UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  **FORM
20-F**
  (Mark
One)
  Registration
      statement pursuant to Section 12(b) or 12(g) of the Securities Exchange
      Act of 1934
 or
 
 X__
    Annual
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
 
 For
the fiscal year ended  December
31, 2004
 or
 
 ___
    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   **0-29500**
 
 ARGOSY
      MINERALS INC.(Exact
      name of registrant as specified in its charter)Yukon
      Territory, Canada(Jurisdiction
      of incorporation or organization)
  20607
      Logan Avenue
      Langley,
      BC
      Canada
      V3A 7R3(Address
      of principal executive offices)
 **Securities
registered or to be registered pursuant to Section 12(b) of the
Act:**
 
 None(Title
      of Class)
 **Securities
registered or to be registered pursuant to Section 12(g) of the
Act:**
 
 Common
      Shares, Without Par Value(Title
      of Class)
 **Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:**
 
 None(Title
      of Class)
 **Indicate
the number of outstanding shares of each of the registrant’s classes of capital
or common stock as of the close of the period covered by the annual
report.**
 
 95,969,105
      Common Shares
 
 1
 **Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 X No
 
 **Indicate
by check mark which financial statement item the registrant has elected to
follow.**
 
 Item
17 X Item 18
 
  2
  **Table
of Contents**
 **Table
      of Contents**
    **3****Glossary
      Of Technical Terms**
    **5**NOTE
      TO UNITED STATES READERS – DIFFERENCES REGARDING THE DEFINITIONS OF
      RESOURCE AND RESERVE ESTIMATES IN THE UNITED STATES AND
    CANADA
    6**Special
      Note Regarding Forward Looking Statements**
    **7****Metric
      Equivalents**
    **8****Part
      I**
    **9**Item
      1 –
    Identity
      of Directors, Senior Management and Advisors
    9Item
      2 –
    Offer
      Statistics and Expected Timetable
    9Item
      3 –
    Key
      Information
    9*A.*
    *Selected
      Financial Data*
    *9**B.*
    *Capitalization
      and Indebtedness*
    *10**C.*
    *Reasons
      for the Offer and Use of Proceeds*
    *10**D.*
    *Risk
      Factors*
    *10*Item
      4 –
    Information
      on the Company
    17*A.*
    *History
      and Development of the Company*
    *17**B.*
    *Business
      Overview*
    *21**C.*
    *Organizational
      Structure*
    *32**D.*
    *Property,
      Plant and Equipment*
    *33*Item
      5 –
    Operating
      and Financial Review and Prospects
    35*A.*
    *Operating
      Results*
    *35**B.*
    *Liquidity
      and Capital Resources*
    *42**C.*
    *Research
      and Development, Patents and Licences, etc.*
    *43**D.*
    *Trend
      information*
    *43*Item
      6 –
    Directors,
      Senior Management and Employees
    44*A.*
    *Directors
      and Senior Management*
    *44**B.*
    *Compensation*
    *44**C.*
    *Board
      Practices*
    *47**D.*
    *Employees*
    *48**E.*
    *Share
      Ownership*
    *48*Item
      7 –
    Major
      Shareholders and Related Party Transactions
    50*A.*
    *Major
      shareholders*
    *50**B.*
    *Related
      Party Transactions*
    *50**C.*
    *Interests
      of Experts and Counsel*
    *51*Item
      8 –
    Financial
      Information
    51Item
      9 –
    The
      Offer and Listing
    51*A.*
    *Offer
      and Listing Details*
    *51**B.*
    *Plan
      of Distribution*
    *52**C.*
    *Markets*
    *52**D.*
    *Selling
      shareholders.*
    *52**E.*
    *Dilution*
    *52**F.*
    *Expenses
      of the Issue*
    *52*Item
      10 –
    Additional
      Information
    52*A.*
    *Share
      Capital*
    *52**B.*
    *Memorandum
      and Articles of Association*
    *52**C.*
    *Material
      Contracts*
    *55**D.*
    *Exchange
      Controls*
    *57**E.*
    *Taxation*
    *57**F.*
    *Dividends
      and Paying Agents*
    *69**G.*
    *Statement
      by Experts*
    *69**H.*
    *Documents
      on display*
    *69**I.*
    *Subsidiary
      Information*
    *69*
  3
 Item
      11 –
    Quantitative
      and Qualitative Disclosures about Market Risk
    70Item
      12 –
    Description
      of Securities other than Equity Securities
    70**Part
      II**
    **70**Item
      13 –
    Defaults,
      Dividend Arrearages and Delinquencies
    70Item
      14 –
    Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
    70Item
      15 –
    Controls
      and Procedures
    70Item
      16A –
    Audit
      Committee Financial Expert
    71Item
      16B –
    Code
      of Ethics
    71Item
      16C –
    Principal
      Accountant Fees and Services
    71*Audit
      Fees*
    *72**Audit-Related
      Fees*
    *72**Tax
      Fees*
    *72**All
      other Fees*
    *72*Item
      16D –
    Exemptions
      from the Listing Standards for Audit Committees.
    72Item
      16E –
    Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers.
    73**Part
      III**
    **73**Item
      17 –
    Financial
      Statements
    73*NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS*
    *78*Item
      18 –
    Financial
      Statements
    84Item
      19 –
    Exhibits
    85**SIGNATURES**
    **86**
 4
 **Glossary
Of Technical Terms**
 
 
 **The
following is a glossary of mining terms used in this
document:**
 
 *alluvial*
    *-*
    *Resulting
      from erosion and weathering of primary occurrences and later transported,
      relocated and concentrated by a river.**assays*
    *-*
    *Metallurgical
      procedure for determining grade of sample.**basal*
    *-*
    *Lowermost
      layer or horizon.**breccia*
    *-*
    *rock
      consisting of fragments, more or less angular, in a matrix of
      finer-grained material.**concentrate*
    *-*
    *a
      product containing valuable minerals from which most of the waste material
      in the ore has been separated, usually by a flotation
      technique.**decantation*
    *-*
    *Metallurgical
      process where solutions flow or pumped from one process to
      another.**development*
    *-*
    *the
      preparation of a mining property for production.**diamond
      drilling*
    *-*
    *a
      type of rotary core drilling in which diamonds are used as the cutting
      tool.**diamondiferous*
    *-*
    *Containing
      diamond.**epithermal*
    *-*
    *applied
      to hydrothermal deposits formed at low temperature and
      pressure.**fault*
    *-*
    *a
      fracture in a rock along which there has been
  displacement.**fault
      system*
    *-*
    *two
      or more interconnecting faults.**flotation*
    *-*
    *a
      metallurgical process involving air bubbles to recover a specific mineral
      from an ore.**grade*
    *-*
    *the
      proportion of an element (or substance) in an ore body - commonly
      expressed as a percentage for base metals and grams/tonne or oz/ton for
      precious metals.**g/t*
    *-*
    *Grams
      per tonne.**gravels*
    *-*
    *Coarse
      alluvially derived sediments.**km*
    *-*
    *kilometres
      (1000 metres).**laterite*
    *-*
    *a
      residual deposit derived from the weathering of ultrabasic rocks by the
      drainage of meteoric water through fractures.**lateritic
      ore*
    *-*
    *laterite
      containing nickel and cobalt values in economic
      concentrations.**leaching*
    *-*
    *the
      dissolution stage of a hydrometallurgical process.**limonite*
    *-*
    *a
      hydrated oxide of iron which, in the context of a laterite orebody
      represents the most heavily weathered portion of the laterite profile,
      lying closest to surface with high concentrations of contained iron and
      low concentrations of contained magnesium.**m*
    *-*
    *Metres.**measured
      resource*
    *-*
    *the
      estimated quantity and grade of that part of a deposit for which the size,
      configuration, and grade have been very well-established by observation
      and sampling of outcrops, drill holes, trenches and mine
      workings.**mineralization*
    *-*
    *the
      presence of minerals of possible economic value.**mineralogy*
    *-*
    *the
      study of minerals.**mineral
      resource*
    *-*
    *a
      deposit or concentration of natural, solid, inorganic or fossilised
      organic substance in such quantity and at such a grade or quality that
      extraction of the material at a profit is potentially
      viable.**ore*
    *-*
    *a
      body of rock from which it is or may be possible to extract minerals
      profitably.**oxide*
    *-*
    *a
      mineral compound of an element (or elements) with
oxygen.*
  5
 *palaeochannel*
    *-*
    *Ancient
      river course, usually filled in with overburden.**refinery*
    *-*
    *a
      plant or processing facility where ore, concentrates, mixed sulphides or
      matte are processed into partially or fully refined
      metals.**reserves*
    *-*
    *Proven,
      probable, possible.**resources*
    *-*
    *measured,
      indicated,**drill-inferred,**inferred.**saprolite*
    *-*
    *weathered
      rock in which the original minerals have been almost completely replaced
      (e.g. by clays) but the original texture of the rock type is
      preserved.**saprolitic
      ore*
    *-*
    *saprolite
      containing nickel and cobalt values in economic
      concentrations.**serpentinised
      dunite*
    *-*
    *Altered
      mafic rock.**strike*
    *-*
    *the
      course or bearing of a bed or layer of rock.**stoping*
    *-*
    *Underground
      mining activity to remove ore.**structural
      corridor*
    *-*
    *Regional
      lineations of geological structures such as faults.**vein*
    *-*
    *an
      occurrence of ore with a regular development in length, width and
      depth.*
 
  **NOTE
TO UNITED STATES READERS -** **DIFFERENCES REGARDING THE DEFINITIONS OF RESOURCE AND RESERVE ESTIMATES IN THE
UNITED STATES AND CANADA**
  **Mineral
      Reserve**
    The
      definitions of “mineral reserves”, “proven mineral reserves” and “probable
      mineral reserves,” as used in this report, are Canadian mining terms as
      defined in accordance with National Instrument 43-101 - Standards of
      Disclosure for Mineral Projects under the guidelines set out in the
      Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”)
      Standards on Mineral Resources and Mineral Reserves Definitions and
      guidelines adopted by the CIM Council on August 20, 2000. CIM standards
      differ from the standards in the United States.Under
      United States standards, a “mineral reserve” is defined as a part of a
      mineral deposit which could be economically and legally extracted or
      produced at the time the mineral reserve determination is made,
      where:“reserve”
      means that part of a mineral deposit which can be economically and legally
      extracted or produced at the time of the reserve
      determination;“economically”
      implies that profitable extraction or production has been established or
      analytically demonstrated to be viable and justifiable under reasonable
      investment and market assumptions; andwhile
      “legally” does not imply that all permits needed for mining and processing
      have been obtained or that other legal issues have been completely
      resolved, for a reserve to exist, there should be a reasonable certainty
      based on applicable laws and regulations that issuance of permits or
      resolution of legal issues can be accomplished in a timely
      manner.Mineral
      reserves are categorized as follows on the basis of the degree of
      confidence in the estimate of the quantity and grade of the deposit.
      
      Under
      United States standards, proven or measured reserves are defined as
      reserves for which (a) quantity is computed from dimensions revealed in
      outcrops, trenches, workings or drill holes, grade and/or quality are
      computed from the results of detailed sampling and (b) the sites for
      inspection, sampling and measurement are spaced so closely and the
      geographic character is so well defined that size, shape,depth
      and mineral content of reserves are well established.
  6
 Under
      United States standards, probable reserves are defined as reserves for
      which quantity and grade and/or quality are computed from information
      similar to that of proven reserves (under United States standards), but
      the sites for inspection, sampling, and measurement are further apart or
      are otherwise less adequately spaced. The degree of assurance, although
      lower than that for proven mineral reserves, is high enough to assume
      continuity between points of observation.**Mineral
      Resource**
    While
      the terms “mineral resource,” “measured mineral resource,” “indicated
      mineral resource,” and “inferred mineral resource” are recognized and
      required by Canadian regulations, they are not defined terms under
      standards in the United States. As such, information contained in this
      report concerning descriptions of mineralization and resources under
      Canadian standards may not be comparable to similar information made
      public by U.S. companies subject to the reporting and disclosure
      requirements of the Securities and Exchange Commission. “Indicated mineral
      resource” and “inferred mineral resource” have a great amount of
      uncertainty as to their existence and a great uncertainty as to their
      economic and legal feasibility. It can not be assumed that all or any part
      of an “indicated mineral resource” or “inferred mineral resource” will
      ever be upgraded to a higher category. Investors are cautioned not to
      assume that any part or all of mineral deposits in these categories will
      ever be converted into reserves.
 
 **Special
Note Regarding Forward Looking Statements**
 
 
 Certain
statements in this document constitute “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Some, but not
all, forward-looking statements can be identified by the use of words such as
“anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend,” statements
that an action or event “may,” “might,” “could,” “should,” or “will” be taken or
occur, or other similar expressions. Forward-looking
statements in this report include, but are not limited to, (i) the likelihood
the Registrant will be granted a permit by the United States Forest Service to
commence its drilling program in the spring of 2005 related to the Nevada Gold
Project (as defined herein) and the Registrant’s proposed activities after
receiving such permit, and (ii) the extent of the nickel deposits related to the
Burundi Nickel Project (as defined herein) and the projected life of any mining
project related to such deposits. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Registrant, or other future events, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following
risks: the
risks associated with the Tripartite Agreement arbitration;  risks
associated with project development; the Registrant’s history of losses and lack
of revenues; the Registrant’s lack of mineral producing properties; the
potential inability of investors to enforce U.S. judgments against the
Registrant or its officers or directors; the need for additional financing;
operational risks associated with mining and mineral processing; fluctuations in
diamond and metal prices; title matters; uncertainties and risks related to
carrying on business in foreign countries ;
political risks and political risk insurance ;
environmental liability claims and insurance; infrastructure issues; reliance on key personnel; the potential for conflicts of interest among certain
officer s ,
directors or promoters of the Registrant with certain other projects; the
absence of dividends; currency fluctuations; competition; dilution; the
volatility of the Registrant’s common share price and volume;
and adverse tax consequences to U.S. Shareholders resulting from the
Registrant’s PFIC status. Additional information concerning these and other
factors that could affect the operations or financial results of the Registrant
are included in this document under *“Item
3. - Risk Factors”* .
Although the Registrant believes that the expectations reflected in its
forward-looking statements are reasonable, it cannot guarantee future results,
performance and achievements or other future events. The Registrant is under no
duty to update any of its forward-looking statements after the date of this
report. Investors should not place undue reliance on such forward-looking
statements.
  
 7
 **Metric
Equivalents**
 For
ease of reference, the following factors for converting metric measurements into
imperial equivalents are provided:
 
 **To
      Convert From Metric**
    **To
      Imperial**
    **Multiply
      By**hectares
    acres
    2.471metres
    feet
    3.281kilometres
    miles
    0.621tonnes
    tons
      (2000 pounds)
    1.102
 
 In
this Annual Report on Form 20-F, unless otherwise specified, all monetary
amounts are expressed in Canadian dollars. The following table sets out the
exchange rates, based on the noon buying rate in New York City for cable
transfer in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York, for the conversion of Canadian dollars (CDN$) into
United States dollars (US$) in effect for each of the following periods, and the
average exchange rates (based on the average of the exchange rates on the last
day of each month) and the high and low exchange rates for each of the previous
six months:
 **Year
      Ended December 31****2004**
    **2003**
    **2002**
    **2001**
    **2000**Average
      for Period
    0.772
    0.7205
    0.6369
    0.6446
    0.6726
 **Month
      Ended****28-Feb-05**
    **31-Jan-05**
    **31-Dec-04**
    **30-Nov-04**
    **31-Oct-04**
    **30-Sep-04**High
      for Period
    0.8134
    0.8346
    0.8435
    0.8493
    0.8201
    0.7906Low
      for Period
    0.7961
    0.805
    0.8064
    0.8155
    0.7858
    0.7651
 Exchange
rates are based upon the noon buying rate in New York City for cable transfers
in foreign currencies for customs purposes by the Federal Reserve Bank of New
York. The noon rate of exchange on February 28, 2005 as reported by the United
States Federal Reserve Bank of New York for the conversion of Canadian dollars
into United States dollars was 0.8133 (US$1.00 = CDN$1.2295) and for the
conversion of Australian dollars into United States dollars was 0.7940 (US$1.00
= AUS$1.2594).
 
 The
information set forth in this Form 20-F is as at February
28, 2005
unless an earlier or later date is indicated.
  8
  **Part
I**
 
  **Item
1 - Identity of Directors, Senior Management and Advisors**
  Not
applicable.
   **Item
2 - Offer Statistics and Expected Timetable**
  Not
applicable.
   **Item
3 - Key Information**
  **A.**  **Selected
Financial Data**
 The
following table summarizes selected consolidated financial data for the
Registrant (stated in Canadian dollars) prepared in accordance with Canadian
Generally Accepted Accounting Principles (“Canadian GAAP”). The table also
summarizes certain corresponding information prepared in accordance with United
States Generally Accepted Accounting Principles (“U.S. GAAP”). The information
in the table was extracted or derived from the more detailed audited
consolidated financial statements and related notes included herein and should
be read in conjunction with such financial statements and with the information
appearing under the heading “ *Item
5. - Operating and Financial Review and Prospects”* .
Reference is made to Note 10 of the December 31, 2004 consolidated financial
statements of the Registrant, included herein, for a discussion of the material
differences between Canadian GAAP and US GAAP, and their effects on the
Registrant’s financial statements.
  To
date, the Registrant has not generated any cash flow from operations to fund
ongoing operational requirements and cash commitments. The Registrant has
financed its operations principally through the sale of its equity securities,
and reimbursement of prior expenditures. The Registrant currently has sufficient
funds to maintain operations for the remainder of its fiscal year at its current
level of activity. In the event that activities increase or new projects are
acquired, the Registrant’s ability to continue operations will be dependent on
its ability to obtain additional financing. For particulars, see “ *Item
4. - Business Overview”* and
“ *Item
5 - Operating and Financial Review and Prospects - Liquidity and Capital
Resources”* .
  9
 **Year
      Ended**
      **Dec.
      31, 2004**
    
    **Year
      Ended**
      **Dec.
      31, 2003**
    
    **Year
      Ended**
      **Dec.
      31, 2002**
    
    **Year
      Ended**
      **Dec.
      31, 2001**
    
    **Year
      Ended**
      **Dec.
      31, 2000****Statement
      Of Operations And Deficit**Operating
Revenues
    
    
    n/a
    
    
    n/a
    
    
    n/a
    
    
    n/a
    
    
    n/aNet Loss for the
      PeriodCanadian GAAP
    
    $
    3,148,252
    
    $
    2,493,133
    
    $
    11,079,339
    
    $
    9,188,012
    
    $
    1,055,049U.S. GAAP
    
    $
    3,148,252
    
    $
    2,402,621
    
    $
    10,486,769
    
    $
    664,697
    
    $
    2,417,915Basic & Diluted Loss per
      Common ShareCanadian GAAP
    
    $
    0.03
    
    $
    0.03
    
    $
    0.12
    
    $
    0.10
    
    $
    0.01U.S. GAAP
    
    $
    0.03
    
    $
    0.03
    
    $
    0.11
    
    $
    0.01
    
    $
    0.03Dividends
Declared
    
    
    n/a
    
    
    n/a
    
    
    n/a
    
    
    n/a
    
    
    n/a**Balance
      Sheet**Total AssetsCanadian GAAP
    
    $
    4,812,927
    
    $
    8,261,351
    
    $
    10,628,717
    
    $
    21,901,677
    
    $
    30,609,994U.S. GAAP
    
    $
    4,812,927
    
    $
    8,261,351
    
    $
    10,538,205
    
    $
    21,218,595
    
    $
    21,403,597Net AssetsCanadian GAAP
    
    $
    4,661,926
    
    $
    7,810,178
    
    $
    10,303,311
    
    $
    21,382,650
    
    $
    30,524,151U.S. GAAP
    
    $
    4,661,926
    
    $
    7,810,178
    
    $
    10,212,799
    
    $
    20,699,568
    
    $
    21,317,754Shareholders’
    EquityCanadian GAAP
    
    $
    4,661,926
    
    $
    7,810,178
    
    $
    10,303,311
    
    $
    21,382,650
    
    $
    30,524,151U.S. GAAP
    
    $
    4,661,926
    
    $
    7,810,178
    
    $
    10,212,799
    
    $
    20,699,568
    
    $
    21,317,754Weighted Average Number of Shares
      Outstanding
    
    
    95,969,105
    
    
    95,969,105
    
    
    95,969,105
    
    
    95,894,105
    
    
    95,781,605
 
 **B.**
    **Capitalization
      and Indebtedness**
 Not
applicable.
 
 **C.**
    **Reasons
      for the Offer and Use of Proceeds**
 Not
applicable.
  **D.**
    **Risk
      Factors**
 An
investment in the Common
Shares Common
Shares of
the Registrant should be considered to be highly speculative due to the nature
of the Registrant’s business, the present stage of its projects and the risks
inherent in the development, construction, commissioning of mines and the
processing and the sale of diamonds, nickel, cobalt, gold and silver products.
 
 Some
of the risks associated with an investment in the Common Shares of the
Registrant include, but are not limited to, the following:
  *i.*
    *Lack
      of Revenues; History of Losses*
  The
Registrant has not recorded any revenues or net income from its operations nor
has the Registrant commenced commercial production on any of its properties over
the Registrant’s twenty (20) year existence. The Registrant has accumulated net
losses of approximately $39,413,000 through December 31, 2004. There can be no
assurance that significant additional losses will not occur in the near future
or that the Registrant will generate any revenues from mining operations or be
profitable in the future. The Registrant anticipates that its operating expenses
and capital expenditures may increase significantly in subsequent years if it
adds the consultants, personnel and equipment associated with advancing
exploration, development and possible commercial production of its properties
should it decide to put a property into production. The amounts and timing of
expenditures will depend on the Registrant’s ability to obtain financing on
acceptable terms, the progress of ongoing exploration and development, the
results of consultant analysis and recommendations, the rate at which operating
losses are incurred, the execution of any joint venture agreements with
strategic partners, the Registrant’s acquisition
of additional properties and other factors, many of which are beyond the
Registrant’s control.
 
 10
  The
Registrant does not expect to receive revenues from operations in the
foreseeable future, if at all. The Registrant expects to continue to incur
losses unless and until such time as properties enter into commercial
production, if at all, and generate sufficient revenues to fund its continuing
operations. The development of the Registrant’s properties will require the
commitment of substantial resources to conduct the time-consuming exploration
and development of properties. There can be no assurance that the Registrant
will generate any revenues or achieve profitability.
   *ii.*
    *No
      Mineral Producing Properties; Registrant is in Exploration
      Stage*
  The
Registrant is an exploration-stage company. There are no known ore reserves on
the Registrant’s properties and any work program on a property would be an
exploratory search for ore grade mineralization. There can be no assurance that
the current exploration programs planned by the Registrant will result in a
profitable commercial mining operation.
  The
exploration for and development of mineral deposits is a speculative venture
necessarily involving substantial risks. There is no certainty that the
expenditures to be made by the Registrant will result in discoveries of
commercially viable mineral deposits. Few properties which are explored are
ultimately developed into producing mines. The Registrant has no plant or
equipment located on any of its sites. Major expenses may be required to
establish ore reserves, develop metallurgical processes, construct mining and
processing facilities at a particular site and establish the required
infrastructure ( *i.e.,* electricity and roads). In exploring its properties, the Registrant may be
subjected to an array of complex economic factors and accordingly, there can be
no assurance that feasibility studies will be carried out on any of its
properties or that results projected by any feasibility study will be attained
in the event that the Registrant commences production on any of its
properties.
  *iii.*
    *Risk
      of Development*
  The
Registrant has not brought any property in which it had an interest into
commercial production. As such, the Registrant’s ability to meet production,
timing and cost estimates for properties cannot be assured. Technical
considerations, delays in obtaining government approvals, the inability to
obtain financing or other factors could cause delays in developing properties.
Such delays could materially adversely affect the financial performance of the
Registrant.
  *iv.*
    *Additional
      Financing Requirements*
  The
Registrant’s operations currently do not provide any cash flow. In the past the
Registrant has relied on sales of equity securities to meet its cash
requirements. There can be no assurance that future operations will provide cash
flow sufficient to satisfy operational requirements and cash commitments, or
that additional equity financing will be available on terms acceptable to the
Registrant, or at all.
  The
Registrant presently has sufficient financial resources to maintain its current
level of operations for at least the remainder of its fiscal year. Property
acquisitions or changes in the scope of the Registrant’s operations may require
additional funding. The Registrant’s operational budget is based in part on
estimates provided by independent contractors. In the past these estimates have
proven to be less than amounts ultimately paid by the Registrant,
largely resulting from changes in the project. Failure of the Registrant to
obtain additional financing, if and as required, on a timely basis could delay
some or all of the Registrant’s projects.
  11
 Construction
of any of the projects may require that the Registrant raise substantial project
financing. The Registrant has not previously completed financing of a
development project and a financing of this magnitude will be dependent on a
large number of factors beyond the Registrant’s control, including the state of
financial and equity markets, interest rates, currency exchange rates, commodity
prices for diamonds, nickel, cobalt, sulphur, gold and silver, energy prices and
other factors. Failure by the Registrant to finance any of the projects could
materially adversely affect the Registrant’s future financial performance.
  *v.*
    *Operational
      Risks*
  The
business of mining and processing is generally subject to certain types of risks
and hazards, including fires, power outages, labour disruptions, the inability
to obtain suitable or adequate land, machinery, equipment, or labour,
environmental hazards, industrial accidents, unusual or unexpected rock
formations, cave-ins,  flooding,
finished product losses, theft, periodic interruptions due to inclement or
hazardous weather conditions and political risk. Such risks could result in
damage to, destruction of or expropriation of mineral properties or production
facilities, personal injury, environmental damage, delays in mining, monetary
losses and possible legal liability. Projects may also be affected by risks of
fluctuations in exchange rates and inflation. No assurance can be given that
insurance to cover these risks will be available at economically feasible
premiums or at all. Insurance against environmental risks (including potential
for pollution or other hazards as a result of the disposal of waste products
occurring from production) is not generally available to the Registrant or to
other companies within the industry. To the extent that the Registrant is
subject to environmental liabilities, the payment of such liabilities would
reduce or exhaust the funds available to the Registrant. Should the Registrant
be unable to fund fully the cost of remedying an environmental problem, the
Registrant might be required to suspend operations or enter into interim
compliance measures pending completion of the required remedy.
  *vi.*
    *Fluctuations
      in Commodity Prices*
  The
mining industry in general is intensely competitive and there is no assurance
that, even with commercial quantities of mineral deposits discovered, a
profitable market will exist for the sale of any metals and diamonds produced.
Factors beyond the control of the Registrant may affect the marketability of any
substances discovered. The prices of rough diamonds and various metals have
experienced significant movement over short periods of time, and are affected by
numerous factors beyond the control of the Registrant, including international
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates and global or regional consumption patterns,
speculative activities and increased production due to improved mining
production methods. The supply of and demand for rough diamonds and metals are
affected by various factors, including political events, economic conditions and
production costs in major producing regions. There can be no assurance that the
price of rough diamonds or any metal will be such that the Registrant’s
properties can be mined at a profit.
 
 12
 The
Registrant does not currently hedge any of its proposed future production, but
may do so in the future.
  *vii.*
    *Uncertainty
      of Title*
  Third
parties may dispute the Registrant’s rights to its mining and other interests.
While the Registrant has investigated title to all its property interests and,
to the best of its knowledge, title to all properties is in good standing or are
subject to permit renewal application, this should not be construed as a
guarantee of title.
 
 Potential
project sites in Burundi, South Africa and Nevada, USA may be subject to
dispute, prior unregistered claims, or native land claims and ultimate transfer
to the Registrant may be affected by undetected defects. Such claims or defects
could materially adversely affect one or more of the projects and the
Registrant’s financial performance.
  *viii.*
    *Foreign
      Countries and Regulatory Requirements*
  The
current or future operations of the Registrant, including development activities
and commencement of production on its properties, require permits from various
foreign, federal, state and local government authorities and such operations are
and will be governed by existing and possible future laws and regulations
governing prospecting, development, mining, production, exports, taxes, labour
standards, occupational health, waste disposal, toxic substances, land use,
environmental protection, mine safety and other matters. Companies engaged in
the development and operation of mines and related facilities generally
experience increased costs and delays in production and other schedules as a
result of the need to comply with applicable laws, regulations and permits for
exploration and permit renewals. Permitting for the commencement of mining
operations on any of the properties in which the Registrant has an interest will
require further processing by government agencies, however, the Registrant does
not anticipate being in a position to apply for any of the required permits to
commence mining operations on its properties until the end of 2005 at the
earliest. Applications for the renewal of prospecting permits are made as and
when required. The Registrant’s management does not expect that any of its
properties will have progressed to completion of a feasibility study prior to
such time, and the Registrant would not commence operations on any property
until a feasibility study has been prepared on that property.
 
 The
Registrant believes it is in substantial compliance with all material laws and
regulations which currently apply to its activities. There can be no assurance,
however, that all permits which the Registrant may require for prospecting or
the construction of mining facilities and conduct of mining operations will be
obtainable on reasonable terms or that such laws and regulations would not have
an adverse effect on any mining project which the Registrant might undertake.
  *ix.*
    *Political
      Risk and Political Risk Insurance*
  The
Registrant is exposed to political risk as it has projects in areas which may be
subject to unstable political situations. The Registrant has not applied for
political risk insurance through the Canadian Export Development Corporation.
Should the Registrant apply for such insurance there can be no assurance that
insurance will be available at economically feasible premiums or available at
all.
 
 13
 The
Canadian government, through the Export Development Corporation, may provide
insurance to cover unforeseen political risk. In deciding whether to provide
insurance coverage, the Canadian government considers the following factors:
whether the Registrant’s activities involve economic advantages to Canada, such
as the development and preservation of foreign markets or the securing of
sources of raw materials not available in Canada; whether there are economic
advantages to the host country, such as expansion of employment; whether there
is host government approval of the proposed activity; and the size and nature of
the activity; however, as a matter of policy, the Canadian government’s
insurance program covers almost any right that a Canadian company may acquire in
a foreign enterprise, including equity, loans, management contracts and royalty
and licensing agreements.
 
 Specifically,
the Registrant’s Burundi n N ickel P p roject
is located at Musongati in Burundi in Central Africa where  (the
“Burundi Nickel Project”)  where there
has been a recent history of political conflict between the various tribal
groups. These groups are seeking to share political and military power. Attempts
have been made by the international community to broker an agreement which will
allow for an end to the conflict and a peaceful transition of power. The
instability within the country gave rise to a declaration of force majeure by
the Registrant’s subsidiary in April 2000. Following the implementation of a
transitional government in Burundi in November 2001 as a result of the peace
accord signed by most of the parties and a subsequent improvement in general
security, the declaration of force majeure was lifted on March 28, 2002. Force
majeure was re-imposed in August 2002 following a significant deterioration in
security in Burundi. The project has remained under force majeure since August
2002 except for a brief period in July 2004. In the event that the political and
security situation does not improve the Registrant’s ability to proceed with the
Burundi Nickel Project will be materially adversely affected.
  *x.*
    *Environmental
      Factors*
  While
the Registrant has reviewed the existing environmental legislation of each
country in which it has a project, these assessments are preliminary. The
Registrant’s projects are at an early stage and will require substantially more
work regarding environmental matters and will be required to meet World Bank
standards or regulations of the local governments, whichever is more stringent.
Therefore, existing and possible future environmental legislation, regulations
and actions in Burundi, South Africa and the USA could cause additional expense,
capital expenditures, restrictions and delays in the Registrant’s activities
undertaken in connection with the projects. The continued conduct of each of the
Registrant’s projects depends, to a large extent, on the obtaining and
maintaining of environmental approvals and there is no assurance that such
approvals will be granted when requested. Delays in the granting of such
approvals and/or changes in environmental legislation and regulations could
materially adversely affect the Registrant’s operations and financial
performance.
  *xi.*
    *Infrastructure
      Issues*
  The
Burundi Nickel Project will require significant infrastructure upgrades,
particularly relating to transportation (rail, road and neighbouring country
harbour facilities) as well as the provision of additional electrical power.
Delays in infrastructure upgrades or the requirement for the Registrant to
finance such upgrades may materially adversely affect the Registrant’s financial
performance.
  
 14
  *xii.*
    *Reliance
      on Key Personnel*
  The
Registrant is heavily dependent upon the expertise of certain of its own or its
subsidiaries’ key officers. The loss of the services of one or more of these
individuals could have a material adverse effect on the Registrant. The
Registrant’s ability to recruit and retain highly qualified management personnel
is critical to its success. There can be no assurance that the Registrant will
be successful in attracting and retaining skilled and experienced management; if
it is unable to do so this may materially adversely affect the Registrant’s
financial performance.
  *xiii.*
    *Conflicts
      of Interest*
  Certain
directors, officers or promoters of the Registrant are directors, officers,
significant shareholders or promoters of other publicly listed companies. As a
result, potential conflicts of interest may arise with respect to the exercise
by such persons of their respective duties for the Registrant. In the event
that such a conflict of interest arises at a meeting of the directors of the
Registrant, a director who has such a conflict will abstain from voting for or
against the approval of such participation or such terms. In the appropriate
cases, the Registrant will establish a special committee of independent
directors to review a matter in which several directors, or management, may have
a conflict. Other than as indicated, the Registrant has no other procedures or
mechanisms to deal with conflicts of interest.
  *xiv.*
    *Absence
      of Dividends*
  The
Registrant has never declared or paid cash dividends on its Common Shares and
does not anticipate doing so in the foreseeable future. There can be no
assurance that the Registrant’s board of directors (the “Board”) will ever
declare cash dividends, which action is exclusively within its discretion.
Investors cannot expect to receive a dividend on the Registrant’s Common Shares
in the foreseeable future, if at all.
  *xv.*
    *Currency
      Fluctuation*
  The
Registrant currently maintains its banking accounts mostly in Canadian dollars.
The Registrant’s office in Canada (using Canadian dollars) and office in
Australia (using Australian Dollars) and proposed operations in Burundi (using
Burundian francs), in South Africa (using Rands) and in the USA, and the
proposed sale of metals and diamonds which are priced in U.S. dollars make it
subject to foreign currency fluctuations and such fluctuations may materially
affect the Registrant’s financial position and results from operations. The
Registrant does not currently engage in hedging activities.
  *xvi.*
    *Competition*
  The
Registrant competes with other development companies which have similar
operations, and many such competitor companies have operations and financial
resources and industry experience far greater than those of the Registrant.
Nevertheless, the market for the Registrant’s potential future production of
diamonds, nickel, cobalt, gold and silver tends to be commodity-oriented rather
than company-oriented. If it successfully reaches commercial production, the
Registrant will still be subject to competition from much larger and financially
stronger competitors and such competition may materially adversely affect the
Registrant’s financial performance.
  
 15
 
  *xvii.*
    *Dilution*
  The
Registrant may attempt to raise additional capital in the future from the issue
of new Common Shares and grant to some or all of its own and its subsidiaries’
directors, officers, insiders and key employees options to purchase the
Registrant’s Common Shares as non-cash incentives to those employees. Such
capital raisings may be a t prices below or equal to market prices and such options may be granted at
exercise prices equal to market prices at times when the public market is
depressed. To the extent that significant numbers of new Common Shares are
issued or such options may be granted and exercised, the interests of then
existing shareholders of the Registrant will be subject to additional dilution.
 
 The
Registrant is currently without a source of revenue and will most likely be
required to issue additional shares to finance its operations and, depending on
the outcome of the feasibility studies, may also issue substantial additional
shares to finance the construction of any or all of its projects.
  xviii.
    *Volatility
      of Common Share Price and Volume**;
      Lack of Liquidity*
  The
Registrant’s Common Shares are listed for trading on the Australian Stock
Exchange (“ASX”). The Registrant’s listing on the CDNX, in Canada, was
voluntarily terminated on October 4, 2001 due to lack of trading volume.
Shareholders of the Registrant may still be unable to sell significant
quantities of the Common Shares into the public trading markets without a
significant reduction in the price of the shares, if at all. Furthermore, there
can be no assurance that the Registrant will continue to be able to meet the
listing requirements of the ASX or achieve listing on any other public trading
exchange. The market price of the Common Shares may be affected significantly by
factors such as changes in the Registrant’s operating results, the completion or
delay of a positive feasibility study, the availability of construction
financing, fluctuations in the price of metals and diamonds, the interest of
investors, traders and others in small exploration stage public companies such
as the Registrant and general market conditions. In recent years the securities
markets in Australia have experienced a high level of price and volume
volatility, and the market price of securities of many companies, particularly
small capitalisation exploration companies similar to the Registrant, have
experienced wide fluctuations which have not necessarily been related to the
operating performances, underlying asset values or future prospects of such
companies. There can be no assurance that future fluctuations in the price of
the Registrant’s shares will not occur.
  *xix.*
    *Adverse
      Tax Consequences to U.S. Shareholders Resulting From the Registrant’s PFIC
      Status*
  The
Registrant believes that it qualified as a passive foreign investment company
(“PFIC”) for the fiscal year ended December 31, 2004 and may qualify as a PFIC
in the future with respect to U.S. Holders of the Registrant’s Common Shares
because the only source of income is interest, a passive source of income under
the PFIC rules.
 
 See
“ *Item
10.E. Taxation - United States Federal Income Tax Consequences”* for a more detailed discussion of material United States federal income tax
consequences for U.S. shareholders.
  *xx.*
    *Potential
      Inability to Enforce U.S. Judg*ements
      against the Registrant or its Officers and
Directors
  The
Registrant is incorporated under the laws of the Yukon Territory, Canada and,
all of the Registrant’s directors and officers are residents of either Canada or
Australia. Consequently,
it may be difficult for United States investors to effect service of process
within the United States upon the Registrant or upon those directors or officers
who are not residents of the United States, or to realize in the United States
upon judgments of United States courts predicated upon civil liabilities under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A
judg e ment
of a U.S. court predicated solely upon such civil liabilities may be enforceable
in Canada by a Canadian court if the U.S. court in which the judg e ment
was obtained had jurisdiction, as determined by the Canadian court, in the
matter. There is substantial doubt whether an original action could be brought
successfully in Canada against any of such persons or the Registrant predicated
solely upon such civil liabilities.
 
 16
  **Item
4 - Information on the Company**
  **A.**
    **History
      and Development of the Company**
 The
Registrant was incorporated in the Province of Alberta pursuant to the Business
Corporations Act (Alberta) on December 17, 1985, was continued under the Canada
Business Corporations Act on September 24, 1987 and was continued pursuant to
the *Business
Corporations Act* (Yukon) on June 17, 1997.
 
 The
head office and address for service of the Registrant is 20607 Logan Avenue,
Langley, British Columbia, V3A 7R3, Canada - tel. (604) 530-8436 and its
registered and records office in Canada is located at 3081 Third Avenue, The
Drury Building, Whitehorse, Yukon, Y1A 4Z7, Canada - tel. (867) 668-4405. Its
registered office in Australia is Suite 3, Parkview, 23 Richardson Street, South
Perth, Western Australia, Australia 6151 - tel. (011)
618-9474-4178.
 
 Since
inception, the Registrant has been involved in exploration for metals, minerals
and diamonds and in the feasibility study for the potential development of a
nickel processing facility initially in Australia and subsequently in New
Caledonia in the South Pacific (the “New Caledonia Nickel Project) .
 
 In
May 1998, the Registrant revised the scope of its nickel project to improve the
economics of the project by reducing the anticipated costs associated with
transporting ore from New Caledonia to Australia. The revised scope included a
joint venture equity participation in Societe des Mines de la Tontouta’s (“SMT”)
Nakety concessions, whereby the Registrant would complete a feasibility study
for the mining and processing of the ore in New Caledonia. A Heads of Agreement
was signed, subject to further negotiation and finalisation, to form a joint
venture company that would undertake the construction of a mine and processing
facility to be located in the Canala region of New Caledonia.
 
 Effective
May 7, 1999, the Registrant entered into a Plan of Arrangement (the “Plan”)
whereby the Registrant acquired Argosy Mining Corp (“AMC”). Pursuant to the
Plan, the shareholders of AMC exchanged their shares for shares of the
Registrant on the basis of 5 AMC shares for 3 new shares of the Registrant, the
Registrant changed its name from Calliope Metals Corporation to Argosy Minerals
Inc. and changed its year end to December 31 from April 30. As the shareholders
of AMC as a group acquired control of the Registrant, the transaction was
accounted for as a reverse takeover.
 
 The
heads of agreement, signed in May 1998, was superseded by a Tripartite agreement between the Registrant, SMT and Norilsk
Nickel’s subsidiary, NN Invest Holdings SA (“NNIH”), signed in October 2001,
under which NNIH re-imbursed the Registrant US$7,166,000 for a portion of its
expenditure previously incurred on the New Caledonia Nickel Project, and would
complete a Bankable Feasibility Study by December 2004. On August 5, 2002 the
Registrant received a termination notice from NNIH terminating its involvement
in the New Caledonia Nickel Project. The termination by NNIH effectively
terminated the Registrant’s interest in the New Caledonia Nickel Project. In
addition NNIH, through the International Court of Arbitration of the
International Chamber of Commerce (“ICC”), issued a request for arbitration for
the return of US$7,166,000 paid to the Registrant on signing of the Tripartite
Agreement plus expenditures of US$1,368,222 and the costs of arbitration.
 
 17
 In
March 2003, the Registrant entered into an option agreement, with subsequent
amendments for the acquisition of 85% of Albetros Inland Diamond Exploration Pty
Ltd. (“Albetros”), the owner of a prospecting permit in Namaqualand, South
Africa (the “Albetros Diamond Project”). *See
Item 4B Business Overview*
 
 In
December 2003 and May 2004, the Registrant entered into option agreements over
the Gold Creek properties in Nevada, USA. *See
Item 4B Business Overview,* ** *Gold
in Nevada, USA*
 
 In
December 2004, The Registrant announced that the arbitration initiated by NNIH
in September 2002 over the New Caledonia nickel
laterite Nickel  p P roject
had been discontinued and is now settled. The
Settlement Agreement, the terms of which are bound by a confidentiality
agreement signed between the parties, follows a meeting held in Paris on the
25th of November, 2004. Each party will remain responsible for its costs
incurred in the arbitration process and neither party has any claim outstanding
against the other.
 
 ***Principal
Capital Expenditures and Divestitures***
  The
Registrant’s Principal Accounting Policies for Project Assessment and Mineral
Properties and Deferred Costs are as follows:
  *i.*
    *Project
      Assessment*
 Project
assessment costs consist of expenditures to evaluate new projects. These
expenditures are charged to income when incurred. Once the Registrant decides to
acquire the property, costs associated with further exploration or development
are accounted for as described under Mineral Properties and Deferred Costs
below. Included in project assessment expenditures are option payments for
mineral properties, these payments are charged to income when incurred.
  ii.
    *Mineral
      Properties and Deferred Costs*
 The
costs of acquiring mineral properties, and related exploration and development
costs, are deferred until the property to which they relate is placed into
production, sold or abandoned. Deferred costs will be amortized over the
estimated useful life of the ore body following commencement of production, or
written off if the property is sold or abandoned.
  The
Registrant will reduce the carrying value of mineral properties and deferred
costs by any amount received from the introduction of a joint venture
partner.
  Management's
estimate of carrying values, if any, is subject to risks and uncertainties
affecting the recoverability of the Registrant’s investment in mineral
properties. Although management makes its best estimate of these factors based
on current conditions, it is possible that changes could occur in the near term
which could adversely affect
management's estimate of the recoverability of mineral properties and deferred
costs, if any, and the need for asset impairment write-downs.
  18
 Although
the Registrant has taken steps to verify title to mineral properties in which it
has an interest, these procedures do not guarantee the Registrant’s title. Such
properties may be subject to prior undetected agreements or transfers and title
may be affected by such defects.
  The
Registrant has financed capital expenditures on its mineral resource projects
from funds available after completion of the Plan and receipt of funds from NNIH
as follows:
  **Project**
    
    **Location**
    
    **2004**
    
    **2003**
    
    **2002**Burundi
      Nickel Project
    
    
    Burundi,
      Central Africa
    
    
    Nnil
    
    $
    19,783
    
    $
    50,662Kremnica
      Gold Project
    
    
    Slovak
      Republic, Central Europe
    
    
    n/a
    
    $
    33,988
    
    $
    99,036New
      Caledonia Nickel Project
    
    
    New
      Caledonia, South Pacific
    
    
    n/a
    
    
    n/a
    
    $
    90,512
  Where
exploration on its mineral projects prove unsatisfactory, the Registrant
disposes of the project and writes off expenses and deferred costs associated
with that project. No expenditures were written off over the last 3 years due to
unsatisfactory exploration results. In addition, the Registrant reviews the
carrying costs, if any, of each of its investments quarterly and writes down
mineral properties and deferred costs associated with projects whose carried
costs may not be recoverable. Mineral properties and deferred costs written down
over the last 3 years due to continued low metals prices, political instability,
the loss of the project or the inability to introduce a joint venture partner or
sell the underlying project are as follows:
  **Project**
    
    **Location**
    
    **2004**
    
    **2003**
    
    **2002**Burundi
      Nickel Project(1)
    
    
    Burundi
    
    $
    nil
    
    $
    19,783(2)
    
    $
    7,973,049(4)New
      Caledonia Nickel Project
    
    
    New
      Caledonia
    
    
    n/a
    
    
    n/a(3)
    
    $
    2,539,625(5)Kremnica
      Gold Project(1)
    
    
    Slovak
      Republic, Central Europe
    
    
    n/a
    
    $
    nil(3)
    
    
    nil
  1.
    .
    The
      Registrant acquired the Kremnica Gold Project and the Burundi Nickel
      Project during the year ended December 31, 1999 following the completion
      of the Plan whereby Argosy Mining Corp. (“AMC”) became a wholly-owned
      subsidiary of the Registrant.
 2.
    .
    During
      the year ended December 31, 2003 the Registrant wrote off $19,783 expended
      on the Burundi Nickel Project during the
year.
 3.
    .
    The
      Registrant sold the Kremnica Gold Project in July 2003.
 4.
    .
    During
      the year ended December 31, 2002 the Registrant wrote down its investment
      in the Burundi Nickel Project by $7,973,049 to $nil due to the ongoing
      political and security problems in the country.
 5.
    .
    On
      August 5, 2002, NNIH terminated its involvement in the New Caledonia
      Nickel Project which resulted in the loss of the project. Consequently,
      during the year ended December 31, 2002, the Registrant wrote off its
      remaining investment in the project in the amount of
      $2,539,625.
 
 Divestiture
of assets over the last 3 years are as follows:
  **Proceeds****Project**
    **Location**
    **2004**
    **2003**
    **2002**Kremnica
      Gold Project
    Slovak
      Republic
    -
    $500,000
    -
 
 In
July 2003, the Registrant completed the sale of its Slovak subsidiary Kremnica
Gold a.s., the owner
of the Kremnica Gold Project for $500,000. Previously, during the year ended
December 31, 2001, the Registrant wrote down its investment in the project by
$7,533,332 to recognize the difficulty in being able to sell the project or
introduce a joint venture partner. Deferred expenditures during 2002 and 2003
amounted to $374,500 resulting in a gain on disposal of $125,500.
 19
 Details
of Project Assessment Expenditures during the years ended December 31, 2004 and
2003 are as follows:
  ***Albetros
      Diamond Project***
    
    **2004**
    
    **2003**Geological
      Consulting, Supervision and Legal
    
    $
    44,565
    
    $
    218,115Drilling
    
    
    80,207
    
    
    486,693Gravel
      Processing and Sorting
    
    
    57,020
    
    
    147,866Travel
      and Accommodation
    
    
    55,220
    
    
    129,608Option
      Fees
    
    
    117,158
    
    
    469,000Rehabilitation
    
    
    30,934
    
    
    -385,104
    
    
    1,451,282***Nevada
      Gold Project***Geological
      Consulting, Supervision and Legal
    
    
    81,995
    
    
    -Assessment
      and Data
    
    
    8,894
    
    
    -Option
      Fees
    
    
    59,317
    
    
    -Claim
      Fees
    
    
    12,904
    
    
    -Travel
      and Accommodation
    
    
    53,135
    
    
    -216,245
    
    
    -***Other
      Projects***Legal,
      Consulting
    
    
    40,331
    
    
    142,216Data
      Acquisition
    
    
    -
    
    
    74,463Travel,
      Accommodation and other
    
    
    62,367
    
    
    53,402Expenses
      Recovered
    
    
    (116,804
    )
    
    -(14,106
    )
    
    270,081***Total***
    
    $
    587,243
    
    $
    1,721,363
 
 Over
the next year, the Registrant proposes to finance the following project
assessment and capital expenditures on its projects:
  **Project**
    
    **Location**
    
    **2005
      (Proposed)**Nevada
      Gold Project
    
    
    Nevada,
      USA
    
    $
    250,000Burundi
      Nickel Project(1)
    
    
    Burundi,
      Central Africa
    
    $
    nilAlbetros
      Diamond Project(2)
    
    
    Namaqualand,
      South Africa
    
    $
    nil
 Note:  (1) The Registrant is seeking new opportunities and project assessment or capital
expenditures will vary depending on the nature of new projects acquired or the
results of assessments of current projects, as well as any change in the
security situation in Burundi.
  (2) Subsequent to December 31, 2004 , the Registrant terminated the agreement to acquire the Albetros Diamond Project.
 
 These
expenditures are being financed from the Registrant’s working
capital.
 
 
 20
 
 The
Registrant is currently re-evaluating its ongoing involvement in the Musongati Burundi
Nickel Project.
 
 There
has been no indication of any public takeover offers by third parties in respect
of the Registrant’s common
shares Common
Shares or by it in respect of other companies’ shares during the last or in the
current financial year.
 
 The
Registrant was not involved in any bankruptcy, receivership or similar
proceedings, nor was it a party to any material reclassification, merger,
consolidation or purchase or sale of a significant amount of assets, since
December 31, 2003 through the date of this Annual Report.
 
 **B.**
    **Business
      Overview**
 The
Registrant is a Yukon corporation involved in the exploration and possible
future development of mineral resources. Its Common Shares are listed for
trading on the ASX under the trading symbol “AGY”.
 
 At
December 31, 2004 , the Registrant had three projects namely:
  -
    The
      Nevada Gold Project (as defined below) in Nevada, USA,
 -
    TheMusongatiBurundiNickel Projectin Burundi,
      which is subject to force majeure, and
 -
    The
      Albetros Diamond Projectin South Africa.
      Subsequent to December 31, 2004 the Registrant terminated the agreement to
      acquire this project.
 
 Apart
from the Nevada Gold Project, all of the Registrant’s projects are located
outside North America and none of the projects are currently in production,
consequently the Registrant does not have a source of revenue other than
interest income from cash balances.
 
 To
date , the Registrant has not earned any revenues.
 
 ***1.***
    ***Gold
      in Nevada, USA***
 *Gold
Creek*
 In
November 2003, the Registrant entered into an option agreement over a gold-rich
vein system (“Gold Creek”) in Elko County, Nevada, U.S.A. (the “Nevada Gold Project”). The property is located within the southern boundary area of Humboldt National
Forest, some 100 km north of the town of Elko, and NE of Jerritt Canyon Gold
Mine. Access to the property is via secondary gravel road to the entrance to the
national forest and then on tracks which criss cross the area.
 
 The
Gold Creek property is covered by 37 unpatented mining claims of 3.1
km 2 total area. An additional 2 claims (16.7 hectares) cover water rights. Mineral
rights on the claims are held by Happy Tracks Mining Company (“Happy Tracks”).
The option agreement with Happy Tracks initially covered 31 unpatented lode
claims and a  n
additional six further
6 were
staked in 2004 , and have become subject to the same option agreement. The option agreement
provides for annual payments over 3.5 years totalling US$66,000 with an exercise
price of US$1,250,000 for 100% of the mining claims.
 21
  
 
 The
Gold Creek claims cover two past producing mines: Rosebud and St. Elmo. Gold was
reportedly first discovered in the district in the late 1800’s when placer
mining produced at least 40,000 ounces of gold. The Rosebud and St. Elmo mines
were probably discovered around the same time. Accurate production figures for
the Rosebud underground silver - lead - zinc - copper mine are not known. Much
of the underground development work at the St. Elmo gold mine reportedly took
place in the 1940’s although there are no records of production. The main St.
Elmo vein system was mined underground along a strike distance of 165m and a
limited amount of raising and stoping was carried out in the ore. It has been
estimated that some 3,200 tonnes was mined at this time.
 
 The
existing high grade gold mineralization at St. Elmo will be the main focus for
future work by the Registrant. Gold is hosted by sulphide-bearing quartz veins
and breccias emplaced along NNW- to NE-trending high angle structures within the
Cambrian age Prospect Mountain Quartzite.
 
 *Past
Exploration*
 In
terms of recent exploration activity, some 6 companies conducted evaluation work
in the Gold Creek area between 1962 and 2000. During 1988 , Newmont Exploration Ltd completed chip-channel sampling of the accessible
underground workings at St. Elmo, returning assays ranging
from 0.05 g/t up to
213g/t. Newmont noted that “native gold is commonly seen in oxidized cavities
within the quartz vein” and that “very flashy ore grades (>22oz/t gold)” do
occur.
 
 In
1990, Harrison Western mined about 1,400 tonnes from 90m of drift development
within St. Elmo. The weighted average grade for this material was reported to be ~ approximately 10g/t  gold.  Harrison
Western supplied a 360  kg
sample for metallurgical testwork by Hazen Research Inc. Hazen reported that
this sample had an average grade of 8g/t.
 
 Surface
sampling of exposed vein/breccia at St. Elmo by Neil and Associates Ltd in 1996
returned assays up ranging
from 5 ppb to 28.5g/t gold. Further surface sampling by Mason Exploration
Associates Ltd in 1997-99 along a 350m strike over St. Elmo returned assays up ranging
from 5 ppb to 73g/t.
 
 22
 Golden
Hope Mines Limited in 1998 completed an Induced Polarisation (“IP”) survey (“IP”) to
help define the vein system at St. Elmo. The IP revealed a well defined
resistivity high suggesting that quartz vein/breccia mineralization has a strike
length of 600m to 800m with the anomaly open to the north and possibly to the
south as well. “Realsection profiles” across the resistivity anomaly suggest
that the veins continue below surface to +300m depth.
 
 In
1999, Mason Exploration Associates Ltd completed 3 diamond drill holes at
St.Elmo. Covering a strike extent of 200m the three holes returned best results
of 2m at 17g/t gold, 0.5m at 6.7g/t gold, and 0.5m at 0.5g/t gold. The hole with
the latter of the above results targeted the northern extension of the IP
resistivity anomaly with a 73g/t gold rock chip sample at the surface.
  *Diamond
Jim*
 In
December 2003, the Registrant announced another option agreement over additional
claims covering the northern extension of this gold rich system. The northern
extension is covered by 33 unpatented mining claims (“Diamond Jim Mine Claims”),
total area 2.2 km 2 that adjoin s the Gold Creek claims located to the south. Mineral rights on the claims are
held by a private individual. The option agreement, at no cost, allowed the
Registrant until May 2004 to decide on whether to continue exploring the Diamond
Jim claim block and to negotiate terms that would govern any extension to the
option. In June 2004, the Registrant announced that it had entered into an
option agreement over the Diamond Jim Mine Claims. The terms of the 3 year
option agreement required the Registrant to pay US $20,000 on signature and
equal payments of US $20,000 at the end of the first and second years. The
option grants the Registrant the right to purchase the property outright for US
$1,500,000 with option payments being credited towards the purchase price.
 
 The
claims cover a past producing mine, the Diamond Jim Mine, which is located 2 km
northwest of St. Elmo Mine. The earliest development at Diamond Jim probably
commenced soon after 1873. It has been estimated that less than 9,000 tonnes
were mined at Diamond Jim prior to 1954. Recorded production from 1954 to 1985
is: 23,108 oz silver, 152,350 kg lead with minor gold, zinc and copper.
 
 Of
interest to the Registrant is are
believed to be known  high
grade gold mineralisation outcropping to the east of the mine and the likelihood
that this mineralisation may be a northerly extension to that at St. Elmo. An IP
completed by Golden Hope Mines Limited in 1998 identified a half km long roughly
SSE - trending resistivity high on the eastern slopes of Rosebud Peak (0.5km NE
of Diamond Jim mine). The resistivity high on Rosebud Peak has been described as
being coincident with a fault zone that may be closely related to the fault
controlling the gold mineralisation at St. Elmo. Surface rock chip sampling by
Mason Exploration Associates Ltd. along a 100m N-S zone above the resistivity
high on the eastern slopes of Rosebud Peak returned highest assays ranging from 5ppb to :
6.25, 7.85, 9.3, 9.8, 11.97, 12.03, 15.15 and 15.43
g/t gold within quartz veins and breccia in quartzite.
 
 *Geology
and Mineralisation*
 The
main rock units in the project area are the Cambrian aged Prospect Mountain
Quartzite and a shale plus sandstone sequence belonging to the Cambro-Ordovician
Tennessee Mountain Formation.
 23
  Gold
mineralisation within the Gold Creek Project area has been described from 3
areas: the St. Elmo mine area, Rosebud Peak and from the “saddle zone” between
Rosebud Peak and St. Elmo. By far the most prospective area at this time is that
surrounding the St. Elmo mine area. Gold mineralisation in the St. Elmo mine
area is high grade, fault-controlled epithermal-style gold-silver in close
association with quartz - pyrite - sericite alteration of the quartzite
wallrocks. Sulphide minerals identified at St. Elmo include pyrite,
chalcopyrite, galena, sphalerite, covellite, chalcocite, digenite, enargite and
tetrahedrite. The vein system is a series of roughly north-trending anastomosing
quartz veins that dip between 55 o and 65 o eastwards and which have been traced 230m along strike by drilling. Geophysical
surveys completed by previous explorers suggesting that quartz vein/breccia
mineralisation has a strike length of 600m to 800m with the possibility of
extensions to the north and possibly to the south as well.
 
 Surface
sampling of exposed vein/breccia at St. Elmo by previous explorers returned
assays up to 73 g/t Au and assays up to 213 g/t gold, with visible gold, from
their sampling of the underground workings.
 
 A
geophysical survey completed by an earlier explorer on Rosebud Peak identified a
half km long roughly SSE - trending anomaly on the eastern slopes of Rosebud
Peak (0.5km NE of Diamond Jim mine); this anomaly was described as being
associated with a fault zone that may be closely related to the fault
controlling the gold mineralisation at St. Elmo.
 
 The
“saddle zone” is located in a topographic saddle between Rosebud Peak and St.
Elmo. Past rock chip sampling returned 1.03 g/t gold and 0.82 g/t gold.
 
 *2004
Sampling by the Registrant*
  Assay
results , from samples provided by the Registrant, reported by ALS Chemex in Vancouver, confirm the encouraging results reported by
previous explorers.
 
 Gold
grades ranging
from 0.01 g/t, reaching
145.5 g/t gold were received from the sampling of outcrop, sub-crop and
stockpiles above the St. Elmo vein system. The 145.5 g/t gold sample and an
accompanying 19.15 g/t gold result are both from outcrops of breccia and quartz
veining, respectively, both trending at almost right angles to the main, roughly
north-south, structural trend through St. Elmo. The combined width of the vein
and adjacent breccia is 3.1 m.
 
 Reconnaissance
sampling by the Registrant in the area surrounding Diamond Jim mine returned
rock chip assays ranging
from less than 0.5 g/t and reaching
9.06 g/t gold and 1,500 ppm silver. Anomalous gold grades in rock chip samples
are dispersed along a 300m long, roughly north-south trending crest zone through
Rosebud Mountain where the highest elevation reaches 2,489 metres. Together with
sample results reported by earlier explorers, grades within the 300m long zone
range up to 15.4 g/t gold with 11 samples returning more than 4 g/t gold. This
zone is interpreted to be one of silicified and quartz stockwork veined
quartzite along a possible fault zone.
 
 The
above areas will be targeted in the planned core drilling program.
 
 *Environmental*
  During
the second half of 2004, the Registrant commissioned consultants to complete an
environmental audit across the area that would be subject to a proposed drilling
program. The audit is complete and has been lodged with the US Forest
Service (“USFS”) . The r Registrant
believes it will obtain permit approval prior to the spring of 2005 from the
USFS. There can be no assurance however that such permit will be granted or the
scope of such permit will allow the Registrant to conduct its proposed drilling
program. Permit
approval is expected in advance of Spring 2005.
 
 
 24
 
  *Plan
of Operations*
  Subject
to receiving the necessary permits, C c ommencing
in late S s pring of 2005
proposed work will include a diamond drilling program that will test the 3 areas
of gold anomalism sampled by the Registrant during the 2004 program . .
The drilling program is subject to the Registrant receiving a permit from the US
Forest Service to carry out the program. This permit is expected by April-May
2005 .
 
 ***2.***
    ***Burundi
      Nickel Project - Musongati***
  The
Burundi Nickel project
(the “Burundi Nickel Project ”) is a proposed venture to mine and process lateritic nickel-cobalt ore to produce
nickel and cobalt metal in Burundi. The Registrant expects that the nickel
laterite deposits at Musongati, identified by previous exploration work
conducted between 1972 and 1990 by other parties, are sufficiently large to
support a mining operation with a life exceeding 20 years -
see “Special Note Regarding Forward-Looking Statements” .
Testwork by Universal Oil Products in 1978-79 indicated the ore is amenable to
leaching using the pressure
acid leach (“ PAL ”) process, followed by counter current decantation and iron precipitation, prior
to the precipitation of an intermediate product which may then be further
refined to produce LME grade nickel and LMB grade cobalt.
 
 The
Burundi Nickel Project is based on three nickel cobalt laterite deposits.
Considerable exploration and engineering work was completed on the deposits in
the period 1972 to 1990. The major deposit known as Musongati was drilled and
evaluated the most. The other two deposits, Waga and Nyabikere are far less
advanced but have potential to supply the project with quantities of high-grade
saprolite ore. The Musongati deposit also has anomalous platinum-group-metal
concentrations, along with indications of sulphide mineralisation underlying the
laterites.
 
 Musongati
lies at an elevation of 1700 m, in the tropical highlands of Burundi, about 1000
m above Lake Tanganyika. The outlying Waga deposit is 30 km west of Musongati
and the Nyabikere deposit is 40 km north.
 
 The
Musongati laterites are derived from the weathering of an ultrabasic complex,
particularly, serpentinised dunite with a primary nickel content of about 0.3%.
Two types of mineralisation are present in approximately equal proportions:
limonite and saprolite (a less weathered laterite rock type generally found
beneath limonite). Nickel in the limonite mineralisation is tied to goethite
whereas in the saprolite mineralisation it is related to serpentine group and
clay minerals. The typical weathering profile is canga (iron caprock), the
limonite zone (averaging 15 m thick), the saprolite zone (averaging 12 m thick)
and ultrabasic bedrock.
 
 The
Musongati nickel/cobalt deposit is situated within the Musongati E e xploration L l icence
on three adjacent plateaux as a result of erosion of a single layer of laterite.
The plateaux are referred to from west to east as the Geyuka, Rubara and Buhinda
zones, of which Buhinda is the most significant and best defined. Historical
exploration (by diamond drilling) was completed in three stages from 1975 to
1990, by different parties with different objectives. A total of 237 holes were
drilled at Musongati, while 81 holes were drilled at Waga and Nyabikere. Due to
the large size of the mineralised area, an effort directed to identifying zones
with a high nickel content resulted in a greater focus on the Buhinda
Zone.
 
 *Mining
Convention*
  In
1998, Andover Resources N.L. (“Andover”), now a wholly-owned subsidiary of the
Registrant, negotiated a Mining Convention (the “Convention”) with the
Government of Burundi to explore and develop the Musongati deposits. The
Convention was ratified by the Burundian National Assembly on March 10, 1999,
giving the Registrant the exclusive right to develop the Musongati
deposit. The Convention is a comprehensive agreement that awards mineral rights
to the Registrant and sets out a work program and a detailed framework for
future development and operation of a mine. During the initial 3-year
exploration period, geological and engineering studies were to be completed,
leading to a full project feasibility study. The Registrant planned a staged
exploration program including scoping and pre-feasibility studies that would
lead to a full feasibility study. The program included drilling, ore reserve
estimations, metallurgical testing, infrastructure studies and an environmental
impact study. Upon completion of the feasibility study and a decision to
proceed, the agreement provides for the awarding of a mining title known as a
Mining Concession. The term of the Mining Concession is 25 years, renewable
twice for successive periods of 10 years. If the project proceeds, a new
Burundian company in which the Burundian government will have 15% interest, will
be incorporated to develop and operate the project. Within 30 days of receipt of
project finance for full mine development, the government will be reimbursed
their previous expenditure of US$8.3 million. A 5-year tax holiday will apply to
the project, followed by a 35% income tax rate. Mine equipment, materials and
fuels will be tax and duty exempt. Force majeure and international arbitration
provisions normal to the industry apply.
 
 25
 *Technology*
  Previous
metallurgical studies identified PAL as a suitable process technology for
Musongati. These studies provide initial benchmark results, which will require
further testwork to optimise the specific PAL process plant design.
 
 *Project
Information*
  The
proposed mine and plant is to be situated at the Musongati deposit located
approximately 120 km east-southeast of Bujumbura, the capital of Burundi.
Burundi is a small country located in Central Africa and borders the western
edge of Tanzania.
  *i.*
    *Land*
  An
exploration licence covering 171.1 km 2 was granted March 18, 1999 for three years covering the Musongati deposit; the
Waga and Nyabikere deposits are reserved for Andover pending the completion of a
feasibility study at Musongati. On April 19, 2000, Andover declared force
majeure and curtailed operations in Burundi due to the deteriorating security
situation. In March 2002, the declaration of force majeure was lifted due to
improved security conditions in Burundi; however, due to the deterioration in
security in Burundi, force majeure was re-imposed on August 1, 2002. The
project has been subject to force majeure since August 2002 except for a brief
period during 2004. The
exploration licence is extended for the duration of force majeure and has a
remaining term of approximately 18 months once force majeure is lifted. The
Musongati licence area is sparsely populated due in part to the poor lateritic
soil.
  *ii.*
    *Transportation*
  The
Burundi Nickel Project is accessed by roads which are mostly in good condition.
A network of trails and roads crosses the main areas of the licence. During
construction and operation, the Burundi Nickel Project will require the
importation of significant quantities of goods not locally available. As Burundi
is a landlocked country, approximately 1100 km from the Indian Ocean,
transportation infrastructure is a key issue to the economics of the project.
Initial investigations have determined both the preferred route, as well as
which consumables will need to imported. The preferred transportation corridor
is from the port of Dar es-Salaam in Tanzania on the east coast of Africa, by
the existing railway to Kigoma, just south of Burundi. From there, a regional
road network will be utilised to truck
material north to Musongati. Most of the parts necessary to construct the plant
will have to be imported and transported along this route. The major consumables
once production commences will be fuel, sulphur (for acid) and dolomite (as a
neutralising agent). Fuel and sulphur will be sourced on the world markets and
shipped via the above route, while dolomite will be sourced locally within
Burundi and trucked to Musongati. There can be no assurance that such
consumables will be available or deliverable to the Registrant at prices that
would make the Burundi Nickel Project economically feasible.
  26
  *iii.*
    *Services*
  The
Burundi Nickel Project has access to electricity via hydroelectric facilities in
the country and elsewhere in the region. The existing national electricity grid
does not currently have enough capacity to provide power to the Burundi Nickel
Project. The Registrant intends to generate electricity via fuel-powered
generator sets or alternatively to utilise new sources of electricity. There is
potential to generate electricity by steam co-generators powered by the
sulphuric acid plant. A number of independent proposals to create or expand
hydroelectric facilities in the country and in the region, which could be
advantageous to the project, are at the planning stage. There can be no
assurance that sufficient access to electricity will exist in the future or can
be created to power the Burundi Nickel Project.
  *iv.*
    *Tailings*
  The
process residue (or tailings) that remains after the production of nickel and
cobalt will be safely stored in tailings impoundment areas in the general
vicinity of the processing plant. The Registrant began to identify suitable
areas in 1999 which would require further study as part of the feasibility
study.
  *v.*
    *Environment*
  The
Convention specifies a requirement for an environmental impact study as part of
the feasibility study. World Health Organization standards are to be the
reference standards and the Convention allows for a minimum
monitoring/maintenance period of two years following the completion of
mining.
  *vi.*
    *Permitting/Approvals*
  The
Convention requires that the government issue “ Mining mining T t itle ” to the Registrant within three months of application following the completion of
a feasibility study and the decision to proceed to development of the
mine.
  *Plan
of Operations*
  The
Registrant’s plan of operations for the Burundi Nickel Project was to develop a
PAL plant to produce nickel, cobalt and possibly copper and by-product platinum
group metals (“PGMs”) from the nickel laterite deposits at Musongati. The
Registrant provided to the government a staged work program and scheduled a
costing study to up-date the previous studies, leading to a full project
feasibility study in 2001. The plan was based on previous studies and involved a
feasibility study which would focus on the transportation, logistics and
infrastructure issues, as well as metallurgy and environmental aspects. On April
19, 2000 the Registrant’s subsidiary Andover declared force majeure due to
delays to the feasibility study caused by security issues in the region. As a
result of this declaration, activities on the project were suspended. Pursuant
to the Convention, Andover’s obligations under the Convention are suspended for
a period of up to 2 years while the declaration of force majeure is in effect.
The declaration of force majeure was lifted on March 28, 2002 and the rights and
obligations pursuant to the Convention have been extended by the period of force
majeure. Due to the subsequent deterioration in security in Burundi,
force majeure was re-imposed on August 1, 2002 and has remained in place except for a brief period in 2004. .
 
 27
 During
2002, the Registrant engaged the international engineering firm Sinclair Knight
Merz (“SKM”) to conduct a critical cost review of the Burundi Nickel Project.
The study concluded that the project may prove uneconomic, using nickel and
cobalt prices of $3.00/lb and $7.50/lb respectively, if one were to simply
attempt to exploit the nickel laterite orebody. However, due to the fact that
the laterite orebody overlies a large basic/ultrabasic instrusive complex
containing known nickel sulphide and associated PGMs it may provide an
opportunity for a staged development utilizing the PGM potential at Musongati.
 
 In
order for the Registrant to complete the current stage of the development of the
Burundi Nickel Project there must be a sustained return to political stability
and security following which, it must undertake various steps, including the
following:
  i.
    secure
      a commitment from a financial and/or technical joint venture
      partner;
 ii.
    establish
      the PGM potential at Musongati;
 iii.
    complete
      the feasibility study;
 iv.
    obtain
      any necessary approvals and permits required in order to operate the
      nickel processing facility;
 v.
    acquire
      the right to lands on which the nickel and cobalt processing facility and
      associated infrastructure will be constructed;
and
 vi.
    create
      a Burundian company to be owned 85% by the Registrant and 15% by the
      government of Burundi.
  Once
the Registrant completes these steps in its current stage of activity, and if
the results of the feasibility study are positive, the second stage in the
development of the Burundi Nickel Project which the Registrant must undertake is
to obtain project financing to raise the funds necessary to be able to acquire
the land and construct the processing facilities. The third and final stage in
the development of the Burundi Nickel Project would be the construction and
commissioning of the processing facilities. There can be no assurance that any
of the preceding steps will be completed to allow for the Burundi Nickel Project
to move forward.
 
 As
a result of continued instability in Burundi, the Registrant was unable to
conduct any activity at its Burundi Nickel Project during 2004 and the project
remains under force majeure.
 
 As
detailed in the news release of 20 August 2004, the Registrant’s subsidiary
re-imposed force majeure following a massacre that took place on the 15th August
near Bujumbura. Despite the presence of over 5000 UN peacekeepers, rebel
activity continued
unabated continues .
Earlier indications that the security situation in Burundi was improving and
that the country was moving towards a UN supervised election did not materialise
and it has become apparent that the situation has deteriorated. Consequently, it
is not feasible recommence activities in Burundi at this time.
 
 Hence,
despite the obvious merits of Musongati as an attractive exploration target, the
Registrant is re-evaluating its involvement in this project.
 
 ***3.***
    ***Albetros
      Diamond Project***
  The
Albetros Diamond project
(the “Albetros Diamond Project ”) ,
which is an alluvial diamond project, is close to the present-day Buffels River
and the De Beers’ mining town of Kleinsee. The principal alluvial diamond target at
Albetros Diamond Project was a series of major, gravel-filled palaeo drainage
systems, notably the Megalodon and Sidewinder channels, that represent
structural corridors in which diamonds may have been successively reworked
during periods of marine regression, particularly those coinciding with humid,
wet climatic conditions.
 28
 *Terms
of Option Agreement for the Acquisition of Albetros*
  The
prospecting permit for the Albetros Diamond Project is held by
Albetros Inland Diamond Exploration Pty Ltd. (“Albetros”) .
Pursuant to the agreement and the subsequent amendments entered into between among the
Registrant’s subsidiary Argosy Mining Corporation Pty Ltd, and Albetros
and the shareholders of Albetros together with subsequent addendums to the agreement ,
the Registrant had an option to acquire 85% of Albetros. The agreement provided
for:
 
 a)
    an
      option exercise date of August 31, 2004;
  b)
    monthly
      option fees totalling R4,050,000 ($799,000) payable as
      follows:
 -
2003 - R2,400,000 ($469,000) - paid.
 -
2004 - R1,650,000 ($3 44 3 0,000)
- of which R 30 55 0,000
has been paid during 2003 ;
and
  c)
    a
      purchase price of R17,000,000 ($3,406090,000)
      less all option fees paid at the date of exercise of the option. Had the
      Registrant exercised its option to acquire Albetros the purchase price of
      R17,000,000 less option fees totalling R4,050,000 (R2,950,000 has been
      paid to date) would have been paid in two payments as
    follows:
 -
R7,000,000 ($1,4 86 0 0,000)
on August 31, 2004.
 -
R5,950,000 ($1,  19 263 0 ,000)
on December 1, 2004.
  The
Registrant could withdraw from the agreement to acquire Albetros at any time.
 
 In
addition, the Registrant agreed to sell a 5.5% interest in Albetros to Umnotho
we Sizwe Diamond Company Pty Ltd. (“Umnotho”), its Black Economic Empowerment
partner in South Africa, for a cash consideration of R1,100,000 ($2 20 33 ,000),
which would have resulted in the Registrant retaining a 79.5% interest in
Albetros had the Registrant exercised its option to acquire Albetros. In
addition, Umnotho would have refunded the Registrant a pro rata portion of
expenditures incurred on assessing the Albetros Diamond Project.
 
 On
March 8, 2005, the Registrant terminated the Option Agreement for the
acquisition of Albetros.
  *Summary
of Activities*
 Commencing
in March 2003, with little reliable or useful technical information over the 125
km 2 licence area, the Registrant identified the principal palaeochannel targets,
established a major gravel resource and the diamondiferous nature of the
Megalodon Channel. With the unsuccessful application of ground penetrating
radar, probe drilling became the preferred exploration tool in tapping beneath
the ubiquitous dune shield to locate, map and evaluate the buried
palaeochannels. A total of 9,330 metres of probe drilling was accomplished,
sufficient to support gravel estimates of 9.8 million tonnes for the Megalodon
Channel and 10.6 million tonnes for the Sidewinder North and South Channels.
 29
  
  Large
diameter auger drilling was confined to the northernmost 1.4 km of available
Megalodon Channel in Predikant Vlei. Some 22 holes (940 metres) were drilled at
8 sites generating 42 samples. Sample processing was undertaken at a nearby dense
media separation DMS plant
and diamond recovery through hand sorting at a geological laboratory. A drill
density of one large
diameter auger (“ LDA ”) hole per 40,000 m 2 and a sample density of 1:5,550 was achieved. Concentrate sorting yielded 33
diamonds weighing 14.962 carats, the largest a 4.979 carat stone.
  *Large
Diameter Auger Drilling*
  LDA
drilling, employing the Bauer BG36C rig, was conducted over a six week period in
the final quarter of 2003 for a total of 940 metres from 22 holes at 8 sites.
Site locations were randomly
selected along previous probe drill lines across a strike length of 1.4 km for
the purpose of both lateral and longitudinal spread and to shun major zones of
basal conglomerate and sandstone. There
was no attempt to target and favour the more geologically prospective
topographic lows or bedrock depressions.  Sample
treatment and diamond recovery continued until March 2004 and stone valuations,
provided by DeBeers’ subsidiary, DTC, were US $314.70 per carat for the parcel
of stones recovered.
 30
 **
 *Black
Economic Empowerment and Mining Charter and Permit Renewal*
  The
South African Mining Charter requires that all new mining projects have a Black
Empowerment Entity (“BEE”) component in the ownership of the project. The
concept is that by including previously disadvantaged groups initially in the
ownership of mining projects, it will facilitate the economic upliftment of all
South Africans. In addition empowerment is expected to provide skills transfer
and the general upliftment of disadvantaged communities.
 
 The
South African Mining Charter creates opportunities for historically
disadvantaged persons and enables the transfer of an equity interest in mining
projects to take place in a transparent manner and at fair market value to
enable a target of 15% ownership in 5 years and 26% in 10 years.
 
 As
part of its agreement for the acquisition of Albetros, the Registrant secured
the right to introduce its BEE partner of choice, Umnotho, to
Albetros.
 
 Umnotho,
a subsidiary of Umnotho we Sizwe Investment Holdings Pty Ltd., was one of the
first mining empowerment companies in South Africa. The Registrant has been in
discussions with Umnotho since 2002 regarding such empowerment transactions.
 
 In
terms of the agreement, Umnotho acquired an immediate 15% interest in Albetros
from the Albetros shareholders. The acquisition of an interest in Albetros by
Umnotho resulted in Albetros meeting the Charter requirements as an empowered
company.
 
 Indications
were that with Albetros having met the BEE requirements of the Mining Charter
and the application for the prospecting permit having been submitted
time ous ly
in January 2004, that it would be issued expenditiously. However, the new
Minerals and Energy Act came into force in May 2004 and there has been a delay
in processing applications for prospecting permits.
 
 Subsequently,
in a clarification on the application of the charter by the South African
Department of Minerals and Energy it has
become became apparent that the project would require BEE participation of not less than 51%
during a one year transition period, resulting in a loss of control of the
project by the Registrant .
 
 The
agreement with Albetros did not
make provision contempla n te  for BEE
participation over and above the legislated initial 15%, however the Registrant
expected to comply with the requirement to have BEE participation of 26% over a
period of 10 years. It The
Registrant did
not anticipate a BEE requirement of 51% , which has hampered the granting of the permit.
 
 Consequently,
despite the expenditure incurred and the initial drilling results, the
Registrant terminated the agreement to acquire Albetros on March 8, 2005.
 
 31
 ***4.***
    ***New
      Caledonia Nickel Project***
 The
New Caledonia Nickel project (“New Caledonia Nickel Project”) was a proposed
joint venture to explore the feasibility of mining and processing lateritic
nickel-cobalt ore to produce nickel and cobalt metal in New Caledonia.
  *Tripartite
Agreement*
 The
Registrant had previously entered into a Heads of Agreement with SMT to carry
out a feasibility study, at the Registrant’s risk, for the development of a
nickel refinery based upon SMT’s mining concessions at Nakety and at Bogota.
The Heads of Agreement also provided for a joint venture to be established
between the Registrant and SMT to develop the project. On July 25, 2001, the
Registrant announced JSC "MMC Norilsk Nickel" had taken the positive decision to
proceed with the Nakety/Bogota project in New Caledonia by completing the
bankable feasibility study leading to the joint development with the Registrant
and SMT of the project. A Tripartite Agreement (the “Agreement”) between NNIH,
SMT and the Registrant’s subsidiary Balzan was signed on October 16, 2001. Under
the terms of the Agreement, NNIH reimbursed the Registrant 45% of its costs
incurred to date, or US$7.166 million (Cdn$11,307,948). On August 5, 2002, the
Registrant received a termination notice from NNIH, terminating its involvement
in the New Caledonia Nickel Project. The termination by NNIH effectively
terminated the Registrant’s interest in the New Caledonia Nickel Project. In
addition NNIH, through the ICC, issued a request for arbitration for the return
of US$7,166,000 paid to the Registrant as a re-imbursement of expenditures paid
on signing of the Tripartite Agreement plus expenditures of US$1,368,222 and the
costs of arbitration.
  In
December 2004, The Registrant announced that the arbitration initiated by NNIH
in September 2002 over the New Caledonia N n ickel laterite
p P roject
had been discontinued and is now settled.
 
 The
Settlement Agreement, the terms of which are bound by a confidentiality
agreement signed between the parties, follows a meeting held in Paris on the
25th of November, 2004. Each party will remain responsible for its costs
incurred in the arbitration process and neither party has any claim outstanding
against the other.
 
 **C.**
    **Organizational
      Structure**
 The
following chart represents the inter-corporate relationships between the
Registrant and its wholly-owned subsidiaries, as well as the jurisdiction of
incorporation of each of these entities.
 
 32
 
  **D.**
    **Property,
      Plant and Equipment**
 The
Registrant at December 31, 2004, did not have any significant plant and
equipment, mines or producing properties. The Registrant is an exploration stage
company, and it has not determined whether its properties contain ore reserves
that are economically recoverable.
 
 The
Registrant owns and has options to acquire certain mineral properties as part of its business, as described in detail in
“ *Item
4.B. - Business Overview”* .
These include the following:
 
 **Name**
    **Licence**
    **Type**
    **Size**1Nevada
      Gold Project
    
    Unpatented
      Mining Claims
    2.6
      km2Burundi
      Nickel Project
    Decree
      100/32
    Musongati
      Exploration Licence
    171.1
      km22Albetros
      Diamond Project
    PP5
      / 2001
    Prospecting
      Licence under Application
    76
      km2
 
 1.
    Option
      to acquire 100% of the unpatented mining claims owned by Happy Tracks
      Mining Company which cover the now-abandoned St. Elmo and Rosebud mines
      and an Option with the owner of the abandoned Diamond Jim mine claims to
      acquire 100% of these claims. The Option with Happy Tracks Mining Company
      includes two unpatented claims over water rights.
 2.
    Option
      to acquire up to 85% of Albetros Inland Diamond Exploration Pty Ltd, the
      owner of the prospecting licence. An application for the renewal of the
      prospecting permit was filed in January 2004 over a reduced area of 76
      km2.
      The prospecting permit expired on March 15, 2004 and a new permit has not
      yet been issued.
  ***1.***
    ***Nevada
      Gold Project***
 The
Nevada Gold project
(the “Nevada Gold Project ”) consists of a total 37 unpatented lode mining claims and 2 unpatented claims covering
water rights, situated within the Southern boundary of the Humbolt National
Forest, some 100 km north of Elko in Nevada, USA. These claims are held under a
3 year option agreement with Happy Tracks Mining Company. The project includes a
further 33 claims over which the Registrant has an option agreement with the
owners for 3 years commencing May 2004 which allows the Registrant to purchase
all the claims.  *See
Item 4, Information on the Company, Gold in Nevada, USA*
 33
 The
project area covers 3 now abandoned mines and has been subject to exploration by
a number of companies between 1962 and 2000. The results of that exploration
reported underground chip channel sampling assays from workings of up to 213 g/t
and surface sampling of up to 73 g/t gold over 350 m. Three diamond drill holes
covering a strike length of 200 returned best results of 2 m at 17 g/t, 0.5 m at
6.7 g/t and 0.5 m at 0.5 g/t gold. For
more information, please see “Item 4B - Gold in Nevada, USA.”
 
 ***2.***
    ***Burundi
      Nickel Project - Musongati***
 Musongati
lies at an elevation of 1700 m, in the tropical highlands of Burundi, about 1000
m above Lake Tanganyika. The outlying Waga deposit is 30 km west of Musongati
and the Nyabikere deposit is 40 km north.
 
 The
Musongati laterites are derived from the weathering of an ultrabasic complex,
particularly, serpentinised dunite with a primary nickel content of about 0.3%.
Two types of mineralisation are present in approximately equal proportions:
limonite and saprolite (a less weathered laterite rock type generally found
beneath limonite). Nickel in the limonite mineralisation is tied to goethite
whereas in the saprolite mineralisation it is related to serpentine group and
clay minerals. The typical weathering profile is canga (iron caprock), the
limonite zone (averaging 15 m thick), the saprolite zone (averaging 12 m thick)
and ultrabasic bedrock.
 
 The
Musongati nickel/cobalt deposit is situated within the Musongati
Exploration Licence Musongati
exploration licence on
three adjacent plateaux as a result of erosion of a single layer of laterite.
The plateaux are referred to from west to east as the Geyuka, Rubara and Buhinda
zones, of which Buhinda is the most significant and best defined. Historical
exploration (by diamond drilling) was completed in three stages from 1975 to
1990, by different parties with different objectives. A total of 237 holes were
drilled at Musongati, while 81 holes were drilled at Waga and Nyabikere. Due to
the large size of the mineralised area, an effort directed to identifying zones
with a high nickel content resulted in a greater focus on the Buhinda
Zone. For more information, please see *“Item
4B - Burundi Nickel Project - Musongati.”*
 
 ***3.***
    ***Albetros
      Diamond Project***
 The
Albetros Diamond Project covered an area of approximately 76 km 2 and lies approximately 15 km north of Kleinsee which is a restricted access
town. Albetros is an alluvial project which abuts the coastal Kleinsee, Dreyers
Pan and Twee Pad mines of DeBeers and is downstream of the river-related mines
of Langhoogte, Nuttabooi, Wolfberg and Bontekoe.
 Despite
th e encouraging start to exploration, the Registrant was unsuccessful in its
attempts through the permit holder, Albetros
Inland Diamond Exploration Pty Ltd. (“ Albetros ”) ,
to obtain an exploration permit following its expiry in March 2004. This was
despite complying with an indication that early submission of the application
would facilitate renewal. Requests to continue exploration under a temporary
permit from the South African Department of Minerals and Energy were turned
down. Subsequent to December
31, 2004 the Registrant terminated the agreement to acquire Albetros due to
increased BEE requirements and the fact that the prospecting permit had not yet
been issued. *See
Item 4 Information on the Company, Albetros Diamond Project* For
more information, please see *“Item
4B - Albetros Diamond Project.”*
 34
  **Item
5 - Operating and Financial Review and Prospects**
 The
following discussion of the financial condition, changes in cash flows and
results of operations of the Registrant for the past three fiscal years should
be read in conjunction with the consolidated financial statements of the
Registrant and related notes included therein.
 
 **A.**
    **Operating
      Results**
 ***Critical
Accounting Estimates***
 The
detailed accounting policies are discussed in the attached annual financial
statements, however, the following accounting policies require the application
of management’s judgment:
  (a)
    Mineral
      property valuations - Management uses its best estimate for recording any
      mineral property value based on the results of any exploration conducted,
      prevailing market conditions, similar transactions and factors such as
      stability of the country in which the asset may be located.
  (b)
    Contingent
      Liabilities - Management evaluates any claims against the Corporation and
      provides for those claims, where necessary, based on information available
      to it, including in some instances, legal advice.
  ***Overview***
 The
Registrant’s activities are primarily directed to exploring existing and future
mining mineral properties. The Registrant does not currently have a producing
mine or processing facility. Activities over the last three years include a
pre-feasibility study for the construction of a nickel/cobalt processing
facility and general exploration to locate and evaluate mineral properties that
have been acquired by the Registrant. Costs incurred for general exploration
that did not result in the acquisition of mineral properties with ongoing
exploration or development potential were charged to operations. Exploration
costs, if any, relating to the Registrant’s properties and engineering studies
are capitalized as mineral properties and deferred costs. Should the Registrant
abandon a property or project, the related deferred costs will be charged to
operations. Administrative costs not associated with property exploration or
project development were charged to operations. Costs associated with the
evaluation of new opportunities are charged to operations as project assessment
expenditure, when incurred. Excess cash is invested by the Registrant in
short-term investments.
 
 The
Registrant’s consolidated financial statements are in Canadian dollars and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Registrant, conforms
quantitatively in all material respects for the periods presented with US GAAP
except for the measurement differences referred to in Note 10 to the financial
statements of the Registrant.
 
 The
Registrant’s consolidated financial statements were prepared on a going-concern
basis which assumes that the Registrant will be able to realize assets and
discharge liabilities in the normal course of business.
 
 35
 
  From
incorporation in December 1985, the Registrant has been exclusively a natural
resource company engaged in the business of exploration of diamonds, metals and
minerals. At this stage of its development the Registrant has no producing
properties and consequently, has no current operating income or cash
flow.
 
 The
Registrant has not yet determined whether its properties contain ore reserves
that are economically recoverable. As a result, the Registrant is considered an
exploration stage company.
 
 The
recoverability of amounts shown for mineral properties and deferred costs, if
any, is dependent upon the discovery of economically recoverable reserves,
completion of positive feasibility studies, confirmation of the Registrant’s
interest in the underlying mineral claims, the ability of the Registrant to
obtain necessary regulatory and environmental operating permits, the ability of
the Registrant to obtain necessary financing to complete exploration and
development and future profitable production from the disposition
thereof.
  *2004
Fiscal Year*
 During
the year ended December 31, 2004, the Registrant completed the sorting of
gravels recovered from the large diameter auger drill program conducted on the
Albetros Diamond project in late 2003. A total of 33 diamonds for
a total of that have were
equal to an aggregate of 14.962 carats were recovered. An application for a renewal of the prospecting
permit, which expired on March 15, 2004 was filed in January 2004, however a new
permit has not yet been issued. The Registrant spent $385,104 during 2004 on the
Albetros Diamond Project. Since the expiry of the prospecting permit, the
Registrant has
not continued ceased paying the option payments required to maintain its option for the acquisition
of Albetros , and advised the owners of Albetros that it believed all payment obligations will should be
extended by the period for which no permit is in place. Given the delay in
renewing the permit and the requirements for increased black economic entity
participation required for projects in South Africa , the Registrant terminated the option to acquire Albetros in March 2005.
 
 During
2004, the Registrant entered into an option agreement over the adjoining 33
unpatented claims at its Gold Creek project and commissioned a heritage resource
survey and environmental report which has been submitted to the US
Forest Service USFS as part of the application for a permit to carry out a drilling program at Gold
Creek. Expenditure on the Gold Creek project totalled $216,245 during the year.
 
 Except
for a brief period during 2004, the Burundi Nickel project remained under force
majeure due to the ongoing political instability and violence in Burundi. The
Registrant is currently reviewing any future involvement in Burundi.
 
 The
Registrant evaluated other opportunities during the year focusing on gold,
specifically in areas with high geological potential and in countries with low
political risk.
 
 Site
visits were made to investigate several gold - silver project opportunities in
Nevada and elsewhere in North America. Several opportunities continue to be
under review.
 
 36
 
  In
addition, several diamond project opportunities from southern Africa were
reviewed during the year, but were
not followed up did
not continue beyond the initial due diligence phase .
 
 During
the year ended December 31, 2004 the Registrant expended approximately $103,000
evaluating these opportunities.
  *2003
Fiscal Year*
 During
the year ended December 31, 2003, the Registrant progressed the exploration
drilling and sampling of the Albetros Diamond Project in Namaqualand, South
Africa. The Registrant entered into an option agreement, with subsequent
amendments (the “Agreement”), with Albetros, the owner of the prospecting permit
over the project area, for the acquisition of 85% of Albetros at a cost of R17
million. The Agreement included monthly option payments, which were deductible
from the purchase price, in the event that the Registrant exercised its option
to acquire Albetros. The Agreement made provision for participation by a Black
Empowerment Group as per the South African Mining Charter. A total of $1,451,282
was spent on the Albetros Diamond Project in 2003.
 
 Force
majeure, imposed in August 2002 on its Burundi Nickel Project, due to security
in the country deteriorating, was maintained during 2003 and consequently no
work was carried out in Burundi during the year. A total of $19,783 was spent on
the Burundi Nickel Project during 2003.
 
 The
Registrant sold the Kremnica Gold Project to Tournigan Gold Corporation after a
proposed joint venture transaction with Eurogold Limited failed to proceed. A
total of $33,988 was spent on the Kremnica Gold Project during 2003, prior to
its sale for $500,000.
 
 The
Registrant evaluated other opportunities including the Beregove Gold Project and
the Nevada Gold Project. A total of $270,081 was spent on evaluating these other
opportunities.
  *2002
Fiscal Year*
 During
the year ended December 31, 2002, the Registrant initially progressed the
development of the New Caledonia Nickel Project with its partners NNIH and SMT.
In August 2002, the Registrant received a termination notice from NNIH regarding
its involvement in the New Caledonia Nickel Project effectively terminating the
Registrant’s interest in the project. Subsequently on September 13, 2002, NNIH
issued a request for arbitration through the ICC for a return of US$7,166,000
paid to the Registrant plus US$1,368,222 expended on the project plus costs.
Consequently the Registrant wrote off its remaining investment in the New
Caledonia Nickel Project of $2,539,625.
 
 The
Registrant initiated a work program on its Burundi Nickel Project following the
lifting of force majeure in March 2002. The work program centered around a
re-evaluation of existing drill hole core and data and included technical
personnel visiting Burundi. Due to security in the country deteriorating, force
majeure was re-imposed in August 2002. The Registrant continued to progress the
project and commissioned a detailed cost review study completed by the consulting
firm SKM. The costing study concluded that the development of a nickel laterite
mine was not economic given the substantial infrastructure requirements, however
the platinum group metal (“PGM”) potential at Musongati may offer the
opportunity to develop the deposit in stages by exploiting the PGM potential. A
total of $99,267 was spent on the Burundi Nickel Project during
2002.
 
 37
 
  
 The
Registrant continued to pursue opportunities for the introduction of a joint
venture partner or the sale of the Kremnica Gold Project. In September 2002, the
Registrant entered into a conditional sale agreement with Eurogold Limited for
the sale of Kremnica to its subsidiary Explorer SA. Subsequently in February
2003, Eurogold announced that it had not met the conditions subsequent to the
agreement and the agreement with Eurogold terminated. A total of $90,512 was
spent on the Kremnica Gold Project during 2002.
 
 *Variation
in Operating Results*
 The
Registrant is presently exploring its properties for sufficient reserves to
justify production. None of its properties are yet in production and
consequently, the properties do not produce any revenue. As a result there is
little variation expected in operating results from year to year and little is
to be expected until such time, if any, as a production decision is made on one
of its properties.
 
 The
Registrant derives interest income on its bank deposits and other short-term
deposits, which depend on the Registrant’s ability to raise funds. Of most
significance would be further cash received from issuance of shares to fund
ongoing operations or received from joint venture partners reimbursing prior
expenditures made by the Registrant on its projects or from the sale of its
projects.
 
 Through
the exploration process, management periodically reviews results both internally
and externally through mining related professionals. Decisions to abandon,
reduce or expand exploration efforts are based upon many factors including
general and specific assessments of mineral deposits, the likelihood of
increasing or decreasing those deposits, land costs, estimates of future mineral
prices, potential extraction methods and costs, the likelihood of positive or
negative changes to the environment, permitting, taxation, labour and capital
costs. Geological and/or economic circumstances render each property unique.
Consequently, it is not possible to have any predetermined hold
period.
 
 The
dollar amounts shown as deferred exploration expenditures, if any, are direct
costs of maintaining and exploring properties, including costs of structures and
equipment employed on the properties and allocations of administrative
management salaries based on time spent and directly related to specific
properties net of write-downs provided. These deferred amounts may not
accurately reflect present or future values.
 
 During
the year ended December 31, 2003 , the Registrant wrote off $19,783 expended on the Burundi Nickel Project, which
is still subject to force majeure.
 
 During
the year ended December 31, 2002, the Registrant wrote off its investment of
$7,973,049 in the Burundi Nickel Project due to ongoing political instability.
In addition, the Registrant wrote
off it’s investment of $2,539,625 in the New Caledonia Nickel Project following
the termination by NNIH of its involvement in the project.  *See* For
more information, please see *“Item 4.B. - Business Overview* *”* *- New Caledonia Nickel Project”* *.*
 
 38
  *Outlook*
 Existing
Projects
 The
Registrant expects
the believes
that the USFS t will o issue a permit during the first quarter of 2005, enabling it to conduct
operations at Gold Creek ; , however , strict guidelines imposed by the USFS on companies operating in a National
Forest , restrict the continuation of work through high snowfall months. There can be no assurance however that the USFS will issue a permit to the
Registrant or that the scope of such permit will allow the Registrant to conduct
its drilling program. Consequently, subject to any permitting requirements o n r
delays operations will not recommence until late spring 2005.
 
 The
Registrant expects to spend approximately $50,000 on option payments on the
Nevada Gold Project and a further $200,000 on evaluating the such properties
during 2005.
 
 The
Registrant terminated the option agreement to acquire Albetros in March 2005 and
is currently reviewing its continued participation in the Musongati Burundi Nickel Project. Given the continuing political instability in Burundi, it is
likely that the Registrant will terminate its involvement in this project.
 
 New
Projects
 The
Registrant continues to seek additional projects through which shareholder value
may be enhanced and has focused on diamonds and precious metals. The Corporation Registrant is
investigating suitable projects on a global basis and has been active in
examining precious metal and diamond opportunities in Angola, elsewhere in
Africa and the Pacific region. There can be no assurance however that the Registrant will be able to locate any
additional suitable projects on terms acceptable to the Registrant if at
all.
 
 *Administration*
 Administrative
expenses during fiscal 2005 are expected to be similar to those of 2004,
however, expenses may increase significantly should the Registrant acquire new
projects which require the use of technical consultants and necessitate
increased travel and additional administrative support. Expenses for future
periods cannot be predicted. In addition, the Registrant is considering
consolidating all of its administrative activities in its Australian office.
Should that decision be effected, the Canadian office will be closed.
  *Albetros
Diamond Project* **
 The
Registrant was involved in the assessment of the diamond potential of the
Albetros Diamond Project, an alluvial diamond project located in Namaqualand on
the west coast of South Africa, prior to deciding to exercise an option to
purchase Albetros, the holder of the exploration licence over the Project. The
assessment has included 9,330 m of rotary air blast drilling to define gravel
resources in 2 main paleochannels and 22 large diameter auger holes to extract
gravel from the Megalodon Channel and confirm the diamondiferous nature of those
gravels. Subsequent
to December 31, 2004, the Registrant terminated the agreement to acquire the
Albetros Diamond project due to the increased BEE requirements and the fact that
the prospecting permit ha s d not been issued. *See
“Item 4.B.* *-
Business Overview -* *Albetros
Diamond Project* *.* *”* *.* **
 
 39
  *Nevada
Gold Project*
 The
Nevada Gold Project was acquired under option agreements in November and
December, 2003 and a further option agreement over adjoining unpatented mining
claims in May 2004. A drilling program is expected to commence on the project in
late spring of 2005, if the permit application submitted to the USFS is
approved. *See
“Item 4.B.* *-
Business Overview -* *Gold
in* *Nevada* *,
USA* *Gold Project* *.* *”* *.* **
  *Burundi
Nickel Project*
 The
Registrant was involved in investigations into the Burundi Nickel Project, which
involved a scoping study on the construction of an integrated mine and PAL
processing refinery to be sited at Musongati in Burundi. Studies were focused on
important transportation and infrastructure issues. The Registrant declared
force majeure in April 2000 due to the deteriorating security situation in the
region. Except for brief periods during 2002 and 2004 the project has been
subject to force majeure due to the unstable conditions in Burundi. Given these
continued unstable conditions, the Registrant is reviewing any future
involvement in Burundi. See “ *Item
4.B.* *- Business Overview -* *Burundi Nickel Project* *.* *”* *.*
 
 ***Summary
and Analysis of Financial Operations*** ******
  *Comparison
of Fiscal 2004 to 2003*
 The Corporation Registrant incurred a loss of $3,148,252 for the year ended December 31, 2004 compared to a
loss of $2,493,133 for the year ended December 31, 2003. The increased loss of
$655,119 is mostly attributable to the increased arbitration expenses of
$423,561, due to the arbitration proceeding and a foreign exchange loss of
$255,686 in 2004 due to the Australian dollar weakening against the Canadian
dollar and the Corporation Registrant holding substantial cash balances in Australian dollars during the year. At year
end substantially all of the Corporation Registrant ’s
cash balances were held in Canadian dollars, however, the Corporation Registrant conducts its activities in various countries which require it to incur
expenditures in currencies other than Canadian dollars, consequently it will be
exposed to exchange gains or losses in the future.
 
 Interest
income of $214,247 for the year ended December 31, 2004, decreased from $363,362
for the year ended December 31, 2003 as a result of decreasing cash balances and
the Corporation Registrant holding its balances in short term deposits at lower interest rates.
 
 During
the year ended December 31, 2004 , cash required for operating activities amounted to $3,434,568 compared to
$3,234,515 for the year ended December 31, 2003. The increase in cash required
for operating activities of approximately $200,000 resulted mainly from a
reduction of accounts payable and accrued liabilities of $300,172, compared to
an increase of $125,767 between 2002 and 2003. While accounts receivable and
prepaids in 2004 remained approximately the same as in 2003, the increase from
2002 to 2003 was $120,559.
 
 During
2004 , administrative expenses were $2,519,569 compared to $1,926,121 for the year
ended December 31, 2003. The increase of $593,448 arose mainly from increased
arbitration expenses, as
the arbitration process between the Corporation and NNIH proceeded and
management fees, due to the Corporation Registrant terminating the management contract with Peninsular
Services Pty Ltd., which is a
corporation controlled by the Chairman of the Corporation Registrant and the payment of $441,814 in settlement of that termination. However,
subsequently Mr . Lloyd has subsequently remained in a full time capacity with Argosy the
Registrant without
any additional compensation, primarily leading the company’s its defense
in the arbitration process initiated by NNIH and acting as a non-executive
director. Following the termination of Peninsular’s Management Contract, Mr. Lloyd has
continued to provide services to the Corporation on a full time basis, dealing
amongst other things with the arbitration initiated by NNIH, without payment,
except for fees paid to non-executive directors.
 
 40
 
  
 Project
assessment expenditures decreased by $1,134,119 due to completion of the
drilling program at the Albetros Diamond Project in December , 2003 and no significant new exploration program being conducted in 2004.
 
 *Comparison
of Fiscal 2003 to 2002*
 The
Registrant incurred a loss of $2,493,133 for the year ended December 31, 2003
compared to a loss of $11,079,339 for the year ended December 31, 2002. The
decreased loss of $8,586,206 is mostly attributable to the decreased write off
of mineral properties and deferred costs of $10,492,891, offset by the increase
in project assessment expenditures of $1,540,005, increased arbitration costs of
$270,055 and decreased income of $136,913. Income decreased by $136,913 due to
the decreased foreign exchange gain of $229,120, the decrease in interest
received of $47,841 offset by gains on disposal of the Kremnica Gold Project and
the sale of marketable securities. The Kremnica Gold Project was sold for
$500,000, deferred costs associated with the project at the date of sale
amounted to $374,500, resulting in a gain on disposal of $125,000.
 
 Interest
income of $363,362 for the year ended December 31, 2003, decreased from $411,203
for 2002 as a result of decreasing cash balances. Cash balances a we re
held mainly in Australian dollars which g i a ve s rise to higher interest earnings due to interest rates on Australian dollar
investments averaging 4.5% which is was higher than rates for Canadian dollar investments. In addition, foreign exchange
gains have resulted from the Registrant holding substantial cash balances in
Australian dollars and the Australian dollar strengthening by approximately 7%
against the Canadian dollar in 2003.
 
 During
the year ended December 31, 2003, cash required for operating activities
amounted to $3,234,515 compared to $1,571,518 for the year ended December 31,
2002. The increase in cash required for operations resulted mainly from
increased project assessment costs of $1,540,005 mainly attributed to the
assessment of the Albetros Diamond Project.
 
 During
2003, administrative expenses were $1,926,121 compared to $1,696,354 for the
year ended December 31, 2002. The increase of $229,767 arose from increased
arbitration expenses of $270,055, increased directors’ fees of $43,768,
increased management fees of $51,444 and increased insurance premiums of $23,862
offset by decreases in legal expenses of $52,672 and travel of $75,901.
 
 The
increased arbitration expenses resulted from the arbitration proceeding between
the Registrant and NNIH. Directors’ fees increased due to the addition of a
non-executive director in 2003 and directors’ fees being increased during 2002.
The increase in management fees resulted from management fees being set in
Australian dollars and the Australian dollar strengthening
by approximately 7% from January 2002 to December 2003, as well as approximately
$31,000 of management fees for 2002 being deferred and capitalized to mineral
properties and deferred costs. There was no increase in the Australian dollar
rate paid for management fees in 2003. Insurance premiums rose due to rapidly
rising insurance rates.
 
 41
 
  The
decrease in legal expenses was mainly due to higher fees in 2002 due to issues
which arose with NNIH, which is
now in proceeded
to arbitration and the decrease in travel was due to the Registrant focusing on its
Albetros Diamond Project, requiring less travel.
 
 Project
assessment expenditures increased by $1,540,005 mainly due to expenditures of
$1,451,282 being incurred on the Albetros Project.
 
 During
the year ended December 31, 2003 capitalised expenditures on mineral properties
totalled $53,771 compared to expenditures of $240,441 on mineral properties in
2002, a decrease of $186,670. The decrease was due to the Registrant having sold
its Kremnica Gold Project and the Musongati Nickel Project remaining under force
majeure. During the year ended December 31, 2003, $19,783 expended on the
Musongati Nickel Project was written off compared to $10,512,674 written off in
the year ended December 31, 2002 on the Musongati Nickel Project and the
Kremnica Gold Project.
 
 **B.**
    **Liquidity
      and Capital Resources**
 The
Registrant’s primary source of funds since incorporation has been the issuance
of common
shares Common
Shares pursuant
to various public and private financings and reimbursement of prior project
expenses. The Registrant has had no revenue from mining operations to date and
does not anticipate mining revenues in the foreseeable future.
 
 The
Registrant’s cash balances at December 31, 2004 totalled $4,616,407 compared to
$8,058,383 at December 31, 2003. Aside from such cash, the Registrant has no
material unused sources of liquid assets. No cash was raised on the issuance of
capital stock during 2004.
 
 The
Registrant does not have any loans or bank debt and there are no restrictions on
the use of its cash resources.
 
 The
Registrant and its subsidiaries have expenditure commitments as at December 31,
2004 for lease payments that expire on June 30, 2005, for office premises which
require rental payments of approximately $4,000 per month. The Registrant
currently has sufficient cash on hand to fulfil l these expenditure commitments.
 
 At
December 31, 2004 the Registrant had met all its expenditure requirements under
the various property agreements it holds or has interests in. See *“Item 4.D. - Property, Plant and Equipment* *.* *”* *.*
 
 In
addition, the Registrant anticipates spending approximately $1,200,000 during
2005 for administrative and other operating expenditures at its head office in
Langley, British Columbia, and at its office in Perth, Australia.
 
 
 42
 
 
  
 The
Registrant may decide to acquire new properties, at which time the Registrant
may require additional equity financing *.* Any such decision will be based on the results of ongoing exploration programs
and the response of equity markets to the Registrant’s properties and business
plan. The r Registrant
expects for to
fulfil these cash commitments through its current cash on hand.
 
 The
Registrant believes it has sufficient cash resources to fund its operations for
at least the next twelve months. The Registrant does not have any source of
funds other than from the issuance of capital stock and the exercise of options,
and the possible joint venture or sale of its mineral properties. While the
Registrant has been successful in the past in raising the necessary funds for
the exploration of its mineral properties there is no assurance that funding
will be available on terms acceptable to the Registrant or at all. If such funds
cannot be secured, the Registrant will be forced to curtail its exploration
efforts to a level for which funding can be secured or relinquish certain of its
properties or allow its interest to be diluted pursuant to the terms of the
respective joint venture agreements or option agreements.
 
 **C.**
    **Research
      and Development, Patents and Licences,
etc.**
 Please
see *“Item
4.A. - History and Development of the Company”* and *“Item
4.B. - Business Overview”* for a description of the Company’s Registrant’s mineral
exploration activities.
 
 **D.**
    **Trend
      information**
 None
of the Registrant’s assets are currently in production or generate revenue.
Please see *“Item
4.A. - History and Development of the Company”* *and “Item 4B - Business Overview”* for a description of the Registrant’s proposed expenditures and any known trends for the upcoming year.
 
 **E.**
    **Off-balance
      Sheet Arrangements**
 The
Registrant does not have any off-balance sheet arrangements that require
disclosure under this Item 5.
 
 **F.**
    **Contractual
      Obligations**
  **2005**
    
    **2006**
    
    **Total**Office
      rent - Australia
    
    $
    24,000
    
    
    -
    
    $
    24,000Property
      Payments - Nevada, HTMC
    
    $
    25,000
    
    $
    25,000
    
    $
    50,000
    1,2Property
      Payments - Nevada, Diamond Jim
    
    $
    25,000
    
    $
    25,00020
    
    $
    50,000
    1,3Option
      fee - Albetros
    
    $
    233,000
    
    
    -
    
    $
    233,000
    1,4,5,6Purchase
      Consideration, Albetros-
      R 12,950,000
    
    $
    2,749,000
    
    
    -
    
    $
    2,749,000
    1,4,5,6$
    3,106,000
 1.
    These
      agreements are able to be terminated without penalty at the option of the
      Corporation.
 2.
    Option
      payments total US$20,000/year for 3 years and the purchase consideration
      for the mining claims at the end of the option period is US$1,250,000.
 3.
    Option
      payments total US$20,000/year for 3 years and the purchase consideration
      for the mining claims at the end of the option period is US$1,500,000.
 4.
    The
      purchase consideration is R17,000,000 less option fees paid to March 31,
      2004 of R2,950,000 and option fees payable of R1,100,000 leaving a balance
      of R12,950,000 ($2,749,000) payable should the option be exercised.
 5.
    The
      Corporation has advised Albetros and the shareholders of Albetros that
      option payments and the option exercise date must be delayed by the period
      for which no permit is held by Albetros.
 6.
    On
      March 8, 2005, the Corporation terminated the Agreement to acquire
      Albetros.
  7.
    The
      Registrant does not have any contractual obligations beyond 2006.
  43
 **Item
6 - Directors, Senior Management and Employees**
 **A.**
    **Directors
      and Senior Management**
 The
following provides a description of the backgrounds of the directors and
officers of the Registrant.
  ***Cecil
R. Bond*** **,** age 48. Chief Executive Officer of the Registrant as of February 2004; Chief
Financial Officer of the Registrant from April 1998 to June 2004 ; , Corporate Secretary of the Registrant from April 1998 to date and a director of
the Registrant from March 1997 to date; Chief Financial Officer and Corporate
Secretary of AMC from August 1998 to date; and
a Director
of AMC from November 1999 to date ; . Mr. Bond is a Chartered Accountant and obtained a Bachelor of Commerce from the
University of Cape Town in 1981. It is expected that Mr. Bond will devote
approximately 90% of his time to the Registrant.
  ***Peter
H. Lloyd*** *,* age 55. Chairman of the Registrant as of February 3, 2004; Chief Executive
Officer of the Registrant from March 1998 to February 2004; a Director
of the Registrant from August 1996 to November 1996 and September 1997 to date;
Chairman of AMC from April 1993 to March 1998; a Director
of Emmerson Holdings Pty Ltd from 1988 to date; a Director
of Wedgefield Holdings Pty Ltd from 1988 to date; a Director
of Peninsular Services Pty Ltd from January 2000 to date; and
a Director
of Java Black Mining Pty Ltd from June 1995 to date.
  ***John
Nicholls,*** age 52. A Director
of the Registrant from November 2002 to date. Accounting Public Practice
Principal (CPA) since 1990 specialising in tax and business consultancy and
provision of c C ompany S s ecretarial
services.  Previously , Company Secretary and Chief Finance Officer for Allwood Ltd. and McLean Bros.
& Rigg Ltd. , and Finance Controller for CSR Ltd Refined Products Division, NSW, 1980 - 1987.
  ***John
Maloney,*** age 66. A Director
of the Registrant from April 2003 to date. Secretary of Wesley College Endowment
Fund Association Inc since 1982; a Director
of Old Wesley Collegians Association since 1995; and a Director of Cybertop Pty Ltd since 1998, Bursar of Wesley College from 1968 to
1993.
  ***Marcus
N. Foster,*** age
55. Chief Financial Officer as of May 18, 2004 and a Director
of the Registrant from April 2, 2004 to date. President, Chief Executive Officer
and a Director
of Ross River Minerals Inc., December 23, 1999 to present , ; President and Chief Executive Officer of Harbour Pacific Oil & Gas
Ltd. , ;
and President of Intwood Investments Ltd., a private investment
company.
  ***David
Russell,*** age
52, Manager, Corporate Development from September 1997 to date. Previously
Mining Investment Analyst with James Capel (Australia) and JDA Anderson (South
Africa).
 
 There
are no arrangements or understandings pursuant to which any director or
executive officer was selected as a director or executive officer. There are no
family relationships between any two or more directors or executive
officers.
 
 **B.**
    **Compensation**
 The
aggregate amount of compensation paid by the Registrant and its subsidiaries
during the Registrant’s most recent fiscal year, directly and
indirectly ,
including directors fees ,
to all officers and directors in their capacity as such total l l ed
$734, 819 075 .
 
 The
Registrant paid a total of $76,136 in directors’ fees during the year ended
December 31, 2004. Each non-executive director is paid a maximum of $25,000 per
year.
 
 44
 Directors
are entitled to reimbursement for reasonable travel and other out-of-pocket
expenses incurred in connection with attendance at meetings of the Board. The
Board may award special remuneration to any director undertaking any special
services on behalf of the Registrant other than services ordinarily required of
a director. Other than as indicated above or in “ *Item
6. C. - Board Practices”* ,
no director received any compensation for his or her services as a director,
including committee participation and/or special assignments.
 
 The
following table sets out a summary of compensation paid to the executive
officers (the “Executive Officers”) of the Registrant during the year ended
December 31, 2004.
 **Annual
      Remuneration**
    **Long
      Term Remuneration****Awards**
    
    **Payouts****Name
      and Principal Position**
    **Salary
      ($)**
    **Bonus
      ($)**
    **Other
      Annual Compensation ($)**
    **Securities
      Under Options / SARs Granted (#)**
    **Restricted
      Shares or Restricted Share
      nits****(1)****($)**
    **Long
      Term Incentive Plan Payouts ($)**
    **All
      Other Compensation ($)**Peter
      H.Lloyd (5)*Chairman and a
      Director*
    Nil
    Nil
    A$466,717
      (2)(4) (5)
    1,000,000
      (3)
    Nil
    Nil
    $22,850
      (8)Cecil
      R. Bond (6)*Chief Executive Officer, Corporate Secretary
      and a Director*
    Nil
    Nil
    A$175,000
      (2)(4)
    1,000,000
      (3)
    Nil
    Nil
    NilMarcus
      N. Foster (7)Chief Financial Officer and a
      Director
    Nil
    Nil
    $26,194
    Nil
    Nil
    Nil
    $3,220
      (8)David
      Russell*Manager, Corporate Development*
    A$175,000(2)
    Nil
    Nil
    600,000
      (3)
    Nil
    Nil
    Nil
 (1)
    The
      term “restricted shares” as it is used in this table means shares granted
      or awarded as compensation, other than incentive stock options, which may
      be subject to vesting conditions based on performance, lapse of time or
      continued service with the Registrant or its subsidiary. There are no
      restricted shares issued by the Registrant within this
      meaning.
 (2)
    The
      exchange rate for an Australian dollar to a Canadian dollar at February
      28, 2005 was.0.9762_____and the exchange rate for an Australian dollar to a United States dollar
      at February 28, 2005,2004was 0.7940.
 (3)
    The
      options granted to the executive officers at A$0.35 per share were
      approved by shareholders on May 23, 2002.
 (4)
    Compensation
      is payable pursuant to management contracts with Peninsular Services Pty
      Ltd and 667060 B.C. Ltd. respectively,.See “*Item
      6.C. - Directors, Senior Management and Employees - Board
      Practices**.*”.
 (5)
    Mr.
      Lloyd retired as President and Chief Executive Officer of the Registrant
      on February 2, 2004and the contract with Peninsular Services terminated. The compensation of
      A$466,717 includes a termination payment of A$445,8484.
      For more information, please*see
      “Item 6C - Directors, Senior Management and Employees - Board
      Practices.”*
 (6)
    Mr.
      Bond was appointed President and Chief Executive Officer of the Registrant
      on February 2, 2004.
 (7)
    Mr.
      Foster was appointed Chief Financial Officer on May 18, 2004 and is paid a
      monthly fee of $3,500..
 (8)
    Directors
      fees paid amount to a maximum of $25,000 per annum and are pro rated for
      the period for which the director serves as a non-executive..
 
 The
Registrant does not provide for pension, retirement or similar benefits for
directors or officers and has not accrued for any such benefits.
  Stock
options to purchase securities from the Registrant are granted to directors,
officers and employees of the Registrant pursuant to Incentive Option Agreements
on terms and conditions acceptable to the regulatory authorities in Australia,
notably the ASX. Stock options granted to directors of the Registrant must be
approved by the Registrant’s shareholders.
 
 45
 No
option granted under the option program is transferable by the optionee other
than by will or the laws of descent and distribution, and each stock option is
exercisable during the lifetime of the optionee only by such optionee. Options
to directors expire up to 6 months following the termination of service of the
optionee, while options to employees expire at various times between 30 days and
up to 6 months following termination of service.
 
 The
exercise prices for all currently outstanding stock options were determined in
accordance with the ASX guidelines and with the minimum exercise price
reflecting the average closing price of the Registrant’s common stock for the
five trading days on the ASX immediately preceding the day on which the grant of
the stock options was announced, but not including a closing price that occurred
earlier than the trading day following the day on which any material change was
announced.
 
 The
following table sets forth the stock options outstanding at February
28 ,
2005 to directors and officers of the Registrant and any of its subsidiaries. No
director or officer holds any warrants or other convertible
securities.
 **Name
      and Title**
    **Number
      of Common Shares Issuable upon Exercise**
    **Exercise
      Price**
    **Expiry
      Date**Cecil
      R. Bond, Chief Executive Officer, Corporate Secretary and a director of
      the Registrant
    1,000,000
    A$0.35
    24-May-06Peter
      H. Lloyd, Chairman and a director of the Registrant
    1,000,000
    A$0.35
    24-May-06John
      Nicholls, a director of the Registrant
    Nil
    n/a
    n/aJohn
      Maloney, a director of the Registrant
    Nil
    n/a
    n/aMarcus
      N. Foster, Chief Financial Officer and a director of the
      Registrant
    Nil
    n/a
    n/aDavid
      Russell, Manager, Corporate Development
    600,000
    A$0.35
    24-May-06
 In
total, directors, officers and employees hold options that are exercisable into
2 ,725,000 Common Shares.
  The
terms and conditions of options which are issued from time to time upon
shareholder approval are as follows:
 1.
    The
      options may be exercised in a specific
period.
 2.
    Director’s
      options remain exercisable for up to 6 months after the date the Optionee
      ceases to be a director or officer of the Registrant. Employee’s options
      remain exercisable for between 30 days and up to 6 months after the date
      the Optionee ceases to be an employee of the
Registrant.
 3.
    The
      options are non-transferable.
 4.
    The
      exercise price for the options shall be set by the Registrant and all
      options granted to directors will be approved by shareholders. Options
      granted to employees are not subject to approval by shareholders.
 5.
    The
      Registrant will not make application to ASX for official quotation of the
      options.
 6.
    The
      Registrant will make application to ASX for the quotation of the shares
      allotted and issued upon the exercise of an option within 10 business days
      after allotment and issue of those shares.
 7.
    All
      shares issued upon exercise of the options will rank pari passu in all
      respects with the Registrant’s then existing
shares.
 8.
    There
      is no participating rights or entitlements inherent in the options and
      holders will not be entitled to participate in new issues of capital
      offered to shareholdersduring
      the currency of the options. However, the Registrant will send a notice to
      each holder of options at least 9 business days before the relevant record
      date. This will give option holders the opportunity to exercise their
      options prior to the date for determining entitlements to participate in
      any such issue.
 46
 9.
    If
      the Registrant makes a bonus issue of shares pro-rata to existing
      shareholders (other than an issue in lieu in satisfaction of dividends or
      by way of dividend investment) and no share has been allotted in respect
      of an option before the books closing date for determining entitlements to
      the bonus issue, then the number of shares over which the option is
      exerciseable shall be increased by the number of shares which the option
      holder would have received if the option holder had exercised the option
      prior to the books closing date.
 10.
    If
      there is a pro-rata issue (except a bonus issue) to holders of shares, the
      exercise price of an option may be reduced in accordance with the formula
      provided for in ASX Listing Rule 6.22.2.
 11.
    In
      the event of any reorganization of the issued capital of the Registrant on
      or prior to the expiry of the options, the rights of an option holder will
      be changed to the extent necessary to comply with the applicable ASX
      Listing Rules in force at the time of the reorganization.
  **C.**
    **Board
      Practices**
 Members
of the Board have served in their respective capacities since their election
and/or appointment and will serve until the next annual general meeting of
shareholders or until a successor is duly elected, unless the office is vacated
in accordance with the articles and bylaws of the Registrant. The executive
officers of the Registrant serve at the pleasure of the Board.
 
 Effective
January 1, 2000, pursuant to an agreement between Peninsular Services Pty Ltd
(“Peninsular”), a corporation controlled by Peter H. Lloyd, and the Registrant,
Peninsular provided management and consulting services of Mr. Peter H. Lloyd,
for consideration of A$200,000 per year. Effective November 1, 2001, the
consideration payable was increased to A$250,000 per year. In addition,
Peninsular provided personnel and secretarial services which amounted to a
consideration of approximately A$32,530
for the period to February 2004. Subsequent to February 2004, personnel in
Australia are employed directly by the Registrant. Effective February 1, 2004
the agreement with Peninsular Services was terminated and a termination payment
of A$445,884 was paid. Following the termination of Peninsular’s Management
Contract, Mr. Lloyd has continued to provide services to the Corporation Registrant on a full time basis, primarily dealing with ,
amongst other things, the arbitration initiated by NNIH, without compensation, except for fees paid to
non-executive directors. Fees paid to each non-executive director consists of
quarterly payments not exceeding $25,000 per annum.
 
 Pursuant
to an agreement dated September 1, 1996, last amended effective April 8, 1998,
between the Registrant and C.R. Bond (“CRBC”), CRBC provided financial and
corporate management services to the Registrant in consideration of $75,000 per
year. In addition, Mr. Bond was paid $52,680 per year pursuant to an agreement
dated September 1, 1996, last amended effective September 22, 1998, between AMC
and CRBC for services provided to AMC. Effective November 1, 2001, the fees
payable to CRBC by the Registrant and its subsidiaries were set at A$175,000 per
year. These agreements were superceded effective July, 2003, pursuant to an
agreement between 667060 B.C. Ltd. (“667060”), a company controlled by Mr. Cecil
R. Bond, and the Registrant, 667060 provides management and consulting services
for consideration of A$175,000 per year. In addition, 667060 provides personnel
and office facilities
to the Registrant in Canada, which amounted to a consideration of approximately $85,464
for the year ended December 31, 2004. Mr. Bond devotes approximately 90% of his
time to the Registrant.
 
 47
 ***Audit
Committee***
 In
accordance with the *Business
Corporations Act (Yukon)* ,
the Registrant is required to have an audit committee. The Registrant’s current
audit committee consists of:
 **Name**
    **Present
      Office**Peter
      H. Lloyd
    Chairman
      and DirectorJohn
      Nicholls
    DirectorJohn
      Maloney
    Director
 
 The audit
committee meets with the Registrant’s independent accountants and management
periodically to review the scope and results of the annual audit and to review
the Registrant’s financial statements and related reporting matters prior to the
submission of the financial statements to the Board.
  The
audit committee meets as often as it determines, but not less frequently than
quarterly. The committee reviews all financial statements prior to the
submission of those statements to the Board of Directors for approval. In
addition, the committee meets with the independent auditors at least on an
annual basis to review and discuss the audit of the Registrant’s financial
statements. The audit committee pre-approves all the audit engagement terms and
all non-audit services. Certain services are pre-approved by the audit committee
on an annual basis.
  The
Registrant has established an audit committee charter which deals with the
establishment of the audit committee and sets out its duties and
responsibilities.
  ***Remuneration
Committee***
 The
Registrant does not have a separate remuneration committee. The full Board
reviews the terms and conditions of employment and remuneration levels for
employees.
 
 **D.**
    **Employees**
 The
following table sets forth the number of direct and indirect employees of the
Registrant and all of its subsidiaries at December 31 for each of the indicated
periods. The employees listed below can all be characterised as administrative personnel.
 **Year**
    **Canada**
    **Australia**
    **Slovak
      Republic**
    **Burundi**
    **Total**2002
    2
    6
    4
    1
    132003
    3
    5
    0
    0
    82004
    3
    5
    0
    0
    8
 The
decrease of employees in 2003 from 2002 was due to the sale of the Registrant’s
Kremnica Gold Project in the Slovak Republic and ongoing instability in Burundi.
The increase in personnel in Canada was due to increased administrative
requirements.
 
 None
of the Registrant’s employees are members of a labour union.
 
 **E.**
    **Share
      Ownership**
 The
following table sets forth, as of February 28, 2005, the number of the
Registrant’s Common Shares beneficially owned by the directors and members of
senior management of the Registrant, individually, and the percentage ownership
of the outstanding Common Shares represented by such shares. The security
holders listed below are deemed to be the beneficial owners of Common
Shares underlying options and warrants which are exercisable within 60 days from
the above date.
 48
 **Name,
      residence* and positions, current and former, if any, held in the
      Registrant**
    **Principal
      occupation for last five years**
    **Served
      as director since**
    **Number
      of shares owned or controlled at Feb. 28, 2005***
    **Percentage
      of shares outstanding****PETER
      H. LLOYD****(1)**Applecross,
      WA Australia*Chairman
      & Director*
    Businessman
      and Investor. Chairman of the Registrant from February 2, 2004, President
      and Chief Executive Officer of the Registrant from March 1998 to February,
      2004.
    August
      to November 1996 and since September 1, 1997
    6,299,996(2)
    6.50%**CECIL
      R. BOND**Langley,
      BC CANADA*President,
      CEO, Secretary and Director*
    Chief
      Executive Officer of the Registrant from February 2, 2004; Chief Financial
      Officer from March 1998 to May 18, 2004, Corporate Secretary of the
      Registrant from March 1998 to date; Treasurer and Controller of the
      Registrant from September 1996 to date, Treasurer and Controller of Argosy
      Mining Corp from September 1996 to date; Chief Financial Officer of Argosy
      Mining Corp. from August 1998 to date.
    March
      1, 1997
    1,732,000(2)
    1.80%**JOHN
      NICHOLLS****(1)**Perth,
      Western Australia*Director*
    Accounting
      Public Practice Principal (CPA) since 1990 specialising in tax and
      business consultancy and provision of company secretarial services.
      Previously Company Secretary and Chief Finance Officer for Allwood Ltd.
      and McLean Bros. & Rigg Ltd., and Finance Controller for CSR Ltd
      Refined Products Division , NSW, 1980 – 1987.
    November
      1, 2002
    62,643
    ****JOHN
      MALONEY****(1)**Perth,
      Western Australia*Director*
    Secretary
      of Wesley College Endowment Fund Association Inc since 1982; a Director of
      Old Wesley Collegians Association since 1995 and a Director of Cybertop
      Pty Ltd since 1998, Bursar of Wesley College from 1968 to
      1993.
    April
      1, 2003
    Nil
    Nil**MARCUS
      N. FOSTER**Vancouver,
      BC CANADA*CFO
      and Director*
    A
      Director of the Registrant from April 2, 2004 to date. Chief Financial
      officer of the Registrant from May 18, 2004 to date. President, CEO and a
      Director of Ross River Minerals Inc., December 23, 1999 to present,
      President & CEO of Harbour Pacific Oil & Gas Ltd. and President of
      Intwood Investments Ltd., a private investment company.
    April
      1, 2004
    Nil
    Nil**DAVID
      A. RUSSELL**Perth,
      Western Australia
    Manager,
      Corporate Development from September 1997 to date. Previously Mining
      Investment Analyst with James Capel (Australia) and JDA Anderson (South
      Africa).
    n/a
    1,033,799(3)
    1.10%
 (1)
    Member
      of audit committee.
 (2)
    Includes
      options to purchase 1,000,000,000common shares at an exercise price of A$0.35 that expire on May 24,
      2006.
 (3)
    As
      for(2)except 600,000Includes
      options to purchase 600,000 common shares at an exercise price of A$0.35
      that expire on May 24, 2006.
 (*)
    The
      directors and members of management have provided the information as to
      residence, principal occupation and number ofcommon
      sharesCommon
      Sharesbeneficially
      owned themselves.
 (**)
    Indicates
      less than onepercent(1)%)
 
 Stock
options to purchase securities from the Registrant are granted to directors,
officers and employees of the Registrant pursuant to Incentive Option Agreements
on terms and conditions acceptable to the regulatory authorities in Australia,
notably the ASX. Stock options granted to directors of the Registrant must be
approved by the Registrant’s shareholders.
 
 No
option granted under the option program is transferable by the optionee other
than by will or the laws of descent and distribution, and each stock option is
exercisable during the lifetime of the optionee only by such optionee. Options
to directors expire up to 6 months following the termination
of service of the optionee, while options to employees expire between 30 days
and up to 6 months following termination of service.
 
 49
 The
exercise prices for all currently outstanding stock options were determined in
accordance with the ASX guidelines and with the minimum exercise price
reflecting the average closing price of the Registrant’s common stock for the
five trading days on the ASX immediately preceding the day on which the grant of
the stock options was announced, but not including a closing price that occurred
earlier than the trading day following the day on which any material change was
announced.
 
 The
following table sets forth the stock options outstanding at February
28 ,
2005 to directors and officers of the Registrant and any of its subsidiaries. No
director or officer holds any warrants or other convertible
securities.
 **Name
      and Title**
    **Number
      of Common Shares Issuable upon Exercise**
    **Exercise
      Price**
    **Expiry
      Date**Cecil
      R. Bond, Chief Executive Officer, Corporate Secretary and a director of
      the Registrant
    1,000,000
    A$0.35
    24-May-06Peter
      H. Lloyd, Chairman and a director of the Registrant
    1,000,000
    A$0.35
    24-May-06John
      Nicholls, a director of the Registrant
    Nil
    n/a
    n/aJohn
      Maloney, a director of the Registrant
    Nil
    n/a
    n/aMarcus
      N. Foster, Chief Financial Officer and a director of the
      Registrant
    Nil
    n/a
    n/aDavid
      Russell, Manager, Corporate Development
    600,000
    A$0.35
    24-May-06
 **Item
7 - Major Shareholders and Related Party Transactions**
  **A.**
    **Major
      shareholders**
 No
beneficial owners of 5% or more of the Common Shares are known to the Registrant
except for Mr. Lloyd as disclosed above under “ *Item
6.E. - Share Ownership”* .
Mr Lloyd’s voting rights do not differ in any way from those of the Registrant’s
other shareholders.
 
 At March
15, 2005 there
were _ 170 ______ record holders of the Registrant’s Common Shares resident in the United States,
holding 5,520,490 ________ Common Shares. This number represents approximately ____ 5.75 %
of the total issued and outstanding Common Shares of the Registrant at that
date.
 
 At February
28 March
15 ,
2005, there were a total of 2,130 __________ record
holders of the Registrant’s Common Shares.
 
 The
Registrant is a publicly owned corporation, the Common Shares of which are owned
by Canadian residents, Australian residents, United States residents, and
residents of other countries. To the extent known to the Registrant, it is not
directly owned or controlled by another corporation, any foreign government or
any other natural or legal person(s) severally or jointly. The Registrant is not
aware of any arrangement, the operation of which may result in a change of
control of the Registrant.
  **B.**
    **Related
      Party Transactions**
 See
“ *Item
6.C. - Board Practices”* for further information.
  Other
than as disclosed here and in “ *Item
6.C. - Board Practices”* ,
there have been no material transactions in
the past three fiscal years since
December 31, 2003 to date ,
and there are no presently proposed transactions, t o
which the Registrant or any of its subsidiaries was or is to be a party, in
which any director, officer or significant shareholder of the Registrant or its
subsidiaries, or any relative or spouse of any of the foregoing persons or any
relative of such spouse who has the same home as such person, had or is to have
a direct or indirect material interest.
 
 50
 Management
believes the transactions referenced above, if any, were on terms at least as
favourable to the Registrant as the Registrant could have obtained from
unaffiliated parties.
  **C.**
    **Interests
      of Experts and Counsel**
 Not
applicable.
  **Item
8 -Financial Information**
  See
“ *Item
17 - Financial Statements”* .
 ***Legal
Proceedings***
 Except
as disclosed in “Item 4 - Information on the Company s. ”,
t  T here
is no pending, threatened or recently concluded legal or arbitration
proceedings, including those relating to bankruptcy, receivership or similar
proceedings that involve any third party, which may have, or have had in the
recent past, significant affects on the Registrant’s financial position or
profitability. This includes governmental proceedings pending or known to be
contemplated.
 
 ***Dividend
Policy***
 The
Registrant has not declared any dividend to date and has no present intention to
declare any such dividend in the foreseeable future.
 
 **Item
9 - The Offer and Listing**
 **A.**
    **Offer
      and Listing Details**
 ***Stock
Price History***
 In
recent years, securities markets in Canada and Australia have experienced a high
level of price and volume volatility, and the market price of many resource and
resource related companies, have experienced wide fluctuations in price which
have not necessarily been related to operating performance or underlying asset
values or prospects of such companies. There can be no assurance that
fluctuations in the Registrant’s share price and volume will not
occur.
 
 The
following table sets out the high and low market prices and the volume of the
Common Shares traded on the CDNX for the 2 3 years to October 4, 2001 (when the Registrant delisted its shares from the CDNX)
and on the ASX for the last 5 years to February 28, 2005.
 **Year
      Ended**
    
    **ASX
      high**
    
    **ASX
      Low**
    
    **ASX
      Volume**
    
    **CDNX
      High**
    
    **CDNX
      Low**
    
    **CDNX
      Volume**2000
    
    
    A$0.570
    
    
    A$0.130
    
    
    37,830,577
    
    $
    0.44
    
    $
    0.08
    
    
    8,856,2282001
    
    
    A$0.660
    
    
    A$0.170
    
    
    53,546,785
    
    $
    0.45
    
    $
    0.10
    
    
    5,215,7102002
    
    
    A$0.550
    
    
    A$0.097
    
    
    21,999,477
    
    
    n/a
    
    
    n/a
    
    
    n/a2003
    
    
    A$0.310
    
    
    A$0.088
    
    
    19,781,253
    
    
    n/a
    
    
    n/a
    
    
    n/a2004
    
    
    A$0.280
    
    
    A$0.060
    
    
    16,064,905
    
    
    n/a
    
    
    n/a
    
    
    n/a
 **Quarter
      Ended**March
      31, 2003
    
    
    A$0.145
    
    
    A$0.080
    
    
    754,096
    
    
    n/a
    
    
    n/a
    
    
    n/aJune
      30, 2003
    
    
    A$0.300
    
    
    A$0.088
    
    
    6,549,392
    
    
    n/a
    
    
    n/a
    
    
    n/aSeptember
      30, 2003
    
    
    A$0.200
    
    
    A$0.120
    
    
    2,491,000
    
    
    n/a
    
    
    n/a
    
    
    n/aDecember
      31, 2003
    
    
    A$0.310
    
    
    A$0.140
    
    
    10,009,645
    
    
    n/a
    
    
    n/a
    
    
    n/a
 51
 March
      31, 2004
    
    
    A$0.290
    
    
    A$0.165
    
    
    10,447,404
    
    
    n/a
    
    
    n/a
    
    
    n/aJune
      30, 2004
    
    
    A$0.190
    
    
    A$0.110
    
    
    4,556,818
    
    
    n/a
    
    
    n/a
    
    
    n/aSeptember
      30, 2004
    
    
    A$0.130
    
    
    A$0.080
    
    
    1,598,791
    
    
    n/a
    
    
    n/a
    
    
    n/aDecember
      31, 2004
    
    
    A$0.110
    
    
    A$0.065
    
    
    2,912,724
    
    
    n/a
    
    
    n/a
    
    
    n/a
   **Month
      Ended**September
      30, 2004
    
    
    A$0.100
    
    
    A$0.085
    
    
    216,440
    
    
    n/a
    
    
    n/a
    
    
    n/aOctober
      31, 2004
    
    
    A$0.095
    
    
    A$0.080
    
    
    860,400
    
    
    n/a
    
    
    n/a
    
    
    n/aNovember
      30, 2004
    
    
    A$0.090
    
    
    A$0.070
    
    
    901,343
    
    
    n/a
    
    
    n/a
    
    
    n/aDecember
      31, 2004
    
    
    A$0.110
    
    
    A$0.070
    
    
    1,150,981
    
    
    n/a
    
    
    n/a
    
    
    n/aJanuary
      31, 2005
    
    
    A$0.090
    
    
    A$0.069
    
    
    977,159
    
    
    n/a
    
    
    n/a
    
    
    n/aFebruary
      28, 2005
    
    
    A$0.070
    
    
    A$0.057
    
    
    1,046,741
    
    
    n/a
    
    
    n/a
    
    
    n/a
 **B.**
    **Plan
      of Distribution**
 Not
applicable.
 
 **C.**
    **Markets**
 The
principal trading market for the Registrant’s Common Shares is the ASX.
Effective June 6, 1997, the Registrant’s Common Shares commenced trading on the
ASX under the trading symbol “CIO”. The Registrant’s Common Shares previously
traded on the CDNX from 1996 under the symbol “CYO”. Effective May 7, 1999 the
Registrant’s Common Shares trade on the ASX under the symbol “AGY” and traded on
the CDNX under the symbol “AGY” until October 4, 2001 when the Registrant
delisted its shares from the CDNX due to a lack of trading volume.
 
 **D.**
    **Selling
      shareholders.**
 Not
applicable.
 
 **E.**
    **Dilution**
 Not
applicable.
 
 **F.**
    **Expenses
      of the Issue**
 Not
applicable.
 
 **Item
10 - Additional Information**
 **A.**
    **Share
      Capital**
 Not
applicable.
  **B.**
    **Memorandum
      and Articles of Association**
 ***Objects
and Purposes of the Company*** ******
 The
Articles of the Registrant restricts it from carrying on the business of a
railway, steamship, air transport, canal, telegraph, telephone or irrigation
corporation.
 
 ***Directors’
Powers***
 Section
2.1 of the By-laws gives directors a broad discretion to manage the affairs of
the Registrant. The directors may, from time to time on behalf of the
Registrant, borrow money in such manner and amount, on such security, from such
sources and upon such terms and conditions as they think fit, and may authorize
the guaranteeing of any obligations of any other person. Furthermore, the
directors may issue bonds, debentures and other debt obligations outright or as
security for any liability or obligation of the Registrant or other person.
Finally, the directors may mortgage, charge, whether by way of specific or
floating charge, or give other security
on the undertaking, or on the whole or any part of the property and assets of
the Registrant.
 
 52
 Section
2.2 of the By-laws provides that the quorum necessary for the transaction of the
business of the directors shall be a simple majority of directors.
 
 Section
2.3 of the By-Laws authorizes the Board to appoint one or more additional
directors between annual general meetings.
 
 Section
2.14 of the By-laws provides that the remuneration of the directors may be
determined from time to time by the directors. There are no restrictions in the
By-laws upon the directors’ power to vote compensation to themselves or any
members of their body. However ASX rules require that the total amount that can
be paid to directors for services as directors be approved by shareholders.
 
 Section
2.17 of the By-laws of the Registrant (the “By-laws”) provides that a director
who is a party to a material contract or a proposed material contract with the
Registrant or who is the director or an officer of or has a material interest in
any person who is a party to a material contract, or a proposed material
contract with the Registrant, shall disclose in writing to the Registrant or
request to have entered in the minutes of meetings of directors, the nature and
extent of his interest. All such disclosures shall be made at the time required
by the applicable provisions of the Yukon Business Corporations Act (the “Act”)
and directors shall refrain from voting in respect of the material contract or
proposed material contract if and when prohibited by the Act. Subject to the
Act, a director who is prohibited by the Act from voting on a material contract
or proposed material contract will be counted in determining whether a quorum is
present for the purpose of the resolution.
 
 The
directors of the corporation have the authority under the By-Laws to provide
financial assistance by means of loan guarantee or otherwise on account of
expenditures incurred on behalf of the corporation, to a wholly-owned subsidiary
and to employees to assist with living accommodations or share purchase plans
unless the corporation does not have the funds.
 
 The
directors have the authority under the By-Laws to appoint officers to serve at
the pleasure of the Board. The powers of the directors set forth in the By-laws and Articles can be varied
by amending the By-laws and/or Articles. Section 175 and 179 of the Act provides
that a corporation may amend its Articles by filing with the registrar of
corporations articles of amendment approved by shareholders by special
resolution. A special resolution means a resolution passed by a majority of not
less than two thirds of the votes cast by those members of a corporation who,
being entitled to do so, vote in person or by proxy at an annual or special
meeting of the corporation.
 
 ***Qualifications
of Directors***
  There
is no provision in the By-laws or Articles imposing a requirement for retirement
or non-retirement of directors under an age limit requirement.
 
 There
is no requirement for directors  to
hold a share in the capital of the Registrant as qualification for his office.
Section 106 of the Act provides that no person is qualified to act as a director
if that person is:
 (a)
    under
      the age of 19 years;
 53
 (b)
    found
      to be incapable of managing the person’s own affairs by reason of mental
      infirmity;
 (c)
    not
      an individual; or
 (d)
    a
      person who has the status of bankrupt.
  Section
102 of the Act provides that every corporation must have at least one director,
and a distributing corporation must have not less than three directors, at least
two of whom are not officers or employees of the corporation or its affiliates.
 
 Section
2.6 of the By-laws provides for the election and removal of a director. The
office of a director shall be vacated if the director (i) dies or resigns his or
her office by notice in writing delivered to the registered office of the
Registrant; or (iii) ceases to be qualified to act as a director pursuant to the
Act. Section 110 of the Act provides that the shareholders may by ordinary
resolution at a special meeting remove any director before the expiration of his
period of office, and may by an ordinary resolution appoint another person in
his or her stead.
 
 ***Share
Rights***
 All
of the authorized shares of common stock of the Registrant are of the same class
and, once
 issued,
rank equally as to dividends, voting powers, and participation in assets,
surpluses and profits and in all other respects, on liquidation, dissolution or
winding up of the Registrant, whether voluntary or involuntary, or any other
distribution of the assets of the Registrant among its shareholders for the
purpose of winding up its affairs after the Registrant has paid out its
liabilities. There are no time limits on dividend entitlement. The issued common
shares Common
Shares are
not subject to call or assessment rights or any pre-emptive or conversion
rights. The holders of Shares are entitled to one vote for each Share on all
matters to be voted on by the shareholders. There are no provisions for
redemption, purchase for cancellation, surrender or purchase funds.
 
 Changing
the rights of shareholders, where such rights are attached to an issued class or
series of shares requires amending the Articles as described in sections 175-179
of the Act and must be enacted via shareholder consent by special resolution,
defined as requiring a two-thirds majority .
 
 ***Meetings***
 The
Act provides that the Registrant must hold an annual general meeting within 18
months of incorporation or amalgamation and not more than 15 months after the
last annual general meeting was held. The Registrant must give to its
shareholders entitled to receive notice of a general meeting not less than 21
days’ and not more than 50 days’ notice of any general meeting of the
Registrant, but those shareholders may waive or reduce the period of notice for
a particular meeting by unanimous consent in writing. Section 151 of the Act
require the directors of a reporting corporation to provide concurrently with
notice of a general meeting a form of proxy for use by every shareholder
entitled to vote at such meeting. Not less than 21 days before each annual
general meeting of its shareholders the directors of the Registrant must place
comparative financial statements, made up to a date not more than 6 months
before the annual general meeting, and the report of the auditor to the
shareholders.
 
 The
Act provides that one or more shareholders of a corporation holding not less
than 5% of the issued voting shares of the corporation may requisition the
directors to call and hold a general meeting.
 
 Two
persons present in person and entitled to vote at the meeting will constitute a
quorum for a general meeting.
  Persons
entitled to attend a meeting of shareholders shall be those entitled to vote
thereat, the auditor, if any, of the Registrant and others who although not
entitled to vote are entitled or required under the provisions of the Act or
By-laws of the Registrant to be present at the meeting. Any other person may be
admitted only on the invitation of the chairman of the meeting or with the
consent of the meeting.
 
 54
 Every
shareholder, including a corporate shareholder, entitled to vote at meetings of
shareholders may by instrument in writing appoint a proxy, who need not be a
shareholder, to attend and act at the meeting in the manner and to the extent
authorized by the proxy and with the authority conferred by the
proxy.
 
 All
questions at meetings of shareholders shall be decided by the majority of the
votes cast in favour. Any question at a meeting of shareholders shall be decided
by show of hands unless a ballot thereon is requested. If a poll is required by
the chairman of the meeting or is duly demanded by a shareholder, a poll upon
the question shall be taken in the manner the chairman of the meeting directs.
In the case of an equality of votes, the chairman of the meeting will not be
entitled to a second or casting vote.
 
 ***Limitations
on Ownership of Securities***
 Except
for as described in “ *Item
10. D. - Exchange Controls”* ,
there are no limitations on the right to own securities, imposed by foreign law
or by the charter or other constituent document of the Registrant.
 
 ***Change
in Control of Corporation***
 No
provision of the Registrant’s articles of association, charter or bylaws would
have the effect of delaying, deferring, or preventing a change in control of the
Registrant, and operate only with respect to a merger, acquisition or corporate
restructuring of the Registrant or any of its subsidiaries.
 
 ***Ownership
Threshold***
 There
are no bylaw provisions governing the ownership threshold above which
shareholder ownership must be disclosed. Upon reaching 10% of the issued
capital, a shareholder is required to make disclosure of further acquisitions
under the Securities Act.
 
 ***Conditions
Governing Changes in Capital***
 There
are no conditions imposed by the By-laws or Articles of the Registrant regarding
changes in the capital that are more stringent than is required by law.
  **C.**
    **Material
      Contracts**
  **Contract**
    **Item
      Reference**
    **Exhibit
      Number**Tripartite
      Agreement between the Registrant, NNIH and SMT
    4
      B 1
    4.1Management
      Agreement with Peninsular Services Pty Ltd
    6
      C
    4.2Management
      Agreement with C.R. Bond
    6
      C
    4.3Management
      Agreement with Peninsular Services Pty Ltd
    6
      C
    4.6Management
      Agreement with 667060 BC Ltd
    6
      C
    4.7
   55
 ***Tripartite
Agreement***
 Under
the Tripartite Agreement signed October 16, 2001 between the Registrant, NNIH
and SMT, NNIH was required to fund and complete a bankable feasibility study on
the New Caledonia Nickel Project. NNIH refunded an agreed portion of the
Registrant’s costs of the New Caledonia Nickel Project which totalled US$7.166
million. Upon completion of the bankable feasibility study, NNIH would have held
45% of the New Caledonia Nickel Project, the Registrant would have held 45% and
SMT would have held 10%. NNIH had the option to increase its holdings to 70% by
paying the Registrant US$17.5 million and providing funding guarantees. NNIH
could then purchase the Registrant’s remaining 20% for consideration of US$12.5
million plus an agreed 20% of the Net Present Value of the New Caledonia Nickel
Project. The Agreement was terminated by NNIH on August 5, 2002.
 
 ***Management
Agreements with Peninsular Services Pty Ltd***
 Effective
January 1, 2000, pursuant to an agreement between Peninsular Services Pty Ltd
(“Peninsular”), a corporation controlled by Peter H. Lloyd, and the Registrant,
Peninsular provided management and consulting services of Mr. Peter H. Lloyd,
for consideration of A$200,000 per year. Effective November 1, 2001 the
consideration payable was increased to A$250,000 per year. In addition,
Peninsular provided personnel and secretarial services in Australia, which
amounted to a consideration of approximately A$32,530
for the 2 month period ended February 2004. Following the termination of
Peninsular’s Management Contract, Mr. Lloyd has continued to provide services to
the Corporation Registrant on
a full time basis, primarily dealing
with amongst
other things, the
arbitration initiated by NNIH, without compensation, except for fees paid to
non-executive directors. Fees paid to each non-executive director consists of
quarterly payments not exceeding $25,000 per annum.
  ***Management
Agreements with C.R. Bond***
 Pursuant
to an agreement dated September 1, 1996, last amended effective April 8, 1998,
between the Registrant and CRBC,
CRBC provided financial and corporate management services to the Registrant in
consideration of $75,000 per year. In addition, Mr. Bond was paid $52,680 per
year pursuant to an agreement dated September 1, 1996, last amended effective
September 22, 1998, between AMC and CRBC for services provided to AMC. Effective
November 1, 2001, the fees payable to CRBC by the Registrant and its
subsidiaries were set at A$175,000 per year. Effective July, 2003, pursuant to
an agreement between 667060 and the Registrant, 667060 provided management and
consulting services for consideration of A$175,000 per year. In addition, 667060
provides personnel and office facilities in Canada, which amounted to a
consideration of $85,464 for the year ended December 31, 2004. Mr. Bond devotes
approximately 90% of his time to the Registrant.
 
 ***Principals’
Escrow Shares***
 As
a condition of the approval by the CDNX of the acquisition of Andover by AMC,
certain shareholders of Andover were required to deposit a total of 3,563,280
Andover shares into escrow. Pursuant to the acquisition of Andover, AMC issued 4
new AMC shares for each Andover share held, resulting in 14,253,120 AMC shares
being held in escrow (the “Escrow Shares”). The Escrow Shares are eligible for
release on the basis of 1/7 th being released on the date of issue, being March 9, 1999 and a further
1/7 th on the annual anniversary of such issue. At March 31, 1999, 2,036,160 of the
Escrow Shares had been released from escrow leaving a total of 12,216,960 AMC
shares subject to escrow, which, pursuant to the Plan, were exchanged for 7,330,177
shares in the Registrant and are subject to release on the same basis. As of
March 8, 2005 there are no shares of the Registrant subject to escrow.
 
 56
 **D.**
    **Exchange
      Controls**
 There
are no governmental laws, decrees or regulations in Canada relating to
restrictions on the export or import of capital, or affecting the remittance of
interest, dividends or other payments to non-resident holders of the
Registrant’s Common Shares. Any remittances of dividends to United States
residents are, however, subject to a 15% withholding tax (5% if the shareholder
is a corporation owning at least 10% of the outstanding Common Shares of the
Registrant) pursuant to Article X of the reciprocal tax treaty between Canada
and the United States. See “ *Item
10. E. - Taxation”* .
 
 Except
as provided in the *Investment
Canada Act* (“ICA”),
there are no limitations under the laws of Canada, the Province of British
Columbia or in the charter or any other constituent documents of the Registrant
on the right of foreigners to hold or vote the Common Shares of the
Registrant.
 
 The
ICA *,* which
became effective on June 30, 1985, requires a non-Canadian making an investment
to acquire control, directly or indirectly, of a Canadian business, to file a
notification or an application for review with Investment Canada. An application
for review must be filed if the investor is not a citizen or resident of a World
Trade Organization member country, and the investment is over $50,000,000 or, if
the investor is a citizen or resident of a World Trade Organization member
country and the investment is over $2 37 50 ,000,000.
For all acquisitions of a Canadian business which do not meet the threshold
criteria for filing an application for review, the ICA requires the investor to
file a notification.
 
 The
provisions of the ICA are complex, and the above is a limited summary of the
main provisions of the ICA. Any non-Canadian citizen contemplating an investment
to acquire control of the Registrant should consult professional advisors as to
whether and how the ICA might apply.
 
 For
purposes of the ICA, direct acquisition of control means a purchase of the
voting interests of a corporation, partnership, joint venture or trust carrying
on a Canadian business, or any purchase of all or substantially all of the
assets used in carrying on a Canadian business. An indirect acquisition of
control means a purchase of the voting interest of a corporation, partnership,
joint venture or trust, whether a Canadian or foreign entity, which controls a
corporation, partnership, joint venture or trust company carrying on a Canadian
business in Canada.
 
 **E.**
    **Taxation******
 
 ***Canadian
Federal Income Tax Consequences***
 The
following is a summary of the material Canadian federal income tax
considerations generally applicable to U.S. holders of the Registrant’s Common
Shares.
 
 The
tax consequences to any particular holder of Common Shares will vary according
to the status of that shareholder as either an individual, trust, corporation or
member of a partnership, the jurisdiction in which the shareholder is subject to
taxation, the place of residence of the shareholder and, generally, the
shareholder’s particular circumstances.
 57
  This
summary is applicable to only those shareholders who are resident in the United
States, have never been resident in Canada, deal at arm’s length with the
Registrant, hold their Common Shares as capital property, and who will not use
or hold the Common Shares in carrying on business in Canada. Special rules not
discussed in this summary may apply to a U.S. shareholder that is an issuer
carrying on business in Canada and elsewhere.
 
 This
summary is based upon the provisions of the *Income
Tax Act* of Canada and the regulations thereunder (collectively, either the
“Tax **** Act”
or “ITA”), the *Canada-United
States Tax Convention* current at the date of this Annual Report ** (the
“Tax **** Convention”),
and the current administrative practices of the Canada Customs
and Revenue
Agency. This summary does not take into account provincial income tax
consequences.
 
 This
summary is not exhaustive of all possible income tax consequences. It is not
intended as legal or tax advice to any particular shareholder and should not be
so construed. Each shareholder should consult his or her own tax advisor with
respect to the income tax consequences applicable in that shareholder’s own
particular circumstances.
 
 *Dividends*
 Pursuant
to the *Tax
Convention* ,
any dividends paid to non-resident shareholders of the Registrant, will
generally be subject to Canadian withholding tax (“Part XIII Tax”) equal to 15%
of the gross amount of any dividend paid or deemed to be paid to the
non-resident shareholder on his or her shares. The Registrant will be required
to withhold the applicable amount of Part XIII Tax from each dividend so paid
and remit the withheld amount directly to the Receiver General of Canada for the
account of the non-resident shareholder. By virtue of Article X of the *Tax
Convention* ,
the rate of tax on dividends paid to U.S. resident shareholders is generally
limited to 15% of the gross dividend (or 5% in the case of certain corporate
shareholders owning at least 10% of the Registrant’s voting shares). In the
absence of the treaty provisions, the rate of Canadian withholding tax imposed
on non-resident shareholders is 25% of the gross dividend.
 
 In
addition, under the *Tax
Convention* ,
dividends may be exempt from Canadian withholding tax if paid to certain US
residents that are qualifying religious, scientific, literary, educational or
charitable tax-exempt organization and qualifying trusts, companies,
organization or arrangements operated exclusively to adminster or provide
pension, retirement or employee benefits that are exempt from tax in the United
States and that have complied with specific administrative procedures.
 
 *Disposition
of Common Shares*
 A
non-resident of Canada who disposes of a share, including by deemed disposition
on death, will generally not be subject to Canadian tax under the ITA in respect
of any capital gains (or be entitled to deduct any capital loss) thereby
realized upon the disposition of Common Shares listed on a prescribed stock
exchange unless the shares represent ‘taxable Canadian property’ (as defined by
the Act) to the shareholder. A Common Share of the Registrant will be deemed to
be taxable Canadian property to a non-resident shareholder if, at any time
during the five years preceding the disposition, the non-resident shareholder,
persons with whom the non-resident shareholder did not deal at arm’s length, or
the non-resident shareholder and persons with whom he/she did not deal at arm’s
length, owned 25% or more of the issued Common Shares of the Registrant. In the
case of a non-resident holder to whom Common Shares of the Registrant represent
‘taxable Canadian property’ and who is a U.S. resident (under the terms of the
Tax Convention),
generally no Canadian tax is payable on a capital gain realized on such shares
by reason of the *Tax
Convention* unless the value of such shares is derived principally from real property
located in Canada or the U.S. shareholder previously held the shares while
resident in Canada.
 
 58
 If
a non-resident shareholder disposes of the Registrant’s Common Shares to another
Canadian corporation which deals or is deemed to deal on a non-arm’s length
basis with that shareholder and which, immediately after the disposition, is
connected with the Registrant (i.e., holds 10% or more of the voting rights and
market value of the Registrant’s Common Shares), the amount by which the fair
market value of any consideration (other than shares of the purchasing
corporation) exceeds the paid-up capital for the Common Shares sold will be
deemed to be taxable as a dividend paid by the purchasing corporation and
subject to withholding taxes as described above.
 
 Where
a shareholder disposes of Common Shares to the Registrant (unless the Registrant
acquired the shares in the open market in like manner to any member of the
public) the result will be a deemed dividend to the U.S. shareholder equal to
the amount by which the consideration paid by the Registrant exceeds the paid-up
capital of the Common Shares. The amount of such dividend will be subject to
withholding tax as previously described.
 
 ***Material
Australian Income Tax Consequences***
 Management
of the Registrant believes that the following general summary fairly describes
the principal Australian income tax consequences applicable to a holder of
Common Shares of the Registrant who is a resident of the United States and who
is not a resident of Australia and who does not use or hold, and is not deemed
to use or hold, his Common Shares of the Registrant in connection with carrying
on a business in Australia (a “non-resident shareholder”).
 
 This
summary is based upon the current provisions of the *Income
Tax Assessment Acts 1936 and 1997* (Australia) (the “ITAA”), the regulations thereunder (the “Regulations”), the
current publicly announced administrative and assessing policies of the
Australian Taxation Office, and all specific proposals (the “Tax Proposals”) to
amend the ITAA and Regulations announced by the Treasurer (Australia) prior to
the date hereof. This description is not exhaustive of all possible Australian
federal income tax consequences and, except for the Tax Proposals, does not take
into account or anticipate any changes in law, whether by legislative,
governmental or judicial action, nor does it take into account provincial or
foreign tax considerations which may differ significantly from those discussed
herein. The holders and prospective holders of Common Shares of the Registrant
should consult with their own tax advisors about the federal, provincial and
foreign tax consequences of purchasing, owning and disposing of Common Shares of
the Registrant in light of their particular tax circumstances.
  *Dividends*
 Dividends
received by the Registrant from its Australian subsidiary which are paid from
profits which have borne Australian company tax (“franked dividends”) are not
subject to Australian withholding tax. Unfranked dividends (which are paid from
profits which have not borne Australian company tax) paid by the Australian
subsidiary to the Registrant will be subject to a withholding tax in Australia.
Where the Registrant is a US resident corporation with at least a 10%
shareholding, the withholding rate will reduce to 5% . for
dividends derived on or after 13 July 2003 (in terms of the entering into force
on 12 May 2003 of the protocol to amend the Double Tax Agreement between
Australia and the US).
 *59*
 *Disposal
of shares*
 A
non-resident of Australia will only be subject to Australian capital gains tax
on the disposal of an asset if it has the “necessary connection with Australia”.
As the Registrant is not an Australian resident public company, as defined by
the ITAA, there will not be this necessary connection and the non-resident
shareholders of the Registrant will not be subject to Australian capital gains
tax on the disposal of their Common Shares in the Registrant.
 
 An
exception is noted where a non-resident realizes a profit or gain which
represents income attributable to a business of the shareholder carried on in
Australia through a “permanent establishment” as defined in the Australia/US
Double Tax Agreement. In this instance, a non-resident of Australia may be
subject to tax in respect of that profit or gain.
 
 ***U.S.
Federal Income Tax Consequences***
 The
following is a general discussion of certain possible U.S. federal income tax
consequences, under current law, generally applicable to a U.S. Holder (as
hereinafter defined) of shares in the Registrant. This discussion is of a
general nature only and
does not take into account the particular facts and circumstances, with respect
to U.S. federal income tax issues, of any particular U.S. Holder. In
addition, this discussion does not cover any state, local or foreign tax
consequences. (See “Taxation--Canadian Federal Income Tax Consequences”
above).
 
 The
following discussion is based upon the sections of the Internal Revenue Code of
1986, as amended (“Code”), Treasury Regulations, published Internal Revenue
Service (“IRS”) rulings, published administrative positions of the IRS and court
decisions that are currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time and which
are subject to differing interpretations. This discussion does not consider the
potential effects, both adverse and beneficial, of any proposed legislation
which, if enacted, could be applied, possibly on a retroactive basis, at any
time.
 
 **This
discussion is for general information only and it is not intended to be, nor
should it be construed to be, legal or tax advice to any U.S. Holder or
prospective U.S. Holder of shares issued by the Registrant, and no opinion or
representation with respect to the U.S. federal income tax consequences to any
such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders
and prospective U.S. Holders of** **common
shares** **Common
Shares** **issued
by the Registrant should consult their own financial advisor, legal counsel or
accountant regarding the U.S. federal, state, local and foreign tax consequences
of purchasing, owning and disposing of shares issued by the
Registrant.**
 
 *U.S.
Holders.*
 As
used herein, a “U.S. Holder” means a holder of c C ommon S s hares
issued by the Registrant who is (i) a citizen or individual resident of the
U.S., (ii) a corporation created or organized in or under the laws of the U.S.
or of any political subdivision thereof, (iii) an estate whose income is taxable
in the U.S. irrespective of source or (iv) a trust subject to the primary
supervision of a court within the U.S. and control of a U.S. fiduciary as
described Section 7701(a)(30) of the Code. If a partnership or other
“pass-through” entity treated as a partnership for U.S. federal income tax
purposes holds shares issued by the Registrant, the U.S. federal income tax
treatment of the partners or owners of such partnership or other pass-through
entity generally will depend on the status of such partners or owners and the nature
and activities
of such partnership or pass-through entity.
 
 60
  *Persons
Not Covered.*
 This
summary does not address the U.S. federal income tax consequences to persons
(including persons who are U.S. Holders) subject to special provisions of U.S.
federal income tax law, including but not limited to (i) persons who are
tax-exempt organizations, qualified retirement plans, individual retirement
accounts and other tax-deferred accounts, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies, or
brokers, dealers or traders in securities, (ii) persons who have a “functional
currency” other than the U.S. dollar, (iii) persons subject to the alternative
minimum tax, (xi) persons who own their c C ommon s S hares
as part of a straddle, hedging, conversion transaction, constructive sale or
other arrangement involving more than one position, (iv) persons who acquired
their c C ommon S s hares
through the exercise of employee stock options or otherwise as compensation for
services, (v) persons that own an interest in an entity that owns c C ommon s S hares,
(vi) persons who own, exercise or dispose of any options, warrants or other
rights to acquire c C ommon s S hares,
(vii) persons who are partners or owners of partnerships or other pass-through
entities or (viii) persons who own their c C ommon s S hares
other than as a capital asset within the meaning of Section 1221 of the
Code.
  *Distributions
Made by the Registrant to U.S. Holders.*
 *General
Rules* .
U.S. Holders receiving distributions (including constructive distributions) with
respect to common
shares Common
Shares issued
by the Registrant are required to include in gross income as a dividend for U.S.
federal income tax purposes the gross amount of such distributions (without
reduction for any Canadian income tax withheld from such distributions), equal
to the U.S. dollar value of such distributions on the date of receipt (based on
the exchange rate on such date), to the extent that the Registrant has current
or accumulated earnings and profits. To the extent that distributions from the
Registrant exceed its current and accumulated earnings and profits, such
distributions will be treated first as a return of capital, to the extent of the
U.S. Holder’s adjusted basis in the shares, and thereafter as gain from the sale
or exchange of the shares. (See more detailed discussion at “Disposition of
Shares” below). Any Canadian tax withheld from a distribution by the Registrant
may be credited, subject to certain limitations, against the U.S. Holder’s U.S.
federal income tax liability or, alternatively, may be deducted in computing the
U.S. Holder's U.S. federal taxable income by those who itemize deductions. (See
more detailed discussion at “Foreign Tax Credit” below).
 
 *Currency
Gain or Loss* .
In the case of foreign currency received as a distribution that is not converted
by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will
have a tax basis in the foreign currency equal to its U.S. dollar value on the
date of receipt. Generally any gain or loss recognized upon a subsequent sale or
other disposition of the foreign currency, including the exchange for U.S.
dollars, will be ordinary income or loss. However, an individual whose realized
gain does not exceed $200 will not recognize that gain, to the extent that there
are no expenses associated with the transaction that meet the requirements for
deductibility as a trade or business expense (other than travel expenses in
connection with a business trip) or as an expense for the production of
income.
 
 *Dividend
not Eligible for Reduced Tax Rate* .
For taxable years beginning after December 31, 2002 and before January 1, 2009,
dividends received by U.S. Holders that are individuals, estates or trusts from
“qualified foreign corporations,” as defined in Section 1(h)(11) of the Code,
generally are taxed at the same preferential tax rates applicable to long-term
capital gains. Although not free from doubt, it appears that the Registrant
would be a “qualified foreign corporation,” as defined in Section 1(h)(11) of
the Code pursuant to the U.S. Canada income tax treaty
if the Registrant was not a Passive Foreign Investment Company (“PFIC”). A
corporation that is properly described as a PFIC, Foreign
Personal Holding Company (defined below), or
a Foreign Investment Company (defined below) with respect to a specific US holder for its taxable year during which it pays a dividend, or for its immediately
preceding taxable year, will not be treated as a “qualifying foreign
corporation” and dividends received by U.S. Holders that are individuals,
estates or trusts generally will be subject to U.S. federal income tax at
ordinary income tax rates (and not at the preferential tax rates applicable to
long-term capital gains).
 
 61
 *Dividends
not Eligible for Dividends Received Deduction* .
Dividends paid by the Registrant generally will not be eligible for the
“dividends received deduction” allowed to corporate shareholders receiving
dividends from certain U.S. corporations. Under certain circumstances, a U.S.
Holder that is a corporation and that owns shares representing at least 10% of
the total voting power and the total value of shares issued by the Registrant
may be entitled to a 70% deduction of the “U.S. source” portion of dividends received from the Registrant
(unless the Registrant qualifies as a “Foreign Personal Holding Company” or a
“PFIC” as defined below). The availability of the dividends received deduction
is subject to several complex limitations that are beyond the scope of this
discussion, and U.S. Holders of shares issued by the Registrant should consult
their own financial advisor, legal counsel or accountant regarding the dividends
received deduction.
 
 *Dividend
Paid to Shareholder who Made QEF Election may be Exempt from
Tax* .
Generally, shareholders are not subject to additional income taxation on
distributions made by a PFIC to the extent of the shareholder’s basis in the
corporation’s shares if a Qualified Electing Fund (“QEF”) election is in effect.
(Please see the QEF election discussion below.) A shareholder’s basis in this
situation is usually equal to the cost of purchasing the shares plus the amount
of the corporation’s income that was reported on the shareholder’s return
pursuant to the QEF election less any prior distributions made by the
corporation to the shareholder. Again, these rules are subject to several
exceptions that are beyond the scope of this discussion, and U.S. Holders of
shares issued by the Registrant should consult their own financial advisor,
legal counsel or accountant regarding whether dividends paid by the Registrant
to them will be exempt from federal income tax if a QEF election is
made.
  *Disposition
of Shares.*
 General
Rule .
A U.S. Holder will recognize gain or loss upon the sale or other taxable
disposition of shares issued by the Registrant equal to the difference, if any,
between (i) the amount of cash plus the fair market value of any property
received, and (ii) the shareholder’s tax basis in the shares. This gain or
loss will be capital gain or loss if the common
shares Common
Shares are
a capital asset in the hands of the U.S. Holder, which will be long-term capital
gain or loss if the shares are held for more than one year.
 
 Reduced
Tax Rate .
Preferential tax rates apply to long-term capital gains of U.S. Holders that are
individuals, estates or trusts. There are currently no preferential tax rates
for long-term capital gains for a U.S. Holder that is a corporation (other than
a corporation subject to Subchapter S of the Code). Deductions for net capital
losses are subject to significant limitations. For U.S. Holders that are not
corporations, any unused portion of such net capital loss may be carried over to
be used in later tax years until such net capital loss is thereby exhausted. For
U.S. Holders that are corporations (other than corporations subject to
Subchapter S of the Code), an unused net capital loss may be carried back three
years and carried forward five years from the loss year to be offset against
capital gains until such net capital loss is thereby exhausted.
Sales of PFIC stock are not eligible for the reduced long-term capital gains
rates that are usually applicable to sales of stock unless the shareholder made
a QEF election regarding such shares. As discussed below, the Registrant
believes it is a PFIC.
 
 62
 *Management
Believes Company is a Passive Foreign Investment Company.*
 *General
Discussion* .
Management of the Registrant believes it qualifies as a PFIC, within the meaning
of Sections 1291 through 1298 of the Code, for the fiscal year ended October December 31, 2003 2004 ,
may have qualified as a PFIC in prior years and may qualify as a PFIC in
subsequent years. A U.S. Holder who holds stock in a foreign corporation during
any year in which such corporation qualifies as a PFIC is subject to numerous
special U.S. federal income taxation rules and may elect to be taxed under two
alternative tax regimes. The following is a discussion of these three sets of
special rules applied to U.S. Holders of shares issued by the Registrant. In
addition, special rules apply if a foreign corporation qualifies as both a PFIC
and a “controlled foreign corporation” (as defined below) and a U.S. Holder
owns, actually or constructively, 10 % or more of the total combined voting
power of all classes of stock entitled to vote of such foreign corporation
(See more detailed discussion at “Controlled Foreign Corporation”
below).
 
 *Definition
of PFIC* .
Section 1297 of the Code defines a PFIC as a corporation that is not formed in
the U.S. and, for any taxable year, either (a) 75% or more of its gross income
is “passive income” or (b) the average percentage, by fair market value (or, if
the corporation is not publicly traded and either is a controlled foreign
corporation or makes an election, by adjusted tax basis), of its assets that
produce or are held for the production of “passive income” is 50% or more.
“Passive income” includes, for example, dividends, interest, certain rents and
royalties, certain gains from the sale of stock and securities, and certain
gains from commodities transactions. However, gains resulting from commodities
transactions are generally excluded from the definition of passive income if
“substantially all” of a merchant’s, producer’s or handler’s business is as an
active merchant, producer or handler of such commodities. For purposes of the
PFIC income test and the assets test, if a foreign corporation owns (directly or
indirectly) at least 25% by value of the stock of another corporation, such
foreign corporation shall be treated as if it (a) held a proportionate share of
the assets of such other corporation, and (b) received directly its
proportionate share of the income of such other corporation. Also, for purposes
of such PFIC tests, passive income does not include any interest, dividends,
rents or royalties that are received or accrued from a “related” person to the
extent such amount is properly allocable to the income of such related person
which is not passive income. For these purposes, a person is related with
respect to a foreign corporation if such person “controls” the foreign
corporation or is controlled by the foreign corporation or by the same persons
that control the foreign corporation. For these purposes, “control” means
ownership, directly or indirectly, of stock possessing more than 50% of the
total voting power of all classes of stock entitled to vote or of the total
value of stock of a corporation. As stated above, management of the Registrant
believes it satisfied both the 75% passive income and the 50% passive assets
tests during the fiscal year ended on October December 31,
2003 and anticipates meeting both of these tests in the fiscal year that will
end on October December 31,
2004. This determination is not binding on U.S. Holders or the IRS and there can
be no assurance that the IRS will not challenge this determination.
 
 *Generally
Applicable PFIC Rules* .
If a U.S. Holder does not make a timely election to be taxed in conformity with
the Mark-to-Market rules or the QEF rules during a year in which it holds (or is
deemed to have held) shares issued by the Registrant while it is a PFIC (a
“Non-Electing U.S. Holder”), then special taxation rules under Section 1291 of
the Code will apply to (i) gains realized on the disposition (or deemed to
be realized by reasons of a pledge) of his common
shares Common Shares and
(ii) certain “excess distributions” (generally, distributions received in
the current taxable year that are in excess of 125% of the average distributions
received during the three preceding years or, if shorter, the U.S. Holder’s
holding period) by the Registrant.
 
 63
 A
Non-Electing U.S. Holder generally would be required to pro rate all gains
realized on the disposition of his common
shares Common
Shares and
all excess distributions on his common
shares Common
Shares over
the entire holding period for the common shares. All gains or excess
distributions allocated to prior years of the U.S. Holder (other than years
prior to the Registrant’s first taxable year during such U.S. Holder’s holding
period and beginning after January 1, 1987 for which the Registrant was a
PFIC) would be taxed at the highest tax rate for each such prior year applicable
to ordinary income. The Non-Electing U.S. Holder also would be liable for
interest on the foregoing tax liability for each such prior year calculated as
if such liability had been due with respect to each such prior year. A
Non-Electing U.S. Holder that is not a corporation must treat this interest
charge as “personal interest” which, as discussed above, is wholly
nondeductible. The balance of the gain or the excess distribution will be
treated as ordinary income in the year of the disposition or distribution, and
no interest charge will be incurred with respect to such balance.
 
 If
the Registrant is a PFIC for any taxable year during which a Non-Electing U.S.
Holder holds shares issued by the Registrant, then it will continue to be
treated as a PFIC with respect to such common shares, even if it ceases meeting
the definition of a PFIC. A Non-Electing U.S. Holder may terminate this deemed
PFIC status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common
shares Common
Shares had
been sold on the last day of the last taxable year for which it was a
PFIC.
 
 *Market-to-Market
Election* .
Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S.
Holders who hold, actually or constructively, marketable stock (as specifically
defined in the Treasury Regulations) of a foreign corporation that qualifies as
a PFIC may annually elect to mark such stock to the market (a “mark-to-market
election”). If such an election is made, such U.S. Holder will generally not be
subject to the special taxation rules of Section 1291 discussed above. However,
if the mark-to-market election is made by a Non-Electing U.S. Holder after the
beginning of the holding period for the PFIC stock, then the Section 1291 rules
will apply to certain dispositions of, distributions on and other amounts
taxable with respect to the Registrant’s common shares. A U.S. Holder who makes
the mark-to market election will include in income for the taxable year for
which the election was made an amount equal to the excess, if any, of the fair
market value of the Registrant’s common
shares Common
Shares as
of the close of such tax year over such U.S. Holder’s adjusted basis in such
common shares. In addition, the U.S. Holder is allowed a deduction for the
lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis
in the common
shares Common
Shares over
the fair market value of such shares as of the close of the tax year, or
(ii) the excess, if any, of (A) the mark-to-market gains for the
Registrant’s shares included by such U.S. Holder for prior tax years, including
any amount which would have been included for any prior tax year but for the
Section 1291 interest on tax deferral rules discussed above with respect to
Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares
that were allowed as deductions for prior tax years. A U.S. Holder’s adjusted
tax basis in his shares will be adjusted to reflect the amount included in or
deducted from income as a result of a mark-to-market election. A mark-to-market
election applies to the taxable year in which the election is made and to each
subsequent taxable year, unless the shares cease to be marketable, as
specifically defined, or the IRS consents to revocation of the
election.
 
 
 64
 
 *QEF
Election* .
A U.S. Holder who makes a timely QEF election (an “Electing U.S. Holder”)
regarding his shares issued by the Registrant will be subject, under Section
1293 of the Code, to current U.S. federal income tax for any taxable year in
which the Registrant qualifies as a PFIC on his pro rata share of the
Registrant’s (i) “net capital gain” (the excess of net long-term capital gain
over net short-term capital loss), which will be taxed as long-term capital gain
to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings
and profits over net capital gain), which will be taxed as ordinary income to
the Electing U.S. Holder, in each case, for the shareholder’s taxable year in
which (or with which) the Registrant’s taxable year ends, regardless of whether
such amounts are actually distributed.
 
 The
effective QEF election also allows the Electing U.S. Holder to
(i) generally treat any gain realized on the disposition of his common
shares Common
Shares (or
deemed to be realized on the pledge of his shares) as capital gain;
(ii) treat his share of the Registrant’s net capital gain, if any, as
long-term capital gain instead of ordinary income; and (iii) either avoid
interest charges resulting from PFIC status altogether, or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his share of the Registrant’s annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the Electing U.S. Holder is
not a corporation, such an interest charge would be treated as “personal
interest” that is not deductible.
 
 The
procedure a U.S. Holder must comply with in making an effective QEF election,
and the U.S. federal income tax consequences of the QEF election, will depend on
whether the year of the election is the first year in the U.S. Holder’s holding
period in which the Registrant is a PFIC. If the U.S. Holder makes a QEF
election in such first year, *i.e.,* a
timely QEF election, then the U.S. Holder may make the QEF election by simply
filing the appropriate QEF election documents at the time the U.S. Holder files
his tax return for such first year. However, if the Registrant qualified as a
PFIC in a prior year, then in addition to filing the QEF election documents, the
U.S. Holder must elect to recognize (i) under the rules of Section 1291 of
the Code (discussed herein), any gain that he would otherwise recognize if the
U.S. Holder sold his stock on the qualification date or (ii) if the
Registrant is a controlled foreign corporation, the U.S. Holder’s pro rata share
of the Registrant’s post-1986 earnings and profits as of the qualification date.
The qualification date is the first day of the Registrant’s first tax year in
which the Registrant qualified as a QEF with respect to such U.S. Holder. The
elections to recognize such gain or earnings and profits can only be made if
such U.S. Holder’s holding period for the shares includes the qualification
date. By electing to recognize such gain or earnings and profits, the U.S.
Holder will be deemed to have made a timely QEF election. A U.S. Holder who made
elections to recognize gain or earnings and profits after May 1, 1992 and
before January 27, 1997 may, under certain circumstances, elect to change
such U.S. Holder’s qualification date to the first day of the first QEF year.
U.S. Holders are urged to consult a tax advisor regarding the availability of
and procedure for electing to recognize gain or earnings and profits under the
foregoing rules. In addition to the above rules, under very limited
circumstances, a U.S. Holder may make a retroactive QEF election if such U.S.
Holder failed to file the QEF election documents in a timely
manner.
 
 A
QEF election, once made with respect to the Registrant, applies to the tax year
for which it was made and to all subsequent tax years, unless the election is
invalidated or terminated, or the IRS consents to revocation of the election. If
a QEF election is made by a U.S. Holder and the Registrant ceases to qualify as
a PFIC in a subsequent tax year, the QEF election will remain in effect,
although not applicable, during those tax years in which the Registrant does not
qualify as a PFIC. Therefore, if the Registrant again qualifies as a PFIC in a
subsequent tax year, the QEF election will be effective and the U.S. Holder will
be subject to the rules described above for Electing
U.S. Holders in such tax year and any subsequent tax years in which the
Registrant qualifies as a PFIC. In addition, the QEF election remains in effect,
although not applicable, with respect to an Electing U.S. Holder even after such
U.S. Holder disposes of all of his or its direct and indirect interest in the
Registrant’s shares. Therefore, if such U.S. Holder reacquires an interest in
the Registrant, that U.S. Holder will be subject to the rules described above
for Electing U.S. Holders for each tax year in which the Registrant qualifies as
a PFIC.
 
 65
 Generally,
shareholders do not make a QEF election unless they have sufficient information
to determine their proportionate shares of a corporation’s net capital gain and
ordinary earnings. The Registrant has not calculated these amounts for any
shareholder and do es not anticipate making these calculations in the foreseeable future. Therefore,
U.S. Holders of the Registrant’s common
shares Common
Shares should
consult their own financial advisor, legal counsel or accountant regarding the
QEF election before making this election.
 
 *Other
PFIC Rules* .
Under Section 1291(f) of the Code, the IRS has issued Proposed Treasury
Regulations that, subject to certain exceptions, would treat as taxable certain
transfers of PFIC stock by Non-Electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. Generally, in such cases the basis of shares in the
hands of the transferee and the basis of any property received in the exchange
for those shares would be increased by the amount of gain recognized. However,
the specific U.S. federal income tax consequences to the U.S. Holder and the
transferee may vary based on the manner in which the common
shares Common
Shares are
transferred.
 
 Certain
special, generally adverse, rules will apply with respect to shares issued by
the Registrant while it is a PFIC whether or not it is treated as a QEF. For
example under Section 1298(b)(6) of the Code, a U.S. Holder who uses PFIC stock
as security for a loan (including a margin loan) will, except as may be provided
in regulations, be treated as having made a taxable disposition of such
shares.
 
 **The
PFIC rules are very complicated, and U.S. Holders should consult their own
financial advisor, legal counsel or accountant regarding the PFIC rules,
including the advisability of and procedure for making a QEF election or a
mark-to-mark election, and how these rules may impact their U.S. federal income
tax situation.**
 
 *Foreign
Tax Credit.*
 A
U.S. Holder who pays (or has withheld from distributions) Canadian or other
foreign income tax with respect to the ownership of shares issued by the
Registrant may be entitled, at the option of the U.S. Holder, to either receive
a deduction or a tax credit for U.S. federal income tax purposes with respect to
such foreign tax paid or withheld. Generally, it will be more advantageous to
claim a credit because a credit reduces U.S. federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income
subject to U.S. federal income tax. This election is made on a year-by-year
basis and applies to all foreign taxes paid by (or withheld from distributions
to) the U.S. Holder during that year.
 
 There
are significant and complex limitations that apply to the foreign tax credit,
among which is the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S.
Holder’s “foreign source” income bears to his or its worldwide taxable income.
In applying this limitation, the various items of income and deduction must be
classified as either “foreign source” or “U.S. source.” Complex rules govern this
classification process. In
addition, For
taxable years beginning before January 1, 2007, this
limitation is calculated separately with respect to nine specific
classes of income such as “passive income,” “high withholding tax interest,”
“financial services income,” “shipping income,” and certain other
classifications of income. If
the Registrant is not a “United States” owned foreign corporation D d ividends
distributed by the Registrant will generally constitute “foreign source” income,
and will be classified as “passive income” or, in the case of certain U.S.
Holders, “financial services income” for these purposes.
 
 66
 Pursuant
to recently enacted legislation, for taxable years beginning after December31,
2006 the number of specific classes of income has been reduced from nine classes
to two classes - “passive income” and “general income”. Dividends paid on the
Common Shares generally will be treated as “passive” (or possibly “general”)
income.
 
 If
and for so long as, the Registrant is a United States-owned foreign corporation,
dividends paid by the Registrant on the Common Shares may, subject to certain
exceptions, instead be treated for United States foreign tax credit purposes as
partly foreign source “passive” (or possibly “financial services”) income (for
taxable years beginning before January 1, 2007) or “passive” (or possibly
“general”) income (for taxable years beginning after December 31, 2006), and
partly United States-source income, in proportion to the earnings and profits of
the Registrant in the year of such distribution allocable toforeign and United
States sources, respectively. The US Holder may elect to treat the United States
source income as foreign source income. The Registrant will be treated as a
United States-owned foreign corporation if stock representing 50% or more of the
voting power orvalue of the stock of the Registrant is held, directly or
indirectly, by US holders. No assurance can be given as to whether the
Registrant is or will become a United-States-owned foreign corporation.
 
 In
addition, U.S. Holders that are corporations and that own 10% or more of the
Registrant’s voting stock may be entitled to an “indirect” foreign tax credit
under Section 902 of the Code with respect to the payment of dividends by the
Registrant under certain circumstances and subject to complex rules and
limitations. **The availability of the foreign tax credit and the application of the
limitations with respect to the foreign tax credit are fact specific, and each
U.S. Holder of** **common
shares** **Common
Shares** **issued
by the Registrant should consult their own financial advisor, legal counsel or
accountant regarding the foreign tax credit rules.**
 
 *Information
Reporting; Backup Withholding.*
 Certain
information reporting and backup withholding rules may apply with respect to
certain payments related to shares issued by the Registrant. In particular, a
payor or middleman within the U.S., or in certain cases outside the U.S., will
be required to withhold 28% (which rate is scheduled for periodic adjustment) of
any payments to a U.S. Holder regarding dividends paid by the Registrant, or
proceeds from the sale of, such common
shares Common
Shares within
the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification
number (generally on Form W-9) or otherwise fails to comply with, or establish
an exemption from, the backup withholding tax requirements. Any amounts withheld
under the U.S. backup withholding tax rules will be allowed as a refund or a
credit against the U.S. Holder’s U.S. federal income tax liability, provided the
required information is furnished to the IRS. **U.S.
Holders should consult their own financial advisor, legal counsel or accountant
regarding the information reporting and backup withholding rules applicable to
the Registrant’s shares.**
 
 
 67
 
  *Other
Considerations for U.S. Holders.*
  In
the following circumstances, the above sections of this discussion may not
describe the U.S. federal income tax consequences to U.S. Holders resulting from
the ownership and disposition of shares issued by a foreign
corporation.
 
 *Foreign
Personal Holding Company* .
If at any time during a taxable year (a) more than 50% of the total voting power
or the total value of outstanding shares issued by the Registrant is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the U.S. and (b) 60% (or 50% in certain cases) or more of the
Registrant’s gross income for such year is “foreign personal holding company
income” as defined in Section 553 of the Code ( *e.g.,* dividends, interest, royalties, certain gains from the sale of stock and
securities, and certain gains from commodities transactions), the Registrant may
be treated as a “Foreign Personal Holding Company” (“FPHC”) In that event, U.S.
Holders of the Registrant’s common
shares Common
Shares would
be required to include in gross income for such year their allocable portions of
such “foreign personal holding company income” to the extent the Registrant does
not actually distribute such income.
 
 The
FPHC rules decribed above have been repealed with respect to taxable years of
the Registrant beginning after Decmber 31, 2004 and to traxable years of US
Holders of Common Shares with or within which such taxable year of the
Registrant ends.
 
 The
Registrant does not believe that it currently qualifies as a FPHC. However,
there can be no assurance that the Registrant will not be considered a FPHC for
the current or
any future taxable
year.
 
 *Foreign
Investment Company* .
If (a) 50% or more of the total voting power or the total value of the
Registrant’s outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), and (b) the Registrant is
found to be engaged primarily in the business of investing, reinvesting, or
trading in securities, commodities, or any interest therein, the Registrant may
be treated as a "Foreign Investment Company" (“FIC”) as defined in Section 1246
of the Code, causing all or part of any gain realized by a U.S. Holder selling
or exchanging the Registrant’s common
shares Common
Shares to
be treated as ordinary income rather than capital gain.
 
 The
FIC rules described above have been repealed with respect to taxable years of
the Registrant beginning after December 31, 2004 and to taxable years of US
Holders of Common Shares with or within which such taxable year of the
Registrant ends.
 
 The
corporation does not believe that it currently qualifies as a FIC. However,
there can be no assurance that it will not be considered a FIC for the current or
any future taxable
year.
 
 *Controlled
Foreign Corporation* .
If more than 50% of the total voting power or the total value of the
Registrant’s outstanding shares is owned, directly or indirectly, by citizens or
residents of the U.S., U.S. partnerships or corporations, or U.S. estates or
trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly
or indirectly, 10% or more of the total voting power of the Registrant’s
outstanding shares (each a “10% Shareholder”), the Registrant could be treated
as a “Controlled Foreign Corporation” (“CFC”) under Section 957 of the
Code.
 
 
 68
 
 The
classification of the Registrant as a CFC would effect many complex results,
including that 10% Shareholders would generally (i) be treated as having
received a current distribution of the Registrant’s “Subpart F income” and
(ii) would also be subject to current U.S. federal income tax on their pro rata
shares of the Registrant’s earnings invested in “U.S. property.” The foreign tax
credit may reduce the U.S. federal income tax on these amounts for such certain 10% Shareholders (See more detailed discussion at “Foreign Tax Credit” above).
In addition, under Section 1248 of the Code, gain from the sale or other taxable
disposition of the Registrant’s common
shares Common
Shares by
a U.S. Holder that is or was a 10% Shareholder at any time during the five-year
period ending with the sale is treated as a dividend to the extent of the
Registrant’s earnings and profits attributable to the common
shares Common
Shares sold
or exchanged.
 
 If
the Registrant is classified as both a PFIC and a CFC, it generally will not be
treated as a PFIC with respect to 10% Shareholders. This rule generally will be
effective for taxable years of 10% Shareholders beginning after 1997 and for its
taxable years ending with or within such taxable years of 10%
Shareholders.
 
 The
Registrant does not believe that it currently qualifies as a CFC. However, there
can be no assurance that it will not be considered a CFC for the current or any
future taxable year. **The
CFC rules are very complicated, and U.S. Holders should consult their own
financial advisor, legal counsel or accountant regarding the CFC rules and how
these rules may impact their U.S. federal income tax
situation.**
  **F.**
    **Dividends
      and Paying Agents**
 Not
applicable.
  **G.**
    **Statement
      by Experts**
 Not
applicable .
  **H.**
    **Documents
      on display**
 The
Registrant’s documents can be viewed at its North American office, located at
20607 Logan Avenue, Langley, BC, Canada. The Registrant is subject to the
informational requirements of the Exchange Act, and it files reports,
registration statements and other information with the SEC. The Registrant’s
reports, registration statements and other information can be inspected on the
SEC’s website at www.sec.gov and such information can also be inspected. and
copies ordered at the public reference facilities maintained by the SEC at the
following locations:
 
 Judiciary
      Plaza
      Room
      1024
      Washington,
      DC 20549
    500
      West Madison
      Suite
      1400
      Chicago,
      IL 60661
 
 Copies
of these materials can also be obtained by mail at prescribed rates from the
Public Reference Section of the SEC, 450 Fifth Street, NW, Washington, DC 20549
or by calling the SEC at 1-800-SEC-0330.
 
 **I.**
    **Subsidiary
      Information**
 Not
applicable.
 
 69
  **Item
11 - Quantitative and Qualitative Disclosures about Market
Risk**
  The
Registrant has not entered into any activities in derivative financial
instruments, other financial instruments, or derivative commodity instruments.
The Registrant’s financial assets in the form of cash and cash equivalents are
held in short term interest-bearing deposits at institutions with high credit
quality ratings. Material amounts of foreign currency, mainly Australian and US
dollars are held. As such the Registrant is exposed to exchange rate risk. The
Registrant does not currently engage in foreign currency hedging and its
operations are subject to foreign currency fluctuations, and such fluctuations
may materially affect its financial position and results of
operations.
 
 There
can be no assurance that steps taken by management to address foreign currency
fluctuations will eliminate all adverse effects and accordingly, the Registrant
may suffer losses due to adverse foreign currency fluctuations.
 
 The
Registrant has not entered into any agreements or purchased any instruments to
hedge any possible currency risks at this time.
 
 As
the Registrant is engaged in exploring mineral properties which, if successful,
will produce commodities, it can be seen to be exposed indirectly to commodity
risk. Such exposure cannot be accurately estimated by quantitative means
although the risk would increase as the possibility of project success
increased. Industry practice dictates that attempts to hedge commodity risk not
begin until at least there are funding agreements in place supported by a
bankable feasibility study. The Registrant has in the past and may in the future
finance its activities by the sale of equity and/or debt instruments. This is
also an indirect exposure to equity and/or interest-rate risk, which cannot be
accurately estimated by quantitative means.
  **Item
12 - Description of Securities other than Equity
Securities**
  Not
applicable.
  **Part
II**
  **Item
13 - Defaults, Dividend Arrearages and Delinquencies**
  There
have been no defaults, dividend arrearages or delinquencies.
  **Item
14 - Material Modifications to the Rights of Security Holders and Use of
Proceeds**
  There
have been no material modifications to the Registrant’s common
shares.
  **Item
15 -** **Controls
and Procedures**
 Under
the supervision and with the participation of its management, including its
Chief Executive Officer and Chief Financial Officer, the Registrant has
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures under the Exchange Act. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that, as of the
end of the period covered by this report, the Registrant’s disclosure controls
and procedures were effective in timely alerting it to the material information
relating to it (or its consolidated subsidiaries) required to be included in the
reports it files or submits under the Exchange Act.
 
 During
the period covered by this report, there has been no change in the Registrant’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, its internal control over financial
reporting.
 
 Management,
including its Chief Executive Officer, does not expect that the Registrant’s
disclosure controls and procedures or internal controls and procedures will
prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Registrant have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of control. The design of any system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
control may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.
 **Item
16A - Audit Committee Financial Expert**
  As
of the date of this report, the Registrant’s Board had not yet determined
whether one of its audit committee members met the requirements set forth under
the SEC rules to be deemed to be “ an “ audit
committee financial expert”; however, management believes that Mr. John
Nicholls, CPA, Australia meets these requirements. Mr. Nicholls is an “ independent
director ” under 4200 (a) (15) of the National Association of Securities Dealers listing
standards, as such standards may be amended and modified.
  **Item
16B - Code of Ethics**
  The
Registrant has adopted a code of ethics that applies to its executive officers,
a copy of which is available, without charge, upon written request ,
by delivering a letter of request for such policy to the Registrant’s Secretary at 20607 Logan Avenue, Langley, BC V3A 7R3
CANADA.
  **Item
16C - Principal Accountant Fees and Services**
 
 Horwath
Orenstein LLP (“Horwath”) who were appointed as auditors of the Registrant on
February 1, 2005, audited the Registrant’s books and records for the year ended
December 31, 2004. PricewaterhouseCoopers, LLP (“PWC”) who resigned as auditors
of the Registrant on January 5, 2005, audited the Registrant’s books and records
for the year ended December 31, 2003.
 70
  **Audit
Fees**
 Fees
billed by Horwath for professional services totalled $45,000 for the year ended
December 31, 2004. Such fees were for the audit of the Registrant’s annual
financial statements and for services in connection with statutory and
regulatory filings for that fiscal year.
 
 Fees
billed by PWC for professional services totalled $8,932 for the year ended
December 31, 2004, and $37,807 for the year ended December 31, 2003. Such fees
included fees associated with services that are normally provided by PWC in
connection with statutory and regulatory filings or engagements for those fiscal
years and with the audit of the Registrant’s annual financial statements for the
year ended December 31, 2003.
 
 **Audit-Related
Fees** ****
 Fees
for audit-related services totalled $ nil for the years ended December 31, 2004
and 2003.
 
 **Tax
Fees** ****
 No
fees related to tax services were billed by Horwath. Fees for tax services
billed by PWC, including fees for review of various tax returns and tax issues
related to restructuring of the Registrant, totalled $26,000 for the year ended
December 31, 2004.
 
 **All
other Fees**
 No
other fees were billed by Horwath for the year ended December 31, 2004. Fees
paid to PWC for due diligence assistance on the possible acquisition of mineral
properties for the year ended December 31, 2003 totalled $61,141 and fees
relating to statutory filings for foreign subsidiaries totalled $9,205 in the
year ended December 31, 2003.
 
 During
the fiscal year ended December 31, 2004, Horwath did not bill for any products
or services other than as described above.
 
 During
the fiscal years ended December 31, 2004 and December 31, 2003, PWC did not bill
for any products or services other than as described above.
 
 The
audit committee pre-approves audit engagement terms and fees prior to the
commencement of any audit work, other than that which may be necessary for the
Registrant’s independent auditors to prepare the proposed audit approach, scope
and fee estimates. The independent auditors annually submit a written proposal
that details all audit and audit related services. Audit fees are fixed and
contained in the proposal, and the audit committee reviews the nature and dollar
value of services provided under such proposal. Any revisions to such proposal
after the engagement has begun are reviewed and pre-approved by the audit
committee.
 
 There
were no fees in 2004 or 2003 that were not pre-approved by the audit committee.
All services described above under the captions “Audit Fees”, “Audit Related
Fees” and “Tax Fees” and “All Other Fees” were approved by the audit committee
pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).
 **Item
16D - Exemptions from the Listing Standards for Audit
Committees.**
  Not
applicable
 
 71
  **Item
16E - Purchases of Equity Securities by the Issuer and Affiliated
Purchasers.**
  Neither
the Registrant not any affiliated purchaser engaged in any repurchases of the
registrant’s equity securities during the year ended December 31,
2004.
 
 **Part
III**
 
  **Item
17 - Financial Statements**
  These
financial statements were prepared in accordance with Canadian Generally
Accepted Accounting Principles (“GAAP”) and are expressed in Canadian dollars.
Such financial statements have been reconciled to United States Generally
Accepted Accounting Principles GAAP for measurement differences between Canadian and United States GAAP (see Note 10
therein). For
a history of exchange rates in effect for Canadian dollars as against U.S.
dollars, see “ *Item
3.A. - Selected Financial Data”* .
 
 72
 
 ***MANAGEMENT'S
RESPONSIBILITY FOR FINANCIAL REPORTING***
  The
consolidated financial statements and the information contained in the annual
report have been prepared by the management of the Corporation. The financial
statements have been prepared in accordance with Canadian generally accepted
accounting principles and, where appropriate, reflect management's best
estimates based on currently available information. A system of internal
accounting control is maintained to provide reasonable assurance that financial
information is accurate and reliable.
 
 The
Corporation's independent auditors, Horwath Orenstein LLP, who have been
appointed by the directors, conduct an audit in accordance with generally
accepted auditing standards in Canada and the United States to allow them to
express an opinion on the financial statements.
 
 The
Audit Committee of the Board of Directors meets periodically with management and
the independent auditors to review the scope and result of the annual audit, and
to review the financial statements and related reporting matters prior to
submission to the Board.
 
 
 
 
 
 
 *"signed"*Cecil R. Bond
    Marcus N. FosterChief
      Executive Officer
    Chief
      Financial Officer
 ***February
18, 2005***
  
 
 
 ***REPORT
OF INDEPENDENT ACCOUNTANTS***
  ***To
the Shareholders of Argosy Minerals Inc***
  We
have audited the consolidated balance sheet of Argosy Minerals Inc as at
December 31, 2004 and the consolidated statements of operations and deficit and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with Canadian and Public Company Accounting
Oversight Board (United States) generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.
 
 In
our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2004
and the results of its operations and changes in its cash flows for the year
then ended in accordance with Canadian generally accepted accounting
principles.
 
 The
financial statements as at December 31, 2003 and 2002 and for the years then
ended were audited by other auditors who expressed an opinion without
reservation on those financial statements in their report dated January 16,
2004. Those financial statements were prepared in all material respects in
accordance with Canadian generally accepted accounting principles.
 
 
 **Chartered
      Accountants**
      Toronto,
      Canada
      
      ***February
      18, 2005***
 
 
 73
 **Argosy
      Minerals Inc****(an
      Exploration stage corporation)****CONSOLIDATED
      BALANCE SHEETS****As
      At December 31, 2004 and 2003**(Expressed
      in Canadian Dollars)**2004**
    
    **2003****ASSETS**Current
      AssetsCash
      and cash equivalents
    
    $
    4,616,407
    
    $
    8,058,383Accounts
      receivable and prepaids
    
    
    166,960
    
    
    163,5554,783,367
    
    
    8,221,938Office
      Equipment and Furniture
    
    
    29,560
    
    
    39,413$
    4,812,927
    
    $
    8,261,351**LIABILITIES**Current
      LiabilitiesAccounts
      payable and accrued liabilities
    
    $
    151,001
    
    $
    451,173**SHAREHOLDERS'
      EQUITY**Capital
      Stock *Note
      5*Authorised
      - unlimitedIssued
      - 95,969,105 common shares (2003: 95,969,105)
    
    
    44,075,384
    
    
    44,075,384Deficit
    
    
    (39,413,458
    )
    
    (36,265,206
    )4,661,926
    
    
    7,810,178$
    4,812,927
    
    $
    8,261,351
   **APPROVED
      BY THE DIRECTORS**
    
    
    **Cecil
      R. Bond, Director
    
    
    John
      Nicholls, Director
 74
 **Argosy
      Minerals Inc****(an
      Exploration stage corporation)****CONSOLIDATED
      STATEMENTS OF OPERATIONS AND DEFICIT****For
      the Years Ended December 31, 2004, 2003 and 2002**(Expressed
      in Canadian Dollars)**2004**
    
    **2003**
    
    **2002**IncomeInterest
    
    $
    214,247
    
    $
    363,362
    
    $
    411,203Gain
      on Disposal of Mineral Property
    
    
    -
    
    
    125,500
    
    
    -Foreign
      exchange gain / (loss)
    
    
    (255,686
    )
    
    670,724
    
    
    899,844Gain
      on sale of Marketable Securities
    
    
    -
    
    
    14,548
    
    
    -(41,439
    )
    
    1,174,134
    
    
    1,311,047ExpensesAccounting
      and audit
    
    $
    98,606
    
    $
    105,121
    
    $
    86,227Arbitration *Note
      3(c)*
    
    
    789,871
    
    
    366,310
    
    
    96,255Bank
      charges
    
    
    6,386
    
    
    7,721
    
    
    7,002Capital
      taxes
    
    
    -
    
    
    334
    
    
    832Depreciation
    
    
    13,088
    
    
    15,292
    
    
    9,725Directors'
      fees
    
    
    76,136
    
    
    68,750
    
    
    24,982Insurance
    
    
    83,894
    
    
    77,812
    
    
    53,950Legal
    
    
    52,373
    
    
    55,268
    
    
    107,940Management
      and consulting fees
    
    
    668,664
    
    
    428,827
    
    
    377,383Office
    
    
    25,292
    
    
    25,029
    
    
    25,589Project
      assessment expenditures *Note
      4(c)*
    
    
    587,244
    
    
    1,721,363
    
    
    181,358Rent
    
    
    63,611
    
    
    60,403
    
    
    66,219Salaries
      and benefits
    
    
    434,665
    
    
    427,394
    
    
    418,374Shareholder
      communications
    
    
    35,930
    
    
    33,740
    
    
    85,278Telecommunications
    
    
    15,558
    
    
    18,249
    
    
    19,454Transfer
      agent and stock exchange
    
    
    57,254
    
    
    46,146
    
    
    51,518Travel
    
    
    98,241
    
    
    189,725
    
    
    265,626Write-off
      of mineral propertiesand
      deferred costs *Note
      3*
    
    
    -
    
    
    19,783
    
    
    10,512,6743,106,813
    
    
    3,667,267
    
    
    12,390,386Loss
      for the Year
    
    
    (3,148,252
    )
    
    (2,493,133
    )
    
    (11,079,339
    )Deficit
      - Beginning of Year
    
    
    (36,265,206
    )
    
    (33,772,073
    )
    
    (22,692,734
    )Deficit
      - End of Year
    
    $
    (39,413,458
    )
    $
    (36,265,206
    )
    $
    (33,772,073
    )Basic
      & Diluted Loss per Common Share
    
    $
    (0.03
    )
    $
    (0.03
    )
    $
    (0.12
    )Weighted
      Average Number ofCommon
      Shares Outstanding
    
    
    95,969,105
    
    
    95,969,105
    
    
    95,969,105
 75
  **Argosy
      Minerals Inc****(an
      Exploration stage corporation)****CONSOLIDATED
      STATEMENTS OF CASH FLOWS****For
      the Years Ended December 31, 2004, 2003 and 2002**(Expressed
      in Canadian Dollars)**2004**
    
    **2003**
    
    **2002****Cash
      Provided from (Used for)****Operating
      Activities**Loss
      for the year
    
    $
    (3,148,252
    )
    $
    (2,493,133
    )
    $
    (11,079,339
    )Adjustments
      for:Depreciation
    
    
    13,088
    
    
    15,292
    
    
    9,725Foreign
      exchange (gain) / loss
    
    
    4,173
    
    
    (641,617
    )
    
    (804,273
    )Gain
      on marketable securities
    
    
    -
    
    
    (14,548
    )
    
    -Write-off
      of mineral propertiesand
      deferred costs
    
    
    -
    
    
    19,783
    
    
    10,512,674Gain
      on Disposal of Mineral Property
    
    
    -
    
    
    (125,500
    )
    
    -(3,130,991
    )
    
    (3,239,723
    )
    
    (1,361,213
    )**Changes
      in Non-cash Working Capital**Increase
      in accounts receivableand
      prepaids
    
    
    (3,405
    )
    
    (120,559
    )
    
    (16,684
    )Increase/(Decrease)
      in accounts payableand
      accrued liabilities
    
    
    (300,172
    )
    
    125,767
    
    
    (193,621
    )**Cash
      Flows from Operating Activities**
    
    
    (3,434,568
    )
    
    (3,234,515
    )
    
    (1,571,518
    )**Financing
      Activities****Cash
      Flows from Financing Activities**
    
    
    -
    
    
    -
    
    
    -**Investing
      Activities**Disposal
      of Mineral Property *Note
      3(b)*
    
    
    -
    
    
    500,000
    
    
    -Mineral
      properties and deferred costs
    
    
    -
    
    
    (53,771
    )
    
    (240,441
    )(Acquisition)/Disposition
      of Marketable Securities
    
    
    -
    
    
    278,288
    
    
    (263,740
    )Purchase
      of office equipment and furniture
    
    
    (3,234
    )
    
    (11,371
    )
    
    (43,672
    )Restricted
      cash
    
    
    -
    
    
    157,960
    
    
    (1,960
    )**Cash
      Flows from Investing Activities**
    
    
    (3,234
    )
    
    871,106
    
    
    (549,813
    )**Foreign
      Exchange Gain / (loss) on cash****held
      in Foreign Currency**
    
    
    (4,173
    )
    
    641,617
    
    
    804,273**Decrease
      in Cash and Cash****Equivalents**
    
    
    (3,441,975
    )
    
    (1,721,792
    )
    
    (1,317,058
    )**Cash
      and Cash Equivalents -****Beginning
      of Year**
    
    
    8,058,383
    
    
    9,780,175
    
    
    11,097,233**Cash
      and Cash Equivalents -****End
      of Year**
    
    $
    4,616,407
    
    $
    8,058,383
    
    $
    9,780,175
 76
 **ARGOSY
MINERALS INC**
 (An
Exploration stage corporation)
  **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 For
the year ended December 31, 2004
 
 ***1.
Nature Of Operations***
 The
Corporation and its subsidiaries are engaged in the exploration and development
of mineral properties and is considered to be an exploration stage company. The
Corporation is in the process of investigating possible property acquisitions
and continues to evaluate the Nevada Gold Project in Nevada, USA. The
Corporation is still waiting for the issuance of a prospecting permit for the
Albetros Diamond Project in South Africa, consequently, no activity is being
undertaken at this time. See Note 4. The Corporation was previously involved in
studies for the development of a nickel/cobalt processing facility at Musongati
in the Republic of Burundi and in gold exploration in the Slovak Republic. In
August 2002 the Corporation’s subsidiary, Andover Resources N.L., declared force
majeure and curtailed its activities in Burundi as a result of the deterioration
of the security situation. See Note 3(a). In July 2003, the Corporation sold its
Slovak subsidiary, Kremnica Gold a.s. See Note 3(b).
 
 As
yet, it has not been determined if the Corporation’s mineral properties contain
ore reserves that are economically recoverable. The recoverability of any amount
recorded for mineral properties and deferred costs is dependent on the existence
of economically recoverable reserves, the ability of the Corporation to obtain
necessary financing to complete the development and future profitable production
or proceeds from disposition of the mineral properties. The amounts shown as
mineral properties and deferred costs, if any, represent costs to date, less
amounts recovered or written off, and do not necessarily represent present or
future values.
 
 ***2.
Significant Accounting Policies***
 **Principles
of Consolidation**
 The
consolidated financial statements include the accounts of the Corporation and
its wholly owned subsidiaries after elimination of inter-company accounts and
transactions:
 Company
      Name
    CountryArgosy
      Mining Corp. ("Argosy")
    CanadaArgosy
      Mining Corporation Pty. Ltd.
    South
      AfricaAndover
      Resources N.L. ("Andover")
    AustraliaBalzan
      Investments Limited (“Balzan”)
    BVI
 **Financial
Statement Presentation**
 These
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (“GAAP”). The material measurement
differences between Canadian and United States GAAP are explained in Note 10,
along with their effect on the Corporation’s consolidated statements of
operations and consolidated balance sheets.
 
 **Use
of Estimates**
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of income and expenses during the period. Significant areas
where management’s judgement is applied are mineral property valuations,
valuation of future income tax benefits and contingent liabilities. Actual
results may differ from those estimates.
 
 **Cash
and Cash Equivalents**
 Cash
and cash equivalents include cash and short-term deposits maturing within 90
days of the original date of acquisition. In order to limit its exposure to
losses, the Corporation deposits its funds with major Canadian, Australian and
UK banks. A portion of the cash balances are held in Australian and U.S.
dollars, accordingly, the Corporation has exposure to fluctuations in currency
exchange rates.
 
 **Office
Equipment and Furniture**
 Depreciation
is provided on office equipment and furniture using the straight line method
over the estimated useful lives of the assets.
 
 **Project
Assessment Expenditures**
 Project
assessment costs consist of expenditures to evaluate new projects. These
expenditures are charged to income when incurred. Once the Corporation decides
to acquire the property, costs associated with further exploration or
development are accounted for as described under Mineral Properties and Deferred
Costs below. Included in project assessment expenditures are option payments for
mineral properties. These payments are charged to income when incurred.
 
 **Mineral
Properties and Deferred Costs**
 The
costs of acquiring mineral properties, and related exploration and development
costs, are deferred until the property to which they relate is placed into
production, sold or abandoned. Deferred costs will be amortized over the
estimated useful life of the ore body following commencement of production, or
written off if the property is sold or abandoned.
  77
 The
Corporation will reduce the carrying value of mineral properties and deferred
costs by any amount received from the introduction of a joint venture
partner.
  Management's
estimate of carrying values is subject to risks and uncertainties affecting the
recoverability of the Corporation's investment in mineral properties. Although
management makes its best estimate of these factors, where applicable, based on
current conditions, it is possible that changes could occur in the near term
which could adversely affect management's estimate of the recoverability of
mineral properties and deferred costs and the need for asset impairment
write-downs.
  Although
the Corporation has taken steps to verify title to mineral properties in which
it has an interest, these procedures do not guarantee the Corporation's title.
Such properties may be subject to prior undetected agreements or transfers and
title may be affected by such defects.
  **Stock
Based Compensation**
 The
Corporation has prospectively adopted the amended requirements of CICA 3870,
Accounting for Stock Based Compensation and Other Stock Based Payments, in the
year ended December 31, 2004. These amendments require an expense to be
recognized in financial statements for all forms of employee stock-based
compensation, including stock options. The income statement impact of stock
options granted by the Corporation subsequent to the adoption of CICA 3870 on
January 1, 2002 but prior to the adoption of the amendments to CICA 3870, is
included in pro-forma disclosure in Note 5 to these financial statements. No
compensation expense was recognised in 2004 or 2003 because no stock options
were granted or vested in those years. Any consideration paid by employees on
the exercise of stock options is credited to capital stock.
 
 **Loss
per Common Share**
 Loss
per common share is calculated using the weighted average number of common
shares issued and outstanding during each year. Basic and diluted loss per share
are the same, as the effect of potential issues of shares under stock option
arrangements would be anti-dilutive.
 
 **Foreign
Currency Translation**
 The
Corporation’s foreign subsidiaries are integrated foreign operations. Currency
translations into Canadian dollars are made as follows:
 (i)
    monetary
      assets and liabilities at the rates of exchange prevailing at the balance
      sheet date;
 (ii)
    non-monetary
      items at rates prevailing when they are
acquired;
 (iii)
    exploration
      costs and administration costs at average rates for the
      period.
 Gains
and losses arising on currency translation are included in the statement of
operations.
 
 **Financial
Instruments**
 The
fair value of cash and cash equivalents, accounts receivable and accounts
payable approximate their carrying amounts. The Corporation is not exposed to
significant interest rate risk due to the short term maturity of its monetary
current assets and current liabilities.
 
 **Arbitration**
 Expenditures
related to the arbitration are expensed as and when incurred. See Note
3(c)
 
 **Income
taxes**
 Income
taxes are calculated using the liability method of accounting. Temporary
differences arising from the difference between the tax basis of an asset or
liability and its carrying amount on the consolidated balance sheet are used to
calculate future income tax assets or liabilities. Future income tax assets or
liabilities are calculated using the tax rates anticipated to apply in the
periods that the temporary differences are expected to reverse. Valuation
allowances are established when necessary to reduce future income tax assets
arising from loss carry-forwards to amounts expected to be realized.
 
 ***3.
Mineral Properties***
 **a)**
    **Burundi
      Nickel Project**
 During
1998, Andover entered into a Protocol agreement with the Republic of Burundi
acquiring the exclusive rights to the Musongati nickel project. On February 11,
1999, a Mining Convention setting out Andover's rights and obligations for the
completion of a feasibility study on the Musongati nickel project was ratified
by the Burundian Parliament. The Mining Convention requires that Andover
complete a feasibility study for the development of a nickel/cobalt processing
facility by the end of 2001 or such later date as may be determined by
extensions granted by the Minister of Mines. On April 19, 2000, Andover declared
force majeure and curtailed its activities in Burundi as a result of the
deterioration in security in the region. Pursuant to the terms of the Mining
Convention the declaration of force majeure may be in place for up to two years
during which time Andover’s obligations are interrupted and the completion of
the feasibility study delayed by the period of force majeure. Pursuant to the
terms of the Mining Convention, Andover was required to post a performance bond
of US$100,000.
 
 On
March 28, 2002 the Corporation announced the withdrawal of the declaration of
force majeure and planned to resume its exploration activities, however security
deteriorated ahead of the implementation of an agreed cease-fire between various
political parties and the Corporation re-imposed the declaration of force
majeure in August 2002. Following improved security conditions, the Corporation
lifted force majeure in July 2004 and commenced planning of a drilling program
at Musongati. However, following a massacre outside Bujumbura, the Corporation
re-imposed force majeure in August, 2004. The Corporation is currently
reassessing its continued involvement with the Burundi Nickel Project and at
this time, no further activity is planned.
 
 78
 At
December 31, 2002, the Corporation wrote off its investment in the project of
$7,973,049, to recognize the reduction in value due to the ongoing political
instability in the country and the failure of nickel laterite projects around
the world.
 
 The
term of the performance bond provided by the Corporation expired during 2002. A
new performance bond will be required should the Corporation lift force majeure
and re-commence activity in Burundi.
 
 **b)**
    **Slovak
      Gold Property**
 In
July 2003 the Corporation sold its Slovak subsidiary, the owner of the Slovak
Gold Property for $500,000. During the year ended December 31, 2001, the
Corporation wrote down its investment in the project by $7,533,332 to recognize
the difficulty in being able to sell the project or introduce a joint venture
partner. The sale of the project gave rise to a gain on disposal of $125,500.
 
 **c)**
    **New
      Caledonia Nickel Project - Joint Venture Arrangement and
      Arbitration**
 On
July 25, 2001, the Corporation announced JSC "MMC Norilsk Nickel" (“Norilsk”)
had taken the positive decision to proceed with the Nakety/Bogota Project in New
Caledonia by completing a feasibility study leading to the joint development
with the Corporation and Societe des Mines de la Tontouta (“SMT”) of the
project. The Tripartite Agreement( the “Agreement”) between the Norilsk
subsidiary, NN Invest Holdings SA (“NNIH”), SMT and the Corporation’s subsidiary
Balzan was signed on October 16, 2001. Under the terms of the Agreement, NNIH
reimbursed the Corporation 45% of its costs incurred, amounting to US$7,166,000
(C$11,307,948) which was applied to reduce the carrying value of the project.
Thereafter, NNIH had the ability to earn a 45% stake in the project by
completing a feasibility study to international standards over two years.
 
 On
August 5, 2002, the Corporation received a notice of termination from NNIH
terminating the Agreement and its involvement in the New Caledonia Nickel
Project. On September 13, 2002, the Corporation and its subsidiary Balzan
received a request for arbitration by NNIH from the International Court of
Arbitration of the International Chamber of Commerce (“IC”). The request for
arbitration sought to recover US$7,166,000 paid to Balzan plus an additional
US$1,368,222 expended on the project.
 
 The
termination notice effectively terminated the Agreement and the Corporation
wrote off its remaining investment of $2,539,625 in the project. Following a
meeting between the Corporation and NNIH in November 2004, the arbitration was
settled. The terms of the settlement agreement are bound by a confidentiality
agreement signed between the parties, however, each party remains responsible
for its costs incurred in the arbitration process and neither party has any
future claim outstanding against the other regarding this matter. The
Corporation does not anticipate that it will incur any further costs related to
this matter.
 
 ***4.
Project Assessment Expenditures***
 **a)**
    **Albetros
      Diamond Project**
 The
Albetros Project is an alluvial diamond project situated on the west coast of
South Africa near Kleinsee. The Corporation holds its interest in the Albetros
Project through an option agreement to purchase up to 85% of the shares of
Albetros Inland Diamond Exploration Pty Ltd (“Albetros”) the owner of the
Project.
 
 The
Option Agreement provides for:
 a)
    an
      option exercise date of August 31, 2004. *
  b)
    monthly
      option fees totalling R4,050,000 ($799,000) payable as
      follows:
 -
2003 - R2,400,000 ($469,000) - paid.
 -
2004 - R1,650,000 ($344,000) - of which R550,000 has been paid, and
  c)
    a
      purchase price of R17,000,000 ($3,609,000) less all option fees paid at
      the date of exercise of the option. Should the Corporation exercise its
      option to acquire Albetros the purchase price of R17,000,000 less option
      fees totalling R4,050,000 (R2,950,000 has been paid to date) will be paid
      in two payments as follows:
 -
R7,000,000 ($1,486,000) on August 31, 2004. *
 -
R5,950,000 ($1,263,000) on December 1, 2004. *
  An
application for a new prospecting permit (“Permit”) was submitted in January,
2004 as the expiry date of the Permit was March 15, 2004. However with the new
Minerals and Energy Act in South Africa coming into force in May 2004,
processing of the application has been delayed and the new Permit has not yet
been issued. Consequently, no work can be conducted on the Project at this time.
 
 *Pursuant
to the agreement with the shareholders of Albetros, the Corporation had until
August 31, 2004 (the option exercise date) to fully evaluate the Project. As a
new Permit has not yet been issued, the Corporation ceased its obligation to
make option payments subsequent to March 2004 and advised the shareholders of
Albetros that all payment obligations will be extended by the number of days
that Albetros does not hold a valid Permit.
 
 The
Corporation can withdraw from the option agreement to acquire Albetros at any
time.
 
 If
the Corporation exercises its option to acquire 85% of Albetros, it has agreed
to sell a 5.5% interest in Albetros to Umnotho weSizwe Diamond Company Pty Ltd.
(“Umnotho”), its Black Economic Empowerment partner in South Africa, for a cash
consideration of R1,100,000 ($233,000), which would result in the Corporation
retaining a 79.5% interest in Albetros should the Corporation exercise its
option to acquire Albetros.  In
addition, Umnotho will refund the Corporation a pro rata portion of the
expenditures incurred in assessing the Albetros Project.
 
 79
 In
January 2004, the owners of Albetros transferred 14% of the shares of Albetros
to the Corporation for options fees paid to that time of R2,700,000 ($538,000).
The Corporation has not attributed any value to these shares, since no decision
has been made to proceed with the Project.
 
 In
addition, recent announcements regarding Black Economic Entity (“BEE”)
participation in new prospecting permits over state owned minerals have
indicated a requirement for increased BEE participation of 51% from previous
requirements of an initial 15% interest rising to a required 26% interest over a
number of years. The Corporation is currently evaluating the impact of these new
requirements on its continued participation in the Project.
 
 **b)**
    **Nevada
      Gold Project**
 The
Nevada Gold Project is situated within the southern boundary area of the
Humboldt - Toiyabe National Forest, in Northern Elko County, Nevada and
comprises 70 unpatented lode mining claims and 2 unpatented claims covering
water rights.
 
 The
Corporation holds the Nevada Gold Project under 2 option agreements. The option
agreement dated November 17, 2003 over the Gold Creek property covers 37
unpatented mining claims and 2 claims covering water rights. The agreement is
for 3 years and has an annual option payment of US$20,000 and a purchase price
of US$1,250,000 for 100% of the claims. During May 2004 the Corporation entered
into an option agreement over the adjoining 33 unpatented claims. The agreement
is for 3 years and has an annual option payment of US$20,000 and a purchase
price of US$1,500,000 for 100% of the claims.
 
 **c)**
    **Project
      Assessment Expenditures**
 Details
of Project Assessment Expenditures during the years ended December 31, 2004 and
2003 are as follows:
  ***Albetros
      Diamond Project***
    
    **2004**
    
    **2003**Geological
      Consulting, Supervision and Legal
    
    $
    44,565
    
    $
    218,115Drilling
    
    
    80,207
    
    
    486,693Gravel
      Processing and Sorting
    
    
    57,020
    
    
    147,866Travel
      and Accommodation
    
    
    55,220
    
    
    129,608Option
      Fees
    
    
    117,158
    
    
    469,000Rehabilitation
    
    
    30,934
    
    
    -385,104
    
    
    1,451,282***Nevada
      Gold Project***Geological
      Consulting, Supervision and Legal
    
    
    81,995
    
    
    -Assessment
      and Data
    
    
    8,894
    
    
    -Option
      Fees
    
    
    59,317
    
    
    -Claim
      Fees
    
    
    12,904
    
    
    -Travel
      and Accommodation
    
    
    53,135
    
    
    -216,245
    
    
    -***Other
      Projects***Legal,
      Consulting
    
    
    40,331
    
    
    142,216Data
      Acquisition
    
    
    -
    
    
    74,463Travel,
      Accommodation and other
    
    
    62,367
    
    
    53,402Expenses
      Recovered
    
    
    (116,804
    )
    
    -(14,106
    )
    
    270,081***Total***
    
    $
    587,243
    
    $
    1,721,363
 
 ***5.
Capital Stock***
  **a)**
    **Authorised
      Capital Stock**
 The
Corporation is authorised to issue an unlimited number of common shares without
par value.
  **b)**
    **Issued**
 Number
      ofShares
    
    AmountTotal
      Issued - December 31, 2004 and 2003
    
    
    95,969,105
    
    $
    44,075,384
 
 80
 **Stock
Options**
  The
Corporation grants stock options to employees as determined by the Corporation's
Board of Directors. Stock options granted to the directors of the Corporation
are granted subject to approval of the Corporation's shareholders.
 
 No
stock options were granted during the years ended December 31, 2004 and 2003.
Information relating to compensation expense for the year ended December 31,
2002 of options granted to employees and directors, using the fair value method,
pursuant to the adoption of CICA 3870 Accounting for Stock Based Compensation is
disclosed as pro-forma information.
 
 The
assumptions stated below result in an estimated fair value of the Corporation’s
stock options granted in 2002 of $0.20 per stock option. This results in a
pro-forma compensation expense of $835,000, which would increase the
Corporation’s loss per share as indicated below:
 December
      31, 2002Loss
      for the Year
    
    
    *As
      reported*
    
    $
    11,079,339**
    
    
    *Pro
      forma*
    
    $
    11,914,339Basic
      and Diluted Loss per Common Share
    
    
    *As
      reported*
    
    $
    0.12**
    
    
    *Pro
      forma*
    
    $
    0.12
 
 The
fair value of stock options used to calculate compensation expense is estimated
using the Black-Scholes Option Pricing Model with the following
assumptions:
  Risk-free
      interest rate
    4%Expected
      Dividend yield
    0%Expected
      Stock price volatility
    75%Expected
      Option life in years
    4
 
 Option
pricing models such as the Black-Scholes Model require the input of highly
subjective assumptions including expected stock price volatility. Differences in
input assumptions can materially affect the fair value estimate and therefore
the existing models do not necessarily provide a reliable single measure of the
fair value of the Corporation’s stock options.
  The
status of stock options granted to employees and directors as at December 31,
2004 and 2003 and the changes during the years ended on those dates is presented
below:
 **December
      31, 2004**
    
    
    
    **December
      31, 2003**Weighted
    
    
    
    WeightedShares
    
    Average
      Exercise Price
    
    Shares
    
    Average
      Exercise PriceOptions
      outstanding-
      Beginning of Year
    
    
    3,075,000
    
    $
    0.34
    
    
    4,790,000
    
    $
    0.44Cancelled/Expired
    
    
    (350,000
    )
    $
    0.34
    
    
    (1,715,000
    )
    $
    0.68Options
      outstanding and exercisable-
      End of Year
    
    
    2,725,000
    
    $
    0.33
    
    
    3,075,000
    
    $
    0.34
 All
options outstanding at December 31, 2004 have an exercise price of Australian
$0.35 (C$0.33). The weighted average remaining contractual life of these options
is 1.4 years.
  **c)**
    **Escrow
      Shares**
 At
December 31, 2004 a total of 905,032 (2003: 1,810,061) common shares of the
Corporation were subject to escrow and are eligible for release in March 2005.
  ***6.
Related Party Transactions***
  During
the year ended December 31, 2004: $748,593 (2003: $461,623, 2002: $482,389) was
paid to five directors of the Corporation, or to companies controlled by them,
for director’s fees, management consulting services and project management and
assessment services. The expenditures of $748,593 included a termination payment
of $441,814 paid to Peninsular Services Pty Ltd. (“Peninsular”), a company
controlled by Mr. Lloyd, a director and Chairman of the Corporation, on the
termination of Peninsular’s Management Contract.
 
 Following
the termination of Peninsular’s Management Contract, Mr. Lloyd has continued to
provide services to the Corporation on a full time basis, dealing amongst other
things with the arbitration initiated by NNIH, without payment, except for fees
paid to non-executive directors. Fees paid to each non-executive director does
not exceed $25,000 per annum.
 
 In
addition $117,700 (2003: $414,181, 2002: $445,750) was paid to two companies,
$32,236 to an Australian company and $85,464 to a Canadian company, each
controlled by a director of the Corporation for the provision of office
facilities and personnel in Australia and Canada respectively. These services
are provided at cost. Subsequent to February 2004, personnel in Australia are
employed directly by the Corporation.
 
 81
 At
December 31, 2004, management and consulting expenses payable amounted to $NIL
(2003: $NIL) and are included in accounts payable and accrued
liabilities.
 
 ***7.
Income Taxes***
  A
potential future income tax asset of approximately $3,081,000 arises from the
following loss carry forwards (for Canadian Tax purposes):
  a)
      Non capital loss carry forwards
    
    $
    7,302,000b)
      Other deductible tax pools
    
    $
    1,348,000$
    8,650,000
 In
addition, the Corporation has capital losses of approximately
$2,203,000.
 
 The
non-capital loss carry forwards can be offset against income for Canadian
purposes in future years and expire as follows:
  2005
    
    
    107,0002006
    
    
    888,0002007
    
    
    1,576,0002008
    
    
    -2009
    
    
    1,506,0002010
    
    
    1,503,0002011
    
    
    1,722,000Total
    
    $
    7,302,000
 
 The
Corporation has reduced the value of the potential future income tax asset to
$Nil through the application of a valuation allowance of $3,081,000 as the
Corporation does not have any current source of income to which the tax losses
can be applied.
 
 The
Corporation’s statutory tax rate of 35.62% (2003 -35.62%) has been reduced to an
effective rate of nil% (2003 - nil%) due to losses for which no tax benefit has
been recognized.
 
 ***8.
Segmented Information***
 2004Canada
    
    Australia
    
    UK
    
    TotalCurrent
      Assets
    
    $
    69,699
    
    $
    40,325
    
    $
    4,673,343
    
    $
    4,783,367Property,
      Plant & Equipment
    
    
    5,148
    
    
    24,412
    
    
    -
    
    
    29,560$
    74,847
    
    $
    64,737
    
    $
    4,673,343
    
    $
    4,812,9272003Canada
    
    
    
    
    
    Australia
    
    
    UK
    
    
    TotalCurrent
      Assets
    
    $
    291,931
    
    $
    576,046
    
    $
    7,353,961
    
    $
    8,221,938Property,
      Plant & Equipment
    
    
    7,209
    
    
    32,204
    
    
    -
    
    
    39,413$
    299,140
    
    $
    608,250
    
    $
    7,353,961
    
    $
    8,261,351
 The
Corporation’s sole operating segment is the exploration for mineral
resources.
 
 ***9.
Commitments***
  (a)
    The
      Corporation has entered into leases, expiring June 30, 2005, for office
      premises which require rental payments of approximately $4,000 per month.
 
 (b)
    The
      Corporation has provided a guarantee to Albetros in the amount of R100,000
      ($21,000) for any environmental rehabilitation which may be required on
      the Albetros Diamond Project. See Note 4.
 
  82
   ***10.
Differences between Canadian and US Generally Accepted Accounting Principles
("GAAP”)***
  The
Corporation’s consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in Canada. The material
measurement differences between GAAP in Canada and the United States that would
have had an effect on these financial statements are as follows:
 
 **Statements
of Operations and Deficit**
 2004
    
    2003
    
    2002Loss
      for the Year - under Canadian GAAP
    
    $
    3,148,252
    
    $
    2,493,133
    
    $
    11,079,339Exploration
      Expenditures and write-downs-
      net of recoveries
    
    
    -
    
    
    (90,512
    )
    
    (592,570
    )Loss
      for the Year - under US GAAP
    
    $
    3,148,252
    
    $
    2,402,621
    
    $
    10,486,769Basic
      & diluted loss per common share-
      under US GAAP
    
    $
    (0.03
    )
    $
    (0.03
    )
    $
    (0.11
    )Deficit
      - under US GAAP - Beginning of Year
    
    $
    36,265,206
    
    $
    33,862,585
    
    $
    23,375,816Loss
      - under US GAAP
    
    
    3,148,252
    
    
    2,402,621
    
    
    10,486,769Deficit
      - under US GAAP - End of Year
    
    $
    39,413,458
    
    $
    36,265,206
    
    $
    33,862,585
 **Project
Assessment Expenditures (Exploration Expenses)**
 
 For
US GAAP purposes the Corporation expenses exploration expenses when incurred.
When proven and probable reserves are determined for a property, subsequent
development costs of the property will be capitalized. The capitalized costs of
such properties will then be measured, on a periodic basis for recoverability of
carrying values. Acquisition costs of mineral properties are capitalized for US
GAAP purposes.
 
 **Stock
Based Compensation**
 
 For
US GAAP purposes, the Corporation has prospectively adopted the fair value based
method of accounting for stock based compensation in accordance with FASB
123(R). As no stock options were granted in fiscal 2004, there is no impact on
the Corporation's loss for the year or balance sheet at December 31, 2004 under
US GAAP.
 
  **Item
18 - Financial Statements**
  The
Registrant has elected to provide financial statements pursuant to “ *Item
17 - Financial Statements”* .
 83
 **Item
19 - Exhibits**
 **Exhibit
      No.**
    **Name
      of Exhibit**1.1(1)
    Certificate
      and Articles of Incorporation (No. 20340926) — Alberta Business
      Corporations Act (December 17, 1985) — Goldcap Inc.1.2(1)
    Certificate
      and Articles of Amendment (July 2, 1987) — Goldcap Inc.1.3(1)
    Certificate
      of Discontinuation — Alberta Business Corporations Act (September 24,
      1987) — Goldcap Inc.1.4(1)
    Certificate
      and Articles of Continuance (No. 222001-6) — Canada Business Corporations
      Act (September 24, 1987) — Goldcap Inc.1.5(1)
    Certificate
      of Extra-Provincial Registration — Province of British Columbia (March 12,
      1990) — Goldcap Inc.1.6(1)
    Certificate
      and Articles of Amendment — Canada Business Corporations Act (March 17,
      1994) — Goldcap Inc.1.7(1)
    Certificate
      and Articles of Amendment including Name Change (October 26, 1994) —
      Durandel Minerals Corporation1.8(1)
    Certificate
      and Articles of Amendment (November 28, 1995) — Durandel Minerals
      Corporation1.9(1)
    Certificate
      and Articles of Amendment including Name Change (April 22, 1996) —
      Calliope Metals Corporation1.10(1)
    Certificate
      and Articles of Continuance (No. 25946) — Yukon Business Corporations Act
      (June 17, 1997) — Calliope Metals Corporation1.11(2)
    Certificate
      and Articles of Amendment including Name Change (May 10, 1999) — Argosy
      Minerals Inc1.12(3)
    Amendment
      to General By-Laws (May 25, 2000) - Argosy Minerals Inc. Section 7:13
      “Show of Hands”1.13(1)
    General
      By-Laws (January 6, 1987) — Goldcap Inc.1.14(1)
    General
      By-Laws (September 12, 1995) — Durandel Minerals
    Corporation1.15(1)
    General
      By-Laws (April 30, 1997) — Calliope Metals Corporation4.1(3)
    Tripartite
      Agreement with Norilsk Mining Company and Société des Mines De La Tontouta
      regarding formation of a Joint Venture to advance the New Caledonia Nickel
      Project dated October 16, 2001.*Redacted
      version. A Request for Confidential Treatment with respect to certain
      portions of this agreement has been filed with the Securities and Exchange
      Commission.*4.2(2)
    Management
      Agreement with Peninsular Services Pty Ltd4.3(2)
    Management
      Agreement with C.R. Bond.4.4(2)
    Management
      Agreement with Canaust Resource Consultants Ltd.4.5(2)
    Form
      of Stock Option Agreement4.6(3)
    Management
      Agreement with Peninsular Services Pty Ltd. dated January 1,
      20034.7(3)
    Management
      Agreement with 667060 BC Ltd.4.8(3)
    Agreement
      for Sale of Shares with Albetros Inland Diamond Exploration (Pty) Limited4.9(3)
    Option Agreement with Happy Tracks Mining
      Company4.10
    Option
      Agreement with Cirincione Brothers8.1
    List of Subsidiaries12.1
    Section 302 Certification12.2
    Section 302 Certification13.1
    Section 906 Certification13.2
    Section 906 Certification
 
  (1)
    Incorporated
      by reference to Form 20-F Amendment No. 2 filed January 8,
      1998.
 (2)
    Incorporated
      by reference to Form 20-F filed June 29,
2001.
 (3)
    Incorporated
      by reference to Form 20-F filed May29, 2004
 **84**
 **SIGNATURES** ****
  The
Registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused and authorized this annual report to be signed on
its behalf by the undersigned.
 
 
 **ARGOSY
MINERALS INC.**
 
 
 
 
 
 Dated: March
      31, 2005
    By:Cecil
      R. Bond, Chief Executive Officer
 
 
  85
 Exhibit 4.9
  Option
to Purchase Agreement
 
 **THIS
OPTION TO PURCHASE** (the
“ **Agreement** ”)
is made effective this 1 st day of May, 2004 (the “ **Effective
Date** ”),
 
 **BY
AND BETWEEN:**
 **Joseph
F. Cirincione,** a
single man, of
 10700
Dormar Court, San Jose, CA 95127, and
 **Peter
Cirincione,** a
single man, of
 574
N 19 th Street, San Jose CA 95112
 
 (together
hereinafter referred to as “the **Owner** ”)
 
 **AND**   **Argosy
Mining Corp**
 20607
Logan Avenue,
 Langley,
BC V3A 7R3 CANADA
 
 (hereinafter
referred to as “ **Argosy** ”)
 
 **WITNESSETH:**
 
 **THAT
FOR AND IN CONSIDERATION** of
ten dollars (US $10.00) and other good and valuable consideration, the receipt
and sufficiency which are acknowledged, and in further consideration of the
mutual covenants and agreements of Argosy and the Owner as set forth in this
Agreement, the Owner does hereby exclusively lease, and let to Argosy solely for
the purposes stated in this Agreement, those certain unpatented mining claims
situated in the County of Elko, in the State of Nevada, which is further
described in Exhibit “A” attached hereto and made a part of this Agreement (the
“ **Property** ”),
together with all ores, mineral and mineral substances of every nature and
character, whatsoever, and all other appurtenant rights useful or convenient for
exploration and related uses. The interests leased are subject only to existing
encumbrances of record.
 
 1.
    Rights
      Granted
 Notwithstanding
any of the terms and conditions of this Agreement, the intent of the parties is
for Argosy to conduct exploration activities upon the Property to determine its
further interest in developing and mining said ores, minerals, metals, tailings,
concentrates and all mineral substances of any character and nature (the
“ **Minerals** ”).
Upon Argosy’s determination and at its sole discretion, Argosy may exercise the
Option to Purchase as provided for in Section 4. Option to Purchase.
 
 The
Owner grants to Argosy any and all rights in any way appurtenant to exploration
activities, insofar as the Owner has the power and ability to grant such rights,
including, but not limited to the following:
 (a)
    the
      right to enter the Property to survey, explore, drill, sample and develop
      without limitation, all Minerals,
 (b)
    to
      construct, use, maintain, repair, replace and relocate any structure and
      facilities deemed necessary by Argosy to effectuate the purposes of this
      Agreement,
 (c)
    to
      use the Property for storage or disposal of Minerals, water, waste or
      other materials produced from the Property or other property controlled by
      Argosy,
 86
 (d)
    to
      use all easements, rights of way or other means of access for ingress and
      egress to and from the Property convenient or necessary for Argosy’s
      activities on the Property or on other property owned, leased or acquired
      by Argosy,
 (e)
    to
      use as much of the surface granted by this Agreement as Argosy deems
      advisable to further Argosy’s performance of its rights and obligations
      and to effectuate the purposes of this
Agreement,
 (f)
    to
      appropriate, use and dispose of all water on or appurtenant to the
      Property,
 (g)
    to
      use any exploration method without limitation, and
 (h)
    to
      exercise all rights and privileges not specifically described above which
      may be reasonably necessary, convenient or suitable for or incidental to
      Argosy to effectuate the purposes of this Agreement.
 
 2.
    Term
 This
Agreement is granted for a term of three (3) years from the Effective Date first
written above. The term of this Agreement may be extended by mutual agreement of
the parties.
 
 3.
    Consideration
 In
consideration of the terms and conditions granted by this Agreement, Argosy
shall pay to the Owner the following sums:
 (a)
    upon
      execution of this Agreement, the sum of Twenty Thousand Dollars (US
      $20,000),
 (b)
    On
      or before the first anniversary of the Effective Date of this Agreement,
      the sum of Twenty Thousand Dollars (US $20,000), and
 (c)
    On
      or before the second anniversary of the Effective Date of this Agreement,
      the sum of Twenty Thousand Dollars (US $20,000).
 Argosy
has the right to prepay any consideration payment. The consideration payment
shall be in lieu of any obligation expressed or implied to explore or perform
any work on the Property.
 
 4.
    Option
      to Purchase
 *4.1*
    *Total
      Purchase Price*
 The
Owner grants to Argosy the exclusive and irrevocable option to purchase the
Owner’s entire interest in and to the Property for the total purchase price of
One Million, Five Hundred Thousand Dollars, (US $1,500,000). All consideration
payments made in accordance with Section 3 - Consideration shall be fully
credited towards the total purchase price.
 
 To
exercise its option to purchase, Argosy shall give written notice to the Owner
and the balance of the total purchase price shall be paid in a lump sum within
thirty (30) days from the date of Argosy’s written notice to the Owner.
 
 Argosy
may exercise this option to purchase at any time during the term of the
Agreement. Argosy must, however, exercise the option to purchase in order to
commence commercial production from the Property.
 
 *4.2*
    *Closing*
 Closing
will occur thirty (30) days from the date of Argosy’s written notice to exercise
the option to purchase, at such time and place agreed upon by the parties. At
the closing, the Owner will deliver to Argosy a fully executed and recordable
quitclaim deed conveying all of Owner’s rights, titles and interests in and to
the Property. At that time, Argosy shall pay to the Owner the balance of the
total purchase price (after crediting consideration payments) by cheque or wire
transfer of funds to the bank account designated by the Owner. Upon completion
of closing, this Agreement shall terminate.
 
 87
 *4.3*
    *Reconveyance
      of Claims*
 During
the term of this Agreement, should Argosy choose to abandon any of the
unpatented lode mining claims comprising the Property, Argosy will execute,
record and send to the Owner a quitclaim deed releasing the unwanted claims to
the Owner.
 
 5.
    Method
      of Payment.
 All
payments owing to the Owner shall be paid by cheque or wire transfer at the
request of the payee, as given by notice as provided for herein, not less than
thirty (30) days prior to the due date of said payment. The most recent request
shall remain in effect until countermanded. Argosy shall make all payments
stated in Sections 3 and 4 in the manner and at the times stated in those
sections. All payments by cheque shall be sent to the Owner at the addresses
provided for in Section 12.
 
 In
the event of a present or future division of ownership interests, payments made
as stated above shall constitute full satisfaction of Argosy’s obligations and
Argosy shall be relieved from any responsibility and liability for the division
of disbursements.
 
 6.
    Owner’s
      Rights, Covenants and Obligations .
 *6.1*
    *Owner’s
      Representations.*
 The
Owner represents and warrants to Argosy that:
 (a)
    To
      the best of its knowledge after due inquiry and
ability:
  (i)
    the
      unpatented claims comprising the Property have been properly monumented on
      the ground, including removal of any PVC and remonumentation with wood
      posts,
 (ii)
    any
      required validation work has been properly
performed,
 (iii)
    location
      notices and certificates have been properly recorded or filed,
 (iv)
    all
      filings required to maintain the claims in good standing through the
      effective date of this Agreement, including evidence of location and
      assessment work, or the equivalent thereof, under NRS Section 517 and the
      Federal Land Policy and Management Act of 1976, 43 USC Section 1744 have
      been made including for the current year 2004,
 (v)
    all
      assessment work required to hold the claims has been properly performed,
      and
 (vi)
    the
      annual filings required under federal statute have been properly and
      timely filed through the assessment year ending September 1, 2004 for the
      current assessment year.
  The
Owner hereby covenants with Argosy and with its successors and assigns that the
Owner:
  (vii)
    is
      lawfully seized of all rights, titles, and interests in and to the
      Property, subject only to the paramount interest of the United States and
      has granted no other interest in the same;
and
 (viii)
    that
      the Property and Minerals are free and clear from all liens and
      encumbrances, including any leases, rights or licenses by third parties,
      excepting reservations of record.
 (b)
    In
      lieu of giving a covenant of quiet enjoyment, the Owner agrees that Argosy
      may, at its sole discretion, take all action necessary, including judicial
      proceedings, to remove any cloud from or cure any defect in the Owner’s
      title to the Property, the Owner agrees to co-operate with Argosy in any
      action taken.
 88
 (c)
    The
      Owner has full power and authority to execute this Agreement.
 (d)
    The
      Owner has not made:
 (i)
    any
      assignment for the benefit of creditors,
 (ii)
    filed
      any petition in bankruptcy,
 (iii)
    been
      adjudicated insolvent or bankrupt,
 (iv)
    petitioned
      or applied to any tribunal for any receiver, conservator or trustee of it
      or any of its properties or assets, or
 (v)
    commenced
      any proceeding under any reorganization, arrangement, readjustment of
      debt, conservation, dissolution or liquidation law or statue of any
      jurisdiction.
 To
the best of the Owner’s knowledge no action or proceeding has been commenced
against the Owner by any creditor, claimant, governmental agency or other
person.
 (e)
    The
      Owner knows of no suit, action or other proceeding or threatened
      proceeding before any court or governmental agency that might result in
      impairment or loss of the Owner’s title to, or the Owner’s interest in any
      part of the Property or the value thereof, or which otherwise materially
      affects title to the Property. The Owner shall notify Argosy promptly of
      any such proceeding arising or threatened prior to the termination of this
      Agreement.
 (f)
    To
      the best of the Owner’s knowledge, there currently is no, nor has there
      previously been any violation of any applicable federal, state, regional
      or county law or regulation relating to zoning, land use, environmental
      protection or otherwise with respect to the Property or the activities
      relating thereto.
 (g)
    The
      Owner represents that to the best of its knowledge and belief, the Owner
      is not aware of any current law or regulation which would prevent the
      performance of Argosy’s right and obligations under this Agreement.
 (h)
    The
      Owner shall not create, nor permit, nor suffer any liens or encumbrances,
      reservations, restrictions and easements on the Property and Minerals.
 
 *6.2*
    *Title*
 Upon
request by Argosy, the Owner shall provide Argosy with all data in its
possession with respect to deeds, easements or other documents which bear the
Owner’s title to the Property and copies of all documents and title reports in
the Owner’s possession or control. The Owner shall, upon Argosy’s request,
record any such document in the Owner’s possession or control which has not been
recorded, but no such interest shall negate the representations of title
contained in this Agreement.
 
 *6.3*
    *Lesser
      Interest*
 Without
impairment of the representations of title contained in this Agreement, if the
Owner controls or owns less than the entire undivided estate in the Property,
all consideration and purchase payments shall be proportionately reduced and all
payments due under that Agreement shall be payable to the Owner only in the
proportion that the Owner’s actual interest in the Property bears to the whole
and undivided estate. The Owner and Argosy acknowledge that there are some
overlapping claims in the “Rose Bud Mine” area.
 
 *6.4*
    *After-Acquired
      Rights*
 If
the Owner acquires any right, title or interest in the Property or in any right,
title or interest within the exterior boundaries of the Property while this
Agreement is in effect, the Owner shall promptly notify Argosy in writing of the
acquisition. At Argosy’s sole election, such right, title or interest shall
become part of the Property and subject to this Agreement, and a recordable
amendment will be executed by the parties.
 
 89
 *6.5*
    *Inspection*
 The
Owner, its agents, employees or personal representatives, duly authorized in
writing, may inspect the activities of Argosy on the Property during normal
business hours, provided, however, that such inspection be made upon no less
than five (5) business days prior notice given to Argosy, and only under the
control and direction of Argosy.
 
 The
Owner, in the exercise of its rights, shall indemnify and hold Argosy harmless
from and against any course of action, right of action, claims, demands, costs
(including attorneys’ fees) or judgments arising out of any death, personal
injury or property damage sustained by the Owner, its agents, employees or
personal representatives while in or upon the Property, unless such death or
injury arises as a direct result of the gross negligence or willful misconduct
of Argosy.
 
 *6.6*
    *Taxes*
 While
this Agreement is in effect, Argosy shall in a timely manner, pay all taxes,
levies or assessments occasioned by and attributable to the equipment or actions
of Argosy. Ad valorem taxes, assessments, levies against the Property and
personal income from purchase payments shall be paid by the Owner during the
term of this Agreement.
 
 *6.7*
    *Confidentiality*
 During
the term of this Agreement, the Owner shall keep all information supplied to it
by Argosy or obtained through any other sources whatever, concerning Argosy’s
exploration on the Property, or any other matters concerning Argosy strictly
confidential. The Owner shall not disclose to any third party during the term of
this Agreement any information, reports, data, maps, surveys or analysis
furnished by Argosy. The Owner agrees that it shall not use the name of Argosy
in any document or press release or disclose any information it may obtain
hereunder to third party or parties or to the public without first having
obtained the written consent of Argosy.
 
 The
Owner further covenants and agrees that in the event it should acquire any
knowledge or information relating to internal proprietary techniques or methods
used by Argosy for purposes of geologic interpretation, extraction, mining,
processing of minerals or any other proprietary information of Argosy, such
proprietary information shall not be used by the Owner, sold, given, disclosed
or otherwise made available to third parties or the public. This subsection
shall survive and continue in full force and effect after the termination, for
any reason, of this Agreement for a period of two (2) years following the date
of said termination.
 
 Under
no circumstances is any portion of the contents of any negotiations of this
Agreement to be recorded with the Elko County Recorder’s office or Bureau of
Land Management or become a matter of public knowledge unless Argosy initiates
such action.
 
 *6.8*
    *Data*
 Upon
the execution of this Agreement, the Owner shall make available to Argosy all
drill core and copies of all geological, geophysical and engineering data and
maps, logs of drill holes, results of assaying and sampling and disclose all
additional data and information the Owner has knowledge of regarding the
Property. Frank Lewis claims he owns a small piece of Property that is two
hundred feet (200’) wide and one thousand feet (1,000’) long. He claims it is
the Mardis patented mine.
 
 90
 7.
    Argosy’s
      Rights, Covenants and Obligations
 *7.1*
    *Operations*
 (a)
    **Exploration
      and Related Activities**- Argosy shall conduct all its activities on the Property in a good and
      workmanlike manner and in accordance with accepted mining practices. All
      decisions with respect to Argosy’s activities, including all decisions
      regarding the commencement, suspension, resumption or termination of any
      activities shall be made by Argosy in its sole discretion. Argosy shall
      comply, however, with all valid and applicable state, federal and local
      laws and regulations governing its activities on the Property.
 (b)
    **Roads
      -**Argosy
      and the Owner shall both have reasonable non-exclusive use of any
      presently existing roads, ways and trails upon the Property, provided,
      however, that the Owner’s use does not unreasonably interfere with the
      rights granted to Argosy by this Agreement. The Owner makes no
      representations or warranties to Argosy as to access to or from adjacent
      properties owned by third parties.
 (c)
    **Tailings
      and Residues**-
      All tailings and other residues resulting from Argosy’s activities on the
      Property shall be the sole and exclusive property of Argosy. Should any
      tailings remain on or in the Property after expiration of a twelve (12)
      month period following termination of this Agreement (except termination
      pursuant to Section 4, such tailings shall become the property of the
      Owner, and Argosy shall have no further right, title or interest in them.
 (d)
    **Environmental
      Obligations**- During the term of this Agreement, Argosy shall timely and fully perform
      all reclamation required by all governmental authorities pertaining or
      related to Argosy’s operations or activities on or with respect to the
      Property or required under this Agreement. Argosy covenants and agrees not
      to undertake, cause, suffer or permit any conditions or activity at, on or
      in the Property which constitutes a nuisance or which results in a
      violation or liability of any nature or kind whatsoever under any
      applicable state, federal or local environmental law, rule, regulation or
      ordinance. In the event Argosy violates any applicable environmental law,
      rule, regulation or ordinance, or undertakes any activity giving rise to
      liability under any of the same, Argosy agrees, at Argosy’s sole cost and
      expense, to promptly remedy and correct such violation or satisfy such
      liability and to satisfy all obligations in connection therewith.
 
 Argosy’s
obligations and liability shall commence on the effective date of this Agreement
and shall terminate upon the termination or surrender of this Agreement, except
for obligations that may have accrued during the term of this Agreement. The
parties expressly agree that Argosy shall not, by the terms thereof, assume
liability for damages to the Property or responsibility for reclamation or
environmental obligations occurring as a result of any actions or operations on
the Property prior to the Effective Date or those occurring after the
termination date of this Agreement unless Arogsy has exercised its Option to
Purchase. The parties also expressly agree that Argosy shall not, by the terms
thereof, assume liability for damages to the Property or responsibility for
reclamation or environmental obligations occurring as a result of any actions or
operations on the Property conducted by the Owner or its assigns, including, but
not limited to the removal of timber and related products. The Owner shall
indemnify and hold Argosy harmless from any and all claims, causes of action,
penalties, fines or other court costs and reasonable attorney’s fees, that may
arise from actions or operations conducted on the Property prior or occurring
after the termination date of the Agreement, or that may arise from actions or
operations conducted on the Property by the Owner or its assigns, including, but
not limited to the removal of timber and related products.
 
 91
 *7.2*
    *Adverse
      Claims*
 In
case of suit, adverse claim, dispute or question as the ownership of the
Property or of consideration or purchase payment payable under this Agreement,
Argosy may, at its sole discretion deposit the payment (or the portion of the
payment in dispute) into an escrow account, which shall be paid as appropriate
upon final disposition of such suit, claim, dispute or question. Argosy will not
be held in default of payment until such suit, claim, dispute or question has
been finally disposed of.
 
 In
the event payments are deposited in an escrow account, Argosy shall be entitled
to recover all escrow fees and other costs incurred by Argosy in establishing
and maintaining an escrow account.
 
 Any
payments so withheld shall be paid within thirty (30) days after Argosy has been
furnished with proof sufficient, in Argosy’s option, to settle the questions. If
the rights or interests granted Argosy under this Agreement are disputed, it
shall not be counted against Argosy either as affecting the term of the
Agreement, which shall be extended by the period of dispute, or for any other
purpose.
 
 *7.3*
    *Co-mingling*
 Argosy
shall have the right to co-mingle the Minerals produced from the Property with
similar minerals from other properties for the purpose of transportation,
storage, milling, processing, leaching and for sale of disposition. However,
prior to co-mingling any ores or Minerals from the Property (“Property Ore”)
with ores or minerals from other properties (“Outside Ore”) the Property Ore
shall be measured and sampled in accordance with sound mining and metallurgical
practice for moisture and paying mineral content. Representative samples of the
Property Ore shall be retained by Argosy and assays (including penalty
substance) of these samples shall be made before co-mingling to determine metal
content.
 
 *7.4*
    *Annual
      Filings*
 During
the term of this Agreement, Argosy shall pay, in accordance with federal
statute, the required One Hundred Dollars ($100) per claim per assessment year
commencing September 1, 2004 and for every assessment year in which Argosy
continues this Agreement.
 
 Argosy
shall be relieved of its obligation to pay the annual filing for any period in
which such annual filing is not required or is suspended and Argosy shall have
the benefit of subsequent laws enacted which relate to annual filing or
assessment work. In the event such subsequent laws enacted, either federal or
state, become, in Argosy’s opinion, too onerous, Argosy may terminate the
Agreement in accordance with Section 8.1.
 
 *7.5*
    *Amendments,
      Relocation and Patents*
 During
the term of this Agreement, Argosy agrees to use its reasonable efforts without
incurring liability to remonument the Property in accordance with state and
federal regulations and will provide the Owner with a final map. Argosy shall
have the right, but not the obligation to amend or relocate, in the appropriate
name, any or all of the unpatented mining claims included in the Property, to
locate placer claims on ground covered by mining and vice versa, and to locate
any fractions resulting from the location amendment or all expenses authorized
by Argosy in connection with locating, amending or relocating mining claims or
millsites, or prosecuting patent proceedings shall be borne by Argosy. The
rights of Argosy under this Agreement shall extend to all such locations,
amended locations, relocations and patented mining claims and millsites.
 
 92
 8.
    Termination
      and Default
 *8.1*
    *Termination*
 Notwithstanding
anything herein to the contrary, Argosy may terminate all of its rights and
obligations under the Agreement at any time. Argosy will deliver written notice
of such termination in the form of a recordable quitclaim deed releasing all of
its right, title and interest to the Property to the Owner.
 
 In
the event of termination, the Owner shall retain all payments paid pursuant to
this Agreement in consideration for the Owner’s possession of the Property. The
foregoing shall be the Owner’s sole and exclusive remedy for termination and the
Owner exclusively waives the remedies of specific performance or further
compensatory damages.
 
 Upon
termination, Argosy’s sole obligation shall be to perform reclamation work
required as a direct result of Argosy’s activities on the Property, as required
by applicable law. The Owner may, upon approval from the appropriate
governmental agencies, assume any portion of Argosy’s reclamation obligations
and thereby release Argosy from such obligations and liabilities resulting
therefrom.
 
 In
the event Argosy terminates, upon written request from the Owner within ninety
(90) days of termination, Argosy shall supply to the Owner copies of all
non-interpretative geological data which pertains to the Property. ARGOSY MAKES
NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY SUCH
DATA OR INFORMATION AND SHALL NOT BE LIABLE ON ACCOUNT OF ANY USE BY THE OWNER
OR ANY OTHER PARTY OF ANY DATA OR INFORMATION AND THE SAME IS PROVIDED “AS IS,
WHERE IS” WITHOUT ANY WARRANTY, EXPRESSLY EXCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. Argosy shall not be
responsible for any loss or destruction of drill core.
 
 *8.2*
    *Default*
 Failure
by Argosy to perform or comply with any terms, provisions or conditions,
expressed or implied, shall not automatically terminate this Agreement, nor
render it null and void. If Argosy defaults in the performance of its
obligations, the Owner shall give Argosy written notice specifying the default.
If Argosy does not commence curing the default within sixty (60) days after
receiving notice, followed by diligent prosecution of such action to completion
within a reasonable time, the Owner may terminate this Agreement by delivering
to Argosy written notice of such termination. All rights of Argosy under this
Agreement, except as provided hereunder and under Section 8.4 will then
terminate. The Owner shall not have the right to terminate this Agreement except
as provided in this section.
 
 Should
Argosy by notice given to the Owner, dispute the existence of a default, then
this Agreement shall not terminate hereunder unless Argosy does not initiate and
diligently pursue steps to correct the default within sixty (60) days after the
default has been determined by a final decision of a court of competent
jurisdiction.
 
 *8.3*
    *Rights
      not to be Suspended*
 Any
dispute between the parties or resolution thereof relating to this Agreement
shall not interfere with no affect any right Argosy may have under this
Agreement.
 
 *8.4*
    *Equipment
      Removal*
 For
a period of twelve (12) months following the termination of this Agreement,
Argosy shall have the right to remove from the Property all structures, personal
property and improvements owned by Argosy or erected or placed in the Property
by Argosy. Argosy may, at its election and upon obtaining the Owner’s written
consent, elect to leave structures, fixtures and improvements on the Property.
Argosy may, but is not in any way obligated to keep one or more watchmen on the
Property during this period.
 
 9.
    Force
      Majeure
 Argosy’s
failure to perform or to comply with any of the covenants or conditions under
this Agreement by conditions of force majeure shall not be grounds for default,
cancellation, termination or forfeiture of this Agreement. Force majeure means
any cause or conditions beyond Argosy’ reasonable control during which time
failure to perform under this Agreement is caused or compliance with prevented
by severe weather, explosion, unusual mining casualty, damage to or destruction
of facilities, fire, flood, earthquake, civil or military authority
insurrection, strikes, riots, fuel shortages, judicial orders, litigation,
governmental actions., policies or regulations, inability to obtain license,
permit or other authorizations that may be required to conduct activities, acts
of God; or any circumstance or condition beyond the control of Argosy, which
substantially restricts or inhibits Argosy’s activities on the Property under
this Agreement.
 
 Should
Argosy claim the existence of a condition of force majeure, Argosy shall be
excused from and not held liable for, such failure to perform or comply. The
term of this agreement shall be extended for an additional period equal to the
duration of the period of force majeure. Should Argosy claim the existence of a
condition of force majeure, it shall promptly notify the Owner in writing of
such occurrence, describe the estimated extent of any delays likely to result
therefrom and shall similarly so notify the Owner upon cessation of the
condition of force majeure. Argosy shall exercise reasonable diligence to resume
its obligations and activities pursuant to this Agreement.
 
 Argosy
shall have the right to determine and settle any strike, lockout or industrial
disturbance in its sole discretion and the aforesaid requirement of exercising
reasonable diligence to resume activities shall not require Argosy to accede to
any demand or post of any other party involved in such strike, lockout or
industrial dispute.
 
 10
    Assignment
 Either
party may assign all or any portion of their rights under this Agreement. No
change or division in the ownership of the Property or the payments provided
for, however accomplished shall enlarge the obligations nor diminish the rights
of Argosy. The Owner covenants that any change in ownership shall be
accomplished in such a manner that Argosy shall be required to make payments and
give notices to but one person, firm or corporation. In the event Argosy’s
interest in the Property or payments are now or hereafter ever owned by more
than the parties listed in Section 11, Argosy may withhold further payments
until all such owners have designated a single party to act for all of them
hereunder in all respects. No change or division of ownership shall be binding
on Argosy until thirty (30) days after the Owner has delivered to Argosy a
certified copy of the recorded instrument evidencing the change or division.
 
 93
 11.
    Notices
 Any
notice to be given under this Agreement shall be effective when personally
served upon the party to be given such notice at the address designated below,
or when delivered by certified mail, return receipt requested. Until notified
otherwise in writing, the addresses for such notices shall be:
 **Owner:**
    Mr.
      Joseph Cirincione and Mr. Peter Cirincione
 c/o
Mr. Peter Cirincione
 574
N 19 th Street
 San
Jose CA 95112-1741
 USA
 **With a copy to:**
    Mr.
      Joseph Cirincione
 10700
Dormar Cr
 San
Jose CA 95127-2709
 USA
 **Buyer or Lessee:**
    Argosy
      Mining Corp.
 20607
Logan Avenue
 Langley
BC V3A 7R3
 CANADA
 
 12
    General
      Provisions
 *12.1*
    *Memorandum*
 Argosy
and the Owner agree to enter into a Memorandum of this Agreement in the form of
Exhibit “B” for the sole purpose of giving notice of the existence of this
Agreement. Argosy may record the Memorandum of this Agreement or this Agreement
itself, as it may elect.
 *12.2*
    *Additional
      Documents*
 The
parties agree to exclude all such further instruments and to do all such further
actions as may be necessary to effectuate the purposes of this Agreement.
 *12.3*
    *Effect*
 All
covenants, conditions and terms of this Agreement shall be of benefit to and run
with the Property and shall bind and inure to the benefit of the parties hereto,
their respective assigns and successors. Nothing herein shall be construed to
create, expressly or by implication, joint venture, a mining partnership,
commercial partnership or other partnership in relation.
 *12.4*
    *Headings*
 The
title headings to the respective sections hereof shall not be deemed a part of
this Agreement but shall be regarded as having been used for convenience only.
 *12.5*
    *Entire
      Agreement*
 This
Agreement, together with the Exhibits contains the entire Agreement by and
between Argosy and the Owner and no oral agreement, promise, statement or
representation which is not contained herein shall be binding on the parties.
The Agreement shall not be modified or amended except by written agreement
signed by the parties hereto.
 
 IN
WITNESS WHEREOF this Agreement has been entered into this day first above
written.
 
 *“Joseph
F. Cirincione”*
 **___________________________________**
 Joseph
F. Cirincione
 
 94
 
 *“Peter
Cirincione”*
 **___________________________________**
 Peter
Cirincione
 
 
 **ARGOSY
MINING CORP.**
 
 
 *“Cecil
Bond”*
 Per:
_______________________________
 Cecil
R. Bond, Director
 95
 **LIST
OF CLAIMS**
 
 
 **Table
      1: GOLD CREEK CLAIMS (Cirincione claims)****No.**
    **Serial
      Nr Full**
    **Mc
      Claim Nm**
    **Cust
      Nm**
    **Mc
      Lead Case Ser Nr**
    **Casetype**
    **Case
      Disp Txt**
    **Mc
      Loc Dt**
    **Last
      Assess Yr****1**
    NMC92023
    DIANA
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**2**
    NMC92024
    DJ
      # 1
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**3**
    NMC92025
    DJ
      # 2
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**4**
    NMC92026
    DJ
      # 3
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**5**
    NMC92027
    DJ
      # 5
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**6**
    NMC92028
    DJ
      # 6
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/08/1955
    2004**7**
    NMC92018
    HILLTOP
      # 2
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/26/1955
    2004**8**
    NMC92019
    HILLTOP
      # 5
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/27/1955
    2004**9**
    NMC92020
    HILLTOP
      # 6
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/27/1955
    2004**10**
    NMC92021
    MOUNTAN
      VIEW # 4
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/26/1955
    2004**11**
    NMC92022
    MOUNTAN
      VIEW # 7
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/24/1955
    2004**12**
    NMC92000
    PINE
      RIGE # 1 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**13**
    NMC92001
    PINE
      RIGE # 2 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**14**
    NMC92002
    PINE
      RIGE # 3 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**15**
    NMC92003
    PINE
      RIGE # 4 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**16**
    NMC92004
    PINE
      RIGE # 5 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**17**
    NMC92005
    PINE
      RIGE # 6 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**18**
    NMC92006
    PINE
      RIGE # 7 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**19**
    NMC92007
    PINE
      RIGE # 8 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**20**
    NMC92008
    PINE
      RIGE # 9 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/24/1955
    2004**21**
    NMC92009
    PINE
      RIGE # 10 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/24/1955
    2004**22**
    NMC92010
    PINE
      RIGE # 11 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/26/1955
    2004**23**
    NMC92011
    PINE
      RIGE # 12 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    11/10/1948
    2004**24**
    NMC92012
    PINE
      RIGE # 13 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    11/10/1948
    2004**25**
    NMC92013
    PINE
      RIGE # 14 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/26/1955
    2004**26**
    NMC92014
    PINE
      RIGE # 15 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**27**
    NMC92015
    PINE
      RIGE # 16 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    08/11/1955
    2004**28**
    NMC92016
    PINE
      RIGE # 18 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    11/10/1948
    2004**29**
    NMC92017
    PINE
      RIGE # 19 EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/24/1955
    2004**30**
    NMC91999
    PINE
      RIGE EXT
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    09/10/1950
    2004**31**
    NMC92030
    TOMBOY
      # 1
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    10/21/1948
    2004**32**
    NMC92031
    TOMBOY
      # 4
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    10/21/1948
    2004**33**
    NMC92029
    TOMBOY
      # 5
    CIRINCIONE
      PETER
    NMC91999
    384101
    ACTIVE
    10/21/1948
    2004
 96
   **MEMORANDUM
OF OPTION TO PURCHASE**
 
 **THIS
MEMORANDUM OF OPTION TO PURCHASE** (hereinafter
referred to as “the Memorandum”) is made effective this 1 st day of May, 2004 (“the effective date”), by and between JOSEPH F. CIRINCIONE, a
single man, whose address is 10700 Dormar Ct., San Jose, CA 95127, and PETER
CIRINCIONE, a single man, whose address is 574 N 19 th St., San Jose, CA 95112, (hereinafter referred to together as “the Owner”) and
ARGOSY MINING CORP, of 20607 Logan Avenue, Langley, BC V3A 7R3 CANADA
(hereinafter referred to as “Argosy”).
 
 **WHEREAS** the Owner and Argosy have entered into an Option to Purchase of even date
herewith (the “Agreement”), and
 
 **WHEREAS,** the
Owner and Argosy have agreed to enter into and record this Memorandum to reflect
the interest of land affected by the Agreement.
 
 **NOW
THEREFORE,** the
Owner and Argosy agree and state that in consideration of ten dollars (US
$10.00) and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged and in further consideration of the execution of the
Agreement, the Owner grants to Argosy the exclusive right to lease and let,
solely for the purposes stated in the Agreement, those certain unpatented mining
claims situated in the County of Elko, in the State of Nevada which is further
described in Exhibit “A” attached to and made a part of the Agreement (the
“Property”), together with all ores, minerals and mineral substances of every
nature and character whatsoever and all other appurtenant rights useful or
convenient for exploration and related uses. The interests leased are subject
only to existing encumbrances of record.
 
 For
the same consideration, during the term of the Agreement, the Owner also grants
to Argosy the exclusive and irrevocable option to purchase the Property for the
total purchase price specified in the Agreement. Argosy may exercise the option
to purchase by giving notice to the Owner during the term of the Agreement.
 
 The
term of the Agreement and this Memorandum is through and including the
30 th day of June, 2007 .
 
 While
the Agreement is in effect, Argosy shall have the exclusive and unlimited right
to ingress and egress, the exclusive and unlimited right to explore for all
mineral and materials, without exclusion, found in, on and under the Property
and all other rights and privileges convenient to accomplish the purposes of the
Agreement.
 
 **IN
WITNESS WHEREOF,** the
parties hereto have executed this Memorandum effective the day and year first
above written.
 
 *“Joseph
F. Cirincione”*
 **___________________________________**
 Joseph
F. Cirincione
 
 *“Peter
Cirincione”*
 **___________________________________**
 Peter
Cirincione
 
 **ARGOSY
MINING CORP.**
 
 *“Cecil
Bond”*
 Per:
_______________________________
 Cecil
R. Bond, Director
  97
 **Exhibit 8.1**
  **List
of Subsidiaries:**
 
 Argosy
      Mining Corp
    CanadaCalliope
      Metals (Holdings) Ltd.
    CanadaAndover
      Resources N.L.
    AustraliaMelling
      Investments Limited
    BVIBalzan
      Investments Limited
    BVIArgosy
      Mining Corporation Pty Ltd.
    South
      Africa

98
**Exhibit 12.1**


**CERTIFICATION**





I,
Cecil R. Bond, certify that:





1.  I
have reviewed this annual report on Form 20-F of Argosy Minerals
Inc.;





2.  Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;





3.  Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for,
the periods presented in this report;





4.  The
company’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15 (e) and 15d-15 (e)) for the company and have:




(a)  Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;




(b)  Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and




(c)  Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report that has
materially affected, or is reasonably likely to materially affect, the company’s
internal control over financial reporting; and





5.  The
company’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons
performing the equivalent functions):




(a)  All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report
financial information; and




(b)  Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the company’s internal control over financial
reporting.


Date:
    March
      31, 2005Cecil
      R. Bond, Chief Executive Officer(Principal
      Executive Officer)


99
 **Exhibit 12.2**


**CERTIFICATION**
 
 I,
Marcus N. Foster, certify that:
 
 1.  I
have reviewed this annual report on Form 20-F of Argosy Minerals
Inc.;
 
 2.  Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
 
 3.  Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for,
the periods presented in this report;
 
 4.  The
company’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15 (e) and 15d-15 (e)) for the company and have:
  (a)  Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
  (b)  Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
  (c)  Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report that has
materially affected, or is reasonably likely to materially affect, the company’s
internal control over financial reporting; and
 
 5.  The
company’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons
performing the equivalent functions):
  (a)  All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report
financial information; and
  (b)  Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the company’s internal control over financial
reporting.
 Date:
    March
      31, 2005
    
    *"signed"*Marcus
      N. Foster, Chief Financial Officer(Principal
      Financial Officer)
 100
 **Exhibit 13.1**
 **CERTIFICATION
PURSUANT TO**
 **18
U.S.C. §1350,**
 **AS
ADOPTED PURSUANT TO**
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 In
connection with the annual report of Argosy Minerals Inc. (the “Company”) on
Form 20-F for the year ended December 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Cecil R. Bond, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
 
 (1)  The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
 
 (2)  The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
  Date:
    March
      31, 2005Cecil
      R. Bond, Chief Executive Officer(Principal
      Executive Officer)
 101
 **Exhibit 13.2**
 **CERTIFICATION
PURSUANT TO**
 **18
U.S.C. §1350,**
 **AS
ADOPTED PURSUANT TO**
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
 
 
 In
connection with the annual report of Argosy Minerals Inc. (the “Company”) on
Form 20-F for the year ended December 31, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Marcus N. Foster,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
 
 (1)  The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
 
 (2)  The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
      Date:
    March
      31, 2005
    
    *"signed"*Marcus
      N. Foster, Chief Financial Officer(Principal
      Financial Officer)
 102