal accountant for tax compliance, tax advice,
      and tax planning.





**ALL
      OTHER FEES:**


There
      were no other fees billed in each of the last two fiscal years for products
      and
      services provided by the principal accountant, other than the services reported
      above.





**POLICY
      ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
      OF
      INDEPENDENT AUDITORS**





At
      present, we do not have an audit committee, but rather our entire Board of
      Directors performs the functions of the audit committee. Our Board approves
      each
      engagement for audit or non-audit services before we engage our independent
      auditor to provide those services. The Board has not established any
      pre-approval policies or procedures that would allow our management to engage
      our independent auditor to provide any specified services with only an
      obligation to notify the audit committee of the engagement for those services.
      None of the services provided by our independent auditors for fiscal 2007 was
      obtained in reliance on the waiver of the pre-approval requirement afforded
      in
      SEC regulations.


56


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      Company caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.





WITS
                BASIN PRECIOUS MINERALS INC.(“COMPANY”)Dated:
                April 2, 2008
            By:
            /s/
                Stephen D. KingStephen
                D. KingChief
                Executive Officer





Each
      person whose signature to this Annual Report appears below hereby constitutes
      and appoints Stephen D. King and Mark D. Dacko as his true and lawful
      attorney-in-fact and agent, with full power of substitution, to sign on his
      or
      her behalf individually and in the capacity stated below and to perform any
      acts
      necessary to be done in order to file all amendments to this Annual Report
      and
      any and all instruments or documents filed as part of or in connection with
      this
      Annual Report or the amendments thereto and each of the undersigned does hereby
      ratify and confirm all that said attorney-in-fact and agent, or his substitutes,
      shall do or cause to be done by virtue hereof.





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the Company, in the capacities
      and
      dates indicated.




**Name**
            
            **Title**
            ****
            **Date**/s/
                H. Vance White
            
            Chairman
            
            April
                2, 2008H.
                Vance White/s/
                Stephen D. King
            
            Chief
                Executive Officer and Director
            
            April
                2, 2008Stephen
                D. King
            
            (principal
                executive officer)/s/
                Clyde L. Smith
            
            President
            
            April
                2, 2008Clyde
                Smith/s/
                Mark D. Dacko
            
            Chief
                Financial Officer, Secretary and
            
            April
                2, 2008Mark
                D. Dacko
            
            Director
                (principal financial andaccounting
                officer)/s/
                Norman D. Lowenthal
            
            Director
            
            April
                2, 2008Norman
                D. Lowenthal/s/
                Joseph Mancuso
            
            Director
            
            April
                1, 2008Joseph
                Mancuso




57




**ITEM
      7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





Table
      of
      Contents




PageReport
                of Independent Registered Public Accounting Firm of Carver
                Moquist & O’Connor, LLC
            F-2Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            F-3Consolidated
                Statements of Operations for the Years Ended December
                31, 2007 and 2006
            F-4Consolidated
                  Statements of Shareholders’ Equity (Deficit) and Comprehensive Loss for
                  the Years Ended December 31, 2007 and 2006
            F-5Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2007
                  and
                  2006
            F-7Notes
                to Consolidated Financial Statements
            F-8





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Shareholders of


Wits
      Basin Precious Minerals Inc. and subsidiaries (an exploration stage
      company)





We
      have
      audited the accompanying consolidated balance sheets of Wits Basin Precious
      Minerals Inc., and subsidiaries (an exploration stage company) as of December
      31, 2007 and 2006, and the related consolidated statements of operations,
      shareholders’ equity (deficit) and comprehensive loss, and cash flows for the
      years ended December 31, 2007 and 2006, and the period from May 1, 2003
      (inception of exploration stage) to December 31, 2007. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audit included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Wits Basin Precious Minerals Inc.
      as of December 31, 2007 and 2006, and the results of its operations and its
      cash
      flows for the years ended December 31, 2007 and 2006, and the period from May
      1,
      2003 (inception of exploration stage) to December 31, 2007 in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 1 to the
      consolidated financial statements, the Company had net losses for the years
      ended December 31, 2007 and 2006 and had an accumulated deficit at December
      31,
      2007. These conditions raise substantial doubt about its ability to continue
      as
      a going concern. Management’s plans regarding those matters are also described
      in Note 1. The consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





/s/
      Carver Moquist & O’Connor, LLC





Minneapolis,
      Minnesota


March
      31,
      2008


F-2


**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**CONSOLIDATED
      BALANCE SHEETS**




December
                31,2007
            
            2006AssetsCurrent
                assets:Cash
            
            $
            130,481
            
            $
            85,910Receivables
            
            
            —
            
            
            10,323Investment
            
            
            —
            
            
            21,241Prepaid
                expenses
            
            
            91,030
            
            
            53,815Total
                current assets
            
            
            221,511
            
            
            171,289Property
                and equipment, net
            
            
            73,206
            
            
            80,087Advance
                payments on equity investments
            
            
            7,000,000
            
            
            —Debt
                issuance costs, net
            
            
            16,415
            
            
            —Total
                Assets
            
            $
            7,311,132
            
            $
            251,376Liabilities
                and Shareholders’ Equity (Deficit)Current
                liabilities:Convertible
                notes payable, net of original issue discount
            
            $
            9,843,283
            
            $
            —Short-term
                notes payable, net of original issue discount
            
            
            234,220
            
            
            —Accounts
                payable
            
            
            229,292
            
            
            68,622Accrued
                interest
            
            
            514,286
            
            
            —Other
                accrued expenses
            
            
            793,782
            
            
            143,000Total
                current liabilities
            
            
            11,614,863
            
            
            211,622Commitments
                and contingenciesShareholders’
                equity (deficit):Common
                stock, $.01 par value, 300,000,000 shares authorized in 2007 and
                150,000,000 authorized in 2006: 113,982,533 and 94,747,739 shares
                issued
                and outstanding at December 31, 2007 and 2006,
                respectively
            
            
            1,139,825
            
            
            947,477Additional
                paid-in capital
            
            
            51,147,313
            
            
            42,954,263Stock
                subscriptions receivable
            
            
            —
            
            
            (932,600
            )Warrants
                outstanding
            
            
            5,710,383
            
            
            7,515,487Accumulated
                deficit
            
            
            (22,932,460
            )
            
            (22,932,460
            )Deficit
                accumulated during the exploration stage, subsequent to April 30,
                2003
            
            
            (39,368,792
            )
            
            (27,509,595
            )Accumulated
                other comprehensive loss
            
            
            —
            
            
            (2,818
            )Total
                shareholders’ equity (deficit)
            
            
            (4,303,731
            )
            
            39,754Total
                Liabilities and Shareholders’ Equity (Deficit)
            
            $
            7,311,132
            
            $
            251,376





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-3




**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




May
                1, 2003 (inception)December
                31,
            
            To
                Dec. 31,2007
            
            2006
            
            2007Revenues
            
            $
            —
            
            $
            —
            
            $
            —Operating
                expenses:General
                and administrative
            
            
            6,953,591
            
            
            4,963,481
            
            
            18,834,004Exploration
                expenses
            
            
            2,755,491
            
            
            1,958,229
            
            
            10,365,741Depreciation
                and amortization
            
            
            16,050
            
            
            21,214
            
            
            476,314Merger
                transaction costs
            
            
            1,238,619
            
            
            —
            
            
            1,238,619Stock
                issued as penalty
            
            
            —
            
            
            —
            
            
            2,152,128Loss
                on impairment of Kwagga Gold
            
            
            —
            
            
            120,803
            
            
            2,100,000Loss
                (gain) on sale of mining properties
            
            
            (95,820
            )
            
            —
            
            
            571,758Loss
                on disposal of assets
            
            
            —
            
            
            —
            
            
            1,633Total
                operating expenses
            
            
            10,867,931
            
            
            7,063,727
            
            
            35,740,197Loss
                from operations
            
            
            (10,867,931
            )
            
            (7,063,727
            )
            
            (35,740,197
            )Other
                income (expense):Other
                income (expense), net
            
            
            70,117
            
            
            31,122
            
            
            103,464Interest
                expense
            
            
            (1,061,383
            )
            
            (1,858,082
            )
            
            (3,997,133
            )Total
                other expense
            
            
            (991,266
            )
            
            (1,826,960
            )
            
            (3,893,669
            )Loss
                from operations before income taxbenefit
                and discontinued operations
            
            
            (11,859,197
            )
            
            (8,890,687
            )
            
            (39,633,866
            )Benefit
                from income taxes
            
            
            —
            
            
            —
            
            
            243,920Loss
                from continuing operations
            
            
            (11,859,197
            )
            
            (8,890,687
            )
            
            (39,389,946
            )Discontinued
                operations:Gain
                from discontinued operations
            
            
            —
            
            
            —
            
            
            21,154Net
                loss
            
            $
            (11,859,197
            )
            $
            (8,890,687
            )
            $
            (39,368,792
            )Basic
                and diluted net loss per common share:Continuing
                operations
            
            $
            (0.11
            )
            $
            (0.11
            )
            $
            (0.63
            )Discontinued
                operations
            
            
            —
            
            
            —
            
            
            —Net
                loss
            
            $
            (0.11
            )
            $
            (0.11
            )
            $
            (0.63
            )Basic
                and diluted weighted average common shares outstanding
            
            
            105,146,864
            
            
            82,503,278
            
            
            62,125,190




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-4


**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) AND**


**COMPREHENSIVE
      LOSS FOR THE YEARS ENDED DECEMBER 31, 200** **7
      AND 2006**





Additional
            
            StockCommon
                stock
            
            paid-in
            
            subscriptionShares
            
            Amount
            
            capital
            
            receivable
            
            WarrantsBALANCE,
                December 31, 2005
            
            
            65,674,329
            
            $
            656,743
            
            $
            34,487,774
            
            $
            —
            
            $
            6,418,685Exercise
                of warrants with cash
            
            
            21,141,184
            
            
            211,412
            
            
            4,644,069
            
            
            (822,600
            )
            
            149,841Issuance
                of 5,452,794 shares of common stock and 4,000,000 warrants to consultants
                during 2006 for services
            
            
            5,452,794
            
            
            54,528
            
            
            1,677,160
            
            
            —
            
            
            1,015,712Issuance
                of shares of common stock for maturity date extensions and conversion
                of
                interest due; issuance of 3,500,000 warrants and recording a beneficial
                conversion charge all related to 2006 notes payable
            
            
            439,432
            
            
            4,394
            
            
            1,178,222
            
            
            —
            
            
            252,014Conversion
                of accounts payable into common stock at $0.26 per share in March
                2006
            
            
            150,000
            
            
            1,500
            
            
            37,500
            
            
            —
            
            
            —Issuance
                of common stock to obtain exploration rights for Mexico and
                Canada
            
            
            690,000
            
            
            6,900
            
            
            197,900
            
            
            —
            
            
            —Exercise
                of Right-to-Purchase option provided under the terms of 2006 notes
                payable
            
            
            1,000,000
            
            
            10,000
            
            
            190,000
            
            
            (80,000
            )
            
            —Exercise
                of stock options in December 2006
            
            
            200,000
            
            
            2,000
            
            
            28,000
            
            
            (30,000
            )
            
            —Stock
                option compensation expense
            
            
            —
            
            
            —
            
            
            122,873
            
            
            —
            
            
            —Warrants
                that expired during 2006 without exercise
            
            
            —
            
            
            —
            
            
            320,765
            
            
            —
            
            
            (320,765
            )Contributed
                services by an executive
            
            
            —
            
            
            —
            
            
            70,000
            
            
            —
            
            
            —Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Unrealized
                gain (loss) on investment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Total
                comprehensive loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —BALANCE,
                December 31, 2006
            
            
            94,747,739
            
            
            947,477
            
            
            42,954,263
            
            
            (932,600
            )
            
            7,515,487Issuance
                of 2,400,000 shares of common stock and warrants in private placement
                September through December 2007 at $0.25 per unit (net of offering
                costs
                of $30,000)
            
            
            2,400,000
            
            
            24,000
            
            
            258,127
            
            
            —
            
            
            287,873Issuance
                of 2,193,334 shares of common stock in private placement Dec 2007
                at $0.15
                per share (net of offering costs of $15,465)
            
            
            2,193,334
            
            
            21,933
            
            
            291,602
            
            
            —
            
            
            —Exercise
                of warrants with cash
            
            
            8,492,500
            
            
            84,925
            
            
            2,031,222
            
            
            —
            
            
            (898,360
            )Cash-less
                exercise of warrants
            
            
            398,960
            
            
            3,990
            
            
            156,975
            
            
            —
            
            
            (160,965
            )Exercise
                of Right-to-Purchase option provided under the terms of 2006 notes
                payable
            
            
            3,000,000
            
            
            30,000
            
            
            570,000
            
            
            —
            
            
            —Issuance
                of common stock to obtain exploration rights for Mexico
            
            
            2,100,000
            
            
            21,000
            
            
            539,000
            
            
            —
            
            
            —Issuance
                of 300,000 warrants and recording a beneficial conversion charge,
                re-pricing charges and maturity date extensions all related to 2007
                notes
                payable
            
            
            —
            
            
            —
            
            
            331,801
            
            
            —
            
            
            40,305Issuance
                of 650,000 shares of common stock, 5,350,000 warrants, 100,000 options
                and
                the associated charges for re-pricing and the extension of exercise
                dates
                all to consultants for services in 2007
            
            
            650,000
            
            
            6,500
            
            
            166,188
            
            
            —
            
            
            1,614,227Stock
                subscription receivable payments received
            
            
            —
            
            
            —
            
            
            —
            
            
            932,600
            
            
            —Stock
                option compensation expense
            
            
            —
            
            
            —
            
            
            1,159,951
            
            
            —
            
            
            —Warrants
                that expired during 2007 without exercise
            
            
            —
            
            
            —
            
            
            2,688,184
            
            
            —
            
            
            (2,688,184
            )Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Realized
                gain on investment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Total
                comprehensive loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —BALANCE,
                December 31, 2007
            
            
            113,982,533
            
            $
            1,139,825
            
            $
            51,147,313
            
            $
            —
            
            $
            5,710,383





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-5


**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) AND**


**COMPREHENSIVE
      LOSS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006**




Accumulated
              deficit
            
            Deficit
              accumulated
              (1)
            
            Accumulated
              other
              comprehensive
              loss/gain
            
            TotalBALANCE,
                December 31, 2005
            
            $
            (22,932,460
            )
            $
            (18,618,908
            )
            $
            (7,644
            )
            $
            4,190Exercise
                of warrants with cash
            
            
            —
            
            
            —
            
            
            —
            
            
            4,182,722Issuance
                of 5,452,794 shares of common stock and 4,000,000 warrants to consultants
                during 2006 for services
            
            
            —
            
            
            —
            
            
            —
            
            
            2,747,400Issuance
                of shares of common stock for maturity date extensions and conversion
                of
                interest due; issuance of 3,500,000 warrants and recording a beneficial
                conversion charge all related to 2006 notes payable
            
            
            —
            
            
            —
            
            
            —
            
            
            1,434,630Conversion
                of accounts payable into common stock at $0.26 per share in March
                2006
            
            
            —
            
            
            —
            
            
            —
            
            
            39,000Issuance
                of common stock to obtain exploration rights for Mexico and
                Canada
            
            
            —
            
            
            —
            
            
            —
            
            
            204,800Exercise
                of Right-to-Purchase option provided under the terms of 2006 notes
                payable
            
            
            —
            
            
            —
            
            
            —
            
            
            120,000Exercise
                of stock options in December 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            —Stock
                option compensation expense
            
            
            —
            
            
            —
            
            
            —
            
            
            122,873Warrants
                that expired during 2006 without exercise
            
            
            —
            
            
            —
            
            
            —
            
            
            —Contributed
                services by an executive
            
            
            —
            
            
            —
            
            
            —
            
            
            70,000Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            (8,890,687
            )
            
            —
            
            
            —Unrealized
                gain (loss) on investment
            
            
            —
            
            
            —
            
            
            4,826
            
            
            —Total
                comprehensive loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (8,885,861
            )BALANCE,
                December 31, 2006
            
            
            (22,932,460
            )
            
            (27,509,595
            )
            
            (2,818
            )
            
            39,754Issuance
                of 2,400,000 shares of common stock and warrants in private placement
                September through December 2007 at $0.25 per unit (net of offering
                costs
                of $30,000)
            
            
            —
            
            
            —
            
            
            —
            
            
            570,000Issuance
                of 2,193,334 shares of common stock in private placement Dec 2007
                at $0.15
                per share (net of offering costs of $15,465)
            
            
            —
            
            
            —
            
            
            —
            
            
            313,535Exercise
                of warrants with cash
            
            
            —
            
            
            —
            
            
            —
            
            
            1,217,787Cash-less
                exercise of warrants
            
            
            —
            
            
            —
            
            
            —
            
            
            —Exercise
                of Right-to-Purchase option provided under the terms of 2006 notes
                payable
            
            
            —
            
            
            —
            
            
            —
            
            
            600,000Issuance
                of common stock to obtain exploration rights for Mexico
            
            
            —
            
            
            —
            
            
            —
            
            
            560,000Issuance
                of 300,000 warrants and recording a beneficial conversion charge,
                re-pricing charges and maturity date extensions all related to 2007
                notes
                payable
            
            
            —
            
            
            —
            
            
            —
            
            
            372,106Issuance
                of 650,000 shares of common stock, 5,350,000 warrants, 100,000 options
                and
                the associated charges for re-pricing and the extension of exercise
                dates
                all to consultants for services in 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            1,786,915Stock
                subscription receivable payments received
            
            
            —
            
            
            —
            
            
            —
            
            
            932,600Stock
                option compensation expense
            
            
            —
            
            
            —
            
            
            —
            
            
            1,159,951Warrants
                that expired during 2007 without exercise
            
            
            —
            
            
            —
            
            
            —
            
            
            —Comprehensive
                loss:Net
                loss
            
            
            —
            
            
            (11,859,197
            )
            
            —
            
            
            —Realized
                gain on investment
            
            
            —
            
            
            —
            
            
            2,818
            
            
            —Total
                comprehensive loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (11,856,379
            )BALANCE,
                December 31, 2007
            
            $
            (22,932,460
            )
            $
            (39,368,792
            )
            $
            —
            
            $
            (4,303,731
            )





(1)
            Deficit
                accumulated during the exploration stage, subsequent to April 30,
                2003.





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-6


**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





May
                1, 2003(inception)
                toDecember
                31,
            
            Dec.
                31,2007
            
            2006
            
            2007OPERATING
                ACTIVITIES:Net
                loss
            
            $
            (11,859,197
            )
            $
            (8,890,687
            )
            $
            (39,368,792
            )Adjustments
                to reconcile net loss to cash flows from operating
                activities:Depreciation
                and amortization
            
            
            16,050
            
            
            21,214
            
            
            476,314Loss
                (gain) on disposal of miscellaneous assets
            
            
            (65,580
            )
            
            —
            
            
            (63,947
            )Loss
                (gain) on sale of mining projects
            
            
            (95,820
            )
            
            —
            
            
            571,758Issuance
                of common stock for exploration rights
            
            
            560,000
            
            
            204,800
            
            
            5,700,090Loss
                on impairment of Kwagga Gold
            
            
            —
            
            
            120,803
            
            
            2,100,000Amortization
                of debt issuance costs
            
            
            36,480
            
            
            4,662
            
            
            175,338Amortization
                of original issue discount
            
            
            495,609
            
            
            798,889
            
            
            2,196,890Amortization
                of prepaid consulting fees related to issuance and
              modifications
                of warrants and issuance of common stock
            
            
            944,581
            
            
            2,744,326
            
            
            5,508,669Compensation
                expense related to stock options
            
            
            1,159,951
            
            
            122,873
            
            
            1,282,824Issuance
                of common stock and warrants for services
            
            
            932,418
            
            
            419,524
            
            
            2,101,940Contributed
                services by an executive
            
            
            —
            
            
            70,000
            
            
            274,500Interest
                expense related to issuance of common stock and warrants
            
            
            —
            
            
            1,084,630
            
            
            1,173,420Issuance
                of common stock as penalty related to private placement
            
            
            —
            
            
            —
            
            
            2,152,128Gain
                from discontinued operations
            
            
            —
            
            
            —
            
            
            (21,154
            )Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            10,323
            
            
            (10,323
            )
            
            18,017Prepaid
                expenses
            
            
            (127,299
            )
            
            (306,869
            )
            
            (254,062
            )Accounts
                payable
            
            
            160,670
            
            
            (28,601
            )
            
            159,011Accrued
                expenses
            
            
            1,165,068
            
            
            77,028
            
            
            1,087,481Net
                cash used in operating activities
            
            
            (6,666,746
            )
            
            (3,567,731
            )
            
            (14,729,575
            )INVESTING
                ACTIVITIES:Purchases
                of property and equipment
            
            
            (9,169
            )
            
            (11,742
            )
            
            (115,523
            )Proceeds
                from sale of mining projects
            
            
            95,820
            
            
            —
            
            
            220,820Proceeds
                from sale of miscellaneous assets
            
            
            89,639
            
            
            —
            
            
            89,639Purchases
                of investments
            
            
            —
            
            
            (5,155
            )
            
            (2,244,276
            )Advance
                payments on equity investments
            
            
            (7,000,000
            )
            
            —
            
            
            (7,000,000
            )Net
                cash used in investing activities
            
            
            (6,823,710
            )
            
            (16,897
            )
            
            (9,049,340
            )FINANCING
                ACTIVITIES:Payments
                on short-term and long-term debt
            
            
            (1,325,000
            )
            
            (1,100,000
            )
            
            (2,759,645
            )Cash
                proceeds from issuance of common stock, net of offering
                costs
            
            
            1,563,535
            
            
            120,000
            
            
            6,408,807Cash
                proceeds from exercise of stock options
            
            
            30,000
            
            
            —
            
            
            199,900Cash
                proceeds from exercise of warrants
            
            
            2,040,387
            
            
            4,182,722
            
            
            6,526,047Cash
                proceeds from short-term debt
            
            
            11,279,000
            
            
            350,000
            
            
            12,379,000Cash
                proceeds from long-term debt
            
            
            —
            
            
            —
            
            
            650,000Debt
                issuance costs
            
            
            (52,895
            )
            
            —
            
            
            (191,753
            )Net
                cash provided by financing activities
            
            
            13,535,027
            
            
            3,552,722
            
            
            23,212,356INCREASE
                (DECREASE) IN CASH EQUIVALENTS
            
            
            44,571
            
            
            (31,906
            )
            
            (566,559
            )CASH
                AND EQUIVALENTS, beginning of period
            
            
            85,910
            
            
            117,816
            
            
            697,040CASH
                AND EQUIVALENTS, end of period
            
            $
            130,481
            
            $
            85,910
            
            $
            130,481





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-7


**WITS
      BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES**


**(AN
      EXPLORATION STAGE COMPANY)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 and 2006**




**NOTE
      1 - NATURE OF BUSINESS**





Wits
      Basin Precious Minerals Inc., and subsidiaries (“we,” “us,” “our,” “Wits Basin”
or the “Company”) is a minerals exploration and development company based in
      Minneapolis, Minnesota. As of December 31, 2007, we hold interests in mineral
      exploration projects in South Africa (FSC), Colorado (Bates-Hunter) and Mexico
      (Vianey). The following is a summary of our projects:





·
            We
                hold a 35 percent equity interest in Kwagga Gold (Barbados) Limited
                (“Kwagga Barbados”), which, through its wholly owned subsidiary Kwagga
                Gold (Proprietary) Limited, holds mineral exploration rights in South
                Africa. This project is referred to as the “FSC Project” and is located
                adjacent to the historic Witwatersrand Basin. The last completed
                drillhole
                on the FSC project occurred in 2005. On December 12, 2007, we entered
                into
                an agreement with AfriOre International (Barbados) Limited (“AfriOre”),
                the holder of the other 65 percent of Kwagga Barbados, whereby we
                may
                acquire all of AfriOre’s interest of Kwagga Barbados. See Note 19 –
                Subsequent Events for an update regarding a letter of intent we have
                entered into with respect to our rights to acquire the 65 percent
                interest
                in Kwagga Barbados held by AfriOre.





·
            On
                September 20, 2006, we executed a formal asset purchase agreement
                relating
                to the purchase of assets of the Hunter GoldMining
                Corporation, a corporation incorporated under the laws of British
                Columbia, Canada, which assets includes the Bates-Hunter Mine, a
                prior
                producing gold mine from the 1860’s until the 1930’s located in Central
                City, Colorado. On January 28, 2008, we executed a fourth amendment
                to the
                formal purchase agreement, including an amendment to change the closing
                date from March 31, 2008 to June 30, 2008. See Note 19 - Subsequent
                Events
                for detailed information regarding the fourth amendment to the formal
                asset purchase agreement. We are continuing with a defined work program,
                which includes dewatering the existing mine shaft and performing
                a surface
                drilling program.





·
            On
                October 31, 2007, we executed an amendment to the formal joint venture
                agreement with Journey Resources Corp., a corporation formed under
                the
                laws of the Province of British Columbia (“Journey”) and Minerales Jazz
                S.A. De C.V., a corporation duly organized pursuant to the laws of
                Mexico
                and a wholly owned subsidiary of Journey. Pursuant to the terms of
                the
                amendment, we own a 50 percent undivided beneficial interest in “located
                mineral claims” in the property known as the Vianey Mine Concession
                located in the State of Guerrero, Mexico (“Vianey”). In addition to
                located mineral claims, our interest includes all surface rights,
                personal
                property and permits associated with Vianey and all other claims,
                leases
                and interests in minerals acquired within two kilometers of the external
                perimeter of Vianey.  All work being performed at Vianey is under the
                supervision of Journey, which mainly consists of cleaning the site
                for a
                future work program.





Additionally,
      we have made $7,000,000 in advance payments on two equity investments to acquire
      interests in the following mining projects located in the People’s Republic of
      China (the “PRC”): (i) a nickel mining operation, the Xing Wang Mine and (ii)
      the iron ore mining properties of Nanjing Sudan Mining Co., Ltd. (which includes
      Maanshan Zhaoyuan Mining Co. Ltd., Xiaonanshan Mining Co., Ltd.) and Changjiang
      Mining Company Limited. Further due diligence is required before we can proceed
      with further negotiations on either of these PRC projects. In January 2008,
      we
      entered into a revised letter agreement establishing a purchase price and
      payment schedule relating to the Nanjing Sudan Mining Co, whereby the purchase
      price was set at 620,000,000 Chinese Remnimbi (approximately $86 million US).
      Depending on the final agreements ultimately agreed to and closed by both
      parties, the Company may also have to issue a significant amount of shares
      of
      common stock as contingent consideration based on the number of tonnes of iron
      ore processed over a period of time from the actual closing
      date.


F-8





Until
      March 14, 2003, we provided industry-specific solutions for managing, sharing
      and collaborating on business information on the Internet through our Hosted
      Solutions Business and until April 30, 2003, we provided accounting software

      through our Accounting Software Business. We sold substantially all of the
      assets relating to our Hosted Solutions and Accounting Software Businesses
      as of
      such dates and as a result, we became an exploratory stage company effective
      May
      1, 2003.





As
      of
      December 31, 2007, we do not directly own any mining permits, we possess only
      a
      few pieces of equipment and we employ insufficient numbers of personnel
      necessary to actually explore and/or mine for minerals. Therefore, we are
      substantially dependent on the third party contractors we engage to perform
      such
      operations.




The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      assuming we will continue as a going concern, which contemplates the realization
      of assets and satisfaction of liabilities in the normal course of business.
      For
      the year ended December 31, 2007, we incurred losses from continuing operations
      of $11,859,197. At December 31, 2007, we had an accumulated deficit of
      $62,301,252 and a working capital deficit of $11,393,352. Our ability to
      continue as a going concern is dependent on our ability to raise the required
      additional capital or debt to meet short and long-term operating requirements.
      We believe that private placements of equity capital and debt financing may
      be
      adequate to fund our long-term operating requirements. We may also encounter
      business endeavors that require significant cash commitments or unanticipated
      problems or expenses that could result in a requirement for additional cash.
      If
      we raise additional funds through the issuance of equity or convertible debt
      securities, the percentage ownership of our current shareholders could be
      reduced, and such securities might have rights, preferences or privileges senior
      to our common stock. Additional financing may not be available upon acceptable
      terms, or at all. If adequate funds are not available or are not available
      on
      acceptable terms, we may not be able to take advantage of prospective business
      endeavors or opportunities, which could significantly and materially restrict
      our operations. We are continuing to pursue external financing alternatives
      to
      improve our working capital position. If we are unable to obtain the necessary
      capital, we may have to cease operations.





As
      of the
      date of this Annual Report, we do not claim to have any mineral reserves on
      our
      properties.





**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of Wits Basin Precious
      Minerals Inc., and our wholly owned subsidiaries: (i) Gregory Gold Producers,
      Inc; (ii) Wits-China Acquisition Corp; (iii) China Global Mining Resources
      Ltd,
      a British Virgin Islands corporation; (iv) China Global Mining Resources Ltd
      a
      Hong Kong corporation; (v) Red Wing Business Systems, Inc; and (vi) Champion
      Business Systems, Inc. After the sale of our Accounting Software Business in
      2003, Red Wing and Champion Business Systems became inactive subsidiaries,
      which
      are represented as discontinued operations in the statement of operations.
      All
      significant intercompany transactions and balances have been eliminated in
      consolidation.





Cash
      and Cash Equivalents





We
      include as cash equivalents: (a) certificates of deposit, and (b) all other
      investments with maturities of three months or less, which are readily
      convertible into known amounts of cash. We maintain our cash in high-quality
      financial institutions. The balances, at times, may exceed federally insured
      limits.


F-9


Property
      and Equipment





Property
      and equipment are recorded at cost and depreciated using the straight-line
      method over estimated useful lives ranging from five to seven
      years.





Long-Lived
      Assets





We
      will
      periodically evaluate the carrying value of long-lived assets to be held and
      used, including but not limited to, capital assets and intangible assets, when
      events and circumstances warrant such a review. The carrying value of a
      long-lived asset is considered impaired when the anticipated undiscounted cash
      flow from such asset is separately identifiable and is less than its carrying
      value. In that event, a loss is recognized based on the amount by which the
      carrying value exceeds the fair value of the long-lived asset. Fair value is
      determined primarily using the anticipated cash flows discounted at a rate
      commensurate with the risk involved. Losses on long-lived assets to be disposed
      of are determined in a similar manner, except that fair values are reduced
      for
      the cost to dispose.





Segment
      Reporting





Due
      to
      the reclassification of our Hosted Solutions Business into discontinued
      operations, we have a single operating segment. The single operating segment
      is
      that of minerals exploration.





Revenue
      Recognition and Deferred Revenue





We
      currently do not have the ability to generate revenues from our investments
      in
      any of our projects. Furthermore, we do not expect to generate revenues for
      the
      foreseeable future.





Exploration
      Expenses





Any
      exploration expenses incurred relating to our projects will be charged as
      incurred.





Use
      of
      Estimates





Preparing
      financial statements in conformity with accounting principles generally accepted
      in the United States of America 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 revenues and expenses during the
      reporting period. Actual results could differ from those estimates.





Stock
      Based Compensation





On
      January 1, 2006, the Company adopted Financial Accounting Standards Board
      (“FASB”) Statement No. 123(R), “Share-Based Payment,” which requires the
      fair value of share-based payments, including grants of employee stock options
      and employee stock purchase plan shares, to be recognized in the income
      statement based on their estimated fair values unless a fair value is not
      reasonably estimable. The Company's consolidated
      financial statements as of and for the years ended December 31, 2007 and 2006,
      reflect the impact of SFAS 123(R). SFAS
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service periods in the Company's consolidated
      statements of operations.





Off
      Balance Sheet Arrangements





As
      of
      December 31, 2007, we did not have any off-balance sheet activities (including
      the use of structured finance or special purpose entities) or any trading
      activities in non-exchange traded commodity contracts that have a current or
      future effect on our financial condition, changes in the financial condition,
      revenues or expenses, results of operation, liquidity, capital expenditures
      or
      capital resources that are material to our investors .


F-10





Financial
      Instruments





The
      carrying amounts for all financial instruments approximates fair value. The
      carrying amounts for cash and cash equivalents, accounts payable and accrued
      liabilities approximated fair value because of the short maturity of these
      instruments. The fair value of short-term debt approximated the carrying amounts
      based upon our expected borrowing rate for debt with similar remaining
      maturities and comparable risk.





Comprehensive
      Income (Loss)





Comprehensive
      income (loss) includes net income (loss) and items defined as other
      comprehensive income (loss). Items defined as other comprehensive income (loss)
      include such items as foreign currency translation adjustments and unrealized
      gains (losses) on certain marketable securities.





Net
      Loss per Common Share





Basic
      net
      loss per common share is computed by dividing net loss applicable to common
      shareholders by the weighted average number of common shares outstanding during
      the periods presented. Diluted net loss per common share is determined using
      the
      weighted average number of common shares outstanding during the periods
      presented, adjusted for the dilutive effect of common stock equivalents,
      consisting of shares that might be issued upon exercise of options, warrants
      and
      conversion of convertible debt. In periods where losses are reported, the
      weighted average number of common shares outstanding excludes common stock
      equivalents, because their inclusion would be anti-dilutive.





As
      of
      December 31, 2007, we have (i) 13,659,500 shares of common stock issuable upon
      the exercise of stock options, (ii) 24,930,238 shares of common stock issuable
      upon the exercise of warrants and (iii) reserved an aggregate of 21,150,000
      shares of common stock issuable under convertible debt agreements. These
      59,739,738 shares, which would be reduced by applying the treasury stock method,
      were excluded from the basic and diluted weighted average outstanding shares
      amount for computing the net loss per common share, because the net effect
      would
      be antidilutive for each of the periods presented.





Income
      Taxes





The
      Company accounts for income taxes using the liability method to recognize
      deferred income tax assets and liabilities. Deferred income taxes are provided
      for temporary differences between the financial reporting and tax bases of
      our
      assets and liabilities at currently enacted tax rates. Deferred tax assets
      are
      reduced by a valuation allowance when, in the opinion of management, it is
      more
      likely than not that some portion or all of the deferred tax asset will not
      be
      realized.





The
      Company has recorded a full valuation allowance against the net deferred tax
      asset due to the uncertainty of realizing the related benefits.





Recent
      Accounting Pronouncements





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, Fair Value Measurements. This statement defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value measurements.
      The statement is effective in the first fiscal quarter of 2008 and we will
      adopt
      the statement at that time. We believe that the adoption of
      SFAS No. 157 will not have a material effect on the Company’s results
      of operations, cash flows or financial position.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
      Financial Assets and  Financial
      Liabilities,” which provides companies with an option to report selected
      financial assets and  liabilities
      at fair value. This standard is effective beginning after December 31, 2007.
      We
      presently do not  anticipate
      that the provisions of SFAS No. 159 will
      apply to the Company .




F-11




In
        December 2007, the FASB issued Statement No. 141R, “Business Combinations,”
which establishes  principles
        for how an acquirer recognizes and measures in its financial statements the
        identifiable assets  acquired
        and liabilities assumed in a business combination, the goodwill
        acquired  in
        a
        business combination, and determines what information to disclose to enable
        users of the financial  statements
        to evaluate the nature and financial effects of a business combination. We
        are
        required to apply  this
        standard prospectively to business combinations for which the acquisition
        date
        is on or after January 1,  2009.
        Earlier application is not permitted.
 
 In
        December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
        Consolidated Financial Statements - an  amendment
        of Accounting Research Bulletin No. 51” (“SFAS No. 160”). SFAS No. 160 will
        change the accounting and reporting for  minority
        interests, which will be re-characterized as non-controlling interests and
        classified as a component of equity. This new  consolidation
        method will significantly change the accounting for transactions with minority
        interest holders. SFAS No. 160 is  effective
        for fiscal years beginning after December 15, 2008, and will be adopted by
        us in
        the first quarter 2009. SFAS No. 160 is  currently
        not expected to have a material effect on the
        Company’s results of operations, cash flows or financial position .
  **NOTE
        3 – RECEIVABLE**
 
 Pursuant
        to a stock subscription agreement for which we accepted in lieu of cash,
        we held
        a secured promissory note dated April 28, 2006, which accrued interest at
        a rate
        of five percent per annum. The note balance was $10,323 at December 31, 2006,
        which we collected in February 2007.
 
 **NOTE
        4 – INVESTMENT**
 
 We
        held
        225,000 shares of MacDonald Mines Exploration Ltd., a Toronto Stock Exchange
        listed company (TSX-V:BMK), that we received under joint venture agreements
        with
        MacDonald. We had received 175,000 of the shares in 2004 and the additional
        50,000 shares in 2006 with respect to certain joint venture agreements in
        Canadian projects. Our original basis in the aggregate 225,000 shares was
        approximately $24,059 and at December 31, 2006, was valued at $21,241. During
        September 2007, we sold all of these shares by utilizing the efforts of a
        U.S.
        registered broker/dealer in open market sales. The sale of these marketable
        securities generated a gain of $65,580, which has been recorded as other
        income/expense for the year ended December 31, 2007.
 
 **NOTE
        5 – PREPAID EXPENSES**
 
 Prepaid
        expenses consist of two components: prepaid consulting fees and other prepaid
        expenses. The prepaid consulting fees include cash and calculated amounts
        from
        the issuance of common stock, warrants or options to consultants for various
        services that we do not have the internal infrastructure to perform. The
        amortization periods coincide with terms of the agreements. The other prepaid
        expenses contain amounts we have prepaid for general and administrative purposes
        and are being expensed as utilized.
 
 During
        2006, we entered into various consulting agreements and issued the following
        to
        nine unaffiliated third party consultants: (i) an aggregate of 3,700,000
        shares
        of un-registered common stock (with an aggregate value of $1,196,000 based
        on
        closing sale prices of our common stock), (ii) warrants to purchase an aggregate
        of 2,550,000 shares of common stock at exercise prices from $0.25 to $1.00
        per
        share (with an aggregate value of $614,575 using the Black-Scholes pricing
        model) with certain of the warrants issued below market price on date of
        grant
        and (iii) $150,000 in cash to one of the consultants. All of these were
        amortized over monthly periods to coincide with the consulting agreements
        and
        have been fully amortized as of December 31, 2007.
 
 In
        June
        2006, we entered into two agreements with related parties. The first was
        a
        management services agreement with Hawk Uranium Inc. (f/k/a Hawk Precious
        Minerals Inc.), whereby Hawk provided certain management and administrative
        services to the Company in consideration of US$50,000. This agreement expired
        on
        December 31, 2006. H. Vance White, our Chairman of the Board, is also an
        officer
        and director of Hawk. The second agreement was a consulting agreement with
        Boston Financial Partners Inc. (a greater than five percent beneficial
        shareholder) as a non-exclusive consultant, pursuant to which Boston Financial
        provided assistance in various matters pertaining to corporate growth, strategic
        planning, public relations and marketing services in consideration of $100,000
        in cash, 625,000 shares of our common stock (valued at $212,500 based on
        the
        closing sale price of our common stock) and a two-year warrant to purchase
        up to
        an aggregate of 1,000,000 shares of our common stock (valued at $304,802
        using
        the Black-Scholes pricing model), at an exercise price of $0.62 per
        share.
  F-12
  During
        the fourth quarter of 2007, we entered into two consulting agreements with
        unaffiliated third party consultants and issued the following: (i) an aggregate
        of 300,000 shares of un-registered common stock (with an aggregate value
        of
        $63,000 based on the closing sale price of our common stock), (ii) a two-year
        warrant to purchase up to 100,000 shares of common stock at exercise price
        of
        $0.30 per share (value at $16,051 using the Black-Scholes pricing model)
        and
        (iii) a ten-year option from our 2001 Employee Stock Option Plan to purchase
        up
        to 100,000 shares of common stock at exercise price of $0.30 per share (value
        at
        $22,688 using the Black-Scholes pricing model).
 
 During
        2007, we additionally entered into two agreements with related parties. (1)
        In
        August 2007, we entered into a new management services agreement with Hawk,
        which requires a US$100,000 payment, which has been accrued but not paid
        as of
        December 31, 2007. The Hawk agreement expired on December 31, 2007. (2) In
        May
        2007 and again in June 2007, we extended the expiration date on two warrants
        held by Thomas Brazil (the principal shareholder of Boston Financial Partners
        Inc.) for services to be rendered during the remainder of 2007. The previously
        issued and outstanding warrants allow for the purchase of up to an aggregate
        of
        1,380,000 shares of common stock at $1.00 per share for a term to May 22,
        2007.
        The modifications extended the term to December 31, 2007 and resulted in
        an
        additional $815,758 of non-cash expense being recorded from the modification
        of
        the expiration dates (calculated using the Black-Scholes pricing
        model).
 
 Included
        in the other prepaid expenses are two bonds (held in the form of a certificate
        of deposit, CD, $10,000 each) required by the State of Colorado for exploration
        activities, which earn nominal interest. The two bonds should not have to
        be
        expensed unless an event requires us to release them to the State.
 
 Components
        of prepaid expenses are as follows:
 
 December
                  31,2007
              
              2006Prepaid
                  consulting fees
              
              $
              35,743
              
              $
              25,827Other
                  prepaid expenses
              
              
              55,287
              
              
              27,988$
              91,030
              
              $
              53,815
 
 **NOTE
        6 – PROPERTY AND EQUIPMENT**
 
 Related
        to our on-going exploration efforts at the Bates-Hunter Mine in Colorado,
        we
        have made certain purchases of equipment necessary to operate and de-water
        the
        property. Depreciation of these purchases is calculated on a straight-line
        method over the estimated useful life, presently ranging from five to seven
        years. Components of our depreciable assets are as follows:
 
 December
                  31,2007
              
              2006Equipment
                  purchases
              
              $
              115,522
              
              $
              106,353Less
                  accumulated depreciation
              
              
              (42,316
              )
              
              (26,266
              )$
              73,206
              
              $
              80,087




F-13




**NOTE
      7 – ADVANCE PAYMENTS ON EQUITY INVESTMENTS**





China
      Global Mining Resources Limited





In
      November and December 2006, SSC Mandarin Group Limited, a British Virgin Islands
      corporation with a principal place of business in Hong Kong (“SSC Mandarin
      Group”), introduced us to various potential mining opportunities located in the
      People’s Republic of China(the "PRC"). From January through June 2007, we made
      loans in the aggregate amount of approximately $7.8 million to SSC Mandarin
      Group, which were used by SSC Mandarin Group to acquire interests in certain
      mining properties (which are described below) located in the PRC through SSC
      Mandarin Group’s wholly owned subsidiary, China Global Mining Resources Limited,
      a British Virgin Islands corporation (“CGMR”). The loans to CGMR were made out
      of the proceeds from the China Gold, LLC convertible promissory notes (see
      Note
      9). In partial consideration for the loans, we received two promissory notes
      of
      CGMR in the respective amounts of $2 and $5 million. CGMR’s obligations under
      the notes were secured by its rights under various acquisition and other
      agreements, including a supply agreement relating to forty tonnes of nickel,
      that CGMR had entered into relating to the mining opportunities (as discussed
      below). Additionally, an aggregate of $500,000 of the amounts loaned to SSC
      Mandarin Group were used to acquire interests in two entities from SSC Mandarin
      Group, SSC Mandarin Africa ($400,000) and SSC-Sino Gold ($100,000), which are
      described below. The remaining $300,000 was expensed for due diligence
      activities relating to the acquisition of the mining interests. Norman D.
      Lowenthal, a director of ours, serves as Vice Chairman of SSC-Sino Gold and
      as a
      director of SSC Mandarin Africa, and until June 2007 served as Chairman of
      SSC
      Mandarin Financial, all of which are affiliates of SSC Mandarin
      Group.





On
      March
      28, 2007, we entered into separate Sale of Shares and Claims Agreements with
      SSC
      Mandarin Group whereby we acquired CGMR and a Hong Kong entity of the same
      name,
      China Global Mining Resources Limited. The Hong Kong entity does not hold any
      assets, but was formed for the right to use the corporate name in Hong Kong.
      Due
      to technical deficiencies in the original Sale of Shares and Claims Agreements,
      we and SSC Mandarin Group re-executed the agreements on July 27, 2007 to resolve
      the deficiencies in the original agreements, and on August 1, 2007 paid the
      nominal purchase price of $10,000 Hong Kong dollars (US$1,317) for each
      corporation as required under the Sale of Shares and Claims Agreements.
      Effective August 1, 2007, we reclassified the $7 million in promissory notes
      received from CGMR as “Advance payments on equity investments” in our financial
      statements to reflect the status of CGMR as our wholly owned subsidiary.





At
      the
      time of the acquisition of CGMR, it held rights to acquire interests in a nickel
      and various iron ore mining properties located in the PRC. As of December 31,
      2007, we hold only the right or option to acquire and do not hold title to
      any
      of these properties, therefore, we have recorded these as advanced payments
      until such time as we complete a transaction. In the event we determine that
      such a transaction will not occur, we will seek to collect our advance payments
      or consider available alternatives.





*Nickel
      – Shanxi Hua Ze Nickel Smelting Co.*





CGMR
      is a
      party to that certain Joint Venture Agreement with Shanxi Hua Ze Nickel Smelting
      Co. (“Shanxi Hua Ze”) dated April 14, 2007, as supplemented on June 6, 2007,
      pursuant to which the parties contemplate a joint venture relating to the Xing
      Wang Mine, a nickel mine located in the Qinghai province of the PRC. Pursuant
      to
      the agreement, CGMR would receive a 25% interest in the joint venture in
      consideration of its contribution of approximately 425 million Chinese Renminbi,
      or RMB, (approximately US$52 million) to the joint venture, such contribution
      to
      be used for the development and improvement of the mining property and
      production facility, the repayment of loans and settlement of other outstanding
      payables and other purposes. Shanxi Hua Ze would receive 75% of the joint
      venture in consideration of its contribution of the mine and related assets.
      Upon the acquisition by the joint venture of additional land with an additional
      200,000 tonnes of nickel, CGMR would be required to contribute an additional
      155
      million RMB (approximately US$19 million). In consideration of this additional
      contribution, CGMR would receive an additional 15% of the equity interest in
      the
      joint venture, resulting in a holding of 40% of the joint venture at such time.
      CGMR further has the right to acquire an additional 40% interest in the joint
      venture from Shanxi Hua Ze if it contributes an additional 580 million RMB
      (approximately US$71 million) on or before June 15, 2008. To date, the parties
      have been unable to meet the agreed upon timetables for contributions due to
      the
      inability to obtain the necessary permits for the joint venture. We are
      currently exploring our options with respect to this project.




F-14


As
      a
      condition to the Joint Venture Agreement, CGMR also entered into a Supply
      Contract with Shanxi Hua Ze to purchase forty tonnes of electrolytic nickel
      (greater than 99% grade) for US$2 million, which payment also served as a
      prepayment of the initial contribution outlined in the Joint Venture Agreement.
      CGMR’s obligations under the Joint Venture Agreement are subject to the receipt
      of certain government approvals. The nickel to be acquired under the Supply
      Contract has been prepaid, and accordingly CGMR is entitled to receive the
      40
      tonnes of nickel pursuant to the terms of any future purchase orders relating
      to
      such nickel. CGMR’s rights under the Supply Contract serve as security for the
      loan to CGMR in the amount of $2 million. Based on current market prices for
      nickel, we believe that the 40 metric tonnes of nickel is worth approximately
      $1.2 million. In the event the transaction is not completed, there can be no
      assurance, however, that CGMR will be able to recover the $2 million advance
      on
      a timely basis, or at all.





*Iron
      Ore – Nanjing Sudan Mining Co., Ltd.*





CGMR
      is a
      party to that certain Equity and Asset Transfer Heads of Agreement, dated May
      4,
      2007 (the “Nanjing Heads of Agreement”) with Maanshan Zhaoyuan Mining Co., Ltd.,
      Xiaonanshan Mining Co., Ltd., and two individual sellers (collectively, the
      “Sellers”), pursuant to which CGMR holds a right to acquire 100% of Nanjing
      Sudan Mining Co., Ltd. (which holds a processing plant), two iron ore mining
      properties located in the PRC (Maanshan Zhaoyuan Mining Co. and Xiaonanshan
      Mining Co.) and related assets for a purchase price of $66 million, to be paid
      in cash or shares of stock of a listed company, as agreed by the parties. Of
      this amount, CGMR has paid an aggregate of 40 million Hong Kong Dollars
      (approximately $5 million US) in the form of two deposits to be credited against
      the purchase price. The consummation of the transaction is subject to the
      completion of definitive agreements, receipt of various governmental approvals,
      the completion by and satisfaction of due diligence by CGMR, and satisfaction
      of
      certain indicated iron ore reserve requirements, among other conditions, which
      have not been fulfilled as of March 31, 2008. Additionally, in the event the
      transaction is consummated, CGMR will be required to enter into an eight-year
      management services contract with one of the sellers. The Nanjing Heads of
      Agreement calls for the completion of definitive documents and the receipt
      of
      necessary government approval by May 30, 2007, but the parties have verbally
      extended the applicable timetable due to a difficulty in obtaining the necessary
      permits.





Subsequent
      to our fiscal year end, on January 25, 2008, the Company, CGMR and the Sellers
      entered into a letter agreement establishing a purchase price and payment
      schedule relating to Nanjing Heads of Agreement. Under the Nanjing Heads of
      Agreement, the purchase price for the assets was dependent upon proven tonnage
      of the Maanshan and Xiaonanshan mines. The letter agreement sets the purchase
      price at 620,000,000 RMB (approximately $86 million US), and requires that
      CGMR
      pay the purchase price in accordance with the following schedule: (1) 25% within
      30 days following the verification that a permit has been obtained with respect
      to Xiaonanshan Mining Company; (2) 50% within 30 days of verification of a
      permit for additional reserves contiguous to the Xiaonanshan mine; and (3)
      25%
      within 30 days following the verification of a permit for Maanshan Zhaoyuan
      Mining Co. On March 24, 2008, the parties further amended the terms of Nanjing
      Heads of Agreement to include a production incentive whereby we would be
      required to issue a substantial number of our unregistered shares of common
      stock to the sellers upon the achievement of certain performance criteria
      relating to the delivery of iron ore within certain stated time frames. Based
      on
      our discussions with the Sellers, we anticipate the permits relating to the
      Xiaonanashan Mining Company will be obtained in the first half of 2008, at
      which
      time our obligation to pay 25% of the purchase price as set forth in the letter
      agreement will arise. We are in the process of obtaining third-party financing
      to assist us in proceeding with this transaction.





At
      the
      time of our acquisition of CGMR, it had advanced an aggregate of $5 million
      to
      the Sellers which may be applied by CGMR against the purchase price. In the
      event the transaction is not completed, there can be no assurance that CGMR
      will
      be able to recover the $5 million of advances on a timely basis, or at all.




F-15


*Iron
      Ore – Yun County Changjiang Mining Company Ltd.*





CGMR is
      also
      party to that certain Equity Transfer Heads of Agreement (“Changjiang Heads of
      Agreement”) dated May 4, 2007 with three individual sellers, whereby CGMR holds
      a right to acquire a 95% equity interest in Yun County Changjiang Mining Company
      Limited (“Changjiang”), which holds licenses to explore for iron ore in the
      Hubei province of the PRC, for an aggregate of $57 million. The purchase price
      is to be paid by up to $15 million in cash and the remainder in shares of stock
      of a listed company. Two of the sellers, holding an aggregate of 90% of the
      interest in Changjiang), are parties to the Nanjing Heads of Agreement. Under
      the Changjiang Heads of Agreement, CGMR is required to arrange for a loan to
      Changjiang in the amount of $10 million, such loan to be secured by the capital
      stock of Changjiang. Additionally, in the event CGMR and Changjiang enter into
      an exclusive supply agreement relating to the purchase by CGMR of iron ore
      from
      Changjiang, CGMR will also be required to arrange for an additional loan to
      Changjiang, the amount of such loan to be determined based on the reserves
      of
      iron ore located on the related mining properties, but not to exceed 1.2 billion
      RMB. The consummation of the transaction is subject to the completion of
      definitive agreements, receipt of various governmental approvals, the completion
      by and satisfaction of due diligence by CGMR, and satisfaction of certain
      indicated iron ore reserve requirements, among other conditions. Additionally,
      in the event the transaction is consummated, CGMR will be required to enter
      into
      an eight-year management services contract with one of the sellers. As of
      December 31, 2007, no funds have been advanced for this project. The resources
      that will be required to complete this transaction are substantial, and greater
      than we can currently support. Accordingly, we are seeking an industry partner
      to assist us in completing this transaction.





Agreement
      to acquire interest in SSC Mandarin Africa (Proprietary)
      Limited





On
      March
      28, 2007, we entered into a Sale of Shares and Claims Agreement with SSC
      Mandarin Financial Services Limited (“SSC Mandarin Financial”) and SSC Mandarin
      Africa (Proprietary) Limited, a company incorporated under the laws of the
      Republic of South Africa (“Mandarin Africa”), relating to the acquisition of a
      40% equity interest in Mandarin Africa for a purchase price of US$400,000.
      The
      purchase price was paid on February 14, 2007. Due to technical deficiencies
      in
      the original agreement, we and SSC Mandarin Financial re-executed the agreement
      on July 27, 2007 to resolve the deficiencies in the original agreement. SSC
      Mandarin Financial is an affiliate of SSC Mandarin Group. Norman D. Lowenthal,
      a
      director of ours, served as Chairman of SSC Mandarin Financial until June 2007,
      and remains a director of Mandarin Africa.





Mandarin
      Africa’s only asset was a two-year Collaboration Agreement with Kumba Iron Ore
      (an affiliate of Anglo American PLC) dated August 4, 2006, whereby Mandarin
      Africa could potentially earn a finders fee with respect to any PRC iron ore
      mining projects it introduced to Kumba that Kumba subsequently acquired.
      Subsequent to December 31, 2007, we were informed by Kumba Iron Ore that it
      had
      no interest in reviewing any iron ore projects for the near term, and that
      it
      would not pursue any properties potentially subject to the Collaboration
      Agreement. Furthermore, we are unable to consummate our acquisition of the
      40%
      equity interest in Mandarin Africa and obtain a stock certificate representing
      such interest as we have learned that SSC Mandarin Financial is unable to
      transfer the interest as agreed. Therefore, we expensed the entire $400,000
      representing the investment, effective December 31, 2007, and claim not to
      hold
      any ownership in Mandarin Africa.





Agreement
      to acquire option to acquire an interest in SSC-Sino Gold Consulting Co.
      Limited





On
      March
      28, 2007, we entered into an Option Agreement (the “Option Agreement”) with SSC
      Mandarin Financial and SSC-Sino Gold Consulting Co. Limited, a company
      incorporated under the laws of the PRC (“SSC-Sino Gold”), pursuant to which we
      acquired, for US$100,000, a three-year option to purchase a 60% equity interest
      in SSC-Sino Gold for an exercise price of US$5,000,000. Norman D. Lowenthal,
      one
      of our directors, was then and continues to serve as Vice Chairman of SSC-Sino
      Gold. We paid the purchase price on March 22, 2007. Due to technical
      deficiencies in the original agreement, the parties re-executed the agreement
      on
      July 27, 2007 to resolve the deficiencies in the original agreement. SSC-Sino
      Gold holds rights to acquire an 80% interest in Tongguan Taizhou Gold Mining
      Co., Ltd., which holds licenses relating to a gold mine located in the Shaanxi
      province of the PRC.




F-16


On
      October 15, 2007, we received a notice of termination of the Sale of Shares
      and
      Claims Agreements with SSC Mandarin Group relating to the acquisition of CGMR
      (as discussed above), whereby SSC Mandarin Group alleged that the parties agreed
      to certain amended terms to the Sale of Shares and Claims Agreements, and that
      we had breached those amended terms. In an effort to resolve the potential
      dispute with SSC Mandarin Group, on December 12, 2007, we entered into a
      Termination of Option Agreement (the “Termination Agreement”) by and among SSC
      Mandarin Group, CGMR, and China Global Mining Resources Limited (Hong Kong)
      whereby we relinquished our right to purchase a 60% equity interest in SSC-Sino
      Gold under the Option Agreement. Under the Termination Agreement, we agreed
      to
      pay SSC Mandarin Group within 60 days an aggregate of 3,850,000 Hong Kong
      Dollars (approximately $500,000 US) as reimbursement for expenses incurred
      by
      SSC Mandarin Group for the wholly-foreign owned enterprises (“WFOE”) established
      for the iron ore projects (Maanshan and Changjiang). Additionally, we and SSC
      Mandarin Group have agreed to offset other payment obligations to one another
      on
      the later of 90 days and the date we complete due diligence and obtain the
      necessary title and permits for the iron ore projects. These offsets currently
      result in an obligation of the Company to pay SSC Mandarin Group approximately
      an additional $750,000, but we believe that we are entitled to additional
      offsets from SSC Mandarin Group in an amount equal to or greater than
      $750,000.





Due
      to
      the termination of the Option Agreement, effective December 31, 2007, we have
      expensed the entire $100,000 representing the purchase price of the option
      and
      do not claim to hold any ownership in developments in the Tongguan Taizhou
      Gold
      Mining Co.





Summary





As
      of
      December 31, 2007, we hold only the right or option to acquire and do not hold
      title to any of these properties, therefore, we have recorded these as advanced
      payments until such time as we complete a transaction. In the event we determine
      that such a transaction will not occur, we will seek to collect our advance
      payment or consider available alternatives.




**NOTE
      8 – DEBT ISSUANCE COSTS**





With
      respect to legal services relating to promissory notes issued during 2007,
      we
      paid $52,895 of debt issuance costs. The following table summarizes the
      amortization of debt issuance costs:





December
                31,2007
            
            2006Gross
                debt issuance costs
            
            $
            52,895
            
            $
            7,361Less:
                amortization of debt issuance costs
            
            
            (36,480
            )
            
            (7,361
            )Debt
                issuance costs, net
            
            $
            16,415
            
            $
            —




**NOTE
      9 – CONVERTIBLE NOTES PAYABLE**





China
      Gold, LLC





On
      April
      10, 2007, we entered into a Convertible Securities Purchase Agreement with
      China
      Gold, LLC, a Kansas limited liability company (“China Gold”), whereby we agreed
      to offer and sell, and China Gold agreed to purchase, an aggregate of
      $12,000,000 in convertible secured promissory notes over 12 months, with up
      to
      an additional $13,000,000 in convertible secured promissory notes to be issued
      at the discretion of both parties. The issuance and sale of convertible secured
      promissory notes under the Convertible Securities Purchase Agreement was subject
      to certain conditions, including Wits Basin having a sufficient number of
      authorized and unissued shares available to permit the conversion of the
      outstanding promissory notes issued to China Gold. Promissory notes issued
      under
      the Convertible Securities Purchase Agreement had a five-year term, bear
      interest at a rate of 8.25%, and are convertible at the option of the holder,
      after the expiration of 120 days from the date of issue, into shares of our
      common stock at a conversion price of $1.00 per share. The notes are also
      subject to automatic conversion in certain conditions. On April 10, 2007, we
      issued and sold the initial promissory note under the Convertible Securities
      Purchase Agreement in the aggregate amount of $3,000,000, with a purchase
      discount of $60,000 (“Note 1”). Additionally, on May 7, 2007, we offered and
      sold to China Gold an additional convertible secured promissory note under
      the
      Convertible Securities Purchase Agreement in the aggregate amount of $2,000,000,
      with a purchase discount of $40,000 (“Note 2”).


F-17





On
      June
      19, 2007, we entered into an Amendment to Convertible Notes Purchase Agreement
      with China Gold, whereby the parties amended the terms of the Convertible Notes
      Purchase Agreement discussed above (as amended, the “Purchase Agreement”) to (a)
      clarify that the obligations of the parties under the Purchase Agreement to
      sell
      and purchase convertible notes under the Purchase Agreement shall terminate
      at
      the earlier of (i) April 10, 2008 and (ii) the date of effectiveness of our
      proposed merger with Easyknit Enterprises Holdings Limited (“Easyknit”), (b) to
      provide us an opportunity to prepay our obligations under notes issued under
      the
      Purchase Agreement, in which case China Gold is entitled to a purchase right
      to
      acquire shares of our common stock at equivalent terms to its rights to
      otherwise convert the notes issued under the Purchase Agreement, and (c) extend
      certain registration rights of China Gold.





Furthermore,
      on June 19, 2007, we sold China Gold an additional note under the Purchase
      Agreement in the principal amount of $4,000,000, with a purchase discount of
      $80,000 (“Note 3”). Note 3 bears interest at a rate of 8.25% per annum, and is
      convertible at the option of China Gold into shares of our common stock at
      a
      conversion price of $1.00 per share, subject to anti-dilutive adjustments.
      Additionally, the outstanding balance on the Notes was subject to automatic
      conversion in the event we completed the proposed merger transaction with
      Easyknit. Note 3 is payable in full at the earlier of maturity or at such time
      that we and our subsidiaries receive financing in the aggregate amount of at
      least $50,000,000 from a third party. The maturity date of Note 3 was September
      17, 2007, but was subject to extensions upon our request for additional periods
      of thirty (30) days, but in no event later than December 31, 2007, provided
      that
      at the time of each such extension we and Easyknit had not terminated the
      proposed merger. In the event the merger was terminated after September 17,
      2007, our obligations under Note 3 were to become due and payable upon the
      expiration of fifteen (15) days following demand of China Gold. We also provided
      China Gold demand and piggyback registration rights relating to the resale
      of
      the shares of common stock issuable upon conversion of Note 3.





On
      July
      9, 2007, we sold China Gold an additional note under the Purchase Agreement
      in
      the principal amount of $800,000, with a purchase discount of $16,000 (“Note 4”
and collectively with Note 1, Note 2 and Note 3, the “Notes”). Note 4 bears
      interest at a rate of 8.25% per annum, and is convertible at the option of
      China
      Gold into shares of our common stock at a conversion price of $1.00 per share,
      subject to anti-dilutive adjustments. Additionally, the outstanding balance
      on
      Note 4 was subject to automatic conversion in the event we completed the
      proposed merger transaction with Easyknit. Note 4 is payable in full at the
      earlier of maturity or at such time that we and our subsidiaries receive
      financing in the aggregate amount of at least $50,000,000 from a third party.
      The maturity date of Note 4 was October 7, 2007, but was subject to extensions
      upon our request for additional periods of thirty (30) days, but in no event
      later than December 31, 2007, provided that at the time of each such extension
      we and Easyknit had not terminated the proposed merger. In the event the merger
      was terminated after October 7, 2007, our obligations under Note 4 were to
      become due and payable upon the expiration of fifteen (15) days following demand
      of China Gold. We also provided China Gold demand and piggyback registration
      rights relating to the resale of the shares of common stock issuable upon
      conversion of Note 4.




In
      the
      event the Company and/or any of our majority-owned subsidiaries receive, at
      a
      time when any Notes remain outstanding, cumulative financing in the form of
      cash
      or immediately available funds from one or more third parties in the aggregate
      amount of at least $50,000,000 from and after June 19, 2007, (a “Substantial
      Financing”), the outstanding Notes issued under the Purchase Agreement shall be
      due and payable out of the proceeds from such Substantial Financing. In the
      event such prepayment of any or all outstanding Notes, the respective Holder
      of
      each such prepaid Note shall be entitled to receive from the Company, from
      the
      date of such prepayment until the earlier of (i) immediately prior to the
      proposed Easyknit merger or (ii) five (5) years from the date of such
      prepayment, at a purchase price of $1.00 per share, the right to purchase the
      number of shares of our common stock equal to the amount prepaid on such Note
      divided by $1.00.


F-18





On
      October 31, 2007, we entered into a letter agreement with China Gold whereby
      the
      parties amended the maturity date on each of the Notes to February 29, 2008.
      As
      consideration for the Note extensions, we agreed to reduce the conversion price
      applicable to the Notes from $1.00 to $0.50 per share and to reduce the purchase
      price applicable to certain purchase rights of China Gold under the Notes from
      $1.00 to $0.50 per share. The letter agreement further gives us an option to
      obtain, at our sole discretion, an extension of the maturity dates of the
      respective Notes to May 31, 2008 in consideration for a further reduction in
      the
      conversion price applicable to the Notes and the purchase price relating to
      purchase rights provided under the Notes from $0.50 to $0.25 per share. We
      exercised our right to extend the maturity date to May 31, 2008 by giving notice
      to China Gold in February 2008.





As
      of
      December 31, 2007, we have issued an aggregate of $9,800,000 of Notes under
      the
      Purchase Agreement and have received net proceeds of $9,604,000, less $196,000
      paid to an affiliate of China Gold in the form of a loan discount fee. The
      resulting original issue discount is being amortized over the life of the Notes
      using the straight-line method, which approximates the interest method. We
      also
      agreed to pay $40,000 in accountable expenses of China Gold with respect to
      the
      Notes issued under the Purchase Agreement.





Other
      Third Party





In
      December 2007, in consideration of an unsecured loan from an unaffiliated third
      party, we received net proceeds of $100,000 and issued a convertible promissory
      note in the principal amount of $110,000. The promissory note has a maturity
      date of March 31, 2008, and bears interest at a rate of 10% per annum.
      Furthermore, the note holder has the right to convert any portion of the
      principal or interest of the outstanding note into shares of our common stock
      based on a conversion rate equal to $0.20 per share and is considered to be
      conventional convertible debt under the accounting guidance of Emerging Issues
      Task Force (“EITF”) 05-2 “The Meaning of ‘Conventional Convertible Debt’ in
      Issue No. 00-19”. Under the terms of the convertible promissory note and as
      additional consideration for the loan, we issued a warrant to purchase up to
      100,000 shares of our common stock at $0.20 per share with an expiration date
      of
      February 12, 2009. The application of the provisions of EITF 98-5, “Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to
      Certain Convertible Instruments” resulted in the proceeds of the loan being
      allocated based on the relative fair value of the loan and warrants. Lastly,
      due
      to the reduced relative fair value assigned to the convertible debt, the debt
      had a beneficial conversion feature that was “in-the-money” on the commitment
      date which totaled $27,500. Since the debt was convertible on the issuance
      date,
      the entire beneficial conversion amount was charged to interest expense
      immediately.





The
      following table summarizes the convertible note balances:





Original
                gross proceeds
            
            $
            9,910,000Less:
                original issue discount at time of issuance of notes
            
            
            (206,000
            )Less:
                principal payments
            
            
            —Less:
                value assigned to beneficial conversion feature and
                warrants
            
            
            (40,224
            )Add:
                amortization of original issue discount and beneficial conversion
                feature
            
            
            179,507Balance
                at December 31, 2007
            
            $
            9,843,283




F-19


**NOTE
      10 – SHORT-TERM NOTES PAYABLE**





In
      fiscal
      2005, we had borrowed an aggregate of $750,000 from three lenders with each
      one
      receiving warrants to purchase shares of our common stock and two of them,
      Andrew Green and Pacific Dawn Capital, LLC. (as of December 31, 2007, Mr. Green
      and Pacific Dawn Capital each beneficially owned more than five percent of
      our
      securities) received the right to convert any portion of the principal or
      interest of their outstanding notes into shares of our common stock based on
      a
      conversion rate equal to $0.20 per share and was considered to be conventional
      convertible debt under the accounting guidance of Emerging Issues Task Force
      (“EITF”) 05-2. During the first quarter of fiscal 2006, we borrowed an
      additional $350,000 from Mr. Green.





In
      April
      2006, we entered into amendments to the arrangements with each of the three
      lenders, extending the maturity of each of the notes for an additional 30 days.
      In consideration of these extensions, we issued an aggregate of 110,000 shares
      of our common stock to the lenders (with an aggregate fair value of $27,100,
      based on the closing sale price of our common stock on the date of issuance
      as
      listed on the OTCBB) and we gave each lender an option, at any time on or prior
      to August 31, 2006, the right-to- purchase a number of shares of our common
      stock, at a price per share of $0.20, equal to, but not greater than, the final
      principal and interest balance of their respective note divided by the $0.20
      per
      share price. One of the note holders right to purchase expired on August 31,
      2006. During the three months ended June 30, 2006, we recorded an expense
      relating to the right-to-purchase of the three lenders of $628,643 (the fair
      value of the aggregate shares calculated using the Black-Scholes pricing model)
      resulting in a non-cash interest expense.





We
      paid
      off the obligations under the three notes in May 2006, which required an
      aggregate of $1,100,000 in cash principal payments. The notes had accumulated
      an
      aggregate of $69,239 in interest payable. We paid $3,353 in cash to one note
      holder and paid the remaining $65,886 by the issuance of 329,432 shares (valued
      at $0.20 per share) of our common stock.





In
      August
      2006, we entered into standby joint venture financing agreements with two of
      the
      lenders, Mr. Green and Pacific Dawn, whereby they individually could participate
      in joint venture or financing arrangements for the purpose of financing future
      mineral exploration projects. As partial consideration for their entering into
      their respective standby joint venture financing agreements, we extended the
      term of each of their right-to-purchase shares at $0.20 per share from August
      31, 2006 to March 31, 2007. Since the right-to-purchase price of $0.20 was
      below
      the fair value of our underlying common stock on the modification date, we
      calculated an additional fair value of $363,000 using the Black-Scholes pricing
      model and recorded the entire amount as interest expense for the three months
      ended September 30, 2006 as neither was required to participate in any joint
      venture or financing during the period of the agreements, which agreements
      expired in 2007.





In
      February 2007, in consideration of a new $700,000 loan to the Company from
      Mr.
      Green, we issued a promissory note in the principal amount of $700,000 to Mr.
      Green. The promissory note had a maturity date of March 31, 2007, and bore
      interest at a rate of 6% per annum. The promissory note was paid in full on
      March 29, 2007 along with accrued interest of $3,912. Under the terms of the
      new
      promissory note and as additional consideration for the loan, we reduced the
      exercise price of certain of his pre-existing warrants to purchase up to an
      aggregate of 3,550,000 shares of our common stock from $0.12 to $0.09125 and
      extended the expiration date of his right-to-purchase of up to 3,000,000 shares
      of common stock at a price per share of $0.20 from March 31, 2007 to December
      31, 2007. The fair value of these equity modifications totaling $202,844 was
      recorded as a discount to the note and was amortized over the term of the
      note.





In
      April
      2007, in consideration of a new $625,000 loan from Mr. Green, we issued a
      promissory note to Mr. Green in the principal amount of $625,000. The promissory
      note bore simple interest at a rate of 12% per annum and was paid in full in
      June 2007 along with $11,096 of interest.


F-20





In
      September 2007, in consideration of a new $100,000 loan from Pacific Dawn,
      we
      issued a promissory note in the principal amount of $100,000 to Pacific Dawn.
      The promissory note had an original maturity date of October 21, 2007, and
      bears
      interest at a rate of 5% per annum. Under the terms of the promissory note
      and
      as additional consideration for the loan, we reduced the exercise price of
      his
      right-to-purchase of up to 1,000,000 shares of our common stock from $0.20
      to
      $0.15 per share and extended the expiration date from December 31, 2007 to
      December 31, 2008 of said rights. In December 2007, we memorialized an extension
      to the maturity date from October 21, 2007 to January 21, 2008 and provided
      a
      further price reduction of his right-to-purchase from $0.15 to $0.10 per share.
      The fair value of these equity modifications totaled $101,457 and was recorded
      as a discount to the note and is being amortized through January 21,
      2008.





In
      September 2007, in consideration of an unsecured $50,000 loan from Mrs. Nancy
      White, a Canadian citizen and the mother of H. Vance White, our Chairman, we
      issued a promissory note in the principal amount of $50,000 to Mrs. White.
      The
      promissory note had an original maturity date of December 21 2007, and bears
      interest at a rate of 10% per annum. In December 2007, we negotiated an
      extension on the maturity date to be January 11, 2008. Under the terms of the
      promissory note and as additional consideration for the initial loan, we issued
      a warrant to purchase up to 100,000 shares of our common stock, with an original
      exercise price of $0.27 per share, to expire October 3, 2009. As additional
      consideration for the extension of the maturity date, we agreed to a reduction
      in the exercise price of the warrant from $0.27 per share to $0.20 per share.
      The proceeds of the unsecured loan were allocated based on the relative fair
      value of the loan and the warrant granted in accordance with APB 14, “Accounting
      for Convertible Debt and Debt Issued with Stock Purchase Warrants.” The fair
      value of the warrant (including the reduction to the exercise price) was $15,443
      based on the Black Scholes pricing model and is being amortized over the term
      of
      the debt.





In
      November 2007, in consideration of an unsecured loan from Shirley Co. LLC,
      a
      Colorado limited liability company, we received net proceeds of $100,000 and
      issued a promissory note in the principal amount of $110,000 to Shirley Co.
      The
      promissory note has a maturity date of February 11, 2008, and bears interest
      at
      a rate of 10% per annum. Under the terms of the promissory note and as
      additional consideration for the loan, we issued a warrant to purchase up to
      100,000 shares of our common stock at $0.20 per share with an expiration date
      of
      November 12, 2009. The proceeds of the unsecured loan were allocated based
      on
      the relative fair value of the principal amount and the warrant granted in
      accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with
      Stock Purchase Warrants.” The fair value of the warrant was $12,138 based on the
      Black Scholes pricing model and is being amortized over the term of the
      debt.





The
      following table summarizes the notes payable balances:





Original
                gross proceeds received in 2005
            
            $
            750,000Less:
                original issue discount at time of issuance of notefor
                common stock and warrants
            
            
            (521,304
            )Less:
                beneficial conversion feature
            
            
            (179,977
            )Add:
                amortization of original issue discount andbeneficial
                conversion feature
            
            
            252,392Balance
                at December 31, 2005
            
            
            301,111Add:
                additional draws received in the 1stQuarter 2006
            
            
            350,000Less:
                original issue discount at time of issuance of notewith
                warrants
            
            
            (252,014
            )Less:
                beneficial conversion feature
            
            
            (97,986
            )Add:
                amortization of original issue discount andbeneficial
                conversion feature
            
            
            798,889Less:
                principal payments
            
            
            (1,100,000
            )Balance
                at December 31, 2006
            
            $
            —Add:
                additional loans received in 2007
            
            
            1,585,000Less:
                original issue discount at time of issuance of noterelated
                to cash and warrants
            
            
            (341,882
            )Add:
                amortization of original issue discount
            
            
            316,102Less:
                principal payments
            
            
            (1,325,000
            )Balance
                at December 31, 2007
            
            $
            234,220




F-21





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES**





Operating
      Leases





We
      currently occupy approximately 160 square feet of office space, together with
      the use of related adjacent common areas, in Minneapolis, Minnesota pursuant
      to
      a lease agreement that expires May 31, 2009. Under the lease, we are required
      to
      make monthly payments of $1,261 through May 2009. Total rent expense under
      operating leases for the years ended December 31, 2007 and 2006, was $14,837
      and
      $16,485, respectively.





Future
      minimum operating
      lease commitments are as follows for the years ending December 31:





2008
            
            $
            15,1442009
            
            
            6,310$
            21,454




**NOTE
      12 – LEGAL MATTERS**





The
      Company is subject to legal proceedings in the normal course of business. The
      Company is currently addressing a matter relating to a termination of a
      consulting arrangement relating to SSC Mandarin Africa and SSC-Sino Gold of
      which the agent is disputing the amount of reimbursable expenses owed to them.
      Management believes that this proceeding will not have a material adverse effect
      on the financial statements.





Terminated
      Merger Transaction with Easyknit Enterprises





In
      an
      effort to finance our potential transactions in the PRC through access to the
      capital markets in Hong Kong, on April 20, 2007, we entered into an Agreement
      and Plan of Merger and Reorganization (the “Merger Agreement”) with Easyknit
      Enterprises Holdings Limited, a Bermuda corporation with its principal place
      of
      business in Hong Kong that is listed on the Hong Kong Stock Exchange (SEHK:
      0616) (“Easyknit”), and Race Merger, Inc., a Minnesota corporation and wholly
      owned subsidiary of Easyknit (“Merger Sub”). Pursuant to the Merger Agreement,
      the parties contemplated the merger of Merger Sub with and into the Company,
      with the Company constituting the surviving corporation to the merger and a
      wholly owned subsidiary of Easyknit following completion of the merger.





In
      the
      course of due diligence on the proposed merger transaction, on August 15, 2007,
      we filed a declaratory judgment action in the District Court in the Fourth
      Judicial District of the State of Minnesota against Easyknit and Race Merger
      seeking a declaration by the court that we were entitled to terminate the Merger
      Agreement pursuant to its terms based on our conclusion, determined in our
      sole
      and absolute discretion, that the merger transaction was not in the best
      interests of our shareholders based on our due diligence findings. We also
      asserted alternative grounds that there existed a material adverse change in
      the
      financial condition of Easyknit. On October 15, 2007, Easyknit filed an Answer
      and Counterclaim seeking a declaration by the court that it was entitled to
      a
      $30 million termination fee in the event we terminated the Merger Agreement
      or
      it terminated the Merger Agreement based on our alleged breach of contract.





On
      November 1, 2007, we terminated the Merger Agreement. On December 18, 2007,
      we
      entered into a Settlement Agreement and General Release (the “Settlement
      Agreement”) with Easyknit, whereby the parties agreed to dismiss with prejudice
      and release each other from all claims, counterclaims and defenses that touched
      upon or arose out of the parties’ Merger Agreement or which were asserted or
      could have been asserted in the litigation between the parties venued in the
      District Court in the Fourth Judicial District of the State of
      Minnesota.





We
      have
      recorded $1,238,619 of direct merger expenses for the year ended December 31,
      2007.




F-22





**NOTE
      13 - SHAREHOLDERS’ EQUITY**





Common
      Stock Issuances





In
      January 2006, as a continuation of certain May 2005 warrant exercise agreements
      with two consultants, we provided the consultants a reduced exercise price
      (at
      $0.20 per share) on previously issued and outstanding warrants (originally
      priced from $0.40 to $5.50 per share), whereby an additional 695,450 warrants
      were exercised into common stock.





In
      March
      2006, we issued 150,000 shares of our common stock to the principal owner of
      a
      public relations firm, in exchange for amounts due them for services rendered
      totaling $39,000, which we had previously recorded as accounts
      payable.





In
      April
      2006, we entered into amendments to the arrangements with each of three
      promissory note holders, extending the maturity of each of the notes for an
      additional 30 days. In consideration of these extensions, we issued an aggregate
      of 110,000 shares of our common stock to the note holders.





In
      May
      2006, we issued 20,794 shares of our common stock to a consultant, who, pursuant
      to a cashless exercise clause, surrendered 29,206 of the available shares to
      pay
      for the exercise. We issued the 50,000 two-year warrant to purchase shares
      of
      our common stock in May 2005, with an exercise price of $0.25 per
      share.




We
      paid
      off the obligations under the three promissory notes in May 2006, which had
      accumulated an aggregate of $69,239 in interest payable. We paid $3,353 in
      cash
      to one note holder and paid the remaining $65,886 by the issuance of 329,432
      shares (valued at $0.20 per share) of our common stock.





Under
      the
      provisions of the Pacific Dawn Capital loan agreement, Pacific had the
      right-to-purchase shares of our common stock (based on a $0.20 per share
      purchase price) of the principal balance. Of the available right-to-purchase
      option of 2,000,000 shares available, Pacific purchased 1,000,000 shares of
      common stock in December 2006.





In
      December 2006, a consultant exercised a stock option held into 200,000 shares
      of
      common stock. The stock option was issued in October 2005.





During
      fiscal 2006, we issued an aggregate of 690,000 shares of our common stock to
      acquire exploration rights on two projects: we issued 40,000 shares to Hawk
      for
      rights to the MacNugget Claims and a total of 600,000 shares to Journey and
      50,000 shares to an unrelated third party for rights to Vianey.





During
      fiscal 2006, we entered into various agreements with consultants for services
      in
      public and investor relations. A total of 5,432,000 shares of our un-registered
      common stock were issued as follows: in January we issued 1,257,000 shares;
      in
      February we issued 500,000 shares; in March we issued 950,000 shares; and in
      June we issued 2,725,000 shares.





During
      fiscal 2006, shareholders exercised an aggregate of 20,445,734 stock purchase
      warrants into common stock.





In
      January 2007, we issued 300,000 shares of our unregistered common stock to
      Relevant Marketing, LLC, a consultant, who exercised a stock purchase warrant
      (issued in April 2005 with an original exercise price of $0.50 per share),
      subsequently re-priced to $0.15 per share. Relevant Marketing paid $15,000
      in
      March 2007 and the remaining balance in November 2007. The president of
      Relevant Marketing is the step-daughter of our CEO, Stephen D. King.


F-23





In
      January 2007, we issued to Andrew Green, a significant shareholder of the
      Company, 1,250,000 shares of common stock pursuant to his exercise of stock
      purchase warrants with an exercise price of $0.12 per share and we received
      $150,000 in proceeds. In March 2007, we issued to Mr. Green (1) 3,550,000 shares
      of common stock pursuant to his exercise of his remaining outstanding warrants
      with the reduced exercise price of $0.09125 per share and we received $323,937
      in proceeds and (2) 1,450,000 shares of common stock pursuant to his exercise
      of
      his right-to-purchase option at $0.20 per share and we further received $290,000
      in proceeds. In June 2007, we issued to Mr. Green 1,550,000 shares of common
      stock pursuant to his exercise of his right-to-purchase option at $0.20 per
      share and we received $310,000 in proceeds.





In
      January 2007, we issued 500,000 shares of our unregistered common stock to
      Journey Resources Corporation relating to our option to earn our first undivided
      25 percent interest in the Vianey Mine.




In
      May
      2007, we issued 1,200,000 shares of our unregistered common stock to William
      Green, upon his exercise of a warrant at $0.12 per share. Mr. Green is our
      President of Asia Operations and the brother of Andrew Green.





In
      September 2007, we issued 100,000 shares of our unregistered common stock to
      a
      non-US vendor, who provided extended terms on payables due to him.





In
      October 2007, we executed an amendment to the joint venture agreement with
      Journey Resources Corporation relating to our option to earn the final undivided
      25 percent interest in the Vianey Mine, whereby we issued 1,600,000 shares
      of
      our unregistered common stock to Journey in lieu of the $400,000 payment due
      under the agreement.





From
      September to December 2007, through a private placement of units of our
      unregistered securities (each unit consisting of one share of our unregistered
      common stock and a five-year warrant to purchase one share of common stock
      at an
      exercise price of $0.25 per share) we sold 2,400,000 units at a price per unit
      of $0.25, resulting in gross proceeds of $600,000 less offering costs of
      $30,000.





In
      November and December 2007, through a private placement of our securities,
      we
      sold 2,193,334 shares of our common stock at $0.15 per share, resulting in
      gross
      proceeds of $329,000 less offering costs of $15,465.





In
      December 2007, we entered into agreements with two consultants for services
      in
      public and investor relations and issued an aggregate of 550,000 shares of
      our
      unregistered common stock with a fair value totaling $123,000.





During
      fiscal 2007, we issued 2,591,460 shares of our unregistered common stock
      pursuant to the exercise of warrants as follows:


(1)
            Two
                lenders exercised warrants into 1,800,000 shares with exercise prices
                of
                $0.12 and $0.40 per share related to promissory
                notes;


(2)
            An
                individual private placement holder exercised his Class C Redeemable
                Warrant into 62,500 shares at $0.50 per
                share;


(3)
            We
                issued 398,960 shares to two consultants, who, pursuant to a cashless
                exercise clause, surrendered 251,040 of the available shares to pay
                for
                the exercise, with a range of exercise prices from $0.25 to $0.75
                per
                share; and


(4)
            Four
                consultants exercised warrants into an aggregate of 330,000 shares
                with a
                range of exercise prices from $0.12 to $0.30 per share.




Warrant
      Grants





During
      January and February 2006, relating to the issuance of two promissory notes,
      we
      issued five-year warrants to purchase an aggregate of 3,500,000 shares of common
      stock at $0.12 per share as additional consideration.





In
      January 2006, we issued two 100,000 two-year warrants to purchase common stock
      at $0.20 per share for consultant services, valued at $53,104.


F-24





In
      February 2006, we issued two-year warrants to purchase an aggregate of 1,150,000
      shares of common stock as follows: 150,000 at $0.25 per share; 500,000 at $0.50
      per share; and 500,000 at $1.00 per share all for consultant services, valued
      at
      $253,335.





Effective
      March 31, 2006, we terminated an exclusive placement agent agreement (entered
      into on January 30, 2006) with the issuance of a five-year stock purchase
      warrant to purchase up to 250,000 shares of our common stock, with an exercise
      price of $0.25 per share, valued at $55,020.





In
      April
      2006, we issued two-year warrants to purchase an aggregate of 500,000 shares
      of
      common stock as follows: 200,000 at $0.30 per share and 300,000 at $0.50 per
      share all for consultant services, valued at $103,531.





In
      April
      2006, we completed a round of financing through the exercise of issued and
      outstanding warrants. One incentive of the exercise offer was the receipt of
      one
      Class C Redeemable Warrant for each two shares purchased upon exercise of
      previously held warrants. We issued Class C Redeemable Warrants to purchase
      an
      aggregate of up to 7,788,700 shares of our common stock, at an exercise price
      of
      $0.50 per share, which expire on April 28, 2009.





In
      May
      2006, we issued a two-year warrant to purchase 150,000 shares of common stock
      at
      $0.50 per share for consultant services, valued at $49,889.





In
      June
      2006, we issued two-year warrants to purchase an aggregate of 1,500,000 shares
      of common stock as follows: 250,000 at $0.50 per share; 250,000 at $0.60 per
      share and 1,000,000 at $0.62 per share all for consultant services, valued
      at
      $459,671.





In
      August
      2006, we issued a two-year warrant to purchase 150,000 shares of common stock
      at
      $0.50 per share for consultant services, valued at $30,548.





In
      October 2006, we issued a two-year warrant to purchase 100,000 shares of common
      stock at $0.29 per share for consultant services, valued at
      $22,403.




In
      July
      2007, we entered into a one-year consulting agreement with MHG Consultant LLC,
      to provide consulting services relating to the acquisition of mines, minerals
      rights and financing. Subject to third-party consent (as described below) we
      delivered into escrow to MHG two warrants, both with an exercise price of $0.01
      per share, to purchase up to an aggregate of 5,100,000 shares of our common
      stock as follows: (i) one warrant to purchase up to 2,100,000 shares that was
      immediately exercisable and (ii) one warrant to purchase up to 3,000,000 shares
      to vest in amounts of 250,000 per month for 12 months as earned under the
      consulting agreement. The issuance of the warrants was subject to our receipt
      of
      consent from Easyknit Enterprises Holdings Limited, a Bermuda corporation with
      its principal place of business in Hong Kong and listed on the Hong Kong Stock
      Exchange (SEHK: 0616) (“Easyknit”) pursuant to the terms of an Agreement and
      Plan of Merger and Reorganization, dated April 20, 2007 with Easyknit. On
      November 1, 2007, we terminated the merger transaction, thereby removing the
      obligation under the warrants to MHG to obtain Easyknit consent. Accordingly,
      on
      November 1, 2007, we issued the 2,100,000 warrant and began recording the
      related expense of these and the monthly warrant issuances. For the period
      ended
      December 31, 2007, we recorded $588,400 relating to the release of 2,600,000
      warrants under this agreement (calculated utilizing the Black-Scholes pricing
      model). At December 31, 2007, 2,500,000 of this warrant grant remains unvested.
      See Note 19 - Subsequent Events regarding a financing transaction which involved
      the MHG warrants yet to be issued.




During
      the fourth quarter of 2007, in consideration of three loans, we issued three
      two-year warrants (100,000 each) to purchase up to an aggregate of 300,000
      shares of our common stock (100,000 at $0.27 per share and 200,000 at $0.20
      per
      share). The value of the warrants totaled $40,305 using the Black-Scholes
      pricing model.





During
      the fourth quarter of 2007, we issued warrants to purchase up to 2,400,000
      shares of our common stock through a private placement of units of our
      securities (each unit consisting of one share of our common stock and a
      five-year warrant to purchase one share of common stock at an exercise price
      of
      $0.25 per share). The value of the warrants totaled $287,873 using the
      Black-Scholes pricing model.


F-25





During
      the fourth quarter of 2007, we issued warrants to two consultants to purchase
      an
      aggregate of 350,000 shares of common stock as follows: a two year warrant
      to
      purchase up to 100,000 shares at $0.30 per shares and a five-year warrant to
      purchase up to 250,000 at $0.25 per share all for consultant services, valued
      at
      $71,015.





For
      warrants issued to non-employees in exchange for services, we account for such
      warrants in accordance with EITF Issue No. 96-18 “Accounting For Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling Goods or Services”. We value the fair value of the
      equity instrument using the Black-Scholes pricing model unless the value of
      the
      services is more reliably measurable.





Using
      the
      Black-Scholes pricing model, the following assumptions were used to value the
      fair value of warrants granted, for which the fair value of the services were
      not more reliably measurable, (i) during 2007: dividend yield of 0%, risk-free
      interest rate of 2.625% to 4.875%, expected life equal to the contractual life
      between two and ten years, and volatility of 154% to 156% and (ii) during 2006:
      dividend yield of 0%, risk-free interest rate of 4.25% to 4.875%, expected
      life
      equal to the contractual life between two and ten years, and volatility of
      163%
      to 186%.





The
      following table summarizes information about the Company’s
      warrants:





Number
            
            Weighted Average
              Exercise Price
            
            Range of
              Exercise PriceOutstanding
                at December 31, 2005
            
            
            40,126,998
            
            $
            1.10
            
            $
            0.10
                - $7.15Granted
            
            
            15,288,700
            
            
            0.42
            
            
            0.12
                – 1.00Cancelled
                or expired
            
            
            (4,674,887
            )
            
            4.12
            
            
            0.10
                – 5.50Exercised
            
            
            (21,161,978
            )
            
            0.24
            
            
            0.12
                – 0.25Outstanding
                at December 31, 2006
            
            
            29,578,833
            
            $
            0.56
            
            $
            0.12
                - $7.15Granted
            
            
            8,150,000
            
            
            0.10
            
            
            0.01
                – 0.27Cancelled
                or expired
            
            
            (1,156,095
            )
            
            1.14
            
            
            0.25
                – 1.25Exercised
            
            
            (9,142,500
            )
            
            0.16
            
            
            0.09125
                – 0.75Outstanding
                at December 31, 2007
            
            
            27,430,238
            
            $
            0.53
            
            $
            0.01
                - $7.15Warrants
                exercisable at December 31, 2007
            
            
            24,930,238
            
            $
            0.58
            
            $
            0.01
                - $7.15




Option
      Grants





The
      Company has six stock option plans: the 1993 and 1999 Stock Option Plans, the
      2000 and 2003 Director Stock Option Plans, the 2001 Employee Stock Option Plan
      and the 2007 Stock Incentive Plan. Stock options, stock appreciation rights,
      restricted stock and other stock and cash awards may be granted under the plans.
      In general, options vest over a period ranging from immediate vesting to five
      years and expire 10 years from the date of grant. Additionally, the Company
      has
      two non-plans, titled “Non-Plan Stock Options” which are outside of the six
      plans listed above. As of December 31, 2007, an aggregate of 17,250,000 shares
      of our common stock may be granted under these eight plans as determined by
      the
      board of directors.





Effective
      January 13, 2006, the 2001 Employee Stock Option Plan was amended to increase
      the total shares of stock which may be issued under the Plan from 1,450,000
      to
      2,500,000. Effective September 13, 2006, the 1999 Stock Option Plan was amended
      to increase the total shares of stock which may be issued under the Plan from
      4,250,000 to 6,250,000.


F-26





In
      January 2006, we granted options to purchase 1,000,000 shares of common stock
      to
      a consultant as compensation for services, with the exercise price greater
      than
      the fair market value of our common stock on the date of grant. The aggregate
      consulting option was valued at $200,000 and such value was recorded as a
      component of Prepaid Expenses in 2006. The entire amount was expensed during
      2006, coinciding with the consulting agreement timeline for services to be
      rendered.





During
      the year ended December 31, 2006, we granted our President, Dr. Clyde Smith
      an
      option to purchase up to 1,500,000 shares of common stock (the “Standard
      Options”) and an option to purchase up to 500,000 shares of common stock (the
“Incentive Based Stock Options”), each an exercise price of $0.31 per share (the
      closing sale price of our common stock as reported on the OTCBB on the day
      of
      grant). The Standard Options vest as follows: 300,000 vested immediately and
      300,000 vest each anniversary thereafter (September 15, 2007, 2008, 2009 and
      2010). The Incentive Based Stock Options vest at 100,000 shares on each
      anniversary (September 15, 2007, 2008, 2009, 2010 and 2011).




On
      February 19, 2007, we entered into an employment agreement with William Green
      as
      President of Asia Operations and issued Mr. Green a ten-year option to purchase
      up to 2,500,000 shares of the Company's common stock at an exercise price of
      $0.43 per share, the fair market value of the Company's common stock on the
      date
      of grant. The option vests in three installments as follows: (i) 1,000,000
      shares vested in February 2007; (ii) with respect to an additional 500,000
      shares on (A) the earliest of the first anniversary of the effective date or
      (B)
      the achievement of a milestone, as determined by the board of directors or
      (C)
      the termination of Mr. Green’s employment; and (iii) with respect to the
      remaining 1,000,000 shares on the earlier of (a) the time the Company achieves
      certain performance criteria to be established by its board of directors or
      (b)
      the third anniversary of the option grant. Mr. Green is a sibling of Andrew
      Green, a significant shareholder of the Company.





On
      March
      9, 2007, we issued a ten-year option to Stephen D. King to purchase up to
      3,000,000 shares of the Company’s common stock at an exercise price of $1.02 per
      share, the fair market value of the Company’s common stock on the date of grant,
      in consideration for his services as Chief Executive Officer. The option vests
      in six equal annual installments commencing on the first anniversary of the
      grant date. The option shall be accelerated upon the completion of a material
      acquisition of mining related assets by the Company, at the sole discretion
      of
      the board of directors of the Company. In the event the Company attempts to
      obtain listing of its common stock on a stock exchange and such stock exchange,
      as a condition to listing, requires that the Company reduce the number of shares
      issued to Mr. King pursuant to the option, the Company shall be entitled to
      reduce the number of unvested shares available to Mr. King as necessary to
      obtain listing on that exchange.





On
      September 21, 2007, we granted a stock option Joe Mancuso in consideration
      of
      his agreement to serve on our board of directors. Mr. Mancuso received a
      ten-year option to purchase up to 2,000,000 shares
      of
      our common stock at an exercise price of $0.30 per share (the closing price
      of
      our common stock on September 21, 2007). The option vests in equal bi-annual installments of 250,000
      shares each over four years, with the first installment vesting March 24,
      2008.





On
      December 1, 2007, we entered into an agreement with a consultant for services
      in
      public and investor relations and granted a ten-year option to purchase up
      to
      100,000 shares of our common stock at an exercise price of $0.30 per share
      (the
      closing price of our common stock on the grant date) all which vested
      immediately.





The
      Company uses the Black-Scholes pricing model as a method for determining the
      estimated fair value
      for
      employee stock awards under SFAS
      123(R) .
      Compensation expense for employee stock awards is recognized on a straight-line
      basis over the vesting period of
      service awards and for performance based awards, the Company recognizes the
      expense when the performance condition is probable of being met. The adoption
      of
      SFAS 123(R) also requires certain changes to the accounting for income taxes
      and
      the method used in determining diluted shares, as well as additional disclosure
      related to the cash flow effects resulting from share-based
      compensation.


F-27





In
      determining the compensation cost of the options granted during fiscal 2007
      and
      2006, the fair value of each option grant has been estimated on the date of
      grant using the Black-Scholes pricing model and the weighted average assumptions
      used in these calculations are summarized below:





2007
            
            2006Weighted
                average fair value of options granted
            
            
            $0.63
            
            
            $0.27Risk-free
                interest rate
            
            
            4.6%
                - 4.9%
            
            
            4.5%
                - 5.0%Expected
                volatility factor
            
            
            154%
                - 160%
            
            
            164%
                - 172%Expected
                dividend
            
            
            —
            
            
            —Expected
                option term
            
            
            10
                years
            
            
            10
                years




We
      recorded $1,159,951 related to employee stock compensation expense for the year
      ended December 31, 2007, relating to share options granted in 2007 and 2006.
      This expense is included in general and administrative expense. There was no
      tax
      benefit from recording this non-cash expense due to our income tax valuation allowance and
      a
      portion of the options were incentive stock options. The compensation expense
      had a $0.01 per share impact on the loss per share for the year ended December
      31, 2007. As of December 31, 2007, $4,012,625 of total unrecognized compensation
      expense is expected to be recognized over a period of approximately six
      years.





For
      the year
      ended December 31, 2006, we recorded
      $122,873 related to employee stock compensation expense, which is included
      in general and administrative expense. There was no tax benefit from recording this non-cash expense and had no impact on the loss per share for
      the
      year ended December 31, 2006.





The
      following table summarizes information about the Company’s stock
      options:





Number
                of
              Options
            
            Weighted
              Average
              Exercise
              PriceOptions
                outstanding - December 31, 2005
            
            
            6,132,000
            
            $
            0.88Granted
            
            
            3,000,000
            
            
            0.27Canceled
                or expired
            
            
            (1,420,000
            )
            
            0.61Exercised
            
            
            (1,200,000
            )
            
            0.18Options
                outstanding - December 31, 2006
            
            
            6,512,000
            
            
            0.56Granted
            
            
            7,600,000
            
            
            0.63Canceled
                or expired
            
            
            (452,500
            )
            
            0.37Exercised
            
            
            —
            
            
            —Options
                outstanding - December 31, 2007
            
            
            13,659,500
            
            $
            0.53Options
                exercisable - December 31, 2007
            
            
            5,859,500
            
            $
            0.43Weighted
                  average fair value of options granted during the year ended December
                  31, 2007
            
            
            
            
            $
            0.63Weighted
                  average fair value of options granted during the year ended December
                  31, 2006
            
            
            
            
            $
            0.27




F-28


The
      following tables summarize information about stock options outstanding at
      December 31, 2007:





Options
                OutstandingRange
                of
              Exercise
                Prices
            
            Number
              Outstanding
            
            Weighted
              Remaining
              Contractual
              Life
            
            Weighted
              Average
              Exercise
              Price
            
            Aggregate
                Intrinsic Value(1)$0.15
                to $0.30
            
            
            4,025,000
            
            
            8.6
                years
            
            $
            0.26
            
            $
            56,000$0.31
                to $0.43
            
            
            4,850,000
            
            
            7.7
                years
            
            $
            0.38
            
            $
            —$0.56
                to $1.02
            
            
            4,706,000
            
            
            6.8
                years
            
            $
            0.87
            
            $
            —$2.75
                to $4.25
            
            
            78,500
            
            
            0.7
                years
            
            $
            3.13
            
            $
            —$0.15
                to $4.25
            
            
            13,659,500
            
            
            7.4
                years
            
            $
            0.53
            
            $
            56,000





Options
                ExercisableRange
                of
              Exercise
                Prices
            
            Number
              Exercisable
            
            Weighted
              Remaining
              Contractual
              Life
            
            Weighted
              Average
              Exercise
              Price
            
            Aggregate
                Intrinsic Value(1)$0.15
                to $0.30
            
            
            2,025,000
            
            
            7.8
                years
            
            $
            0.22
            
            $
            56,000$0.31
                to $0.43
            
            
            2,050,000
            
            
            7.4
                years
            
            $
            0.38
            
            $
            —$0.56
                to $1.02
            
            
            1,706,000
            
            
            4.3
                years
            
            $
            0.60
            
            $
            —$2.75
                to $4.25
            
            
            78,500
            
            
            0.7
                years
            
            $
            3.13
            
            $
            —$0.15
                to $4.25
            
            
            5,859,500
            
            
            6.0
                years
            
            $
            0.43
            
            $
            56,000





(1)
      The
      aggregate intrinsic value in the table represents the difference between the
      closing stock price on December 31, 2007 and the exercise price, multiplied
      by
      the number of in-the-money options that would have been received by the option
      holders had all option holders exercised their options on December 31, 2007.
      The
      total intrinsic value of options exercised during the year ended December 31,
      2006 was approximately $212,000. No options were exercised during
      2007.




Common
      Stock Shares held in Reserve Pursuant to Right-to-Purchase
      Options





In
      September 2005, we issued Pacific Dawn Capital, LLC a six-month secured
      convertible promissory note. In April 2006, we entered into an amendment
      extending the maturity of the note for an additional 30 days and gave Pacific
      Dawn an option, at any time on or prior to August 31, 2006, to purchase a number
      of shares of our common stock, at a price per share of $0.20, equal to, but
      not
      greater than, the final principal and interest balance of its note divided
      by
      the $0.20 per share price. We reserved 2 million shares in order to satisfy
      Pacific Dawn’s right-to-purchase. In August 2006, we entered into a standby
      joint venture financing agreement with Pacific Dawn and as partial
      consideration, we extended the term of its right-to-purchase from August 31,
      2006 to March 31, 2007. Pacific Dawn partially exercised its option in December
      2006 and purchased 1 million shares at $0.20 per share and in consideration
      of
      that exercise, we agreed to extend its remaining right-to-purchase from
      March 31, 2007 to December 31, 2007, and subsequently to December 31,
      2008.





On
      June
      19, 2007, we entered into an amendment in connection with the Convertible Notes
      Purchase Agreement with China Gold, LLC, dated April 10, 2007, whereby China
      Gold provided us an opportunity to prepay our obligations under the four notes
      issued and we provided China Gold the right-to-purchase our common stock at
      equivalent terms to its rights to convert the notes issued under the Purchase
      Agreement, stated at $1.00 per share conversion rate. On October 31, 2007,
      we
      entered into a letter agreement with China Gold whereby the maturity date on
      each of the notes was extended to February 29, 2008 and as additional
      consideration, we agreed to reduce the conversion price applicable to the notes
      from $1.00 to $0.50 per share and to reduce the right-to-purchase price from
      $1.00 to $0.50 per share. The letter agreement further gives the Company an
      option to obtain an extension of the notes to May 31, 2008 in consideration
      for
      a further reduction in the conversion price from $0.50 to $0.25 per share.
      As of
      July 9, 2007, we had issued an aggregate of $9.8 million of notes under the
      Purchase Agreement and thereby have reserved 9.8 million shares available for
      purchase at $0.50 per share.


F-29





Therefore,
      as of December 31, 2007, we have reserved 10,980,000 shares of our common stock
      under these right-to-purchase options.




**NOTE
      14 – STOCK SUBSCRIPTIONS RECEIVABLE**





On
      April
      28, 2006, we completed a round of financing through the exercise of issued
      and
      outstanding warrants to certain warrant holders who qualified as accredited
      investors. Certain of the warrant holders were offered a limited time reduction
      of the exercise price of $0.25 per share. We accepted subscription agreements
      to
      exercise 15,577,401 common stock purchase warrants and received approximately
      $3.84 million in cash (which includes $307,600 for which we accepted, in lieu
      of
      cash, a secured promissory note, bearing interest at five percent per annum,
      was
      due December 29, 2006 and is secured by the stock issued). Of those warrants
      exercised, warrants representing 1,230,401 shares, which were held by a former
      director of ours, Wayne W. Mills, during: (i) April 2001 (340,734 issued with
      an
      original exercise price of $3.00 per share), (ii) October 2003 (208,000 issued
      with an original exercise price of $0.50 per share); (iii) May 2004 (475,000
      issued with an original exercise price of $0.40 per share) and (iv) 206,667
      warrants he purchased in a private transaction from another shareholder. The
      secured promissory note was paid in February 2007 along with the $10,323 of
      interest receivable.





By
      December 31, 2006, we had received subscription exercise forms from 11
      shareholders who held 2,060,000 stock purchase warrants, all with an exercise
      price of $0.25 per share, totaling $515,000, issued in connection with our
      private placement of 16,600,000 units of January 2005, all with an expiration
      date of December 31, 2006. All of these shareholders paid their respective
      subscription subsequent to December 31, 2006.




In
      December 2006, we issued a consultant 200,000 shares upon the exercise of a
      stock option originally granted in October 2005 at an exercise price of $0.15
      per share. The $30,000 cash exercise amount was paid in February
      2007.





Under
      provisions of a Loan Agreement entered into with Pacific Dawn Capital, and
      related promissory note issued to Pacific Dawn, Pacific Dawn had the right
      to
      purchase, at a price per share of $0.20, a number of shares of our common stock
      equal to the maximum principal amount drawn against the promissory note divided
      by $0.20. Of the available right to purchase option of 2,000,000 shares, Pacific
      Dawn purchased 1,000,000 shares of common stock in December 2006. Pacific Dawn
      paid $120,000 of the exercise price in December 2006 and the remaining $80,000
      in January 2007.





By
      February 2007, all $932,600 of the stock subscriptions funds receivable as
      of
      December 31, 2006 have been received.





**NOTE
      15 – COMPREHENSIVE LOSS**





Comprehensive
      loss was the unrealized loss on the investment in marketable securities (the
      225,000 shares of MacDonald common stock previously held). We reported an
      unrealized loss, at December 31, 2006, of $2,818 in our Condensed Consolidated
      Balance Sheets.





During
      September 2007, we sold all of the shares of MacDonald we held, by utilizing
      the
      efforts of a U.S. registered broker/dealer in open market sales. Our original
      basis in the aggregate 225,000 shares was approximately $24,059. The sale of
      these marketable securities generated a realized gain of $65,580, which has
      been
      recorded within the other income/expense line items for the year ended December
      31, 2007. Therefore, we no longer have any comprehensive losses related to
      these
      marketable securities.


F-30


**NOTE
      16 - RELATED PARTY TRANSACTIONS**





Hawk
      Uranium Inc. (f/k/a Hawk Precious Minerals Inc.)





On
      May
      15, 2006, we entered into a management services agreement with Hawk, a company
      in which our Chairman, H. Vance White, is also an officer and director of,
      whereby Hawk provided certain management and administrative services to the
      Company. The term of the agreement was until December 31, 2006 and required
      a US
      $50,000 payment.





On
      June
      29, 2006, we executed a Memorandum of Agreement between the Company and Hawk
      (the “Hawk Memorandum”). Under the terms of the Hawk Memorandum, we acquired a
      50 percent interest in MacNugget Claims located in northern Ontario, held
      entirely by Hawk by issuing Hawk 40,000 shares of our common stock, valued
      at
      US$12,800. Then on November 30, 2006, both parties executed a second agreement
      in which we both sold a portion of the MacNugget Claims to MacDonald Mines
      Exploration Ltd., whereby MacDonald became a 51 percent owner in the MacNugget
      Claims and the operator of the project and Hawk and the Company retained a
      24.5%
      interest in the MacNugget Claims. On October 1, 2007, we sold our 24.5% interest
      in the MacNugget Claims to both Hawk and MacDonald for an aggregate sale price
      of $50,000 Canadian (US$48,560). Other than the common stock issued to Hawk
      in
      June 2006, we have not incurred any other expenses related to this
      project.





In
      August
      2007, we entered into a new management services agreement with Hawk, which
      requires a US$100,000 payment, which has been accrued but not paid as of
      December 31, 2007. The Hawk agreement expired on December 31, 2007.





On
      September 19, 2007, we sold all of our rights and claims in the Holdsworth
      Project to Hawk for $50,000 Canadian (US$47,260). We acquired the Holdsworth
      Project from Hawk in June 2003. The rights we held allowed us to explore only
      through a limited surface depth, with the remaining below-surface rights
      belonging to Hawk. We had not expended any funds on the Holdsworth since its
      acquisition. We’ve retained a one percent gross gold royalty for any gold
      extracted from the limited surface depth and Hawk retains the right to purchase
      one half of the royalty from us for $500,000 Canadian. We have estimated that
      the value of the one percent royalty is immaterial and therefore have not
      recorded the possibility of a future gain.





Stephen
      D. King





On
      January 27, 2005, the Board authorized a consulting agreement with Stephen
      D.
      King, at the time a director, and who currently serves as our Chief Executive
      Officer and as a director. The agreement was for consulting services to provide
      strategic merger, acquisition and corporate advice with regard to the Company’s
      Colorado mining opportunities, as well as other consulting services. Under
      this
      agreement, we paid Mr. King $80,000 in fiscal 2006. Upon acceptance of Mr.
      King’s employment as the Company’s President in March 2006, the agreement was
      terminated.





In
      fiscal
      year 2005, pursuant to certain secured convertible promissory notes with Pacific
      Dawn Capital, LLC and Andrew Green, Mr. King, who only served as a board member
      at that time, provided a personal guaranty for the repayment of these notes.
      In
      exchange for agreeing to personally guaranty our obligations under the Pacific
      Note, we issued Mr. King a two-year warrant to purchase 1,000,000 shares of
      our
      common stock at a price of $0.15 per share and in exchange for agreeing to
      personally guaranty our obligations under the Green Note, we issued Mr. King
      a
      two-year warrant to purchase 1,000,000 shares of our common stock at a price
      of
      $0.15 per share. The fair value of these warrants was valued at $70,913. Mr.
      King subsequently assigned both of the warrants to his spouse. The warrants
      had
      expiration dates of October 13 and November 4, 2007. In October 2007, the
      Company’s board of directors authorized an extension of the expiration dates,
      granting a one-year extension and the Company recorded a non-cash expense of
      $139,054 relating to the extension.




F-31


Corporate
      Resource Management, Inc.





The
      Company entered into a consulting agreement with Corporate Resource Management,
      Inc., a Minnesota corporation (“CRM”), effective May 15, 2006. CRM is an entity
      wholly owned by Deb King, the spouse of Stephen D. King (at which time he was
      our president and board member). CRM provides the Company with investment
      banking services relating to the purchase and sale of mining related assets.
      The
      terms of the agreement include the following: (i) a two-year initial term with
      the right to terminate with a 30-day written notice, subject to a $75,000
      termination fee payable to CRM if terminated by the Company without cause,
      (ii)
      a fee of $10,000 per month, plus reimbursement of normal out-of-pocket expenses,
      and (iii) commissions of up to two percent of the value of the transaction
      upon
      successful closings of any asset transactions during the term of the agreement
      and for a period of one year following termination. For the years ended December
      31, 2007 and 2006, we paid $120,000 and $75,000, respectively, pursuant to
      the
      terms of the consulting agreement.





Relevant
      Marketing LLC, dba Lighthouse Communications





The
      Company utilizes the services of Lighthouse Communications as its primary
      investor and public relations management consultant. The President of
      Relative Marketing is the step-daughter of our CEO, Stephen D. King. For
      the years ended December 31, 2007 and 2006, we paid $120,650 and $0,
      respectively for services provided.





Boston
      Financial Partners, Inc.





Effective
      June 1, 2006, we engaged Boston
      Financial Partners, Inc., as a non-exclusive consultant, to provide assistance
      to the Company in various matters pertaining to corporate growth, strategic
      planning, public relations and marketing services. As consideration for the
      services, we paid a one-time fee of $100,000 and
      issued (i) 625,000 shares of our common stock valued at $212,500 and (ii) a
      two-year warrant to purchase up to 1,000,000 shares of our common stock, at
      an
      exercise price of $0.62 per share, valued at $304,802. Boston Financial Partners
      is controlled by Thomas Brazil, a greater than five percent beneficial
      shareholder of the Company’s securities.





On
      April
      13, 2007, we entered into a new six-month consulting agreement with Boston
      Financial Partners, Inc., as a non-exclusive consultant, to provide assistance
      to the Company in various matters pertaining to corporate growth, strategic
      planning, public relations and marketing services. As consideration for the
      services, we agreed to pay a fee of $100,000. As of December 31, 2007, we have
      paid $36,400 towards this fee and the remaining $63,600 is in other accrued
      expenses.





In
      May
      2007, the Company’s board of directors authorized an extension of the expiration
      dates on two warrants held by Boston Financial Partners, granting a 30-day
      extension. The warrants are: (1) to purchase 500,000 shares at $1.00 per share
      expiring on May 25, 2007 and (2) to purchase 880,000 shares at $1.00 per share
      expiring on May 25, 2007, both obtained in 2001. Then in June 2007, the board
      further authorized a six month extension, until December 31, 2007. Furthermore,
      on December 28, 2007, the board further authorized a one-year extension, until
      December 31, 2008. The Company recorded a non-cash expense of $815,758 relating
      to these extensions.





In
      October 2007, the Company’s board of directors authorized an extension of the
      expiration dates on two
      other warrants held by Boston Financial Partners, granting a one-year extension.
      The warrants are: (1) to purchase 442,000 shares at $0.50 per share expiring
      on
      October 14, 2007 and (2) to purchase 96,000 shares at $0.50 per share expiring
      on October 24, 2007, both obtained as part of the Company’s 2003 private
      placement. No non-cash compensation charge was recorded due to the Company
      providing this modification as an incentive to raise capital and not for any
      services in return.





Norman
      D. Lowenthal





Mr.
      Lowenthal was the Chairman of SSC Mandarin Financial Services Ltd for the period
      2001 to 2007 and continues to serve as a director of SSC-Sino Gold Consulting
      Co
      Ltd, which is an advisor to the Government operated association of China gold
      mines via the China Gold Bureau, and SSC Mandarin Africa (Proprietary) Limited.
      We have entered into transactions with SSC Mandarin Financial
      Services, SSC-Sino Gold Consulting, SSC Mandarin  Africa and SSC
      Mandarin Group Limited, which is affiliated with all three entities, during
      2007.




F-32





**NOTE
      17 - INCOME TAXES**





The
      Company estimates that at December 31, 2007 it had cumulative net operating
      loss
      (“NOL”) carryforwards for tax purposes of approximately $14,670,000 for both
      federal and state purposes. These carryforwards, if not used, will begin to
      expire in 2023. Deferred income taxes reflect the net tax effects of temporary
      differences between the carrying amount of assets and liabilities for financial
      reporting purposes and the amounts used for income tax purposes. During 2006,
      the Company had a change of ownership as defined under IRC Section 382. Although
      the Company has not performed a formal Section 382 study, it appears that the
      NOL-carryforward from 2006 would be limited to approximately $740,000 per year.
      Due to the number of additional shares issued in 2007, it appears that the
      Company may have another Section 382 limitation in 2008. Future ownership
      changes could significantly further limit the use of the NOL. In addition,
      a
      number of the Company's deferred tax assets will likely be considered capital
      assets and therefore, if the transactions result in a loss, they would create
      a
      capital loss. Capital losses have a five year carryforward and can only be
      offset by capital gains. There can be no assurance of future capital gain income
      to offset any potential capital losses.





Significant
      components of the Company’s estimated deferred tax assets and liabilities at
      December 31, 2007 and 2006 are as follows:





2007
            
            2006Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            6,014,000
            
            $
            3,719,000Exploration
                rights
            
            
            3,198,000
            
            
            2,959,000Expenses
                related to warrants and options
            
            
            1,736,000
            
            
            1,900,000Accrued
                liabilities and other
            
            
            413,000
            
            
            —Total
                deferred tax asset
            
            
            11,361,000
            
            
            8,578,000Valuation
                allowance
            
            
            (11,361,000
            )
            
            (8,578,000
            )$
            —
            
            $
            —





The
      income tax provision consists of the following for the years ended December
      31:





2007
            
            2006Current
                tax provision
            
            $
            —
            
            $
            —Deferred
                tax provision
            
            
            (2,783,000
            )
            
            (3,205,000
            )Valuation
                allowance
            
            
            2,783,000
            
            
            3,205,000Total
                income tax provision
            
            $
            —
            
            $
            —





Reconciliation
      between the statutory rate and the effective tax rate for the years ended
      December 31:





2007
            
            2006Federal
                statutory tax rate
            
            
            (35.0
            )%
            
            (35.0
            )%State
                taxes, net of federal benefit
            
            
            (6.0
            )%
            
            (6.0
            )%Permanent
                differences
            
            
            17.0
            %
            
            5.0
            %Valuation
                allowance
            
            
            24.0
            %
            
            36.0
            %Effective
                tax rate
            
            
            —
            
            
            —




At
      December 31, 2007, the Company fully reserved its net deferred tax assets
      totaling $11,361,000, recognizing that the Company has incurred losses during
      the last several years and there is no assurance that future years will be
      profitable.




F-33





**NOTE
      18 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION**





May 1, 2003(inception)December 31,
            
            to Dec. 31,2007
            
            2006
            
            2007Supplemental
                cash flow information:Cash
                paid for interest
            
            $
            15,008
            
            $
            3,353
            
            $
            76,056Issuance
                of common stock for accounts payable
            
            $
            —
            
            $
            39,000
            
            $
            39,000Issuance
                of common stock, warrants and options for prepaid consulting
                fees
            
            $
            854,497
            
            $
            2,327,876
            
            $
            4,701,578




**NOTE
      19 - SUBSEQUENT EVENTS**




During
      the first three months of 2008, we sold 5,733,133 shares of our unregistered
      common stock in a private placement at $0.15 per share, resulting in gross
      proceeds of $860,000 less offering costs of $612.




Amendment
      to Bates-Hunter Purchase Agreement, January 28, 2008





On
      September 20, 2006, we entered into an asset purchase agreement by and between
      the Company, Central City Mining Corp., George Otten, Hunter Gold Mining Corp.,
      and Hunter Gold Mining Inc. (as amended on October 31, 2006, March 1, 2007
      and
      May 31, 2007). On January 28, 2008, the parties to the asset purchase agreement
      entered into a fourth amendment relating to the modification or amendment of
      certain terms, including without limitation: (i) the incorporation of an
      acknowledgement of the parties that the Company has incurred to date
      approximately $2,500,000 in due diligence costs; (ii) an amendment to change
      the
      closing date of the asset purchase agreement from March 31, 2008 to June 30,
      2008 (and to change the date upon which either party may terminate the agreement
      in the event a closing has not occurred as of such date to June 30, 2008);
      and
      (iii) an amendment to the purchase price so that a required cash payment of
      the
      Company of $250,000 Canadian Dollars could be deferred and included in
      a promissory note to be issued at closing. Pursuant to the fourth
      amendment, all payments of principal and interest under such note can be
      deferred until the earlier of production on the property or January
      2010.





At
      December 31, 2007, Kenneth Swaisland, an individual who previously assigned
      us certain rights relating to the Bates-Hunter property, held the right to
      receive a warrant to purchase up to 1 million shares of our common stock, at
      an
      exercise price equal to the average prior 30-day sale price of our common stock,
      should we close on the purchase of the Bates-Hunter. In January 2008, we entered
      into an agreement with Mr. Swaisland that allowed Mr. Swaisland the
      right-to-purchase 125,000 shares of our unregistered common stock at $0.20
      per
      share and (ii) the issuance of a new three-year warrant to purchase up to
      875,000 shares of our common stock at $0.20 per share upon the return of the
      1
      million share warrant. In February 2008, Mr. Swaisland purchased the shares
      for
      $25,000 and we finalized the agreement by issuing the new warrant with a fixed
      price of $0.20 per share.




F-34





Execution
      of Senior Secured Convertible Promissory Note





On
      February 13, 2008, we entered into a Note and Warrant Purchase Agreement (the
      “Platinum Agreement”) dated February 11, 2008 with Platinum Long Term Growth V,
      LLC, a Delaware limited liability company (“Platinum”), pursuant to which we
      issued to Platinum a 10% Senior Secured Convertible Promissory Note in the
      principal amount of $1,020,000 (the “Note”). We received net proceeds of
      $1,000,000. The Note has a maturity date of February 11, 2009. The Note is
      convertible at the option of the holder at any time into shares of our common
      stock at an initial conversion price of $0.18 per share. The conversion price
      is
      further subject to weighted-average anti-dilution adjustments in the event
      we
      issue equity or equity-linked securities at a price below the then-applicable
      conversion price. The Note accrues interest at a rate of 10% per annum, and
      such
      interest is payable on a quarterly basis commencing March 31, 2008, with the
      principal balance of the Note, together with any accrued and unpaid interest
      thereon, due and payable on the maturity date. At any time after August 11,
      2008, if the seven trailing trading day volume-weighted average price (“VWAP”)
      of our common stock is less than $0.30 per share (as appropriately adjusted
      for
      any splits, combinations or like events relating to the common stock), Platinum
      shall have the option to (i) require us to prepay in cash all or any portion
      of
      the Note at a price equal to 115% of the aggregate principal amount to be repaid
      together with accrued and unpaid interest or (ii) demand that all or a portion
      of the Note be converted into common stock at a conversion price equal to the
      lesser of the then-applicable conversion price or 85% of the lowest VWAP for
      the
      10 trading days preceding such demand. Subject to certain conditions, if,
      between August 11, 2008 and February 11, 2009, our common stock exceeds $0.50
      per share for a period of 20 consecutive trading days, we will be entitled
      to
      require the holder of the Note to convert the outstanding balance of the Note
      at
      the applicable conversion price.




Our
      obligations under the Note are secured by a first priority security interest
      in
      all of our assets with the exception of our equity interests and assets held
      in
      CGMR and Wits-China Acquisition Corp., a Minnesota corporation and a wholly
      owned corporation of ours, to the extent such entities or assets are located
      in
      or relate to China and are subject to a lien in favor of China Gold LLC.
      Platinum’s security interest includes our equity interest in Gregory Gold
      Producers, Inc., a Colorado corporation and a wholly owned corporation of ours
      and Kwagga Gold (Barbados) Limited (the FSC Project). We also delivered to
      Platinum a guaranty of Gregory Gold Producers.




Pursuant
      to the Platinum Agreement, we also issued Platinum a five-year warrant to
      purchase up to 2.5 million shares of our common stock at an exercise price
      of
      $0.35 per share (the “Warrant”). The Warrant provides for cashless exercise at
      any time after August 11, 2008, and further provides for a weighted-average
      anti-dilution adjustment to the exercise price in the event we issue equity
      or
      equity-linked securities at a price below the then-applicable exercise
      price.





As
      additional consideration pursuant to the terms of the Platinum Agreement, we
      agreed to accelerate the vesting of a previously issued warrant (from MHG
      Consultant LLC) to purchase up to 3,000,000 shares of our common stock that
      was
      transferred to Platinum at closing, such that all shares underlying such warrant
      are immediately exercisable. We provided Platinum piggy-back registration rights
      relating to the shares of common stock issuable upon conversion of the Note
      and
      exercise of the Warrant. The Platinum Agreement and other transaction documents
      contain standard representations, warranties, and covenants of the
      parties.




F-35