UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QQuarterly Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended
June 30, 2008

£Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period
__________ to __________



Colombia Goldfields Ltd.

|Delaware                                                                | 76-0730088                                
|----------------------------------------------------------------------- | ------------------------------------------
|(State
    or other jurisdiction of 
    incorporation or organization) | (IRS
    Employer 
    Identification No.)

#208-8 King Street East, Toronto, Ontario, Canada M5C
1B5

416-361-9640

_________________________________________________________

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days

Q

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. (Check one):

|Large Accelerated
    Filer£                      | Accelerated Filer£            
|------------------------------------------------- | ------------------------------
|                                                  |                               
|Non-accelerated filer£                            | Smaller reporting
    companyQ
|(Do not check
    if a smaller reporting company) |                               

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

£YesQNo

Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: 92,932,486 common shares as of June 30, 2008.

---

TABLE OF CONTENTS



|                               |                                                                                           | Page
|------------------------------ | ----------------------------------------------------------------------------------------- | ----
|                               |                                                                                           |     
|PART I - FINANCIAL INFORMATION
|                               |                                                                                           |     
|Item
    1.                    | Financial Statements                                                                      | 2   
|Item 2.                        | Management's
    Discussion and Analysis of Financial Condition and Results of Operations | 32  
|Item
    3.                    | Quantitative and Qualitative Disclosures About Market Risk                                | 55  
|Item 4.                        | Controls and
    Procedures                                                               | 55  
|                               |                                                                                           |     
|PART II - OTHER INFORMATION   
|                               |                                                                                           |     
|Item
    1.                    | Legal Proceedings                                                                         | 55  
|Item 2.                        | Unregistered Sales of
    Equity Securities and Use of Proceeds                           | 55  
|Item
    3.                    | Defaults Upon Senior Securities                                                           | 55  
|Item 4.                        | Submission of Matters
    to a Vote of Security Holders                                   | 55  
|Item
    5.                    | Other Information                                                                         | 55  
|Item 6.                        | Exhibits                                                                                  | 55  

1

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PART I - FINANCIAL INFORMATION

Item 1.
Financial Statements



2

---





|COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in US Dollars, In Thousands, Except Share and Per Share Amounts)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 |                                                                        |          |   |              
|---------------------------------------------------------------- | ---------------------------------------------------------------------- | -------- | - | -------------
|                                                                 |                                                                        | June 30, |   | December  31,
|                                                                 |                                                                        | 2008     |   | 2007         
|                                                                 |                                                                        |          |   |              
|ASSETS                                                           |                                                                        |          |   |              
|                                                                 |                                                                        |          |   |              
|Current                                                          |                                                                        |          |   |              
|                                                                 |                                                                        |          |   |              
|Cash and cash equivalents                                        | $                                                                      | 287      | $ | 6,939        
|Prepaid expenses and deposits                                    |                                                                        | 1,103    |   | 579          
|Prepaid consulting fees (Note 6)                                 |                                                                        | 114      |   | 367          
|                                                                 |                                                                        | 1,504    |   | 7,885        
|                                                                 |                                                                        |          |   |              
|Mineral and exploration properties and rights (Note 4)           |                                                                        | 65,897   |   | 65,377       
|Property and equipment, net of accumulated amortization (Note 5) |                                                                        | 1,169    |   | 1,257        
|Restricted cash (Note 3)                                         |                                                                        | 2,500    |   | -            
|Mineros advance (Note 3)                                         |                                                                        | 7,000    |   | -            
|                                                                 | $                                                                      | 78,070   | $ | 74,519       
|                                                                 |                                                                        |          |   |              
|LIABILITIES                                                      |                                                                        |          |   |              
|                                                                 |                                                                        |          |   |              
|Current                                                          |                                                                        |          |   |              
|                                                                 |                                                                        |          |   |              
|Accounts payable and accrued liabilities                         | $                                                                      | 2,632    | $ | 2,818        
|Mineral property purchase obligations (Note 7)                   |                                                                        | 6,034    |   | 8,747        
|Short-term promissory note (Note 8)                              |                                                                        | 2,500    |   | -            
|                                                                 |                                                                        | 11,166   |   | 11,565       
|Non-current                                                      |                                                                        |          |   |              
|Deferred income tax liability (Notes 4 and 9)                    |                                                                        | 10,406   |   | 11,868       
|                                                                 |                                                                        | 21,572   |   | 23,433       
|                                                                 |                                                                        |          |   |              
|STOCKHOLDERS EQUITY                                             |                                                                        |          |   |              
|                                                                 |                                                                        |          |   |              
|Common stock (Notes 6 & 13)                                      |                                                                        |          |   |              
|Authorized:                                                      |                                                                        |          |   |              
|                                                                 | 200,000,000 common shares, $0.00001 par value                          |          |   |              
|Issued and outstanding:                                          |                                                                        | 1        |   | 1            
|                                                                 | 92,932,486 common shares (December 31, 2007: 86,590,075 common shares) |          |   |              
|                                                                 |                                                                        |          |   |              
|Additional paid-in capital (Note 6)                              |                                                                        | 80,328   |   | 73,490       
|Special Warrants (Note 6)                                        |                                                                        | 8,558    |   | -            
|                                                                 |                                                                        | 88,887   |   | 73,491       
|Deficit accumulated during the exploration stage                 |                                                                        | (32,389) |   | (22,405)     
|                                                                 |                                                                        | 56,498   |   | 51,086       
|                                                                 | $                                                                      | 78,070   | $ | 74,519       



See accompanying Notes to Interim Consolidated Financial Statements



* Going Concern (Note 1)

* Commitments and Contingencies (Note 13)



3

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|COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Amounts in US Dollars, In Thousands, Except Share and Per Share Amounts)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                      |   | Three Months |   | Three Months |   | Six Months |   | Six  Months |   | Cumulative
From
Inception
(March 25,
2003)
|----------------------------------------------------- | - | ------------ | - | ------------ | - | ---------- | - | ----------- | - | ------------------------------------------
|                                                      |   | Ended        |   | Ended        |   | Ended      |   | Ended       |   | through                                   
|                                                      |   | June 30,     |   | June 30,     |   | June 30,   |   | June 30,    |   | June 30,                                  
|                                                      |   | 2008         |   | 2007         |   | 2008       |   | 2007        |   | 2008                                      
|                                                      |   |              |   |              |   |            |   |             |   |                                           
|REVENUES                                              | $ | -            | $ | -            | $ | -          | $ | -           | $ | -                                         
|OPERATING EXPENSES                                    |   |              |   |              |   |            |   |             |   |                                           
|                                                      |   |              |   |              |   |            |   |             |   |                                           
|Mineral property exploration expenses (Notes 4 and 6) |   | 4,254        |   | 1,561        |   | 7,229      |   | 3,033       |   | 19,809                                    
|General and administrative (Note 6)                   |   | 1,560        |   | 1,290        |   | 3,767      |   | 2,691       |   | 14,184                                    
|Foreign exchange loss (gain)                          |   | (888)        |   | 889          |   | 952        |   | 935         |   | 3,026                                     
|Amortization                                          |   | 58           |   | 21           |   | 121        |   | 40          |   | 306                                       
|Total operating expenses                              |   | 4,984        |   | 3,761        |   | 12,069     |   | 6,699       |   | 37,325                                    
|Other income                                          |   | (7)          |   | (4)          |   | (13)       |   | (13)        |   | (160)                                     
|Loss before deferred income taxes                     |   | (4,977)      |   | (3,757)      |   | (12,056)   |   | (6,686)     |   | (37,165)                                  
|Deferred income tax recovery (Note 9)                 |   | 1,168        |   | 538          |   | 2,072      |   | 963         |   | 4,776                                     
|Net loss and comprehensive loss                       | $ | (3,809)      | $ | (3,219)      | $ | (9,984)    | $ | (5,723)     | $ | (32,389)                                  
|LOSS PER SHARE  BASIC AND DILUTED                    | $ | (0.04)       | $ | (0.05)       | $ | (0.11)     | $ | (0.09)      |   |                                           
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  |   |              |   |              |   |            |   |             |   |                                           
|Basic  and diluted                                    |   | 92,932,486   |   | 65,755,750   |   | 89,796,129 |   | 61,507,236  |   |                                           





See accompanying Notes to Interim Consolidated Financial Statements



* Going Concern (Note 1)



4

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|COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
(UNAUDITED)
(Amounts in US Dollars, In Thousands, Except Share and Per Share Amounts)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|Balance, December 31, 2006                                                                                                                                                                                
|                                                                                                                                                                                                          
|Year Ended December 31, 2007                                                                                                                                                                              
|                                                                                                                                                                                                          
|Issue of Common stock for cash at $1.00 per share less agents fee of $541 on March 21, 2007                                                                                                              
|                                                                                                                                                                                                          
|Issue of 541,200 agents warrants in connection with March 21, 2007 common stock issuance                                                                                                                 
|                                                                                                                                                                                                          
|Issue of common stock for consulting services                                                                                                                                                             
|                                                                                                                                                                                                          
|Issue of common stock to non-management directors                                                                                                                                                         
|                                                                                                                                                                                                          
|Issue of common stock for cash at CDN $1.40 per unit (common shares and warrants) less allocated agents fee of $611 on August 14, 2007                                                                   
|                                                                                                                                                                                                          
|Issue of 4,241,500 share purchase warrants with August 14, 2007 common stock issuance less allocated agents fee of $59  (Note 6B)                                                                       
|                                                                                                                                                                                                          
|Issue of 508,980 agents warrants in connection with August 14, 2007 common stock issuance  (Note 6B)                                                                                                    
|                                                                                                                                                                                                          
|Issuance of common stock for mineral concessions at $1.47 on September 14, 2007                                                                                                                           
|                                                                                                                                                                                                          
|Issuance of common stock for cash at CDN $1.10 per unit (common shares and warrants) less agents fees and issue costs of $649 on December 28, 2007                                                       
|                                                                                                                                                                                                          
|Issuance of 4,582, 613 share purchase warrants with December 28, 2007 common stock issuance less agents fees and issue costs of $139  (Note 6B)                                                         
|                                                                                                                                                                                                          
|Issuance of 595,739 agents warrants in connection with December 28, 2007 common stock issuance  (Note 6B)                                                                                               
|                                                                                                                                                                                                          
|Exercise of common stock options on May 3, 2007 and November 14, 2007                                                                                                                                     
|                                                                                                                                                                                                          
|Stock based compensation                                                                                                                                                                                  
|                                                                                                                                                                                                          
|Net loss for the year ended December 31, 2007                                                                                                                                                             
|Balance December 31, 2007                                                                                                                                                                                 





See accompanying Notes to Consolidated Financial Statements



* Going concern Note 1



5

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|COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)
(UNAUDITED)
(Amounts in US Dollars, In Thousands, Except Share and Per Share Amounts)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                          |  | Common Shares |   | Capital/Stock
Additional Paid-in Capital |   | Share Purchase Warrants |   | Special Warrants |   | Deficit Accumulated During the Exploration Stage |   | Total Stockholders Equity
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | - | ---------------------------------------- | - | ----------------------- | - | ---------------- | - | ------------------------------------------------ | - | --------------------------
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Balance, December 31, 2007                                                                                                                |  | 86,590,075    | $ | 67,189                                   | $ | 6,302                   | $ | -                | $ | (22,405)                                         | $ | 51,086                    
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Six Months  Ended June 30, 2008                                                                                                           |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Issue of 350,000 share purchase warrants with February 8, 2008 short-term promissory note  (Note 6B)                                     |  | -             |   | -                                        |   | 100                     |   | -                |   | -                                                |   | 100                       
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Issue of common stock for cash at $0.85 per unit (common shares and warrants) less agents fees and issue costs of $160 on March 31, 2008 |  | 6,342,411     |   | 3,931                                    |   | -                       |   | -                |   | -                                                |   | 3,931                     
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Issue of 6,341,411 share purchase warrants with March 31, 2008 common stock issuance less agents fees and issue costs of $48             |  | -             |   | -                                        |   | 1,252                   |   | -                |   | -                                                |   | 1,252                     
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Expiry of 6,500,666 share purchase warrants on April 25, 2008                                                                             |  | -             |   | 2,750                                    |   | (2,750)                 |   | -                |   | -                                                |   | -                         
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Issue of 11,167,000 special warrants for cash at $0.85 per special warrant less agents fees and issue costs of $934 on June 18, 2008     |  | -             |   | -                                        |   | -                       |   | 8,558            |   | -                                                |   | 8,558                     
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Stock based compensation                                                                                                                  |  | -             |   | 1,555                                    |   | -                       |   | -                |   | -                                                |   | 1,555                     
|                                                                                                                                          |  |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Net loss for the six months ended June 30, 2008                                                                                           |  | -             |   | -                                        |   | -                       |   | -                |   | (9,984)                                          |   | (9,984)                   
|Balance June 30, 2008                                                                                                                     |  | 92,932,486    | $ | 75,425                                   | $ | 4,904                   | $ | 8,558            | $ | (32,389)                                         | $ | 56,498                    





See accompanying Notes to Interim Consolidated Financial Statements



* Going concern Note 1



6

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|COLOMBIA GOLDFIELDS LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in US Dollars, In Thousands, Except Share and Per Share Amounts)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           |                                                   | Three Months Ended
June 30,
2008 |         | Three Months Ended
June 30,
2007 |       | Six Months Ended
June 30,
2008 |         | Six Months Ended
June 30,
2007 |       | Cumulative from Inception (March 25, 2003) through June 30, 2008
|---------------------------------------------------------- | ------------------------------------------------- | -------------------------------- | ------- | -------------------------------- | ----- | ------------------------------ | ------- | ------------------------------ | ----- | ----------------------------------------------------------------
|OPERATING ACTIVITIES:                                      |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|Net loss                                                   | $                                                 | (3,809)                          | $       | (3,219)                          | $     | (9,984)                        | $       | (5,723)                        | $     | (32,389)                                                        
|Items not requiring cash outlay:                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|                                                           | - Consulting fees                                 |                                  | -       |                                  | -     |                                | -       |                                | -     |                                                                 
|                                                           | - Amortization                                    |                                  | 58      |                                  | 21    |                                | 121     |                                | 40    |                                                                 
|                                                           | - Mineral property exploration                    |                                  | -       |                                  | -     |                                | -       |                                | -     |                                                                 
|                                                           | - Stock based compensation                        |                                  | 787     |                                  | 861   |                                | 1,808   |                                | 1,426 |                                                                 
|                                                           | - Deferred income taxes                           |                                  | (1,168) |                                  | (538) |                                | (2,072) |                                | (963) |                                                                 
|Changes in non-cash working capital items                  |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|                                                           | - Prepaid expenses and deposits                   |                                  | (146)   |                                  | (356) |                                | (524)   |                                | (548) |                                                                 
|                                                           | - Accounts payable, accrued and other liabilities |                                  | (1,197) |                                  | 317   |                                | 423     |                                | 1,028 |                                                                 
|                                                           | - Due to/from related parties                     |                                  | -       |                                  | -     |                                | -       |                                | -     |                                                                 
|Net cash used in operating activities                      |                                                   | (5,475)                          |         | (2,914)                          |       | (10,228)                       |         | (4,740)                        |       | (26,001)                                                        
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|FINANCING ACTIVITIES:                                      |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|Issuance of equity securities, net of issue costs and fees |                                                   | 8,558                            |         | -                                |       | 13,741                         |         | 8,479                          |       | 55,955                                                          
|Issuance of promissory notes and related warrants          |                                                   | -                                |         | 3,500                            |       | 2,500                          |         | 7,200                          |       | 12,200                                                          
|Repayment of promissory notes                              |                                                   | -                                |         | -                                |       | -                              |         | (3,700)                        |       | (9,700)                                                         
|Exercise of stock options                                  |                                                   | -                                |         | 37                               |       | -                              |         | 37                             |       | 131                                                             
|Net cash provided by financing activities                  |                                                   | 8,558                            |         | 3,537                            |       | 16,241                         |         | 12,016                         |       | 58,586                                                          
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|INVESTING ACTIVITIES:                                      |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|Purchase of mineral exploration rights                     |                                                   | (655)                            |         | (2,095)                          |       | (3,132)                        |         | (5,674)                        |       | (21,353)                                                        
|Purchase of equipment                                      |                                                   | (2)                              |         | (8)                              |       | (33)                           |         | (23)                           |       | (1,424)                                                         
|Website development costs                                  |                                                   | -                                |         | -                                |       | -                              |         | -                              |       | (21)                                                            
|Mineros deposit advance and restricted cash                |                                                   | (7,000)                          |         | -                                |       | (9,500)                        |         | -                              |       | (9,500)                                                         
|Net cash used in investing activities                      |                                                   | (7,657)                          |         | (2,103)                          |       | (12,665)                       |         | (5,697)                        |       | (32,298)                                                        
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           |                                                   | (4,574)                          |         | (1,480)                          |       | (6,652)                        |         | 1,579                          |       | 287                                                             
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD           |                                                   | 4,861                            |         | 3,942                            |       | 6,939                          |         | 883                            |       | -                                                               
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                 |                                                   | 287                              |         | 2,462                            |       | 287                            |         | 2,462                          |       | 287                                                             
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|SUPPLEMENTAL CASH FLOW INFORMATION                         |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|                                                           |                                                   |                                  |         |                                  |       |                                |         |                                |       |                                                                 
|Interest and financing fees-promissory notes               |                                                   | 129                              |         | 231                              |       | 312                            |         | 231                            |       | 737                                                             
|Taxes                                                      |                                                   | -                                |         | -                                |       | -                              |         | -                              |       | -                                                               





See accompanying Notes to Interim Consolidated Financial Statements



* Going Concern (Note 1)



7

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|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

NOTE 1  GOING CONCERN AND NATURE OF OPERATIONS

The Company was incorporated under the laws of the State of
Nevada, U.S.A., on March 25, 2003. On July 31, 2006, the Companys jurisdiction
of incorporation was changed to the state of Delaware. The Company is currently
in the exploration stage and its operational focus is on the acquisition of
exploration for, and development of mineral properties.

The Company has incurred a cumulative net loss since
inception on March 25, 2003 to June 30, 2008 of $32,389 and has no source of
operating revenue. The Companys ability to meet its obligations and continue as
a going concern is dependent on the ability to identify and complete future
funding. While the Company has been successful in raising financing to date,
there can be no assurance that it will be able to do so in the future.

These consolidated financial statements have been prepared
using U.S generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and settlement of liabilities in
the normal course of business as they come due. In addition to the Companys
working capital deficiency and an accumulated deficit at June 30, 2008, the
Company must also secure sufficient funding to meet its anticipated exploration
expenses, mineral properties and rights acquisitions, and purchase commitment
for the issued and outstanding shares of Mineros Nacionales S.A.. The Companys
restricted cash and Mineros advance are non-refundable and are committed to this
purchase and are therefore not available for general working capital purposes.

These circumstances lend substantial doubt as to the ability
of the Company to meet its obligations as they come due and, accordingly, as to
the appropriateness of the use of accounting principles applicable to a going
concern. In recognition of these circumstances, as disclosed in note 14, the
Company is in the process of completing both a debt offering and equity private
placement in order to fund the balance of the Mineros purchase price, repay the
Companys short term promissory note, and provide working capital for general
corporate purposes. The Company intends to continue relying upon the issuance of
securities to finance exploration, meet contractual obligations and continue as
a going concern. As of the date of the approval of the consolidated financial
statements, there is no assurance that these initiatives will be sufficient or
successful.

The Companys ability to continue as a going concern is
dependent upon its ability to fund its working capital and exploration
requirements and, eventually, upon the future development of profitable
operations from its mineral properties. These consolidated financial statements
do not reflect the adjustments to the carrying values of assets and liabilities
and the reported expenses and balance sheet classifications that would be
necessary if the going concern assumption were not appropriate, and these
adjustments could be material.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been
prepared in accordance with the accounting principles generally accepted in the
United States.

Use of Estimates

The preparation of financial statements in accordance with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the period. Actual results may differ from those estimates.

8

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|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Consolidation

Entities that are controlled by the Company, either directly
or indirectly, are consolidated. Control is established by the Companys ability
to determine strategic, operating, investing and financing policies without the
co-operation of others. The Company analyzes its level of ownership, voting
rights and representation on the board of directors in determining if control
exists by any one, or a combination, of these factors.

These consolidated financial statements include the accounts
of (i) Colombia Goldfields Ltd., a Delaware corporation (ii) the Companys 100%
interest in RNC (Colombia) Limited ("RNC"), a Belize corporation and its 95%
owned subsidiary  Compania Minera De Caldas, S.A. ("Caldas"), a Colombia
corporation, (iii) the Companys 94% interest in Gavilan Minerales, S.A. ("Gavilan")
a Colombia corporation. Colombian law requires Colombian companies to have at
least five shareholders and, as a result, the remaining 5% of Caldas and 6% of
Gavilan is held by directors and senior management of the Company. All
significant inter-company transactions and balances have been eliminated upon
consolidation.

Since the non-controlling shareholders of RNC and Gavilan
have no obligation to contribute any additional capital and the Company is the
primary entity obligated to fund future exploratory work, no non-controlling
interest related to RNC or Gavilan has been recognized in the consolidated
statements of operations for the periods ended June 30, 2008 and 2007 and in the
consolidated balance sheets at June 30, 2008 and December 31, 2007. The
directors and senior management of Caldas and Gavilan have executed voting and
support agreements in favour of the Company.

Mineral Property Rights Acquisition and Exploration and
Development Expenditures

Costs of acquiring mining properties are capitalized upon
acquisition. Pursuant to Statement of Financial Accounting Standards (SFAS) No.
34,Capitalization of Interest Costs, interest costs attributable to
mineral property acquisitions are also capitalized. Mine development costs
incurred either to develop new ore deposits, expand the capacity of mines, or to
develop mine areas substantially in advance of current production are also
capitalized once proven and probable reserves exist and the property is a
commercially mineable property. Costs incurred to maintain current production or
to maintain assets on a standby basis are charged to operations. Costs of
abandoned projects are charged to operations upon abandonment. The Company
evaluates the carrying value of capitalized mining costs and related property,
plant and equipment costs, to determine if these costs are in excess of their
net recoverable amount whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable. The periodic evaluation of
carrying value of capitalized costs and any related property, plant and
equipment costs is based upon expected future cash flows and/or estimated
salvage value in accordance with SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets.

9

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Asset Retirement Obligations

The Company applies SFAS No. 143, Accounting for Asset
Retirement Obligations which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. SFAS No. 143 requires the Company to record a liability for the
present value using a credit-adjusted risk free interest rate, of the estimated
site restoration costs with a corresponding increase to the carrying amount of
the related long-lived assets. The liability is accreted until it has been fully
incurred and the asset is amortized over the life of the related assets.
Adjustments are made for changes resulting from the passage of time and changes
to either the timing or amount of the original present value estimate underlying
the obligation. As at June 30, 2008 and December 31, 2007 the Company does not
have any asset retirement obligations.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a
maturity of three months or less at the time of issuance to be cash equivalents.

Property and Equipment

Property and equipment are carried at cost. For the
significant components of property and equipment, depreciation is provided for
using the following method and time periods:

|Asset                       | Basis         | Period       
|--------------------------- | ------------- | -------------
|Vehicles                    | Straight line | 5 years      
|Buildings                   | Straight line | 20 years     
|Equipment and
    computers | Straight line | 3 to 10 years

The Company evaluates the carrying values of property and
equipment to determine if these costs are in excess of their net recoverable
amount whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. The periodic evaluation of the carrying value of
property and equipment costs is based on expected future cash flows and
estimated salvage value.

Environmental Costs

Environmental expenditures that related to current operations
are charged to operations or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are charged to operations.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the cost can be reasonably estimated.

Comprehensive Income

In accordance with SFAS No. 130, Reporting Comprehensive
Income ("SFAS 130"), comprehensive income consists of net income and other
gains and losses affecting stockholders equity that are excluded from net
income, such as unrealized gains and losses on investments available for sale,
foreign currency translation gains and losses when a subsidiary has a functional
currency other than US dollars. For all periods presented, the Companys
financial statements do not include any of the additional elements that affect
comprehensive income. Accordingly, net loss and comprehensive loss are
identical.

10

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Stock-Based Compensation

The Company applies SFAS No. 123(R), Share-Based Payment,
to account for stock options and similar equity instruments issued. Accordingly,
compensation expense attributable to stock options or similar equity instruments
granted is measured at the fair value at the grant date using the Black-Scholes
option pricing model and a graded approach and recognized over the expected
vesting period. In the event stock options are forfeited, any previously
recognized compensation expense related to unvested and expiring awards in
excess of estimated forfeitures is recognized in earnings during the period of
forfeiture.

Although the assumptions used to record stock compensation
expense reflect managements best estimates, they involve inherent uncertainties
based on market conditions generally outside of the control of the Company. If
other assumptions were used, stock-based compensation expense could be
significantly impacted. As stock options are exercised, the proceeds received on
exercise, in addition to the previously recognized amounts related to those
stock options, are credited to stockholders equity.

The Company provides direct stock awards to certain
directors, officers, and consultants. Direct stock awards are typically subject
to a two year vesting period. Direct stock awards are recorded at fair value on
the grant date, with compensation expense recognized on a straight-line basis
over the vesting period.

Foreign Currency Translation

The Companys functional currency is the US dollar.
Accordingly, foreign currency balances are translated into US dollars as follows
i) Monetary assets and liabilities are translated at the period-end exchange
rate ii) Non-monetary assets are translated at the rate of exchange in effect at
their acquisition date; and iii) Revenue and expense items are translated at the
average exchange rate for the respective period. Foreign exchange gains and
losses are recognized as period expenses.

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net
earnings (loss) available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted net earnings (loss) per
share on the potential exercise of equity-based financial instruments is not
presented where anti-dilutive. For the periods ended June 30, 2008 and 2007,
outstanding share purchase warrants and options to purchase common shares were
excluded from the computation of diluted earnings per share as the impact of
these instruments was anti-dilutive as a result of losses incurred in these
periods.

Income Taxes

The Company accounts for income taxes using the asset and
liability method which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Companys financial statements or tax returns.

11

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Financial Instruments

The Companys financial instruments consist of cash and cash
equivalents, restricted cash, accounts payable and accrued liabilities,
short-term promissory notes, and mineral property purchase obligations. The
carrying value of these financial instruments approximates their fair value
based on their liquidity or their short-term nature. The Company is not exposed
to significant interest or credit risk arising from these financial instruments.

NOTE 3  MINEROS ADVANCE AND RESTRICTED CASH

On January 29, 2008 the Company entered into a Share Purchase
and Sale Agreement (the "Agreement") to purchase all of the issued and
outstanding shares of Mineros Nacionales S.A., ("Mineros") a corporation
organized under the laws of the Republic of Colombia, for cash consideration of
$35,000. The Mineros Agreement provided that the transaction would be completed
on April 29, 2008, unless such closing date is extended by mutual agreement. The
Company has provided a guarantee in the amount of $2,500, which would be payable
to the vendors if the transaction is not completed for any reason. The guarantee
is collateralized by a term deposit held by the Company in the amount of $2,500
and has been classified as restricted cash in the consolidated balance sheet.

The Company and Mineros subsequently agreed to modify the
Agreement and extend the completion date of the Mineros transaction from April
29, 2008 to July 31, 2008. In connection with this extension, on June 19, 2008
the Company advanced $7,000, representing 20% of the $35,000 purchase price with
the balance due upon completion of the transaction. The advance has been
classified as a non-current asset in the consolidated balance sheet.

Pursuant to the modification and extension, the final 80% is
payable in Colombian pesos, with any costs associated with settling the final
payment to be the responsibility of the Company. Both the $2,500 guarantee and
$7,000 deposit are non-refundable if the transaction is not completed for any
reason.

As disclosed in note 14, no formal agreement for further extension has been
executed, however both Mineros and the Company continue to work together to
complete the transaction.

NOTE 4  MINERAL PROPERTIES AND EXPLORATION RIGHTS

Mineral Property Rights Acquisition
and Exploration Expenditures

The Companys mineral property acquisition and exploration expenditures
consist of

I)

The acquisition of mineral
concessions;

II)

The acquisition of mineral and
exploration rights from existing titleholders;

III)

The exploration
of acquired mineral properties and related activities; and

IV)

Stock-based
compensation allocated pursuant to SFAS No. 123(R)

12

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

The following table summarizes the Companys mineral
concession acquisitions, mineral rights acquisitions, and mineral exploration
expenses as recorded in the Companys consolidated financial statements:

|                                                                                                  |              |              |            |          |            |          |                  |          |   | Cumulative
|------------------------------------------------------------------------------------------------- | ------------ | ------------ | ---------- | -------- | ---------- | -------- | ---------------- | -------- | - | ----------
|                                                                                                  |              |              |            |          |            |          |                  |          |   | From      
|                                                                                                  |              |              |            |          |            |          |                  |          |   | Inception 
|                                                                                                  | Three Months | Three Months | Six Months |          | Six Months |          | (March 25, 2003)
|                                                                                                  |              | Ended        |            | Ended    |            | Ended    |                  | Ended    |   | Through   
|                                                                                                  |              | June 30,     |            | June 30, |            | June 30, |                  | June 30, |   | June 30,  
|                                                                                                  |              | 2008         |            | 2007     |            | 2008     |                  | 2007     |   | 2008      
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|I) Acquisition of mineral
    concessions                                                         | $            | -            | $          | -        | $          | -        | $                | -        | $ | 26,911    
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|II) Acquisition of mineral and
    exploration rights                                             |              | 141          |            | 1,451    |            | 520      |                  | 5,192    |   | 25,978    
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|Total acquired mineral and
    exploration properties and rights                                  |              | 141          |            | 1,451    |            | 520      |                  | 5,192    |   | 52,889    
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|III) Exploration of acquired
    mineral properties                                               |              | 4,117        |            | 1,316    |            | 6,844    |                  | 2,573    |   | 18,311    
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|IV) Stock based compensation                                                                      |              | 137          |            | 245      |            | 385      |                  | 460      |   | 1,498     
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|Total mineral property
    exploration expenses                                                   |              | 4,254        |            | 1,561    |            | 7,229    |                  | 3,033    |   | 19,809    
|                                                                                                  |              |              |            |          |            |          |                  |          |   |           
|Total mineral and exploration
    properties and rights acquisitions and exploration expenditures | $            | 4,395        | $          | 3,012    | $          | 7,749    | $                | 8,225    | $ | 72,698    



13

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Capitalized Mineral and Exploration Properties and Rights

Acquired mineral and exploration properties and exploration
rights have been recorded at amounts necessary to reflect temporary differences
associated with the differences between their accounting and tax bases. These
differences arise primarily due to differences between the assigned values and
tax bases of acquired Caramanta Project and Marmato Project mineral concessions.
As a result, acquired mineral and exploration properties and rights are recorded
in the consolidated balance sheets as follows:

|                                                              |   | June 30, 2008 | December 31, 2007
|------------------------------------------------------------- | - | ------------- | -----------------
|Purchase of mineral and
    exploration properties and rights | $ | 52,889        | $                
|Recognition of deferred tax
    liability upon acquisition    | $ | 13,008        | $                
|Mineral and exploration properties
    and rights             | $ | 65,897        | $                

Title to mineral properties and mining and exploration rights
involves certain inherent risks due to the difficulties of determining the
validity of certain claims as well as the potential for problems arising from
the frequently ambiguous conveyance history characteristic of many mining
properties when the Company acquires title to mineral properties either
individually or through the acquisition of subsidiaries, the conveyance of such
titles can be time consuming and subject to the interpretation of Colombian
laws. The Company cannot give any assurance that title to such properties will
not be challenged or impugned and cannot be certain that the Company will have
valid title to its mining properties. The Company relies on title opinions by
legal counsel who base such opinions on the laws of countries in which the
Company operates.

NOTE 5  PROPERTY AND EQUIPMENT

|                        |   |       |   | Accumulated  |   | Net Book
|----------------------- | - | ----- | - | ------------ | - | --------
|As at June 30, 2008     |   | Cost  |   | Amortization |   | Value   
|                        |   |       |   |              |   |         
|Equipment and computers | $ | 1,012 | $ | (146)        | $ | 866     
|Building                |   | 97    |   | (9)          |   | 88      
|Vehicles                |   | 315   |   | (100)        |   | 215     
|                        |   |       |   |              |   |         
|Total                   | $ | 1,424 | $ | (255)        | $ | 1,169   
|                        |   |       |   |              |   |         
|                        |   |       |   |              |   |         
|                        |   |       |   | Accumulated  |   | Net Book
|As at December 31, 2007 |   | Cost  |   | Amortization |   | Value   
|                        |   |       |   |              |   |         
|Equipment and computers | $ | 998   |   | (84)         | $ | 914     
|Building                |   | 96    |   | (6)          |   | 90      
|Vehicles                |   | 312   |   | (59)         |   | 253     
|                        |   |       |   |              |   |         
|Total                   | $ | 1,406 | $ | (149)        | $ | 1,257   



14

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

NOTE 6  STOCKHOLDERS EQUITY

A) Common Stock and Special Warrants

|                                                                       | June 30, 2008 | December 31, 2007
|---------------------------------------------------------------------- | ------------- | -----------------
|                                                                       |               |                  
|Authorized:                                                            |               |                  
|200,000,000 common shares, $0.00001 par value                          |               |                  
|                                                                       |               |                  
|Issued and
    Outstanding:                                            |               |                  
|92,932,486 common shares (December 31, 2007: 86,590,075 common shares) | $ 1           | $ 1              

i)

During the six
months ended June 30, 2008 the Company completed the following transactions:

a)

On March 3,
2008 the Company issued 250,000 options to purchase the Companys common stock
to an employee.

b)

On March 19,
2008 the Company issued 50,000 options to purchase the Companys common stock to
a director.

c)

On March 31,
2008 the Company completed a private equity offering of 6,342,411 Units at USD
$0.85 per Unit to a total of 7 investors. Each Unit consists of one share of
common stock and one warrant ("the Warrant"), for a total of 6,342,411 common
shares and 6,342,411 warrants issued. The total gross proceeds raised were
$5,391. Each warrant is exercisable for one common share at an exercise price of
$1.10 and the Warrants are exercisable at any time up to two years from the
issue date.

In connection with this private
equity offering, the Company paid as a commission $158 and incurred issue costs
of $50.

The Company has allocated the total
net proceeds from the offering of $5,183 to the various underlying equity
instruments comprising the equity offering, based on the estimated relative fair
value of each instrument at the offering date as follows:

Net ProceedsCommon shares andAdditional paid in
      capital  common shares
      $
      3,931


Additional paid in capital  share
      purchase warrants
      
      1,252Total net proceeds from private
      equity offering
      $
      5,183




15

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

d)

On June 18,
2008 the Company completed a private equity offering of 11,167,000 special
warrants (the "Special Warrants") at a price of $0.85 per Special Warrant to a
total of 16 investors. Each Special Warrant will be automatically exercised for
no additional consideration to acquire one Unit (the "Units") upon the earlier
of a) the issuance of a receipt for the prospectus of the Units and b) four
months following the closing date of the offering. Each Unit will consist of one
common share of the Company (the "Common Shares") and one Common Share purchase
Warrant (the "Warrant"). Each Warrant will entitle the holder to acquire one
Common Share at a price of $1.50 for 60 months following the date of the
offering.

In connection with the offering, the Company paid as a
commission $664 and incurred issue costs of $270. The Company issued 781,690
special broker warrants (the Special Broker Warrants") to the agents retained
for the offering, each Special Broker Warrant exercisable for no additional
consideration into one broker warrant of the Company ("Broker Warrants"), and
each Broker Warrant entitling the holder, subject to shareholder approval, to
purchase one Common Share at an exercise price of $0.85 per Common Share for 24
months following the date of the offering. The net proceeds of $8,558 were
allocated to the special warrants as a separate component of stockholders
equity and will be reclassified to the various equity elements upon conversion
of the special warrants.

In connection with the Offering, the Company entered into
registration rights agreements with the holders and agents pursuant to which the
Company agreed to prepare and file with the SEC a registration statement to
register the resale of Common Shares and the Common Shares issuable upon
exercise of the Warrants by the purchasers in the Offering as well as the Common
Shares issuable upon exercise of the Broker Warrants.

In the event the registration statement registering the
resale of the Common Shares issued in connection with the Offering does not
become effective on or before October 18, 2008 or, subject to certain
exceptions, ceases to be effective and available for use any time it is required
to be effective and available for use or, if, at a time the registration
statement is not available for use, Rule 144 is not available for use for a
period of five consecutive business days by holders of such securities because
of certain breaches by the Company, the Company is obligated, subject to
shareholder approval, to issue to each purchaser of Special Warrants that hold
Common Shares or Warrants issued pursuant to the Special Warrants or Common
Shares issued pursuant to the Warrants a number of Common Shares and Warrants
(together referred to as "Additional Units"), equal to 10% of the number of
Special Warrants purchased by purchasers in the Offering and issue to the agents
a number of Broker Warrants equal to 10% of the Broker Warrants initially issued
to the agents. In addition, the Company is obligated, subject to shareholder
approval, to issue to each such purchaser 279,175 Additional Units (subject to
an aggregate maximum of 558,350 Additional Units) for each 30 days after the
four month anniversary of the closing date of the Offering (whether or not
continuous) when neither the registration statement nor Rule 144 is available
for resale of securities of the Company. In lieu of issuing such Additional
Units, the Company has the option, or if shareholder approval is not obtained,
to pay the cash equivalent of such Additional Units, which shall be deemed to be
$0.85 per Additional Unit.

16

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

ii)

During the year
ended December 31, 2007, the Company completed the following transactions:

a)

On March 21,
2007, the Company completed a private equity offering of 9,020,000 common shares
at $1.00 per common share. The gross proceeds received from the offering were
$9,020. In connection with this private equity offering, the Company paid a
commission of $541 and issued agents warrants to purchase 541,200 shares of the
Companys common stock with each warrant exercisable at any time up to March 22,
2010 at an exercise price of $1.00 per share. The fair value of the agents
warrants was $404 and has been accounted for as a reduction of the additional
paid-in capital associated with the net proceeds of $8,479 related to the March
21, 2007 common stock issuance.

b)

On March 22,
2007, the Company issued 650,000 common shares to certain consultants to the
Company as described under "Stock Options and Other Stock- Based Compensation".

c)

On May 3, 2007
the Company issued 50,000 common shares pursuant to the exercise of 50,000
options for proceeds of $37.

d)

On June 6, 2007
the Company issued 60,000 common shares to non-management directors of the
company in connection with their annual remuneration.

e)

On August 7,
2007 the Company issued 150,000 options to purchase the Companys common stock
to certain consultants.

f)

On August 14,
2007, the Company completed a private equity offering of 8,483,000 Units at
$1.40 CDN per Unit to a total of 24 investors. Each Unit consists of one share
of common stock and one-half warrant ("the Warrant"), for a total of 8,483,000
common shares and 4,241,500 warrants issued. The total gross proceeds raised
were $11,164 ($11,876 CDN). Each Warrant is exercisable for one common share at
an exercise price of $1.85 CDN and the Warrants are exercisable at any time up
to August 14, 2008. The Warrants also require the holder, upon notice from the
Company, to exercise in the event that during any fifteen consecutive trading
days, the common stock of the Company closes at or above $2.25 CDN on a
recognized North American stock exchange.

In connection with this private
equity offering, the Company paid as a commission $713 and issued additional
warrants ("Agents Warrants") to purchase 508,980 shares of the Companys common
stock with each Agents Warrant exercisable for a price of $1.40 CDN per share.
The Agents Warrants are exercisable at any time up to August 14, 2010.

The Company has allocated the net
proceeds of $10,494 from the offering to the various underlying equity
instruments comprising the offering, based on the estimated relative fair value
of each instrument at the closing date, as follows:

Net ProceedsCommon shares and additional paid in
      capital-common shares
      $
      9,568Additional paid in capital-share
      purchase and agents warrants
      
      926$
      10,494




17

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

g)

On September
14, 2007 in connection with the acquisition of the final 10% of RNC, the Company
issued 3,000,000 common shares at $1.47 per share to Investcol (See Note 3).

h)

On October 1,
2007 The Company issued 150,000 options to purchase the Companys common stock
to certain consultants in exchange for services rendered.

i)

On November 8,
2007 The Company issued 1,850,000 options to purchase the Companys common stock
to certain directors, officers and employees.

j)

On November 14,
2007 The Company issued 125,000 common shares pursuant to the exercise of
125,000 options for proceeds of $94.

k)

On December 28,
2007, The Company completed a private equity offering of 9,165,226 Units at
$1.10 CDN per Unit to a total of 11 investors. Each Unit consists of one share
of common stock and one-half warrant (the "Warrant"), for a total of 9,165,226
common shares and 4,582,613 warrants issued. The total gross proceeds raised
were $10,283 ($10,082 CDN). Each Warrant is exercisable for one common share at
an exercise price of $2.00 CDN and the Agents Warrants are exercisable at any
time up to December 28, 2012.

In connection with this private
equity offering, the Company paid as a commission $668 ($665 CDN), incurred
issue costs of $120, and issued additional warrants ("Agents Warrants") to
purchase 595,739 shares of the Companys common stock with each Agents Warrant
exercisable for one common share at an exercise price of $1.20 CDN. The Warrants
are exercisable at any time up to December 28, 2009.

The Company has allocated the net
proceeds from the offering of $9,495 to the various underlying equity
instruments comprising the equity offering, based on the estimated relative fair
value of each instrument at the offering date, as follows:

Net ProceedsCommon shares andAdditional paid in capital  common shares
      $
      7,581Additional paid in capital  share purchase and agents
      warrants
      
      1,914Total net proceeds from private equity offering
      $
      9,495


B) Fair Value Disclosures

The 4,241,500 Warrants and 508,980 Agents Warrants issued in
connection with the Companys August 14, 2007 private placement, the 4,582,613
warrants and 595,739 Agents Warrants issued in connection with the Companys
December 28, 2007 private placement and the 350,000 Warrants issued in
connection with the Companys February 8, 2008 short-term promissory note
issuance are denominated in Canadian dollars while the Companys functional and
reporting currency is the U.S. Dollar. As a result, the fair value of the
Warrants fluctuates based on their time and expiry and changes in the exchange
rate between the U.S. and Canadian dollar.

18

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Recent developments suggest warrants with exercise prices
denominated in a different currency than an entitys functional currency should
not be classified as equity. If U.S. GAAP is changed to reflect this view, these
instruments would be treated as derivatives and recorded as liabilities carried
at their fair value, with period to period changes in the fair value recorded as
a gain or loss in the statement of operations and comprehensive loss.

Options (Including Embedded Conversion Options) Are Indexed
to both an Entitys own Stock and Currency Exchange Rated. The tentative
conclusions of C21 would mean the Companys Canadian dollar denominated warrants
do not meet a scope exception under FAS133 and therefore these warrants would be
recorded as derivative liabilities and carried at fair value. Transitional
provisions would require a cumulative-effect adjustment to the opening balance
of the Companys deficit. However, the FASB deferred making a decision on
confirming their tentative conclusions in Issue C21 and asked that it be
subsumed into an EITF issue of 07-5 "Determining Whether an Instrument (or
Embedded Feature) is Indexed to a Companys Own Stock." A conclusion has
recently been reached indicating that these types of instruments should be
recorded as liabilities at fair value for years beginning on or after December
15, 2008. The Company expects to adopt the recommendations of EITF 07-05 on
January 1, 2009 and adjust the warrants to liabilities when required.

If the Company had recorded such instruments as liabilities
at fair value at June 30, 2008, it would have reported the following unrealized
cumulative gain:

|                                             |   | Total  
|-------------------------------------------- | - | -------
|Fair value  At Inception of
    instruments | $ | 3,865  
|Decrease in fair value of instruments        |   | (2,616)
|Fair value  June 30, 2008                   | $ | 1,249  

In connection with certain of the Companys historical
private placements totalling $51,586, the Company historically committed to
penalties ranging between 1.5% and 15% of the gross proceeds received in the
event the subsequent registration statements are not declared effective by the
SEC and/or remain effective within specified periods following the closing of
the offerings. Pursuant to EITF 00-19-2 Accounting for Registration Payment
Arrangements, the Company concluded that at inception and subsequently,
payments under these commitments are not probable. As a result, no liabilities
for registration payment obligations are required to be recognized in the
consolidated balance sheets at June 30, 2008 and December 31, 2007.

19

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

C) Warrants

As at June 30, 2008, the following warrants were issued and
outstanding:

|Number of Warrants | Exercise Price | Expiry Date       
|------------------ | -------------- | ------------------
|390,040            | $              | 2.00 USD per share
|541,200            |                | 1.00 USD per share
|4,241,500          |                | 1.85 CDN per share
|508,980            |                | 1.40 CDN per share
|4,582,613          |                | 2.00 CDN per share
|595,739            |                | 1.20 CDN per share
|350,000            |                | 1.10 CDN per share
|5,992,411          |                | 1.10 USD per share
|350,000            |                | 1.10 USD per share
|17,552,483         | $              | 1.55 USD per share













D) Stock Options and Other Stock-Based Compensation

Stock Options

In 2006, the Company adopted the 2006 Stock Incentive Plan,
(the "Plan") which provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units, and stock awards to officers,
directors or employees of, as well as advisers and consultants to, the Company.

All stock options and rights are to vest over a period
determined by the Board of Directors and expire not more than ten years from the
date granted. On August 17, 2007 the Company received shareholder approval for
an amended Stock Incentive Plan. Pursuant to the amended Plan, the number of
shares that may be issued for awards granted under the 2006 plan was increased
to 6,500,000.

Pursuant to the Plan, during 2008 the Company granted stock
options to employees, directors, officers and consultants of the Company. These
stock options vest at a rate of 25% every six months over a period of two years,
and have a life of 10 years.

A summary of stock options granted and exercised is as
follows:

|                                         |           | Weighted Average
|---------------------------------------- | --------- | ----------------
|                                         |           |                 
|                                         | Shares    |                 
|                                         |           |                 
|Options outstanding at December 31, 2007 | 5,890,000 | $               
|Granted in fiscal 2008                   | 300,000   |                 
|Exercised in fiscal 2008                 | -         |                 
|Forfeited and expired in fiscal 2008     | (150,000) |                 
|Options outstanding at June 30, 2008     | 6,040,000 | $               



20

---





|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

|              |             |          |             |            
|------------- | ----------- | -------- | ----------- | -----------
|              |             | Weighted |             |            
|              |             | Weighted | Average     |            
|Range of      |             | Average  | Remaining   |            
|Exercise      | Number      | Exercise | Contractual | Number     
|Prices        | Outstanding | Price    | Life (yrs)  | Exercisable
|              |             |          |             |            
|$0.75 - $1.00 | 550,000     | $0.85    | 8.70        | 250,000    
|$1.01 - $1.90 | 5,490,000   | 1.33     | 8.74        | 2,807,500  
|$0.75 - $1.90 | 6,040,000   | $1.29    | 8.73        | 3,057,500  

|                                                                     |  |  |  |             |             |   |     
|-------------------------------------------------------------------- |  |  |  | ----------- | ----------- | - | ----
|                                                                     |  |  |  | Fiscal 2008 | Fiscal 2007
|Weighted average fair value of options
    granted during the period |  |  |  | $           | 0.71        | $ | 1.06
|                                                                     |  |  |  |             |             |   |     
|Weighted average fair value of options
    vested during the period  |  |  |  | $           | 1.11        | $ | 1.12
|                                                                     |  |  |  |             |             |  

The fair value of options granted in 2008 has been estimated
as of the date of the grant using the Black-Scholes option pricing model with
the following assumptions: risk-free interest rate of 4.45%, dividend yield 0%,
an estimated volatility of 65%, and expected term of 10 years, equal to the full
life of the options as the Company does not expect any material option awards to
be forfeited or exercised early.

The fair value of options granted in 2007 has been estimated
as of the date of the grant using the Black-Scholes option pricing model with
the following assumptions: risk-free interest rate of 4.45%, dividend yield 0%,
an estimated volatility of 74%, and expected term of 10 years, equal to the full
life of the options as the Company does not expect any material option awards to
be forfeited or exercised early.

Other Stock-Based Compensation

On October 1, 2006, the Company agreed to grant 500,000
common shares to a consultant providing services to the Company. Pursuant to the
terms of the Consulting Agreement, should the Consultants employment terminate
by the Consultants resignation before the period of two years has elapsed, the
Consultant is required to return a pro rata portion of the shares based on the
time remaining in the contract. In the case of a change in control of the
Company by merger or sale of a majority stake or otherwise, the shares held by
the Consultant will immediately vest. The fair value of the common stock award,
based on the market price of the Companys common shares at the agreement date,
was $915. The shares were issued on March 22, 2007 and the Company is accounting
for this award by recognizing compensation expense ratably over twenty-four
months, commencing on the agreement date.

21

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

On January 15, 2007, the Company agreed to grant 150,000
common shares to a consultant. The fair value of the common stock award, based
on the market price of the Companys common shares at the agreement date, was
$166. The shares were issued on March 22, 2007 and the Company accounted for
this award by recognizing compensation expense ratably over three months,
commencing on the agreement date.

On May 6, 2007, the Company granted 60,000 common shares to
non-management directors. The fair value of the common stock awards, based on
the market price of the Companys common shares at the grant date, was $73. The
shares were issued on June 6, 2007 and the Company accounts for this award by
recognizing compensation expense ratably over twelve months, commencing on the
grant date.

Summary of Stock-Based Compensation Expenses

The following table summarizes stock-based compensation
recorded in the consolidated statements of operations:

|                                      |          |        |          |        |          |        |          |        |                  | Cumulative    
|------------------------------------- | -------- | ------ | -------- | ------ | -------- | ------ | -------- | ------ | ---------------- | --------------
|                                      |          | Three  |          | Three  |          | Six    |          | Six    |                  | From Inception
|                                      |          | Months |          | Months |          | Months |          | Months | (March 25, 2003)
|                                      |          | Ended  |          | Ended  |          | Ended  |          | Ended  |                  | through       
|                                      | June 30, |        | June 30, |        | June 30, |        | June 30, |        | June 30,        
|                                      |          | 2008   |          | 2007   |          | 2008   |          | 2007   |                  | 2008          
|Mineral property exploration expenses | $        | 137    | $        | 245    | $        | 385    | $        | 460    | $                | 1,498         
|General and administrative            |          | 650    |          | 616    |          | 1,423  |          | 966    |                  | 5,378         
|Total stock-based compensation        | $        | 787    | $        | 861    | $        | 1,808  | $        | 1,426  | $                | 6,876         

As at June 30, 2008, there was $1,282 of unrecognized
compensation cost related to unvested stock options. At June 30, 2008, there was
$114 of unrecognized compensation cost related to unvested direct stock awards
recorded as prepaid consulting fees in the Companys consolidated balance sheet.

NOTE 7  MINERAL PROPERTY PURCHASE OBLIGATIONS

In the normal course of business the Company enters into
contractual obligations with Colombian titleholders to acquire mineral and
exploration rights. Upon signing, typically 25% of the negotiated purchase price
is immediately due and payable with an additional 25% due when all required
documentation has been submitted to the local mining department and the final
50% due when the mining claim has been successfully transferred and registered
in the Companys name. The Company records the full contractual obligation as a
contract liability upon signing. The timing and magnitude of repayment of these
obligations will vary between periods as will cash flows related to these
obligations.

22

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

NOTE 8  SHORT TERM PROMISSORY NOTE

On February 8, 2008 the Company entered into a $2,500
short-term promissory note with Global Resource Fund ("Global"). One of the
Companys directors serves as Chief Executive Officer of a company that is a
$750 participant in the note. The loan, collateralized by the Companys
investment in RNC and collateralized by a pledge of the Companys shares of
Caldas, is due and payable on or before July 31, 2008. Upon signing, a $75 fee
was paid to the note holder. The note bears interest at 12.5% per annum, with
monthly interest payments commencing February 29, 2008.

In connection with this promissory note, the Company issued
warrants to purchase 350,000 shares of the Companys common stock with each
warrant exercisable at any time up to February 8, 2010 at an exercise price of
CDN $1.10 per share. If the warrants are not exercised by the expiration date,
the lender may require the Company to repurchase the warrants for $50.

The Company has allocated the total net proceeds received of $2,500 to the
various underlying instruments, based on the estimated relative fair value of
each instrument as follows:

|                                                     | Net Proceeds
|---------------------------------------------------- | ------------
|Short-term promissory note                           | $           
|Additional paid in capital  share purchase warrants |             
|                                                     | $           

As disclosed in note 14, repayment of the note was extended by the lender to
September 30, 2008.

NOTE 9  INCOME TAXES

The full potential benefit of net operating loss carry
forwards has not been recognized in the financial statements. Since the Company
has no source of operating revenue, it cannot be assured that it is more likely
than not that such benefit will be realized in future years. The components of
the net deferred tax asset, net deferred tax liability, differences between the
statutory rate and the effective rate, and the valuation allowance are as
follows:

a)

Components of income tax
provision:

The components of the Companys provision for (recovery of) income taxes are
as follows:

|          |          |   | Three Months  |   | Three Months  |               | Six Months    |   | Six Months
|--------- | -------- | - | ------------- | - | ------------- | ------------- | ------------- | - | ----------
|          |          |   | Ended         |   | Ended         |               | Ended         |   | Ended     
|          |          |   | June 30, 2008 |   | June 30, 2007 | June 30, 2008 | June 30, 2007
|Current:  | Federal  | $ | -             | $ | -             | $             | -             | $ | -         
|          | Domestic |   | -             |   | -             |               | -             |   | -         
|          | Foreign  |   | -             |   | -             |               | -             |   | -         
|          |          | $ | -             | $ | -             | $             | -             | $ | -         
|          |          |   |               |   |               |               |               |   |           
|          |          |   |               |   |               |               |               |   |           
|          |          |   | Three Months  |   | Three Months  |               | Six Months    |   | Six Months
|          |          |   | Ended         |   | Ended         |               | Ended         |   | Ended     
|          |          |   | June 30, 2008 |   | June 30, 2007 | June 30, 2008 | June 30, 2007
|Deferred: | Federal  | $ | -             | $ | -             | $             | -             | $ | -         
|          | Domestic |   | -             |   | -             |               | -             |   | -         
|          | Foreign  |   | (1,168)       |   | (538)         |               | (2,072)       |   | (963)     
|          |          | $ | (1,168)       | $ | (538)         | $             | (2,072)       | $ | (963)     

23

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

b)

Income tax rate reconciliation:

i)

The Companys loss before
provision for income taxes is as follows:

Three Months
      
      Three Months
      
      Six Months
      
      Six MonthsEnded
      
      Ended
      
      Ended
      
      EndedJune 30, 2008
      
      June 30, 2007
      June 30, 2008
      
      June 30, 2007Domestic
      $
      (1,718)
      $
      (2,065)
      $
      (4,358)
      $
      (3,297)Foreign
      
      (3,259)
      
      (1,692)
      
      (7,698)
      
      (3,389)$
      (4,977)
      $
      (3,757)
      $
      (12,056)
      $
      (6,686)


ii)

The effective
income tax rate differs from the statutory rate that would be obtained by
applying the U.S. Federal income tax rate to net income (loss) before income
taxes. These differences result from the following items:

Three Months
      Three Months
      Six Months
      Six MonthsEnded
      Ended
      Ended
      EndedJune 30, 2008
      June 30, 2007
      June 30, 2008
      June 30 2007US federal income tax rate
      34.0%
      34.0%
      34.0%
      34.0%Decrease inIncome tax rate resultingFrom:Losses notrecognized fortax purposes
      (12.1)
      (10.9%)
      (13.0)
      (9.5%)Tax rate differencesin foreignsubsidiaries
      (2.7)
      (0.9%)
      (2.1)
      (2.8%)Other permanentdifferences
      4.3
      (7.9%)
      (1.7)
      (7.3%)Effective income tax rate
      23.5%
      14.3%
      17.2%
      14.4%


24

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

c)

Components of deferred income
tax provision:

The components of the temporary differences, which resulted in deferred
income tax provision, are as follows:

|                              | Three Months  |         | Three Months  |               | Six Months |              | Six Months
|----------------------------- | ------------- | ------- | ------------- | ------------- | ---------- | ------------ | ----------
|                              |               | Ended   |               | Ended         |            | Ended        |           
|                              | June 30, 2008 |         | June 30, 2007 | June 30, 2008 |            | June 30 2007
|Losses carried                |               |         |               |               |            |              |           
|forward                       | $             | (388)   | $             | (560)         | $          | (848)        | $         
|Tax depreciation              |               |         |               |               |            |              |           
|less than                     |               |         |               |               |            |              |           
|accounting depreciation       |               | 11      |               | 11            |            | 21           |           
|Mineral concessions           |               | (862)   |               | -             |            | 982          |           
|Foreign exchange on mineral   |               |         |               |               |            |              |           
|concessions and foreign       |               |         |               |               |            |              |           
|exploration costs             |               | 641     |               | -             |            | (609)        |           
|Foreign exploration costs     |               | (947)   |               | (538)         |            | (2,445)      |           
|Change in valuation           |               |         |               |               |            |              |           
|allowance                     |               | (1,545) |               | (1,087)       |            | (2,899)      |           
|Deferred income tax provision |               | 377     |               | 549           |            | 827          |           
|                              | $             | (1,168) | $             | (538)         | $          | (2,072)      | $         

d)

Components of deferred tax asset
and liability:

The components of the temporary differences, which resulted in deferred tax
assets, are:

|                           |   | June 30, 2008 |   | December 31, 2007
|-------------------------- | - | ------------- | - | -----------------
|Tax depreciation less than |   |               |   |                  
|depreciation               | $ | 302           | $ | 324              
|Losses carried             |   |               |   |                  
|forward                    |   | 3,529         |   | 2,680            
|                           |   | 3,831         |   | 3,004            
|Valuation allowance        |   | (3,831)       |   | (3,004)          
|Deferred tax asset         | $ | -             | $ | -                

e)

The components of the temporary
differences, which have resulted in the deferred tax liability, are:

|                               |   | June 30, 2008 |   | December 31, 2007
|------------------------------ | - | ------------- | - | -----------------
|Tax depreciation less than     |   |               |   |                  
|Accounting depreciation        | $ | -             | $ | -                
|Tax basis less than accounting |   |               |   |                  
|basis for mineral concessions  |   | (15,555)      |   | (14,572)         
|Foreign exploration costs      |   | 5,149         |   | 2,704            
|Deferred tax liability         | $ | (10,406)      | $ | (11,868)         

25

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

f)

The Company has income tax
losses available for carry forward of which expire as follows:

|Expiry Year |   | Domestic |   | Foreign |   | Total 
|----------- | - | -------- | - | ------- | - | ------
|            |   |          |   |         |   |       
|2023        | $ | 36       | $ | -       | $ | 36    
|2024        |   | 23       |   | -       |   | 23    
|2025        |   | 311      |   | -       |   | 311   
|2026        |   | 1,535    |   | -       |   | 1,535 
|2027        |   | 5,550    |   | -       |   | 5,550 
|2028        |   | 2,920    |   | -       |   | 2,920 
|            | $ | 10,375   | $ | -       | $ | 10,375

g)

FIN 48  Accounting for Uncertainty in Income Taxesrequires all material tax
positions to undergo a new two-step recognition and measurement process. All
material tax positions in all jurisdictions in all tax years in which the
statute of limitations remains open upon the initial date of adoption are
required to be assessed. For a tax benefit to be recognized it must be more
likely than not that a tax position will be sustained upon examination based
solely on its technical merits. If the recognition standard is not satisfied,
then no tax benefit otherwise arising from the tax position can be recorded for
financial statement purposes. If the recognition standard is satisfied, the
amount of tax benefit recorded for financial statement purposes will be the
largest amount of tax benefit with a greater than 50% likelihood of being
realized upon ultimate settlement with a taxing authority. The adoption of FIN
48 on January 1, 2007 did not have a material impact on the Companys financial
position, results of operations, or cash flows for the three or six months ended
June 30, 2008. The Company files tax returns in the United States and Colombia.
For all jurisdictions, all years remain subject to tax authority examination.

NOTE 10  RELATED PARTY TRANSACTIONS

During the normal course of operations, the Company engages in transactions
with certain directors, senior officers, and shareholders of the Company.

Related party transactions reflected within the Companys consolidated
financial statements include:

a)

Management and consulting fees
paid to certain directors, senior officers, and shareholders of the Company in
fiscal 2008 and 2007;



26

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

b)

The issuance and
repayment of a short-term promissory note during the first quarter of fiscal
2007 year. On February 27, 2007 the Company entered into a $3,700 promissory
note between the Company and the Companys Vice Chairman and CEO, and a Company
controlled by these individuals. The loan, collateralized by the Companys
investment in RNC, was due and payable upon closing a planned equity financing,
but in no case later than April 15, 2007. Upon repayment, an $185 loan
origination fee was payable to the note holders. The note bore interest at 10%
per annum, with monthly interest payments commencing February 28, 2007. In
connection with the Companys March 21, 2007 private placement a total of $3,931
(representing the principal amount of the promissory note of $3,700 the loan
origination fee of $185, and accrued interest of $46) was paid to the holders in
full satisfaction of all amounts owing;

c)

The issuance of
a short-term promissory note during the second quarter of fiscal 2007. On June
6, 2007 the Company entered into a $3,500 promissory note between the Company
and the Companys Vice Chairman and CEO, President and a Company controlled by
these individuals. The loan, collaterized by the Companys investment in RNC,
was due and payable upon the closing of a planned equity financing, but in no
case later than August 15, 2007. Upon repayment, a $52 fee was payable to the
note holders. The note bore interest at 10% per annum, with monthly interest
payments commencing June 30, 2007. In connection with the Companys August 14,
2007 private placement a total of $3,634 (representing the principal amount of
the promissory note of $3,500, the loan origination fee of $52, and accrued
interest of $82) was paid to the holders in full satisfaction of all amounts
owing; and

d)

The issuance of
a short-term promissory note during the fourth quarter of fiscal 2007. On
November 12, 2007 the Company entered into a $2,500 promissory note between the
Companys Vice Chairman and CEO, President and a company controlled by these
individuals. The loan, collateralized by the Companys investment in RNC, was
due and payable upon closing an equity financing, but in no case later than
December 31, 2007. Upon repayment a $37 fee was payable to the note holders. The
note bore interest at 10% per annum with monthly interest payments commencing
November 30, 2007. In Connection with the Companys December 28, 2007 private
placement, a total of $2,559 (representing the principal amount of the
promissory notes of $2,500, the loan origination fee of $37 and accrued interest
of $22) was paid to the holders in full satisfaction of all amounts owing.

e)

The issuance of
a short-term promissory note during the first quarter of fiscal 2008 whereby one
of the Companys directors serves as an executive of a company that is a
participant in the note as disclosed in Note 8.

During the three months ended June 30, 2008 the Company:

a)

Paid $24 for board and committee
meeting fees to non-management directors of the Company (six months ended June
30, 2008: $159)

b)

Paid $45 in management, salary,
and consulting fees to directors of the Company (six months ended June 30, 2008:
$73).

c)

Paid $51 in management, salary,
and consulting fees to shareholders of the Company (six months ended June 30,
2008: $102).

d)

Paid $129 for interest and
administration fees on short-term bridge loans (six months ended June 30, 2008:
$312)



27

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

Included in accounts payable and accrued liabilities is $35 owing to
directors and officers of the Company.

During the three months ended June 30, 2007 the Company:

a)

Paid $113 for management and
consulting fees to senior officers of the Company (six months ended June 30,
2007: $212).

b)

Paid $97 for management and
consulting fees to shareholders of the Company (six months ended June 30, 2007:
$211).

c)

Paid $231 for interest and
administration fees on short-term bridge loans (six months ended June 30, 2007:
$231).

Included in prepaid expenses and deposits at December 31,
2007 is $47 related to a director of the Company. Included in accounts payable
and accrued liabilities at December 31, 2007 is $190 owing to directors and
officers of the Company.

NOTE 11  SEGMENTED INFORMATION

The Company has determined that it operates in a single reportable segment,
being the acquisition of, exploration for, and development of mineral
properties.

NOTE 12  ACCOUNTING DEVELOPMENTS

a)

In September,
2006 the FASB issued FAS 157  Fair Value Measurements that provides
enhanced guidance for using fair value to measure assets and liabilities. FAS
157 applies whenever US GAAP requires or permits measurement of assets or
liabilities at fair value. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 (partially deferred for
certain non financial assets and liabilities). The adoption of FAS 157 had no
impact on the Companys financial statements.

b)

In February 2007
the FASB issued FAS 159  The Fair Value Option for Financial Assets and
Financial Liabilities. FAS 159 offers an irrevocable option to carry
eligible financial assets and liabilities at fair value, with the election to be
made on an instrument by instrument basis, with changes in fair value recorded
in earnings. FAS 159 is expected to expand the use of fair value measurement for
many companies, which is consistent with the FASBs long-term measurement
objectives for accounting for financial instruments. FAS 159 is effective as of
an entitys first fiscal year that begins after November 15, 2007 and is applied
prospectively. The adoption of FAS 159 had no impact on the Companys financial
statements.

c)

In December
2007, the FASB issued FAS 141(R), Business Combinations, which will
replace FAS 141 prospectively effective for business combinations in the first
reporting period after December 15, 2008. Early adoption is not permitted. Under
FAS 141(R), business acquisitions will be accounted for under the "acquisition
method", compared to the "purchase method" mandated by FAS 141.

28

---



|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

d)

In December
2007, the FASB issued FAS 160  Non-Controlling Interests in Consolidated
Financial Statements which is effective for periods beginning after December
15, 2008. Under FAS 160, non-controlling interests are measured at 100% of the
fair value of assets acquired and liabilities assumed. Under current standards,
the non-controlling interest is measured at book value. For presentation and
disclosure purposes, non-controlling interests will be classified as a separate
component of shareholders equity. FAS 160 will change the manner in which
increases/decreases in ownership percentages are accounted for. Changes in
ownership percentages will be recorded as equity transactions and no gain or
loss will be recognized as long as the parent retains control of the subsidiary.
When a parent company deconsolidates a subsidiary but retains a non-controlling
interest, the non-controlling interest is re-measured at fair value on the date
control is lost and a gain or loss is recognized at that time. Finally, under
FAS 160, accumulated losses attributable to the non-controlling interests are no
longer limited to the original carrying amount, and therefore non-controlling
interests could have a negative carrying balance. The provisions of FAS 160 are
to be applied prospectively with the exception of the presentation and
disclosure, which are to be applied for al prior periods presented in the
financial statements. Early adoption is not permitted.

NOTE 13  COMMITMENTS AND CONTINGENCIES

i)

Letter of Intent with Colombia
Gold PLC:

On November 20, 2007 the Company
entered into a Letter of Intent to acquire Colombia Gold PLC, a corporation
organized under the laws of the United Kingdom, whose main assets are the mining
rights to the Echandia Property adjacent to the Marmato Mountain. Completion of
the transaction is subject to the negotiation of a definitive agreement,
satisfactory completion of technical, financial, legal, and commercial due
diligence and customary conditions, including all shareholder, court, and
regulatory approvals.

ii)

Caramanta Properties

a)

On August 27,
2007 the Company entered into an agreement with an unrelated party that provides
the Company with an option to acquire 100% of concession No. 669-17 in the
Caramanta region. Over a twenty-four month period the Company has the option to
pay a total of 2.4 billion Colombian pesos ($1,261) to acquire a 100% interest
in the property. At June 30, 2008 the Company has expended an initial 480
million pesos ($252) for a 20% interest. The Company plans to continue to
explore the region to determine if it is desirable to continue to acquire the
remaining 80% interest. Should the Company decide not to continue with the
project, the Company is not obligated to make any further payments and title to
the project remains with the original owner.

b)

On March 17,
2008 the Company entered into an agreement with an unrelated party that provides
the Company with an option to acquire Concession No. 653-17 in the Caramanta
region. Over a twenty-four month period the Company has the option to pay a
total of 1.0 billion Colombian pesos ($525) to acquire a 100% interest in the
property. A June 30, 2008 the Company has expended an initial 300 million ($158)
for a 30% interest. The Company plans to continue to explore the region to
determine if it is desirable to continue to acquire the remaining 70% interest.
Should the Company decide not to continue with the project, the Company is not
obligated to make any further payments and title to the project remains with the
original owners.

29

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|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

c)

The Company has
other options with various unrelated parties totalling $930 million Colombian
pesos ($490) to acquire 100% interests in the properties, subject to the
concessions being granted to the underlying applicants and subsequently being
transferred to and registered in the name of the Company.

iii)

Drilling Contracts:

In the normal course of operations the Company has entered
into agreements with third-party drilling contractors to manage certain aspects
of the Companys drill programs. The Company is committed to payments totalling
$2,100 over the next twelve months in respect of these contracts.

NOTE 14  SUBSEQUENT EVENTS

i) Short-term promissory note extension and Mineros acquisition

On July 16, 2008 the Superintendant of Industry and Commerce
for the Ministry of Commerce, Industry and Tourism of the Republic of Colombia
(the "Superintendant") requested additional information from the Company and
Mineros as part of its review of the Companys planned acquisition of Mineros.
The Company and Mineros are currently working together to address the
Superintendants request and are in the process of negotiating a further
extension of the closing date, however as of the date of these financial
statements, no formal agreement has been executed. The Company has recorded in
the consolidated financial statements at June 30, 2008 restricted cash of $2,500
and Mineros advance of $7,000. As disclosed in note 3, these items are
non-recoverable in the event that the transaction does not close. As a result,
the carrying value of these items could be impacted in future periods should the
Mineros transaction not close.

The Company is also currently undertaking a private offering
of up to 30,000,000 debt units for expected gross proceeds of up to $30,000 to
fund the balance of the purchase price of the Mineros transaction and repay the
short-term promissory note described in Note 8. Furthermore, the Company
anticipates
undertaking a private equity offering to be used for general working capital
purposes.

In light of these circumstances, on August 7, 2008 Global agreed to extend
repayment of the short-term promissory note until September 30, 2008. In return
for this extension, the Company agreed to pay Global $50 and issue to global
125,000 shares of the Companys common stock.

30

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|COLOMBIA GOLDFIELDS LTD.                                                     
|-----------------------------------------------------------------------------
|(An Exploration
    Stage Company)                                           
|NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS                               
|(Amounts in US Dollars, In
    Thousands, Except Share and Per Share Amounts)

NOTE 15  RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the current
period presentation.

31

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction

This Managements Discussion and Analysis (MD&A) is intended to supplement and complement our unaudited interim consolidated financial statements and notes thereto for the three and six months ended June 30, 2008 prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), (our Financial Statements). You are encouraged to review our Financial Statements in conjunction with your review of this MD&A. Additional information relating to our Company is available at
www.sec.gov.com and www.sedar.com. All dollar amounts in our MD&A are expressed in U.S. dollars, unless otherwise specified.

Forward-Looking Statements

This MD&A contains forward-looking statements that are based on the beliefs of our management and reflect our current expectations as contemplated under section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.  When used in this MD&A, the words estimate, project, believe, anticipate, intend, expect, plan, predict, may, should, will, can, the negative of these words, or such other variations thereon, or comparable terminology, are all intended to identify forward-looking statements.  Such statements reflect the current views of Colombia Goldfields Ltd. with respect to future events based on currently available information and are subject to numerous assumptions, risks and uncertainties, including but not limited to, risks and uncertainties pertaining to development of mining properties, changes in economic conditions and other risks, uncertainties and factors, which may cause the actual results, performance, or achievement expressed or implied by such forward-looking statements to differ materially from the forward looking statements.

See Risks and Uncertainties elsewhere in this MD&A. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Our Business

We were incorporated under the laws of the State of Nevada, U.S.A., on March 25, 2003 and changed our name from Secure Automated Enterprises, Inc. to Colombia Goldfields Ltd. (CGL or the Company) on May 13, 2005.  On July 31, 2006, our jurisdiction of incorporation was changed to the state of Delaware.

We are an exploration stage company engaged in the acquisition and exploration of mineral resource properties.  The Companys head office is located in Toronto, Canada and its exploration and administrative office is located in the city of Medellin, Colombia.  Our main activity is the exploration and development of the Marmato Mountain Gold District in Western Colombia.  The Marmato Mountain Gold District is located 80 km south of Medellin. We are actively advancing two areas within the Marmato Mountain Gold District. These are Zona Alta of Marmato Mountain and the Caramanta Exploration Properties. The Caramanta Exploration Properties surround the Marmato Mountain and we are actively securing additional exploration concessions between the two in order to continue to consolidate the district.  We are also endeavoring to acquire Zona Baja of Marmato Mountain through the planned acquisition of Mineros Nacionales S.A. and the adjacent Echandia property through the planned acquisition of Colombia Gold PLC as described elsewhere in this MD&A.

  32

Our objective is to define and consolidate a gold district in the Marmato Mountain Region of Western Colombia.  Our main target in this region is the Marmato Mountain, which is divided into two zones Zona Alta (Upper Zone) and Zona Baja (Lower Zone).  We currently own the exploration rights to Zona Alta, and we are working towards completing the acquisition of 100% of its legally registered property titles.  On January 29, 2008, we were declared the successful bidders to acquire Zona Baja through a competitive bid process.  Our ultimate goal is to combine Zona Alta and Zona Baja to create a bulk mineable ore body on the Marmato Mountain and develop additional resources in the surrounding region.

Second Quarter Fiscal 2008 Overview

In the second quarter of fiscal 2008 we advanced our business plan of consolidating the Marmato Mountain district by:
Solidifying our property title
  ownership to 108 of 119 legally registered mineral titles by continuing to
  negotiate property purchases from existing Colombian titleholders;Completing additional underground
  samples and 13,000 meters of drilling for a total of 32,000 meters drilled;Raising $8,558,000 to fund our
  acquisition and exploration activities; and
  Continuing to proceed with the acquisitions
  of:

i)
Mineros Nacionales S.A, a corporation organized under the laws of the Republic
of Colombia ("Mineros"), which owns Zona Baja of the Marmato Mountain; and
ii)
Colombia Gold PLC, a company organized under the laws of England ("Colombia
Gold"), which owns the mountain adjacent to the Marmato Mountain ("The Echandia
Property").
Marmato Mountain  Zona Alta

As at June 30, 2008, the Zona Alta of Marmato Mountain in Colombia hosts approximately 275 small mines, and Compañia Minera de Caldas, S.A. (Caldas), our Colombian subsidiary, is seeking to purchase each of these. We own 95% of Caldas, with the remaining 5% held directly or indirectly by directors, officers, and senior management of the Company, as Colombian law requires a minimum of five shareholders.  Of these mines, 83 have registered titles in the Ministry of Mines in the province of Caldas. We refer to these mines as Category 1.  Another 36 mines are located in an area called CHG-081, in which there is one mining contract, and we refer to these mines as Category 2. Once the Category 2 mines have been purchased, Caldas will own the entire CHG-081 contract. Our objective is to secure ownership of these 119 properties.  Approximately 90 of the remaining mines have made applications for legalization.  We refer to these mines as Category 3.  Of the applications made, management believes that less than 20 will be approved. Approximately 66 are illegal mines.

Certain mining properties have been purchased or optioned and are awaiting final payment once the documentation and registration is complete. The total number of legally registered mineral titles acquired by Caldas at June 30, 2008 is 108, compared to 107 at March 31, 2008. 81 of these mines are currently registered in the name of Caldas, are fully paid, and are no longer operating.

  33

Marmato Mountain  Zona Baja

On January 29, 2008 we entered into a Share Purchase and Sale Agreement with Mineros.  Under the terms of the agreement, we agreed to purchase all of the issued and outstanding shares of Mineros for cash consideration of $35,000,000.  The agreement provided that the transaction would be completed on April 29, 2008, unless extended by mutual agreement. We hold a deposit guarantee in the amount of $2,500,000.  On April 29, 2008 the Company and Mineros agreed to extend the completion date to June 30, 2008, unless further extended by mutual agreement.  In connection with this extension, we advanced a further $7,000,000 towards the purchase price on June 19, 2008 with the balance due upon closing.  Pursuant to the extension, the final 80% is payable in Colombian pesos, with any costs associated with settling the final payment to be the responsibility of the Company.  On June 27, 2008 the Company and Mineros entered into an agreement to extend the closing date until the third business day after the transaction is approved by Colombian regulators without going beyond July 30, 2008.  Regulatory approval was not received prior to July 30, 2008 and, although no formal further written extension has been executed, the Company and Mineros have responded to a request for further information from the Colombian Superintendant of Industry and Commerce and are in the process of negotiating a further extension.  Both the deposit guarantee and the deposit are non-refundable if the transaction is not completed for any reason.  In the event we are successful in acquiring Mineros, we would own both the Upper and Lower Zones of Marmato Mountain.  There is no assurance that the proposed transaction will be completed.

The Echandia Property

On November 20, 2007, we entered into a letter of intent with Colombia Gold, a corporation incorporated under the laws of England.  Colombia Golds main assets are the mining rights to the Echandia Property, located adjacent to Marmato Mountain. We believe that the Echandia Property contains an extension of the gold mineralization from Marmato Mountain. Completion of the transaction is subject to negotiation and execution of a definitive agreement, satisfactory completion of technical, financial, legal, and other commercial due diligence and customary conditions, including all shareholder, court and regulatory approvals.  We expect the transaction will be a share exchange with the Company exchanging its shares for those of Colombia Gold.  There is no assurance that a definitive agreement will be executed or that the acquisition will be completed.

Principal factors affecting our results of operations

Our consolidated financial statements are prepared in accordance with U.S. GAAP, and we maintain our accounts in U.S. Dollars.

We believe the key determinants of our operating and financial results are:

(a)
The state of capital markets, which affects our ability to finance acquisitions and exploration activities;

(b)
The valuation of mineral properties, as exploration results provide further information relating to the underlying reserves of such properties; and

(c)
Prices for metals, particularly gold.




34

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There is no assurance that commercially exploitable reserves of gold exist on any of our property interests. In the event that commercially exploitable reserves of gold exist on any of our property interests, there is no guarantee that we will make a profit. If we cannot acquire or locate gold deposits, or if it is not economical to recover the gold deposits, our business and operations will be materially adversely affected.



Revenues



We have not yet completed our economic feasibility studies to establish the existence of proven or probable reserves for our properties.  To date, we have not produced any gold, and, as a result, we have not recognized any revenues from mining activities for the period since incorporation to June 30, 2008.



Expenses



Our primary expenses consist of mineral property exploration expenditures and general and administrative expenses.



Critical accounting policies



The following are the accounting policies that we consider to be critical accounting policies. Critical accounting policies are those that are both important to the portrayal of our financial condition and results of operations and those that require the most difficult, subjective, or complex judgments, often as result of the need to make estimates about the effect of matters that are subject to a degree of uncertainty.



Going Concern



We incurred a net loss of $32,389,000 for the period from inception on March 23, 2003 to June 30, 2008, and we are not presently generating any revenue. Furthermore, we have used $58,299,000 during this period to fund our operations mineral acquisitions program. At June 30, 2008, we had a significant working capital deficiency. Our future ability to meet our anticipated exploration expense, mineral properties,
and rights acquisitions, and purchase commitment for the issued and outstanding shares of Mineros is dependent upon our ability to obtain additional financing and upon future acquisition, exploration and development of profitable operations from our mineral properties.  Subsequent to June 30, 2008, repayment of our short-term promissory note was extended to September 30, 2008.  We plan to continue to seek additional financing in private and/or public equity offerings to secure funding for the balance of the Mineros purchase, repayment of our short-term promissory note, and to fund our working capital requirements.  Our estimate of total financing requirements for fiscal 2008 is approximately $100,000,000 ($35,000,000 for the acquisition of Mineros and related exploration, $25,000,000 for the remaining exploration of Zona Alta, $15,000,000 related to the acquisition of Colombia Gold, and $25,000,000 related to additional drilling and working capital requirements).



As at July 31, 2008 our cash resources are nominal and we will need to raise additional debt or equity financing during the remainder of fiscal 2008 to continue to execute our business plans.  We currently do not have any arrangements for additional financing, other than our planned $30 million debt offering that we announced on June 11, 2008.  There can be no assurance that this transaction will close or that additional financing will be available to us on acceptable terms, or at all. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result should we cease to continue as a going concern.



35



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Basis of Presentation



Entities that are controlled by us, either directly or indirectly, are consolidated. Control is established by our ability to determine strategic, operating, investing and financing policies without the co-operation of others. We analyze our level of ownership, voting rights and representation on the board of directors in determining if control exists by any one, or a combination, of these factors.



Our consolidated financial statements include the accounts of (i) Colombia Goldfields Ltd., a Delaware Corporation, (ii) our wholly-owned subsidiary RNC (Colombia) Limited, a Belize corporation and its 95% owned subsidiary, Compania Minera de Caldas, S.A., a Colombia corporation, (iii) our 94% interest in Gavilan Minerales, S.A. (Gavilan), a Colombia Corporation. Colombian law requires a minimum of five shareholders for Colombian companies; as a result, the remaining 5% ownership of Caldas and 6% ownership of Gavilan are held by directors, officers, and senior management of the Company. The directors and senior management of Caldas and Gavilan have executed voting and support agreements in favour of the Company.  All significant inter-company transactions and balances are eliminated upon consolidation.



Mineral Property Rights Acquisition and Exploration and Development Expenditures



Our mineral property rights acquisition and exploration activities consist of



i)

The acquisition of mineral concessions;

ii)

The acquisition of mineral and exploration rights from existing titleholders;

iii)

The exploration of acquired mineral properties and related activities; and

iv)

The allocation of stock-based compensation related to participants in our stock option plan.



Costs of acquiring mining properties, including interest costs attributable to mineral property acquisitions, are capitalized upon acquisition. Pursuant to Statement of Financial Accounting Standards (SFAS) No.34, Capitalization of Interest Costs, interest costs attributable to mineral property acquisitions are also capitalized. Mine development costs incurred either to develop new ore deposits, expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. We evaluate the carrying value of capitalized mining costs and related property, plant and equipment costs, to determine if these costs are in excess of their net recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.



Title on mineral properties and mining and exploration rights involve certain inherent risks due to the difficulties of determining the validity of certain claims, as well as the potential for problems arising from the frequently ambiguous conveyance history of many mining properties.  We cannot give any assurance that title to such properties will not be challenged or impugned and we cannot be certain that we will have valid title to our mining properties.  We rely on title opinions by legal counsel in Colombia.



36



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Asset Retirement Obligations



We apply SFAS No. 143, Accounting for Asset Retirement Obligations that requires the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires us to record a liability for the present value, using a credit-adjusted risk-free interest rate, of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability is accreted until it has been fully incurred, and the asset will be amortized over the life of the related assets. Adjustments are made for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation. As at June 30, 2008 and December 31, 2007, we believe we do not have any asset retirement obligations.



Stock-Based Compensation



On January 1, 2006, we applied SFAS No. 123(R), Share-Based Payment, to account for stock options and similar equity instruments issued. Accordingly, compensation expense attributable to stock options or similar equity instruments granted is measured at the fair value at the grant date, using the Black-Scholes option pricing model and a graded approach and the resultant compensation expenses are classified in our consolidated statement of operations based on the classification of the underlying option plan participants related compensation expenses. In the event stock options are forfeited, any previously recognized compensation expense related to unvested and expiring awards is recognized in earnings in the period of forfeiture. The majority of our stock-based compensation relates to either i) mineral exploration activities associated with our exploration personnel or ii) general and administrative expenses associated with our administrative employees, directors, and consultants.



Although the assumptions used to record stock compensation expense reflect managements best estimates, they involve inherent uncertainties based on market conditions generally outside of our control. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized amounts related to those stock options, are credited to stockholders equity.



Selected Financial Information



The following table sets forth selected financial information for the three and six months ended June 30, 2008 and 2007. This summary of selected financial information is derived from, and should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited financial statements for the three and six months ended June 30, 2008 and the related note disclosures.



37



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|                                 |   |          |   |          |   |          |   |          |   | Cumulative
|-------------------------------- | - | -------- | - | -------- | - | -------- | - | -------- | - | ----------
|                                 |   |          |   |          |   |          |   |          |   | from      
|                                 |   |          |   |          |   |          |   |          |   | Inception 
|                                 |   | Three    |   | Three    |   | Six      |   | Six      |   | (March 25,
|                                 |   | Months   |   | Months   |   | Months   |   | Months   |   | 2003      
|                                 |   | Ended    |   | Ended    |   | Ended    |   | Ended    |   | through   
|In Thousands, except Per Share   |   | June 30, |   | June 30, |   | June 30, |   | June 30, |   | June 30,  
|Amounts                          |   | 2008     |   | 2007     |   | 2008     |   | 2007     |   | 2008)     
|Statement of Loss and Deficit    |   |          |   |          |   |          |   |          |   |           
|Total Operating Expenses         | $ | 4,984    | $ | 3,761    | $ | 12,069   | $ | 6,699    | $ | 37,325    
|Net loss                         | $ | (3,809)  | $ | (3,219)  | $ | (9,984)  | $ | (5,723)  | $ | (32,389)  
|Loss per Share-basic and diluted | $ | (0.04)   | $ | (0.05)   | $ | (0.11)   | $ | (0.09)   |   | N/A       
|Balance Sheet Data               |   |          |   |          |   | As at    |   | As at    |   |           
|                                 |   |          |   |          |   | June 30, |   | December |   |           
|                                 |   |          |   |          |   | 2008     |   | 31, 2007 |   |           
|Total Assets                     |   |          |   |          | $ | 78,070   | $ | 74,519   |   |           
|Total Long-Term Debt             |   |          |   |          | $ | -        | $ | -        |   |           
|Total Liabilities                |   |          |   |          | $ | 21,572   | $ | 23,433   |   |           
|Total Shareholders Equity       |   |          |   |          | $ | 56,498   | $ | 51,086   |   |           



Results of Operations Second Quarter 2008 Compared with Second Quarter 2007



For the three months ended June 30, 2008, we incurred a net loss of $3,809,000 (2007-$3,219,000). We generated interest income of $7,000 (2007-$4,000). The primary contributors to our net loss for the three months ended June 30, 2008 were mineral property exploration expenses of $4,254,000 (of which $137,000 related to non-cash stock-based compensation expenses) and general and administrative expenses of $1,560,000 (of which $650,000 related to non-cash stock-based compensation expenses), along with foreign exchange gains of $888,000, primarily related to unrealized foreign exchange gains on the translation of foreign currency-denominated deferred income tax balances.



For the comparative period, the primary contributors to our net loss were mineral property exploration expenses of $1,561,000 (of which $245,000 related to non-cash stock-based compensation expenses) and general and administrative expenses of $1,290,000 (of which $616,000 related to non-cash stock-based compensation expenses).



Our operations typically involve the following activities and expenditures:



i)

The acquisition of mineral concessions: To June 30, 2008, this has consisted primarily of payments for the assignment contracts and subsequent full legal titles associated with the Caramanta properties, the acquisition of Zona Alta concessions via our purchases of RNC, and the purchase of the Kedahda properties. The concessions we acquire typically grant to the concessionaire the right to carry out within the given area, the studies, works and installations necessary in order to establish the existence of the minerals, and to exploit them according to rules and criteria belonging to the accepted techniques of geology and mining engineering. During the three and six months ended June 30, 2008, we did not expend any cash on the acquisition of mineral concessions.



38

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ii)

The acquisition of mineral and exploration rights. This typically involves staged payments to affected landholders and related stakeholders. The procedure for payment is normally a payment of 25% of the total negotiated purchase price on signing, 25% when title to all documentation has been submitted to the local mining department and the final 50% payment when the mining claim has been registered in Caldas name. Satisfactory resolution of local landowner concerns is essential to the eventual development and operation of modern gold mines on Marmato Mountain. As at June 30, 2008, we have reached agreements with the titleholders to secure 108 legally registered titles deemed desirable in our business plan, with 81 titles registered in Caldas name. During the three months ended June 30, 2008, we expended a total of $141,000 on mineral and exploration rights (six months ended June 30, 2008  520,000) and have obligations as at June 30, 2008 to make payments of $6,034,000 pursuant to amounts owing under our purchase agreements; and



iii)

The exploration of acquired mineral properties and related activities. This typically involves the payment of salaries, wages, and other exploration costs in Colombia, directly attributable to field activities furthering our mineral concessions and rights, along with allocated stock-based compensation costs. During the three months ended June 30, 2008, we expended a total of $4,254,000 on the exploration of acquired mineral properties (six months ended June 30, 2008 - $7,229,000).



As a result of our fiscal 2008 efforts to explore and evaluate the Marmato Mountain District, our mineral property exploration expenses increased significantly for the three months ended June 30, 2008 to $4,254,000 (including $137,000 in stock-based compensation) from $1,561,000 (including $245,000 in stock-based compensation) for the three months ended June 30, 2007.



General and administrative expenses also increased in the second quarter of fiscal 2008 to $1,560,000 (2007-$1,290,000), reflecting our continued transition from a start-up enterprise to a company with an active exploration program and infrastructure sufficient to support field activities. A significant component of general and administrative expenses in the second quarter of fiscal 2008 was allocated stock-based compensation, which totaled $650,000 compared to $616,000 in fiscal 2007. The remainder of the Companys second quarter fiscal 2008 general and administrative costs included accounting and legal fees of $280,000 (approximately $100,000 of which relates to Sarbanes-Oxley compliance requirements and legal costs associated with maintaining the Companys dual U.S./Canadian public company status), investor relations costs of $503,000, regulatory fees and expenses of $165,000 and the balance relating to corporate salaries, travel and head office expenses.  As well, in the second quarter of fiscal 2008, the Company incurred $888,000 in foreign exchange gains on the translation of foreign currency-denominated monetary assets and liabilities, as the majority of the Companys accounts payable, accrued liabilities, and deferred income taxes in Caldas and Gavilan are denominated in Colombian pesos and are impacted by fluctuations in foreign currency rates.  During fiscal 2008, the U.S. dollar has weakened against most global currencies, including the Colombian peso, however the Colombian peso strengthened by approximately 5% against the U.S. dollar during the second quarter of fiscal 2008, resulting in the aforementioned foreign exchange gains on translation of foreign currency denominated working capital and deferred income taxes.  Approximately $640,000 of these gains relate solely to the translation of deferred tax taxable temporary differences associated with the Companys historical acquisitions of RNC and Gavilan.



39



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The increase in our other operating expenses in the second quarter of fiscal 2008, primarily amortization expenses, related to the amortization of office equipment, computers, and vehicles. For the three months ended June 30, 2008, we incurred a loss from operations of $4,977,000 (2007-$3,757,000), and recorded a deferred income tax recovery of $1,168,000 related to deductible temporary differences associated with our Colombian subsidiaries (2007 - $538,000), applied against deferred tax liabilities in corresponding jurisdictions, resulting in a net loss of $3,809,000 (2007-$3,219,000).



For the six months ended June 30, 2008 we incurred a net loss of $9,984,000 compared to $5,723,000 for the six months ended June 30, 2007.  The primary contributors to our year-to-date fiscal 2008 loss were $7,229,000 in mineral property exploration expenses, $3,767,000 in general and administrative expenses, foreign exchange losses of $952,000 and amortization of $121,000.  We generated $13,000 in interest income during the first six months of fiscal 2008 and recorded a deferred income tax recovery of $2,072,000 related to deductable temporary differences associated with our Colombian subsidiaries.



During the second quarter of fiscal 2008, we used cash of $5,475,000 in operations (2007-$2,914,000). The majority of our operating cash requirements consisted of exploration costs incurred in our Colombian operations, and consulting fees, travel expenses, and audit and legal fees related to regulatory compliance. During the second quarter of fiscal 2008, we issued 11,167,000 special warrants for net proceeds of $8,558,000.  During the second quarter of fiscal 2008, we expended $2,000 on the purchase of capital assets, $655,000 funding the acquisition of mineral exploration rights, and advanced an additional $7,000,000 towards the acquisition of Mineros resulting in a net cash decrease of $4,574,000 for the three months ended June 30, 2008.



As at June 30, 2008, we held cash and cash equivalents of $287,000. Our working capital deficiency of $9,662,000 consisted of i) cash and cash equivalents of $287,000; ii) prepaid expenses and deposits of $1,103,000, consisting primarily of prepaid Marmato exploration expenditures; iii) prepaid consulting fees of $114,000, reflecting the current portion of unamortized stock-based compensation associated with direct stock awards; and iv) current liabilities of $11,166,000, consisting primarily of amounts owing to Marmato titleholders under our mineral and exploration rights purchase agreements (at June 30, 2008, $6,034,000 is owing pursuant to these agreements), and $2,500,000 related to short-term promissory notes, and the balance associated with general trade payables.  While we endeavor to manage the timing of these payments, the timing of settlement of these liabilities is uncertain.  Payment of our mineral and exploration rights agreements are typically due as the contracts progress through the Colombian government approval process.



Liquidity and Capital Resources



Our cash and working capital positions as at the dates indicated were as follows:



As at
      As atJune 30, 2008
      December 31, 2007Cash and cash equivalents*
      $
      287,000
      $
      6,939,000Working capital deficiency
      $
      (9,662,000)
      $
      (3,680,000)* excludes restricted cash of
      $2,500,000 and Mineros advance of $7,000,000 as unavailable for general
      corporate purposes.




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We have historically relied on equity capital to fund our operations and mineral property acquisition and exploration activities. For the cumulative period from March 25, 2003 to June 30, 2008, we have raised $58,586,000 from the issuance of shares of our common stock, special warrants, share purchase warrants, and short-term bridge loans (net of repayments) and used $58,299,000 to fund operations and mineral property acquisition and exploration activities, leaving cash and cash equivalents of $287,000 and a working capital deficiency of $9,662,000 as at June 30, 2008.



On February 8, 2008, we borrowed $2,500,000 from Global Resource Fund (Global) pursuant to a promissory note issued to Global (the Promissory Note).  Auramet Trading, LLC is a $750,000 participant in the loan and one of our directors, James Verraster, serves as Chief Executive Officer of Auramet Trading, LLC.  The Promissory Note provides for a $2,500,000 secured loan maturing on July 31, 2008.  The borrowing under the Promissory Note is secured by a guarantee by our subsidiaries.  The guarantee is in turn secured by first priority pledges of the shares of such subsidiaries held directly and indirectly by the Company.  The borrowing under the Promissory Note bears interest at the rate of 12.5% per annum, and interest payments are due monthly on the last day of the month, commencing on February 29, 2008.  Proceeds from the borrowing were used in connection with the Companys successful bid to acquire all of the issued and outstanding shares of Mineros, as described elsewhere in the MD&A, as well as for general corporate purposes.  In connection with the loan, we issued 350,000 common share purchase warrants to Global and we paid an up-front fee equal to 3.0% of the borrowing under the promissory note.  Each warrant entitles the holder to purchase one common share at an exercise price of CDN $1.10 for a period of 24 months from the date of closing.  If the warrants are not exercised by the expiration date, the holder may require us to repurchase the warrants for US$50,000.  Subsequent to quarter-end, repayment of the Promissory Note was extended by the lender to September 30, 2008.



On March 31, 2008, we completed a private equity offering of 6,342,411 Units at $0.85 per Unit to a total of 7 investors.  Each Unit consists of one share of common stock and one warrant (the Warrant) for a total of 6,342,411 common shares and 6,342,411 warrants issued.  The total gross proceeds raised were $5,391,000.  Each warrant is exercisable for one common share at an exercise price of $1.10 and the Warrants are exercisable at any time up to two years from the date of issuance.  In connection with this private equity offering, we paid commissions of $158,000, incurred issue costs of $50,000.



On June 18, 2008 we completed a private equity offering of 11,167,000 special warrants (the Special Warrants) at a price of $0.85 per Special Warrant to a total of 16 investors for net proceeds of $8,558,000.  Each Special Warrant may be exercised at any time at the holders option and will automatically exercise for no additional consideration upon the earlier of a) the issuance of a receipt for the final prospectus of the warrants and common shares to be issued upon the exercise of the special warrants and b) October 19, 2008.  Each Special Warrant shall entitle the holder to receive upon exercise one common share of the Company and one common share purchase warrant (the Warrant).  Each Warrant will entitle the holder to acquire one common share at a price of $1.50 for 60 months following the date of the offering.



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In connection with the offering, we paid as a commission $664,000 and incurred issue costs of $270,000.  The Company issued 781,690 special broker warrants (the Special Broker Warrants) to the agents retained for the offering, each Special Broker Warrant exercisable for no additional consideration into one broker warrant of the Company (Broker Warrants), and each Broker Warrant entitling the holder, subject to shareholder approval, to purchase one common share at an exercise price of $0.85 per common share for 24 months following the date of the offering.



Based upon our current financial condition, we anticipate that current cash on hand is insufficient to complete our proposed acquisition transactions or to operate our business through the end of fiscal 2008.  As at July 31, 2008, our cash resources were nominal and we will need to raise additional debt or equity financing during the second half of fiscal 2008 to continue to execute our business plan.  We intend to fund operations and our acquisition plans through additional debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in private and/or public equity offerings to secure funding for our operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired and we may lose our option to purchase certain mining and mineral rights and complete the acquisition of Mineros. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.



On June 11, 2008, we announced plans to raise up to $30 million through the offer and sale of units at a price of $1,000 per unit, each unit consisting of a $1,000 face value note due 2013, 100 shares of common stock and 50 common share purchase warrants of the Company.  The notes will pay interest at a rate of 12% semi-annually in arrears for the first two years and 15% semi-annually in arrears during years three through five.  The warrants will be exercisable into one common share at a price of $1.10 for two years from the closing of the offering.  The net proceeds from the units are expected to be used primarily to finance the acquisition of Mineros.  There can be no assurance that the financing will be completed successfully.



In order to finance continuing operations and make payments related to the acquisition of identified properties, additional funding from external sources will be required.



Off-balance sheet arrangements, Commitments, and Contingencies



i)

Letter of Intent with Colombia Gold



As described earlier in this MD&A, we have entered into a letter of intent to acquire Colombia Gold.  Completion of the transaction is subject to the negotiation of a definitive agreement, satisfactory completion of technical, financial, legal, and commercial due diligence and customary conditions, including all shareholder, court and regulatory approvals.



ii)

Acquisition of Mineros



As described earlier in this MD&A, we have entered into an agreement to purchase Mineros for cash consideration of $35,000,000.  We hold a deposit guarantee of $2,500,000, which would be payable to the vendors if the transaction is not completed for any reason.  We have also paid an additional deposit of $7,000,000 in connection with the extension of the closing, which is also nonrefundable.



iii)

Caramanta Properties



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a)

Concession No. 669-17



Pursuant to an option agreement to purchase concession No. 669-17 in the Caramanta region, in the event that we determine it in the best interest of the Company to continue exploration, the contract specifies the following scheduled payments required to obtain a 100% interest in the project: fiscal 2007 - 300 million pesos; fiscal 2008  660 million pesos and fiscal  2009  1.44 billion pesos.  To June 30, 2008 we have made payments totalling 480 million pesos (approximately $250,000) against the total 2.4 billion pesos (approximately $1,261,000) contract.  We intend to continue exploration of the project in order to determine whether we will continue to make scheduled payments towards acquiring a 100% interest.  In the event we chose not to continue the project, no further payments are required and the option would be terminated.



b)

Concession No. 653-17



Pursuant to an option agreement to purchase concession No. 653-17 in the Caramanta region, in the event that we determine it in the best interest of the Company to continue exploration, the contract specifies the following scheduled payments required to obtain a 100% interest in the project: fiscal 2008  450 million pesos; fiscal 2009  350 million pesos; fiscal 2010-200 million pesos.  To June 30, 2008 we have made payments totalling 300 million pesos (approximately $160,000) against the total 1.0 billion pesos (approximately $525,000) contract.  We intend to continue exploration of the project in order to determine whether we will continue to make scheduled payments towards acquiring a 100% interest.  In the event we chose not to continue the project, no further payments are required and the option would be terminated.



c)

Other Concessions and Legalization Proposals (644-17, 805-17, 211-17. 217-17)



The Company has other options with various unrelated parties that provide us with options to acquire other property interests in the Caramanta Region.  The Company has options to pay a total of 930 million pesos (approximately $490,000) to acquire 100% interests in the properties, subject to the concessions being granted to the underlying applicants and subsequently being transferred to and registered in the name of the Company.



iv)

Drilling Contracts



In the normal course of operations the Company has entered into agreements with third-party drilling contractors to manage certain aspects of the Companys drill programs.  We are committed to payments totaling $2,100,000 over the next twelve months in respect of these contracts.



Contractual obligations



We have a two-year employment contract with Mr. J. Randall Martin, our Chief Executive Officer and Vice Chairman, through September 30, 2009. Under the contract, Mr. Martin is entitled to receive monthly compensation of $20,000, and is eligible to participate in our share compensation arrangements. In addition, Mr. Martin is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. If Mr. Martins contract is terminated without cause, he is entitled to receive a lump sum equal to 12 months monthly compensation and accelerated vesting of his options. Under the contract, Mr. Martin has disclaimed any rights to all intellectual property created by him or jointly with others while with us. In addition, following termination of the contract, Mr. Martin will be subject to a one year non-competition covenant.



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We have a two-year employment contract with Mr. James Kopperson, our Chief Financial Officer, through September 30, 2009. Under the contract, Mr. Kopperson is entitled to receive monthly compensation of CDN $17,500, and is eligible to participate in our share compensation arrangements. In addition, Mr. Kopperson is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. If Mr. Koppersons contract is terminated without cause, he is entitled to receive a lump sum equal to 12 months monthly compensation and accelerated vesting of his options. Under the contract, Mr. Kopperson has disclaimed any rights to all intellectual property created by him or jointly with others while with us. In addition, following termination of the contract, Mr. Kopperson will be subject to a one year non-competition covenant.



We have a two-year consulting contract with Dr. Stewart Redwood, our Vice President of Exploration, through September 30, 2008. Under the contract, Dr. Redwood is entitled to receive compensation at the rate of $1,000 per day and is eligible to participate in our share compensation arrangements. In addition, he is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. We also granted Dr. Redwood 500,000 restricted shares in the first quarter of fiscal 2007. Should Dr. Redwoods contract with us be terminated with cause or by his resignation before the period of two years has elapsed, he is required to return pro rata portion of the shares based on the time remaining on the contract.



We have a two-year contract with Mr. Thomas Lough, our President, through October 15, 2009.  Mr. Lough is also the President and a director of Investcol. We purchased our 100% interest in RNC from Investcol. Under the contract, Mr. Lough is entitled to receive monthly compensation of CDN $15,000. In addition, Mr. Lough is entitled to reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. If Mr. Loughs contact is terminated without cause, he is entitled to recover a lump sum equal to 12 months monthly compensation and accelerated vesting of his options. Under the contract, Mr. Lough has disclaimed any rights to all intellectual property created by him or jointly with others while with us. In addition, following termination of the contract, Mr. Lough will be subject to a one year non-competition covenant.



Related Party Transactions



Certain transactions described under The Caramanta Properties and Marmato Propertieselsewhere in this MD&A are considered related party transactions. During certain periods, we also paid management and consulting fees to directors, senior officers and shareholders, and for certain prior periods, we paid office rental fees to a company related to a former director. Further information on these transactions is provided in our accompanying consolidated financial statements under Related Party Transactions.



On February 8, 2008, we borrowed $2,500,000 from Global Resource Fund (Global) pursuant to a promissory note issued to Global (the Promissory Note).  Auramet Trading, LLC is a $750,000 participant in the loan and one of our directors, James Verraster, serves as Chief Executive Officer of Auramet Trading, LLC.  The Promissory Note provides for a $2,500,000 secured loan maturing on July 31, 2008.  The borrowing under the Promissory Note is secured by a guarantee by our subsidiaries.  The guarantee is in turn secured by first priority pledges of the shares of such subsidiaries held directly and indirectly by the Company.  The borrowing under the Promissory Note bears interest at the rate of 12.5% per annum, and interest payments are due monthly on the last day of the month, commencing on February 29, 2008.  Proceeds from the borrowing have been held by the Company as a deposit guarantee in connection with the Companys successful bid to acquire all of the issued and outstanding shares of Mineros, as described elsewhere in the MD&A, as well as for general corporate purposes.



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In connection with the loan, we issued 350,000 common share purchase warrants to Global and we paid an up-front fee equal to 3.0% of the borrowing under the promissory note. Each warrant entitles the holder to purchase one common share at an exercise price of CDN $1.10 for a period of 24 months from the date of closing.  If the warrants are not exercised by the expiration date, the holder may require us to repurchase the warrants for US$50,000.



One of our directors, Edward Flood, serves as Managing Director, Investment Banking with Haywood Securities, UK, Limited.  The Company pays fees to Haywood from time to time for services rendered as agent in connection with financings undertaken by the Company.



Risks and Uncertainties



An investment in our common stock involves a high degree of risk.  You should carefully consider the risks described below and the other information in the prospectus and amendments thereto we filed in connection with our recent private placements (available on www.sec.gov.com) before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.



Going Concern



We incurred a net loss of $32,389,000 for the period from inception on March 23, 2003 to June 30, 2008, and we are not presently generating any revenue. Furthermore, we have used $58,299,000 during this period to fund our operations mineral acquisitions program. At June 30, 2008, we had a significant working capital deficiency. Our future  ability to meet our anticipated exploration expense, mineral properties, and rights acquisitions, and purchase commitment for the issued and outstanding shares of Mineros is dependent upon our ability to obtain additional financing and upon future acquisition, exploration and development of profitable operations from our mineral properties.  Subsequent to June 30, 2008, repayment of our short-term promissory note was extended to September 30, 2008.  We plan to continue to seek additional financing in private and/or public equity offerings to secure funding for the balance of the Mineros purchase, repayment of our short-term promissory note, and to fund our working capital requirements.  Our estimate of total financing requirements for fiscal 2008 is approximately $100,000,000 ($35,000,000 for the acquisition of Mineros and related exploration, $25,000,000 for the remaining exploration of Zona Alta, $15,000,000 related to the acquisition of Colombia Gold, and $25,000,000 related to additional drilling and working capital requirements).



As at July 31, 2008 our cash resources are nominal and we will
need to raise additional debt or equity financing during the remainder of fiscal
2008 to continue to execute our business plans.  We currently do not have any
arrangements for additional financing, other than our planned $30 million debt
offering that we announced on June 11, 2008.  There can be no assurance that
this transaction will close or that additional financing will be available to us
on acceptable terms, or at all. These factors, among others, raise substantial
doubt about our ability to continue as a going concern. Our financial statements
do not include any adjustment to reflect the possible future effect on the
recoverability and classification of the assets or the amounts and
classification of liabilities that may result should we cease to continue as a
going concern.



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Limited Operating History



We have a very limited operating history upon which an evaluation of our future success or failure can be made. It was only recently that we took steps in a plan to engage in the acquisition of interests in exploration and development properties in Western Colombia, and it is premature to evaluate the likelihood that we will be able to operate our business successfully. To date, we have been involved primarily in the acquisition of property interests and mining rights in Western Colombia. We have not earned any revenues from our current operations.



Title Risk



We do not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history of many mining properties. Currently, we are in the process of investigating the title of mineral concessions for which we hold either directly or through our equity interest in our Colombian subsidiaries. We cannot give any assurance that title to properties we acquired individually or through historical share acquisitions will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties. For example, there is a risk that the Colombian government may in the future grant additional titles in excess of the Companys expectations to currently illegal miners or we may be unable to convince currently illegal miners to vacate our properties. Furthermore, although the Company believes that mechanisms exist to integrate the titles of legal mineral properties currently not owned by the Company, there is a risk that this process could be time consuming and costly. As the Company begins the processes of integration, the costs of acquiring the remaining properties and associated surface rights could rise significantly or become cost prohibitive. Furthermore, the risk exists that one or more of the remaining titleholders could delay the integration process through administrative avenues. The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title. As a result, any claims against us may result in liabilities or costs we will not be able to afford or significant delays resulting in the failure of our business.



Town Relocation Risk



Our business plan includes the relocation of the town of Marmato from its current location on the Marmato Mountain to a safer location. While we are currently working with city, state, and federal governments to facilitate this relocation, we are subject to the risk of political, economic, or social circumstances that could delay our ability to complete the town relocation. If we are unable to complete the town relocation, our ability to advance our Marmato project could be impaired.



Political and Economic Uncertainties



Our property interests and proposed exploration activities in Western Colombia are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, mining licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, and fluctuations changing political conditions and international monetary fluctuations. Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as mines, could have a significant effect on us. Any changes in regulations or shifts in political attitudes are beyond our control and may adversely affect our business. Exploration may be affected in varying degrees by government regulations with respect to restrictions on future exploitation and production, price controls, export controls, foreign exchange controls, income and/or mining taxes, expropriation of property, environmental legislation and mine and/or site safety.  No assurances can be given that our plans and operations will not be adversely affected by future developments in Colombia. Colombia is home to South Americas largest and longest running insurgency. Any changes in regulations or shifts in political attitudes are beyond the control of the Company and may adversely affect our business.



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Government Regulation and Environmental Risks



Our operations are subject to Colombian and local laws and regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials. Any changes in these laws could affect our operations and economics. Environmental laws and regulations change frequently, and the implementation of new, or the modification of existing, laws or regulations could harm us. We cannot predict how agencies or courts in Colombia will interpret existing laws and regulations or the effect these adoptions and interpretations may have on our business or financial condition. We may be required to make significant expenditures to comply with governmental laws and regulations.



Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurances can be given that such environmental issues will not have a material adverse effect on our operations in the future. While we believe we do not currently have any material environmental obligations, exploration activities may give rise in the future to significant liabilities on our part to the government and third parties and may require us to incur substantial costs of remediation.



Additionally, we do not maintain insurance against environmental risks. As a result, any claims against us may result in liabilities we will not be able to afford resulting in the failure of our business. Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in exploration operations may be required to compensate those suffering loss or damage by reason of the exploration activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.



Amendments to current laws, regulations and permits governing operations and activities of exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in expenditures and costs, or require abandonment or delays in developing new mining properties.



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Competition



The mineral exploration business is highly competitive.  Many of our competitors have greater financial resources than we do. As a result, we may experience difficulty competing with other businesses when conducting mineral exploration activities or in the retention of qualified personnel. No assurances can be given that we will be able to compete effectively.



Commodity Fluctuations



The availability of markets and the volatility of market prices are beyond our control and represent a significant risk. Even if commercially viable deposits of gold are found to exist on our property interests, a ready market may not exist for the sale of the reserves. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. These factors could inhibit our ability to sell gold in the event that commercially viable deposits are found to exist.



Production Risks



We have limited prior experience in placing mineral properties into production and our ability to do so will be dependent upon us using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance that we will have available to us the necessary expertise when and if we place our resource properties into production.



Dependence on Key Management



The ability to identify, negotiate and consummate transactions that will benefit us is dependent upon the efforts of our management team. The loss of the services of any member of management could have a material adverse effect on us. Our planned future drilling activities may require significant investment in additional personnel and capital equipment. Given the current shortage of equipment and experienced personnel within the mining industry, there can be no assurance that we will be able to acquire the necessary resources to successfully implement our business plan.  We have historically experienced significant delays in recovering quality assay and verified assay results from our third-party analytical laboratories.  The delays stem from issues with our third-party labs quality control systems, as we have implemented a rigorous in-house quality control program that our external labs have experienced difficulty meeting.  While we believe our current QC programs to be comprehensive due to our, and the industry in general, reliance on third-party labs to complete resource estimates, there can be no assurance that we will be able to complete and update our resource estimates on a timely basis.



Dependence on a Single Exploration Region



The Company is currently dependent upon one principal mineral exploration region, that being the Marmato Mountain Gold District in Colombia. The Marmato Mountain Gold District may never develop into commercially viable ore bodies, which would have a materially adverse affect on the Companys potential mineral resource production, profitability, financial performance and results of operations.



Exploration and Mining Risks



The business of exploring for and mining of minerals involves a high degree of risk.  Only a small proportion of the properties that are explored are ultimately developed into producing mines. At present, none of our properties have proven or probable reserves and the proposed programs are an exploratory search for proven or probable reserves. The mining areas presently being assessed by us may not contain economically recoverable volumes of minerals or metals. Our operations may be disrupted by a variety of risks and hazards which are beyond our control, including fires, power outages, labor disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labor and other risks involved in the operation of mines and the conduct of exploration programs. We have relied and may continue to rely upon consultants and others for operating expertise. Should economically recoverable volumes of minerals or metal be found, substantial expenditures will be required to establish reserves through drilling, to develop metallurgical processes, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities or having sufficient grade to justify commercial operations or that funds required for development can be obtained on a timely basis.  The economics of developing gold and other mineral properties are affected by many factors, including: the cost of operations, variations of the grade of ore mined, fluctuations in the price of gold or other minerals produced, costs of processing equipment, the government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Short term factors, such as the need for orderly development of ore bodies or the processing of new or different grades, may have an adverse effect on mining operations and on our results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in geological resources, grades, stripping ratios or recovery rates may affect the economic viability of projects. Depending on the price of gold or other minerals produced, which have fluctuated widely in the past, we may determine that it is impractical to commence or continue commercial production.



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Risks Inherent in Estimating Mineral Reserves and Production



No assurance can be given that any proven or probable reserves will be discovered or that any particular level of recovery of minerals will in fact be realized or that any identified reserves will ever qualify as a commercially mineable (or viable) deposit which can be legally and economically exploited. In addition, the grade of mineralization which may ultimately be mined may differ from that indicated by drilling results and such differences could be material. Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions.



Conflicts of Interest



The Companys directors and officers may serve as directors or officers of other companies or have significant shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Companys directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with the laws of the State of Delaware, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company. In determining whether or not the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time.



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Repatriation of Earnings



There are currently no restrictions on the repatriation from Colombia of earnings to foreign entities. However, there can be no assurance that restrictions on repatriations of earnings from Colombia will not be imposed in the future.





Currency Fluctuations



The Companys operations in Colombia make it subject to foreign currency fluctuations and such fluctuations may materially affect the Companys financial position and results. We report our financial results in U.S. dollars and incur expenses in U.S. dollars, Canadian dollars, and Colombian pesos. As the exchange rate between the Canadian dollar and Colombian peso fluctuates against the U.S. dollar, we will experience foreign exchange gains and losses, both realized and unrealized, and such gains and losses may be significant. We do not hedge any of our foreign currency exposure.



Enforcement of Civil Liabilities



Substantially all the assets of the Company are located outside of the Unites States, and certain of the directors and officers of the Company are resident outside of the United States. As a result, it may be difficult or impossible to enforce judgments granted by a court in the United States against the assets of the Company or the directors and officers of the Company residing outside of the United States.



Internal Controls



Effective internal controls are necessary for us to provide reliable financials reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.



Sarbanes Oxley



The Sarbanes-Oxley Act of 2002 was enacted in the United States in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934. As a public company, we are required to comply with the Sarbanes-Oxley Act. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.  Sarbanes Oxley 404 compliance, is a costly and time-consuming process and there can be no assurance that we will continue to be compliant.  We have limited internal and external resources to devote to maintaining SOX 404 compliance and there can be no assurance that we can maintain compliance. We continue to evaluate and monitor developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.



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Completion of Mineros and Colombia Gold Transactions



As described earlier in this MD&A, the Company has announced proposed acquisitions of Mineros and Colombia Gold..  There can be no assurance that either of these transactions will be completed, as significant regulatory, due diligence, and legal matters are outstanding.  Furthermore, the acquisition of Colombia Gold may be subject to shareholder approval.  There can be no assurance that we will have the financial and management resources to successfully complete these transactions.



Recently Issued Accounting Standards



In September, 2006 the FASB issued FAS 157  Fair Value Measurements that provides enhanced guidance for using fair value to measure assets and liabilities.  FAS 157 applies whenever U.S. GAAP requires or permits measurement of assets or liabilities at fair value.  FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (partially deferred for certain non financial assets and liabilities). The adoption of FAS 157 had no impact on the Companys financial statements.



In February 2007 the FASB issued FAS 159  The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 offers an irrevocable option to carry eligible financial assets and liabilities at fair value, with the election to be made on an instrument by instrument basis, with changes in fair value recorded in earnings.  FAS 159 is expected to expand the use of fair value measurement for many companies, which is consistent with the FASBs long-term measurement objectives for accounting for financial instruments.  FAS 159 is effective as of an entitys first fiscal year that begins after November 15, 2007 and is applied prospectively.  The adoption of FAS 159 had no impact on the Companys financial statements.



In December 2007, the FASB issued FAS 141(R), Business Combinations, which will replace FAS 141 prospectively effective for business combinations consummated in the first period commencing after December 15, 2008.  Early adoption is not permitted.  Under FAS 141(R), business acquisitions will be accounted for under the acquisition method, compared to the purchase method mandated by FAS 141.



In December 2007, the FASB issued FAS 160  Non-Controlling Interests in Consolidated Financial Statements which is effective for periods beginning after December 15, 2008.  Under FAS 160, non-controlling interests are measured at 100% of the fair value of assets acquired and liabilities assumed.  Under current standards, the non-controlling interest is measured at book value.  For presentation and disclosure purposes, non-controlling interests will be classified as a separate component of shareholders equity.  In addition, FAS 160 will change the manner in which increases/decreases in ownership percentages are accounted for.  Changes in ownership percentages will be recorded as equity transactions and no gain or loss will be recognized as long as the parent retains control of the subsidiary.  When a parent company deconsolidates a subsidiary but retains a non-controlling interest, the non-controlling interest is re-measured at fair value on the date control is lost and a gain or loss is recognized at that time. Finally, under FAS 160, accumulated losses attributable to the non-controlling interests are no longer limited to the original carrying amount, and therefore non-controlling interests could have a negative carrying balance.  The provisions of FAS 160 are to be applied prospectively with the exception of the presentation and disclosure, which are to be applied for al prior periods presented in the financial statements. Early adoption is not permitted.



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Share Data



At June 30, 2008, we had 92,932,486 common shares outstanding. In addition, we had outstanding:

i)

6,040,000 stock options, each of which is exercisable into one common share;

ii)

17,552,483 common share purchase warrants, each of which is exercisable into one common share; and

iii)

11,167,000 special warrants, each of which is exercisable into a unit consisting of one common share   and one common share purchase warrant.



Second Quarter Fiscal 2008 Exploration Activities and Outlook



Marmato Properties



We have been working on the Marmato Mountain Development Project since 2005. The main focus of work since then has been to negotiate the purchase of numerous small mines that compromise the Zona Alta portion of the mountain.  In the second quarter of 2008 we continued technical studies started in 2007 to carry out a scoping study scheduled for completion in the second quarter of 2008 and a pre-feasibility study scheduled for fiscal 2009.  We completed a preliminary resource estimate in the second quarter of 2008 based on the results of the initial drilling and underground mine sampling.



Drilling and Underground Sampling



Our objective is to drill a cumulative total of 60,000 meters by the end of fiscal 2008.



By the end of second quarter of 2008, a total of 32,000 meters of diamond drilling had been completed in 164 holes, including holes still being drilled.  This included 13,000 meters drilled in the second quarter of 2008.



As at June 30, 2008, we had eleven diamond drill rigs in operation. These comprise three portable diamond drills which we own, and eight drills supplied by three third-party contractors.  We have contracted an additional three diamond drill rigs from a third-party contractor which arrived in July, 2008.



The underground channel sampling program at Marmato continued during the second quarter of 2008. The program comprises continuous saw-cut channel samples from all cross-cuts, mine faces and at regular intervals along the backs in the numerous artisanal mines in the Zona Alta. This is being carried out in conjunction with detailed surveying of the mine portals by differential global positioning system instruments and detailed surveying of the underground mines by theodolite and total station survey instruments. This has enabled a three-dimensional model of the mines and veins to be constructed. A program of mine maintenance and rehabilitation is also being carried out for access for surveying and sampling. In addition, drill chambers were prepared underground in order to carry out diamond drilling from underground.



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Resource Estimate



We have contracted Micon International Limited of Toronto, Ontario to carry out a resource estimate of the Zona Alta of Marmato based on our drilling and underground sampling results.  A preliminary inferred resource estimate was announced on May 12, 2008 based on the first 12,000 meters of diamond drilling in 68 holes, 1165 meters cross-cut samples, and 500 meters of individual underground samples.



Metallurgy



SGS Lakefield Research Limited (SGS) of Lakefield, Ontario has been contracted by us to carry out preliminary scoping metallurgy test work to develop a process flow sheet for our Scoping Study.  The report was received in April, 2008, a summary of which was disclosed in our press release of April 18, 2008.



Geotechnical Studies



Golder Associates Ltd. (Golder) of Mississagua, Ontario has been contracted by us to carry out geotechnical data collection and interpretation for open pit design, to make a preliminary selection and evaluation of sites for waste rock and tailings disposal, and to carry out preliminary heap leach pad design. This will form part of the Scoping Study. Geotechnical logs are being made of the drill core by our geologists and Golder are using this and other data to carry out data analysis and pit slope determination at a scoping study level. These studies continued during the second quarter of 2008.  A preliminary report on the pit slope study was received in June, 2008.



Environmental Studies



An Environmental Baseline Study was completed in 2007 by LHC Consultores Ambientales (LHC) of Colombia. This study gives a full year of environmental data for incorporation into the Scoping Study. The study will form the basis for our future environmental permits and our Social and Environmental Impact Statement (EIS). We believe that we have no current environmental liability for past practices of others and we have received approval for drilling from Corpocaldas under an approved Environmental Management Plan. Nevertheless, we intend to meet or exceed modern global standards of environmental stewardship in the preparation of the Baseline study and subsequent EIS.



Knight Piesold of Denver, Colorado have been contracted to carry out validation of environmental data collection and management, and a social impact study, including independent supervision of the baseline study being carried out by LHC. SGS has been contracted by us to carry out a preliminary and rock drainage study (ARD) on tailings and waste rock.  Collection of environmental data is continuing in 2008 to give a second year of baseline data.



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Scoping Study



We have contracted Micon International Limited of Toronto, Ontario to carry out a Scoping Study and preliminary evaluation assessment of Marmato, with completion targeted for the second half of 2008.



Caramanta Properties



We currently control 19,060 hectares (191 square kilometers) of exploration licenses in the Caramanta Exploration Project. This includes five new and distinctive gold targets that we defined by surface exploration and sampling in 2007.  These show that a cluster of gold targets surrounds the Marmato Mountain Development Project and form a 12 km-diameter gold district. These five targets are named Oro Fino, El Salto, Pácora, Campana, and San Bartolome. Our objective is to acquire additional licenses to consolidate the district and to carry out initial drill testing of these targets in 2008. We believe that there is good potential for discovery of additional gold deposits in the Caramanta Exploration Region in a cluster of targets surrounding our core Marmato Mountain Development Project.



Additional surface sampling and geological mapping was carried out in the second quarter of 2008. A helicopter-borne magnetic and radiometric survey was started in the fourth quarter of 2007, and was completed in April 2008 following a delay for equipment repair. The results are expected in July 2008.  The results of these programs will be used to define drill targets.



One of the portable diamond drill rigs that has been contracted from a third party contractor is expected to be used to start a program of preliminary drill evaluation of the five targets identified on the Caramanta project starting in July, 2008.  The start date was delayed due to shipping and customs delays in importing the drill rig.  None of these targets has been drilled before. The program will consist of 2,000 meters of drilling on each of the targets for a total of 10,000 meters.



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Item 3. Quantitative and Qualitative Disclosure About Market
Risk

As a smaller reporting company (as defined in Rule 12b-2 of
the Exchange Act), we are not required to provide the information called for by
this Item 3.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, such officers have concluded that our disclosure controls and
procedures are effective as of the end of such period.

Changes in internal control over financial reporting

There have been no changes during the period covered by this
Quarterly Report on Form 10-Q in our internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

Limitations on the effectiveness of controls and procedures

Our management, including our Chief Executive Officer and
Chief Financial Officer, does not expect that our controls and procedures will
prevent all potential error and fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.

PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of 5% or more of our voting securities are adverse to us or
have a material interest adverse to us.

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

We did not issue any securities without registration under
the Securities Act during the period covered by this Quarterly Report on Form
10-Q other than issuances of securities that were previously included in a
Current Report on Form 8-K.

Item 3.     Defaults upon Senior
Securities

None

Item 4.     Submission of Matters to a
Vote of Security Holders

None.

Item 5.     Other Information

None.

Item 6.     Exhibits

|Exhibit |                                                                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                 
|        |                                                                                                                                                             
|31.1    | Certification of Chief
    Executive Officer pursuant to Rule 13a-15e or 15d-15(e), as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                             
|31.2    | Certification of Chief
    Financial Officer pursuant to Rule 13a-15e or 15d-15(e), as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                             
|32.1    | Certification of Chief
    Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002   
|        |                                                                                                                                                             
|32.2    | Certification of Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002   

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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.
Colombia Goldfields Ltd.
By:        /s/ J.
Randall Martin
             
J. Randall Martin 
Title:     Chief Executive Officer and Vice Chairman 
Date:     August 8, 2008
By:        /s/ James Kopperson
             
James Kopperson 
Title:     Chief Financial Officer 
Date:    August 8, 2008



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