`United States
                       Securities and Exchange Commission
                              Washington, DC 20549

                                   FORM 10-QSB

                  Quarterly Report under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


For the Nine Months Ended                                 Commission File Number
   September 30, 2006                                              0-50218


                               BEKEM METALS, INC.
             (Exact name of registrant as specified in its charter)

                                      UTAH
          (State or other jurisdiction of incorporation or organization

                                   87-0669131
                      (I.R.S. Employer Identification No.)


          170 Tchaikovsky Street, 4th Floor, Almaty, Kazakhstan 050000
                    (Address of principal executive offices)

                                 +7 3272 582 386
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12 (b) of the Act: None.

Securities registered pursuant to section 12(g) of the Exchange Act: Common,
$0.001 par value

Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days. (1) Yes [X] No [ ]

Check whether the Issuer is a shell company (as defined by Rule 12b-2 of the
Exchange Act) Yes [ ] No [X]

As of September 30, 2006, the issuer had 124,088,888 shares of its $0.001 par
value common stock outstanding.



                                      INDEX

                               Bekem Metals, Inc.
                                   Form 10-QSB
                  For The Nine Months Ended September 30, 2006

Part I.  Financial Information                                              Page
                                                                            ----

         Item 1.     Financial Statements

                     Condensed Consolidated Balance Sheets (Unaudited)
                       as of September 30, 2006 and December 31, 2005         2

                     Condensed Consolidated Statements of Operations
                       (Unaudited) for the Nine Months and Three Months
                       Ended September 30, 2006 and 2005                      3

                     Condensed Consolidated Statements of Cash Flows
                       (Unaudited) for the Nine Months Ended September 30,
                       2006 and 2005                                          4

                     Notes to the Unaudited Condensed Consolidated
                       Financial Statements                                   5

         Item 2.     Management's Discussion and Analysis                    18

         Item 3.     Controls and Procedures                                 31


Part II.  Other Information

          Item 2.    Unregistered Sales of Equity Securities and
                       Use of Proceeds                                       32

         Item 6.     Exhibits                                                34

         Signatures



PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                                               BEKEM METALS, INC. AND SUBSIDIARIES
                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                                           (UNAUDITED)

                                                                                          September 30,          December 31,
                                                                                                   2006                  2005
------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash                                                                                      $   8,496,223         $      89,366

Trade accounts receivable                                                                        11,794                18,657

Prepaid expenses and other current assets                                                     2,826,533                     -

Related party receivables                                                                        14,072                42,393
Inventories                                                                                     378,360               337,030

VAT recoverable                                                                                 141,495                61,936
------------------------------------------------------------------------------------------------------------------------------
Total Current Assets                                                                         11,868,477               549,382
------------------------------------------------------------------------------------------------------------------------------


Long-term deferred expenses                                                                       8,101                37,606
Property, plant and equipment (net of accumulated                                             5,188,951             3,061,290
   depreciation of $56,089 and $25,436)

Other assets                                                                                    131,999                 1,635
Mineral property rights net                                                                   8,243,226             7,877,078
------------------------------------------------------------------------------------------------------------------------------
Total Assets                                                                              $  25,440,754         $  11,526,991
==============================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable                                                                          $     740,926         $     424,306
Accrued expenses                                                                                489,780               276,291

Due to related party                                                                                  -                 5,518
Current portion of long-term notes payable                                                            -             3,660,230
------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities                                                                     1,230,706             4,366,345

Deferred tax liabilities                                                                      2,473,823             2,304,285
Notes payable                                                                                         -               797,178
Notes payable - related parties                                                                  90,000             4,075,012
Asset retirement obligation                                                                     931,656               833,840
------------------------------------------------------------------------------------------------------------------------------
Total Liabilities                                                                             4,726,185            12,376,660
------------------------------------------------------------------------------------------------------------------------------

Shareholders' Equity (Deficit)
Preferred stock; $0.001 par value, 20,000,000 shares
  authorized, no shares outstanding                                                                   -                     -
Common stock; $0.001 par value, 150,000,000 shares
  authorized, 124,088,888 and 100,089,888 shares outstanding                                    124,089               100,089
Additional paid-in capital                                                                   26,893,722               515,879
Accumulated deficit                                                                          (6,286,730)           (1,448,344)
Cumulative translation adjustment                                                               (16,512)              (17,293)
------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity (Deficit)                                                         20,697,210             (849,669)
------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity (Deficit)                                      $  25,440,754         $  11,526,991
==============================================================================================================================

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

                                                                   2


                                               BEKEM METALS, INC. AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (UNAUDITED)

                                              For the three months ended               For the nine months ended
                                                      September 30,                        September 30,
                                             --------------------------------------------------------------------
                                                  2006            2005                 2006             2005
-----------------------------------------------------------------------------------------------------------------
Revenue                                      $          -     $         -          $     69,527      $         -
-----------------------------------------------------------------------------------------------------------------

Operational Expenses

Cost of product sold                                    -               -                65,871                -

General and administrative expenses             1,287,652         168,575             2,209,740          358,519

Research and development costs                          -               -               391,307                -
Exploratory costs                                 264,688          87,609               382,953          275,175
Accretion expense                                  18,758          13,915                54,901           41,746
Depreciation expense                               12,695           7,629                48,423           23,781
-----------------------------------------------------------------------------------------------------------------

Total Expenses                                  1,583,793         277,728             3,153,195          699,221
-----------------------------------------------------------------------------------------------------------------

Loss From Operations                           (1,583,793)       (277,728)           (3,083,668)        (699,221)

Other Income (Expense)
Other income                                      (37,556)              -              (109,267)               -
Interest expense                               (1,109,062)              -            (1,474,274)               -

Translation adjustment                             90,045               -               (30,269)               -
Grant expense                                           -               -                     -           (3,108)
Grant revenue                                           -               -                     -            3,108
Exchange rate gain (loss)                      (1,031,056)            835              (140,908)           3,920
-----------------------------------------------------------------------------------------------------------------

Net Other Income                               (2,087,629)            835            (1,754,718)           3,920
-----------------------------------------------------------------------------------------------------------------

Net Loss Before Taxes                          (3,671,422)       (276,893)           (4,838,386)        (695,301)

Deferred tax benefit                                    -               -                     -                -

-----------------------------------------------------------------------------------------------------------------

Net Loss                                     $ (3,671,422)    $  (276,893)         $ (4,838,386)     $  (695,301)
=================================================================================================================
Basic Loss per Common Share                  $      (0.03)    $     (0.01)         $      (0.05)     $     (0.02)
=================================================================================================================
Weighted-Average Shares used in
Basic Loss per Common Share                   120,436,714      38,543,236           106,946,031       38,387,970
=================================================================================================================

=================================================================================================================
Diluted Loss per Common Share                $      (0.03)    $     (0.01)         $      (0.04)     $     (0.02)
=================================================================================================================
Weighted-Average Shares used in
Diluted Loss per Common Share                 129,254,105      38,543,236           109,917,459       38,387,970
=================================================================================================================

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

                                                           3

                                              BEKEM METALS, INC. AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                           (UNAUDITED)

For the nine months ended September 30                                                      2006                      2005
---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net loss                                                                            $ (4,838,386)             $   (695,301)
Adjustments to reconcile net loss to
   net cash provided by operating activities:
      Depreciation and amortization                                                       37,396                     5,938
      Accretion expense on asset retirement obligations                                   54,901                     59571
      Shares issued on option modification                                                     -                    19,426
      Foreign currency exchange gain                                                      41,682                    (7,317)
      Loss on disposal of property and equipment                                          40,191                         -
      Change in operating assets and liabilities:
         Accounts receivable                                                               7,370                         -
         Inventories                                                                     (24,469)                   (4,610)
         Prepaid expenses and other current assets                                      (709,570)                   13,994
         Accounts payable and accrued liabilities                                        298,512                   234,487
         Accrued expenses                                                                206,418                         -
         Deferred grant revenue                                                            2,445                    (2,565)
---------------------------------------------------------------------------------------------------------------------------
Net Cash From Operating Activities                                                    (4,883,510)                 (376,377)
---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Issuance of shares                                                                    26,401,842                         -
Purchase of property and equipment, net                                               (2,079,419)                   (2,521)
Purchase of intangible assets                                                            (31,797)                        -
Restricted cash                                                                         (100,000)
Cash acquired in acquisitions                                                             45,393                     2,648
Increase in related party payables                                                    (2,240,252)                        -
---------------------------------------------------------------------------------------------------------------------------
Net Cash From Investing Activities                                                    21,995,494                       127
---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from notes payable                                                              869,900                   397,472
Payments on notes payable                                                            (11,260,644)                        -
Proceeds from notes payable                                                            1,536,044                         -
Proceeds from accrued liabilities to related parties                                           -                     2,374
---------------------------------------------------------------------------------------------------------------------------
Net Cash From Financing Activities                                                    (8,854,700)                   399,846
---------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash                                                  149,573                     2,554
---------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash                                                                   8,406,857                    26,150
Cash at Beginning of Period                                                               89,366                     4,190
---------------------------------------------------------------------------------------------------------------------------
Cash at End of Period                                                               $  8,496,223              $     30,340
===========================================================================================================================

Supplemental Cash Flow Information
===========================================================================================================================
Non Cash Investing and Financing Activities:
Fair value of assets acquired                                                       $          -              $      4,471
Fair value of shares issued for
acquisitions                                                                        $          -              $     11,706
---------------------------------------------------------------------------------------------------------------------------
Liabilities Assumed                                                                 $          -              $     16,177
===========================================================================================================================

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

                                                             4


NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS

Interim Financial Information -- The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they are condensed and do not
include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments and reclassifications
considered necessary for a fair and comparable presentation have been included
and are of a normal recurring nature. The accompanying financial statements
should be read in conjunction with the Company's most recent audited financial
statements included in the Company's annual report on Form 10-KSB filed for the
year ended December 31, 2005. Operating results for the nine-month period ended
September 30, 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006.

Basis of Presentation

On October 24, 2005, Bekem Metals, Inc. ("BMI", "Bekem" or the "Company")
entered into an Acquisition Agreement with Kazakh Metals, Inc., a British Virgin
Islands international business company ("KMI"), under which BMI acquired 100% of
the outstanding common shares of KMI in exchange for the issuance of 61,200,000
common shares.

The KMI shareholders received 61.1% of the BMI common stock outstanding after
the transaction and therefore KMI was considered the acquirer for financial
reporting purposes. Accordingly, the accompanying financial statements include
financial statements of KMI for all periods presented.

Brisa Equities Corporation, a British Virgin Islands holding company ("Brisa"),
together with other entities its owners control, is the controlling shareholder
of KMI and was also the principal shareholder of BMI. Accordingly, the
transaction was considered to be between entities under common control and did
not result in a change in control of BMI. Following the transaction, entities
over which the controlling shareholder maintained voting and investment control
held 51,600,000 BMI common shares, which represented 51.5% of the 100,088,888
outstanding common shares.

The acquisition of the portion of the net liabilities of BMI relating to the
common shares owned by the controlling shareholder was recorded at historical
cost of $(161,998). The acquisition of the common shares of BMI purchased from
the minority shareholders of BMI were recorded at $345,000, which was the
estimated fair value of those shares on the date of acquisition. KMI accounted
for the purchase of BMI similar to a pooling.

The accompanying consolidated financial statements include the accounts of Bekem
Metals, Inc. and its wholly owned subsidiaries, Kazakh Metals, Inc., Kyzyl Kain
Mamyt LLP ("KKM"), Condesa Pacific, S.A. ("Condesa"), and Kaznickel, LLP
("Kaznickel"). Intercompany accounts and transactions have been eliminated in
consolidation. The results of operations of the previously separate KMI and BMI

                                       5


were combined for all periods prior to the acquisition, with recognition of the
minority interest in BMI, and the operations of BMI and KMI are consolidated
from October 24, 2005.

Bekem Metals, Inc. - The combined financial statements include the accounts of
Condesa and Kaznickel, since the date of its acquisition by Condesa, and the
accounts of BMI since its acquisition by Condesa. Condesa was incorporated under
the laws of the British Virgin Islands on March 5, 2004. Condesa acquired BMI in
a reverse acquisition, on January 28, 2005. See Note 12.

Kazakh Metals, Inc. - The combined financial statements also include the
accounts of KMI and its wholly-owned subsidiary, KKM, which it acquired on June
1, 2005 in a purchase business combination.

Name Change -- On February 9, 2005, the Board of Directors of EMPS Research
Corporation approved, and the stockholders holding a majority of the outstanding
shares of the company approved and ratified by written consent, a change in the
company's name from EMPS Research Corporation to BMI. On March 16, 2005, the
Company filed an amendment to its Articles of Incorporation to affect the
change.

Nature of Business

The Company is engaged in the acquisition, exploration and production of mineral
resource properties. Kaznickel owns the right to the Gornostayevskoye
("Gornostai") nickel and cobalt deposit located in the East Kazakhstan Oblast in
northeast Kazakhstan. The license is for exploration and production of cobalt
and nickel ores and is valid through February 26, 2026. KKM holds exploration
and production licenses from the government of Kazakhstan to a 575,756 acre
parcel, located approximately 130 kilometers northwest of Aktobe, Kazakhstan.
This deposit is referred to as the Kempirsai deposit. The licenses grant KKM the
right to explore for and produce nickel and cobalt from deposits located within
the territory through October 12, 2011, which may be extended upon agreement
between KKM and the Ministry of Energy and Minerals Resources (MEMR) of the
Republic of Kazakhstan. KKM also holds a license to explore for and produce
Mamyt brown coal from a deposit located within 40 kilometers of its cobalt and
nickel deposit. This license expires on December 11, 2018 with further possible
extensions.

Business Condition - The Company has no proven mineral reserves that conform to
U.S. accounting standards and has had only limited ore and Mamyt brown coal
production from its Kempirsai deposit since its acquisition on May 31, 2005. The
Gornostai deposit has not yet entered the development stage with respect to its
mineral interests and has no production. There has been only limited revenue
from the Kempirsai operations, and the Company has incurred a net loss of
$4,855,745 and $695,301 for the nine-month periods ended September 30, 2006 and
2005, respectively. Management expects that the Company will need significant
additional capital to fund construction of a processing plant in 2006-2008. The
Company anticipates it will need to raise additional capital through the sale of
its equity securities or debt securities. Certain shareholders of the Company
have indicated a willingness to provide the Company a line of credit of up to

                                       6


$10,000,000. The Company has no formal agreement with said shareholders to
provide this line of credit and the shareholders are under no obligation to
enter into any agreement or make available any funds to the Company.

Kempirsai Production Stage - The Kempirsai, or KKM, operations are considered to
be in the production stage.

Gornostai Exploration Stage - The Gornostai, or Kaznickel, operations are
considered to be in the exploration stage. Since its inception on March 4, 2004,
the Company has devoted a substantial amount of effort in raising capital,
acquiring Kaznickel, and exploring the Gornostai deposit under its exploration
contract. This mineral property has not yet reached development or production
stage and accordingly, no revenues from production have been recorded.
Therefore, the Gornostai or Kaznickel operation is considered to be in the
development stage.

Currency Translation - The consolidated financial statements are presented in
U.S. dollars. The functional currency of the Company's subsidiaries operating in
Kazakhstan is U.S. dollars for Kaznickel and Kazakh tenge for KKM. Results of
operations are translated into U.S. dollars at the average exchange rates during
the reporting period. Non-monetary assets and liabilities of Kaznickel are
translated into U.S. dollars, using historical exchange rates and monetary
assets and liabilities are translated into U.S. dollars using exchange rates on
the date of the financial statements. Translation differences are included in
results of operations. All balance sheet accounts of KKM are translated at
exchange rates on the date of the financial statements and translation
differences are included in stockholders' equity as cumulative translation
adjustments.

NOTE 2 - ACQUISITIONS

Purchase of Minority Interest in Bekem Metals, Inc. - On October 24, 2005 the
Company issued 17,888,888 shares of common stock to acquire the minority
shareholders' interests of BMI. Acquisition of the minority interests was
accounted for under the purchase method. The incremental increase in the assets
acquired and liabilities assumed related to the Kaznickel property, and were
recorded at their estimated fair values as follows:

         -------------------------------------------------------------------
         Mineral interest rights                               $    132,432
         Purchased exploration costs                                251,286
         Deferred tax liability                                     (38,718)
         -------------------------------------------------------------------
         Minority Shareholders' Interests Acquired             $    345,000
         ===================================================================

The value assigned to the intangible purchased exploration costs was written off
and charged to operations on the date of the acquisition as exploration costs.
Intangible mineral interest rights assets acquired include the mineral property
rights, which are capitalized until the production phase begins, subject to
impairment considerations.

                                       7


Acquisition of Kyzyl Kain Mamyt, LLC - On June 1, 2005, Kazakh Metals acquired
100% of the equity interests of Kyzyl Kain Mamyt, LLC for the cash purchase
price of $100,000. The former equity holders of KKM were not related parties.
KKM operates in the Aktyubinsk region of northwestern Kazakhstan and has
licenses to explore for, and is engaged in the production and sale of nickel and
cobalt ore and Mamyt brown coal. KKM has been actively involved in mining cobalt
and nickel ore since its inception in 1938. The height of production occurred in
the late 1980's. Limited production has occurred since that time. KKM's primary
assets are its rights to exploit unproven reserves and its infrastructure of
buildings, machinery and equipment, including a rail spur.

Kazakh Metals accounted for the acquisition of KKM as a purchase business
combination with a purchase price of $100,000. The purchase price was allocated
to the assets acquired and liabilities assumed based on their estimated fair
values. The Company has estimated a fair value of $40,000,000 for the mineral
interests and obtained an independent appraisal of the buildings and equipment
of $17,693,795 on the acquisition date, and is in the process of obtaining
third-party valuations of the mineral assets; accordingly, the allocation of the
purchase price is subject to refinement. Negative goodwill was not recognized in
connection with the acquisition of KKM. Instead, the excess of the fair value of
the net assets over the purchase price was allocated as a pro rata reduction of
the amounts that otherwise would have been assigned to the long-term assets.
Notes payable assumed in the acquisition with a stated value of $7,445,197 are
due to third parties generally within three years, including $4,432,290 to a
bank, and were recorded based upon their fair values on the acquisition date,
resulting in a discount to the notes that will be recognized as interest expense
through maturity. The operations and cash flows of KKM are included in the
Company's consolidated financial statements since the date of the acquisition.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition.


           -----------------------------------------------------------------
           Current Assets                                      $    469,379
           Unproved mineral property rights                       7,034,321
           Asset retirement costs of the mineral rights              86,852
           Buildings, construction machinery and equipment        3,068,786
           -----------------------------------------------------------------
              Total assets acquired                              10,659,338
           -----------------------------------------------------------------
           Current                                                  717,527
           Asset retirement obligation                               97,223
           Notes Payable, net of discount of $917,737             6,541,670
           Deferred tax liability                                 3,202,918
           -----------------------------------------------------------------
              Total assumed                                      10,559,338
           -----------------------------------------------------------------
           Net Assets Acquired                                 $    100,000
           =================================================================

                                       8


Intangible assets acquired include the mineral property rights, which are
capitalized and amortized on a units-of-production method, subject to impairment
considerations. Other intangible assets include the asset retirement costs of
the mineral rights, which have a 20-year estimated life and are subject to
amortization at a planned rate of $4,311 per year, and the asset retirement
obligation, which is accreted over its 20-year life, with a current estimated
expense of $7,680 per year.

Acquisition of EMPS Research, Inc. - On January 28, 2005, EMPS Research, Inc.
("EMPS") completed a Plan and Agreement of Reorganization with Condesa, wherein
EMPS acquired 100% of the outstanding capital stock of Condesa in exchange for
the issuance of 35,000,000 common shares of which 21,000,000 were held by the
controlling shareholder of KMI and 14,000,000 were issued to minority
shareholders in Condesa. EMPS then changed its name to Bekem Metals, Inc. As a
result of that reorganization, the shareholders of Condesa owned 91% of the
outstanding common stock of EMPS at that reorganization date. The combined
entities were referred to after that reorganization as Bekem.

EMPS had 3,300,000 shares of common stock outstanding prior to that transaction
that remained outstanding, were classified as minority interests and were valued
at $0. The transaction resulted in a change of control of EMPS. For financial
reporting purposes, Condesa was considered the acquirer. The acquisition was
recognized as a forward stock split of Condesa's 30,000 shares of capital stock
held by the controlling shareholder of KMI that were outstanding prior to the
reorganization into 21,000,000 common shares, or a 700-for-1 stock split. The
accompanying financial statements have been restated for the effects of the
stock split for all periods presented. Condesa's assets, liabilities and
minority interests were recorded at their historical cost and the effect of the
stock split was reflected retroactively since the inception of Condesa. The
assets of EMPS were considered to have been acquired by Condesa in exchange for
the assumption of EMPS's net liabilities. The net assets consisted of cash of
$2,648 and intangible assets of $1,823 and current liabilities of $15,077. The
operations of Condesa are included for all periods presented and the operations
of EMPS are included from the acquisition of EMPS.

Purchase of Kaznickel LLP -On September 22, 2004, Brisa acquired an interest in
Kaznickel by purchasing 60 percent of the equity interest of the founding
partners' remaining 60 percent interests. As consideration for the purchase, the
original partners obtained a commitment from Brisa to facilitate a reverse
merger with a U.S. public company, and a commitment to obtain funding to enable
Kaznickel to further develop its mineral property rights. The value of the
commitment was estimated to be $270,000 based on the percent of Kaznickel
obtained for Condesa's original cash investment of $300,000.

On November 19, 2004, Brisa and the remaining Kaznickel interest holders
exchanged their combined 60% interest in Kaznickel for a new 60% interest, equal
to 21,000,000 shares of Condesa, thereby making Kaznickel a wholly-owned
subsidiary of Condesa. Brisa received 12,600,000 shares of Condesa in the
transaction. The remaining 8,400,000 common shares issued in the acquisition
were recognized as minority shareholders' interests. The acquisition of a
controlling interest in Kaznickel by Brisa and Condesa was considered the

                                        9


purchase of Kaznickel with a measurement date of September 22, 2004, the date
Brisa and Condesa obtained control from the original Kaznickel partners.

Condesa accounted for the acquisition of Kaznickel as a purchase business
combination with a purchase price of $304,456. The purchase price was allocated
to the assets acquired and liabilities assumed based on their estimated fair
values. Negative goodwill was not recognized in connection with the acquisition
of Kaznickel. Instead, the excess of the fair value of the net assets over the
purchase price was allocated as a pro rata reduction of the amounts that
otherwise would have been assigned to the long-term assets. The Company is in
the process of obtaining an independent valuation of the net assets acquired.
Accordingly the allocation of the purchase price is subject to refinement. At
September 22, 2004, the purchase price was allocated to the assets acquired and
the liabilities assumed as follows:

         -------------------------------------------------------------
         Current assets                                  $    231,674
         Mineral property rights                              267,660
         Asset retirement costs of the mineral rights         474,936
         Property and equipment                                21,573
         -------------------------------------------------------------
              Total assets acquired                           995,843
         -------------------------------------------------------------
         Current liabilities                                  (25,468)
         Asset retirement obligation                         (665,919)
         -------------------------------------------------------------
              Total liabilities assumed                      (691,387)
         Minority Shareholders' interests                    (121,782)
         -------------------------------------------------------------
         Net Assets Acquired                             $    182,674
         =============================================================

Intangible assets acquired include the mineral property rights, which are
capitalized until the production phase begins, subject to impairment
considerations. Other intangible assets include the asset retirement costs of
the mineral rights, which have a 20-year estimated life and are subject to
amortization at a planned rate of $24,291 per year, and the asset retirement
obligation, which is accreted over its 20-year life, with a current estimated
expense of $43,274 per year.

NOTE 3 - MINERAL PROPERTY RIGHTS

The government of Kazakhstan retains the title to the property upon which the
Company's mineral rights pertain; accordingly, the Company's mineral interests
are considered to be intangible assets. The Company capitalized the acquisition
costs of its mineral interests upon the purchase business combinations with
Kaznickel and with KKM.

Gornostai Deposit

Kaznickel acquired its interest in the Contract on Exploration and Development
of Gornostai Cobalt and Nickel Deposit (the "Contract") issued by the Ministry
of Energy and Mineral Resources of the Republic of Kazakhstan ("MEMR") dated
February 26, 2004. By virtue of the Contract, Kaznickel acquired the right to

                                       10


exploit the mineral property including the right to explore, develop and produce
the cobalt and nickel mineral resources on the Deposit through February 26,
2026. The Company has the right to re-negotiate the contract at that time for an
additional 30 years. The government of Kazakhstan retains the title to the
property; accordingly, the Company's mineral interest is considered to be an
intangible asset. The Company capitalized the acquisition costs of its mineral
interest upon the purchase business combination with Kaznickel. The allocated
purchase price included a capitalized amount of an acquired asset retirement
obligation. While the property is not in production, the asset retirement cost
is depleted over the life of the contract from the date of acquisition.

The Contract provides the Company certain rights and also imposes certain
obligations and commitments. The rights include exploration through February
2008, and development and production of minerals through February 26, 2026. The
Company may transfer its right to third parties in accordance with Kazakh laws
and regulations and has a right to renegotiate an extension of the Contract.
Significant rights and obligations and commitments of the Contract include
monetary commitments for exploration of $1,105,100 in 2006 and $1,576,480 in
2007, and expenditures to support social projects amounting to $300,000 during
the production stage. In addition, the Company was required to pay a fee of
$2,000 upon award of the Contract, and a fee for the use of Kazakh owned
technical data of $735,400 of which $4,179 was paid on award of the Contract and
$731,221 will be due upon a finding of commercial deposits. Royalties of 0.5% of
ores extracted and sold will be required. The Contract subjects the Company to
pay regular income tax of 30 percent and requires an excess profits tax of 15 to
60 percent if its net profits exceed 20 percent of gross profit. Obligations
also include the establishment and funding of a reclamation fund that includes
the cost of removing buildings and equipment used in the Deposit area. The
Company is also required to comply with Kazakh environmental laws and
regulations.

Kempirsai Deposit

Bekem acquired two contracts to explore for and extract minerals in connection
with the purchase of KKM. One contract is for the exploration and extraction of
nickel and cobalt ore from deposits located in an approximately 575,756 acre
site in the northwest area of the Republic of Kazakhstan approximately 130
kilometers northwest of the city of Aktobe, Kazakhstan, near the town of
Badamsha, referred to as the "Kempirsai" deposit through October 12, 2011. The
other contract is for the exploration and extraction of Mamyt brown coal at a
site located within 40 kilometers of the Kempirsai deposit through December 11,
2018. The contracts may be extended upon agreement between KKM and the Geology
and Minerals Resources Committee of the Ministry of Energy and Minerals
Resources of the Republic of Kazakhstan. The Kempirsai contract requires the
Company to pay royalty payments equal to 2.21% of gross ore sales. The Mamyt
brown coal contract requires a royalty payment equal to nine tenths of one
percent of gross coal sales. Both contracts require the Company to pay an excess
profits tax ranging from 4 to 30 percent based upon the reaching of an internal
rate of return (as defined in the contracts) ranging from 22 to 30 percent. The
allocated purchase price of the mineral interest included a capitalized amount
of an acquired asset retirement obligation. The asset retirement cost is
depleted over the life of the contract from the date of acquisition.

                                       11


NOTE 4 - CASH

                                                 September 30,   December 31,
                                                          2006           2005
          --------------------------------------------------------------------
          Current accounts (US Dollars)             $  649,272        $64,136
          Current accounts (Tenge)                     263,057         25,230
          Bank deposit (US Dollars)                  7,583,894              -
          --------------------------------------------------------------------
          Cash                                      $8,496,223        $89,366
          ====================================================================

Bank deposit accounts are located in a Kazakhstani Bank (Center Credit Bank).
Bank deposits earn interest from 3% to 8% annually. Restrictions on the use of
these facilities vary with a maximum term of 15 months. Cash of $100,000
restricted in its use over 15 months is shown as other non-current assets.

NOTE 5 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of September 30, 2006 substantially
represent a short term loan made to the Mining Bureau (Kazakhstan) in the amount
of $2,070,000. The Company holds a Russian patent to a proprietary ore
processing technology. The technology is designed to decrease start-up
investment costs and result in more economical operating costs. The Mining
Bureau represents the interests of a Russian metallurgy research institute,
which developed this ore processing technology in Kazakhstan. Currently, the
Company, in conjunction with the Mining Bureau and a Western metallurgy
specialist, is performing tests of the ore processing technology in a pilot
plant (see Note 6). The payment to the Mining Bureau was made for the purpose of
facilitating the joint testing of the ore processing technology and assistance
in making an ore reserve valuation and pre-feasibility study. The payment was
made under a loan agreement terminating on December 31, 2006 and bears interest
at an annual interest rate of 6%.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment net, were as follows:

                                                 September 30,   December 31,
                                                          2006           2005
          --------------------------------------------------------------------
          Buildings                                 $2,174,191     $2,062,865
          Machinery and equipment                    2,983,200        970,005
          Other fixed assets                            87,649         53,856
          --------------------------------------------------------------------
                                                     5,245,040      3,086,726
          Accumulated depreciation                     (56,089)       (25,436)
          --------------------------------------------------------------------
          Net Property and Equipment                $5,188,951     $3,061,290
          ===================================================================-

                                       12


The increase in property, plant and equipment is principally related to the
purchase of equipment by the Company in May 2006 from a third party for
$2,000,000, which is used in KKM's pilot plant. The equipment was capitalized
since it was placed in service on June 15, 2006.

NOTE 7 - RELATED PARTY TRANSACTIONS

On December 2, 2004 the Company borrowed $92,308 from CJSC Kazmorgeophysica, a
Kazakh company related by
virtue of several common shareholders. The short-term loan is denominated in
Kazakh Tenge, interest free and was due on its original terms by December 31,
2004. During March 2005 the Company borrowed an additional $99,798 from CJSC
Kazmorgeophysica, as a Kazakh Tenge denominated, interest-free, due on demand
note. In addition, during the six months ended March 31, 2005, the Company
received advances in the amount of $26,866 from certain owners, which are
short-term in nature and payable upon demand.

On January 18, 2006, the Company signed a financial aid agreement with Balmont
Trading S.A (see Note 9) which was repaid on July 25, 2006.

Because the notes are denominated in Tenge, the balance reported on the
financial statements fluctuates based upon ending exchange rates.

                                       13


NOTE 8 - NOTES PAYABLE

Notes payable consists of the following:

                                                                                    September 30,              December 31,
                                                                              --------------------    ----------------------
                                                                                             2006                      2005
----------------------------------------------------------------------------------------------------------------------------
Note payable to a company bearing interest at 0%;
   imputed interest of 22%; denominated in U.S. dollars;
   due April 2009; unsecured;                                                                $  -               $   497,818
Note payable to a company bearing interest at 3%;
   imputed interest of 22%; denominated in U.S.
   dollars; due April 2010; unsecured;                                                          -                   550,000
Note payable to a company bearing interest at 0%;
   imputed interest of 22%; denominated in U.S.
   dollars; due August 2008; unsecured;                                                         -                   485,951
Note payable to a company bearing interest at
   LIBOR plus 2% (6.39% at December 31, 2005);
   imputed interest of 22%; denominated in U.S.
   dollars; due March 2010; unsecured;                                                          -                    60,000
Notes payable to companies bearing interest at 0%;
   imputed interest of 22%; due on demand; unsecured;                                           -                 3,018,032
Note payable to a company bearing interest at 14%;
   due on demand; unsecured;                                                                    -                    29,709
Note payable to a company bearing interest at 16%;
   due on demand; unsecured;                                                                    -                    52,286
Note payable to a company bearing interest at 5%;
   due on demand; unsecured;                                                                    -                   560,203
Note payable to a company bearing interest at 0%;
   due on demand; unsecured;                                                                    -                         -
Note payable to a company bearing interest at 0%;
   due on demand; unsecured; (See Note 6)                                                       -                         -
============================================================================================================================
Total Long-term Debt                                                                            -                 5,253,999
Less: Current Portion                                                                           -                (3,660,230)
Less: Debt discount                                                                             -                  (796,591)
----------------------------------------------------------------------------------------------------------------------------
Long-term Debt - Net of Current Portion                                                      $  -               $   797,178
============================================================================================================================

During third quarter of 2006 the Company repaid notes payable in the amount of
$9,275,724 which also represents additional borrowings made during the nine
months 2006.

                                       14


NOTE 9 - NOTES PAYABLE - RELATED PARTIES

Long-term debt to related parties consists of the following:

                                                                            September 30,            December 31,
                                                                    ----------------------    --------------------
                                                                                     2006                    2005
------------------------------------------------------------------------------------------------------------------
Notes payable to related companies bearing interest
   at 6.29%; due August 2008; unsecured;                                          $     -              $1,710,012
Note payable to related company bearing interest
   at 6.29%; due August 2010; unsecured;                                           90,000               2,288,000
Notes payable to related companies bearing interest
   at 6.29%; due May 2008; unsecured;                                                   -                  77,000
Notes payable to related companies bearing interest
   at 0%; due May 2007; unsecured;                                                      -                       -
------------------------------------------------------------------------------------------------------------------
Total Long-term Debt                                                               90,000               4,075,012

Less: Current Portion                                                                   -                       -
------------------------------------------------------------------------------------------------------------------
Long-term Debt - Net of Current Portion                                           $90,000              $4,075,012
------------------------------------------------------------------------------------------------------------------


The above amounts were loaned to the Company per an agreement dated August 8,
2005, between KMI and KKM, for up to $10,000,000 for the purpose of assisting
KKM in funding its work requirements, including generation of geological data,
under its mineral extraction contract. Funds borrowed under this agreement bear
interest at the rate of 6.29% (the August 8, 2005 LIBOR plus 2%) per annum.
Terms ranged from three to five years with no prepayment penalties. The notes
were not collateralized. At December 31, 2005 $3,998,012 had been borrowed. The
former owners of Kazakh Metals, Inc. are funding this agreement.

On January 18, 2006, the Company signed a financial aid agreement with Balmont
Trading S.A. Under this agreement the Company borrowed $100,000 for the period
of 16 months from the date of signing the agreement. The loan was repaid on July
25, 2006.

During the quarter ended September 30, 2006, the Company repaid a substantial
portion of related party debt in the amount of $3,984,874 which payment also
included payment of additional borrowings made during the nine months ended
September 30, 2006. Subsequent to September 30, 2006 the Company repaid the
remaining $90,000.

NOTE 10 - SHAREHOLDERS' EQUITY

On July 14, 2006, the Company closed a private placement of 24,000,000 common
shares and warrants to purchase 8,000,000 common shares to two non-U.S.
investors for $28,000,000. These issuances did not result in a change in control
of the Company.

From the total proceeds, the Company paid the placement agent, Aton Securities,
Inc., a cash fee totaling 5% of the total proceeds raised, or $1,400,000. The
Company also issued to the placement agent a warrant to purchase up to 2,400,000

                                       15


shares of our restricted common stock. The exercise price of this warrant is
$1.17 per share. The warrant is immediately exercisable and will expire eighteen
months from the date they are granted. Also, the Company incurred legal and
consulting expenses of $153,487.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Concentration of Risk Relating to Foreign Mining Operations -- All of the
Company's properties are located within the Republic of Kazakhstan in Central
Asia. In addition to general industry risks of nickel and cobalt price
fluctuations, and potential lack of economic viability of the claims, the
Company has a concentration of risk related to its foreign properties and
interests which are subject to political uncertainty, changes in government,
unilateral renegotiation of licenses, claims or contracts, and nationalization,
or other uncertainties. In addition, the validity of mining claims which
constitute the Company's property holdings in Kazakhstan, may, in certain cases,
be uncertain and are subject to being contested.

Kazakhstan Business Environment - Kazakhstan, as an emerging market, has a legal
and regulatory infrastructure that is not as mature and stable as those usually
existing in more developed free market economies. As a result, operations
carried out in Kazakhstan can involve risks and uncertainties that are not
typically associated with those in developed markets. The instability associated
with the ongoing transformation process to a market economy can lead to changes
in the business conditions in which the Company currently operates. Changes in
the political, legal, tax or regulatory environment could adversely impact the
Company's operations.

Tax Matters - The local and national tax environment in the Republic of
Kazakhstan is subject to change and inconsistent application, interpretation and
enforcement. Non-compliance with Kazakhstan laws and regulations, as interpreted
by the Kazakh authorities, can lead to the imposition of fines, penalties and
interest.

Environmental Matters - Extensive national, regional and local environmental
laws and regulations in Kazakhstan affect the Company's operations. These laws
and regulations set various standards regulating certain aspects of health and
environmental quality provide for user fees, penalties and other liabilities for
the violation of these standards and establish, in some circumstances,
obligations to remediate current and former facilities and off-site locations.
The Company believes it is currently in compliance with all existing Republic of
Kazakhstan environmental laws and regulations. However, as new environmental
laws and legislation are enacted and the old laws are repealed, interpretation,
application and enforcement of the laws may become inconsistent. Compliance in
the future could require significant expenditures, which may adversely affect
the Company's operations.

                                       16


NOTE 12 -SUBSEQUENT EVENT

Stock grants

Pursuant to the board of directors desire to attract and retain experienced and
educated executives, on October 20, 2006 the board agreed to award restricted
stock grants for 1,083,123 shares to certain officers and employees of the
Company. The stock grants were valued at $1.95 per share, which represented the
closing market price of the Company's stock on October 20, 2006. The stock
grants were made under the Company's 2003 Stock Option Plan.

Sale of Condesa

On October 1, 2006 Bekem sold Condesa to a third party for a nominal value.

                                       17


Item 2.  Management's Discussion and Analysis

         For a complete understanding, this Management's Discussion and Analysis
should be read in conjunction with the Financial Statements and Notes to the
Financial Statements contained in this Form 10-QSB and our Form 10-KSB for the
year ended December 31, 2005, as amended.

         Forward Looking Information and Cautionary Statement

         Certain statements in this quarterly report may be deemed to be
forward-looking statements. Forward-looking statements regarding economic
conditions, effects of corporate initiatives, future profitability, projections,
future revenue opportunities, and their impact on us are forward-looking
statements and not historical facts. These statements are estimates or
projections involving numerous risks or uncertainties, including but not limited
to, our ability to locate and exploit commercially viable mineral deposits,
demand for nickel, cobalt and brown coal, our ability to prove up our ore
processing technology, our ability to control expenses, actions by competitors,
changes in market needs and technology, political or regulatory matters,
litigation, general economic conditions and changes in management strategy.

         Actual results or events could differ materially from those discussed
in the forward-looking statements. See our annual report on Form 10-KSB as filed
with the Securities and Exchange Commission for further information. We disclaim
any obligation to publicly update, revise or correct any forward-looking
statements, whether as a result of new information, future events or otherwise.

         The information contained in this analysis should be read in
conjunction with the financial statements contained herein and related
disclosures.

         Overview

         We are engaged in the exploration, extraction, refining and marketing
of nickel, cobalt and brown coal in the Republic of Kazakhstan.

         We incorporated in the state of Utah under the name EMPS Research
Corporation on January 30, 2001. We changed our name to Bekem Metals, Inc., on
March 16, 2005 following our acquisition of Condesa Pacific, S.A., a British
Virgin Islands international business company, and its wholly owned subsidiary
Kaznickel, LLP in January of 2005. On July 24, 2006, Condesa transferred its
interest in Kaznickel to Bekem, making Kaznickel a wholly-owned subsidiary of
Bekem. On October 1, 2006 Bekem sold Condesa to a third party for a nominal
value.

         The primary asset of Kaznickel is an exploration and production
concession issued by the government of the Republic of Kazakhstan which grants
Kaznickel the exclusive right, through February 2026, to explore for and engage
in test production of nickel, cobalt and other minerals in a 12,232 acre area in
northeastern Kazakhstan known as the Gornostai deposit.

                                       18


         On October 24, 2005, we entered into an agreement whereby we acquired
KMI, and its wholly owned subsidiary KKM in exchange for 61,200,000 of our
common shares. As discussed above, KKM holds the exclusive licenses to extract
and process nickel and cobalt ore from its Kempirsai deposit and brown coal from
its Mamyt deposit in northwestern Kazakhstan. Under the applicable accounting
reporting rules, KMI was considered the accounting acquirer.`

`Results of Operations

         Since inception we have generated only limited revenue from operations.
We do not anticipate generating cash flow from operations until 2008. We
anticipate we will expend millions of dollars before reaching commercial
production stage. Because we are not currently, and do not expect to generate
cash flow from operations until some time in 2008, we will be completely
dependent on investment funds to support our operations until such time as
production generates sufficient revenues to cover our operating expenses. We do
not expect to begin production until the fourth quarter 2008, and we do not
anticipate generating sufficient revenue to cover operating expenses until at
least 2009. In July 2006 we raised $28,000,000 through a private placement of
our equity securities. These funds are being used in the further development of
our properties and technology, for repayment of loans, to make acquisitions and

                                       19


as working capital. The funds raised in July, however, represent only a portion
of the funds we will need to begin commercial production. We anticipate the need
to seek significant additional funding in the future. There is no assurance that
we will be able to obtain additional funding in the future on favorable terms,
or at all.

         As you read this Results of Operations section it is important to keep
in mind that in October 2005 we acquired KMI and its operating subsidiary KKM.
KMI acquired KKM on May 31, 2005. As a result of common ownership between Bekem
and KMI prior to the October 2005 acquisition, the operations of KKM have been
included in our financial statements from the time KKM was acquired by KMI on
May 31, 2005. While KKM has not engaged in significant operations in recent
years, it has engaged in significantly greater operations than Bekem or
Kaznickel. Prior to the acquisition of KMI, we were engaged in exploration of
our Gornostai deposit. However, because of a lack of funds our exploration
activities were limited. The increases in revenue and expenses during the three
and nine months ended September 30, 2006 compared to the three and nine months
ended September 30, 2005 is the result of acquisition of KKM and not the result
of increased operations of Bekem or Kaznickel.

Three months ended September 30, 2006 compared to the three months ended
September 30, 2005

         General and Administrative Expenses

         With the acquisition of KKM, our general and administrative expenses
during the three months ended September 30, 2006 increased to $1,287,652 from
$168,575 during the third quarter 2005. This significant increase in general and
administrative expenses in the third quarter 2006 is attributable to the
significant increase in employees and employee-related costs due to the
acquisition of KKM, as well as, costs associated with having operations in both
northeastern and northwestern Kazakhstan, including increased office rents and
travel expenses. During the remainder of the 2006 fiscal year we expect general
and administrative expenses will continue to increase at about the same or a
more accelerated rate as we continue our efforts to ramp up mining and
processing operations.

         Accretion Expense

         As a result of our acquisition of KKM and the Kempirsai deposit in the
current fiscal year, during the three months ended September 30, 2006 accretion
expense increased 35% compared to the three months ended September 30, 2005 when
we recognized accretion expense related only to the Gornostai deposit. We
believe accretion expense will continue at rates consistent with those realized
during the quarter ended September 30, 2006 through the balance of the current
fiscal year.

         Depreciation Expense

         During the third quarter 2006 we realized depreciation expense of
$12,695 compared to $7,629 during the third quarter 2005. With the acquisition
of KKM, we also acquired the assets of KKM, which includes equipment, buildings,

                                       20


machinery, etc. that we did not own during the third quarter 2005. We expect
increases in depreciation expense during the fourth quarter of fiscal 2006 to
remain at levels more or less consistent with the increase experienced during
the third quarter 2006.

         Total Expenses

         For the reasons discussed in the preceding paragraphs, our total
expenses increased from $277,728 during the three months ended September 30,
2005 to $1,583,793 during the three months ended September 30, 2006. We expect
total expenses during the rest of 2006 to increase at even greater rates as we
ramp up our business.

         Loss from Operations

         During the three months ended September 30, 2006 we experienced a loss
from operations of $1,583,793 compared to a loss of $277,728 during the three
months ended September 30, 2005. This dramatic increase in loss from operations
during the third quarter 2006 is the result of our acquisition of KKM and its
active operations. By comparison, during the third quarter 2005 we engaged in
limited operations and incurred few expenses. We expect we will continue to
generate losses from operations until such time as we begin significant ore
production.

         Net Loss

         For the foregoing reasons, during the three months ended September 30,
2006 we experienced a net loss of $3,671,422 compared to a net loss of $276,893
during the three months ended September 30, 2005. This increase in net loss also
resulted from retiring notes payable prior to their due dates and the full
recognition of the debt discount of $1,075,065. We anticipate we will continue
to experience increasing net losses until we are able to engage in significant
nickel and cobalt ore extraction, processing and sales. We do not expect to be
engaged in significant ore extraction and processing prior to the 2008 fiscal
year.

Nine months ended September 30, 2006 compared to the nine months ended September
30, 2005

         Revenue

         During the nine month period ended September 30, 2006, we earned
revenue of $69,527 primarily from
the sale of brown coal and providing various services with our existing
machinery and equipment. By comparison, in the first three quarters of 2005 we
realized no revenue. During the nine-month period ended September 30, 2005 we
acquired the Gornostai deposit. Our operations during the period were limited to
exploratory drilling. The KKM operations were limited immediately after our
acquisition on May 31, 2005 and no revenue was produced until later in 2005. By
the end of the 2006 fiscal year we expect revenue to be lower as compared to the
2005 fiscal year because we do not expect to sell any significant quantities of
ore or coal in 2006.

                                       21


         Cost of Product Sold

         We realized cost of product sold of $65,871 during the nine months
ended September 30, 2006 and no cost of product sold during the comparable 2005
period. This increase in cost of product sold is the direct result of our
acquisition of KKM and its active operations. As discussed above, during the
first nine months of 2005 we engaged in very limited mining operations. We
expect by the end of the 2006 fiscal year that cost of product sold will be
lower when compared to the 2005 fiscal year because we do not expect to sell any
significant quantities of ore or coal during the 2006 fiscal year.

         General and Administrative Expenses

         General and administrative expenses during the nine month period ended
September 30, 2006 increased to $2,209,740 from $358,519 during the nine month
period ended September 30, 2005. This dramatic increase in general and
administrative expense is attributable to a significant increase in employees
and employee-related costs as a result of the acquisition of KKM, as well as,
costs associated with having operations in both northeastern and northwestern
Kazakhstan, increased office rents and travel expenses. During the remainder of
the 2006 fiscal year we expect general and administrative expense will continue
to increase at about the same or a more accelerated rate as we continue our
efforts to ramp up mining and processing operations.

         Accretion Expense

         Accretion expense increased 32% during the nine months ended September
30, 2006 compared to the nine months ended September 30, 2005. As discussed
above, this increase in accretion expense is attributable to our acquisition of
the Kempirsai deposit. We acquired the Kempirsai deposit during the fourth
quarter of 2005 and therefore did not recognize accretion expense for this
deposit during the third quarter of 2005. We believe accretion expense will
continue at rates consistent with those realized during the nine months ended
September 30, 2006 throughout the balance of the current fiscal year.

         Depreciation Expense

         During the nine months ended September 30, 2006 we realized
depreciation expense of $48,423 compared to $23,781 during the nine months ended
September 30, 2005. With the acquisition of KKM, we also acquired the assets of
KKM, which included equipment, buildings, machinery, etc. that we did not own
during the first quarter 2005. We expect increases in depreciation expense
during the remainder of the year to remain at levels more or less consistent
with the increase experienced during the first nine months of the year.

                                       22


         Research and Development Costs

         We realized research and development costs of $391,307 related to the
development of our pilot processing plant compared to $0 during the nine months
ended September 30, 2005. We expect our research and development costs will
increase by more than $400,000 by the end of current fiscal year as we start
testing our pilot processing plant.

         Total Expenses

         As a result of our acquisition of KKM our total expenses increased from
$699,221 during the nine months ended September 30, 2005 to $3,153,195 during
nine months ended September 30, 2006. We expect our total expenses during the
rest of 2006 will continue to increase at even greater rates as we ramp up our
business.

         Loss from Operations

         During the nine months ended September 30, 2006 we experienced a loss
from operations of $3,083,668 compared to a loss of $699,221 during the nine
months ended September 30, 2005. This dramatic increase in loss from operations
during the nine months ended September 30, 2006 is the result of our acquisition
of KKM and its active operations during the fourth quarter 2005. By comparison,
during the nine months ended June 30, 2005 we engaged in limited operations and
incurred fewer expenses. We expect we will continue to generate losses from
operations until such time as we engage in significant ore production.

         Net Loss

         For the foregoing reasons, during the nine months ended September 30,
2006 we experienced a net loss of $4,838,386 compared to a net loss of $695,301
during the nine months ended September 30, 2005. The increase in net loss also
resulted from retiring notes payable prior to their due dates and the full
recognition of the debt discount of $1,075,065. We anticipate we will continue
to experience increasing net losses until we are able to engage in significant
nickel and cobalt ore extraction, processing and sales. We do not expect to be
engaged in significant ore extraction and processing prior to the 2008 fiscal
year.

Liquidity and Capital Resources

         Our capital resources have consisted primarily of funds we have
borrowed from related and non-related parties and the sale of our equity
securities. As discussed above, in July 2006 we raised $28,000,000 through the
private placement of our equity securities. These funds, however, represent only
a portion of the funds we will need to move to commercial production. As of
September 30, 2006, we have about $8,500,000 of the approximately $26,000,000 in
net proceeds we realized from the private placement. We used the money raised in
the private offering to reduce debt, acquire equipment, continue exploration and

                                       23


fund operations. We anticipate the need for substantial additional capital
resources, which will likewise consist primarily of funds raised in financing
activities and debt.

         During the nine months ended September 30, 2006 and September 30, 2005,
cash was primarily used to fund operations and repay notes payable. See below
for additional discussion and analysis of cash flow.

                                                               Nine months ended           Nine months ended
                                                              September 30, 2006          September 30, 2005
                                                  ------------------------------- ---------------------------
Net cash used in operating activities                               $ (4,883,510)                  $(376,377)
Net cash provided by investing activities                             21,995,494                         127
Net cash provided by/used in) financing activities                    (8,854,700)                    399,846
Effect of exchange rate changes on cash                                  149,573                       2,554
                                                                    ------------                   ---------
NET INCREASE IN CASH                                                $  8,406,857                   $  26,150
                                                                    ============                   =========

         During the nine months ended September 30, 2006 net cash used in
operating activities was $4,883,510 compared to net cash used in operating
activities of $376,377 during the nine months ended September 30, 2005. This
increase in net cash used in operating activities is primarily attributable to
increases in general and administrative expenses and research and development
costs, which were largely the result of our acquisition of KMI and its operating
subsidiary KKM.

         During the nine months ended September 30, 2006 we received $21,995,494
from investing activities, most of which is related to cash received through the
private placement of our equity securities. By comparison, during the nine
months ended September 30, 2005 we realized net cash from investing activities
of $127.

         Net cash used in financing activities during the nine months ended
September 30, 2006 was $8,854,700 compared to net cash provided by financing
activities of $399,846 during the nine months ended September 30, 2005. During
the nine months ended September 30, 2006 the Company repaid a substantial
portion of notes payable and related party debts.

Plan of Operations

Operations

         Drilling

         We plan to drill approximately 34,500 meters of the east and west banks
of the Gornostai deposit. Estimated drilling costs is $3,500,000 which include

                                       24


both direct and indirect drilling costs, including geologist fees and costs for
site supervisors, geological data processors, core sample takers, topographers,
site procurement specialists, etc.

         Core Analysis

         We anticipate spending approximately $250,000 for core analysis.

Design and Engineering

         We anticipate spending approximately $3,500,000 for pre-feasibility and
feasibility studies and to develop a commercial processing plant design for ore
processing at the Kempirsai deposit. We will also perform an independent
resource and reserves estimate and valuation.

         Independent Resource and Reserve Estimate

         We will allocate $1,000,000 to hire an independent mining consulting
firm to provide us with a resource and reserve reclassification and estimate for
the Gornostai deposit and the Kempirsai deposits.

         Feasibility Study

         We anticipate spending approximately $1,000,000 for the preparation of
pre-feasibility and feasibility studies.

         Detailed Design

         Detailed design costs of $1,500,000 represent the prospective costs of
detailed engineering and design contract for construction of a commercial
processing plant at the Kempirsai deposit. This includes flow sheet design and
its pilot testing. This is a rough estimate, which will be subject to future
revision following completion of feasibility studies.

Professional Fees

         We expect to incur approximately $300,000 during the current fiscal
year in expenses to our financial auditors and securities attorneys.

Administrative Expenses

         We have allocated approximately $3,000,000 for administrative expenses
for the current fiscal year, which includes expenses of maintaining offices in
the United States and Kazakhstan, for salaries and for taxes.

                                       25


Working Capital

         We plan to allocate $2,800,000 for working capital for the next twelve
months. This will be used to finance our operations at the Kempirsai and
Gornostai deposits.

Summary of Material Contractual Commitments

The following table lists our significant commitments as of September 30, 2006:

                                                                     Payments Due by Fiscal Year
                                                           ------------------------------------------------
                                                             Less than 1       1-3 years      Thereafter
        Contractual Commitments                Total             year
----------------------------------------- ---------------- ---------------- ---------------- --------------
Monetary commitments for exploration          $ 2,441,580          865,100        1,576,480            -0-
----------------------------------------- ---------------- ---------------- ---------------- --------------
Notes Payable - Related Party                 $    90,000           90,000              -0-            -0-
----------------------------------------- ---------------- ---------------- ---------------- --------------
Due to the Government of
Republic of Kazakhstan(1)                     $   731,221              -0-          731,221            -0-
----------------------------------------- ---------------- ---------------- ---------------- --------------
Training                                      $    42,000              -0-          $42,000            -0-
----------------------------------------- ---------------- ---------------- ---------------- --------------
Social projects                               $   117,906              -0-              -0-        117,906
----------------------------------------- ---------------- ---------------- ---------------- --------------
Operating Leases                              $   211,058           54,539          156,519            -0-
----------------------------------------- ---------------- ---------------- ---------------- --------------
Total                                         $ 3,633,765        1,009,639        2,506,220        117,906
----------------------------------------- ---------------- ---------------- ---------------- --------------

(1) In connection with our acquisition of the exploration contract covering the
    Gornostai deposit, we are required to repay the Republic of Kazakhstan for
    historical costs incurred by it in undertaking geological and geophysical
    studies and infrastructure improvements. The repayment terms of this
    obligation will not be determined until such time as we apply for and are
    granted a contract to engage in commercial production by the Republic of
    Kazakhstan. Under our current contract once we determine the property
    contains commercially producible reserves, if we wish to commence commercial
    production, we must apply for such right prior to the expiration of our
    exploration and development rights in February 2026. We anticipate that we
    will apply for a commercial production contract within the next 1-3 years.
    Of course, there is no guarantee when or if we will discover commercially
    producible reserves within the Gornostai deposit. Should we decide not to
    pursue a commercial production contract, we can relinquish the Gornostai
    deposit to the Republic of Kazakhstan in satisfaction of this obligation.

         For us to maintain our rights under the exploration license held by
Kaznickel and the production license held by KKM, we must satisfy the work
program requirements of the MEMR. Each year we must submit a proposed annual
work program under each license to the MEMR. This annual work program must be
reviewed and approved by the MEMR. If we fail to meet the minimum work program
requirements, we could lose our licenses. Under the current work program for
Kaznickel, we must drill at least 17,498 meters in 2006. The current work
program under the KKM licenses calls for KKM to extract the following amounts of
ore for processing and brown coal through 2011.

                                       26


                                  Tons of Ore           Tons of Brown Coal
                              -------------------    -------------------------
                      2006                -0-                  20,000
                      2007            175,000                  60,000
                      2008            350,000                 200,000
                      2009          1,000,000                 200,000
                      2010          1,000,000                 200,000
                      2011          1,000,000                 200,000

         To date, we have met the minimum obligations under the minimum work
programs of our subsidiaries. Should we fail to complete the minimum work
program in some year, the MEMR could review the work program, request an update
and amendment to the work program or even recall our license.

         We are confident of our ability to satisfy the obligations of the
minimum work programs of our subsidiaries in the future.

Off-Balance Sheet Financing Arrangements

         As of September 30, 2006 we had no off-balance sheet financing
arrangements.

Critical Accounting Policies

         The preparation of financial statements in accordance with accounting
standards generally accepted in the United States requires management to make
estimates and assumptions that affect both the recorded values of assets and
liabilities at the date of the financial statements and the revenues recognized
and expenses incurred during the reporting period. Our estimates and assumptions
affect our recognition of deferred expenses, bad debts, income taxes, the
carrying value of our long-lived assets and our provision for certain
contingencies. We evaluate the reasonableness of these estimates and assumptions
continually based on a combination of historical information and other
information that comes to our attention that may vary our outlook for the
future. Actual results may differ from these estimates under different
assumptions.

         We suggest that our Summary of Significant Accounting Policies, as
described in Note 1 of Notes to Consolidated Financial Statements on Form 10-KSB
for December 31, 2005, be read in conjunction with this Management's Discussion
and Analysis of Financial Condition and Results of Operations. We believe the
critical accounting policies that most impact our consolidated financial
statements are described below.

         Use of Estimates - The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates. The more significant areas requiring
the use of management estimates and assumptions relate to mineral reserves that

                                       27


are the basis for future cash flow estimates and units-of-production
depreciation, depletion and amortization calculations; environmental,
reclamation and closure obligations; asset impairments; write-down of inventory
to net realizable value; valuation allowances for deferred tax assets; reserves
for contingencies and litigation; and the fair value and accounting treatment of
financial instruments. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. Accordingly, actual results may differ significantly from these
estimates under different assumptions or conditions.

         Currency Translation - The consolidated financial statements are
presented in U.S. dollars. The functional currency of the Company's subsidiaries
operating in Kazakhstan is U.S. dollars for Kaznickel and Kazakh tenge for KKM.
Results of operations are translated into U.S. dollars at the average exchange
rates during the reporting period. Non-monetary assets and liabilities of
Kaznickel are translated into U.S. dollars, using historical exchange rates and
monetary assets and liabilities are translated into U.S. dollars using exchange
rates on the date of the financial statements. Translation differences are
included in results of operations. All balance sheet accounts of KKM are
translated at exchange rates on the date of the financial statements and
translation differences are included in stockholders' equity as cumulative
translation adjustments.

         Revenue Recognition - For its operating mine, revenues currently arise
from the limited sale of ore and Mamyt brown coal. Revenue is recorded when
persuasive evidence of an arrangement exists, title to product transfers to the
customer, and collectibility is reasonably assured. Produced, but unsold
minerals or ore are recorded as inventory until sold.

         Trade Receivables -- In the normal course of business, the company
extends credit to its customers on a short-term basis. The principal customers
are local companies and government agencies. Although credit risks associated
with these customers are considered minimal, the company routinely reviews its
accounts receivable balances and makes provisions for doubtful accounts.

         Related Party Receivables - Related party receivables consists of
short-term advances to employees. No allowance has been provided due to the
historic short-term nature and recoverability of such advances.

         Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
-- Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount that the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
At December 31, 2005, we reviewed our long-lived assets as disclosed above and
determined no impairment was necessary.

                                       28


         Income taxes - Income taxes are calculated using the liability method
of tax accounting. Under this method, future income tax assets and liabilities
are computed based on temporary differences between the tax basis and carrying
amount on the balance sheet for assets and liabilities. Future income tax assets
and liabilities are calculated using tax rates anticipated to apply in the
periods that the temporary differences are expected to reverse.

         Depreciation, Depletion and Amortization - Expenditures for new
facilities or equipment and expenditures that extend the useful lives of
existing facilities or equipment are capitalized and depreciated using the
straight-line method at rates sufficient to depreciate such costs over the
estimated future lives of such facilities or equipment. These lives do not
exceed the estimated mine life based on proven and probable reserves as the
useful lives of these assets are considered to be limited to the life of the
relevant mine.

         Costs incurred to develop new properties are capitalized as incurred,
where it has been determined that the property can be economically developed
based on the existence of proven and probable reserves. At our surface mines,
these costs include costs to further delineate the ore body and remove
overburden to initially expose the ore body. All such costs are amortized using
the units-of-production ("UOP") method over the estimated life of the ore body
based on recoverable minerals to be mined from proven and probable reserves.

         Major development costs incurred after the commencement of production
are amortized using the UOP method based on estimated recoverable minerals to be
mined from proven and probable reserves. Depending upon whether the development
is expected to benefit the entire remaining ore body, or specific ore blocks or
areas only, the UOP basis is either the life of the entire ore body, or the life
of the specific ore block or area.

         The calculation of the UOP rate of amortization, and therefore the
annual amortization charge to operations, could be materially impacted to the
extent that actual production in the future is different from current forecasts
of production based on proven and probable reserves. This would generally occur
to the extent that there were significant changes in any of the factors or
assumptions used in determining reserves. These factors could include: (i) an
expansion of proven and probable reserves through exploration activities; (ii)
differences between estimated and actual cash costs of mining, due to
differences in grade, mineral recovery rates and foreign currency exchange
rates; and (iii) differences between actual commodity prices and commodity price
assumptions used in the estimation of reserves. Such changes in reserves could
similarly impact the useful lives of assets depreciated on a straight-line
basis, where those lives are limited to the life of the mine, which in turn is
limited to the life of the proven and probable reserves.

         The expected useful lives used in depreciation, depletion and
amortization calculations are determined based on applicable facts and
circumstances, as described above. Significant judgment is involved in the
determination of useful lives, and no assurance can be given that actual useful
lives will not differ significantly from the useful lives assumed for purpose of
depreciation, depletion and amortization calculations.

                                       29


         Stripping Costs - In general, mining costs are allocated to production
costs, stockpiles, and inventories, and are charged to costs applicable to sales
when minerals are sold. However, the mining industry, generally, defers and
amortizes certain mining costs on a units-of-production basis over the life of
the mine. These mining costs, which are commonly referred to as "deferred
stripping" costs, are incurred in mining activities that are normally associated
with the removal of waste rock. The deferred stripping accounting method is
generally accepted in the mining industry where mining operations have diverse
grades and waste-to-ore ratios; however, industry practice does vary. Deferred
stripping matches the costs of production with the sale of minerals, where this
procedure is employed, by assigning each quantity of mineral with an equivalent
amount of waste removal cost. When stripping costs are expensed as incurred,
there might be greater volatility in a company's period-to-period results of
operations. We did not acquire any deferred stripping costs in the acquisition
of KKM.

         In March 2005, the FASB ratified Emerging Issues Task Force Issue No.
04-6, "Accounting for Stripping Costs Incurred during Production in the Mining
Industry," (EITF 04-6) which addresses the accounting for stripping costs
incurred during the production phase of a mine and refers to these costs as
variable production costs that should be included as a component of inventory to
be recognized in costs applicable to sales in the same period as the revenue
from the sale of inventory. As a result, capitalization of stripping costs is
appropriate only to the extent product inventory exists at the end of a
reporting period and the carrying value is less than the net realizable value.
We adopted the provisions of EITF 04-6 on January 1, 2006. We have had very
limited production activity in the recent period, so the full effect of this
adoption will be felt as production increases in the future periods.

         Mineral Property Rights - Mineral property acquisition costs, site
restoration costs and development costs on mineral properties with proven and
probable reserves are capitalized and will be depleted using the
units-of-production method over the estimated life of the reserves. If there are
insufficient reserves to use as a basis for depleting such costs, they are
written off as a mineral property or mineral interest impairment in the period
in which the determination is made. Site restoration costs are depleted over the
term of their expected life. Interest costs are capitalized on mineral
properties and mineral interests in development. The development potential of
mining properties is established by the existence of proven and probable
reserves, reasonable assurance that the property can be permitted as an
operating mine and evidence that there are no metallurgical or other impediments
to the production of saleable metals.

         Exploration costs incurred on mineral interests, other than acquisition
costs, prior to the establishment of proven and probable reserves are charged to
operations as incurred. Development costs incurred on mineral interests with
proven and probable reserves will be capitalized as mineral properties. We
regularly perform evaluations of our investment in mineral interests to assess
the recoverability and / or the residual value of its investments in these
assets. All mineral interests and mineral properties are reviewed for impairment
whenever events or circumstances change which indicate the carrying amount of an
asset may not be recoverable, utilizing established guidelines based upon
undiscounted future net cash flows from the asset or upon the determination that
certain exploration properties do not have sufficient potential for economic
mineralization.

                                       30


         Our estimates of mineral prices, recoverable probable reserves, and
operating, capital and reclamation costs, when available, are subject to certain
risks and uncertainties, which may affect the recoverability of mineral property
costs. Although we have made our best estimate of these factors, it is possible
that changes could occur in the near term, which could adversely affect the
future net cash flows to be generated from the properties.

Item 3.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

         Our principal executive officer and our principal financial officer
(the "Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e). Such officers have concluded (based upon their evaluations of
these controls and procedures as of the end of the period covered by this
report) that our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in this report is accumulated and
communicated to management, including the Certifying Officers as appropriate, to
allow timely decisions regarding required disclosure. Based on this evaluation,
our Certifying Officers have concluded that our disclosure controls and
procedures are effective as of September 30, 2006.

Changes in Internal Control over Financial Reporting

         There were no changes in our internal controls over financial reporting
during the quarter ended September 30, 2006 that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

PART II - OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         On July 14, 2006, we closed a private placement of 8,000,000 Units of
our securities to two non-U.S. investors for $28,000,000. Each Unit consists of
three shares of restricted common stock and one warrant to purchase an
additional share of common stock for two years from the closing at a price of
$2.00 per share. The warrants are immediately exercisable. The price per Unit
was $3.50.

         In connection with this private placement we issued a total of
24,000,000 common shares and warrants to purchase 8,000,000 common shares. These
issuances did not result in a change in control of the Company.

         From the total proceeds, we compensated the placement agent, Aton
Securities, Inc., a cash fee totaling 5% of the total proceeds raised, or
$1,400,000. We also issued to Aton Securities warrants to purchase up to
2,400,000 shares of our restricted common stock. The exercise price of the

                                       31


warrants is $1.17 per share. The warrants will be immediately exercisable and
will expire eighteen months from the date they are granted. The placement agent
is not an officer, director or greater than 10% shareholder of the Company. None
of the fees to be paid or warrants to be granted to the placement agent will
either directly or indirectly be paid to any officer, director or greater than
10% shareholder of the Company.

         Investors in this offering were granted the right to request the
Company file a registration statement on their behalf registering for resale the
shares they purchased in this private placement. The Registration Rights
Agreement requires that at least 51% of the shares purchased in this private
placement request registration before we must undertake efforts to register the
shares for resale. The investors in this private placement may not request
registration for at least 90 days from the closing of the private placement.

         As set forth above, the securities were issued without registration
under the Securities Act of 1933 in reliance upon exemptions from registration
pursuant to Regulation S of the rules and regulations promulgated by the
Securities and Exchange Commission under the Securities Act of 1933.

         Sales Pursuant to Regulation S

         All offers and sales were made to non-U.S. persons in offshore
transactions. No directed selling efforts were made in the United States by the
issuer, placement agent or any person acting on their behalf. The shares sold
are subject to the offering restrictions set forth in Rule 903(b)(3), including
a one-year distribution compliance period.

         On October 20, 2006 the board agreed to award restricted stock grants
to the following four officers or employees of the Company;

Name                     Position with the Company                         Number of Shares
---------------------    --------------------------------------------    ------------------
Marat Cherdabayev        Chief Executive Officer, President, Director              421,772
Yermek Kudabayev         Chief Financial Officer                                   383,429
Nurlan Tajibaev          Vice President, Director                                  191,715
Alexander Rassokhin      Exploration Manager                                        86,207

         The stock grants were valued at $1.95 per share, which represented the
closing market price of our stock on October 20, 2006. The stock grants were
made under our 2003 Stock Option Plan.

         Mr. Cherdabayev's shares will vest as follows: one-fourth (105,443
shares) on the first anniversary of the grant date; one-fourth (105,443 shares)
on the second anniversary of the grant date and the remaining one-half (210,886
shares) will vest on the third anniversary of the grant date.

         Mr. Kudabayev's shares will vest as follows: one-fourth (95,857 shares)
in April 2007 and one-fourth (95,857 shares) in April 2008, provided that the
Company has timely filed its reports with Securities and Exchange Commission.

                                       32


The final one-half (191,715 shares) will vest in April 2009. Vesting during each
year is contingent upon the Company timely filing of its reports with the
Securities and Exchange Commission each year. Moreover, vesting in the third
year is also contingent upon the Company having commenced commercial operations.

         Mr. Tajibaev's shares will vest as follows: one-fourth (47,929 shares)
on the first anniversary of the grant date and one-fourth (47,929 shares) on the
second anniversary of the grant date, provided that in each year the Company
meets the yearly deadlines for the pilot plant construction, completion and
operations as dictated by the board of directors. The final one-half (95,857
shares) will vest on the third anniversary of the grant date conditioned that
the Company timely meet the third year deadlines for the pilot plant
construction, completion and operations during the third year, and the Company
having commenced commercial operations.

         Mr. Rassokhin's shares will vest as follows: one-fourth (21,552 shares)
on the first anniversary of the grant date and one-fourth (21,552 shares) on the
second anniversary of the grant date, provided that in each year the Company
timely performs the drilling work program requirements as dictated by the
Republic of Kazakhstan's Ministry of Energy and Mineral Resources. The final
one-half (43,103 shares) will vest on the third anniversary of the grant date,
conditioned upon the Company timely performing the drilling work program
requirements, as dictated by the Republic of Kazakhstan's Ministry of Energy and
Mineral Resources during the third year and the Company having commenced
commercial operations.

         These stock grants were made without registration under the Securities
Act of 1933 in reliance upon exemptions from registration pursuant to Regulation
S of the rules and regulations promulgated by the Securities and Exchange
Commission under the Securities Act of 1933.


Item 6.  Exhibits

         Exhibits. The following exhibits are included as part of this report:

                  Exhibit No.       Exhibit

                  Exhibit 31.1      Certification of Principal Executive Officer
                                    pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002

                  Exhibit 31.2      Certification of Principal Financial Officer
                                    pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002

                  Exhibit 32.1      Certification of Principal Executive Officer
                                    pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002

                  Exhibit 32.2      Certification of Principal Financial Officer
                                    pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002

                                       33


                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               BEKEM METALS, INC.



November 14, 2006                              By: /s/ Marat Cherdabayev
                                                  ------------------------------
                                                  Marat Cherdabayev,
                                                  Principal Executive Officer



November 14, 2006                              By:  /s/ Yermek Kudabayev
                                                  ------------------------------
                                                  Yermek Kudabayev,
                                                  Principal Financial Officer

                                       34`