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
September 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: 104,224,486 common shares as of September 30, 2008.

---

TABLE OF CONTENTS



|        |                                                                                           | Page
|------- | ----------------------------------------------------------------------------------------- | ----
|        |                                                                                           |     
|        | PART I - FINANCIAL INFORMATION                                                            |     
|        |                                                                                           |     
|Item 1. | Financial Statements                                                                      | 1   
|Item 2. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations | 31  
|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                                                           | 56  
|Item 4. | Submission of Matters to a Vote of Security
    Holders                                   | 56  
|Item 5. | Other Information                                                                         | 56  
|Item 6. | Exhibits                                                                                  | 56  
|        |                                                                                           |     

---

PART I - FINANCIAL INFORMATION

Item 1. Financial
Statements



1

---

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



|                                                                            | September 30, | December 31,
|--------------------------------------------------------------------------- | ------------- | ------------
|                                                                            |               | 2008        
|                                                                            |               |             
|ASSETS                                                                      |               |             
|                                                                            |               |             
|Current                                                                     |               |             
|                                                                            |               |             
|Cash and cash
    equivalents                                               | $             | -           
|Prepaid expenses and
    deposits                                           |               | 136         
|Prepaid consulting fees                                                     |               | -           
|                                                                            |               | 136         
|                                                                            |               |             
|Mineral and
    exploration properties and rights (Note 4)                  |               | 66,007      
|Property and equipment, net of
    accumulated amortization (Note 5)        |               | 517         
|                                                                            | $             | 66,660      
|                                                                            |               |             
|LIABILITIES                                                                 |               |             
|                                                                            |               |             
|Current                                                                     |               |             
|                                                                            |               |             
|Bank indebtedness                                                           | $             | 53          
|Accounts payable and
    accrued liabilities                                |               | 7,318       
|Mineral property
    purchase obligations (Notes 4 and 7)                   |               | 5,143       
|Related party advances
    (Note 8)                                         |               | 2,207       
|Short-term promissory note (Note 8)                                         |               | 2,550       
|                                                                            |               | 17,271      
|Non-current                                                                 |               |             
|Deferred income tax liability (Notes 4
    and 9)                           |               | 6,943       
|                                                                            |               | 24,214      
|                                                                            |               |             
|STOCKHOLDERS
    EQUITY                                                    |               |             
|                                                                            |               |             
|Common stock (Notes
    6 & 13)                                             |               |             
|Authorized:                                                                 |               |             
|200,000,000 common shares, $0.00001 par value                               |               |             
|Issued and
    outstanding:                                                 |               | 1           
|104,224,486 common shares (December 31, 2007:
    86,590,075 common shares) |               |             
|                                                                            |               |             
|Additional paid-in capital (Note 6)                                         |               | 89,440      
|                                                                            |               | 89,441      
|Deficit accumulated during the
    exploration stage                        |               | (46,995)    
|                                                                            |               | 42,446      
|                                                                            | $             | 66,660      



See accompanying Notes to Interim Consolidated Financial Statements



* Going Concern (Note 1)

* Commitments and Contingencies (Note 13)



2



---

|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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                               |               |            |               |               |               |               |   |            |   | Cumulative
|-------------------------------------------------------------- | ------------- | ---------- | ------------- | ------------- | ------------- | ------------- | - | ---------- | - | ----------
|                                                               |               |            |               |               |               |               |   |            |   | From      
|                                                               |               |            |               |               |               |               |   |            |   | Inception 
|                                                               |               |            |               |               |               |               |   |            |   | (March 25,
|                                                               | Three Months  |            | Three Months  |               | Nine Months   | Nine Months   |   | 2003)     
|                                                               |               | Ended      |               | Ended         |               | Ended         |   | Ended      |   | through   
|                                                               | September 30, |            | September 30, | September 30, | September 30, | September 30,
|                                                               |               | 2008       |               | 2007          |               | 2008          |   | 2007       |   | 2008      
|                                                               |               |            |               |               |               |               |   |            |   |           
|REVENUES                                                       | $             | -          | $             | -             | $             | -             | $ | -          | $ | -         
|                                                               |               |            |               |               |               |               |   |            |   |           
|OPERATING EXPENSES                                             |               |            |               |               |               |               |   |            |   |           
|Mineral property exploration
    expenses (Notes 4 and 6)      |               | 8,222      |               | 2,457         |               | 15,451        |   | 5,490      |   | 28,031    
|General and administrative (Note
    6)                        |               | 1,574      |               | 1,608         |               | 5,341         |   | 4,299      |   | 15,758    
|Write-down of Mineros advance and
    deposit (Notes 3 and 14) |               | 9,296      |               | -             |               | 9,296         |   | -          |   | 9,296     
|Foreign exchange loss (gain)                                   |               | (2,131)    |               | 372           |               | (1,179)       |   | 1,307      |   | 895       
|Amortization                                                   |               | 28         |               | 38            |               | 149           |   | 78         |   | 334       
|Total operating expenses                                       |               | 16,989     |               | 4,475         |               | 29,058        |   | 11,174     |   | 54,314    
|Other income                                                   |               | (126)      |               | (5)           |               | (139)         |   | (19)       |   | (286)     
|Loss before deferred income taxes                              |               | (16,863)   |               | (4,470)       |               | (28,919)      |   | (11,155)   |   | (54,028)  
|Deferred income tax recovery (Note 9)                          |               | 2,257      |               | 540           |               | 4,329         |   | 1,502      |   | 7,033     
|Net loss and comprehensive loss                                | $             | (14,606)   | $             | (3,930)       |               | (24,590)      | $ | (9,653)    | $ | (46,995)  
|LOSS PER SHARE  BASIC AND
    DILUTED                         | $             | (0.16)     | $             | (0.06)        | $             | (0.27)        | $ | (0.15)     |   |           
|WEIGHTED AVERAGE NUMBER OF
    COMMON SHARES OUTSTANDING       |               |            |               |               |               |               |   |            |   |           
|Basic and diluted                                              |               | 93,123,160 |               | 70,797,110    |               | 90,913,234    |   | 64,637,889 |   |           



See accompanying Notes to Interim Consolidated Financial Statements

-

Going Concern (Note 1)

3



---

|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



4



---

|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                    
|                                                                                                                                          |               |   |                                          |   |                         |   |                  |   |                                                  |   |                           
|Nine Months Ended September 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                     
|Issuance of 125,000 common shares on August 8, 2008 in connection with bridge loan extension                                              | 125,000       |   | 50                                       |   | -                       |   | -                |   | -                                                |   | 50                        
|Expiry of 4,241,500 share purchase warrants on August 14, 2008                                                                            | -             |   | 926                                      |   | (926)                   |   | -                |   | -                                                |   | -                         
|Conversion of 11,167,000 special warrants into 11,167,000 common shares and 11,167,000 share purchase warrants on September 30, 2008      | 11,167,000    |   | 6,121                                    |   | 2,437                   |   | (8,558)          |   | -                                                |   | -                         
|Stock based compensation                                                                                                                  | -             |   | 2,059                                    |   | -                       |   | -                |   | -                                                |   | 2,059                     
|Net loss for the nine months ended September 30, 2008                                                                                     | -             |   | -                                        |   | -                       |   | -                |   | (24,590)                                         |   | (24,590)                  
|Balance September 30, 2008                                                                                                                | 104,224,486   | $ | 83,026                                   | $ | 6,415                   | $ | -                | $ | (46,995)                                         | $ | 42,446                    



See accompanying Notes to Interim Consolidated Financial Statements

-

Going concern Note 1



5



---

|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
September 30,
2008 |         | Three Months Ended
September 30,
2007 |       | Nine Months Ended
September 30,
2008 |         | Nine Months Ended
September 30,
2007 |         | Cumulative from Inception (March 25, 2003) through September 30, 2008
|---------------------------------------------------------- | ------------------------------------------------- | ------------------------------------- | ------- | ------------------------------------- | ----- | ------------------------------------ | ------- | ------------------------------------ | ------- | ---------------------------------------------------------------------
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|OPERATING ACTIVITIES:                                      |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|Net loss                                                   | $                                                 | (14,606)                              | $       | (3,930)                               | $     | (24,590)                             | $       | (9,653)                              | $       | (46,995)                                                             
|Items not requiring cash outlay:                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|                                                           | - Consulting fees                                 |                                       | -       |                                       | -     |                                      | -       |                                      | -       |                                                                      
|                                                           | - Amortization                                    |                                       | 28      |                                       | 38    |                                      | 149     |                                      | 78      |                                                                      
|                                                           | - Mineral property exploration                    |                                       | -       |                                       | -     |                                      | -       |                                      | -       |                                                                      
|                                                           | - Stock based compensation                        |                                       | 669     |                                       | 749   |                                      | 2,477   |                                      | 2,175   |                                                                      
|                                                           | - Write down of Mineros advance and deposit       |                                       | 9,296   |                                       | -     |                                      | 9,296   |                                      | -       |                                                                      
|                                                           | - Deferred income taxes                           |                                       | (2,257) |                                       | (540) |                                      | (4,329) |                                      | (1,502) |                                                                      
|Changes in non-cash working capital items                  |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|                                                           | - Prepaid expenses and deposits                   |                                       | 1,171   |                                       | 13    |                                      | 647     |                                      | (535)   |                                                                      
|                                                           | - Accounts payable, accrued and other liabilities |                                       | 3,262   |                                       | 1,012 |                                      | 3,685   |                                      | 2,039   |                                                                      
|                                                           | - Due to/from related parties                     |                                       | -       |                                       | -     |                                      | -       |                                      | -       |                                                                      
|Net cash used in operating activities                      |                                                   | (2,437)                               |         | (2,658)                               |       | (12,665)                             |         | (7,398)                              |         | (28,438)                                                             
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|FINANCING ACTIVITIES:                                      |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|Issuance of equity securities, net of issue costs and fees |                                                   | -                                     |         | 10,494                                |       | 13,741                               |         | 18,973                               |         | 55,955                                                               
|Issuance of promissory notes and related warrants          |                                                   | -                                     |         | -                                     |       | 2,500                                |         | 7,200                                |         | 12,200                                                               
|Repayment of promissory notes                              |                                                   | -                                     |         | (3,500)                               |       | -                                    |         | (7,200)                              |         | (9,700)                                                              
|Related party advances                                     |                                                   | 2,207                                 |         | -                                     |       | 2,207                                |         | -                                    |         | 2,207                                                                
|Increase in bank indebtedness                              |                                                   | 53                                    |         | -                                     |       | 53                                   |         | -                                    |         | 53                                                                   
|Exercise of stock options                                  |                                                   | -                                     |         | -                                     |       | -                                    |         | 37                                   |         | 131                                                                  
|Net cash provided by financing activities                  |                                                   | 2,260                                 |         | 6,994                                 |       | 18,501                               |         | 19,010                               |         | 60,846                                                               
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|INVESTING ACTIVITIES:                                      |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|Purchase of mineral exploration rights                     |                                                   | (110)                                 |         | (4,196)                               |       | (3,242)                              |         | (9,871)                              |         | (21,463)                                                             
|Purchase of equipment                                      |                                                   | -                                     |         | (677)                                 |       | (33)                                 |         | (699)                                |         | (1,424)                                                              
|Website development costs                                  |                                                   | -                                     |         | -                                     |       | -                                    |         | -                                    |         | (21)                                                                 
|Mineros deposit advance and restricted cash                |                                                   | -                                     |         | -                                     |       | (9,500)                              |         | -                                    |         | (9,500)                                                              
|Net cash used in investing activities                      |                                                   | (110)                                 |         | (4,873)                               |       | (12,775)                             |         | (10,570)                             |         | (32,408)                                                             
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           |                                                   | (287)                                 |         | (537)                                 |       | (6,939)                              |         | 1,042                                |         | -                                                                    
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD           |                                                   | 287                                   |         | 2,462                                 |       | 6,939                                |         | 883                                  |         | -                                                                    
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                 | $                                                 | -                                     | $       | 1,925                                 | $     | -                                    | $       | 1,925                                | $       | -                                                                    
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|SUPPLEMENTAL CASH FLOW INFORMATION                         |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|                                                           |                                                   |                                       |         |                                       |       |                                      |         |                                      |         |                                                                      
|Interest and financing fees                                | $                                                 | 129                                   | $       | 134                                   | $     | 441                                  | $       | 231                                  | $       | 866                                                                  
|Income taxes                                               | $                                                 | -                                     | $       | -                                     | $     | -                                    | $       | -                                    | $       | -                                                                    



See accompanying Notes to Interim Consolidated Financial Statements



* Going Concern (Note 1)

6



---

|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 and exploration of, and development of mineral properties.



The Company has incurred a cumulative net loss since inception on March 25, 2003 to September 30, 2008 of $46,995 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.  As a result of the recent turmoil in worldwide financial markets the Company has been unable to raise the required capital necessary to address the Companys current working capital deficiency at September 30, 2008.  As a result, the Company is reviewing strategic alternatives, including a sale process for all or some of the Companys assets.  The Company has canvassed a number of qualified parties with respect to a sale or financing transaction for some or all of the Companys assets.  The Company has also provided data room access pursuant to confidentiality agreements to interested parties.  At the present time there is no certainty that these initiatives or any financing or sale of one or more of the Companys projects or the Company itself will be completed.



At September 30, 2008 the Company has a significant working capital deficiency including $17,271 in current liabilities as follows:



|Bank indebtedness                        | $                      53
|---------------------------------------- | -------------------------
|Accounts payable and accrued liabilities | 7,318                    
|Mineral property purchase obligations    | 5,143                    
|Related party advances                   | 2,207                    
|Short-term promissory note               | 2,550                    
|                                         | $               17,271   



The Company is commencing discussions with its trade creditors and parties to the Companys mineral property purchase obligations to ascertain their willingness to work with the Company to restructure its obligations.  As well, the Company is terminating all but essential personnel in both its Toronto and Medellin offices in order to further reduce the Companys monthly operating cash requirements.  While the Companys President and CEO are supportive of the Companys efforts to restructure its operations, their ability to provide significant additional working capital advances, given the current gold prices, has become increasingly difficult.  While they have not requested repayment of their related party advances there can be no assurance that additional funding from these individuals will be available on acceptable terms to the Company or at all.



7



---

|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
(Continued)



The most significant of the Companys short-term obligations is its short-term promissory note with Global Resource Fund.  The note is collateralized by the Companys investment in RNC (Colombia) Ltd. and collateralized by a pledge of the Companys investments in Compania Minera de Caldas (Caldas) and Gavilan Minerales S.A. (Gavilan).  Caldas is the Companys principal operating subsidiary and the titleholder of the Companys mineral rights and legal mine titles.  The loan is due December 29, 2008 and there exists the risk that pursuant to its contractual terms the loan may be called earlier.  In connection with the Companys attempts to advance other strategic and/or financing alternatives, the Company has commenced discussions with the note holder and has advised the holder of the Companys plans.  There can be no assurance that under these circumstances the Companys short-term promissory note will be repaid on or before December 29, 2008 or that the holder will not ultimately request acceleration of the loan or exercise its rights to the loans underlying collateral interests.



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
addressing the Companys working capital deficiency and  accumulated deficit at September 30, 2008, the Company must also secure sufficient funding to meet its anticipated exploration expenses, and mineral properties and rights obligations.  These circumstances lend substantial doubt as to the ability of the Company to meet its obligations as they become due, and, accordingly, as to the appropriateness of the use of accounting principles applicable to a going concern.  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.  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



---

|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 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)



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 September 30, 2008 and 2007 and in the consolidated balance sheets at September 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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)



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 September 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 and 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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)



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 gains and losses.



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 September 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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)



Financial Instruments



The Companys financial instruments consist of cash and cash equivalents, restricted cash, bank indebtedness, accounts payable and accrued liabilities, related party advanced, 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 ACQUISITION



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 provided a guarantee in the amount of 4.9 billion pesos, which would be payable to the vendors if the transaction is not completed for any reason.  The guarantee was collateralized by a term deposit held by the Company in the amount of 4.9 billion pesos (U.S. $2,296).



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.



On September 22, 2008 the Company and Mineros agreed to further extend the completion date to October 31, 2008.  Both the guarantee and deposit were non-refundable if the transaction was not completed for any reason.  On October 31, 2008 Mineros notified the Company it was unwilling to extend the closing of the transaction beyond October 31, 2008 and terminated the transaction.  Mineros has exercised its right to the non refundable advance of $7,000 and 4.9 billion pesos term deposit.  As a result, a write-down of $9,296 with respect to these items has been recognized in the Consolidated Statements of Operations for the three and nine months ended September 30, 2008.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 4  MINERAL PROPERTIES AND EXPLORATION RIGHTS (Continued)



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:



|                                                                                                |   | Three Months Ended
September 30,
2008 |   | Three Months
Ended
September 30,
2007 |   | Nine Months
Ended
September 30, 2008 |   | Nine Months
Ended
September 30,
2007 |   | Cumulative
From
Inception
(March 25, 2003)
Through
September 30,
2008
|----------------------------------------------------------------------------------------------- | - | ------------------------------------- | - | ------------------------------------- | - | ------------------------------------ | - | ------------------------------------ | - | ---------------------------------------------------------------------
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|I) Acquisition of mineral concessions                                                           | $ | -                                     | $ | 4,710                                 | $ | -                                    | $ | 4,710                                | $ | 26,911                                                               
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|II) Acquisition of mineral and exploration rights                                               |   | 110                                   |   | 1,670                                 |   | 630                                  |   | 6,862                                |   | 26,088                                                               
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|Total acquired mineral and exploration properties and rights                                    |   | 110                                   |   | 6,380                                 |   | 630                                  |   | 11,572                               |   | 52,999                                                               
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|III) Exploration of acquired  mineral properties                                                |   | 8,058                                 |   | 2,241                                 |   | 14,902                               |   | 4,814                                |   | 26,369                                                               
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|IV) Stock based compensation                                                                    |   | 164                                   |   | 216                                   |   | 549                                  |   | 676                                  |   | 1,662                                                                
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|Total mineral property exploration expenses                                                     |   | 8,222                                 |   | 2,457                                 |   | 15,451                               |   | 5,490                                |   | 28,031                                                               
|                                                                                                |   |                                       |   |                                       |   |                                      |   |                                      |   |                                                                      
|Total mineral and exploration properties and rights acquisitions and exploration
  expenditures | $ | 8,332                                 | $ | 8,837                                 | $ | 16,081                               | $ | 17,062                               | $ | 81,030                                                               



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 4  MINERAL PROPERTIES AND EXPLORATION RIGHTS (Continued)



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:



|                                                          | September 30, 2008 | December 31, 2007
|--------------------------------------------------------- | ------------------ | -----------------
|Purchase of mineral and exploration properties and rights | $                  | 52,999           
|Recognition of deferred tax liability upon acquisition    | $                  | 13,008           
|Mineral and exploration properties and rights             | $                  | 66,007           



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.  Furthermore, as disclosed in Note 7, certain mineral properties are subject to contractual obligations.  The Company cannot give any assurance that title to its 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.  As disclosed in Notes 1 and 14, the ability of the Company to continue as a going concern and realize the carrying value of the Companys mineral and exploration properties and rights is dependent upon a number of external factors.  Should the Company be unable to continue as a going concern, or be able to successfully advance its
strategic alternatives and negotiate with creditors to restructure its
obligations, the carrying values of the rights could be impacted in future periods and adjustment may be significant.



NOTE 5  PROPERTY AND EQUIPMENT

|As at September 30, 2008 |   | Cost |   | Accumulated
Amortization |   | Net Book
Value
|------------------------ | - | ---- | - | ------------------------ | - | --------------
|Equipment and computers  | $ | 402  | $ | (141)                    | $ | 261           
|Building                 |   | 92   |   | (11)                     |   | 81            
|Vehicles                 |   | 300  |   | (125)                    |   | 175           
|                         |   |      |   |                          |   |               
|Total                    | $ | 794  | $ | (277)                    | $ | 517           



|As at December 31, 2007 |   | Cost  |   | Accumulated
Amortization |   | Net Book
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



|                                                     | September 30, 2008 | December 31, 2007
|---------------------------------------------------- | ------------------ | -----------------
|                                                     |                    |                  
|Authorized:                                          |                    |                  
|200,000,000 common shares,                           |                    |                  
|$0.00001 par value                                   |                    |                  
|Issued and Outstanding:                              |                    |                  
|104,224,486 common                                   |                    |                  
|shares (December 31, 2007:
86,590,075 common shares) | $  1               | $  1             



i)

During the nine months ended September 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 $0.85 per Unit to a total of 7 investors.  Each Unit consists of one share of common stock and one 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 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 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
  $                 3,931Additional 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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



A) Common Stock and Special Warrants
(Continued)



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 was automatically exercisable 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 consisted of one common share of the Company (the Common Shares) and one Common Share Purchase Warrant (the Warrant).  Each Warrant entitles the holder to acquire one Common Share at a price of $1.50 up to June 18, 2013.



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, to purchase one Common Share at an exercise price of $0.85 per Common Share up to June 28, 2010.



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 i) did not become effective on or before October 18, 2008 and, subject to certain exceptions; ii) 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 was obligated i) 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; and is obligated ii) 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 had the option, or if shareholder approval was not obtained, to pay the cash equivalent of such Additional Units, deemed to be $0.85 per Additional Unit.



On September 17, 2008 the SEC declared the Companys registration statement effective once on September 30, 2008 the Company received shareholder approval for items i) and ii) above.



e)

On August 6, 2008 the Company issued 100,000 options to purchase the Companys common stock to an employee.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



A) Common Stock and Special Warrants
(Continued)



f)

On August 8, 2008 the Company issued 125,000 common shares in connection with the extension of the Companys bridge loan with Global Resource Fund.



g)

On August 13, 2008 the Company issued 100,000 options to purchase the Companys common stock to an employee.



h)

On August 14, 2008 4,241,500 Stock Purchase Warrants expired unexercised.



i)

On September 30, 3008 the Company converted 11,167,000 Special Warrants issued in connection with the Companys June 18, 2008 private placement into 11,167,000 common shares and 11,167,000 Common Share Purchase Warrants exercisable at a price of $1.50 per common share up to June 18, 2013.  The Company also converted 781,690 Special Broker Warrants into 781,690 Broker Warrants exercisable at a price of $0.85 per common share up to June 18, 2010.



The Company has allocated the total net proceeds from the June 18, 2008 offering of $8,558 to the underlying equity instruments comprising the offering, based on the estimated relative fair value of each instrument at the offering date as follows:



Net ProceedsCommon shares and Additional paid in capital  common shares
  $                6,121Additional paid in capital  share purchase warrants
  2,437$                8,558




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.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



A) Common Stock and Special Warrants
(Continued)



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, 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 was exercisable for one common share at an exercise price of $1.85 CDN and exercisable at any time up to August 14, 2008. The warrants also required 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 closed at or above $2.25 CDN on a recognized North American stock exchange.  On August 14, 2008 the Warrants expired unexercised.



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 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




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.



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, 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.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



A) Common Stock and Special Warrants
(Continued)



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 Agents 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 and Agents Warrants fluctuates based on their time and expiry and changes in the exchange rate between the U.S. and Canadian dollar.



EITF 07-5 indicates warrants with exercise prices denominated in a different currency than an entitys functional currency should not be classified as equity for years beginning on or after December 15, 2008.  As a result, 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.  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 September 30, 2008, it would have reported the following unrealized cumulative gain:



TotalFair value  At Inception of instruments
  $                          3,865Decrease in fair value of instruments
  (3,727)Fair value  September 30, 2008
  $                             138




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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



B) Fair Value Disclosures
(Continued)



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 September 30, 2008 and December 31, 2007.



C) Warrants



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



|Number of Warrants | Exercise Price         | Expiry Date      
|------------------ | ---------------------- | -----------------
|390,040            | $   2.00 USD per share | April 25, 2009   
|541,200            | 1.00 USD per share     | March 22, 2010   
|508,980            | 1.40 CDN per share     | August 14, 2010  
|4,582,613          | 2.00 CDN per share     | December 28, 2012
|595,739            | 1.20 CDN per share     | December 28, 2009
|350,000            | 1.10 CDN per share     | February 8, 2010 
|5,992,411          | 1.10 USD per share     | March 28, 2010   
|350,000            | 1.10 USD per share     | March 31, 2010   
|11,167,000         | 1.50 USD per share     | June 18, 2013    
|781,690            | 0.85 USD per share     | June 18, 2010    
|25,259,673         | $   1.45 USD per share |                  



D) Stock Options and Other Stock-Based Compensation



Stock Options



The Company maintains two Stock Incentive Plans, a 2006 Stock Incentive Plan and a 2008 Stock Incentive Plan, (collectively, the Plans) 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 advisors and consultants to, the Company.



All stock options and rights vest over a period determined by the Board of Directors and expire not more than ten years from the date granted.  All outstanding stock options currently vest at a rate of 25% every six months over a period of two years, and have a life of 10 years, unless certain change in control provisions are triggered, in which cases the Plans provide for accelerated vesting.



The following is a summary of the Plans at September 30, 2008:



|          | Options Available for Issue | Shares Reserved for Issuance
|--------- | --------------------------- | ----------------------------
|2006 Plan | 85,000                      | 6,325,000                   
|2008 Plan | 3,922,449                   | 3,922,449                   
|          | 4,007,449                   | 10,247,449                  

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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



D) Stock Options and Other Stock-Based Compensation
(Continued)



A summary of stock options granted, and exercised and outstanding, under the Plans are as follows:

|                                          |  | Shares    |  | Weighted
  
  Average
Exercise
Price
|----------------------------------------- |  | --------- |  | ------------------------------------
|                                          |  |           |  |                                     
|Options outstanding at December 31, 2007  |  | 5,890,000 |  | $1.30                               
|Granted in fiscal 2008                    |  | 500,000   |  | 0.74                                
|Exercised in fiscal 2008                  |  | -         |  | -                                   
|Forfeited and expired in fiscal 2008      |  | (150,000) |  | 0.97                                
|Options outstanding at September 30, 2008 |  | 6,240,000 |  | $1.26                               

|                         |                    |                                 |                                                   |                    |                                
|------------------------ | ------------------ | ------------------------------- | ------------------------------------------------- | ------------------ | -------------------------------
|                         |                    |                                 |                                                   |                    |                                
|Range of
Exercise
Prices | Number
Outstanding | Weighted
Average
Exercise
Price | Weighted
Average
Remaining
Contractual
Life (yrs) | Number
Exercisable | Weighted
Average
Exercise
Price
|$0.42 - $1.00            | 750,000            | $              0.74             | 8.82                                              | 325,000            | $         0.79                 
|$1.01 - $1.90            | 5,490,000          | 1.33                            | 8.48                                              | 3,430,000          | 1.33                           
|$0.75 - $1.90            | 6,240,000          | $              1.26             | 8.52                                              | 3,755,000          | $         1.28                 





|                                                                  | Fiscal 2008        | Fiscal 2007     
|----------------------------------------------------------------- | ------------------ | ----------------
|Weighted average fair value of options  granted during the period | $             0.57 | $           1.06
|Weighted average fair value of options vested during the period   | $             1.08 | $           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 average volatility of 67%, 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 average 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.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 6  STOCKHOLDERS EQUITY
(Continued)



D) Stock Options and Other Stock-Based Compensation
(Continued)



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.



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 Company accounted for this award by recognizing compensation expense ratably over twelve months, commencing on the grant date.



On August 11, 2008 the Company issued 125,000 common shares to Global Resource Fund (Global) as consideration for extending the Companys bridge loan from July 31, 2008 to September 30, 2008.  The fair value of this common stock award was $50, based on the market price of the Companys common shares at the issue date.  The Company accounted for this award by recognizing an expense ratably over the extension period, 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:



|                                      | Three Months Ended September 30, 2008 | Three Months
Ended September 30, 2007 | Nine
Months Ended September 30, 2008 | Nine
Months
Ended
September 30,
2007 | Cumulative
From Inception
(March 25, 2003)
through
September 30,
2008
|------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------ | ------------------------------------ | ---------------------------------------------------------------------
|Mineral property exploration expenses | $           164                       | $           216                       | $           549                      | $           676                      | $       1,662                                                        
|General and administrative            | 505                                   | 533                                   | 1,928                                | 1,499                                | 5,883                                                                
|Total stock-based compensation        | $           669                       | $           749                       | $        2,477                       | $        2,175                       | $       7,545                                                        



As at September 30, 2008, there was $850 of unrecognized compensation cost related to unamortized stock options.  (September 30, 2007: $1,195)



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 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.



NOTE 8  SHORT TERM PROMISSORY NOTE AND RELATED PARTY ADVANCES



On February 8, 2008 the Company entered into a $2,500 short-term promissory note with 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, was 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 underlying instruments, based on the estimated relative fair value of each instrument as follows:



|                                                     | Net Proceeds                   
|---------------------------------------------------- | -------------------------------
|Short-term promissory note                           | $                         2,400
|Additional paid in capital  share purchase warrants | 100                            
|                                                     | $                         2,500



On August 11, 2008 Global agreed to extend repayment of the loan until September 30, 2008.  In return for this extension, the Company agreed to pay Global $50 and issued 125,000 shares of the Companys common stock.  As disclosed in note 14, repayment of the note was further extended by the lender to December 29, 2008.



Certain of the Companys officers have provided working capital advances totalling $2,207 at September 30, 2008 (December 31, 2007 - $ NIL).  These advances, which are unsecured, are non-interest bearing, and have no specified repayment terms, have been classified as current liabilities in the consolidated balance sheet.



NOTE 9  INCOME TAXES



The full potential benefit of net operating loss carry forwards has not been recognized in the financial statements, since it is not 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:



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 9  INCOME TAXES
(Continued)



a)

Components of income tax provision:



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



|                      | Three Months Ended      | Three Months Ended      | Nine  Months Ended      | Nine Months Ended      
|--------------------- | ----------------------- | ----------------------- | ----------------------- | -----------------------
|                      | September 30, 2008      | September 30, 2007      | September 30, 2008      | September 30, 2007     
|Current:     Domestic | -                       | -                       | -                       | -                      
|Foreign               | -                       | -                       | -                       | -                      
|                      | $                     - | $                     - | $                     - | $                     -





|                     | Three Months Ended      | Three Months Ended    | Nine Months Ended   | Nine Months Ended  
|-------------------- | ----------------------- | --------------------- | ------------------- | -------------------
|                     | September 30, 2008      | September 30, 2007    | September 30, 2008  | September 30, 2007 
|Deferred:   Domestic | -                       | -                     | -                   | -                  
|Foreign              | (2,257)                 | (540)                 | (4,329)             | (1,502)            
|                     | $               (2,257) | $               (540) | $           (4,329) | $           (1,502)



b)

Income tax rate reconciliation:



i)

The Companys loss before deferred income tax recoveries is as follows:

|         |                     |                         |                     |                      
|-------- | ------------------- | ----------------------- | ------------------- | ---------------------
|         | Three Months Ended  | Three Months Ended      | Nine Months Ended   | Nine Months Ended    
|         | September 30, 2008  | September 30, 2007      | September 30, 2008  | September 30, 2007   
|Domestic | $           (1,903) | $               (1,701) | $           (6,261) | $             (4,997)
|Foreign  | (14,960)            | (2,769)                 | (22,658)            | (6,158)              
|         | $          (16,863) | $               (4,470) | $         (28,919)  | $            (11,155)



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 9  INCOME TAXES
(Continued)



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 Ended | Three Months Ended | Nine Months Ended  | Nine Months Ended
|                                             | September 30, 2008 | September 30, 2007 | September 30, 2008 | September 30 2007
|                                             |                    |                    |                    |                  
|US federal income tax rate                   | 34.0%              | 34.0%              | 34.0%              | 34.0%            
|                                             |                    |                    |                    |                  
|Decrease in                                  |                    |                    |                    |                  
|Income tax rate resulting                    |                    |                    |                    |                  
|From:                                        |                    |                    |                    |                  
|Losses not recognized for tax purposes       | (23.7)             | (8.6)              | (17.8)             | (10.5)           
|Tax rate differences in foreign subsidiaries | (2.4)              | (3.4)              | (2.2)              | (3.1)            
|Other permanent differences                  | 5.5                | (9.9)              | 1.0                | (6.9)            
|Effective income tax rate                    | 13.4%              | 12.1%              | 15.0%              | 13.5%            



c)

Components of deferred income tax provision:



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

|                                                                      |                      |                          |                     |                        
|--------------------------------------------------------------------- | -------------------- | ------------------------ | ------------------- | -----------------------
|                                                                      | Three Months Ended   | Three Months Ended       | Nine Months Ended   | Nine Months Ended      
|                                                                      | September 30, 2008   | September 30, 2007       | September 30, 2008  | September 30, 2007     
|Losses carried forward                                                | $              (490) | $                 (825)  | $           (1,338) | $               (1,698)
|Tax depreciation less than accounting depreciation                    | 11                   | 11                       | 32                  | 66                     
|Mineral concessions                                                   | (1,802)              | -                        | (820)               | -                      
|Foreign exchange on mineral concessions and foreign exploration costs | 1,204                | -                        | 595                 | -                      
|Foreign exploration costs                                             | (1,660)              | (539)                    | (4,105)             | (1,502)                
|Change in valuation allowance                                         | (2,737)              | (1,353)                  | (5,636)             | (3,134)                
|Deferred income tax recovery                                          | 480                  | 813                      | 1,307               | 1,632                  
|                                                                      | $           (2,257)  | $                  (540) | $           (4,329) | $             (1,502)  



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 9  INCOME TAXES
(Continued)



d)

Components of deferred tax asset and liability:



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

|                                        |   |                    |   |                  
|--------------------------------------- | - | ------------------ | - | -----------------
|                                        |   | September 30, 2008 |   | December 31, 2007
|Tax depreciation less than depreciation | $ | 292                | $ | 324              
|Losses carried  forward                 |   | 4,019              |   | 2,680            
|                                        |   | 4,311              |   | 3,004            
|Valuation allowance                     |   | (4,311)            |   | (3,004)          
|Deferred tax asset                      | $ | -                  | $ | -                



e)

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

|                                                             |   |                    |   |                  
|------------------------------------------------------------ | - | ------------------ | - | -----------------
|                                                             |   | September 30, 2008 |   | December 31, 2007
|Tax depreciation less than Accounting depreciation           | $ | -                  | $ | -                
|Tax basis less than accounting basis for mineral concessions |   | (13,752)           |   | (14,572)         
|Foreign exploration costs                                    |   | 6,809              |   | 2,704            
|Deferred tax liability                                       | $ | (6,943)            | $ | (11,868)         



f)

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

|            |   |          |   |         |   |       
|----------- | - | -------- | - | ------- | - | ------
|Expiry Year |   | Domestic |   | Foreign |   | Total 
|            |   |          |   |         |  
|2023        | $ | 37       | $ | -       | $ | 37    
|2024        |   | 23       |   | -       |   | 23    
|2025        |   | 310      |   | -       |   | 310   
|2026        |   | 1,535    |   | -       |   | 1,535 
|2027        |   | 5,550    |   | -       |   | 5,550 
|2028        |   | 4,360    |   | -       |   | 4,360 
|            | $ | 11,815   | $ | -       | $ | 11,815



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 nine months ended September 30, 2008.  The Company files tax returns in the United States and Colombia.  For all jurisdictions, all years remain subject to tax authority examination.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



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.



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.



f)

Unsecured working capital advances totalling $2,207 at September 30, 2008 provided by a Company controlled by the Companys Vice Chairman, CEO and President in fiscal 2008,
as disclosed in Note 8.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 10  RELATED PARTY TRANSACTIONS
(Continued)



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



a)

Paid $35 for board and committee meeting fees to non-management directors of the Company (nine months ended September 30, 2008: $94).



b)

Paid $56 in management, salary, and consulting fees to directors of the Company (nine months ended September 30, 2008: $156).



c)

Paid $51 in management, salary, and consulting fees to shareholders of the Company (nine months ended September 30, 2008: $153).



d)

Paid $129 for interest and administration fees on short-term bridge loans (nine months ended September 30, 2008: $441).



Included in accounts payable and accrued liabilities at September 30, 2008 is $213 owing to directors and officers of the Company.  Related party advances at September 30, 2008 total $2,207.



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



a)

Paid $117 for management and consulting fees to senior officers of the Company (nine months ended September 30, 2007: $329).



b)

Paid $88 for management and consulting fees to shareholders of the Company (nine months ended September 30, 2007: $300).



c)

Paid $43 for interest and administration fees on short-term bridge loans (nine months ended September 30, 2007: $365).



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.



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)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 12  ACCOUNTING DEVELOPMENTS
(Continued)



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 annual 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.



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)

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 ($1,103) to acquire a 100% interest in the property.  At September 30, 2008 the Company has expended an initial 480 million pesos ($221) 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.



29



---

|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 13  COMMITMENTS AND CONTINGENCIES
(Continued)



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 ($460) to acquire a 100% interest in the property.  A September 30, 2008 the Company has expended an initial 300 million ($138) 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.



c)

The Company has other options with various unrelated parties totalling $930 million Colombian pesos ($428) 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.



NOTE 14  SUBSEQUENT EVENTS



i)

Short-term promissory note extension



On October 7, 2008 Global agreed to extend repayment of the short-term promissory note until December 29, 2008.  In return for this extension, the Company agreed to pay Global a further $50 and issue to Global 300,000 shares of the Companys common stock.  In connection with this extension, the interest rate payable on the loan from the date of extension was increased to 15% per annum, and the Companys commitment to repurchase the lenders 350,000 warrants was increased from $50 to $100 in the event the warrants expire unexercised.



ii)

Mineros Extension



On October 31, 2008 Mineros S.A. notified the Company that it was unwilling to extend the closing of the Mineros transaction beyond October 31, 2008 and terminated the transaction.  In connection with the termination, Mineros exercised its right to the non refundable advance and deposit guarantee previously provided by the Company in connection with the transaction.



NOTE 15  RECLASSIFICATIONS



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



30

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

Introduction

This Managements Discussion and Analysis
("MD&A"), prepared as of November 7, 2008, is intended to supplement and
complement our unaudited interim consolidated financial statements and notes
thereto (our "Financial Statements") for the three and nine months ended
September 30, 2008 prepared in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP"). 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 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 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 focused on two areas within the Marmato Mountain Gold District. These are
Zona Alta (Upper Zone) of Marmato Mountain and the Caramanta Exploration
Properties. The Caramanta Exploration Properties surround the Marmato Mountain.

31

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Third Quarter Fiscal 2008 Overview

In light of recent economic instability,
created primarily by the banking and credit crisis in the U.S., at the end of
the third quarter of fiscal 2008 the Company determined it necessary to revisit
its short-term operating plan. In connection with this review, we have suspended
additional drilling beyond the already completed 46,000 meters on Zona Alta to
reduce our ongoing operating expenses. In light of current market conditions, we
commenced evaluating strategic options to address our short-term and long-term
project development goals. During the third quarter of fiscal 2008, the
Companys ongoing operations were financed primarily by unsecured working capital advances
from a company controlled by the Companys President and Chief Executive
Officer.

Results from the 46,000 meters of Zona Alta drilling are
currently being reviewed to update our resource estimate for the mountain.

Despite the challenges, posed by the capital markets in the
third quarter of fiscal 2008 we achieved the following objectives:

- 

Events Subsequent to Quarter-End and Impact on Corporate
Liquidity

As a result of the recent turmoil in worldwide
financial markets, the collapse in market valuations of comparable gold
exploration and development companies and the reluctance of investors to participate in the
exploration sector, the Company has been unable to raise the required capital
necessary to complete the Zona Baja (Mineros) transaction and address the
Companys current working capital deficiency. On October 31, 2008 Mineros S.A.
notified the Company that it was unwilling to extend the closing of the Mineros
transaction beyond October 31, 2008 and terminated the transaction. Mineros has
exercised its right to the nonrefundable advance deposit previously provided by
the Company in connection with the transaction.

The Company is therefore at this time unable
to advance its ultimate goal of combining Zona Alta and Zona Baja and is
reviewing all strategic alternatives, including a potential sale of all or some
of the Companys assets. The Company has canvassed a number of qualified parties
with respect to a possible strategic transaction with the Company and several
interested parties are reviewing information regarding the Company pursuant to
confidentiality agreements. In addition, the Company continues to explore
potential financing opportunities. At the present time there is no certainty
that these initiatives or any financing or strategic transaction will be
completed.

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At September 30, 2008 the Company has a significant working capital
deficiency including $17,271 in current liabilities as follows:

Bank indebtedness
      $
      53Accounts payable and accrued liabilities
      
      7,318Mineral property purchase
      obligations
      
      5,143Related party advances
      
      2,207Short-term promissory note
      
      2,550$
      17,271


The Company is commencing discussions with its
trade creditors and parties to the Companys mineral property purchase
obligations to ascertain their willingness to work with the Company to
restructure its obligations. As well, the Company has commenced terminating all
but essential personnel in both its Toronto and Medellin offices in order to
further reduce the Companys monthly operating cash requirements. There can be
no assurance that impacted parties will cooperate with the Company in respect to
these initiatives. The Companys President and CEO are supportive of the
Companys efforts to restructure its operations, however their ability to
provide significant additional working capital advances, given the current gold
prices, has become increasingly difficult. There can be no assurance that
additional funding from these individuals will be available on acceptable terms
to the Company or at all.

The Company has issued a short-term promissory
note to Global Resource Fund ("Global"). The note is collateralized by the
Companys investment in RNC (Colombia) Ltd. and collateralized by a pledge of
the Companys investments in Caldas and Gavilan. Caldas is the Companys
principal operating subsidiary and the titleholder of the Companys mineral
rights and legal mine titles. The loan is due December 29, 2008 and by its terms
potentially could be called earlier upon the occurrence of certain events. In
connection with the Companys attempts to advance other strategic and/or
financing alternatives, the Company has commenced discussions with the note
holder and has advised the holder of the Companys plans. There can be no
assurance that under these circumstances the Companys short-term promissory
note will be repaid on or before December 29, 2008 or that the holder will not
request acceleration of the loan or exercise its rights to the loans underlying
collateral.

The ability of the Company to continue as a
going concern is dependent on the ongoing discussions and/or forbearance with
its lenders, trade creditors, and mineral property obligation holders, as well
as obtaining additional financing. There is no assurance that our lenders will
cooperate with the Company, that trade creditors will provide accommodations, or
that a financing or other transaction can be completed on terms acceptable to
the Company, or at all.

Marmato Mountain  Zona Alta

As at September 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, referred to as
Category 2, 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.

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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 September 30, 2008 is 107, compared to 107 at June 30,
2008. Of these mines, 89 are currently registered in the name of Caldas and are
no longer operating.

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 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 held a
deposit guarantee in the amount of 4.9 billion pesos (approximately $2,296,000)
in respect to this transaction. 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.

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. In June, 2008 we filed a request for review of the
transaction with the Colombian Government in an effort to accelerate closing of
the transaction. In July, 2008 the Colombian officials requested additional
information from both parties and regulatory approval was ultimately granted in
September, 2008. The closing date of the transaction was further extended by
Mineros until October 31, 2008 and we endeavored to complete our previously
announced debt offering to fund the balance of the purchase price. Both the
deposit guarantee and the advance were non-refundable if the transaction was not
completed for any reason. On October 31, 2008 Mineros notified the Company that
it was unwilling to extend the closing of the transaction beyond October 31,
2008 and exercised its right to both the nonrefundable advance and deposit
guarantee.

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 mineralized zone 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. The proposed transaction was a
share exchange with the Company exchanging its shares for those of Colombia
Gold. We have experienced difficulty in receiving certain information specified
in our Letter of Intent with Colombia Gold that we require to complete our due
diligence investigation. Given these ongoing delays and our short-term liquidity
issues there is no assurance that
we will be able to complete our due diligence investigation, that a definitive
agreement will be executed, or that the acquisition will be completed. In
addition, the Board of Directors of Colombia Gold have recentlyindicated that they now intend to terminate the Letter of
Intent. We have informed Colombia Gold that it does not have the ability to
terminate the Letter of Intent at this time. The Company intends to enforce its
rights under the Letter of Intent.

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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.

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 economic 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 September 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.

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Going Concern

We incurred a net loss of $46,995,000 for the
period from inception on March 23, 2003 to September 30, 2008, and we are not
presently generating any revenue. Furthermore, we have used $60,846,000 during
this period to fund our operations and mineral acquisitions program.

As at October 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 plan. We currently
do not have any arrangements for additional financing. There can be no assurance
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. Readers of this
MD&A should refer to the Companys Interim Consolidated Financial Statements for
the three and nine months ended September 30, 2008 and in particular Note 1 
"Going Concern and Nature of Operations" to these financial statements for
further information.

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, and senior management of the Company. The directors and
senior management of Caldas and Gavilan have executed voting and support
agreements in favor 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 commercially mineable. 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.

36

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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.

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 September 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.

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Selected Financial Information

The following table sets forth selected
financial information for the three and nine months ended September 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 nine months ended September
30, 2008 and the related note disclosures.

|                              |           |          |           |           |           |          |           |          |           | Cumulative
|----------------------------- | --------- | -------- | --------- | --------- | --------- | -------- | --------- | -------- | --------- | ----------
|                              |           |          |           |           |           |          |           |          |           | from      
|                              |           |          |           |           |           |          |           |          |           | Inception 
|                              |           |          |           | Three     |           |          |           | Nine     |           | (March 25,
|                              |           | Three    |           | Months    |           | Nine     |           | Months   |           | 2003      
|                              |           | Months   |           | Ended     |           | Months   |           | Ended    |           | through   
|In Thousands, except Per      |           | Ended    | September |           | Ended     |          | September |          | September
|Share Amounts                 | September |          | 30,       | September |           | 30,      |           | 30,     
|                              |           | 30, 2008 |           | 2007      |           | 30, 2008 |           | 2007     |           | 2008)     
|Statement of Loss and Deficit |           |          |           |           |           |          |           |          |           |           
|Total Operating Expenses      | $         | 16,989   | $         | 4,475     | $         | 29,058   | $         | 11,174   | $         | 54,314    
|Net loss                      | $         | (14,606) | $         | (3,930)   | $         | (24,590) | $         | (9,653)  | $         | (46,995)  
|Loss per Share-basic and      | $         | (0.16)   | $         | (0.06)    | $         | (0.27)   | $         | (0.15)   |           | N/A       
|diluted                       |           |          |           |           |           |          |           |          |           |           
|Balance Sheet Data            |           |          |           |           |           | As at    |           | As at    |           |           
|                              |           |          |           |           | September |          | December  |          |          
|                              |           |          |           |           |           | 30,      |           | 31, 2007 |           |           
|                              |           |          |           |           |           | 2008     |           |          |           |           
|Total Assets*                 |           |          |           |           | $         | 66,660   |           | 74,519   |           |           
|Total Long-Term Debt          |           |          |           |           | $         | -        | $         | -        |           |           
|Total Liabilities             |           |          |           |           | $         | 24,214   | $         | 23,433   |           |           
|Total Shareholders Equity    |           |          |           |           | $         | 42,446   | $         | 51,086   |           |           

* includes non-monetary / non-current mineral and exploration
properties and rights of 66,007 and 65,377 respectively

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

For the three months ended September 30, 2008,
we incurred a net loss of $14,606,000 (2007-$3,930,000). We generated interest
and other income of $126,000 (2007-$5,000). The primary contributors to our net
loss for the three months ended September 30, 2008 were mineral property
exploration expenses of $8,222,000 (of which $164,000 related to non-cash
stock-based compensation expenses) and general and administrative expenses of
$1,574,000 (of which $505,000 related to non-cash stock-based compensation
expenses), along with foreign exchange gains of $2,131,000, primarily related to
unrealized foreign exchange gains on the translation of foreign
currency-denominated accounts payable and accrued liabilities, mineral property
purchase obligations, and deferred income tax balances. We also recorded a
$9,296,000 write-down of the Mineros advance and deposit in connection with
Mineros decision to terminate its agreement with us subsequent to quarter-end.

For the comparative period, the primary
contributors to our net loss were mineral property exploration expenses of
$2,457,000 (of which $216,000 related to non-cash stock-based compensation
expenses) and general and administrative expenses of $1,608,000 (of which
$533,000 related to non-cash stock-based compensation expenses).

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Our operations typically involve the following activities and
expenditures:

i)

The acquisition of mineral
concessions: To September 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 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 nine months ended September 30,
2008, we did not expend any cash on the acquisition of mineral concessions.

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 September 30, 2008, we had reached agreements with the
titleholders to secure 108 legally registered titles deemed desirable in our
business plan, with 89 titles registered in Caldas name. During the three
months ended September 30, 2008, we expended a total of $110,000 on mineral and
exploration rights (nine months ended September 30, 2008  $630,000) and have
obligations as at September 30, 2008 to make payments of $5,143,000 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 September 30, 2008, we expended a total of
$8,222,000 on the exploration of acquired mineral properties (nine months ended
September 30, 2008 - $15,451,000).

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
September 30, 2008 to $8,222,000 (including $164,000 in stock-based
compensation) from $2,457,000 (including $216,000 in stock-based compensation)
for the three months ended September 30, 2007. The primary reason for the
increase was the significant drilling expenses incurred to complete the 46,000
meters of drilling described elsewhere in this MD&A. With the suspension of
additional drilling at the end of the third quarter of fiscal 2008, we expect
that exploration expenses will be reduced in future periods.

General and administrative expenses remained
relatively constant in the three months ended September 30, 2008 at $1,574,000
compared to $1,608,000 for the three months ended September 30, 2007, reflecting
the completion of our transition from a start-up enterprise to a company with an
exploration program and infrastructure sufficient to support field activities. A
significant component of general and administrative expenses in the third
quarter of fiscal 2008 was allocated stock-based compensation, which totaled
$505,000 compared to $533,000 in fiscal 2007. The remainder of the Companys third quarter
fiscal 2008 general and administrative costs included accounting and legal fees
of $575,000 (approximately $125,000 relating to Sarbanes-Oxley compliance
requirements, $350,000 relating to the Companys proposed acquisitions of
Mineros and Colombia Gold, and the balance relating to legal costs associated
with maintaining the Companys dual U.S./Canadian public company status),
investor relations costs of $180,000, and the balance relating to corporate
salaries, travel and head office expenses. As well, in the third quarter of
fiscal 2008, the Company incurred $2,131,000 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 the third
quarter of fiscal 2008, the U.S. dollar strengthened against the Colombian peso
by approximately 13%, resulting in the aforementioned foreign exchange gains on
translation of foreign currency denominated working capital and deferred income
taxes. Approximately $1,206,000 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.

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For the three months ended September 30, 2008,
we incurred a loss from operations of $16,863,000 (2007-$4,470,000), and
recorded a deferred income tax recovery of $2,257,000 related to deductible
temporary differences associated with our Colombian subsidiaries (2007 -
$540,000), applied against deferred tax liabilities in corresponding
jurisdictions, resulting in a net loss of $5,300,000 (2007-$3,930,000).

For the nine months ended September 30, 2008
we incurred a net loss of $24,590,000 compared to $9,653,000 for the nine months
ended September 30, 2007. The primary contributors to our year-to-date fiscal
2008 loss were $15,451,000 in mineral property exploration expenses, $5,341,000
in general and administrative expenses, $9,296,000 related to the write-down of
the Mineros advance and deposit, foreign exchange gains of $1,179,000 and
amortization of $149,000. We generated $139,000 in interest and other income
during the first nine months of fiscal 2008 and recorded a deferred income tax
recovery of $4,329,000 related to deductable temporary differences associated
with our Colombian subsidiaries.

During the third quarter of fiscal 2008, we
used cash of $2,437,000 in operations (2007-$2,658,000). 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 third quarter of fiscal 2008, we
received $2,207,000 in related party advances, experienced an increase in bank
indebtedness of $53,000 and expended $110,000 on the acquisition of mineral
exploration rights, resulting in a net cash decrease of $287,000. We also sold
$590,000 of drilling equipment to one of our drilling contractors, however no
cash proceeds were granted on the sale as the drills were sold as consideration
for an outstanding trade payable balance.

As at September 30, 2008, our working capital
deficiency of $17,135,000 consisted of i) prepaid expenses and deposits of
$136,000, consisting primarily of prepaid Marmato exploration expenditures; and
ii) current liabilities of $17,271,000, consisting primarily of amounts owing to
Marmato titleholders under our mineral and exploration rights purchase
agreements (at September 30, 2008, $5,143,000 is owing pursuant to these
agreements), $2,550,000 related to our short-term promissory note with Global
Resource Fund, $2,207,000 in related party advances and the balance associated
with general trade payables. While we endeavor to manage the timing of these
payments, the timing of settlement of theseliabilities is uncertain. Payment of our mineral and exploration rights
agreements are typically due as the contracts progress through the Colombian
government approval process.

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Liquidity and Capital Resources

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

As at
      
      As atSeptember 30, 2008
      December 31, 2007Cash
      and cash equivalents
      $
      -
      $
      6,939,000Working capital deficiency
      $
      (17,135,000)
      $
      (3,680,000)


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 September 30, 2008,
we have raised $60,846,000 from the issuance of shares of common stock, special
warrants, share purchase warrants, and short-term bridge loans (net of
repayments) and used $60,846,000 to fund operations and mineral property
acquisition and exploration activities, leaving nominal cash resources and a
working capital deficiency of $17,135,000 as at September 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 provided 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
bore 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 bid to acquire all
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 were
not exercised by the expiration date, pursuant to the loan the holder could
require us to repurchase the warrants for $50,000.

On August 7, 2008 the lender extended the
maturity of the loan to September 30, 2008 in exchange for an extension fee of
$50,000 and the issuance by the Company of 125,000 shares of our common stock.
On October 7, 2008 the lender further extended the loan to December 29, 2008 in
exchange for an extension fee of $50,000 and the issuance by the Company of
300,000 shares of our common stock. In addition, the agreement provides that the
price that the lender could require the Company to repurchase its 350,000
warrants was increased to $100,000.

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, and incurred issue
costs of $50,000.

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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 entitled the holder to receive upon exercise
one common share of the Company and one common share purchase warrant (the
"Warrant"). Each Warrant entitled 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, 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 to purchase one common
share at an exercise price of $0.85 per common share for 24 months following the
date of the offering.

On September 30, 2008 the 11,167,000 Special
Warrants issued in connection with the June 8, 2008 private placement were
automatically exercised pursuant to their terms into 11,167,000 common shares
and 11,167,000 common share purchase warrants exercisable at a price of $1.50
per common share up to June 18, 2013. The 781,690 Special Broker Warrants were
also converted into 781,690 Broker Warrants exercisable at a price of $0.85 per
common share up to June 18, 2010.

As at September 30, 2008, our cash resources
were nominal and we will need to raise additional equity financing to continue
to execute our business plan. 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, our rights
to certain Zona Alta mineral properties, and there can be no assurance that such
additional financing will be available to us on acceptable terms or at all.

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. We have experienced difficulty in obtaining certain due
diligence information from Colombia Gold necessary to complete our due diligence
investigation. In addition, the Board of Directors of Colombia Gold have
recently indicated that they intend to terminate the Letter of Intent. We have
informed Colombia Gold that it does not have the ability to terminate the Letter
of Intent at this time. The Company intends to enforce its rights under the
Letter of Intent.

ii)

Acquisition of
Mineros

As described earlier in this MD&A, we had
previously entered into an agreement to purchase Mineros for cash consideration
of $35,000,000. We held a deposit guarantee secured by a term deposit of 4.9
billion Colombian pesos (approximately $2,296,000), which was payable to the
vendors if the transaction was not completed for any reason. We also paid an
additional advance of $7,000,000 against the purchase price in connection with
the extension of the closing, which was also nonrefundable.

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On September 22, 2008 we entered into an
agreement with Mineros to extend the closing of the transaction to October 31,
2008. On October 31, 2008 Mineros indicated they were unwilling to further
extend the transaction beyond October 31, 2008 and exercised their right to both
the deposit and advance.

iii)

Caramanta
Properties

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 September 30, 2008 we have made
payments totalling 480 million pesos (approximately $221,000) against the total
2.4 billion pesos (approximately $1,103,000) 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 September 30, 2008 we have made payments
totalling 300 million pesos (approximately $138,000) against the total 1.0
billion pesos (approximately $460,000) 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 $428,000) 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.

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.

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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.

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,
2010. 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 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 provided 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 bore 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  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
$100,000. The Company has also agreed to pay $100,000 and issued 425,000 common
shares in connection with extensions of the loan to December 29, 2008.

The Company has received from time to time
advances totaling $2,207,000 at September 30, 2008 from RNC (Management) Ltd., a
Company controlled by the Companys President and Chief Executive Officer. The
advances are unsecured, non-interest bearing, and are being used to finance the
Companys ongoing operations while alternative sources of financing are pursued.

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 $46,995,000 for the
period from inception on March 23, 2003 to September 30, 2008, and we are not
presently generating any revenue. Furthermore, we have used $60,846,000 during
this period to fund our operations and mineral acquisitions program. At
September 30, 2008, we had a significant working capital deficiency. Our future
and ability to meet our anticipated exploration expense, mineral properties, and
rights acquisitions 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 September 30, 2008,
repayment of our short-term promissory note was extended by the lender to
December 29, 2008. We have made efforts to reduce or eliminate certain costs in
order to continue as a going concern. Management expects to monitor and control
the Companys operating costs to a minimum until cash is available through
external financing sources. In the interim, a Company controlled by certain
officers of the Company has provided unsecured working capital advances to
maintain the continuity of our operations.

As at October 31, 2008 our cash resources are
nominal and we will need to raise additional  financing during the
remainder of fiscal 2008 to continue to execute our business plan. 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 and we have experienced
significant losses and have a working capital deficiency as of September 30,
2008.

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, or by our inability to honor our contractual purchase
obligations. Furthermore, given our current financial condition, are unable if
we are unable to secure further financing our trade and/or other creditors may
seek to lay claims against our assets or otherwise impede our business. 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 changing political conditions and internationalmonetary 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.

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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.

Government, Environmental, and Legal 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 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.

Our plans to significantly curtail our
Medellin and Toronto operations may result in unforeseen expenses and/or
restructuring liabilities. Given our plan to terminate all but essential
personnel in Toronto and Medellin, there can be no assurance that the Company
will not be subject to government or civil penalties or severance costs should
individuals and/or government agencies impacted by the Companys termination
plans choose to bring legal actions against the Company or otherwise impede our
restructuring plans. Furthermore, we may not have adequate resources to resolve
any unforeseen restructuring issues or costs.

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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.

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. Our plans to significantly curtail our Medellin and Toronto
operations may result in unforeseen expenses and/or restructuring liabilities.
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 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 Quality
Control 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.

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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.

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.

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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.

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, or lack of resources to properly implement internal
controls, 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.

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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.

Completion of Colombia Gold Transaction

As described earlier in this MD&A, the Company
has announced the proposed acquisitions of Colombia Gold. There can be no
assurance that this transaction will be completed, as significant regulatory,
due diligence, and legal matters are outstanding. Furthermore, the acquisition
of Colombia Gold continues to be delayed primarily due to delays by Colombia
Gold in delivering certain outstanding due diligence materials. In addition, the
Board of Directors of Colombia Gold has indicated that they intend to terminate
the Letter of Intent. We have informed Colombia Gold that it does not have the
ability to terminate the Letter of Intent at this time. The Company intends to
enforce its rights under the Letter of Intent. There can be no assurance that we
will have the financial and management resources to successfully complete this
transaction.

Recently Issued Accounting Standards

In September, 2006 the FASB issued FAS 157 

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.

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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 annual reporting 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 all prior periods presented in the
financial statements. Early adoption is not permitted.

Share Data

At September 30, 2008, we had 104,224,486 common shares
outstanding. In addition, we had outstanding:

i)

Third Quarter Fiscal 2008 Exploration Activities and
Exploration 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 comprise the Zona Alta
portion of the mountain. In the third 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 original objective was to drill a cumulative total of
60,000 meters by the end of fiscal 2008.

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On September 23, 2008 we announced that we had
completed 46,000 meters of our drilling program on Zona Alta. Results from this
drilling are being used to update the Companys resource estimate for the entire
mountain. In connection with this, the Company temporarily suspended additional
drilling in order to reduce the Companys ongoing operating expenses.

The underground channel sampling program at
Marmato continued during the third 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.

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 in April, 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.

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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.

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. The
completion date is now expected to be the first half of fiscal 2009, provided we
are able to obtain the necessary financial resources to complete the project.

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, Pÿcora, 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. 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.
The drill testing has been postponed to 2009 for financial reasons and to focus
resources on Marmato. 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
were received in the third quarter of 2008. The results of these programs are
expected to
be used to better define drill targets.

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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, affiliates 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

On June 18, 2008, we completed a private placement of
11,167,000 special warrants (the "Special Warrants") at a price of $0.85 per
Special Warrant for net proceeds of $8,558,000, each special warrant
excercisable for no additional consideration into one common share and one
common share purchase warrant exercisable at a price of $1.50 per common share
up to June 18, 2013. In connection with the offering, we 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. This private placement was
described in our Current Report on Form 8-K filed with the Commission on June
20, 2008. On September 30, 2008, the 11,167,000 Special Warrants issued in
connection with the June 18, 2008 private placement were automatically exercised
pursuant to their terms into 11,167,000 common shares and 11,167,000 common
share purchase warrants exercisable at a price of $1.50 per common share up to
June 18, 2013. The 781,690 Special Broker Warrants were also exercised into
781,690 broker warrants exercisable at a price of $0.85 per common share up to
June 18, 2010. The Company did not generate any proceeds in connection with the
exercise of the special warrants and special broker warrants or the issuance of
the common shares, common share purchase warrants and broker warrants described
above. The securities were issued to institutional accredited investors as
specified in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the U.S.
Securities Act pursuant to the exemption from registration provided by Section
4(2) of the U.S. Securities Act.

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Item 3. Defaults upon Senior Securities

None.

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

The annual meeting of shareholders of the Company was held on September 30,
2008.

The following matters were acted upon at the meeting:

1)

Each of
Jonathan Berg, J. Randall Martin, Thomas McGrail, David Bikerman, Terry Lyons,
James Verraster and Edward Flood were elected directors of the Company to serve
until the next annual meeting of shareholders or until a successor becomes duly
elected and qualified. Voting results for the election of directors were as
follows:

Name
      For
      Against
      AbstainJonathan Berg
      39,568,688
      679,055
      101,288J. Randall Martin
      39,569,188
      678,555
      101,288Thomas McGrail
      39,569,188
      678,555
      101,288David Bikerman
      40,247,743
      0
      101,288Terry Lyons
      39,569,188
      678,555
      101,288James Verraster
      39,568,888
      678,855
      101,288Edward Flood
      39,566,888
      680,855
      101,288


2)

The appointment of PricewaterhouseCoopers
LLP as the Companys independent certified public accounting firm for the fiscal
year ending December 31, 2008 was approved. Votes on this proposal were cast as
follows:

For
      Against
      Abstain40,273,231
      72,443
      3,357


3)

The Companys 2008 Stock
Incentive Plan was approved. Votes on this proposal were cast as follows:

|For        | Against | Abstain | Not Voted
|---------- | ------- | ------- | ---------
|36,999,828 | 704,555 | 40,175  | 2,604,473

4)

The issuance of
additional securities of the Company in certain circumstances in connection with
the Companys private placement of special warrants was approved, as more
particularly described in the Company proxy statement filed with the Commission
on August 19, 2008. Votes on this proposal were cast as follows:

|For        | Against | Abstain | Not Voted
|---------- | ------- | ------- | ---------
|37,655,583 | 77,900  | 11,075  | 2,604,473

d) not applicable

Item 5. Other Information

None.

Item 6. Exhibits

|Exhibit | Description                                                                                                                                                 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                             
|        |                                                                                                                                                             
|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   

56

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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 ChairmanDate: November 11, 2008

By: /s/ James Kopperson
James Kopperson 
Title: Chief Financial OfficerDate: November 11, 2008

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