##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number 1-11887
 CANYON RESOURCES CORPORATION
    þ o
 o o  þ
 o þ




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##### 



CANYON RESOURCES CORPORATION
FORM 10-Q
For the Three Months ended March 31, 2006
 TABLE OF CONTENTS
  
 PART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    Page 1Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    Page 15Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    Page 22Item 4. Controls and Procedures
    
    Page 23PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    Page 24Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
    
    Page 24Item 3. Defaults Upon Senior Securities
    
    Page 24Item 4. Submission of Matters to a Vote of
Security Holders
    
    Page 24Item 5. Other Information
    
    Page 24Item 6. Exhibits
    
    page 24SIGNATURES
    
    Page 25Consulting Agreement - Dr. Gary HuberCertification of CEO Pursuant to Section 302Certification of Chief Accounting Officer Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of Chief Accounting Officer Pursuant to Section 906
  i




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
   Consolidated Balance Sheets
    
    Page 1Consolidated Statements of Operations
    
    Page 2Consolidated Statements of Cash Flows
    
    Pages 3-4Consolidated Statement of Changes in Stockholders Equity
    
    Page 5Notes to Interim Consolidated Financial Statements
    
    Pages 6-14Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    Page 15Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    Page 22Item 4. Controls and Procedures
    
    Page 23
 ii




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    4,560,600
    
    
    $
    5,649,200Restricted cash
    
    
    
    
    
    
    281,300Accounts receivable
    
    
    19,700
    
    
    
    16,400Metal inventories
    
    
    18,400
    
    
    
    65,900Prepaid and other current assets
    
    
    173,100
    
    
    
    170,900Total current assets
    
    
    4,771,800
    
    
    
    6,183,700Property, plant and mine development, net
    
    
    5,851,400
    
    
    
    5,276,700Restricted cash
    
    
    3,273,800
    
    
    
    2,939,900Other non current assets
    
    
    246,400
    
    
    
    246,400Total Assets
    
    $
    14,143,400
    
    
    $
    14,646,700LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    505,300
    
    
    $
    474,100Asset retirement obligations
    
    
    1,026,200
    
    
    
    1,210,600Payroll liabilities
    
    
    100,600
    
    
    
    216,900Other current liabilities
    
    
    77,400
    
    
    
    86,600Total current liabilities
    
    
    1,709,500
    
    
    
    1,988,200Notes
payable  long term
    
    
    825,000
    
    
    
    825,000Warrant liabilities
    
    
    505,900
    
    
    
    360,000Capital
leases  long term
    
    
    24,300
    
    
    
    25,900Asset retirement obligations
    
    
    4,471,500
    
    
    
    4,558,600Total liabilities
    
    
    7,536,200
    
    
    
    7,757,700Commitments and contingencies (Note 12)Common stock ($.01 par value) 100,000,000 shares authorized;
issued and outstanding: 38,320,533 at March 31, 2006, and
38,320,533 at December 31, 2005
    
    
    383,200
    
    
    
    383,200Capital in excess of par value
    
    
    134,050,200
    
    
    
    133,949,900Retained deficit
    
    
    (127,826,200
    )
    
    
    (127,444,100
    )Total Stockholders Equity
    
    
    6,607,200
    
    
    
    6,889,000Total Liabilities and Stockholders Equity
    
    $
    14,143,400
    
    
    $
    14,646,700
  1




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Three months ended March 31,2006
    
    
    2005REVENUESales
    
    $
    593,300
    
    
    $
    1,002,200EXPENSESCost of sales
    
    
    453,600
    
    
    
    1,130,200Depreciation, depletion, and amortization
    
    
    8,900
    
    
    
    909,900Selling, general and administrative
    
    
    867,800
    
    
    
    608,500Exploration costs
    
    
    309,100
    
    
    
    171,300Accretion expense
    
    
    50,800
    
    
    
    33,500Debenture conversion expense
    
    
    
    
    
    
    448,2001,690,200
    
    
    
    3,301,600Operating Loss
    
    
    (1,096,900
    )
    
    
    (2,299,400
    )OTHER INCOME (EXPENSE)Interest income
    
    
    57,700
    
    
    
    32,700Interest expense
    
    
    (13,000
    )
    
    
    (41,200
    )Gain on sale of securities
    
    
    816,000
    
    
    
    Loss on derivative instruments
    
    
    (145,900
    )
    
    
    714,800
    
    
    
    (8,500
    )Net loss
    
    ($
    382,100
    )
    
    ($
    2,307,900
    )Basic and diluted net loss per share
    
    ($
    0.01
    )
    
    ($
    0.08
    )Basic and diluted weighted average shares outstanding
    
    
    38,320,533
    
    
    
    30,268,200
  2




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three months ended March 31,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    ($
    382,100
    )
    
    ($
    2,307,900
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation, depletion and amortization
    
    
    8,900
    
    
    
    909,900Amortization of beneficial conversion feature
    
    
    
    
    
    
    11,300Debenture conversion expense
    
    
    
    
    
    
    448,200Impairment of inventory
    
    
    
    
    
    
    128,200Loss on derivative instruments
    
    
    145,900
    
    
    
    Share-based compensation expense
    
    
    100,300
    
    
    
    Gain on sale of securities
    
    
    (816,000
    )
    
    
    Accretion of asset retirement obligation
    
    
    50,800
    
    
    
    33,500Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (3,300
    )
    
    
    549,400Decrease in inventories
    
    
    47,500
    
    
    
    176,300Increase in prepaid and other assets
    
    
    (2,200
    )
    
    
    (100
    )Decrease in accounts payable and other
current liabilities
    
    
    (231,000
    )
    
    
    (120,300
    )Decrease in asset retirement obligations
    
    
    (322,300
    )
    
    
    (381,200
    )Increase in restricted cash
    
    
    (52,600
    )
    
    
    (9,100
    )Total adjustments
    
    
    (1,074,000
    )
    
    
    1,746,100Net cash used in operating activities
    
    
    (1,456,100
    )
    
    
    (561,800
    )Cash flows from investing activities:Purchases and development of property and equipment
    
    
    (447,100
    )
    
    
    (14,800
    )Proceeds from sale of securities
    
    
    816,000
    
    
    
    Net cash provided by (used in) investing activities
    
    
    368,900
    
    
    
    (14,800
    )Cash flows from financing activities:Issuance of stock, net
    
    
    
    
    
    
    3,100,900Payments on debt
    
    
    
    
    
    
    (924,000
    )Payments on capital lease obligations
    
    
    (1,400
    )
    
    
    (4,000
    )Net cash (used in) provided by financing activities
    
    
    (1,400
    )
    
    
    2,172,900Net (decrease) increase in cash and cash equivalents
    
    
    (1,088,600
    )
    
    
    1,596,300Cash and cash equivalents, beginning of year
    
    
    5,649,200
    
    
    
    4,638,300Cash and cash equivalents, end of period
    
    $
    4,560,600
    
    
    $
    6,234,600
  3




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
 Three months ended March 31,2006
    
    2005Supplemental disclosures of cash flow information:1. Interest paid
    
    $
    13,000
    
    
    $
    29,9002. Income taxes paid
    
    $
    
    
    
    $
    Supplemental schedule of non-cash financing activities:Non-cash financing activities:1. Issuance of 936,200 shares to retire convertible debentures
    
    $
    
    
    
    $
    675,000
  4




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
  Common Stock
    
    
    Capital in
    
    
    
    
    
    
    TotalNumber of
    
    
    At Par
    
    
    Excess of Par
    
    
    Retained
    
    
    StockholdersShares
    
    
    Value
    
    
    Value
    
    
    Deficit
    
    
    EquityBalances, December 31, 2005
    
    
    38,320,533
    
    
    $
    383,200
    
    
    $
    133,949,900
    
    
    
    ($127,444,100
    )
    
    $
    6,889,000Share-based compensation
    
    
    
    
    
    
    
    
    
    
    100,300
    
    
    
    
    
    
    
    100,300Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (382,100
    )
    
    
    (382,100
    )Balances, March 31, 2006
    
    
    38,320,533
    
    
    $
    383,200
    
    
    $
    134,050,200
    
    
    
    ($127,826,200
    )
    
    $
    6,607,200
  5




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##### Table of Contents



1. Basis of Presentation :
   2. Management Estimates and Assumptions :
  3. Restricted Cash :
  March 31,
    
    December 31,2006
    
    2005Collateral for Letter of Credit (a)
    
    $
    249,000
    
    
    $
    249,000Collateral for reclamation bonds and other contingent events (b)
    
    
    158,200
    
    
    
    156,500Kendall Mine reclamation (c)
    
    
    2,028,400
    
    
    
    2,007,500McDonald Gold Project cash reclamation bond (d)
    
    
    526,900
    
    
    
    526,900Net proceeds from property sales (e)
    
    
    281,300
    
    
    
    281,300Briggs cash reclamation bond (f )
    
    
    30,000
    
    
    
    3,273,800
    
    
    
    3,221,200Current portion (e)
    
    
    
    
    
    
    281,300Noncurrent portion
    
    $
    3,273,800
    
    
    $
    2,939,900
 
 (a)
    
    In connection with the issuance of certain bonds for the performance of
reclamation obligations and other contingent events at the Briggs Mine, a bank
letter of credit was provided in favor of the surety as partial collateral for
such bond obligations. The letter of credit is fully collateralized with cash and
will expire no earlier than December 31, 2006, and at the banks option, may be
renewed for successive one-year periods.(b)
    
    Held directly by the surety as partial collateral for reclamation and
other contingent events at the Briggs Mine.(c)
    
    Held directly by the Montana Department of Environmental Quality in an
interest bearing account for use in continuing reclamation at the Kendall
minesite. (See Note 12(a)) 6




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##### Table of Contents



(d)
    
    Held directly by the Montana Department of Environmental Quality (DEQ) for
reclamation at the McDonald Gold Property.(e)
    
    In connection with the auction of certain properties, cash has been
sequestered by court order. (See Note 12(d)).(f)
    
    Cash bond held by Bank of America for the performance of reclamation
obligations for Cecil R exploration activities at the Briggs Mine. 4. Inventories :
  March 31, 2006
    
    December 31, 2005Broken ore under leach
    
    $
    
    
    
    $
    Doré
    
    
    18,400
    
    
    
    65,900$
    18,400
    
    
    $
    65,900
  5. Property, Plant and Mine Development:
  As of March 31, 2006Depreciation
    
    Asset Value
    
    Accumulated
    
    Net BookMethod
    
    at Cost
    
    Depreciation
    
    ValueBuildings and Equipment
    
    1 - 5 Years SL
    
    $
    5,943,900
    
    
    $
    4,020,900
    
    
    $
    1,923,000Mine Development
    
    UOP
    
    
    569,700
    
    
    
    
    
    
    
    569,700Mineral Interest
    
    UOP
    
    
    7,021,900
    
    
    
    3,820,900
    
    
    
    3,201,000Asset Retirement Cost
    
    UOP
    
    
    157,700
    
    
    
    
    
    
    
    157,700$
    13,693,200
    
    
    $
    7,841,800
    
    
    $
    5,851,400
  As of December 31, 2005Depreciation
    
    Asset Value
    
    Accumulated
    
    Net BookMethod
    
    at Cost
    
    Depreciation
    
    ValueBuildings and Equipment
    
    1 - 5 Years SL
    
    $
    5,940,400
    
    
    $
    4,012,000
    
    
    $
    1,928,400Mine Development
    
    UOP
    
    
    
    
    
    
    
    
    
    
    Mineral Interest
    
    UOP
    
    
    7,011,500
    
    
    
    3,820,900
    
    
    
    3,190,600Asset Retirement Cost
    
    UOP
    
    
    157,700
    
    
    
    
    
    
    
    157,700$
    13,109,600
    
    
    $
    7,832,900
    
    
    $
    5,276,700
 6. Asset Retirement Obligations :
 7




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##### Table of Contents



Balance, December 31, 2005
    
    $
    5,769,200Settlement of liabilities
    
    
    (322,300
    )Accretion expense
    
    
    50,800Balance, March 31, 2006
    
    
    5,497,700Current portion
    
    
    1,026,200Non current portion
    
    $
    4,471,500
 7. Notes Payable :
  Balance, December 31, 2005
    
    $
    825,000Conversions/Retirements
    
    
    Balance, March 31, 2006
    
    
    825,000Current portion
    
    
    Non current portion
    
    $
    825,000
     8. Warrants and Warrant Liability:
  Range
of Exercise
    
    Shares Underlying
    
    Weighted Average
    
    Weighted AveragePrices
    
    Warrants Outstanding
    
    Remaining Contractual Life
    
    Exercise Price$0.50-$1.00
    
    
    281,000
    
    
    2.5 years
    
    $
    0.77$1.01-$1.50
    
    
    5,299,723
    
    
    2.0 years
    
    $
    1.13$1.51-$2.16
    
    
    2,199,836
    
    
    0.2 years
    
    $
    2.16Total/Average
    
    
    7,780,559
    
    
    1.5 years
    
    $
    1.41
 8




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##### Table of Contents



Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock
    Warrant
    
    Exercise
    
    Expiration
    
    Outstanding
    
    
    
    
    
    
    
    
    
    OutstandingDescription
    
    Price
    
    Date
    
    Dec. 31, 2005
    
    Exercises
    
    Expirations
    
    Mar. 31, 2006Series A
    
    $
    1.30
    
    
    
    12/1/2008
    
    
    
    1,765,503
    
    
    
    
    
    
    
    
    
    
    
    1,765,503Series B
    
    $
    1.08
    
    
    
    12/1/2006
    
    
    
    882,754
    
    
    
    
    
    
    
    
    
    
    
    882,754Series C
    
    $
    0.76
    
    
    
    12/1/2008
    
    
    
    231,000
    
    
    
    
    
    
    
    
    
    
    
    231,000Total/ Average
    
    $
    1.19
    
    
    
    
    
    
    
    2,879,257
    
    
    
    
    
    
    
    
    
    
    
    2,879,257
  9. Equity Transactions:
  10. Share-Based Compensation:
 Share-Based Payment
  9




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##### Table of Contents



2006
    
    2005Expected Volatility ISO Plan
    
    
    50
    %
    
    
    75
    % NSO Plan
    
    
    50
    %
    
    
    N/AExpected Option Term ISO Plan
    
    2.5-3 years
    
    5 years NSO Plan
    
    3 years
    
    
    N/AWeighted Average Risk-Free Interest Rate ISO Plan
    
    
    4.3
    %
    
    
    4.0
    % NSO Plan
    
    
    4.5
    %
    
    
    N/AForfeiture rate ISO Plan (1)
    
    
    
    
    
    
     NSO Plan (2)
    
    
    
    
    
    
    N/A
 
 (1)
    
    Most grants were immediately exercisable; some have a one year vesting period.(2)
    
    These options, which vest immediately, were issued to a past officer and director for
consulting services. Incentive Stock Option Plan
  10




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##### Table of Contents



2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseNumber
    
    
    Price
    
    
    Number
    
    
    PriceOutstanding  beginning of year
    
    
    1,165,925
    
    
    $
    1.32
    
    
    
    927,925
    
    
    $
    1.51Grants
    
    
    200,000
    
    
    $
    0.76
    
    
    
    100,000
    
    
    $
    0.81Exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeitures
    
    
    (124,585
    )
    
    $
    1.70
    
    
    
    
    
    
    
    Expirations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  end of period
    
    
    1,241,340
    
    
    $
    1.19
    
    
    
    1,027,925
    
    
    $
    1.44Exercisable  end of period
    
    
    1,141,340
    
    
    $
    1.23
    
    
    
    977,925
    
    
    $
    1.47
  Non-Qualified Option Plan
  2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseNumber
    
    
    Price
    
    
    Number
    
    
    PriceOutstanding  beginning of year
    
    
    591,601
    
    
    $
    2.65
    
    
    
    571,601
    
    
    $
    2.81Grants
    
    
    150,000
    
    
    $
    0.94
    
    
    
    
    
    
    
    Exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeitures
    
    
    (20,415
    )
    
    $
    3.38
    
    
    
    
    
    
    
    Expirations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  end of period
    
    
    721,186
    
    
    $
    2.27
    
    
    
    571,601
    
    
    $
    2.81Exercisable  end of period
    
    
    641,186
    
    
    $
    2.46
    
    
    
    491,601
    
    
    $
    2.50
  11




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##### Table of Contents



11. Earnings per Share
 Earnings
per Share
 12. Commitments and Contingencies :
 (a)
    
    Kendall Mine ReclamationThe Kendall Mine operates under permits granted by the Montana DEQ. In February 2002, the
DEQ issued a decision that a comprehensive Environmental Impact Statement (EIS) was
needed for completion of remaining reclamation at Kendall. The Companys estimate to
achieve mine closure could be impacted by the outcome of an agency decision following an
EIS. The Company has deposited $2,028,400 in an interest bearing account with the DEQ
for reclamation at the Kendall Mine.(b)
    
    Briggs Mine Surety BondsThe Briggs Mine operates under permits granted by various agencies including BLM, Inyo
County, California, the California Department of Conservation, and the Lahontan Regional
Water Quality Control Board (Lahontan). These agencies have jointly required the Company
to post a reclamation bond in the amount of $3,030,000 to ensure appropriate reclamation.Additionally, the Company was required by Lahontan to post a $1,010,000 bond to ensure
adequate funds to mitigate any foreseeable release, as defined, of pollutants to state
waters. Both bonds are subject to annual review and adjustment.In 2000, in response to a demand for an increase in collateral by the surety who issued
the above described
bonds, the Company granted a security interest in 28,000 acres of mineral interests in
Montana. In addition,
the Company agreed to make cash deposits with the surety totaling $1.5 million over a
three year period at
the rate of $0.5 million per year, commencing June 30, 2001. The Company has not made any
deposits to date, and has held discussions with the surety to reschedule the deposit
requirements. If an acceptable rescheduling of the deposit requirements cannot be agreed
to, the surety could seek to terminate the bonds which could result in the Company
becoming liable for the principal amounts under its collateral agreement with the surety.
In April 2004, the Company ceased active mining at Briggs due to lack of development and
began reclamation activities. The Company has spent approximately $1.9 million on Briggs
reclamation through the first quarter ended March 31, 2006.Beginning in the fourth quarter of 2005 and through the first quarter ended March 31,
2006, the Company began exploring the possibility that additional reserves may remain in
and around the Briggs pits. Due to the initial success in the infill drilling program on
the Briggs property and the addition of the Reward property that could utilize the Briggs
processing plant to process potential gold production, the Company is currently
performing certain redevelopment activities at Briggs designed to enhance our ability to
bring the mine back into production as soon as possible.(c)
    
    Contingent Liability  McDonald Gold ProjectUnder the Seven-Up Pete Venture (SPV) purchase agreement with Phelps Dodge Corporation
(Phelps Dodge), the Company is required to make a final payment of $10 million upon
issuance of all permits required for construction of the McDonald Gold Project, or
alternatively, one-third of any proceeds received from a takings lawsuit. The purchase
payments are collateralized only by the 72.25% participating interest
and underlying assets in the SPV transferred from Phelps Dodge to the Company and CR
Montana in this
 12




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##### Table of Contents



transaction and the 50% co-tenancy interest in certain real property also
transferred to the Company and CR Montana. In April 2006, the Company did not renew the
remaining private lease underlying the McDonald Gold Project and the Company believes the
remaining $10 million contingent payment to Phelps Dodge is no longer valid. The Company
is currently working with Phelps Dodge to formally release the Company from liability.During the second quarter of 2005 in connection with the Montana Supreme Court decision
affirming the termination of the McDonald Gold Projects state mineral leases, the
Company wrote off their carrying value of $9,242,100.Also in April 2006, the Companys takings lawsuit was dismissed in U.S. District Court
for the District of Montana and the Company filed a notice of appeal to the U.S. Court of
Appeals for the Ninth Circuit.(d)
    
    Kendall Mine LawsuitsIn October 2001, a plaintiff group including members of the Shammel Ruckman and Harrell
families filed suit in the State of Montana District Court against the Company and its
wholly-owned subsidiary, CR Kendall Corporation. The complaint alleges violation of
water rights, property damage, trespass and negligence in connection with the operation
of the Kendall Mine and seeks unspecified damages and punitive damages. The Company has
taken the position that the allegations are without merit and believes that it will
prevail in this matter.In August 2002, a Preliminary Injunction was issued in Montana District Court on behalf
of the plaintiff group in connection with the Companys auction of certain mineral rights
and fee lands in western Montana. In October 2002, the Court issued a Supplemental Order
which will sequester any proceeds realized from the auction until such time as the
lawsuit is concluded. As of March 31, 2006, $281,300 is held by the Court as required by
the Order.In March 2004, the Montana Environmental Information Center and Earthworks Mineral Policy
Center brought civil action before the U.S. District Court for the District of Montana
against CR Kendall Corporation and the Company claiming that the defendants have polluted
waters of the U.S. with their operations at the Kendall Mine, near Lewistown, Montana.
On February 2, 2006, the case was dismissed without prejudice.
 13. Derivative Instruments and Price Protection Arrangements :
  14. Income Taxes :
  15. Recently Issued Financial Accounting Standards :
 Accounting for Conditional Asset
Retirement Obligations  an interpretation of FASB Statement No. 143 Accounting for Asset
Retirement Obligations,
 13




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##### Table of Contents



Accounting for Stripping Costs Incurred during Production in the Mining Industry,
 Share-Based Payment. Accounting for Stock-Based Compensation
 14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995.
  §
    
    the volatility of gold prices;§
    
    the speculative nature of mineral exploration;§
    
    uncertainty of estimates of mineralized material and gold deposits;§
    
    compliance with environmental and governmental regulations;§
    
    the potential un-availability of financing on acceptable terms or the inability to
obtain additional financing through capital markets, joint ventures, or other
arrangements in the future;§
    
    the outcome of the McDonald and Kendall Mine litigation as well as other possible
judicial proceedings;§
    
    economic and market conditions;§
    
    unanticipated grade, geological, metallurgical, processing or other problems;§
    
    operational risks of mining, development and exploration and force majeure events; and§
    
    other risk factors as described from time to time in the Companys filings with the
Securities and Exchange Commission (SEC).
  Overview
     15




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##### Table of Contents



Montana Environmental Information Center, Inc. and Earthworks/Mineral
Policy Center Inc., the Plaintiffs, vs. Canyon Resources Corporation and C.R. Kendall Corporation
 Seven-Up
Pete Venture, et al. v The State of Montana
 Critical Accounting Policies and Estimates
   16




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##### Table of Contents



Reserves:
  Inventories:
 Asset Retirement Obligations: Accounting
for Asset Retirement Obligations
 17




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##### Table of Contents



Impairments: Accounting for the Impairment or Disposal of Long-Lived Assets
  Derivatives Instruments and Hedging Activities: Accounting for Derivative
Instruments and Hedging Activities Accounting for Certain Derivative Instruments
and Certain Hedging Activities-an Amendment to SFAS No. 133.
  Stock-Based Compensation: Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Income Taxes:
 Potential Litigation Liabilities:
 Results of Operations
 18




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##### Table of Contents



Three Months Ended
    
    
    Three Months EndedMarch 31, 2006
    
    
    March 31, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageGold
    
    
    Price Per
    
    
    Revenue
    
    
    Gold
    
    
    Price Per
    
    
    RevenueOunces
    
    
    Oz.
    
    
    $000s
    
    
    Ounces
    
    
    Oz.
    
    
    $000sDeliveries
Spot Sales
    
    
    1,045
    
    
    $
    567
    
    
    $
    593
    
    
    
    2,365
    
    
    $
    424
    
    
    $
    1,0021,045
    
    
    $
    567
    
    
    
    593
    
    
    
    2,365
    
    
    $
    424
    
    
    
    1,002Other transactions
Silver proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,045
    
    
    $
    567
    
    
    $
    593
    
    
    
    2,365
    
    
    $
    424
    
    
    $
    1,002
  
    
    Gross margin (revenues less cost of sales) improved $0.2 million due primarily to the
increased gold price.
    
    Lower depreciation, depletion and amortization of $0.9 million due to the second quarter
2005 impairment of $9.2 million of McDonald mineral leases, which were being amortized on a
straight line basis.
    
    Selling, general and administrative expenses increased by $0.3 million due primarily to
expensing share-based compensation related to the adoption of SFAS 123(R), employee
departure costs and increased investor relations activities.
    
    The increase in exploration costs of $0.1 million was due primarily to work performed at
Briggs on an exploratory underground target east of Briggs North pit.
    
    Expenses decreased by $0.4 million because there was no debenture conversion expense
incurred in the current quarter.
    
    Other income increased by $0.8 million due to sale of securities in the quarter.
    
    Other expense increased by $0.1 million due to the increase in the warrant liability as
a result of the warrants issued in the December 2005 financing.
 Liquidity & Capital Resources
  19




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##### Table of Contents



Outlook
 Operations
    Financing
  Expiration Date
    
    Underlying Shares
    
    
    Strike PriceJune 1, 2006
    
    
    2,199,836
    
    
    $
    2.16December 1, 2006
    
    
    882,754
    
    
    $
    1.08August 31, 2007
    
    
    50,000
    
    
    $
    0.80March 14, 2008
    
    
    2,651,466
    
    
    $
    1.03December 1, 2008
    
    
    1,765,503
    
    
    $
    1.30December 1, 2008
    
    
    231,000
    
    
    $
    0.76Total/Average
    
    
    7,780,559
    
    
    $
    1.41
 20




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##### Table of Contents



Contractual Obligations
  Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsLong-term debt obligations
    
    $
    825,000
    
    
    $
    
    
    
    $
    
    
    
    $
    825,000
    
    
    $
    Capital lease obligations
    
    
    30,600
    
    
    
    6,300
    
    
    
    24,300
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    113,700
    
    
    
    84,500
    
    
    
    29,200
    
    
    
    
    
    
    
    Asset retirement obligations
    
    
    5,497,700
    
    
    
    1,026,200
    
    
    
    1,970,800
    
    
    
    2,016,100
    
    
    
    484,600Total
    
    $
    6,467,000
    
    
    $
    1,117,000
    
    
    $
    2,024,300
    
    
    $
    2,841,100
    
    
    $
    484,600
 Other Matters
 Federal Legislation
  Gold Prices, Price Protection Arrangements, and Associated Risks
   Recently Issued Accounting Standards
 Accounting Changes and Error Corrections Accounting Changes Reporting Accounting
Changes in Interim Financial Statements
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##### Table of Contents



Accounting for Conditional Asset
Retirement Obligations  an interpretation of FASB Statement No. 143 Accounting for Asset Retirement Obligations,
 Accounting for Stripping
Costs Incurred during Production in the Mining Industry,
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Dividends
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Commodity Prices
   22




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##### Table of Contents



Interest Rates
  Foreign Currency
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   
    
    increasing the involvement in the review and analysis by senior management of our financial statements;
    
    adding more rigorous policies and procedures regarding the review and approval process for complex
calculations and transactions; and
    
    engaging outside consultants with accounting expertise regarding unusual and complex transactions.
   23




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Seven-Up Pete
Venture, et al. v The State of Montana
 Item 1A. Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    None
 
 Item 3.
    
    Defaults Upon Senior Securities
    
    None
 
 Item 4.
    
    Submission of Matters to Vote of Security Holders
    
    None
 
 Item 5.
    
    Other Information
    
    None
 
 Item 6.
    
    Exhibits
 3.1
    
    Amended and Restated Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to Companys Amendment No. 1 to Registration Statement on Form S-1
(File No. 333-130692) on February 24, 2006, and incorporated herein by reference)10.1
    
    Form of Change of Control Agreements between the Company and certain of
its Executive Officers and a Schedule of such Agreements (filed as Exhibit 10.4 to
Companys Amendment No. 1 to Registration Statement on Form S-1 (File No.
333-130692) on February 24, 2006, and incorporated herein by reference)10.2
    
    Converse Uranium Project, Exploration, Development and Mine Operating
Agreement, effective as of January 23, 2006, between Canyon Resources Corporation
and New Horizon Uranium Corporation
(filed as Exhibit 10.9 to the
Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2005 (File No. 001-11887), and
incorporated herein by references)10.3
    
    Consulting Agreement, dated February 1, 2006, between the Company and Dr.
Gary Huber31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 200231.2
    
    Certification of Chief Accounting Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 200232.1
    
    Certification of Chief Executive Officer pursuant to U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Accounting Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 24




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##### Table of Contents



SIGNATURES
  CANYON RESOURCES CORPORATIONDate: May 8, 2006
    
    /s/ James K. B. HeskethJames K. B. HeskethPresident and Chief Executive Officer(Principal Executive Officer)Date: May 8, 2006
    
    /s/ David P. SuleskiDavid P. SuleskiChief Accounting Officer, Treasurer andCorporate Secretary(Principal Accounting Officer)
 25




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##### Table of Contents



Exhibit Index
 EXHIBIT NO.
    
    DESCRIPTION3.1
    
    Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to Companys Amendment No. 1 to Registration Statement on Form S-1 (File No.
333-130692) on February 24, 2006, and incorporated herein by reference)10.1
    
    Form of Change of Control Agreements between the Company and certain of its
Executive Officers and a Schedule of such Agreements (filed as Exhibit 10.4 to Companys
Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-130692) on February
24, 2006, and incorporated herein by reference)10.2
    
    Converse Uranium Project, Exploration, Development and Mine Operating Agreement,
effective as of January 23, 2006, between Canyon Resources Corporation and New Horizon
Uranium Corporation (filed as Exhibit 10.9 to the Companys
Annual Report on form 10-K for the fiscal year ended
December 31, 2005 (File No. 001-11887), and incorporated herein
by references)10.3
    
    Consulting Agreement, dated February 1, 2006, between the Company and Dr. Gary
Huber31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Accounting Officer pursuant to Rule 13(a)-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Accounting Officer pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002