UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

# FORM 20-F/A(Amendment No. 1)

|[  ] |  | REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|---- |  | ----------------------------------------------------------------------------------------------

OR

|X |  | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the
fiscal year ended June 30, 2005
|- |  | ----------------------------------------------------------------------------------------------------------------------------

OR

|[  ] |  | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES          EXCHANGE ACT OF 1934
|---- |  | -------------------------------------------------------------------------------------------------

| | For
the transition period from __________ to _______________
| | ------------------------------------------------------------

OR

|[  ] |  | SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES          EXCHANGE ACT OF
1934
|---- |  | ----------------------------------------------------------------------------------------------------

| | Date
of event requiring this shell company report __________
| | ------------------------------------------------------------

Commission file number:
0-50880

White Knight
Resources Ltd. (Exact name of
Registrant as specified in its charter)

Province of British
Columbia, Canada
(Jurisdiction of incorporation or organization)

#922, 510 West
Hastings Street, Vancouver, British Columbia, Canada V6B 1L8
(Address of principal executive offices)

| | Securities
registered or to be registered pursuant to Section 12(b) of the Act.
| | -------------------------------------------------------------------------------

|Title of each classN/A | Name of each exchange on which registeredN/A
|---------------------- | --------------------------------------------

| | Securities
registered or to be registered pursuant to Section 12(g) of the Act.
| | -------------------------------------------------------------------------------

Common Stock, No Par Value
(Title of Class)

Securities for which there is a
reporting obligation pursuant to Section 15(d) of the Act.   N/A

Indicate the number of outstanding
shares of each of the issuer's classes of capital or common stock as of the close of the
period covered by this annual report, June 30, 2005:   54,089,386 Common Shares

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.   X   Yes      [_]   No

If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).  [_]   Yes      X  No 

Indicate by check mark which financial
statement item the registrant has elected to follow.   X  Item 17      [_]   Item 18

---

# WHITE KNIGHT RESOURCES
LTD.
FORM 20-F/A ANNUAL REPORT 
TABLE OF CONTENTS

|                                          |                                                                                                                                                                                                                             
|----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE REGARDING FORWARD LOOKING STATEMENTS |                                                                                                                                                                                                                             
|GLOSSARY OF TERMS                         |                                                                                                                                                                                                                             
|ITEM 1:                                   | IDENTITY OF OFFICERS AND DIRECTORS                                                                                                                                                                                          
|ITEM 2:                                   | OFFER STATISTICS AND EXPECTED TIMETABLE                                                                                                                                                                                     
|ITEM 3:                                   | KEY INFORMATION                                                                                                                                                                                                             
|ITEM 4:                                   | INFORMATION ON THE COMPANY                                                                                                                                                                                                  
|ITEM 5:                                   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                                                                                                                                                                
|ITEM 6:                                   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                                                                                                                                                                  
|ITEM 7:                                   | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                                                                                                                                                           
|ITEM 8:                                   | FINANCIAL INFORMATION                                                                                                                                                                                                       
|ITEM 9:                                   | OFFER AND LISTING DETAILS                                                                                                                                                                                                   
|ITEM 10:                                  | ADDITIONAL INFORMATION                                                                                                                                                                                                      
|ITEM 11:                                  | DISCLOSURES ABOUT MARKET RISK                                                                                                                                                                                               
|ITEM 12:                                  | DESCRIPTION OF OTHER SECURITIES                                                                                                                                                                                             
|ITEM 13:                                  | DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES                                                                                                                                                                              
|ITEM 14:                                  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS                                                                                                                                                
|ITEM 15:                                  | CONTROLS AND PROCEDURES                                                                                                                                                                                                     
|ITEM 16:                                  | AUDIT COMMITTEE FINANCIAL EXPERT; CODE OF ETHICS; PRINCIPAL 
ACCOUNTANT FEES  AND SERVICES; EXEMPTIONS FROM LISTING 
STANDARDS FOR AUDIT COMMITTEES; PURCHASEES OF EQUTY SECURITIES BY 
THE ISSUER AND AFFILIATED PURCHASERS
|ITEM 17:                                  | FINANCIAL STATEMENTS                                                                                                                                                                                                        
|ITEM 18:                                  | FINANCIAL STATEMENTS                                                                                                                                                                                                        
|ITEM 19:                                  | EXHIBITS                                                                                                                                                                                                                    
|SIGNATURE                                 |                                                                                                                                                                                                                             

---

# NOTE REGARDING FORWARD
LOOKING STATEMENTS

This report contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934
concerning plans for the properties, operations and other matters of White Knight
Resources Ltd. These statements relate to analyses and other information that are based on
forecasts of future results, estimates of amounts not yet determinable and assumptions of
management. In this Annual Report, unless the context otherwise requires, the terms
White Knight, Company, Issuer, Registrant
and we refer collectively to White Knight Resources Ltd. and its subsidiaries.

Statements concerning reserves, if
any, and mineral resource estimates may also be deemed to constitute forward-looking
statements to the extent that they involve estimates of the mineralization that will be
encountered if the property is developed, and in the case of mineral reserves, such
statements reflect the conclusion based on certain assumptions that the mineral deposit
can be economically exploited. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words or phrases such as
expects or does not expect, is expected,
anticipates or does not anticipate, plans,
estimates or intends, or stating that certain actions, events or
results may, could, would, might or
will be taken, occur or be achieved) are not statements of historical fact and
may be forward-looking statements. Forward-looking statements are subject to a
variety of risks and uncertainties, which could cause actual events or results to differ
from those reflected in the forward-looking statements, including, without limitation:

| |  |  | Risks
related to gold price and other commodity price fluctuations;
| | - |  | -------------------------------------------------------------------

| |  |  | Risks
and  uncertainties  relating to the  interpretation of drill results,  and the geology,
 grade and continuity of mineral                deposits;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Risks
related to the inherent  uncertainty  of production  and cost  estimates  and the
 potential  for  unexpected  costs and                expenses;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Results
of initial feasibility, prefeasibility and feasibility studies, and the possibility that
future exploration, development or mining results will not be consistent with the Companys
expectations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Mining
and development risks, including risks related to accidents, equipment breakdowns, labour
disputes or other unanticipated difficulties with or interruptions in production;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
potential for delays in exploration or development activities or the completion of
feasibility studies;
| | - |  | -----------------------------------------------------------------------------------------------------------

| |  |  | The
uncertainty of profitability based upon the Company's history of losses;
| | - |  | ----------------------------------------------------------------------------

| |  |  | Risks
related to failure to obtain adequate financing on a timely basis and on acceptable terms;
| | - |  | ------------------------------------------------------------------------------------------------

| |  |  | Risks
related to environmental regulation and liability;
| | - |  | --------------------------------------------------------

| |  |  | Risks
related to hedging activities;
| | - |  | ------------------------------------

| |  |  | Political
and regulatory risks associated with mining and exploration; and
| | - |  | --------------------------------------------------------------------------

| |  |  | Other
risks and uncertainties related to the Companys prospects, properties and business
strategy.
| | - |  | ---------------------------------------------------------------------------------------------------

Some of the important risks and uncertainties
that could affect forward looking statements are described in this Annual Report under
Item 3 D.  Risk Factors. Should one or more of these risks and uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements. Forward looking statements
are made based on managements beliefs, estimates and opinions on the date the
statements are made and the Company undertakes no obligation to update forward-looking
statements if these beliefs, estimates and opinions or other circumstances should change.
Investors are cautioned against attributing undue certainty to forward-looking statements.

# GLOSSARY OF TERMS

The following terms have the
following meanings in this Annual Report on Form 20-F

|Adit | A
horizontal or nearly horizontal tunnel made for exploration or mining with one opening.
|---- | -----------------------------------------------------------------------------------------

|Alluvial | Material deposited by the action of running water.
|-------- | --------------------------------------------------

|Alteration | Any
change in the mineral composition of a rock brought about by physical or chemical means.
|---------- | --------------------------------------------------------------------------------------------

|Argillization | Alteration
of the rock which produces clay minerals.
|------------- | ----------------------------------------------------

|Audiomagnetotelluric | Geophysical
technique which measures variations in the earths own electromagnetic field.
|-------------------- | -----------------------------------------------------------------------------------------

|Au | Gold
|-- | ----

2

---

|Barite | Barium sulphate
|------ | ---------------

|Basalt | A
general term for dark-colored mafic igneous rocks, commonly extrusive but locally
intrusive.
|------ | ----------------------------------------------------------------------------------------------

|Bioclastic
Turbidites | Submarine debris flows.
|--------------------- | -----------------------

|BLM | Bureau of Land Management of the State of Nevada.
|--- | -------------------------------------------------

|Breccia | A
rock in which angular fragments are surrounded by a mass of fine-grained matrix.
|------- | ----------------------------------------------------------------------------------

|Carbonate | A
sediment formed by the organic or inorganic precipitation from aqueous solution of
carbonates of calcium, magnesium, or iron; e.g., limestone and dolomite.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|Chert | A
hard, dense, sedimentary rock, consisting primarily of cryptocrystaline quartz.
|----- | ---------------------------------------------------------------------------------

|CSAMT | Controlled
Source Audio Magnetotelluric  geophysical method which measures the decay of an
induced electromagnetic field.
|----- | --------------------------------------------------------------------------------------------------------------------------

|Devonian | Geologic
era 360 million years to 410 million years.
|-------- | ----------------------------------------------------

|Dolomite | A
carbonate sedimentary rock consisting of carbonate and magnesium. Often associated with
and interbedded with limestone.
|-------- | -------------------------------------------------------------------------------------------------------------------------

|Embayment | Indentation in the profile of a coastline.
|--------- | ------------------------------------------

|Facies | Environment
in which a certain sedimentary rock unit is deposited.
|------ | ------------------------------------------------------------------

|Felsic | Intrusive
or volcanic rock with a high silica content.
|------ | ------------------------------------------------------

|g/t | Grams per metric tonne.
|--- | -----------------------

|Geophysical
 Survey | A scientific method of prospecting that measures the physical properties
of rock formations. Common properties investigated include magnetism, specific gravity,
electrical conductivity and radioactivity.
|------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Greenstone | Metamorphosed intermediate to basic volcanics.
|---------- | ----------------------------------------------

|Hematite | An
oxide of iron, and one of irons most common ore minerals.
|-------- | -------------------------------------------------------------

|Horst | A
relatively uplifted rock unit or block that is bounded by faults on its long sides.
|----- | -------------------------------------------------------------------------------------

|Hydrothermal | The
products or the actions of heated waters in a rock mass such as a mineral deposit
precipitating from a hot solution.
|------------ | ------------------------------------------------------------------------------------------------------------------------

|Induced
Polarization | Geophysical exploration method which measures decay of an induced charge.
|-------------------- | -------------------------------------------------------------------------

|Jasperiod | A
dense, usually gray, siliceous rock which contains quartz instead of limestone or
dolomite.
|--------- | ---------------------------------------------------------------------------------------------

|Lower-plate | Generally
refers to the eastern assemblage of northeastern Nevada.
|----------- | ------------------------------------------------------------------

|Magnetotelluric
Survey | An electromagnetic survey in which natural electric and magnetic fields are
measured.
|---------------------- | -------------------------------------------------------------------------------------

|Miocene | Geologic
era 23.7 Million years to 6.2 million years.
|------- | -----------------------------------------------------

|Micritic | Fine-grained carbonate rock.
|-------- | ----------------------------

|NSR | Net
Smelter Royalty, or, the amount payable from the precious metal produced by the mine
after smeltering has removed most of the impurities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|Opt | Ounce per ton.
|--- | --------------

|Paleozoic | Geologic
era 570 million years to 245 million years.
|--------- | ----------------------------------------------------

3

---

|Pod | A
roughly cylindrically-shaped body of ore that decreases at the ends.
|--- | ----------------------------------------------------------------------

|QP | Qualified
Person as defined by National Instrument 43-101.
|-- | ----------------------------------------------------------

|Quarternary | The
period of Earths history from about 2 million years ago to the present; also, the
rocks and deposits of that age.
|----------- | ----------------------------------------------------------------------------------------------------------------------

|Refractory | A
type of ore which it is difficult or expensive to treat to release or recover its
valuable minerals.
|---------- | ------------------------------------------------------------------------------------------------------

|Rhyolite | A
group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow
texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline
groundmass; also, any rock in that group; the extrusive equivalent of granite.
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Sediments | Solid
fragmental material that originates from weathering of rocks and is transported or
deposited by air, water, or ice, or that accumulates by other natural agents, such as
chemical precipitation from solution or secretion by organisms, and that forms in layers
on the Earths surface at ordinary temperatures in a loose, unconsolidated form;
e.g., sand, gravel, silt, mud, alluvium.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Siliclastic | Sedimentary
rock with a high silica content.
|----------- | --------------------------------------------

|Silification | The
in situ alteration of a rock, which involves an increase in the proportion of silica
minerals.
|------------ | --------------------------------------------------------------------------------------------------

|Siltstone | An
indurated silt having the texture and composition of shale but lacking its fine
lamination or fissility; a massive mudstone in which the silt predominates over clay.
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Tertiary | Geologic era 57 million years to recent.
|-------- | ----------------------------------------

|Upper-plate | Generally
refers to the western assemblage of northeastern Nevada.
|----------- | ------------------------------------------------------------------

# RESERVE AND RESOURCE
DISCLOSURE

Terms used in this Annual Report
relating to mineral reserves and mineral resources are Canadian mining terms as defined in
accordance with National Instrument 43-101 under the guidelines set out in Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral
Resources and Mineral Reserves Definitions and Guidelines as adopted by the CIM Council.
Under CIM Standards, the terms mineral reserve, proven mineral
reserve, probable mineral reserve, mineral resource,
measured mineral resource, indicated mineral resource and
inferred mineral resource have the following meanings:

|Mineral
 reserve | The term mineral reserve, under CIM Standards, refers to
the economically mineable part of a measured or indicated mineral resource demonstrated
by at least a preliminary feasibility study. The study must include adequate information
on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified. A
mineral reserve includes diluting materials and allowances for losses that might occur
when the material is mined. Under CIM Standards, mineral reserves are categorized as
follows on the basis of the degree of confidence in the estimate of the quantity and
grade of the deposit.
|---------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proven
mineral reserve means, under CIM Standards, for the part of a deposit which is being
mined, or which is being developed and for which there is a detailed mining plan, the
estimated quantity and grade or quality of that part of a measured mineral resource for
which the size, configuration and grade or quality and distribution of values are so well
established, and for which economic viability has been demonstrated by adequate
information on engineering, operating, economic and other relevant factors, so that there
is the highest degree of confidence in the estimate.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Probable
mineral reserve means, under CIM Standards, the estimated quantity and grade or
quality of that part of an indicated mineral resource for which economic viability has
been demonstrated by adequate information on engineering, operating, economic and other
relevant factors, at a confidence level which would serve as a basis for decisions on
major expenditures. The degree of assurance, although lower than that for proven mineral
reserves, is high enough to assume continuity between points of observation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---

|Mineral
 resource | The term mineral resource, under CIM Standards, refers to
a concentration or occurrence of natural, solid, inorganic or fossilized organic material
in or on the Earths crust in such form and quantity and of such a grade or quality
that it has reasonable prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a mineral resource are known, estimated or
interpreted form specific geological evidence and knowledge. Under CIM Standards, mineral
resources are categorized as follows:
|----------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Measured
mineral resourcerefers to that part of a mineral resource for which a quantity grade
or quality, density, shape and physical characteristics are so well established that they
can be estimated with confidence sufficient to allow the appropriate application of
technical and economic parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed and reliable
exploration, sampling and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes that are spaced
closely enough to confirm both geological and grade continuity.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Indicated
mineral resource refers to that part of a mineral resource for which quantity grade or
quality, density, shape and physical characteristics can be estimated with a level of
confidence sufficient to allow the appropriate application of technical and economic
parameters to support mine planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely enough for geological
and grade continuity to be reasonably assumed.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inferred
mineral resource refers to that part of a mineral resource for which quantity and
grade or quality can be estimated on the basis of geological evidence and limited
sampling and reasonably assumed, but not verified, geological and grade continuity. The
estimate is based on limited information and sampling gathered through appropriate
techniques from locations such as outcrops, trenches, pits, workings and drill holes.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cautionary Note to U.S. Investors
Concerning Estimates of Mineral Reserves and Mineral Resources:

We advise U.S. investors that the definitions of the terms mineral reserve, proven mineral reserve
and probable mineral reserve under CIM Standards are different than the
definitions adopted to the U.S. Securities and Exchange Commission (the SEC)
and applicable to U.S. companies filing reports with the SEC pursuant to Guide 7. It is
the view of the SECs staff that:

| |  |  | A
final or bankable feasibility study is required to meet the
requirements to designate reserves under Guide 7.
| | - |  | -------------------------------------------------------------------------------------------------------------------

| |  |  | A
historic three year average price is to be used in any reserve or cash flow analysis to
designate reserves.
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | To
meet the legal part of the reserve definition, the primary environmental
analysis or document should have been submitted to governmental authorities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, while the terms
mineral resource, measured mineral resource, indicated
mineral resource, and inferred mineral resource are recognized and
required to be reported by Canadian regulations, the SEC does not recognize them. As such,
information contained in this Annual Report concerning descriptions of mineralization,
resources and reserves under Canadian standards may not be comparable to similar
information made public by U.S. companies subject to the reporting and disclosure
requirements of the SEC. Indicated mineral resource and inferred mineral
resource have a great amount of uncertainty as to their existence and a great
uncertainty as to their economic and legal feasibility. It cannot be assumed that all or
any part of an indicated mineral resource or inferred mineral
resource will ever be upgraded to a higher category. U.S. investors are cautioned
not to assume that any part or all of an inferred resource exists, or is economically or
legally mineable.

# METRIC EQUIVALENTS

For ease of reference, the following
factors for converting metric measurements into imperial equivalents are provided:

|To Convert from Metric | To Imperial | Multiply by       
|---------------------- | ----------- | ------------------
|Hectares               |             | Acres             
|Meters                 |             | Feet (ft.)        
|Kilometers (km)        |             | Miles             
|Tonnes                 |             | Tons (2000 pounds)
|Grams/tonne            |             | Ounces (troy/ton) 

5

---

# ITEM 1:    IDENTITY OF
OFFICERS AND DIRECTORS

Not Applicable.

# ITEM 2:    OFFER STATISTICS
AND EXPECTED TIMETABLE

Not Applicable.

# ITEM 3:    KEY INFORMATION

# 3 A.    SELECTED FINANCIAL
DATA

The selected financial data of the
Company for the Years Ended June 30, 2005, 2004 and 2003 were derived from the
consolidated financial statements of the Company that were audited by Davidson &
Company, Chartered Accountants (Davidson & Company), as indicated in their
audit report which is included elsewhere in this Annual Report. The selected financial
data of the Company for the Years Ended June 30, 2002 and 2001 was derived from the
consolidated financial statements of the Company that were audited by Davidson &
Company; these consolidated financial statements are not included herein.

The selected financial data should be
read in conjunction with the consolidated financial statements and other financial
information included elsewhere in the Annual Report.

The Company has not declared any
dividends on its common shares since incorporation and does not anticipate that it will do
so in the foreseeable future. The present policy of the Company is to retain any future
earnings for use in its operations and the expansion of its business.

The following table is derived from
the consolidated financial statements of the Company, which have been prepared in
accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application
of which, in the case of the Company, conforms in all material respects for the years
presented with US GAAP, except as disclosed in Note 15 to the consolidated financial
statements.

In this Annual Report, unless
otherwise specified, all dollar amounts are expressed in Canadian Dollars (CAD$).

|                           | Year
Ended
6/30/05 | Year
Ended
6/30/04 | Year
Ended
6/30/03 | Year
Ended
6/30/02 | Year
Ended
6/30/01
|-------------------------- | ------------------ | ------------------ | ------------------ | ------------------ | ------------------
|Revenue                    |                    | $          0       |                    | $          0       |                   
|Net Loss                   |                    | (1,063             | )                  | (1,664             | )                 
|Net Loss Per Share         |                    | (0.02              | )                  | (0.04              | )                 
|Dividends Per Share        |                    | 0                  |                    | 0                  |                   
|Weighted Avg. Shares (000) |                    | 53,091             |                    | 39,038             |                   

|                           | As at
6/30/05 | As at
6/30/04 | As at
6/30/03 | As at
6/30/02 | As at
6/30/01
|-------------------------- | ------------- | ------------- | ------------- | ------------- | -------------
|Working Capital            |               | 11,216        |               | 9,804         |              
|Mineral Property Interests |               | 2,456         |               | 1,754         |              
|Deferred Exploration Costs |               | 1,509         |               | 733           |              
|Long-Term Debt             |               | 0             |               | 0             |              
|Shareholders' Equity       |               | 15,517        |               | 12,590        |              
|Total Assets               |               | 15,697        |               | 12,720        |              

6

---

Had the consolidated financial
statements of the Company been prepared in accordance with U.S. GAAP, certain selected
financial data would have been reported as follows, (CAD$ in 000 except per share
amounts).

|                     | Year
Ended
6/30/05 | Year
Ended
6/30/04 | Year
Ended
6/30/03 | Year
Ended
6/30/02 | Year
Ended
6/30/01
|-------------------- | ------------------ | ------------------ | ------------------ | ------------------ | ------------------
|Loss Per Share       |                    | (0.05              | )                  | (0.07              | )                 
|Weighted Avg. Shares |                    | 53,091             |                    | 39,038             |                   
|Shareholders' Equity |                    | 11,588             |                    | 10,102             |                   

|                           | As at
6/30/05 | As at
6/30/04 | As at
6/30/03 | As at
6/30/02 | As at
6/30/01
|-------------------------- | ------------- | ------------- | ------------- | ------------- | -------------
|Deferred Exploration Costs |               | 0             |               | 0             |              
|Total Assets               |               | 11,768        |               | 10,232        |              

The Government of Canada permits a
floating exchange rate to determine the value of the CAD$ against the U.S. Dollar (US$).

The following table sets forth the high
and low rate of exchange for the CAD$ for each month during the previous six months, and
for the five most recent fiscal years of the Company. The average rate for each such
fiscal year is calculated using the average of the rate of exchange on the last day of
each month during the year.

For purposes of this table, the rate
of exchange means the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York. The
table sets forth the number of CAD$ required under that formula to buy one US$.

Canadian Dollar/US Dollar

|                         | Average
|------------------------ | -------
|Year Ended June 30, 2005 |        
|Year Ended June 30, 2004 |        
|Year Ended June 30, 2003 |        
|Year Ended June 30, 2002 |        
|Year Ended June 30, 2001 |        

|               | High | Low   
|-------------- | ---- | ------
|November 2005  |      | 1.1960
|October 2005   |      | 1.1887
|September 2005 |      | 1.1880
|August 2005    |      | 1.2185
|July 2005      |      | 1.2437
|June 2005      |      | 1.2578

On December 16, 2005, the rate of
exchange was US$1.00 = CAD$1.156.

# 3 B.    CAPITALIZATION AND
INDEBTEDNESS

Not Applicable.

# 3 C.    REASONS FOR THE
OFFER AND USE OF PROCEEDS

Not Applicable.

7

---

# 3 D.   RISK FACTORS

An investment in the common shares of
the Company involves a high degree of risk and must be considered highly speculative due
to the nature of the Companys business and the present stage of exploration and
development of its mineral resource properties. In particular, the following risk factors
apply:

# Risks Relating to Our
Business and Industry

We have a history of
losses, and we expect to incur losses in the future

The Company has no mineral producing
properties and no operating revenues. The Company has had a history of losses and there is
no assurance that it can generate operating revenues or reach profitability in the future.
The Company could require significant additional funding to meet its business objectives.

Mineral exploration is
speculative and frequently unsuccessful

Resource exploration is a speculative
business, characterized by a number of significant risks including, among other things,
unprofitable efforts resulting not only from the failure to discover resource deposits but
from finding resource deposits which, though present, are insufficient in quantity and
quality to return a profit from production. The marketability of resources acquired or
discovered by the Company may be affected by numerous factors which are beyond the control
of the Company and which cannot be accurately predicted, such as market fluctuations, the
proximity and capacity of refining facilities, resource markets and processing equipment,
and such other factors as government regulations, including regulations relating to
royalties, allowable production, importing and exporting of minerals, and environment
protection, the combination of which factors may result in the Company not receiving an
adequate return on investment capital.

The Company is at the exploration
stage on all of its properties and substantial additional work will be required in order
to determine if any economic deposits occur on the Companys properties. Resource
exploration is highly risky, and most exploration properties do not contain any economic
deposits of minerals. If a property is determined to not contain any economic reserves of
minerals, the entire amount spent on exploration will be lost.

Despite exploration work on its
mineral claims, no known bodies of commercial ore have been established on any of the
Companys resource properties. Finding resource deposits is dependent on a number of
factors, not the least of which is the technical skill of exploration personnel involved.
Even in the event commercial quantities of resources are discovered, the exploration
properties might not be brought into a state of commercial production. The commercial
viability of a resource deposit once discovered is also dependent on a number of factors,
some of which are particular attributes of the deposit, such as size, grade and proximity
to infrastructure, as well as commodity prices. Most of these factors are beyond the
control of the entity conducting such resource exploration. The Company is an exploration
stage company with no history of pre-tax profit and no income from its operations. Even if
the Companys properties are brought into production, operations may not be
profitable.

We could be harmed by a
decline in gold or other metal prices

The economics of developing metal and
mineral properties are affected by many factors including, without limitation, the cost of
operations, variations in the grade of ore or resource mined and the price of such
resources. Depending on the price of gold and other metals, the Company may determine that
it is impractical to commence or continue commercial production. The prices of gold and
other metals have fluctuated in recent years.

Since the Companys properties
are gold prospects, the prices of gold and other metals significantly affect the
Companys ability to explore and develop its properties, and to obtain financing and
its future prospects generally. The prices of gold and other metals are affected by
several factors beyond the control of the Company, including, without limitation,
international economic and political trends, expectations of inflation, interest rates and
global or regional consumption patterns, speculative activities, increased production due
to improved mining and production methods, and changes in primary production capacity and
utilization and in the recycling of secondary material. There can be no assurance that the
prices of gold will remain stable or that such prices will be at levels that will make it
feasible to continue the Companys exploration activities, or, if applicable, begin
development of its properties or commence or, if commenced, continue commercial
production.

The titles to some of our
properties may be uncertain or defective, or we may lose rights to properties if we fail
to meet payment requirements

Certain of our mineral rights consist
of unpatented mining claims created and maintained in accordance with the U.S.
General Mining Law of 1872. Unpatented mining claims are unique property interests granted
in lands owned by the U.S. federal government. No land ownership is conveyed to the
holders of the claims. Unpatented mining claims are generally

8

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considered to be subject to greater
title risk than other real property interests because the validity of unpatented mining
claims is often uncertain. This uncertainty arises, in part, out of the complex federal
and state laws and regulations that supplement the General Mining Law. Also, unpatented
mining claims and related rights, including rights to use the surface, are subject to
possible challenges by third parties or contests by the federal government. The validity
of an unpatented mining claim, in terms of both its location and its maintenance, is
dependent on strict compliance with a complex body of federal and state statutory and
decisional law. In addition, there are few public records that definitively control the
issues of validity and ownership of unpatented mining claims. In recent years, the U.S.
Congress has considered a number of proposed amendments to the General Mining Law.
Although no such legislation has been adopted to date, there can be no assurance that such
legislation will not be adopted in the future. If ever adopted, such legislation could,
among other things, impose royalties on gold production from unpatented mining claims
located on federal lands or impose fees on production from patented mining claims. If such
legislation is ever adopted, it could have an adverse impact on earnings from our
operations, could reduce estimates of our reserves and could curtail our future
exploration and development activity on federal lands or patented claims.

We hold rights in certain of our
properties pursuant to unpatented mining claims, leaseholds, joint ventures, purchase
option agreements and other rights which require the payment of maintenance fees, rents,
or purchase price installments, exploration expenditures, or other fees. If we fail to
make these payments when they are due, our rights to the property may lapse. There can be
no assurance that we will always make payments by the requisite payment dates. There can
be no assurance that we will be able to meet any or all of the development or production
schedules. Our ability to transfer or sell our rights to some of our mineral properties
requires government approvals or third party consents, which may not be granted.

While we have no reason to believe
that the existence and extent of any of our property rights are in doubt, we have done
only a preliminary legal survey of the boundaries of some of our properties, and
therefore, their existence and area could be in doubt. We have not obtained formal title
reports on any of our properties and title may be in doubt. If title is disputed, we will
have to defend our ownership through the courts. In the event of an adverse judgment, we
would lose our property rights.

We may be unable to comply with
the substantial governmental regulation to which our business is subject

The Companys exploration
operations are affected to varying degrees by government regulations relating to resource
operations, the acquisition of land, pollution control and environmental protection,
safety, production and expropriation of property. Changes in these regulations or in their
application are beyond the control of the Company and may adversely affect its operations,
business and results of operations. Failure to comply with the conditions set out in any
permit or failure to comply with the applicable statutes and regulations may result in
orders to cease or curtail operations or to install additional equipment. The Company may
be required to compensate those suffering loss or damage by reason of its operating or
exploration activities. Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price controls, export controls,
foreign exchange controls, income taxes, expropriation of property, environmental
legislation and mine safety.

On the Federal and State of Nevada
level, the Company must comply with exploration permitting requirements which require
sound operating and reclamation plans to be approved by the applicable government body
prior to the start of exploration. Depending upon the type and extent of the exploration
activities, the Company may be required to post reclamation bonds and/or assurances that
the affected areas will be reclaimed. The Company has posted bonds with various government
bodies for exploration work on several of its properties, but if the reclamation requires
funds in addition to those already allocated, the Company could be forced to pay for the
extra work and it could have a significant negative effect upon the Companys
financial position and operations.

In connection with its operations and
properties, the Company is subject to extensive and changing environmental legislation,
regulation and actions. The Company cannot predict what environmental legislation,
regulation or policy will be enacted or adopted in the future or how future laws and
regulations will be administered or interpreted. The recent trend in environmental
legislation and regulation generally is toward stricter standards and this trend is likely
to continue in the future. The recent trend includes, without limitation, laws and
regulations relating to air and water quality, mine reclamation, waste handling and
disposal, the protection of certain species and the preservation of certain lands. These
regulations may require obtaining permits or other authorizations for certain activities.
These laws and regulations may also limit or prohibit activities on certain lands lying
within wetland areas, area providing for habitat for certain species or other protected
areas. Compliance with more stringent laws and regulations, as well as potentially more
vigorous enforcement policies or stricter interpretation of existing laws, may necessitate
significant capital outlays, may materially affect the Companys results of
operations and business, or may cause material changes or delays in the Companys
intended activities.

9

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We rely on key management
personnel

The success of the operations and
activities of the Company is dependent to a significant extent on the efforts and
abilities of its management team. See Item 6  Directors, Senior Management and
Employees for details of Companys current management. Investors must be willing to
rely to a significant extent on their discretion and judgment. The Company does not
maintain key employee insurance on any of its employees.

We face strong competition from
other mining companies for the acquisition of new properties

The Company will be required to
compete in the future directly with other corporations that may have greater resources.
Such corporations could outbid the Company for potential projects or produce commodities
at lower costs, which would have a negative effect on the Companys operations.

Currency fluctuations may
affect the costs of doing business

The Companys activities are
currently located in Canada and the United States. Any appreciation of the US$ could
increase the Companys cost of doing business in the United States. The Company does
not utilize hedging programs to any degree to mitigate the effect of currency movements.

Our insurance coverage
may be inadequate

The mining industry is subject to
significant risks that could result in:

| |  | Damage
to or destruction of property and facilities;
|- |  | ----------------------------------------------------

| |  | Personal
injury or death;
|- |  | -------------------------

| |  | Environmental
damage and pollution; and
|- |  | ---------------------------------------

| |  | Expropriation
of assets and loss of title to mining claims.
|- |  | -----------------------------------------------------------

While where applicable the Company
has purchased property and liability insurance that it believes is appropriate for the
level of risk incurred, it does not carry insurance for political risk, nor environmental
damage or pollution because such coverage cannot be purchased at reasonable costs. This
lack of insurance coverage could result in material economic harm to the Company if a
significant claim against the Company should occur.

Our directors and
officers may have conflicts of interest

The Companys directors and
officers may serve as directors or officers of other resource 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.
From time to time several companies may participate in the acquisition, exploration and
development of natural resource properties thereby allowing for their participation in
larger programs, permitting involvement in a greater number of programs and reducing
financial exposure in respect of any one program. It may also occur that a particular
company will assign all or a portion of its interest in a particular program to another of
these companies due to the financial position of the company making the assignment. In
accordance with the laws of the British Columbia, 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. See Item
6.

We will require additional
financing, which may not be available on favorable terms, or at all

While the Company believes it has
sufficient funds to undertake its planned current exploration projects, future exploration
will require additional funds. The exploration of the Companys mineral properties
is, therefore, dependent upon the Companys ability to obtain financing through the
joint venturing of projects, debt financing, equity financing or other means. Such sources
of financing may not be available on acceptable terms, if at all. Failure to obtain such
financing may result in delay or indefinite postponement of exploration work on the
Companys mineral properties, as well as the possible loss of such properties. Any
transaction involving the issuance of previously authorized but unissued common shares or
securities convertible into common shares could result in dilution, possibly substantial,
to present and prospective holders of common shares. These financings may be on terms less
favorable to the Company than those obtained previously.

10

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# Risks Relating to an
Investment in Our Securities

The market price of our securities
may be volatile

The market for the common shares of
the Company may be highly volatile for reasons both related to the performance of the
Company or events pertaining to the industry (ie, gold exploration/commodity
prices/accidents) as well as factors unrelated to the Company or its industry. In
particular, market demand for products incorporating minerals in their manufacture
fluctuates from one business cycle to the next, resulting in change of demand for the
mineral and an attendant change in the price for the mineral. The Companys common
shares can be expected to be subject to volatility in both price and volume arising from
market expectations, announcements and press releases regarding the Companys
business, and changes in estimates and evaluations by securities analysts or other events
or factors. In recent years the securities markets in the United States and Canada have
experienced a high level of price and volume volatility, and the market price of
securities of many companies, particularly small-capitalization companies such as the
Company, have experienced wide fluctuations that have not necessarily been related to the
operations, performances, underlying asset values, or prospects of such companies. For
these reasons, the price of the Companys common shares can also be expected to be
subject to volatility resulting from purely market forces over which the Company will have
no control. Further, despite the existence of a market for trading the Companys
common shares in Canada, shareholders of the Company may be unable to sell significant
quantities of common shares in the public trading markets without a significant reduction
in the share price.

There may be certain tax
risks associated with investments in our company

The Company could be classified as a
Passive Foreign Investment Company (PFIC) under the United States tax code. If
the Company is declared a PFIC, then owners of the Companys common shares who are
U.S. taxpayers generally will be required to treat any so-called excess
distribution received on its common shares, or any gain realized upon a disposition
of common shares, as ordinary income and to pay an interest charge on a portion of such
distribution or gain, unless the taxpayer makes a qualified electing fund
(QEF) election or a mark-to-market election with respect to the Companys
shares. A U.S. taxpayer who makes a QEF election generally must report on a current basis
its share of the Companys net capital gain and ordinary earnings for any year in
which the Company is classified as a PFIC, whether or not the Company distributes any
amounts to its shareholders.

You could have difficulty or be
unable to enforce certain civil liabilities against us and certain of our directors and
officers

It may be difficult to bring and
enforce suits against the Company. The Company is a corporation incorporated in Canada
under the laws of British Columbia. Most of the Companys directors and officers are
residents of Canada and certain of the Companys assets are located outside of the
United States. Consequently, it may be difficult for United States investors to effect
service of process in the United States upon those directors or officers who are not
residents of the United States, or to realize in the United States upon judgments of
United States courts predicated upon civil liabilities under United States securities
laws.. There is substantial doubt whether an original action could be brought successfully
in Canada against any of such persons or the Company predicated solely upon such civil
liabilities under the United States laws. The Company also has indemnity agreements with
all of its officers and directors which would likely cause further difficulty in the
enforcement of any judgment against those persons and the Company maintains no liability
insurance for its officers and directors.

Brokers may be discouraged from
engaging in transactions in our securities because it is a penny stock

Rules 15g-1 through 15g-9 promulgated
under the Securities Exchange Act of 1934, as amended, impose sales practice and
disclosure requirements on NASD broker-dealers who make a market in a penny
stock. A penny stock generally includes any non-NASDAQ equity security that has a
market price of less than $5.00 per share. The additional sales practice and disclosure
requirements imposed upon broker-dealers may discourage broker-dealers from effecting
transactions in the Companys shares, which could severely limit the market liquidity
of the shares and impede the sale of the Companys shares in the secondary market.

Under the penny stock regulations, a
broker-dealer selling penny stock to anyone other than an established customer or
accredited investor (generally, an individual with net worth in excess of
US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or
her spouse) must make a special suitability determination for the purchaser and must
receive the purchasers written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt.

In addition, the penny stock
regulations require the broker-dealer to deliver, prior to any transaction involving a
penny stock, a disclosure schedule prepared by the US Securities and Exchange Commission
relating to the penny stock market, unless the broker-dealer or the transaction is
otherwise exempt. A broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the securities.
Finally, a broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customers account and
information with respect to the limited market in penny stocks.

11

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# ITEM 4:    INFORMATION ON
THE COMPANY

# 4 A.    HISTORY AND
DEVELOPMENT OF THE COMPANY

The legal and commercial name of the
Company is White Knight Resources Ltd.

The Company was incorporated under
the Company Act of British Columbia under the name White Knight Resources Ltd. on December
18, 1986. The Companys articles were amended on January 31, 1995 to increase the
authorized share capital from 10,000,000 common shares to 100,000,000 common shares
without par value.

On March 29, 2004, the British
Columbia legislature enacted the Business Corporations Act(the New
Act) and repealed the former act, which previously governed the Company. The New Act
removed many of the restrictions contained in the former act, including restrictions on
the residency of directors, the place of annual general meetings and limits on authorized
share capital. The New Act also uses new forms and terminology. Under the New Act, every
company incorporated, amalgamated or continued under the former act must complete a
mandatory transition rollover under the New Act to substitute a Notice of Articles for its
Memorandum within two years of March 29, 2004, after which existing articles could be
altered to take advantage of new provisions contained in the New Act. Under the New Act,
the directors of the Company were permitted to approve and complete this mandatory
transition rollover, and accordingly the Company filed a transition application with the
Registrar of Companies effective June 20, 2005. At an annual general meeting held on
November 26, 2005, the Companys shareholders approved, by a three-quarter majority
vote cast by those shareholders of the Company who, being entitled to do so, vote in
person or by proxy at the Meeting in respect of such resolutions, the removal of
pre-existing company provisions that applied to the Company relating to restrictions in
the former act and no longer required under the New Act, and certain amendments to its
Notice of Articles and to its authorized share capital. In addition, the shareholders
approved new articles (the New Articles) to bring the Companys charter
documents into line with the New Act and, as permitted by the New Act, altered the
authorized capital of the Company from 100,000,000 common shares without par value to an
unlimited number of common shares without par value and the alteration of the Notice of
Articles. The changes were effected and the Registrar issued a new Notice of Articles on
December 21, 2005.

The Company is domiciled in British
Columbia, Canada and is a valid company in good standing and operating under the British
Columbia Corporations Act. The Companys principal place of business is located at
Suite 922, 510 West Hastings Street, Vancouver, British Columbia, Canada, V6B 1L8,
telephone (604) 681-4462, E-Mail info@whiteknightres.com. The Company through its
subsidiary has a technical office in Reno, Nevada.

Since inception, the Company has been
active in the mineral exploration sector. From 1986 to 1993, the Company explored various
properties in British Columbia and the Northwest Territories, Canada. In 1993, the Company
began to acquire gold exploration properties in Nevada and has focused solely on
exploration of properties in Nevada since that time.

See Item 5  Operating and
Financial Review and Prospects for important events that have occurred in the development
of the Companys business during the last full financial year from July 1, 2004 to
June 30, 2005, and subsequent thereto to November 30, 2005 being the latest practicable
date. Also see Item 5 for information on the Companys principal expenditures during
the past three years. There are ongoing drilling programs on the McClusky Pass,
Cottonwood, Gold Pick and Indian Ranch properties. The Company anticipates spending
US$2,000,000 or more during the next year on further exploration of its properties.

# 4 B.    BUSINESS OVERVIEW

The Company is a British Columbia
based mineral resource exploration company engaged, through its subsidiaries, in the
acquisition and exploration of precious metals properties, primarily gold.

All of the Companys mineral
exploration operations are located in the State of Nevada, United States. The Company
continues to explore for projects to acquire in Nevada.

To date, the Company has no revenue
from its operations, nor is it dependent upon any patents, licenses or manufacturing
processes. The Companys operations are dependent upon mineral exploration and mining
rights and claims as well as the terms of option and/or joint venture agreements on those
properties. The Company currently holds interests in 18 properties located in Nevada.

The exploration operations of the
Company are subject to regulation by several government agencies at the Federal, State,
and local levels. These regulations are a fundamental aspect of operations for any
resource company in North America. Management believes it is in compliance with all
current requirements and does not anticipate any significant changes to these regulations
which will have a material effect on the Companys operations.

12

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See Item 3D  Risk Factors, for
a summary of certain risks related to the Companys business and an investment in the
Companys securities.

See Item 4D  Mineral
Properties, for an overview of the Companys properties.

See Item 5  Operating and
Financial Review and Prospects, for an overview of the Companys financial position
and past expenditures.

# 4 C.    ORGANIZATIONAL
STRUCTURE

The following is a listing of the
Companys subsidiaries including name, country of incorporation or residence and the
Companys respective proportion of ownership interest and, if different, proportion
of voting power held.

| | (1) |  | CUN
Minerals, Inc., Nevada, USA, 100% directly owned by the Company.
| | --- |  | --------------------------------------------------------------------

| | (2) |  | White
Knight Gold (U.S.) Inc., Delaware, USA, 100% directly owned by the           Company.
| | --- |  | -------------------------------------------------------------------------------------------

| | (3) |  | Quito
Gold Corporation, Nevada, USA, 100% directly owned by the Company.
| | --- |  | ------------------------------------------------------------------------

# 4 D.    MINERAL PROPERTIES

The following is a description of the
Companys properties and the nature of the Companys interests in such
properties. This Item 4 D. was reviewed and the contents have been verified by the
Companys Qualified Person, John M. Leask, P.Eng.

Indian Ranch Property

The Indian Ranch property (the
Indian Ranch Property) is located in Eureka County, Nevada and consists of 544
unpatented mining claims totaling 10,008 acres. The Company currently has a 75% undivided
interest in the Indian Ranch Property. However, the Companys interest is subject to
an option agreement with Placer Dome U.S. Inc. (Placer Dome) whereupon Placer
Dome can earn up to a 75% interest (thus reducing the Companys interest to 18.75%).
The Indian Ranch Property is without known mineral reserves and is at the exploration
stage. The Companys current efforts are exploratory in nature.



13

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# Acquisition

The Company entered into an option
agreement dated February 10, 1994 with the Damele Family (the Vendor) on the
Indian Ranch Property. The agreement was subsequently amended through 5 separate
amendments with the Vendor. Under the agreement and its amendments, the Company earned a
100% leasehold interest in the Indian Ranch Property by issuing to the Vendor 100,000
common shares and an annual work commitment of 5,000 feet of drilling. The drill
commitment was waived for the year ended February 10, 1996 in consideration of a US$15,000
cash payment. Additionally, the original NSR held by the vendor was amended for
consideration of a US$15,000 cash payment; currently, the vendor retains a 6% NSR, but the
Company may reduce the NSR to 3% in consideration of a US$500,000 payment. The
Companys lease on the Indian Ranch Property extends through February 10, 2014 or for
so long thereafter as exploration, development or mining activity is being conducted on a
continuous annual basis. The Company has met all the required terms under the agreement to
date.

Under an agreement with Chapleau
Resources Ltd. (Chapleau) dated May 26, 1997 and amended June 18, 2001, the
Company granted Chapleau the right to earn an interest in the Indian Ranch Property by
making payments to the Company totaling US$400,000 and incurring exploration expenditures
of US$1,500,000. On June 25, 2001, Chapleau vested a 25% interest, thus reducing the
Companys interest to 75%.

Under an agreement dated March 26,
2003 between the Company, Chapleau and Placer Dome, the Company granted Placer Dome the
right to earn an initial 60% interest in the Indian Ranch Property by paying US$55,000 and
incurring a minimum of US$2,000,000 in work expenditures over a four-year period under the
following schedule:

|Expenditure
        Due Date | Minimum Work
Expenditures (US$)
|---------------------------- | -------------------------------
|March 25, 2004               |                                
|March 25, 2005               |                                
|March 25, 2006               |                                
|March 25, 2007               |                                
|Total                        |                                

Upon vesting its initial 60%
interest, Placer Dome can elect to earn an extra 15% by financing a feasibility study on
the Indian Ranch Property. Placer Dome has met all the required terms under the agreement
to date.

# Location and Access

The Indian Ranch Property lies 10
miles southeast of the Gold Acres-Cortez Window and is located 17 air miles southeast of
the Pipeline/South Pipeline gold mines and 38 air miles northwest of Eureka, Nevada.
Access is achieved via Nevada State Highway 278 south from Carlin for 48 miles, west on
the JD Ranch Road for 4 1/2 miles, south for 12 miles to the Tonkin Ranch site, and then
northwest for 5 miles. The south and central portions of the Indian Ranch Property can be
traversed by unimproved dirt roads, and new roads are planned to provide drilling access
to the north.

# Regional and Property
Geology

The Indian Ranch Property is located
on the Cortez Trend. Lower-plate Paleozoic sediments (the Indian Ranch window)
underlies shallow volcanic and alluvial cover on much of the central and eastern portions
of the Indian Ranch Property. Lower-plate carbonate rocks are not exposed at the surface,
but drilling and mapping thus far indicate that about 10 square miles of the Indian Ranch
Property is underlain by Lower-plate Paleozoic carbonate rocks of the Roberts Mountains
Formation, Rabbit Hill Limestone, Nevada Group, or underlying dolomites of the Hanson
Creek Formation. This covered window of Lower Plate rocks is present in the form of
several uplifted or horsted blocks. Roberts Mountains Formation rocks occur in the window
and have been intersected in drill holes within 35 feet of the surface. Hydrothermal
alteration is present over large areas of the property, and thick (up to 600 feet or more)
zones of intense alteration in the form of silicification, decalcification (sanding), and
argillization are present, as well as amorphous carbon or fine-grained sulfides. Anomalous
gold and associated hydrothermal alteration is present across Indian Ranch in both Upper
and Lower Plate rocks.

# Previous Exploration
History

Prior to the Companys
acquisition of its interest in the Indian Ranch Property, Northern Dynasty Exploration
Ltd. (Northern Dynasty) explored it in 1987. Northern Dynasty prepared a
preliminary geologic map and drilled 4 holes totaling 1,130 feet. Hycroft Resources and
Development Corporation then acquired the property and drilled 90 additional holes from
1988 to 1990 to an average depth of 114 feet. After the Company acquired the Indian Ranch
Property in 1994, exploration was conducted by Delta Gold Mining Corp. (Delta
Gold) under an earn-in joint venture agreement on a combined land package

14

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comprised
of the Indian Ranch Property and the Imperial property. Delta Gold completed an IP survey,
a CSAMT survey,
and drilled 10 holes to an average
depth of 501 feet. This drilling resulted in the discovery of an 80 foot wide zone of gold
mineralization averaging 0.012 oz/ton gold. Delta Gold also intersected a higher-grade
zone of 10 feet averaging 0.22 oz/ton gold. Delta Gold subsequently terminated the
agreement. Under the Chapleau option agreement, 20 holes were drilled during 1997, 12
holes were drilled in 1998, four holes were drilled in 1999, and 11 holes were drilled in
2000 for a total of 45,100 feet in 47 holes. During 1999, a detailed gravity survey and a
soil sampling grid program were also completed. Exploration expenditures under the
Chapleau agreement totaled US$1,500,000.

In 2001, Kennecott Exploration
Company (Kennecott) entered an option agreement with the Company and Chapleau.
Kennecott drilled 11 reverse circulation holes which intersected low-grade gold
mineralization three miles south of the previously identified gold zones. Kennecott
expended US$531,100 before terminating the agreement.

# Current and Planned
Exploration

During the 2005 field season, Placer
Dome executed a three-hole RC drilling program comprising 1,830 metres. As part of this
campaign, Hole PIR 05-10 intersected a broad zone of Carlin-type mineralization grading
0.32 grams/tonne over a thickness of 102 metres which included 9.1 metres grading 1.58
grams/tonne. Placer Dome is currently following up on this discovery with further
drilling.

Slaven Canyon Property

The Slaven Canyon property (the
Slaven Canyon Property) is located in Lander County, Nevada, and totals 6,600 acres.
The Company has a 100% interest in 258 unpatented mining claims comprising 5,174 acres of
the Slaven Canyon Property and has a lease on the remaining 1,426 acres, which are subject
to NSR royalties. The Slaven Canyon Property is without known mineral reserves and is at
the exploration stage. The Companys current efforts are exploratory in nature.



# Acquisition

Since September 2001, the Company has
staked 258 unpatented mining claims comprising 5,174 acres (the Gordo Claims).
Since fiscal 2003, the Company has signed lease agreements on 1,425 acres adjacent to the
Companys staked claims. The leases called for the payment of approximately US$32,430
on signing and escalating lease payments thereafter. The owners retain net smelter returns
ranging from 1⁄2 percent to 31⁄2% with a buy down to 1% for US$1,500,000. 2006
annual holding costs for the property are estimated to be US$81,865, which includes
US$47,418 for the lease payments and US$34,447 in federal and county fees.

15

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# Location and Access

The Slaven Canyon Property is located
in the Northern Shoshone Range, Lander County, Nevada, approximately 14 miles southeast of
Battle Mountain. The Slaven Canyon Property is traversed by numerous unimproved dirt roads
traveling south from Battle Mountain.

# Regional and Property
Geology

Rock units on the Slaven Canyon
Property are dominated by chert, siltstone and limestone of the Ordovician Vinini
Formation and Devonian Slaven Chert, both units of the Upper Plate Roberts Mountains
Allochthon. These units are overlain on the east by Miocene basalt of the Northern Nevada
Rift. Major northeast trending faults cut through the area and are believed to be a
regional control to the localization of gold mineralization. The main zone of gold
mineralization on the property measures about 2400 feet east-west by 300 feet  500
feet north-south. Select drill intercepts include:

|   
|---
|
|   
|60 
|35 
|60 
|100
|40 
|45 
|25 
|   

Mineralization is open on the east
and west end and to some degree down dip. A second area of gold mineralization occurs on
the northern portion of the claims. The primary exploration target is a Carlin-type gold
deposit in Lower-plate carbonate rocks or in carbonate units of the Upper-plate. Select
drill hole intercepts from here include:

|  
|--
|
|  
|25
|25
|10
|  

The zone of mineralization is a
shallow, mostly oxide, shallowly dipping tabular body hosted in Upper-plate siliclastic
rocks. Gold mineralization is probably controlled by a shallow angle thrust fault.
Alteration is dominantly argillization and sanding. Most holes in the vicinity of the main
zone are between 200 feet to 300 feet deep with the deepest being 700 feet.

# Previous Exploration
History

After the discovery of gold-bearing
breccia outcrops, Resource Associates of Alaska (RAA) staked claims at Slaven
Canyon in 1984. RAA conducted geologic mapping, rock and soil sampling, and trenching from
1984 to 1987. Nerco Exploration Company (Nerco) acquired RAA in 1988 and Alta
Gold Company (Alta) joint-ventured the claims with Nerco later that year. Alta
began an aggressive drilling program and completed 59 shallow holes in 1988. An additional
eight holes were drilled in 1989. Cyanide-shake metallurgical tests were conducted in
1990, followed by the drilling of 17 holes in 1991. Uranerz Exploration and Mining Limited
(Uranerz) leased the property in 1991 and completed a 57-hole drilling program
in 1992. Bottle-roll tests were completed in 1993 after which a resource estimate was
completed. Cameco acquired Uranerz in 1994 and terminated the lease. Cyprus Minerals Corp.
(Cyprus) leased the claims from Alta Gold later that year and drilled nine
holes in the northwest part of the property before terminating the lease in 1995.
Following Cyprus withdrawal, Alta Gold retained the claims from 1996 through 1999
but performed no further work on the Slaven Canyon Property. Alta Gold filed for
bankruptcy in 2000 and relinquished the claims shortly thereafter.

# Current and Future
Exploration

Work on the Slaven Canyon Property
during the 2004 and 2005 field seasons included 24 shallow Reverse Circulation holes and
one deep core hole (SL-21). The shallow drilling encountered scattered zones of gold
mineralization in the Upper-plate. Significant gold intercepts from the Reverse
Circulation drill holes are shown in the table below. Drill hole SL-21 intersected a unit
of carbonaceous micritic limestone at a depth of 750 metres (2,460 feet). This carbonate
may be thrust bounded and has strong similarities to eastern assemblage lower plate
carbonate. SL-21 bottomed at a depth of 789 metres. Further drilling is warranted for both
shallow and deep targets.

16

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|                                           
|-------------------------------------------
|Recent Drill Results
Slaven Canyon Property
|                                           
|
|                                           
|SL-5                                       
|incl.                                      
|                                           
|SL-6                                       
|                                           
|SL-10                                      
|                                           
|SL-12                                      
|                                           
|SL-13                                      
|incl.                                      
|                                           
|SL-13                                      
|incl.                                      
|                                           
|SL-14                                      
|                                           
|                                           
|Sl-17                                      
|                                           
|* True widths are unknown                  

Celt Property

The Companys 100% owned Celt
property (the Celt Property) is located in Eureka County, Nevada, and consists
of 608 unpatented mining claims totaling 12,569 acres. Teck Cominco American Incorporated
(TCAI) has an option to earn an initial 51% interest in the Celt Property. The
Celt Property is without known economic mineral reserves and is at the exploration stage.
The Companys current efforts are exploratory in nature.



17

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# Acquisition

The Company has staked 608 unpatented
mining claims located on Bureau of Land Management land since September 2003.

In October 2004, the Company entered
into a Property Acquisition Agreement with TCAI whereby TCAI was granted the option to
earn an initial 51% interest in the Celt Property. The terms of the agreement provide for
exploration expenditures of US$4,000,000 and cash payments of US$750,000 which must be
incurred and paid to the Companys U.S. subsidiary in annual increments prior to
December 31, 2008. TCAI has made a firm commitment to incur US$500,000 in exploration
expenditures by December 31, 2005. Upon TCAI vesting its 51% interest, TCAI and the
Company will form a joint venture to further develop the Celt Property. When the joint
venture completes the earlier of US$8.0 million in expenditures or a preliminary
feasibility study, TCAI will have a one-time option to elect to earn an additional 9%
interest by funding and completing a feasibility study. Upon TCAI earning its additional
interest and the approval of a production plan, the Company will have the option to
request that TCAI arrange financing for the Companys share of the capital costs
required to develop the property. If the Company exercises this option TCAI shall commit
to use its best efforts to arrange or provide project debt financing for not less than 60%
of projected capital costs on a limited recourse basis after technical completion. If
project costs exceed the amount available for debt financing and the parties elect
nonetheless to put the property into production then at the Companys election TCAI
shall also arrange or provide the Companys share of equity financing on a
subordinate loan basis at LIBOR plus 4%.

Under the agreement with TCAI, TCAI
is responsible for all property holding costs during the earn-in period.

# Location and Access

The Celt Property lies along the
southern portion of the Cortez Trend. It is situated along the western edge of the Roberts
Mountains. Access is by a network of all-weather roads.

# Regional and Property
Geology

The Celt Property lies over the
Ordovician Vinini Formation which is dominantly chert and shale, but includes some
limestone and greenstone units. The Celt Property follows more than four miles of strike
length of a north-northwest trending fault zone where anomalous gold and pathfinder
elements occur. The claims were staked to cover the gravel-covered area to the west of the
fault.

# Previous Exploration
History

Gold was discovered in jasperoids
along the eastern edge of the Celt Property in 1972 which led to prospecting and the
staking of blocks of claims between 1972 and 1978. After the discovery of the nearby Gold
Bar deposit in 1984, Atlas Precious Metals (Atlas) staked the entire area, but
the property was not drilled. Cordex Syndicate (Cordex) leased Atlas
claims in the area in 1994. Cordex conducted geologic mapping and grid rock and soil
sampling, and drilled one exploration hole of less than 600 feet along the range front of
the property before dropping the claims.

# Current and Planned
Exploration

During the 2005 field season, TCAI
undertook a program of geological mapping and sampling, infill gravity and Induced
Polarization surveys and Reverse Circulation drilling. To date, the Company has received
results from 26 surface grab samples with gold values ranging from no gold detected to
6.17 grams/tonne. The five highest values were 6.17 grams/tonne, 5.07 grams/tonne, 2.28
grams/tonne, 0.82 grams/tonne and 0.26 grams/tonne.

Cottonwood Property

The Cottonwood property (the
Cottonwood Property) is located in Eureka County, Nevada, and consists of 98
unpatented mining claims totaling 1,885 acres. The Company currently has a 100% interest
in 92 unpatented mining claims and has an option to purchase 100% interest in the other 6
unpatented mining claims. The Cottonwood Property is without known economic mineral
reserves and is at the exploration stage. The Companys current efforts are
exploratory in nature.

18

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# Acquisition

The Company has staked 92 unpatented
mining claims since October 2001. Under an agreement dated February 1, 2002, the Company
has leased from Gregory McN. French (the Jam Vendor) 6 adjacent unpatented
mining claims known as the Jam Claims. Under the agreement, the Company is required make
cash payments and issue common shares to the Jam Vendor under the following schedule:

|Payment
  Due Date                        | Cash Option Payments
    (US Dollars) | Common Share
   Issuances
|----------------------------------------- | ------------------------------------- | -------------------------
|Initial Payment                           |                                       | $1,000 (paid)            
|February 1, 2003                          |                                       | $1,000 (paid)            
|February 1, 2004                          |                                       | $2,000 (paid)            
|February 1, 2005                          |                                       | $2,000 (paid)            
|February 1, 2006                          |                                       | $        3,000           
|February 1, 2007 and each year thereafter |                                       | $        5,000           

The Jam Vendor also retains a NSR on
the Jam Claims which varies by ounces produced and the price of gold. On production
greater than 50,000 ounces but less than 150,000 ounces, the NSR is 4%. For production of
less than 50,000 ounces and greater than 150,000 ounces, the NSR varies from between 1% to
2%, depending upon the price of gold. The Jam Vendor also retains a 1.5% NSR on minerals
other than gold. The Company has the option to acquire the NSR and purchase the Jam Claims
from the Jam Vendor for US$50,000 at any time before the 10th anniversary date
of the lease.

2006 annual holding costs for the
Cottonwood Property are estimated to be US$12,083 for federal and county fees in addition
to the lease payments listed above.

# Location and Access

The Cottonwood Property is located at
the headwaters of Cottonwood Creek in the central Roberts Mountains, approximately 30
miles northwest of the town of Eureka, Nevada. Access is by a network of improved
all-weather roads.

19

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# Regional and Property
Geology

The Cottonwood Property lies on the
Cortez Trend and encompasses a major north-northwest trending window-bounding fault where
it is intersected by a west-northwest trending belt of mineralization which crosses the
Roberts Mountains. The fault places a block of thick Ordovician Vinini Formation on the
west in juxtaposition with Lower Plate Devonian carbonates on the east. Gold bearing
jasperoid is developed on the southeast extension of this window bounding fault.

The Cottonwood Property contains the
Pot Canyon mineralized zone, the French Trail and South French Trail mineralized zones,
and the Wall mineralized zone. The Pot Canyon zone is still open for expansion in two
directions. Significant intercepts from previous drilling at Pot Canyon include:

|      
|------
|
|      
|114-29
|114-34
|114-36
|      

At the South French Trail zone, about
3000 feet north of Gold Canyon, Atlas intersected gold mineralization grading 0.015 opt
gold to 0.044 opt gold over widths of 10 feet to 20 feet in five holes. Follow-up drilling
was not conducted. At the Wall prospect south of Pot Canyon, Barrick intersected 30 feet
of 0.048 opt gold in a window-bounding fault and did no follow-up drilling.

The target is a large Carlin-type
deposit hosted in Devonian carbonate rocks along or east of the major window-bounding
fault. The convergence of the window-bounding fault, the Roberts Mountains thrust fault,
the east-west anticlinal axis, and the west-northwest-trending belt of gold mineralization
produces an ideal exploration setting. Expansion of the Pot Canyon resource and South
French Trail mineralization are also targets.

# Previous Exploration
History

Barite occurrences in the area were
prospected in the late 1970s and in 1980, N.L Baroid Division of N.L. Industries,
Inc. (N.L. Baroid) located claims for barite in the central Cottonwood area.
Prospecting during the gold boom of the early 1980s led to claim groups being
located by Chevron Resources Company (Chevron) in 1980 and by Mapco Minerals
Corporation (Mapco)/Nerco in 1983 in the northern and southern parts of the
Cottonwood area respectively. Chevrons claims lapsed in 1983 and were restaked by
Nerco. ACNC and Phelps Dodge later leased and explored the claims staked by N.L. Baroid
and Nerco. N.L. Baroid discovered the Pot Canyon gold zone in 1985. The property was
acquired by Phelps Dodge in 1986 who continued to explore the property through 1990 until
Atlas acquired their holdings in 1991. Atlas acquired the Nerco claims in 1990. The French
Trail and South French Trail mineralized zones were drilled by Atlas in 1993.

Cordex leased the northern part of
the Cottonwood area in 1995 and drilled a few holes. In 1997, Barrick leased most of
Atlas claims in the area. Barrick drilled eight fairly deep holes in 1998 and
intersected gold mineralization at the Wall prospect. Atlas claims were leased by
Vengold (American Bonanza) in 1999 after Barrick terminated its lease but conducted no
work before relinquishing the property.

# Current and Planned
Exploration

Drilling on the Cottonwood Property
by previous operators identified several gold zones, but little follow-up work was ever
conducted. The Pot Canyon deposit remains open in two directions, and gold mineralization
discovered by drilling the South French Trail and Wall prospect were never followed-up.
The Company is currently drilling on the Cottonwood Property.

Fye Canyon Property

The Fye Canyon property (the
Fye Canyon Property) is located in Eureka County, Nevada and comprises 345
unpatented mining claims on 6,320 acres. The Company currently has a 100% interest,
although TCAI has an option to earn an initial 51% interest. The Fye Canyon Property is
without known economic mineral reserves and is at the exploration stage. The
Companys current efforts are exploratory in nature.

20

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# Acquisition

The Company staked 231 unpatented
mining claims after acquiring 114 unpatented mining claims upon the execution of a mining
lease agreement. Under the terms of the agreement, the Company must pay annual advance
royalty payments starting at US$5,000 upon execution, and increasing by US$5,000 per year
to a maximum of US$50,000 per year. The Company must expend a minimum of US$20,000 on
exploration work on the property per year. The vendor retains a 2% NSR payable on
production up to US$1,000,000 after which it is reduced to 1% to a maximum of
US$5,000,000.

In October 2004, the Company and TCAI
entered into an agreement which granted TCAI an option to earn an initial 51% interest in
the property by making cash payments to the Company totaling US$750,000 and providing
exploration expenditures of US$4,000,000 in annual increments prior to December 31, 2008.
Upon TCAI earning a 51% interest in the property, TCAI and the Company will form a
joint-venture on the Fye Canyon Property. When the joint-venture completes the earlier of
US$8.0 million in expenditures or a preliminary feasibility study, TCAI will have the
one-time option to elect to earn an additional 9% interest (for 60% total) in the property
by funding and completing a feasibility study. Upon TCAI earning its additional interest
and the approval of a production plan, the Company will have the option to request that
TCAI arrange financing for the Companys share of the capital costs required to
develop the Fye Canyon Property. If the Company exercises this option TCAI shall commit to
use its best efforts to arrange or provide project debt financing for not less than 60% of
projected capital costs on a limited recourse basis after technical completion. If project
costs exceed the amount available for debt financing and the parties elect nonetheless to
put the property into production then at the Companys election TCAI shall also
arrange or provide the Companys share of equity financing on a subordinate loan
basis with an interest rate of the London Interbank Offered Rate (LIBOR) plus
4%.

Under the agreement with TCAI, TCAI
is responsible for all property holding costs during the earn-in period.

# Location and Access

The Fye Canyon Property lies on the Cortez
Trend and is adjacent to the Companys Pat Canyon Property to the north. Access is by
a series of all-weather and dirt roads.

# Regional and Property
Geology

The Fye Canyon Property lies along
the southern projection of the north-northwest by south-southeast-trending Cortez fault
zone, just south of a major northeast-trending cross-structure which bounds the northern
edge of Simpson Park Mountains. The claims cover 31⁄2 miles of strike length of this
splayed north-northwest fault system. Upper-plate Ordovician Vinini

21

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Formation crops out in the eastern
part of the block and is overlain by scabs of felsic Tertiary volcanics and thin
Quaternary alluvium in the central area with thicker gravels in the west part.
Intermediate Tertiary volcanics cover the southernmost part of the claim block. The claim
block lies along the projection of Lower-plate carbonate rocks in the Cortez window to the
northwest and the Tonkin window to the southeast. On the property, hematite and barite
veined cherts and siltstones of the Vinini Formation are highly anomalous in both mercury
and arsenic.

# Previous Exploration
History

A number of companies explored
portions of the Fye Canyon claims in the 1980s and 1990s. ECM Inc.
(ECM)/Noranda Inc. (Noranda) staked the Gap claims in 1985;
Noranda drilled 4 shallow (less than 500 ft) holes in 1988; Kennecott drilled 4 holes (500
ft) in 1991; Rio Algom Ltd. leased the claims and drilled 1 hole in 1992; Lac Minerals
Ltd. (Lac) drilled one deep hole (1100 ft) in the northeast corner of the
property in 1995; Placer drilled one hole in 1996; and Aquaterre Mineral Development Ltd.
drilled 2 shallow holes from one pad in 1999. These holes targeted shallow mineralization
based on geochemical anomalies in outcropping Upper-plate rocks and holes terminated in
Vinini Formation.

# Current and Future
Exploration

During the 2005 exploration season,
TCAI undertook additional gravity surveys and drilled several Reverse Circulation holes.
The Company has yet to receive a report detailing this work.

Gold Pick Property

The Companys 100% owned Gold
Pick property (the Gold Pick Property) is located in Eureka County, Nevada,
and consists of 29 unpatented mining claims for 442 acres and patented mining claims (a
patented mining claim is one for which title to the property was transferred
from the U.S. federal government to a private party, in this case the Company) for 156
acres for a total of 598 acres. The Gold Pick Property is without known economic mineral
reserves and is at the exploration stage. The Companys current efforts are
exploratory in nature.



# Acquisition

The Company acquired the unpatented
mining claims and patented mining claims by staking and application since June 2002. 2006
annual holding costs are estimated to be US$3,871 in federal and county fees.

22

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# Location and Access

The Gold Pick Property is located on
the Cortez Trend in the southern Roberts Mountains approximately 30 miles northwest of the
town of Eureka. Access is by all-weather country-maintained roads to the past producing
Gold Bar Mine approximately six miles southwest of the property and then along the Gold
Bar haul road to the Gold Pick Property.

# Regional and Property
Geology

The Gold Pick Property is underlain
by an east-dipping sequence of Devonian carbonate rocks, comprising the Lone Mountain
Dolomite overlain by the McColley Canyon Formation and Denay Formation. Located on the
Gold Pick Property is the past producing Gold Pick Mine, which contains two gold deposits,
the Gold Pick East and Gold Pick West. Also on the Gold Pick Property is a portion of the
formerly producing Gold Ridge gold deposit. All of the known deposits lie along a subtle
east-west anticline, which crosses the Roberts Mountains and provides a regional control
to gold mineralization. Northeast and northwest-trending faults cut the section in the
vicinity of the deposits and provide deposit-scale controls to gold mineralization.

The main Gold Pick East deposit has a
footprint of approximately 1100 feet east-west by 1200 feet north-south. The deposit is
typically 50 feet to 100 feet thick, but can be up to 300 feet thick adjacent to
controlling structures. The southwest extension of the Gold Pick East deposit measures
about 1200 feet in a west-southwest direction and ranges from 75 feet to 200 feet in
width. Within this structurally controlled zone are at least two pods of high-grade
mineralization which include the following drill intercepts:

|      
|------
|
|      
|33-578
|33-570
|33-5  
|33-321
|33-719
|      

Higher-grade pods of gold
mineralization also occur within the main Gold Pick East deposit and include a drill
intercept of 10 feet at 1.20 oz/ton gold beneath the southwest corner of the pit.

The Gold Pick West deposit measures
about 700 feet north-south by 700-800 feet east-west. The deposit contains at least two
pods of +0.20 oz/ton gold mineralization. A third higher-grade pod lies to the east of the
main deposit. The Gold Pick mine consists of two separate open pits: Gold Pick East and
Gold Pick West. Atlas considered mining the high-grade mineralization in the southwest
extension of Gold Pick East by underground mining methods. In the late stages of mining,
an exploration adit was driven to better define reserves in the north wall of the pit and
to define underground reserves in the southwest extension. However, the drift never
reached the southwest zone, and no underground reserves were delineated.

The Gold Pick East and West deposits
have been tested with a total of 877 drill holes. Despite the intensity of drilling,
potential to expand resources remains. The southwest extension zone is open to the
southwest, where it is cut off by a single fence of three drill holes. Beyond that, only a
handful of widely spaced (approx. 300 foot) holes were drilled. The zone could easily
continue beyond the limits of drilling. A fairly high-grade drill intercept (5 ft @ 0.202
oz/ton gold) near the west end of the drilling suggests that the high-grade core of the
zone may extend further to the southwest along the structure. The vast majority of drill
holes have been vertical, which could easily miss high-grade mineralization along
high-angle structures. Potential exists to expand the high-grade portions of the deposit
by drilling angle holes, especially in the area of higher-grade mineralized pods such as
the southwest extension zone. Drilling is also wide-spaced to the northeast of the Gold
Pick East open pit, and good potential remains to expand resources in this direction as
well.

# Previous Exploration
History

After the discovery of the Gold Bar
gold deposit in 1984, Atlas began systematic exploration of the Roberts Mountains.
Gold-mineralized jasperoid was discovered in the Gold Ridge and Gold Pick areas in 1986.
Atlas drilled discovery holes in the Gold Ridge deposit in 1986 and the Gold Pick deposit
in 1987. Open-pit mining of the Gold Ridge deposit commenced in 1991. Approximately 96,000
ounces of gold were produced from the deposit until mining ceased in 1992. The Gold Pick
deposit was mined between 1992 and 1994, with production totaling approximately 48,000
ounces of gold. Vengold Inc. (now American Bonanza) leased the Atlas claim block in 1999.
American Bonanza dropped the claims in the Gold Pick and Gold Ridge areas in September
2001.

# Current and Future
Exploration Plans

Drilling to date during the 2005
exploration season totaled 1,655 metres (5,430 feet) in 10 holes and provided extensions
to the Gold Pick feeder zone to the northwest and southwest. Complete drilling results are
shown in the table below:

23

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True widths are unknown

McClusky Pass Property

The Companys 100% owned
McClusky Pass property (the McClusky Pass Property) consists of 243 unpatented
mining claims totaling 5,174 acres located in Eureka County, Nevada. The McClusky Pass
Property is without known economic mineral reserves and is at the exploration stage. The
Companys current efforts are exploratory in nature.



24

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# Acquisition

The Company acquired the McClusky
Pass Property by staking in September, 2003. 2006 annual holding costs are estimated to be
US$32,440 in federal and county fees.

# Location and Access

The McClusky Pass Property is located
in Eureka County near the intersection of the Roberts and Simpson Park Mountains,
approximately 30 miles northwest of Eureka, Nevada. Access is by way of a series of
improved all weather roads.

# Regional and Property
Geology

The McClusky Pass Property is located
immediately south of the convergence of the north-northeast trending Simpson Park
Mountains and the northwest-trending Roberts Mountains. The two mountain ranges intersect
along a major northwest-trending fault. This fault zone is postulated to be a major
regional control of gold mineralization within the Cortez Trend.

The McClusky Pass Property is
centered on the intersection of this northwest fault zone with a major northeast-trending
cross-structure. The northeast-trending structural zone is characterized by a broad
northeast-trending magnetic low, interpreted to reflect a zone of magnetic destruction.
The zone is also manifest as a northeast-trending gravel-covered embayment into the range.
The project area is nearly completely covered by Quaternary and Tertiary gravels which
fill the northwest arm of Kobeh Valley. Intermediate-composition Tertiary volcanics crop
out in the north central and northeast parts of the property. Thickness of the gravel
deposits is unknown but regional gravity data suggests that the basin becomes shallower to
the north towards McClusky Pass. Tertiary volcanic rocks in the northeast portion of the
property are bleached and argillized, suggesting the possible presence of a hydrothermal
system.

# Previous Exploration
History

Sections of the McClusky Pass
Property were explored by different exploration companies between 1984 and 1995. Atlas
staked claims covering the eastern portion of the current property in 1984 as part of its
larger Gold Bar claim block. Atlas focused its exploration efforts on areas with outcrop
and thus conducted little work in the area of the property, although a few shallow (200
feet or less) holes may have been drilled. In 1988, ECM staked claims over the western
portion of the McClusky area immediately to the west of Atlas claims. ECM drilled
four or five shallow (500 feet deep) holes in the north central part of the claim block,
east of McClusky Pass in 1990. ECM dropped its claims and the area was staked by MBM
Consultants in 1994. Battle Mountain Exploration Company leased the claims and drilled an
unknown number of holes in the north central portion of the claim block in 1995. All
previous claims lapsed and the Company staked the property in September 2003.

# Current and Future
Exploration

In 2005, the Company executed a
gravity and magnetotelluric survey which was designed and supervised by Hans Rasmussen,
the Companys chief geophysicist. Drilling is currently ongoing.

New Pass Property

The New Pass property (the New
Pass Property) consists of 107 unpatented mining claims totaling 2,231 acres located
near the town of Austin in Churchill County, Nevada. The Company currently has a 100%
interest subject to an option agreement with Bonaventure Enterprises Inc.
(Bonaventure) who can earn an initial 50% interest in the New Pass
Property.The New Pass Property is without known economic mineral reserves and is
at the exploration stage. The Companys current efforts are exploratory in nature.

25

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# Acquisition

In March 1998, the Company acquired a
100% interest in the New Pass Property from Quest USA Resources Inc. (Quest)
after paying US$165,000 cash. Quest maintained a 2.75% NSR royalty which the Company
purchased in March 2000, by issuing 100,000 common shares to Quest.

In September 2004, the Company
entered into an option agreement with Consolidated Odyssey Exploration Inc.
(Odyssey) whereupon Odyssey may earn an initial 50% interest in the New Pass
Property. To earn a 50% interest, Odyssey must make cash payments to the Company of
US$500,000, issue 500,000 of its common shares and provide US$2,000,000 in exploration
expenditures, all over a four-year period. Upon earning a 50% in a property, Odyssey may
earn an additional 10% interest in the property by financing the completion of a
feasibility study. Subsequently, Odyssey assigned all rights under the option agreement to
Bonaventure.

During the earn-in period,
Bonaventure is responsible for all property holding costs.

# Location and Access

The New Pass Property is located
along the Austin-Lovelock mineral belt in the New Pass Mining District, 27 miles west of
Austin, Nevada. Access is from Austin on US Highway 50 for 34 miles, north on the Edwards
Valley Road for 5 miles, and east-southeast for 2 1/2 miles on an unimproved road to the
center of the property.

# Regional and Property
Geology

Gold mineralization on the New Pass
Property is hosted in silty and carbonaceous limestones of the Triassic Lower Augusta
Mountain Formation. This unit consists of thin to medium bedded, carbonaceous limestone
with interbeds of platy, calcareous siltstone, fine-grained sandstone, and bioclastic
turbidites. Impermeable, massive, cliff-forming limestones of the upper Augusta Mountain
sequence cap these rocks.

# Previous Exploration
History

Gold was discovered on the New Pass
Property in 1980 by Dekalb Mining Ltd. (Dekalb) which was conducting follow-up
work to a stream sediment survey. Dekalb transferred ownership of the claims to Northern
Illinois Coal, Oil and Resources Mineral Ventures (NICOR) in 1982. NICOR
explored the New Pass Property from 1982 through 1992, and drilled a total of 165 holes.
Consolidated Ramrod Gold (USA), Inc. (Ramrod) acquired the New Pass Property
in 1993. In 1995, Santa Fe Pacific Gold Corp. completed 11 holes on the property under an
exploration agreement with Ramrod. Ramrod was later

26

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reorganized and renamed Quest which
sold the property to the Company in 1998. During 1998, the Company completed 1:6000 scale
mapping, collected 250 rock chip samples, prepared geochemical overlays for all surface
rock chip data, constructed 100-foot cross sections via an Interdex mining software
program, and estimated geologic resources on the main jasperoid.

# Current and Future
Exploration

Bonaventure recently announced
results of their Phase I drilling program which totaled 9,140 feet of Reverse Circulation
drilling in 28 shallow holes. Complete drilling results using a 0.010 oz/ton (0.311
g/tonne) gold cut-off are shown in the table below. This cut-off is based upon several
operating heap leach mines in Nevada with similar average grades, including the Marigold
and Florida Canyon mines. Gold equivalent grades using silver values are calculated as
silver is generally partially recovered in the heap leach process. Based on prices of
US$8/oz silver and US$480/oz gold, a ratio of 60 grams silver/ 1 gram gold was used to
calculate gold equivalents.



A Phase II drilling program is
currently being planned by Bonaventure with a primary goal of outlining the extent of
gold-silver mineralization in the northern portion of the drilling grid. Drilling is
expected to resume in the Spring of 2006. In the meantime, an independent contractor will
be hired by Bonaventure to conduct a resource estimate from the current drilling.
Additional metallurgical testing is also planned during the Phase II exploration program.

Squaw Creek Property

The Squaw Creek property (the
Squaw Creek Property) is located on the northern portion of the Carlin Trend,
42 miles north of the town of Battle Mountain in Elko County, Nevada. The property
consists of 151 unpatented mining claims totaling

27

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3,039 acres. The Company currently
has a 100% interest, subject to an agreement with Bonaventure who can earn an initial 50%
interest.The Squaw Creek Property is without known economic mineral reserves and
is at the exploration stage. The Companys current efforts are exploratory in nature.



# Acquisition

The Company acquired the Squaw Creek
Property by staking during 1996. In September 2004, the Company entered into an option
agreement with Odyssey whereupon Odyssey may earn an initial 50% interest by making cash
payments to the Company of US$500,000, issue 500,000 of its common shares and provide
US$2,000,000 in exploration expenditures, all over a four-year period. Odyssey may earn an
additional 10% interest in the Squaw Creek Property by financing the completion of a
feasibility study. Subsequently, Odyssey assigned all its rights under the option
agreement to Bonaventure.

During the earn-in period,
Bonaventure is responsible for all property holding costs

# Location and Access

The Squaw Creek Property lies between
the Midas and Ivanhoe mining districts on the northern portion of the Carlin Trend. Access
to the property is achieved from the towns of Battle Mountain, Elko, or Winnemucca via
highway and maintained all-weather roads. Unimproved dirt roads provide access along the
pediment on the northern part of Squaw Creek.

# Regional and Property
Geology

The Squaw Creek Property is located
directly on the Carlin Trend, and strongly anomalous gold mineralization associated with
pyrite has been intersected in drill holes in an area more than 3 miles long and 1 mile
wide. Additional weakly anomalous gold has been discovered within virtually all drill
holes over a much larger area. The anomalous gold occurs within silicified and brecciated
zones often more than 100 feet thick in the sedimentary rocks of the Upper Plate or in the
overlying Miocene age volcanics. Zones of gold mineralization are also hosted within silty
dolomitic sediments of unknown age and of unknown stratigraphic position. These silty
dolomitic sediments may be part of the Rodeo Creek Formation and possibly indicate the
presence of nearby auriferous Lower Plate sediments.

# Exploration History

During the 1970s, the US Steel
Company explored the Ivanhoe District and by 1984 had defined a gold reserve on the
adjacent Ivanhoe Property. A series of companies explored the Ivanhoe project which was
expanded to cover the current

28

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Squaw Creek Property. Touchstone
Resources explored the Squaw Creek Property by surface mapping, and drilled at least 4
holes. Newmont Mining Corporation and Cornucopia Resources Ltd. explored the Squaw Creek
Property from 1992 until 1995, drilling a total of 12 holes in the Sheep Corral Mine area
before dropping the outer claims, including the Squaw Creek Property. The Company drilled
three holes in 1998, 14 holes in 1999, and 10 holes in 2000 funded by Chapleau which
terminated its option in August 2000 after incurring exploration expenditures totaling
US$1,024,135.

# Current and Future
Exploration

To date, Bonaventure has executed a
controlled source audiomagnetotelluric survey on the Squaw Creek Property. Drilling is
planned to commence in December 2005, weather permitting.

Other Properties

South Cabin Creek Property

The Companys 100% owned South
Cabin Creek property (the South Cabin Creek Property) is located in Eureka
County, Nevada, and consists of 84 unpatented mining claims totaling approximately 1,735
acres. The South Cabin Creek Property is without known economic mineral reserves and is at
the exploration stage. The Companys current efforts are exploratory in nature.

# Acquisition

The Company acquired the claims that
make up the South Cabin Creek Property by way of staking in October 2001. 2006 annual
holding costs are estimated at US$11,214 for federal and county fees.

# Location and Access

The South Cabin Creek Property is
located about 3⁄4 mile east of the past-producing Gold Pick Mine, approximately 30
miles northwest of the town of Eureka, Nevada. Access is via county maintained roads and
then along all-weather dirt roads.

# Regional and Property
Geology

The South Cabin Creek Property lies
along the Cortez Trend. The claims are underlain by an east-dipping fault-repeated section
of Silurian Lone Mountain Dolomite overlain by Devonian McColley Canyon Formation and
Denay Formation. The claims lie near the Devonian dolomite line, a major facies boundary
controlled by regional Paleozoic-age structure along the continental margin.

The South Cabin Creek Property covers
a small portion of the Cabin Creek deposit, the South Cabin Creek mineralized zone, and
potential extensions of the Cabin Creek mineralizing structure. The Cabin Creek deposit is
an oxide gold deposit hosted in the Bartine member of the McColley Canyon Formation. Drill
intercepts in the southernmost portion of the deposit on the Companys claims
include:

|     
|-----
|
|     
|92-41
|     
|SS-26
|     
|SS-19
|     
|SS-27
|     
|92-53
|     

Mineralization in the Cabin Creek
deposit consists of two ore pods aligned in a northwest-southeast direction. The trend of
gold mineralization and the favourable host rock unit project onto the Companys
claims to the southeast of the Cabin Creek deposit. The northeast-trending high-grade
feeder structure of the deposit also projects on to the northeast part of the
Companys claims.

Widely spaced drilling in the area
south of the Cabin Creek deposit by Atlas discovered the South Cabin Creek gold zone.
Anomalous drill intercepts at the South Cabin Creek mineralized zone include:

29

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|       
|-------
|
|       
|55-51  
|       
|55-12  
|       
|55-10  
|       
|PD55-27
|       

Exploration targets on the South
Cabin Creek Property include shallow small to moderate pods of mineralization in the South
Cabin Creek zone, high-grade mineralization along the projection of the high-grade feeder
structure, and potentially large Carlin-type deposits concealed beneath gravel and
volcanic cover along the major north-northwest-trending fault zone (main controlling
structure) to the east of the Cabin Creek deposit.

# Previous Exploration
History

The area containing the South Cabin
Creek Property was explored by a number of companies from 1982 to 1992. Exxon Coal and
Minerals Company (Exxon) geologists first discovered gold-bearing jasperoid
rocks in the Cabin Creek area in 1982, and drilled the first mineralized holes on the
property. After Exxon relinquished the claims, Nerco staked claims which include the
current property in 1982. American Copper and Nickel Company (ACNC) leased the
property and drilled the discovery hole at Cabin Creek oxide gold deposit adjacent to the
Companys current property, which was later further defined by Phelps Dodge
Corporation (Phelps Dodge) and Atlas. Atlas also drilled holes to the south
and discovered the South Cabin Creek mineralization. From 1997 to 1998, Barrick Gold
Corporation (Barrick) leased the claims but conducted no work. American
Bonanza Gold Mining Corp. (now American Bonanza Gold Corp., American Bonanza)
leased the claims in 1999, but conducted no work before relinquishing the claims in
September 2001.

# Current Project Status
and Planned Work

Due to the location and extension of
a portion of the Cabin Creek oxide deposit onto the Companys property, exploration
targets include potential high-grade mineralization along the projection of the high-grade
feeder structure, shallow small to moderate pods of mineralization in the South Cabin
Creek zone, and possible Carlin-type deposits concealed beneath gravel and volcanic cover
along the major north-northwest trending fault zone (main controlling structure) to the
east of the Cabin Creek deposit.

The Company is currently seeking a
joint-venture partner to fund and conduct exploration on the South Cabin Creek Property.

Gold Bar Horst Property

The Companys 100% owned Gold Bar
Horst property (the Gold Bar Horst Property) is located in Eureka County,
Nevada, and consists of 183 unpatented mining claims totaling 3,707 acres. The Gold Bar
Horst Property is without known economic mineral reserves and is at the exploration stage.
The Companys current efforts are exploratory in nature.

# Acquisition

The Company acquired the 183
unpatented mining claims by way of staking since September 2001. 2006 annual holding costs
are estimated to be US$24,430 for federal and county fees.

# Location and Access

The Gold Bar Horst Property is
located in Eureka County on the southwest flank of the Roberts Mountains, approximately 30
miles northwest of Eureka, Nevada. Access is by way of a series of improved all weather
roads.

# Regional and Property
Geology

The claims were staked to cover the
projection of a northwest-trending horst of Lower Plate Devonian Carbonates. The claims
are in two noncontiguous blocks, covering the northern and southern projections of the
horst beyond the immediate past producing Gold Bar Mine. The depth to bedrock under
Quarternary gravels, as indicated by CSAMT and gravity surveys, and drilling, varies from
less than 500 feet to greater than 1000 feet. Mineralization is controlled by a
north-northwest-trending fault and structural intersections with northeast-trending cross
faults.

30

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# Previous Exploration
History

Atlas discovered gold-anomalous
jasperoid along the southwest flank of the Roberts Mountains in 1983 and drilled 16
shallow exploration holes, one of which intersected thin gold mineralization. In 1984
Atlas discovered the Gold Bar deposit, which lies between the 2 current portions of the
Companys property. Atlas mined the Gold Bar deposit beginning in 1987 before
exhausting the economic reserves in 1994. Atlas negotiated a series of joint-venture
agreements with other mining companies between 1994 and 1999 for further exploration of
the project which includes the claims encompassed by the Companys current property
boundaries. Homestake Mining Company (Homestake) entered into a joint venture
in 1994 for exploration of the pediment area south and southeast of the Gold Bar mine.
Homestake conducted CSAMT surveys and drilled 17 exploration holes on the area south of
Gold Bar in 1995 and 1996. The joint venture was terminated in 1996. Barrick
joint-ventured all of Atlas holdings in the Roberts Mountains, exclusive of the mine
areas, in 1997. Barrick drilled a series of widely-spaced holes in the Millsite area and
drilled seven deep holes to the north before terminating the joint venture in 1999.
Vengold (now American Bonanza) leased all of Atlas holdings in the Roberts Mountains
later in 1999.  When American Bonanza reduced the size of its claim holdings in 2001
to concentrate on the claims around the past producing Gold Bar mine, the Company staked
the two noncontiguous claim groups bordering the remaining claims at Gold Bar on the north
and south which currently comprise the Gold Bar Horst Property.

# Current and Planned
Exploration

Future exploration is expected to
target possible Carlin-style gold mineralization beneath the gravel cover. North-northwest
to northwest-trending horst-bounding faults and crosscutting northeast-trending faults are
possible feeder structures. The master feeder fault has not been tested. The majority of
previous drilling on the Gold Bar Horst Property is less than 350 feet deep and did not
encounter bedrock. One deeper drill hole located on the property encountered a mineralized
jasperoid which returned minor gold values from a depth of 1160 feet to 1255 feet. This
mineralization may be peripheral to other gold mineralization.

The Company is currently seeking a
joint-venture partner to explore the Gold Bar Horst Property.

Hunter Property

The Hunter property (the Hunter
Property) is located in Eureka County, Nevada, and consists of 48 unpatented mining
claims totaling 1,116 acres. The Company has a 100% interest in 46 claims, and has a lease
agreement and an option to purchase a 100% interest in the other 2 claims which make up
the property. The Hunter Property is without known economic mineral reserves and is at the
exploration stage. The Companys current efforts are exploratory in nature.

# Acquisition

The Company acquired 46 unpatented
mining claims of the Hunter Property through staking in September 2001. In February 2002,
the Company signed a lease agreement with Gregory McN. French (the HNT Vendor)
on two adjacent unpatented mining claims known as the HNT Claims. Under the
terms of the lease agreement, the Company is required to make lease payments and issue
common shares to the HNT Vendor under the following schedule:

|Payment
  Due Date                        | Cash Option Payments
    (US Dollars) | Common Share
   Issuances
|----------------------------------------- | ------------------------------------- | -------------------------
|Initial Payment                           |                                       | $2,000 (paid)            
|February 1, 2003                          |                                       | $2,000 (paid)            
|February 1, 2004                          |                                       | $3,000 (paid)            
|February 1, 2005                          |                                       | $3,000 (paid)            
|February 1, 2006                          |                                       | $        4,000           
|February 1, 2007 and each year thereafter |                                       | $        7,000           

The HNT Vendor also retains a NSR on
the HNT claims which varies from between 1% to 2%, depending upon the price of gold. The
vendor retains a 1.5% NSR on minerals other than gold. The Company has the option to
acquire the NSR and purchase the HNT Claims from the vendor for US$75,000 at any time
before the 10th anniversary date of the lease.

2006 annual holding costs are
estimated to be US$6,408 in federal and county fees, as well as the lease payments listed
above.

31

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# Location and Access

The Hunter Property is located on the
Cortez Trend and lies approximately 3 miles southeast of the Gold Pick Mine. Access is via
Highway 50, then approximately 13 miles along county maintained gravel road and 11⁄2
miles along unimproved dirt road.

# Regional and Property
Geology

The Hunter Property encompasses an
easterly dipping fault-repeated section of Silurian Lone Mountain Dolomite overlain by
Devonian McColley Canyon Formation, Bay State Dolomite and Devils Gate Limestone. Miocene
basalts and minor rhyolite overlay and/or are faulted against the Paleozoic section along
both the western and eastern parts of the claims. The western portion of the Hunter
Property is covered by pediment gravels, which masks the Paleozoic and Tertiary rocks.

# Previous Exploration
History

Gold-bearing jasperiods were
discovered in the Hunter area in 1983 and Mapco (Nerco) staked claims over the prospective
ground. The claims were leased to ACNC in 1985. ACNC conducted geological mapping,
rock-chip and soil sampling, geophysical surveys (IP-resistivity and VLF), and drilled 39
shallow holes between 1985 and 1987.

Nerco conducted additional geologic
and geochemical work and drilled seven holes in 1988-1989. Phelps Dodge acquired the Nerco
claims in 1989 and conducted more mapping and collected additional rock-chip samples as
well as drilling 21 exploration holes in 1990. Atlas acquired the Nerco claims in 1991 and
conducted additional drilling in 1993. American Barrick leased all of Atlas claims
in 1997, including those at Hunter, but performed no work on the property before
terminating its lease in 1998. Vengold (now American Bonanza) then leased the Atlas land
holdings in 1999 but also performed no work on the property before dropping the claims in
September 2001.

# Current and Planned
Exploration

The Company is currently seeking a
joint-venture partner to explore the Hunter Property.

Pat Canyon Property

The wholly owned Pat Canyon property
(the Pat Canyon Property) is located in Eureka County, Nevada and consists of
178 unpatented mining claims totaling 3,582 acres. The Pat Canyon Property is without
known mineral reserves and is at the exploration stage. The Companys current efforts
are exploratory in nature.

# Acquisition

The Company acquired the Pat Canyon
Property by staking in November 2003. 2006 annual holding costs are estimated to be
US$23,763 in federal and county fees.

# Location and Access

The Pat Canyon Property lies on the
Cortez Trend and is adjacent to the Companys Fye Canyon Property to the south.
Access is by a series of all-weather and dirt roads.

# Regional and Property
Geology

The Pat Canyon Property lies along
the southern projection of the north-northwest-south-southeast-trending Cortez fault zone
just south of a major northeast-trending cross-structure which bounds the northern edge of
Simpson Park Mountains. The property covers 31⁄2 miles of strike length of this
splayed NNW fault system. Upper-plate Ordovician Vinini Formation crops out in the eastern
part of the block and is overlaid by scabs of felsic Tertiary volcanics and thin
Quaternary alluvium in the central area with thicker gravels in the west part.
Intermediate Tertiary volcanics cover the southernmost part of the claim block. The claim
block lies along the projection of Lower-plate carbonate rocks in the Cortez window to the
northwest and the Tonkin window to the southeast.

# Current and Future
Exploration

The Company is seeking a joint
venture partner to further explore the Pat Canyon Property.

32

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Tonkin Summit Property

The Tonkin Summit property (the
Tonkin Summit Property) is located in Eureka County, Nevada, adjacent to the
Companys McClusky Pass Property to the East. The 100% owned property consists of 186
unpatented mining claims totaling 3,826 acres. The Tonkin Summit Property is without known
mineral reserves and is at the exploration stage. The Companys current efforts are
exploratory in nature.

# Acquisition

The Company acquired the Tonkin
Summit Property by staking in the spring 2004. 2006 annual holding costs are estimated to
be US$24,831 in federal and county fees.

# Location and Access

The Tonkin Summit Property is located
on the Cortez Trend at the northwest end of the Roberts Mountains approximately 30 miles
northwest of Eureka, Nevada. Access is by way of a series of improved all weather roads.

# Regional and Property
Geology

The claims are underlain by
Upper-plate Ordivician Vinini Formation (chert, siltstone with some limestone beds) with
minor Tertiary volcanic and Quaternary gravel cover in the northwest corners. Lower-plate
carbonate rocks are projected to underlie Vinini Formation at relatively shallow depths.

# Current and Planned
Exploration

The target is a Carlin-type
disseminated gold deposit hosted in Lower-plate carbonate units beneath the Roberts
Mountains thrust fault, alternatively similar bodies in limestone units of lower
Ordovician Vinini Formation. The depth to Lower-plate is unknown as the property is
unexplored below a 200 to 600 foot depth. Lower-plate Devonian limestones crop out within
2,000 feet of the east side of the claim block. Scattered anomalous gold, arsenic,
antimony and mercury in rock chips and soils are on trend from two mineralized northeast
trending faults on an adjacent property. The Company is seeking a joint venture partner to
further explore the Tonkin Summit Property.

Miscellaneous

Since 2004, the Company has acquired,
by staking, a 100% interest in four additional Nevada mineral exploration properties
comprised of unpatented mining claims located on the Cortez Trend in Eureka County and one
additional mineral exploration property located on the Getchell Trend in Humboldt County.
The combined acreage of these properties totals 9,300 acres. These properties are without
known mineral reserves and are at the exploration stage. The Companys current
efforts are exploratory in nature.

2006 annual holding costs in federal
and county fees for these properties is estimated to be US$63,105.

Sampling and Analysis

The sampling method used by the
Company field personnel varies with the purpose of the sample. Geologists doing initial
reconnaissance or prospecting may collect selected grab samples from new discoveries. Such
samples would be intended only to determine if minerals of interest are present, not to
estimate grades for any volume of material.

For more systematic sampling,
outcrops are cleaned off and in some cases shallow hand trenches are dug. Continuous chip
samples are collected over intervals selected by a Company geologist. The manner of
sampling is recorded in field notes and is entered into the digital database of surface
samples.

Core from drilling programs is
photographed and logged on the project site by contract geologists under the supervision
of the Companys project manager. Core is split by a contract geotechnician in
Eureka, Nevada. Split core is bagged, sealed and shipped directly to assay labs in Elko,
Nevada for sample preparation, and then to Sparks, Nevada for analysis. All samples are
analyzed for gold and silver by fire-assay technique.

The Company employs a quality control
program consisting of re-assaying of both mineralized (0.010 oz/ton gold) and randomly
selected coarse reject samples, insertion of coarse standard samples and assaying of both
random and mineralized duplicate drilling samples through an umpire laboratory.
Drill-cuttings samples are bagged, sealed and shipped directly to an assay laboratory in
Elko, Nevada for sample preparation, then to Sparks, Nevada for analysis. All samples are
analyzed for gold and silver by fire-assay technique.

33

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# ITEM 5:    OPERATING AND
FINANCIAL REVIEW AND PROSPECTS

# Overview

The Companys consolidated
financial statements are stated in CAD$ and are prepared in accordance with Canadian GAAP,
the application of which, in the case of the Company, conforms in all material respects
for the years presented with US GAAP, except as disclosed in Note 15 to the consolidated
financial statements. The value of the US$ Dollar in relationship to the CAD$ was US$1.00
= CAD$1.2256 as of June 30, 2005.

The Company has since inception
financed its activities through the distribution of equity capital. While the Company has
sufficient resources to meet its obligations for the foreseeable future at its current
level of activity, it is anticipated that additional funds by equity issuance will be
required in the future, as all of the Companys properties are at the exploration
stage. The timing of such offerings is dependent upon the success of the Companys
exploration programs as well as the general economic climate.

# Results of Operations

# Year Ended June 30, 2005
vs. Year Ended June 30, 2004

During the year ended June 30, 2005
the Company acquired two additional mineral exploration properties on the Cortez Trend.
The Company also completed a private placement of its common shares, which provided net
proceeds of $2,370,000.

A loss of $1,063,474 or $0.02 per
share in 2005 was the result of interest on short-term investments of $261,600, a loss on
foreign exchange of $60,377, a partial recovery of $31,404 of the unrealized loss on
temporary investments reported in 2004, a loss on disposal of equipment of $757, a
stock-based compensation charge of $148,543 and costs of $952,203 before write-offs.

In 2004, a loss of $1,664,257 or
$0.04 per share resulted from short-term investment interest of $97,920, a loss on foreign
exchange of $9,299, an unrealized loss on temporary investments of $42,999, a stock-based
compensation charge of $840,005 and costs of $628,325 before write-offs.

During the 2005 fiscal year, $194,598
of preliminary exploration costs was written-off compared to $241,549 in 2004. The
increase in administrative costs from $628,325 at June 30, 2004 to $952,203 at June 30,
2005 was a result of an increase in consulting fees, audit fees, investor relations and
shareholder information costs, management fees, rent, amortization, office costs,
telephone and travel expenses, reflecting the costs associated with the Companys new
Reno office as well as the general increase in exploration activities in Nevada.

# Year Ended June 30, 2004
vs. Year Ended June 30, 2003

During the year ended June 30, 2004
the Company acquired seven additional mineral exploration properties on the Cortez Trend.
The Company also completed three private placements of its common shares, which provided
net proceeds of $9,059,476.

The loss for the year ended June 30,
2004 was $1,664,257, or $0.04 per share, compared to a loss of $357,746, or $0.01 per
share, in the prior year. The increased loss was due to higher expenses of $1,468,330 in
2004 compared to $210,636 in 2003, with the largest increase occurring in consulting
 stock-based compensation, which totaled $840,005 compared to zero in 2003 as the
Company adopted the expensing of non-employee options per CICA Handbook 3870 in 2004.
Other significant changes in expenses occurred in management fees, which rose to $210,000
from $58,000, and wages and benefits which rose to $31,863 from zero due to a higher level
of corporate activity and the addition of personnel in the Companys new field office
in Reno, Nevada in 2004. Transfer agent and listing fees increased to $55,506 in 2004 from
$8,542 in 2003 due to the completion of three private placements and the higher exercise
rate of stock options and warrants. Consulting increased to $82,540 from $36,761 and
travel and entertainment rose to $52,569 in 2004 from $973 in 2003 as management and
consultants visited and reviewed both existing and newly acquired properties in Nevada as
well as travel related to investor relations. Investor relations and shareholder
information rose to $52,889 in 2004 from $21,069 in 2003 in part as a result of a new
investor relations contract executed with Darrell Wellander, an independent businessman,
in September 2003 in order to better inform shareholders and the investment community
about the Companys activities.

The Company also recorded the
write-off of deferred exploration costs of $241,549 in 2004 compared to $118,399 in 2003.
These write-offs are related to general exploration of properties in Nevada which the
Company has investigated but not acquired. The Company also recorded a loss on foreign
exchange of $9,299 in 2004 compared to a loss of $36,524 in 2003 due to unfavorable
changes in the Canadian/US dollar exchange rate, and a unrealized loss on temporary
investments of $42,999 in 2004 compared to zero in 2003 as the market value of certain
highly liquid bonds in which the Company invests a

34

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portion of its cash intended for
future expenditures declined as of June 30, 2004. These expenses were slightly offset by
an increase in interest income of $97,920 in 2004 versus $7,813 in 2003, with the increase
due to higher cash balances in the current period as well as a favorable mix of
higher-yielding temporary investments in highly liquid bonds.

# Liquidity and Capital
Resources

The Companys working capital at
June 30, 2005 was $11,216,455 compared to $9,804,733 at June 30, 2004. The Company
continued a program initiated in 2004 of investing a portion of its working capital in
highly liquid short-term bonds in order to obtain a higher interest rate than that
available through demand bank accounts until such time as the funds are needed for mineral
exploration and working capital. As of June 30, 2005, $10,895,443 was classified as
temporary investments compared to $7,450,824 at June 30, 2004 while $282,459 was
classified as cash and cash equivalents at June 30, 2005, compared to $2,395,527 at June
30, 2004. Subsequent to the 2005 year-end, the Company received net proceeds of $6,415,300
from the exercise of 4,940,586 warrants.

For the 2006 fiscal year, the Company
has budgeted US$2,000,000 for its anticipated exploration activities. Property costs,
including land holding leases and fees, are estimated to total US$600,000, and
administrative costs are estimated at approximately US$600,000. Therefore, the Company
estimates it has sufficient capital resources for all planned expenditures through fiscal
2006 and beyond.

# Year Ended June 30, 2005

Operating activities for the year
ended June 30, 2005 used cash of $954,361, with the loss for the year of $1,063,474
reduced by items not affecting cash including stock-based compensation of $148,543 and
write-off of deferred exploration costs of $194,598. Changes in non-cash working capital
items included increases in accounts receivable of $103,457 and prepaid expenses of
$26,214, and decreases in accounts payable and accrued liabilities of $51,640, and amounts
due to related parties of $52,616.

Investing activities used cash of
$4,972,207. The largest component was the acquisition of temporary investments of
$3,413,215 as the Company invested in highly liquid short-term bonds. Acquisition of
mineral property interests used cash of $673,373, and deferred exploration costs used cash
of $816,648. Acquisition of equipment used cash of $86,486.

Financing activities provided cash of
$3,813,500, with the entire amount provided by the issuance of capital stock. During the
year, the Company issued a total of 4,060,000 common shares: 1,500,000 common shares were
issued pursuant to a private placement for proceeds of $2,370,000; 40,000 shares were
issued for mineral property interests at a deemed value of $28,400; 230,000 shares were
issued on the exercise of stock options for net proceeds of $120,125; and 2,290,000 shares
were issued pursuant to the exercise of warrants for net proceeds of $1,421,304.

During the year the Companys
cash position decreased by $2,113,068.

# Year Ended June 30, 2004

Operating activities for the year
ended June 30, 2004 used cash of $741,247, with the loss for the year of $1,664,257
reduced by items not affecting cash including stock-based compensation of $840,005 and
write-off of deferred exploration costs of $241,549. Changes in non-cash working capital
items included an increase in accounts receivable of $70,608, an increase in accounts
payable and accrued liabilities of $12,714, and a decrease in amounts due to related
parties of $153,168.

Investing activities used cash of
$8,702,270. The largest component was the acquisition of temporary investments of
$7,493,823. Acquisition of mineral property interests used cash of $611,213, and deferred
exploration costs used cash of $442,661. Acquisition of equipment used cash of $89,321 and
reclamation bonds were posted which used cash of $65,252.

Financing activities provided cash of
$11,705,658, with the entire amount provided by the issuance of capital stock. During the
year, the Company issued a total of 20,870,734 common shares: 12,486,926 common shares
were issued pursuant to private placements for gross proceeds of $9,599,998; 40,000 shares
were issued for mineral property interests at a deemed value of $31,200; 2,134,500 shares
were issued for the exercise of stock options for proceeds of $268,310; 6,084,308 shares
were issued pursuant to the exercise of warrants for net proceeds of $2,377,872; and
125,000 common shares were issued for a finders fee.

During the year the Companys
cash position increased by $2,262,141.

35

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# Year Ended June 30, 2003

The Companys had a working
capital deficit of $87,241 as at June 30, 2003 compared to a positive total of $384,121 as
at June 30, 2002. During the year ended June 30, 2003 operating activities used cash of
$179,612. Loss for the year of $357,746 was reduced by items not affecting cash including
write-off of deferred exploration costs of $118,399. Changes in non-cash working capital
items included a decrease in accounts payable and accrued liabilities of $48,943, and an
increase in amounts due to related parties of $103,885.

Investing activities used cash of
$229,419, including $137,565 in acquisition of mineral property interests and $177,797 in
deferred exploration costs offset by refunded reclamation bonds in the amount of $85,943.

Financing activities provided cash of
$33,750, resulting from the issuance of 337,500 common shares pursuant to the exercise of
incentive stock options. The Company also issued 40,000 common shares for mineral property
acquisitions at a deemed value of $8,000.

During the year ended June 30, 2003,
the Companys cash position decreased by $375,281.

# US GAAP Reconciliation
with Canadian GAAP

Under Canadian GAAP, mineral
properties, including exploration, development and acquisition costs, are carried at cost
and written down if the properties are abandoned, sold or if management decides not to
pursue the properties. Under US GAAP, all expenditures relating to mineral interests prior
to the completion of a definitive feasibility study, which establishes proven and probable
reserves, must be expensed as incurred. Once a final feasibility study has been completed,
additional costs incurred to bring a mine into production are capitalized as development
costs.

Under United States GAAP, Statements
of Financial Accounting Standards No. 123, Accounting for Stock-based
Compensation (SFAS 123) requires companies to establish a fair
market value based method of accounting for stock-based compensation plans. The Company
has chosen to account for stock-based compensation using Accounting Principles Board
Opinion No. 25 Accounting for Stock Issued to Employees (APB 25).
Accordingly, compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Companys stock at the date of grant over the option
price. Effective July 1, 2003 the Company elected to follow the fair value method of
accounting for stock-based compensation.

New accounting and disclosure
standards were introduced under Canadian GAAP for the fiscal year ending June 30, 2003.
Accordingly, there were no differences between Canadian GAAP and United States GAAP for
the years ended June 30, 2005, 2004 and 2003.

The reader is advised to consult the
Companys audited annual consolidated financial statements for the year ended June
30, 2005, particularly Note 15, for quantification of the differences.

# Canadian GAAP Conflict
in Accounting for Mineral Property Interests and Deferred Exploration Costs

In March 2000, the Accounting
Standards Board of the Canadian Institute of Chartered Accountants (CICA)
issued Accounting Guideline No. 11 Enterprises in the Development Stage
(AcG 11). AcG 11 addresses three distinct issues: i) the capitalization of
costs/expenditures; ii) impairment; and iii) disclosure. Prior to its issuance,
development stage entities were exempt from following certain aspects of Canadian GAAP.
AcG 11 requires that all companies account for transactions based on the underlying
characteristics of the transaction rather than the maturity of the enterprise. In
addition, AcG 11 requires specific disclosure of information by development stage
companies and is effective no later than fiscal periods beginning on or after April 1,
2000, which in the case of the Company, is the year ended January 31, 2002.

In March 2002, the Emerging Issues
Committee (EIC) of the CICA issued EIC-126 Accounting by Mining
Enterprises for Exploration Costs (EIC-126) which interprets how AcG 11
affects mining companies with respect to the deferral of exploration costs. EIC-126 refers
to CICA Handbook Section 3061 Property, Plant and Equipment (HB
3061), paragraph .21, which states that for a mineral property interest, the cost of
the asset includes exploration costs if the enterprise considers that such costs have the
characteristics of property, plant and equipment.

EIC-126 then states that a mining
enterprise that has not established mineral reserves objectively, and therefore does not
have a basis for preparing a projection of the estimated cash flow from the mineral
property interest, is not precluded from considering the exploration costs to have the
characteristics of property, plant and equipment. EIC-126 also sets forth the EICs
consensus that a mining enterprise in the development stage is not required to consider
the conditions in AcG 11 regarding impairment in determining whether exploration costs may
be initially capitalized. With respect to impairment of capitalized exploration costs,
EIC-126 sets forth the EICs consensus that a mining enterprise in the development
stage that has not established mineral reserves objectively, and, therefore, does not have
a basis for preparing a projection of the

36

---

estimated cash flow from the
property, is not obliged to conclude that capitalized costs have been impaired. However,
such an enterprise should consider the conditions set forth in AcG 11 and HB 3061 in
determining whether a subsequent write-down of capitalized exploration costs related to
mineral property interest is required.

As disclosed above, the Company
considers that its mineral property interests and deferred exploration costs have the
characteristics of property, plant and equipment, and, accordingly, the Company has chosen
to classify its mineral property interests and deferred exploration costs as tangible
assets in accordance with its interpretation of Canadian GAAP.

Although the Company believes its
accounting policy is appropriate and consistent with Canadian GAAP, there is an
alternative interpretation of Canadian GAAP that would consider them to be intangible
assets as a result of the issuance of CICA Handbook Section 1581 Business
Combinations (HB 1581) and CICA Handbook Section 3062 Goodwill and
Other Intangible Assets (HB 3062).

This alternative interpretation under
HB 1581 and HB 3062 would provide for the capitalization of a contract based mining asset
as an intangible asset at its fair value at the time it was acquired, either as an
individual asset purchase or as part of a business combination. For exploration stage
mineral property interests and deferred exploration costs such as those owned by the
Company, the excess of the carrying value over the residual value of the intangible assets
would be amortized on a straight-line basis over the period in which the Company expected
to complete its exploration process or convert, develop or further explore the underlying
properties. For the Company, a reasonable estimate of this amortization period would be 5
years.

Consult the Companys audited
annual consolidated financial statements for the year ended June 30, 2005 for the
differences if the Company had chosen to account for these costs as intangible assets
under HB 1581 and HB 3062 effective February 1, 2002.

# Variation in Operating
Results

The Company derives interest income
on its bank deposits and short-term investments, which depend on the Companys
ability to raise funds.

Management periodically, through the
exploration process, reviews results both internally and externally through mining related
professionals. The decision to abandon, reduce or expand exploration efforts is based upon
many factors including general and specific assessments of mineral deposits, the
likelihood of increasing or decreasing those deposits, land costs, estimates of future
mineral prices, potential extraction methods and costs, the likelihood of positive or
negative changes to the environment, permitting, taxation, labor and capital costs. There
cannot be a pre-determined hold period for any property as geological or economic
circumstances render each property unique.

# Research and Development

The Company conducts no research and
development activities, nor is it dependent upon any patents or licenses.

# Trend Information

The Company knows of no trends,
uncertainties, demands, commitments or events that are reasonably likely to have a
material effect on the Companys operations or financial condition.

# Off-Balance Sheet
Arrangements

The Company does not have any
off-balance sheet arrangements that have or are reasonably likely to have a current or
future effect on the Companys financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.

# Tabular Disclosure of
Contractual Obligations

The Company has an interest in
various exploration-stage mineral properties located in the State of Nevada. Certain of
the underlying claims are leased from third-parties and have lease payments due. Other
claims are unpatented mining claims on land owned by the Bureau of Land Management
(BLM) and have annual lease fees payable. All claims have Nevada county taxes
due annually which vary by county.

Based upon its current and
anticipated future claim holdings, the Company estimates its land holding costs for the
next three fiscal years to be the following:

37

---

Annual Estimated
Property Holding Costs

|           
|-----------
|
|Leases     
|BLM Fees   
|County Fees

The Company also maintains
reclamation bonds for exploration work on certain of its properties. These bonds are held
by or in trust for the responsible government body who oversees the Companys
exploration work. When exploration, development or mining activities cease on that
property, the Company is responsible for restoring the property as provided by law. If the
Company either does not, or is not able, to comply with the required restoration, the
reclamation bond will be used to provide funds for the required restoration work. However,
if the Company completes the required restoration and the applicable government body is
satisfied all requirements have been met, the reclamation bond for that property will be
returned to the Company.

The following is a list of the
Companys reclamation bonds outstanding as of June 30, 2005.

|Property           | Current
Status | Government Body Holding
the Bond | US$ Amount
of Bond | CDN$ Amount
of Bond     
|------------------ | -------------- | -------------------------------- | ------------------ | ------------------------
|                  
|Indian Ranch       |                | Exploration                      |                    | BLM, Nevada             
|McClusky Pass      |                | Exploration                      |                    | BLM, Nevada             
|New Pass           |                | Exploration                      |                    | BLM, Nevada             
|Unallocated Nevada |                | Exploration                      |                    | BLM, Nevada             
|Quito              |                | Dropped                          |                    | US Forest Service       
|Lookout            |                | Dropped                          |                    | B.C. Minister of Finance
|MGM                |                | Dropped                          |                    | B.C. Minister of Finance

# ITEM 6:    DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES

# 6 A.    DIRECTORS AND SENIOR
MANAGEMENT

Each of the Companys directors
is elected by the Companys shareholders at an annual general meeting to serve until
the next annual general meeting of shareholders, scheduled to be held in December 2006, or
until a successor is elected or appointed. The Board of Directors appoints the
Companys executive officers annually after each annual general meeting, to serve at
the discretion of the Board of Directors.

The following tables disclose the
name, age, functions in the Company and date or election or appointment of its directors
and executive officers as of November 30, 2005, together with business experience,
principal business activities performed outside of the Company (including in the case of
directors other principal directorships).

|Director                        | Age | Date First Elected/Appointed
|------------------------------- | --- | ----------------------------
|                               
|John M. Leask (1)               |     | 49                          
|Gordon P. Leask (1)             |     | 44                          
|Brian D. Edgar (1)              |     | 55                          
|Megan Cameron-Jones             |     | 44                          
|(1)  Member of Audit Committee. |     |                             

|Executive Officer   | Position | Age                                   | Date of Appointment
|------------------- | -------- | ------------------------------------- | -------------------
|                   
|John M. Leask       |          | President, CEO and Chairman           |                    
|Megan Cameron-Jones |          | CFO and Corporate Secretary           |                    
|Robert G. Cuffney   |          | Vice-President, Exploration           |                    
|Kareen McKinnon     |          | Vice President, Corporate Development |                    

John M. Leask is President,  Chief
Executive  Officer and Chairman of the Company.  Mr. Leask is a Professional  Engineer
who graduated with a Bachelor of Applied Science degree from the University of British
Columbia in 1980.  Prior to joining

38

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the Company, he was a self-employed
consultant and has 29 years experience in resource exploration and management of public
companies. He joined the Company as a Director in December 1994, and has been Chairman and
Chief Executive Officer since 1996. He also served as President of the Company from
January to July 1996, and was reappointed President in April 2001. He currently also
serves as a director of Mansfield Minerals Inc., a public mineral exploration company
traded on the TSX Venture Exchange. Mr. Leask devotes 50% of his time to Company business.

Gordon P. Leask is a Director of the
Company. Mr. Leask is a Geologist and Professional Engineer who graduated from the
University of British Columbia with a Bachelor of Applied Science degree in Geological
Engineering in 1985. He joined the Company as a Director in January 2003, although he had
provided consulting services to the Company prior to his being named a Director. He has
over 25 years experience in the mineral exploration business, and currently serves as
President and Director of Mansfield Minerals Inc., a public mineral exploration company
traded on the TSX Venture Exchange. Mr. Leask devotes 50% of his time to Company business.

Brian D. Edgar has been a Director of
the Company since February 1996. Mr. Edgar currently serves as an investment banker with
Rand Edgar Investment Corp. in Vancouver, B.C. since 1992 and President of Dome Ventures
Inc. since February 2005. He graduated with a Bachelor of Laws degree from the University
of British Columbia in 1975 and currently serves as a director of other public companies,
including: Pender Financial Group, a public investment company traded on the TSX Venture
Exchange; Lexacal Investment Corp, a public investment company traded on the TSX Venture
Exchange; South Atlantic Ventures Ltd., a mineral exploration company traded on the TSX
Venture Exchange; Valkyries Petroleum Corp., a petroleum and natural gas exploration
company traded on the TSX Venture Exchange; and Lundin Mining Corporation, a mineral
exploration company traded on the Toronto Stock Exchange. Mr. Edgar devotes approximately
5% of his time to Company business.

Megan Cameron-Jones is Chief
Financial Officer, Corporate Secretary and a Director of the Company. She served as
Corporate Secretary from 1990-1991, 1995-1997, in 1999, and from January 2003 to the
present. She was appointed a Director in December 1996 and was appointed Chief Financial
Officer in November 2004. She is President of Cerro Rico Management Corp., a self-owned
management company, and a director of Mansfield Minerals Inc., a public mineral
exploration company traded on the TSX Venture Exchange. She devotes approximately 50% of
her time to Company business.

Robert G. Cuffney is Vice-President
of Exploration for the Company. He is a Professional Geologist and holds a Bachelor of
Science in Geological Engineering and a Master of Science in Geology from the Colorado
School of Mines. Mr. Cuffney has over 29 years of experience in mineral exploration in
North America and Southeast Asia and is a past president of the Geological Society of
Nevada. He was appointed Vice President of Exploration of the Company in August 1998, but
prior to his appointment also served as a geologic consultant to the Company. Before
joining the Company, Mr. Cuffney served as a senior geologist for Newmont Exploration Ltd.
working on the Carlin Trend and regionally in the Great Basin of Nevada and Utah. He
devotes approximately 100% of his time to Company business.

Kareen McKinnon is Vice President,
Corporate Development for the Company. Ms. McKinnon has over 10 years experience in public
markets and handles the investor relations department of the Company. Before joining the
Company, Ms. McKinnon spent several years in Corporate Finance with Nesbitt Burns and
moved on to take a variety of senior level positions within various public companies.

No Director and/or Executive Officer
has been the subject of any order, judgment, or decree of any governmental agency or
administrator or of any court or competent jurisdiction, revoking or suspending for cause
any license, permit or other authority of such person or of any corporation of which he is
a Director and/or Executive Officer, to engage in the securities business or in the sale
of a particular security or temporarily or permanently restraining or enjoining any such
person or any corporation of which he is an officer or director from engaging in or
continuing any conduct, practice, or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a security or
any aspect of the securities business or of theft or of any felony.

All of the Companys Officers
and Directors are covered by Indemnity Agreements executed with each individual. Under
these agreements, the Company has agreed to indemnify the individual and their heirs,
executors, administrators and personal representatives against all costs, charges and
expenses incurred in connection with any civil, criminal, or administrative action to
which they are made a party by reason of having been an officer or director of the
Company. The Indemnity Agreement is only in effect if the individual acted honestly and in
good faith with a view to the best interests of the Company and if the individual had
reasonable grounds for believing that their conduct was lawful.

John M. Leask, President, Chief
Executive Officer, Director and Chairman, and Gordon P. Leask, Director, are brothers.
There are no arrangements or understandings pursuant to which a person was selected as a
Director of the Company.

39

---

# 6 B.    COMPENSATION OF
DIRECTORS AND OFFICERS

The Company has no arrangements
pursuant to which Directors are compensated by the Company for their services in their
capacity as Directors, or for committee participation. Certain Officers and Directors have
been compensated for consulting and expert services during the most recently completed
fiscal year. Officers and Directors are compensated for management, consulting, and
administrative services as rendered. For a description of these payments, see Note 7 to
the Companys consolidated financial statements.

To assist the Company in
compensating, attracting, retaining and motivating personnel, the Company grants stock
options to Directors, Executive Officers and employees under a stock option plan effective
as of November 4, 2002 and amended as of December 12, 2003.

For the three most recently completed
financial years ended June 30, 2005, June 30, 2004 and June 30, 2003 in respect of the
Chief Executive Officer (CEO), the Chief Financial Officer (CFO)
and for each of the Companys three most highly compensated executive officers as at
June 30, 2005 (other than the CEO and CFO), whose total salary and bonus exceeds $150,000,
if any, and any other additional individuals for whom disclosure would have been provided
but for the fact that the individual was no longer an executive officer as at June 30,
2005 (the Named Executive Officers or NEO), the annual and
long-term compensation and bonus is set out below.

|Summary Compensation Table
|--------------------------
|
|
|
|                          
|John M. Leask             
|President, Chairman       
|and Chief Executive       
|Officer                   
|                          
|Megan Cameron-Jones(4)    
|Chief Financial           
|Officer and Corporate     
|Secretary                 
|                          

|(1) |  | SAR
or stock appreciation right means a right granted by the Company, as compensation for
services rendered, to receive          a payment of cash or an issue or transfer of
securities based wholly or in part on changes in the trading price of publicly
         traded securities of the Company.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | LTIP
or long term incentive plan means any plan that provides compensation intended to serve
as incentive for          performance to occur over a period longer than one financial
year, but does not include option or stock appreciation right          plans or plans for
compensation through restricted shares or restricted share units.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | These
monies were paid to Rangefront Exploration Corp., a BC private company controlled by Mr.
Leask.
|--- |  | -----------------------------------------------------------------------------------------------------

|(4) |  | Megan
Cameron-Jones was appointed Chief Financial Officer on November 25, 2004.
|--- |  | -------------------------------------------------------------------------------

# Options Granted in
Financial Year ended June 30, 2005

During the most recently completed
financial year, there were no stock options granted by the Company to the Named Executive
Officers.

40

---

# Aggregated Option
Exercises During the Most Recently Completed Financial Year and Financial Year-End Option
Values

During the most recently completed
financial year, there were no stock options exercised by the Named Executive Officers. The
following table sets out the financial year end value of stock options held by the Named
Executive Officers.

|                   
|-------------------
|
|                   
|John M. Leask      
|                   
|Megan Cameron-Jones
|                   

|(1) |  | In
the money options are those where the market value of the
                    underlying securities at the financial year-end exceeds the exercise
price of                     the option. Value is determined by calculating the
difference between the                     closing price of the Companys common
shares ($0.88) on June 30, 2005,                     and the exercise price of each
option, and then multiplying the difference by                     the number of common
shares under option at the financial year end.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

No funds were set aside or accrued by
the Company during fiscal 2005 to provide pension, retirement or similar benefits for
Directors or Executive Officers.

# 6 C.    BOARD PRACTICES

The Companys Board currently
consists of four directors, all of whom were elected at the annual and special general
meeting of shareholders on November 26, 2005. The current term of office for all the
directors will expire at the next annual general meeting, at which time all four of the
current directors may be nominated for re-election.

The Board is responsible for the
conduct of the Companys affairs generally. The Board is responsible for reviewing
and approving the Companys operating plans and budgets as presented by management.
The Board is responsible for identifying the principal risks of the Companys
business and for ensuring these risks are effectively monitored and mitigated to the
extent practicable. Succession planning, including the recruitment, supervision,
compensation and performance assessment of the Companys senior management personnel
also falls within the gambit of the Boards responsibilities. The Board is
responsible for ensuring effective communications by the Company with its shareholders and
the public and for ensuring that the Company adheres to all regulatory requirements with
respect to the timeliness and content of its disclosure. In keeping with its overall
responsibility for the stewardship of the financial affairs of the Company, the Board
created an audit committee which is responsible for the integrity of the Companys
internal control and management information systems.

The CEO and the Board have not, to
date, developed formal, documented position descriptions for the CEO and the Board
defining the limits of managements responsibilities. The Board is currently of the
view that the respective corporate governance roles of the Board and management are clear
and that the limits to managements responsibility and authority are reasonably
well-defined.

The Board is responsible for
approving annual operating plans recommended by management. Board consideration and
approval is also required for all material contracts and business transactions and all
debt and equity financing proposals.

The Board delegates to management
responsibility for meeting defined corporate objectives, implementing approved strategic
and operating plans, carrying on the Companys business in the ordinary course,
managing the Companys cash flow, evaluating new business opportunities, recruiting
staff and complying with applicable regulatory requirements.

In the event of a conflict of
interest at a meeting of the Board, the conflicted director will in accordance with
corporate law and in accordance with his or her fiduciary obligations as a director of the
Company, disclose the nature and extent of his or her interest to the meeting and abstain
from voting on or against the approval of such participation.

41

---

There are no service contracts
between the Company or any of its directors for benefits upon termination of employment.

Board Committees

The Companys Board of Directors
has appointed one committee, an audit committee (the Audit Committee), which
recommends to the Board of Directors the engagement of the independent auditors of the
Company and reviews with the independent auditors the scope and results of the
Companys audits, the Companys internal accounting controls, and the
professional services furnished by the independent auditors to the Company. The Audit
Committee operates under a written set of rules for its conduct and practices which sets
out its required duties. During fiscal 2005, the Audit Committee met four times, once each
quarter.

The current members of the Audit
Committee are John M. Leask, Gordon P. Leask and Brian D. Edgar.

# 6 D.    EMPLOYEES

As at November 30, 2005, the Company
had no employees.

# 6 E.    SHARE OWNERSHIP

The following table sets forth, as of
November 30, 2005, the number of the Companys common shares beneficially owned by
(a) directors and executive officers of the Company, individually, and as a group,
and (b) the percentage ownership of the outstanding common shares represented by such
shares. The security holders listed below are deemed to be the beneficial owners of common
shares underlying options and other convertible securities which are exercisable or
convertible within 60 days from the above date. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to the shares
shown.

|                         
|-------------------------
|
|                         
|Gordon P. Leask          
|                         
|John M. Leask            
|                         
|Brian D. Edgar           
|                         
|Megan Cameron-Jones      
|                         
|                         
|Robert G. Cuffney        
|                         
|Kareen McKinnon          
|                         
|                         
|Directors and Officers as
|a group (6 persons)      
|                         

|(1) |  | As
of November 30, 2005 there were 59,164,972 common shares of the Company
                    issued and outstanding. Percentage of class is based on the number of
shares                     beneficially owned by the individual (or group, if
applicable), divided by the                     sum of 59,164,972 plus any shares subject
to stock options or other convertible                     securities exercisable by such
individual (or group) within 60 days of November                     30, 2005.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes
1,147,609 common shares held indirectly in the name of Eagle Putt
                    Ventures Inc., a private British Columbia company controlled by Mr.
Leask, and                     750,000 common shares subject to stock options exercisable
within 60 days of                     November 30, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes
231,947 common shares held indirectly in the name of Rangefront
                    Exploration Corp., a private British Columbia company controlled by
Mr. Leask,                     and 750,000 common shares subject to stock options
exercisable within 60 days of                     November 30, 2005.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Includes
750,000 common shares subject to stock options exercisable within 60
                    days of November 30, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes
48,000 common shares held indirectly in the name of Gary Jones,
                    controlled by Ms. Cameron-Jones, and 350,000 common shares subject to
stock                     options exercisable within 60 days of November 30, 2005.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

42

---

|(6) |  | Includes
300,000 common shares subject to stock options exercisable within 60
                    days of November 30, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes
37,500 common shares subject to stock options exercisable within 60
                    days of November 30, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(8) |  | Includes
2,937,500 common shares subject to stock options exercisable within 60
                    days of November 30, 2005.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

Stock Option Plan

Under the Companys stock option
plan effective November 4, 2002 and amended December 12, 2003, the Company may grant
options for up to 7,072,935 common shares to directors, employees and consultants at
exercise prices to be determined by the market value on the date of grant. Vesting of
options is made at the discretion of the Board of Directors at the time the options are
granted with the exception of options granted in relation to investor relations. Options
granted to consultants engaged in investor relations activities vest no earlier than as to
one-quarter upon the grant date and a further one-quarter after each of the following
three three-month periods. The options can be granted for a maximum term of 10 years.

As of November 30, 2005, the
following options are held by directors, executive officers and other employees of the
Company.

|                    
|--------------------
|
|                    
|Cameron-Jones, Megan
|                    
|                    
|Cuffney, Robert     
|                    
|                    
|                    
|                    
|Edgar, Brian D      
|                    
|                    
|Leask, Gordon P     
|                    
|                    
|Leask, John M       
|                    
|                    
|McKinnon, Kareen    
|                    
|                    
|Employees/Others    
|                    
|                    
|                    
|                    

# ITEM 7:    MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

# 7 A.    MAJOR SHAREHOLDERS

The Company is a publicly owned
Canadian corporation, the common shares of which are owned by U.S. residents, Canadian
residents and other foreign residents. The Company is not controlled by another
corporation or any foreign government. No shareholders of the Company have different
voting rights from any other shareholder.

As of November 30, 2005, Pacific
Corporate Trust Company reported that there were 59,164,972 common shares issued and
outstanding. Of those common shares issued, 3,972,250 shares were registered to 41 holders
of record resident in the United States.

The Company is aware of two persons
who beneficially own 5% or more of the Registrants voting securities. The following
table lists as of November 30, 2005, persons and/or companies holding 5% or more
beneficial interest in the Companys outstanding common shares. Unless otherwise
indicated, the shareholders listed possess sole voting and investment power with respect
to the shares shown.

43

---

|5% or Greater Shareholders
|--------------------------
|                          
|
|                          
|Gordon P. Leask (2)       
|Robert McEwen             

|(1) |  | As
of November 30, 2005 there were 59,164,972 common shares of the Company
                    issued and outstanding. Percentage of class is based on the number of
shares                     beneficially owned by the individual, divided by the sum of
59,164,972 plus any                     shares subject to stock options or other
convertible securities exercisable by                     such individual within 60 days
of November 30, 2005.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes
1,147,609 common shares held indirectly in the name of Eagle Putt
                    Ventures Inc., a private British Columbia company controlled by Mr.
Leask, and                     750,000 common shares subject to stock options exercisable
within 60 days of                     November 30, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There has been no significant change
in the percentage ownership held by the major shareholders during the past three years,
except that on or about June 2005, Goldcorp Inc. sold its entire shareholding to Robert
McEwen.

# 7 B.    RELATED PARTY
TRANSACTIONS

The directors, senior officers and
principal shareholders of the Company and associates or affiliates of the foregoing have
had no material interest, direct or indirect, in any transactions in which the Company has
participated since July 1, 2004 which have or will materially affect the Company or any of
its subsidiaries, or that are unusual in their nature or conditions.

There are no outstanding loans or
guarantees made by the Company to or for the benefit of any of the directors, senior
officers or principal shareholders of the Company, nor any associate or affiliate of any
of the foregoing persons.

# 7 C.    INTERESTS OF
EXPERTS AND COUNSEL

Not applicable.

# ITEM 8:    FINANCIAL INFORMATION

# 8 A.    CONSOLIDATED STATEMENTS
AND OTHER FINANCIAL INFORMATION

See Item 17 for details of the
Companys consolidated financial statements which have been prepared by independent
auditors and are accompanied by audit reports, including comparative financial statements
for the latest three financial years audited in accordance with a comprehensive body of
auditing standards.

The financial year end of the Company
is June 30.

Also see Item 5  Operating and
Financial Review and Prospects.

The Company is not and has not been, since
July 1, 2004, a party to any material legal or arbitration proceeding, nor is any material
governmental proceeding involving the Company pending or known to be contemplated.

The Company has not paid any
dividends on its common shares since its incorporation. The Company has no present
intention of paying dividends on its common shares as it anticipates that all available
funds will be invested to finance the growth of its business.

# 8 B.    SIGNIFICANT CHANGES

No significant changes have occurred
since the date of the financial statements included in this Annual Report, except as
disclosed in this Annual Report.

# ITEM 9:    OFFER AND
LISTING DETAILS

The Companys shares were listed
for trading on the Vancouver Stock Exchange, a predecessor to the TSX Venture Exchange, on
October 23, 1989. The CUSIP number is 963900 10 5. The price range of the Companys
common shares during the periods indicated below was as follows:

44

---

|Financial Period
Ended | Financial Period | TSX/V
High | TSX/V
Low
|---------------------- | ---------------- | ---------- | ---------
|November 30, 2005      |                  | Month      |          
|October 31, 2005       |                  | Month      |          
|September 30, 2005     |                  | Month      |          
|August 31, 2005        |                  | Month      |          
|July 31, 2005          |                  | Month      |          
|June 30, 2005          |                  | Month      |          
|September 30, 2005     |                  | Quarter    |          
|June 30, 2005          |                  | Quarter    |          
|March 31, 2005         |                  | Quarter    |          
|December 31, 2004      |                  | Quarter    |          
|September 30, 2004     |                  | Quarter    |          
|June 30, 2004          |                  | Quarter    |          
|March 31, 2004         |                  | Quarter    |          

|Financial Period
Ended | Financial Period | TSX/V
High | TSX/V
Low
|---------------------- | ---------------- | ---------- | ---------
|December 31, 2003      |                  | Quarter    |          
|September 30, 2003     |                  | Quarter    |          
|June 30, 2005          |                  | Annual     |          
|June 30, 2004          |                  | Annual     |          
|June 30, 2003          |                  | Annual     |          
|June 30, 2002          |                  | Annual     |          
|June 30, 2001          |                  | Annual     |          

# ITEM 10:    ADDITIONAL
INFORMATION

# 10 A.    SHARE CAPITAL

Not applicable for Annual
Report.

# 10 B.    NOTICE OF ARTICLES

The new Business Corporations
Act (British Columbia) (the New Act) came into force in British Columbia
on March 29, 2004. The New Act replaces the Company Act (British Columbia) (the
Former Act), which is the statute that previously governed the Company.

Under the New Act, a mandatory
transition rollover to substitute a Notice of Articles for its Memorandum was completed by
the Company effective June 20, 2005, which enabled the Company to alter its articles
to be in line with the new provisions contained in the New Act. Subsequently, at the
annual meeting of shareholders held November 25, 2005, shareholders approved removal of
pre-existing company provisions relating to restrictions contained in the Former Act no
longer required under the New Act, and approved new articles (the New
Articles) by special resolutions approved by a three-quarter majority vote cast by
those shareholders of the Company who, being entitled to do so, vote in person or by proxy
at the Meeting in respect of such resolutions.

The Companys New Articles does
not prescribe any extraordinary limits on the business or purpose of the Company.

Under the New Articles, directors of the
Company: 1) who hold a disclosable interest in a contract or transaction into which the
Company has entered or proposes to enter are not entitled to vote on any directors
resolution to approve that contract or transaction, unless all the directors have a
disclosable interest in that contract or transaction, in which case any or all of those
directors may vote on such resolution; 2) may authorize the Company to borrow money in
amounts, on the security, from the sources and issue bonds, debentures and other debt
obligations, on terms and conditions they consider appropriate; guarantee the repayment of
money; and mortgage, charge, grant a security interest in or give other security on the
whole or any part of the present and future assets and undertaking of the Company; 3) may
authorize the Company to borrow money in amounts, on the security, from the sources and
issue bonds, debentures and other debt obligations, on

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terms and conditions they consider
appropriate; guarantee the repayment of money; and mortgage, charge, grant a security
interest in or give other security on the whole or any part of the present and future
assets and undertaking of the Company; 4) are not required to retire on an age limit and
5) are not required to hold any share in the capital of the Company to become, act or
continue to act as a director of the Company.

All of the authorized share of common
shares of the Company are of the same class and, once issued, rank equally as to
dividends, voting powers, and participation in assets and in all other respects, on
liquidation, dissolution or winding up of the Company, whether voluntary or involuntary,
or any other distribution of the assets of the Company among its shareholders for the
purpose of winding up its affairs after the Company has paid out its liabilities. The
issued common shares are not subject to call or assessment rights or any pre-emptive or
conversion rights. The holders of common shares are entitled to one vote for each share on
all matters to be voted by the shareholders. There are no provisions for redemption,
purchase for cancellation, surrender or to purchase funds.

The Company is authorized to
determine whether the rights of the holders of issued shares of the Company may be altered
only with the approval of the holders of 2/3 or more of the shares of the Company voted at
a meeting of the shareholders of the Company.

General meetings are to be held
annually. All Directors are subject to re-election at each annual general meeting.
Directors may call an extraordinary meeting of shareholders. All registered shareholders
or persons who hold powers of attorney or proxies given to them by registered shareholders
may attend at meetings of shareholders.

There are no limitations on the right
to own securities, imposed by foreign law or by the charter or other constating document
of the Company. There are no provisions in the Companys New Articles or charter
documents that would have the effect of delaying, deferring or preventing a change in the
control of the Company, or that would operate with respect to any proposed merger,
acquisition or corporate restructuring involving the Company or any of its subsidiaries.

There are no conditions imposed by
the Companys New Articles governing changes in the capital where such conditions are
more stringent than is required by the laws of British Columbia. All common shareholders
share equally in the profits of the Company.

# 10 C.    MATERIAL CONTRACTS

Other than contracts entered into in
the ordinary course of business, as described in this Annual Report, neither the Company
nor any member of the group, is a party to any material contracts within the two years
preceding the publication of this document.

# 10 D.    EXCHANGE CONTROLS

Other than as provided in the
Investment Canada Act (Canada) (the Investment Act), there are currently no
limitations imposed by Canadian laws, decrees or regulations that restrict the import or
export of capital, including foreign exchange controls, or that affect the remittance of
dividends to non-resident holders of the Companys securities. However, any such
remittances of dividends paid to United States residents are subject to withholding tax at
a rate equal to a maximum of 15% of the amount paid (see Item 10E Taxation).

The following discussion summarizes
the material features of the Investment Act, in its present form, for a non-resident of
Canada who proposes to acquire common shares of the Company.

The Investment Act regulates the
acquisition of control of a Canadian business by a non-Canadian as defined
under the Investment Act. With respect to the Company, an acquisition of control is
considered to be the acquisition of the majority of its common shares. However, if a
non-Canadian acquires more than one-third of the voting shares of the Company, but less
than a majority, there is a presumed acquisition of control unless it can be established
that the Company is not controlled in fact by the acquirer. All acquisitions of control of
a Canadian business are notifiable (which requires that a notification form be submitted
to Investment Canada within thirty days after the implementation of the investment) unless
the investment is reviewable. If the investment is reviewable, the investment may not be
implemented until the Minister responsible for the Investment Act is, or has been deemed
to be, satisfied that the investment is likely to be of net benefit to Canada.

Where either the acquirer is, or the
Company is presently controlled by, a WTO investor (as that term is defined in the
Investment Act), a direct acquisition of control of the Company will only be reviewable if
the value of the Companys assets, as shown on its audited financial statements for
the most recently completed fiscal year, is equal to or greater than $223 million. This
amount varies each year based on the rate of growth in Canadian gross domestic product.
Other direct acquisitions of control are reviewable if the value of the assets of the
Company, as calculated above, is equal to or greater than $5 million. The $5 million
threshold for review also applies with respect to the acquisition of control of any
Canadian

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business that provides any financial
services or transportation services, is a cultural business, or is engaged in the
production of uranium and owns an interest in or producing uranium property in Canada.

Indirect acquisitions of control
(acquisitions of control of an entity which in turn controls the Company) are not
reviewable under the Investment Act if the acquirer is a WTO investor or if the Company is
controlled by a WTO investor. Otherwise, an indirect acquisition will be reviewable if the
value of the Companys assets is $50 million or more, or if the value of the
Companys assets acquired in the total transaction is in Canada or the acquisition is
not effected through the acquisition of control of a foreign corporation.

Certain types of transactions are
exempt from application of the Investment Act including acquisitions of control of the
Company:

(a)    
          by the acquisition of voting shares or the voting interests by any person in the
          ordinary course of that persons business as a trader or dealer in
          securities;

(b)    
          in connection with the realization of security granted for a loan or other
          financial assistance and not for any purpose related to the Investment Act;

(c)    
          for facilitating its financing and not for any purpose related to the Investment
          Act on the condition that the acquirer divest control within two years after
          control was acquired; and

(d)    
          by reason of an amalgamation, merger, consolidation or corporate reorganization
          following which the ultimate or indirect control in fact of the Company through
          the ownership of voting interests remains unchanged.

There are currently no limitations on
the right of foreign or non-resident owners of common shares to hold or vote such
securities imposed by Canadian law or the Companys charter or other constituent
documents.

# 10 E.    TAXATION

# Certain Canadian Federal
Income Tax Consequences

The discussion under this heading
summarizes the material Canadian federal income tax consequences of acquiring, holding and
disposing of common shares of the Company (Common Shares) for a shareholder of
the Company who is not resident in Canada but is resident in the United States and who
will acquire and hold Common Shares as capital property for the purpose of the Income Tax
Act (Canada) (the Tax Act). This summary does not apply to a shareholder who
carries on business in Canada through a permanent establishment situated in
Canada or performs independent personal services in Canada through a fixed base in Canada
if the shareholders holding in the Company is effectively connected with such
permanent establishment or fixed base.

This summary is based on the
provisions of the Tax Act and the regulations there under and on the Companys
understanding of the administrative practices of Canada Revenue Agency and takes into
account all specific proposals to amend the Tax Act or regulations made by the Minister of
Finance of Canada to April 30, 2005. It has been assumed that there will be no other
relevant amendment of any governing law although no assurance can be given in this
respect. This discussion is general only and is not a substitute for independent advice
from a shareholders own Canadian and U.S. tax advisors. The provisions of the Tax
Act are subject to income tax treaties to which Canada is a party, including the
Canada-United States Income Tax Convention (1980) (the Convention) and the
Protocols to the Convention.

# Dividends on Common
Shares

Under the Tax Act, a non-resident of
Canada is generally subject to Canadian withholding tax at the rate of 25% on dividends
paid or deemed to have been paid to him by a corporation resident in Canada. The
Convention limits the rate to 15% if the shareholder is resident in the United States and
the dividends are beneficially owned by and paid to him, and to 5% if the shareholder is a
corporation that beneficially owns at least 10% of the voting shares of the payor
corporation.

The Convention generally exempts from
Canadian income tax dividends paid to a religious, scientific, literary, educational or
charitable organization or to an organization constituted and operated exclusively to
administer a pension, retirement or employee benefit fund or plan, if the organization is
resident in the United States and is exempt from income tax under the laws of the United
States.

The tax payable on dividends is to be
withheld at source by the company or personnel acting on its behalf. The Company is liable
for the amount of the tax if it fails to so withhold. The taxpayer is liable in any event
if the Company fails to withhold.

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# Disposition of Common
Shares

Under the Tax Act, a taxpayers
capital gain or capital loss from a disposition of Common Shares is the amount, if any, by
which his proceeds of disposition exceed (or are exceeded by, respectively) the aggregate
of his adjusted cost base of the share and reasonable expenses of disposition. One-half of
a capital gain (the taxable capital gain) is included in income, and one-half
of a capital loss in a year (the allowable capital loss) is deductible from
taxable capital gains realized in the same year. The amount by which a shareholders
allowable capital loss exceeds the taxable capital gain in a year may be deducted from a
taxable capital gain realized by the shareholder in the year or in the three previous or
any subsequent year, subject to certain restrictions in the case of a corporate
shareholder.

In the case of a shareholder that is
a corporation, the amount of any capital loss otherwise determined may be reduced, in
certain circumstances, by the amount of dividends previously received in respect of the
shares disposed of, unless the corporation owned the shares for at least 365 days prior to
sustaining the loss and (together with corporations, persons and other entities with whom
the corporation was not dealing at arms length) did not, at the time the dividends
were received, own more than 5% of the shares of any class of the capital stock of the
corporation from which the dividend was received. These loss limitation rules may also
apply where a corporation is a member of a partnership or a beneficiary of a trust that
owned the shares disposed of.

A non-resident of Canada is not
subject to tax under the Tax Act in respect of a capital gain realized upon the
disposition of shares unless the shares represent taxable Canadian property.
Common Shares will not generally constitute taxable Canadian property. common shares of
the Company will constitute taxable Canadian property of a shareholder at a particular
time if the shareholder holds the shares as capital property and used the
shares in carrying on a business in Canada, or if at any time in the five years
immediately preceding the disposition the shareholder owned, either alone or with persons
with whom the shareholder did not deal at arms length, 25% or more of the issued
shares of any class of the share capital of the Company.

Where a United States resident
realizes a capital gain on a disposition of shares that constitute taxable Canadian
property, the Convention relieves the United States resident from liability for
Canadian tax on such capital gains unless:

(a)    
          the value of the shares is derived principally from real property in
          Canada, including the right to explore for or exploit natural resources and
          rights to amounts computed by reference to production,

(b)    
          the shareholder was resident in Canada for 120 months during any period of 20
          consecutive years preceding the disposition, was resident in Canada at any time
          during the 10 years immediately preceding the disposition and the shares were
          owned by him when he ceased to be resident in Canada, or (c) the shares formed
          part of the business property of a permanent establishment or
          pertained to a fixed base used for the purpose of performing independent
          personal services that the shareholder has or had in Canada within the 12 months
          preceding the disposition.

At the present time the value of the
Common Shares is not derived principally from real property in Canada.

Notwithstanding the potential
exemption from Canadian tax provided under the Convention, where a nonresident of Canada
disposes of Common Shares that are taxable Canadian property, the non-resident
is required to file a Canadian income tax return in respect of any such dispositions.

# U.S. Federal Income Tax
Consequences

The following is a summary of the
anticipated material U.S. federal income tax consequences to a U.S. Holder (as defined
below) arising from and relating to the acquisition, ownership, and disposition of Common
Shares.

This summary is for general
information purposes only and does not purport to be a complete analysis or listing of all
potential U.S. federal income tax consequences that may apply to a U.S. Holder as a result
of the acquisition, ownership, and disposition of Common Shares. In addition, this summary
does not take into account the individual facts and circumstances of any particular U.S.
Holder that may affect the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares. Accordingly, this summary is not intended to
be, and should not be construed as, legal or U.S. federal income tax advice with respect
to any U.S. Holder. Each U.S. Holder should consult its own financial advisor, legal
counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax
consequences of the acquisition, ownership, and disposition of Common Shares.

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# Scope of this Disclosure

Authorities

This summary is based on the Internal
Revenue Code of 1986, as amended (the Code), Treasury Regulations (whether
final, temporary, or proposed), published rulings of the Internal Revenue Service
(IRS), published administrative positions of the IRS, the Convention Between
Canada and the United States of America with Respect to Taxes on Income and on Capital,
signed September 26, 1980, as amended (the Canada-U.S. Tax Convention), and
U.S. court decisions that are applicable and, in each case, as in effect and available, as
of the date of this Annual Report. Any of the authorities on which this summary is based
could be changed in a material and adverse manner at any time, and any such change could
be applied on a retroactive basis. This summary does not discuss the potential effects,
whether adverse or beneficial, of any proposed legislation that, if enacted, could be
applied on a retroactive basis.

U.S. Holders

For purposes of this summary, a
U.S. Holder is a beneficial owner of Common Shares that, for U.S. federal
income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a
corporation, or any other entity classified as a corporation for U.S. federal income tax
purposes, that is created or organized in or under the laws of the U.S. or any state in
the U.S., including the District of Columbia, (c) an estate if the income of such estate
is subject to U.S. federal income tax regardless of the source of such income, or (d) a
trust if (i) such trust has validly elected to be treated as a U.S. person for U.S.
federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons have the authority to
control all substantial decisions of such trust.

Non-U.S. Holders

For purposes of this summary, a
non-U.S. Holder is a beneficial owner of Common Shares other than a U.S.
Holder. This summary does not address the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares to non-U.S. Holders. Accordingly,
a non-U.S. Holder should consult its own financial advisor, legal counsel, or accountant
regarding the U.S. federal, U.S. state and local, and foreign tax consequences (including
the potential application of and operation of any tax treaties) of the acquisition,
ownership, and disposition of Common Shares.

U.S. Holders Subject to
Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the
U.S. federal income tax consequences of the acquisition, ownership, and disposition of
Common Shares to U.S. Holders that are subject to special provisions under the Code,
including the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations,
qualified retirement plans, individual retirement accounts, or other tax-deferred
accounts; (b) U.S. Holders that are financial institutions, insurance companies, real
estate investment trusts, or regulated investment companies; (c) U.S. Holders that are
broker-dealers, dealers, or traders in securities or currencies that elect to apply a
mark-to-market accounting method; (d) U.S. Holders that have a functional
currency other than the U.S. dollar; (e) U.S. Holders that are liable for the
alternative minimum tax under the Code; (f) U.S. Holders that own Common Shares as part of
a straddle, hedging transaction, conversion transaction, constructive sale, or other
arrangement involving more than one position; (g) U.S. Holders that acquired Common Shares
in connection with the exercise of employee stock options or otherwise as compensation for
services; (h) U.S. Holders that hold Common Shares other than as a capital asset within
the meaning of Section 1221 of the Code; or (i) U.S. Holders that own, directly or
indirectly, 10% or more, by voting power or value, of the outstanding shares of the
Company. U.S. Holders that are subject to special provisions under the Code, including
U.S. Holders described immediately above, should consult their own financial advisor,
legal counsel or accountant regarding the U.S. federal, U.S. state and local, and foreign
tax consequences of the acquisition, ownership, and disposition of Common Shares.

If an entity that is classified as
partnership (or pass-through entity) for U.S. federal income tax purposes
holds Common Shares, the U.S. federal income tax consequences to such partnership (or
pass-through entity) and the partners of such partnership (or owners of such
pass-through entity) generally will depend on the activities of the
partnership (or pass-through entity) and the status of such partners (or
owners). Partners of entities that are classified as partnerships (or owners of
pass-through entities) for U.S. federal income tax purposes should consult
their own financial advisor, legal counsel or accountant regarding the U.S. federal income
tax consequences of the acquisition, ownership, and disposition of Common Shares.

Tax Consequences Other
than U.S. Federal Income Tax Consequences Not Addressed

This summary does not address the
U.S. state and local, U.S. federal estate and gift, or foreign tax consequences to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares. Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding the U.S.
state and local, U.S. federal estate and gift, and foreign tax

49

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consequences  of the  acquisition,
 ownership,  and disposition of Common Shares.  (See  Taxation--Certain  Canadian
 Federal Income Tax Consequences above).

U.S. 
          Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition
          of Common Shares

Distributions on Common
Shares

General Taxation of
Distributions

A U.S. Holder that receives a
distribution, including a constructive distribution, with respect to the Common Shares
will be required to include the amount of such distribution in gross income as a dividend
(without reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated earnings and profits of the Company. To
the extent that a distribution exceeds the current and accumulated earnings and
profits of the Company, such distribution will be treated (a) first, as a tax-free
return of capital to the extent of a U.S. Holders tax basis in the Common Shares
and, (b) thereafter, as gain from the sale or exchange of such Common Shares. (See more
detailed discussion at Disposition of Common Shares below).

Reduced Tax Rates for
Certain Dividends

For taxable years beginning after
December 31, 2002 and before January 1, 2009, a dividend paid by the Company generally
will be taxed at the preferential tax rates applicable to long-term capital gains if (a)
the Company is a qualified foreign corporation (as defined below), (b) the
U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) such
dividend is paid on Common Shares that have been held by such U.S. Holder for at least 61
days during the 121-day period beginning 60 days before the ex-dividend date
(i.e., the first date that a purchaser of such Common Shares will not be entitled to
receive such dividend).

The Company generally will be a
qualified foreign corporation under Section 1(h)(11) of the Code (a
QFC) if (a) the Company is incorporated in a possession of the U.S., (b) the
Company is eligible for the benefits of the Canada-U.S. Tax Convention, or (c) the Common
Shares are readily tradable on an established securities market in the U.S. However, even
if the Company satisfies one or more of such requirements, the Company will not be treated
as a QFC if the Company is a passive foreign investment company (as defined
below) for the taxable year during which the Company pays a dividend or for the preceding
taxable year. In 2003, the U.S. Department of the Treasury (the Treasury) and
the IRS announced that they intended to issue Treasury Regulations providing procedures
for a foreign corporation to certify that it is a QFC. Although these Treasury Regulations
were not issued in 2004, the Treasury and the IRS have confirmed their intention to issue
these Treasury Regulations. It is expected that these Treasury Regulations will obligate
persons required to file information returns to report a distribution with respect to a
foreign security issued by a foreign corporation as a dividend from a QFC if the foreign
corporation has, among other things, certified under penalties of perjury that the foreign
corporation was not a passive foreign investment company for the taxable year
during which the foreign corporation paid the dividend or for the preceding taxable year.

As discussed below, the Company does
not believe that it was a passive foreign investment company for the taxable
year ended June 30, 2005. (See more detailed discussion at Additional Rules that May
Apply to U.S. Holders below). However, there can be no assurance that the IRS will
not challenge the determination made by the Company concerning its passive foreign
investment company status or that the Company will not be a passive foreign
investment company for the current or any future taxable year. Accordingly, although
the Company expects that it may be a QFC, there can be no assurances that the IRS will not
challenge the determination made by the Company concerning its QFC status, that the
Company will be a QFC for the current or any future taxable year, or that the Company will
be able to certify that it is a QFC in accordance with the certification procedures issued
by the Treasury and the IRS.

If the Company is not a QFC, a
dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is an
individual, estate, or trust, generally will be taxed at ordinary income tax rates (and
not at the preferential tax rates applicable to long-term capital gains). The dividend
rules are complex, and each U.S. Holder should consult its own financial advisor, legal
counsel, or accountant regarding the dividend rules.

Distributions Paid in
Foreign Currency

The amount of a distribution paid to
a U.S. Holder in foreign currency generally will be equal to the US$ value of such
distribution based on the exchange rate applicable on the date of receipt. A U.S. Holder
that does not convert foreign currency received as a distribution into US$ on the date of
receipt generally will have a tax basis in such foreign currency equal to the US$ value of
such foreign currency on the date of receipt. Such a U.S. Holder generally will recognize
ordinary income or loss on the subsequent sale or other taxable disposition of such
foreign currency (including an exchange for US$).

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Dividends Received
Deduction

Dividends paid on the Common Shares
generally will not be eligible for the dividends received deduction. The
availability of the dividends received deduction is subject to complex limitations that
are beyond the scope of this discussion, and a U.S. Holder that is a corporation should
consult its own financial advisor, legal counsel, or accountant regarding the dividends
received deduction.

Disposition of Common
Shares

A U.S. Holder will recognize gain or
loss on the sale or other taxable disposition of Common Shares in an amount equal to the
difference, if any, between (a) the amount of cash plus the fair market value of any
property received and (b) such U.S. Holders tax basis in the Common Shares sold or
otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which
will be long-term capital gain or loss if the Common Shares are held for more than one
year. Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of
Common Shares generally will be treated as U.S. source for purposes of
applying the U.S. foreign tax credit rules. (See more detailed discussion at Foreign
Tax Credit below).

Preferential tax rates apply to
long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There
are currently no preferential tax rates for long-term capital gains of a U.S. Holder that
is a corporation. Deductions for capital losses and net capital losses are subject to
complex limitations. For a U.S. Holder that is an individual, estate, or trust, capital
losses may be used to offset capital gains and up to US$3,000 of ordinary income. An
unused capital loss of a U.S. Holder that is an individual, estate, or trust generally may
be carried forward to subsequent taxable years, until such net capital loss is exhausted.
For a U.S. Holder that is a corporation, capital losses may be used to offset capital
gains, and an unused capital loss generally may be carried back three years and carried
forward five years from the year in which such net capital loss is recognized.

Foreign Tax Credit

A U.S. Holder who pays (whether
directly or through withholding) Canadian income tax with respect to dividends paid on the
Common Shares generally will be entitled, at the election of such U.S. Holder, to receive
either a deduction or a credit for such Canadian income tax paid. Generally, a credit will
reduce a U.S. Holders U.S. federal income tax liability on a dollar-for-dollar
basis, whereas a deduction will reduce a U.S. Holders income subject to U.S. federal
income tax. This election is made on a year-by-year basis and applies to all foreign taxes
paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the
foreign tax credit, including the general limitation that the credit cannot exceed the
proportionate share of a U.S. Holders U.S. federal income tax liability that such
U.S. Holders foreign source taxable income bears to such U.S. Holders
worldwide taxable income. In applying this limitation, a U.S. Holders various items
of income and deduction must be classified, under complex rules, as either foreign
source or U.S. source. In addition, this limitation is calculated
separately with respect to specific categories of income (including passive
income, high withholding tax interest, financial services
income, general income, and certain other categories of income).
Dividends paid by the Company generally will constitute foreign source income
and generally will be categorized as passive income or, in the case of certain
U.S. Holders, financial services income. However, for taxable years beginning
after December 31, 2006, the foreign tax credit limitation categories are reduced to
passive income and general income (and the other categories of
income, including financial services income, are eliminated). The foreign tax
credit rules are complex, and each U.S. Holder should consult its own financial advisor,
legal counsel, or accountant regarding the foreign tax credit rules.

Information Reporting;
Backup Withholding Tax

Payments made within the U.S., or by
a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from certain sales
or other taxable dispositions of, Common Shares generally will be subject to information
reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to
furnish such U.S. Holders correct U.S. taxpayer identification number (generally on
Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified
by the IRS that such U.S. Holder has previously failed to properly report items subject to
backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S.
Holder has furnished its correct U.S. taxpayer identification number and that the IRS has
not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S.
Holders that are corporations generally are excluded from these information reporting and
backup withholding tax rules. Any amounts withheld under the U.S. backup withholding tax
rules will be allowed as a credit against a U.S. Holders U.S. federal income tax
liability, if any, or will be refunded, if such U.S. Holder furnishes required information
to the IRS. Each U.S. Holder should consult its own financial advisor, legal counsel, or
accountant regarding the information reporting and backup withholding tax rules.

51

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# Additional Rules that
May Apply to U.S. Holders

If the Company is a controlled
foreign corporation or a passive foreign investment company (each as
defined below), the preceding sections of this summary may not describe the U.S. federal
income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of
Common Shares.

Controlled Foreign
Corporation

The Company generally will be a
controlled foreign corporation under Section 957 of the Code (a
CFC) if more than 50% of the total voting power or the total value of the
outstanding shares of the Company is owned, directly or indirectly, by citizens or
residents of the U.S., domestic partnerships, domestic corporations, domestic estates, or
domestic trusts (each as defined in Section 7701(a)(30) of the Code), each of which own,
directly or indirectly, 10% or more of the total voting power of the outstanding shares of
the Company (a 10% Shareholder).

If the Company is a CFC, a 10%
Shareholder generally will be subject to current U.S. federal income tax with respect to
(a) such 10% Shareholders pro rata share of the subpart F income (as
defined in Section 952 of the Code) of the Company and (b) such 10% Shareholders pro
rata share of the earnings of the Company invested in United States property
(as defined in Section 956 of the Code). In addition, under Section 1248 of the Code, any
gain recognized on the sale or other taxable disposition of Common Shares by a U.S. Holder
that was a 10% Shareholder at any time during the five-year period ending with such sale
or other taxable disposition generally will be treated as a dividend to the extent of the
earnings and profits of the Company that are attributable to such Common
Shares. If the Company is both a CFC and a passive foreign investment company
(as defined below), the Company generally will be treated as a CFC (and not as a
passive foreign investment company) with respect to any 10% Shareholder. The
Company does not believe that it has previously been, or currently is, a CFC. However,
there can be no assurance that the Company will not be a CFC for the current or any future
taxable year.

Passive Foreign
Investment Company

The Company generally will be a
passive foreign investment company under Section 1297 of the Code (a
PFIC) if, for a taxable year, (a) 75% or more of the gross income of the
Company for such taxable year is passive income or (b) 50% or more of the assets held by
the Company either produce passive income or are held for the production of passive
income, based on the fair market value of such assets (or on the adjusted tax basis of
such assets, if the Company is not publicly traded and either is a controlled
foreign corporation or makes an election). Passive income includes, for
example, dividends, interest, certain rents and royalties, certain gains from the sale of
stock and securities, and certain gains from commodities transactions.

For purposes of the PFIC income test
and asset test described above, if the Company owns, directly or indirectly, 25% or more
of the total value of the outstanding shares of another foreign corporation, the Company
will be treated as if it (a) held a proportionate share of the assets of such other
foreign corporation and (b) received directly a proportionate share of the income of such
other foreign corporation. In addition, for purposes of the PFIC income test and asset
test described above, passive income does not include any interest, dividends,
rents, or royalties that are received or accrued by the Company from a related
person (as defined in Section 954(d) (3) of the Code), to the extent such items are
properly allocable to the income of such related person that is not passive income.

If the Company is a PFIC, the U.S.
federal income tax consequences to a U.S. Holder of the acquisition, ownership, and
disposition of Common Shares will depend on whether such U.S. Holder makes an election to
treat the Company as a qualified electing fund or QEF under
Section 1295 of the Code (a QEF Election) or a mark-to-market election under
Section 1296 of the Code (a Mark-to-Market Election). A U.S. Holder that does
not make either a QEF Election or a Mark-to-Market Election will be referred to in this
summary as a Non-Electing U.S. Holder.

Under Section 1291 of the Code, any
gain recognized on the sale or other taxable disposition of Common Shares, and any
excess distribution (as defined in Section 1291(b) of the Code) paid on the
Common Shares, must be ratably allocated to each day in a Non-Electing U.S. Holders
holding period for the Common Shares. The amount of any such gain or excess distribution
allocated to prior years of such Non-Electing U.S. Holders holding period for the
Common Shares generally will be subject to U.S. federal income tax at the highest tax
applicable to ordinary income in each such prior year. A Non-Electing U.S. Holder will be
required to pay interest on the resulting tax liability for each such prior year,
calculated as if such tax liability had been due in each such prior year.

A U.S. Holder that makes a QEF
Election generally will not be subject to the rules of Section 1291 of the Code discussed
above. However, a U.S. Holder that makes a QEF Election generally will be subject to U.S.
federal income tax on such U.S. Holders pro rata share of (a) the net capital
gain of the Company, which will be taxed as long-term capital gain to such U.S.
Holder, and (b) and the ordinary earnings of the Company, which will be taxed
as ordinary income to such U.S. Holder. A U.S. Holder that makes a QEF Election will be
subject to U.S. federal income tax on such amounts for each

52

---

taxable year in which the Company is
a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by
the Company.

A U.S. Holder that makes a
Mark-to-Market Election generally will not be subject to the rules of Section 1291 of the
Code discussed above. A U.S. Holder may make a Mark-to-Market Election only if the Common
Shares are marketable stock (as defined in Section 1296(e) of the Code). A
U.S. Holder that makes a Mark-to-Market Election will include in gross income, for each
taxable year in which the Company is a PFIC, an amount equal to the excess, if any, of (a)
the fair market value of the Common Shares as of the close of such taxable year over (b)
such U.S. Holders tax basis in such Common Shares. A U.S. Holder that makes a
Mark-to-Market Election will, subject to certain limitations, be allowed a deduction in an
amount equal to the excess, if any, of (a) such U.S. Holders adjusted tax basis in
the Common Shares over (b) the fair market value of such Common Shares as of the close of
such taxable year.

The Company does not believe that it
was a PFIC for the taxable year ended June 30, 2005. There can be no assurance, however,
that the IRS will not challenge the determination made by the Company concerning its PFIC
status or that the Company will not be a PFIC for the current or any future taxable year.

The PFIC rules are complex, and each
U.S. Holder should consult its own financial advisor, legal counsel, or accountant
regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax
consequences of the acquisition, ownership, and disposition of Common Shares.

# 10 F:    DIVIDENDS AND
PAYING AGENTS

Not applicable.

# 10 G.    STATEMENT BY
EXPERTS

Not applicable.

# 10 H.    DOCUMENTS ON DISPLAY

All documents incorporated and
referred by reference in this Annual Report may be viewed at the Companys head
office by giving 48 hours notice to the Corporate Secretary.

# 10 I.    SUBSIDIARY
INFORMATION

Not required.

# ITEM 11:    DISCLOSURES
ABOUT MARKET RISK

The Companys mineral property
interests are all currently at the exploration stage and the Companys operations are
limited to exploring those properties. Therefore, the Companys market risks are
minimal. The Company does, however, have future property payments due in US$. As a
Canadian company, the Companys cash balances are kept in both CAD$ and US$ funds.
Therefore, the Company is exposed to some exchange rate risk. The Company considers the
amount of risk to be manageable and does not currently, nor is it likely in the
foreseeable future to, conduct hedging to reduce its exchange rate risk.

# ITEM 12:    DESCRIPTION OF
OTHER SECURITIES

Not applicable.

# ITEM 13:    DEFAULTS,
DIVIDEND ARREARAGES AND DELIQUENCIES

Not applicable.

# ITEM 14:    MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

53

---

# ITEM 15:    CONTROLS AND
PROCEDURES

Evaluation of Disclosure Controls
and Procedures. The Company maintains a small head office staff which, because of its
size, precludes the functioning of all internal controls, most notably division of duties.
To compensate for this situation management through its Chief Financial Officer performs a
thorough review of any and all financial and corporate information disclosed to the public
markets. In addition, the Companys Audit Committee reviews and recommends to the
Board of Directors approval of any and all financial information reviewed and referred to
it by management for disclosure to the public markets.

The Companys Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the Companys
disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15
under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as
of the end of the period covered by this Annual Report (the Evaluation Date).
Based on such evaluation, such officers have concluded that, as of the Evaluation Date,
the Companys disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company required to be included in
our reports filed or submitted under the Exchange Act.

Changes in Internal Controls over
Financial Reporting. During the fiscal year covered by this Annual Report, there have
not been any changes in the Companys internal controls over financial reporting or
in other factors that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

# ITEM 16:    AUDIT
COMMITTEE FINANCIAL EXPERT, CODE OF ETHICS, PRINCIPAL ACCOUNTANT FEES AND SERVICES,
EXEMPTIONS FROM LISTINGSTANDARDS FOR AUDIT COMMITTEES, PURCHASES OF EQUITY SECURITIES
BY THE ISSUER AND AFFILIATED PURCHASERS

# 16 A.    AUDIT COMMITTEE
FINANCIAL EXPERT

The Company currently does not have
an audit committee financial expert serving on its audit committee.  The
Companys Committee consists of three directors, all of whom are financially
literate, have experience with public companies, and are very knowledgeable about the
Companys business and financial position. Currently, the Companys operations
are entirely exploratory in nature and the Board of Directors does not believe an audit
committee financial expert is needed at this time.

# 16 B.    CODE OF ETHICS

The Company does not currently
believe that a Code of Ethics is necessary due to the small size of the Companys
management team (four officers and no employees).

# 16 C.    PRINCIPAL
ACCOUNTANT FEES AND SERVICES

Davidson & Company serve as the
independent auditors for the Company and have acted as the Companys independent
auditor for the fiscal years ended June 30, 2005 and June 30, 2004. The chart below sets
forth the total amount billed the Company by Davidson & Company for services performed
in the last two fiscal years and breaks down these amounts by category of service (for
audit fees, audit-related fees, tax fees and other fees) in CAD$.

Audit Fees are the
aggregate fees billed by Davidson & Company for the audit of the Companys annual
consolidated financial statements, reviews of interim consolidated financial statements
and attestation services that are provided in connection with statutory and regulatory
filings or engagements.

Audit-Related Fees are
fees charged by Davidson & Company for assurance and related services that are
reasonably related to the performance of the audit or review of the Companys
consolidated financial statements and are not reported under Audit Fees. This
category comprises fees billed for independent accountant review of the interim
consolidated financial statements and management discussion and analysis, as well as
advisory services associated with the Companys financial reporting.

Tax Fees are fees for
professional services rendered by Davidson & Company for tax compliance, tax advice on
actual or contemplated transactions.

Fees disclosed under the category
All Other Fees for the 2004 fiscal year are related to a review of a Company
private placement.

54

---

|                    | Fiscal Year Ended
June 30
|------------------- | -------------------------
|
|Audit Fees:         |                          
|Audit Fees:         |                          
|Audit-Related Fees: |                          
|Tax Fees            |                          
|All Other Fees      |                          
|Total Fees:         |                          

Audit Committees
pre-approval policies and procedures

The Audit Committee nominates and
engages the independent auditors to audit the consolidated financial statements, and
approves all audit services, audit-related services, tax services and other services
provided by Davidson & Company. Any services provided by Davidson & Company that
are not specifically included within the scope of the audit must be pre-approved by the
Audit Committee prior to any engagement.

# 16 D.    EXEMPTIONS FROM
THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

# 16 E.    PURCHASES OF
EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

# ITEM 17:    FINANCIAL STATEMENTS

The consolidated financial statements
are presented in CAD$ and were prepared in accordance with Canadian GAAP, the application
of which, in the case of the Company, conforms in all material respects for the years
presented with US GAAP, except as disclosed in Note 15 to the consolidated financial
statements forming part hereof.

The financial statements and related
schedules as required under item 17 are attached hereto and found immediately following
the text of this Annual Report. The audit report of Davidson & Company is included
herein immediately preceding the consolidated financial statements.

55

---

# WHITE KNIGHT RESOURCES
LTD.

# CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)

# JUNE 30, 2005

56

---



INDEPENDENT
AUDITORS REPORT

To the Shareholders of
White Knight Resources Ltd.

We have audited the consolidated
balance sheets of White Knight Resources Ltd. as at June 30, 2005 and 2004 and the
consolidated statements of operations, shareholders equity and cash flows for the
years ended June 30, 2005, 2004 and 2003. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance
with Canadian generally accepted auditing standards and with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.

In our opinion, these consolidated
financial statements present fairly, in all material respects, the financial position of
the Company as at June 30, 2005 and 2004 and the results of its operations and its cash
flows for the years ended June 30, 2005, 2004 and 2003 in accordance with Canadian
generally accepted accounting principles.

DAVIDSON &
COMPANY LLP

|Vancouver, Canada
September 14, 2005 | Chartered Accountants
|------------------------------------ | ---------------------

# COMMENTS BY AUDITORS
FOR U.S. READERS ON CANADA 
- U.S. REPORTING DIFFERENCE

In the United States, reporting
standards for auditors require the addition of an explanatory paragraph (following the
opinion paragraph) when the financial statements are affected by conditions and events
that cast substantial doubt on the Companys ability to continue as a going concern,
such as those described in Note 1 to the financial statements. Our report to the
shareholders dated September 14, 2005 is expressed in accordance with Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditors report when these are adequately disclosed in the financial statements.

DAVIDSON &
COMPANY LLP

|Vancouver, Canada
September 14, 2005 | Chartered Accountants
|------------------------------------ | ---------------------

A Member ofSC
INTERNATIONAL

1200  609
Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6Telephone (604) 687-0947 Fax (604) 687-6172

57

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WHITE KNIGHT RESOURCES LTD.CONSOLIDATED BALANCE SHEETS 
(Expressed in Canadian Dollars) 
AS AT JUNE 30

|                                           
|-------------------------------------------
|
|                                           
|ASSETS                                     
|                                           
|Current                                    
|Cash and cash equivalents                  
|Temporary investments (Note 3)             
|Receivables (Note 7)                       
|Prepaid expenses                           
|                                           
|                                           
|Total current assets                       
|Mineral property interests(Note 4)         
|Deferred exploration costs(Note 5)         
|Equipment(Note 6)                          
|Restricted reclamation bonds(Note 11)      
|                                           
|                                           
|Total assets                               
|                                           
|LIABILITIES AND SHAREHOLDERS' EQUITY       
|                                           
|Current                                    
|Accounts payable and accrued liabilities   
|Due to related parties (Note 7)            
|                                           
|Total current liabilities                  
|                                           
|                                           
|Shareholders' equity                       
|Capital stock (Note 8)                     
|Authorized:                                
|100,000,000 common shares without par value
|Issued and outstanding                     
|54,089,386 (2004 - 50,029,386)             
|Contributed surplus                        
|Deficit                                    
|                                           
|Total shareholders' equity                 
|                                           
|Total liabilities and shareholders' equity 
|                                           

Nature and continuance of operations(Note 1) Commitments(Note 13)

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

58

---

WHITE KNIGHT RESOURCES LTD.CONSOLIDATED STATEMENTS OF OPERATIONS 
(Expressed in Canadian Dollars) 
YEAR ENDED JUNE 30

|                                                                     
|---------------------------------------------------------------------
|
|                                                                     
|ADMINISTRATION COSTS                                                 
|Amortization                                                         
|Audit                                                                
|Bank charges and interest                                            
|Consulting                                                           
|Consulting - related party (Note 7)                                  
|Consulting - stock-based compensation (Note 8)                       
|Investor relations and shareholder information                       
|Legal                                                                
|Management fees - related party (Note 7)                             
|Office and miscellaneous                                             
|Rent                                                                 
|Telephone                                                            
|Transfer agent and listing fees                                      
|Travel and entertainment                                             
|Wages and benefits                                                   
|                                                                     
|                                                                     
|Loss before other items                                              
|                                                                     
|                                                                     
|OTHER ITEMS                                                          
|Write-off of deferred exploration costs (Note 5)                     
|Interest income                                                      
|Loss on foreign exchange                                             
|Unrealized recovery (loss) on temporary 
        investments (Note 3)
|Loss on disposal of equipment                                        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Loss for the year                                                    
|                                                                     
|Basic and diluted loss per common share                              
|                                                                     
|Weighted average number of common shares outstanding                 
|                                                                     

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

59

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WHITE KNIGHT RESOURCES LTD.CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY 
(Expressed in Canadian Dollars)

|                                 
|---------------------------------
|
|                                 
|Balance, June 30, 2002           
|                                 
|Shares issued for:               
|Mineral property interests       
|Exercise of stock options        
|Loss for the year                
|                                 
|                                 
|Balance, June 30, 2003           
|                                 
|Shares issued for:               
|Mineral property interests       
|Exercise of stock options        
|Exercise of warrants             
|Private placement                
|Finder's fee                     
|Private placement                
|Private placement                
|Private placement expenses       
|Stock-based compensation         
|Loss for the year                
|                                 
|                                 
|Balance, June 30, 2004           
|                                 
|Shares issued for:               
|Mineral property interests       
|Exercise of stock options(Note 8)
|Exercise of warrants(Note 8)     
|Exercise of broker's warrants    
|(Note 8)                         
|Private placement                
|Stock-based compensation         
|Less: Fair market value of stock 
|options and broker's             
|warrants exercised               
|Loss for the year                
|                                 
|                                 
|Balance, June 30, 2005           
|                                 

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

60

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WHITE KNIGHT RESOURCES
LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Expressed in Canadian Dollars) 
YEAR ENDED JUNE 30

|                                                                
|----------------------------------------------------------------
|
|                                                                
|CASH FLOWS FROM OPERATING ACTIVITIES                            
|Loss for the year                                               
|Items not affecting cash:                                       
|Amortization                                                    
|Write-off of deferred exploration costs                         
|Loss on disposal of equipment                                   
|Stock-based compensation                                        
|Unrealized recovery (loss) on temporary investments             
|Changes in non-cash working capital items:                      
|Decrease (increase) in receivables                              
|Increase in prepaid expenses                                    
|Increase (decrease) in accounts payable and accrued liabilities 
|Increase (decrease) in due to related parties                   
|                                                                
|Net cash used in operating activities                           
|                                                                
|CASH FLOWS FROM FINANCING ACTIVITIES                            
|Issuance of capital stock                                       
|                                                                
|Net cash provided by financing activities                       
|                                                                
|CASH FLOWS FROM INVESTING ACTIVITIES                            
|Acquisition of mineral property interests                       
|Deferred exploration costs                                      
|Reclamation bond refunded (posted)                              
|Acquisition of  temporary investments                           
|Proceeds from disposal of equipment                             
|Acquisition of equipment                                        
|                                                                
|Net cash used in investing activities                           
|                                                                
|Increase (decrease) in cash and cash equivalents during the year
|                                                                
|Cash and cash equivalents, beginning of year                    
|                                                                
|Cash and cash equivalents, end of year                          
|                                                                

Supplemental disclosures with
respect to cash flows(Note 12)

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

61

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|1. |  | NATURE
AND CONTINUANCE OF OPERATIONS
|-- |  | ------------------------------------

| | White
Knight  Resources  Ltd.  (the  Company)  is a Canadian  company  incorporated  in
British  Columbia.  The          Company is primarily engaged in the acquisition and
exploration of mineral property interests.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
the date of these consolidated financial statements, the Company has not been able to
identify an ore body on any of its mineral property interests. The ability of the Company
to realize the costs it has incurred to date on these mineral property interests is
dependent upon the Company being able to lever its property interests and cash, by way of
exploration activities and option/joint ventures, into assets of greater value or to
identify a commercial ore body, to finance its exploration costs and to resolve any
environmental, regulatory or other constraints which may hinder the successful
development of the mineral property interest. To date, the Company has not earned
revenues and is considered to be in the exploration stage.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | These
consolidated financial statements have been prepared assuming the Company will continue
on a going concern basis. The Company has incurred losses since inception and the ability
of the Company to continue as a going-concern depends upon its ability to develop
profitable operations and to continue to raise adequate financing. Management is actively
targeting sources of additional financing through alliances with financial, exploration
and mining entities, or other business and financial transactions which would assure
continuation of the Companys operations and exploration programs. In order for the
Company to meet its liabilities as they come due and to continue its operations, the
Company is solely dependent upon its ability to generate such financing. The Company has
sufficient resources to meet its obligations for the foreseeable future at its current
level of activity.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | There
can be no assurance that the Company will be able to continue to raise funds in which
case the Company may be unable to meet its obligations. Should the Company be unable to
realize on its assets and discharge its liabilities in the normal course of business, the
net realizable value of its assets may be materially less than the amounts recorded on
the consolidated balance sheets.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
amounts are in Canadian dollars unless otherwise stated.
| | ------------------------------------------------------------

|               
|---------------
|
|               
|Working capital
|Deficit        
|               

|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

| | These
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (Canadian GAAP). The significant
accounting policies adopted by the Company are as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Use
of estimates
| | ----------------

| | The
preparation of financial statements in accordance with Canadian GAAP requires management
to make estimates and assumptions that affect the reported amounts 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 year.
Actual results could differ from these estimates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

62

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WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|2. |  | SIGNIFICANT
ACCOUNTING POLICIES (contd)
|-- |  | -----------------------------------------

| | Principles
of consolidation
| | ---------------------------

| | These
consolidated financial statements include the accounts of the Company and the following
subsidiaries, all of which are 100% owned:
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | White Knight Gold (U.S.) Inc.
CUN Minerals Inc.
Quito Gold Corp.
| | ----------------------------------------------------------------

| | All
material inter-company transactions have been eliminated upon consolidation.
| | --------------------------------------------------------------------------------

| | Cash
and cash equivalents
| | -------------------------

| | Cash
and cash equivalents consist of cash on hand and highly liquid investments with original
maturities of three months or less. At June 30, 2005 and 2004, cash and cash equivalents
consisted of cash held in financial institutions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Temporary
investments
| | ---------------------

| | Temporary
investments are recorded at the lower of cost or market on an aggregate basis. For
temporary investments in which unrealized losses had been recognized in a previous year,
any subsequent recoveries in market value are recorded up to original cost. This occurred
for the first time during fiscal 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mineral
property interests and deferred exploration costs
| | ---------------------------------------------------------

| | The
Company records mineral property interests, which consist of the right to explore for
mineral deposits, at cost. The Company records deferred exploration costs, which consist
of costs attributable to the exploration of mineral property interests, at cost. All
direct and indirect costs relating to the acquisition and exploration of these mineral
property interests are capitalized on the basis of specific claim blocks until the
mineral property interests to which they relate are placed into production, the mineral
property interests are disposed of through sale or where management has determined there
to be an impairment. If a mineral property interest is abandoned, the mineral property
interest and deferred exploration costs will be written off to operations in the period
of abandonment.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
an ongoing basis, the capitalized costs are reviewed on a property-by-property basis to
consider if there is any impairment on the subject mineral property interest. Managements
determination for impairment is based on: i) whether the Companys exploration
programs on the mineral property interests have significantly changed, such that
previously identified resource targets are no longer being pursued; ii) whether
exploration results to date are promising and whether additional exploration work is
being planned in the foreseeable future or iii) whether remaining lease terms are
insufficient to conduct necessary studies or exploration work. As at June 30, 2005 and
2004, management believes that no impairment relating to the mineral property interests
and deferred exploration costs was required.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
recorded cost of mineral property interests and deferred exploration costs is based on
cash paid and the assigned value of share consideration issued for mineral property
interest acquisitions and exploration costs incurred. The recorded amount may not reflect
recoverable value as this will be dependent on future development programs, the nature of
the mineral deposit, commodity prices, adequate funding and the ability of the Company to
bring its projects into production.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Canadian
GAAP Conflict in Accounting for Mineral Property Interests and Deferred Exploration Costs
| | --------------------------------------------------------------------------------------------------

| | In
March 2000, the Accounting Standards Board of the Canadian Institute of Chartered
Accountants (CICA) issued Accounting Guideline No. 11 Enterprises in
the Development Stage (AcG 11). AcG 11 addresses three
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

63

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WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|2. |  | SIGNIFICANT
ACCOUNTING POLICIES (contd)
|-- |  | -----------------------------------------

| | distinct
issues: i) the capitalization of costs/expenditures; ii) impairment; and iii) disclosure.
Prior to its issuance, development stage entities were exempt from following certain
aspects of Canadian GAAP. AcG 11 requires that all companies account for transactions
based on the underlying characteristics of the transaction rather than the maturity of
the enterprise. In addition, AcG 11 requires specific disclosure of information by
development stage companies.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2002, the Emerging Issues Committee (EIC) of the CICA issued EIC-126
Accounting by Mining Enterprises for Exploration Costs (EIC-126)
which interprets how AcG 11 affects mining companies with respect to the deferral of
exploration costs. EIC-126 refers to CICA Handbook Section 3061 Property, Plant and
Equipment (HB 3061), paragraph .21, which states that for a mineral
property interest, the cost of the asset includes exploration costs if the enterprise
considers that such costs have the characteristics of property, plant and equipment.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | EIC-126
then states that a mining enterprise that has not established mineral reserves
objectively, and therefore does not have a basis for preparing a projection of the
estimated cash flow from the mineral property interest, is not precluded from considering
the exploration costs to have the characteristics of property, plant and equipment.
EIC-126 also sets forth the EICs consensus that a mining enterprise in the
development stage is not required to consider the conditions in AcG 11 regarding
impairment in determining whether exploration costs may be initially capitalized. With
respect to impairment of capitalized exploration costs, EIC-126 sets forth the EICs
consensus that a mining enterprise in the development stage that has not established
mineral reserves objectively, and, therefore, does not have a basis for preparing a
projection of the estimated cash flow from the property, is not obliged to conclude that
capitalized costs have been impaired. However, such an enterprise should consider the
conditions set forth in AcG 11 and HB 3061 in determining whether a subsequent write-down
of capitalized exploration costs related to mineral property interests is required.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
disclosed above, the Company considers that its mineral property interests and deferred
exploration costs have the characteristics of property, plant and equipment, and,
accordingly, the Company has chosen to classify its mineral property interests and
deferred exploration costs as tangible assets in accordance with its interpretation of
Canadian GAAP.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Although
the Company believes its accounting policy is appropriate and consistent with Canadian
GAAP, there is an alternative interpretation of Canadian GAAP that would consider them to
be intangible assets as a result of the issuance of CICA Handbook Section 1581 Business
Combinations (HB 1581) and CICA Handbook Section 3062 Goodwill
and Other Intangible Assets (HB 3062).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | This
alternative interpretation under HB 1581 and HB 3062 would provide for the capitalization
of a contract based mining asset as an intangible asset at its fair value at the time it
was acquired, either as an individual asset purchase or as part of a business
combination. For exploration stage mineral property interests and deferred exploration
costs such as those owned by the Company, the excess of the carrying value over the
residual value of the intangible assets would be amortized on a straight-line basis over
the period in which the Company expected to complete its exploration process or convert,
develop or further explore the underlying properties. For the Company, a reasonable
estimate of this amortization period would be 5 years.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September, 2004, the CICA amended the guidance in HB 3062 to remove the example of
mineral rights as this reference may have implied that mineral rights are necessarily an
intangible asset. This amendment confirmed the Companys current method of
accounting for mineral property interests. Unless alternative guidance is provided, the
Company expects to continue accounting for these assets as tangible assets.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

64

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|2. |  | SIGNIFICANT
ACCOUNTING POLICIES (contd)
|-- |  | -----------------------------------------

| | Asset
retirement obligations
| | ----------------------------

| | Effective
July 1, 2004, the Company recognizes the fair value of a liability for an asset
retirement obligation in the year in which it is incurred when a reasonable estimate of
fair value can be made. The carrying amount of the related long-lived asset is increased
by the same amount as the liability. Changes in the liability for an asset retirement
obligation due to the passage of time will be measured by applying an interest method of
allocation. The amount will be recognized as an increase in the liability and an
accretion expense in the statement of operations. Changes resulting from revisions to the
timing or the amount of the original estimate of undiscounted cash flows are recognized
as an increase or a decrease in the carrying amount of the liability for an asset
retirement obligation and the cost of the related long-lived asset. At June 30, 2005,
there are no asset retirement obligations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Impairment
of long-lived assets and long-lived assets to be disposed of
| | -----------------------------------------------------------------------

| | Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount and the fair value less costs to sell.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Risk
management
| | ---------------

| | The
Companys largest non-monetary assets are its mineral property interests in the
United States of America. The Company could accordingly be at risk for foreign currency
fluctuations and developing legal and political environments.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company does not maintain significant cash or other monetary assets or liabilities in the
United States.
| | ------------------------------------------------------------------------------------------------------------

| | The
Company relies on local consultants for the management of its exploration activities and
for legal and accounting matters.
| | ------------------------------------------------------------------------------------------------------------------------------

| | Equipment
and amortization
| | --------------------------

| | Equipment
is recorded at cost and amortization is calculated at the following rates per annum using
the declining-balance method:
| | ---------------------------------------------------------------------------------------------------------------------------------

|                                 | 
|-------------------------------- | 
|Vehicles and technical equipment | 
|Office equipment                 | 

| | Foreign
currency translation
| | ----------------------------

| | The
Companys subsidiaries are integrated foreign operations and are translated into
Canadian dollar equivalents using the temporal method. Monetary items are translated at
the exchange rate in effect at the balance sheet date; non-monetary items are translated
at historical exchange rates. Income and expense items are translated at the average
exchange rate for the period. Translation gains and losses are reflected in loss for the
year.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

65

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|2. |  | SIGNIFICANT
ACCOUNTING POLICIES (contd)
|-- |  | -----------------------------------------

| | Stock-based
compensation
| | ------------------------

| | Effective
July 1, 2002, the Company adopted the CICA Handbook Section 3870 Stock-Based
Compensation and Other Stock-Based Payments, which recommends the fair value-based
methodology for measuring compensation costs. The section permitted, and the Company
adopted, the use of the intrinsic value-based method, which recognizes compensation cost
for awards to employees and directors only when the market price exceeds the exercise
price at date of grant, but requires pro-forma disclosure of earnings and earnings per
share as if the fair value method had been adopted. Any consideration paid by the option
holders to purchase shares is credited to capital stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
July 1, 2003, the Company recognizes compensation expense, on a prospective basis, for
all stock options and warrants granted using the fair value based method of accounting.
Pro forma disclosures of loss and loss per share as if the fair value based accounting
method had been used to account for stock-based compensation for any options granted
before July 1, 2003 but on or after July 1, 2002 are provided in the notes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future
income taxes
| | -------------------

| | Future
income taxes are recorded using the asset and liability method. Under the asset and
liability method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Future tax assets and
liabilities are measured using the enacted or substantively enacted tax rates expected to
apply when the asset is realized or the liability settled. The effect on future tax
assets and liabilities of a change in tax rates is recognized in income in the period
that substantive enactment or enactment occurs. To the extent that the Company does not
consider it more likely than not that a future tax asset will be recovered, it provides a
valuation allowance against the excess.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loss
per share
| | --------------

| | The
Company uses the treasury stock method to compute the dilutive effect of options,
warrants and similar instruments. Under this method, the dilutive effect on earnings per
share is recognized on the use of the proceeds that could be obtained upon exercise of
options, warrants and similar instruments. It assumes that the proceeds would be used to
purchase common shares at the average market price during the year. The weighted average
number of common shares outstanding at June 30, 2005 of 53,091,304 (2004  39,038,472;
2003  28,958,186) does not include the 9,808,233 (2004  11,964,899; 2003
5,649,308) warrants outstanding and the 3,385,000 (2004  3,665,000; 2003
3,075,000) stock options outstanding.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Basic
loss per share is calculated using the weighted-average number of shares outstanding
during the year.
| | -----------------------------------------------------------------------------------------------------------

| | Comparative
figures
| | -------------------

| | Certain
comparative figures have been reclassified to conform with the current years
presentation.
| | ---------------------------------------------------------------------------------------------------

|3. | TEMPORARY INVESTMENTS
|-- | ---------------------

| | Temporary
investments consist of highly liquid bonds with a carrying value at June 30, 2005 of
$10,895,443 and a fair value of $10,931,667. The recovery reported in the consolidated
financial statements of $31,404 related to temporary investments is a partial recovery of
the unrealized loss on temporary investments reported in fiscal 2004 of $42,999.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

66

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. | MINERAL PROPERTY INTERESTS
|-- | --------------------------

|                       
|-----------------------
|
|                       
|Nevada Properties      
|Benmark                
|Celt                   
|Cottonwood             
|Fye Canyon             
|Gold Bar Horst         
|Gold Pick              
|Goldstone              
|Hunter                 
|Ian                    
|Indian Ranch           
|Knolls                 
|McClusky Pass          
|New Pass               
|Pat Canyon             
|Slaven Canyon          
|South Cabin Creek      
|Squaw Creek            
|Tonkin Summit          
|Other                  
|                       
|Total Nevada Properties
|                       

|                       
|-----------------------
|
|                       
|Nevada Properties      
|Benmark                
|Celt                   
|Cottonwood             
|Fye Canyon             
|Gold Bar Horst         
|Gold Pick              
|Goldstone              
|Hunter                 
|Indian Ranch           
|McClusky Pass          
|New Pass               
|Pat Canyon             
|Slaven Canyon          
|South Cabin Creek      
|Squaw Creek            
|Tonkin Summit          
|                       
|Total Nevada Properties
|                       

67

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. |  | MINERAL
PROPERTY INTERESTS (contd)
|-- |  | ------------------------------------

|                       
|-----------------------
|
|                       
|Nevada Properties      
|Cottonwood             
|Gold Bar Horst         
|Gold Pick              
|Hunter                 
|Indian Ranch           
|McClusky Pass          
|New Pass               
|Slaven Canyon          
|South Cabin Creek      
|Squaw Creek            
|                       
|Total Nevada Properties
|                       

| | Title
to mineral property interests 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 conveyancing history characteristic of many mineral claims.
The Company has investigated title to all of its mineral property interests and, to the
best of its knowledge, expects title to all of its interests to be in good standing. The
mineral property interests in which the Company has committed to earn an interest are
located in the United States and the Company is therefore relying on advice by legal
counsel who are basing such advice on the laws of the United States.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Celt,
Eureka County, Nevada
| | ---------------------------

| | In
fiscal 2004, the Company acquired the property by staking. During the 2005 fiscal year,
Teck Cominco American Incorporated (TCAI) elected to earn an initial 51%
interest in the property pursuant to its rights under a Financing and Acquisition
Agreement. The terms of the agreement provide for exploration expenditures of
US$4,000,000 and cash payments of US$750,000 which must be incurred and paid to the
Companys U.S. subsidiary in annual increments prior to December 31, 2008. TCAI has
made a firm commitment to incur US$500,000 in exploration expenditures by December 31,
2005. Upon TCAI vesting its 51% interest, TCAI and the Company will form a joint venture
to further develop the property. When the joint venture completes the earlier of US$8.0
million in expenditures or a preliminary feasibility study, TCAI will have a one-time
option to elect to earn an additional 9% interest in the property by funding and
completing a feasibility study. Upon TCAI earning its additional interest and the
approval of a production plan, the Company will have the option to request that TCAI
arrange financing for the Companys share of the capital costs required to develop
the property. If the Company exercises this option TCAI shall commit to use its best
efforts to arrange or provide project debt financing for not less than 60% of projected
capital costs on a limited recourse basis after technical completion. If project costs
exceed the amount available for debt financing and the parties elect nonetheless to put
the property into production then at the Companys election TCAI shall also arrange
or provide the Companys share of equity financing on a subordinate loan basis at
LIBOR plus 4%. The property is comprised of 608 claims.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cottonwood,
Eureka County, Nevada
| | ---------------------------------

| | In
fiscal 2002, the Company staked 56 claims and executed a mining lease agreement to
acquire six adjacent claims. Under the terms of the agreement, the Company has made lease
payments totalling US$6,000 and has issued 60,000 common shares of the Company at a value
of $33,800. In addition, the Company is required to make a further lease payment of
US$3,000 and issue a further 20,000 common shares of the Company over the next one-year
period, and thereafter is required to make annual lease payments of US$5,000. The Company
has staked an additional 28 claims in the surrounding area.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

68

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. |  | MINERAL
PROPERTY INTERESTS (contd)
|-- |  | ------------------------------------

| | Fye
Canyon, Eureka County, Nevada
| | ---------------------------------

| | In
fiscal 2004, the Company executed a mining lease agreement to acquire 114 claims (the
Underlying Fye Agreement). Under the terms of the agreement, the Company has
made an initial lease payment of US$5,000 which will increase by US$5,000 per year to a
maximum of US$50,000 per year. The underlying royalty retained by the owner is 2% of net
smelter returns up to a maximum of US$1,000,000 after which it is reduced to 1% of net
smelter returns to a maximum of US$5,000,000. During the 2005 fiscal year, the Company
entered into a Financing and Acquisition Agreement with TCAI whereby TCAI was granted the
option to earn an initial 51% interest in the property. The terms of the agreement
provide for exploration expenditures of US$4,000,000, cash payments of US$750,000 which
must be incurred and paid to the Companys U.S. subsidiary in annual increments
prior to December 31, 2008, and the assumption of all obligations under the Underlying
Fye Agreement. TCAI has made a firm commitment to incur US$500,000 in exploration
expenditures by December 31, 2005. Upon TCAI vesting its 51% interest, TCAI and the
Company will form a joint venture to further develop the property. When the joint venture
completes the earlier of US$8.0 million in expenditures or a preliminary feasibility
study, TCAI will have a one-time option to elect to earn an additional 9% interest in the
property by funding and completing a feasibility study. Upon TCAI earning its additional
interest and the approval of a production plan, the Company will have the option to
request that TCAI arrange financing for the Companys share of the capital costs
required to develop the property. If the Company exercises this option TCAI shall commit
to use its best efforts to arrange or provide project debt financing for not less than
60% of projected capital costs on a limited recourse basis after technical completion. If
project costs exceed the amount available for debt financing and the parties elect
nonetheless to put the property into production then at the Companys election TCAI
shall also arrange or provide the Companys share of equity financing on a
subordinate loan basis at LIBOR plus 4%. An additional 231 claims have been staked in the
area of interest.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Hunter,
Eureka County, Nevada
| | -----------------------------

| | In
fiscal 2002, the Company staked 46 claims and executed a mining lease agreement to
acquire two adjacent claims. Under the terms of the agreement, the Company has made lease
payments totalling US$10,000 and issued 80,000 common shares of the Company at a value of
$37,800. In addition, the Company is required to make a further lease payment of US$4,000
and issue a further 20,000 common shares of the Company over the next one-year period,
and thereafter is required to make annual lease payments of US$7,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Indian
Ranch, Eureka County, Nevada
| | -----------------------------------

| | In
fiscal 1994, the Company entered into a lease agreement for a 100% interest in 48 claims
by issuing 100,000 common shares of the Company. The agreement is subject to a 6% net
smelter return royalty payable to the lessee. The agreement was amended during a prior
year whereby the Company secured the ability to buy down the 6% net smelter return
royalty to 3% by making a payment of US$500,000 and extending the lease term to 2014. The
Company holds an additional 496 claims within the area of interest.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
fiscal 1997, the Company entered into an option agreement with Chapleau Resources Ltd. (Chapleau).
Pursuant to the terms of the agreement and the subsequent amendment, Chapleau was vested
a 40% undivided interest in the property in 2001.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
fiscal 2001, the Company and Chapleau entered into an option agreement with Kennecott
Exploration Company (Kennecott) whereby Kennecott could earn a 60% interest
in the property by making certain option payments and incurring certain exploration
expenditures. After paying the Company certain option payments, Kennecott terminated the
agreement in November 2001. Upon termination of the Kennecott agreement, Chapleaus
interest in the property was reduced to a 25% undivided interest, leaving the Company
with a 75% undivided interest in the property.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

69

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. |  | MINERAL
PROPERTY INTERESTS (contd)
|-- |  | ------------------------------------

| | Indian
Ranch, Eureka County, Nevada (contd)
| | ---------------------------------------------

| | In
fiscal 2003, the Company and Chapleau entered into an option-joint venture agreement with
Placer Dome U.S. Inc. (PDUS). Under the terms of the agreement, PDUS may earn
a 60% interest in the property by incurring minimum work expenditures of US$2.0 million
over a four year period and reimbursing the companies for their 2002 claim filing costs.
Upon vesting its 60% ownership, PDUS can elect to earn an additional 15% by financing a
feasibility study on the property.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New
Pass, Churchill County, Nevada
| | ----------------------------------

| | In
fiscal 1998, the Company purchased a 100% interest in the property from Quest USA
Resources Inc. by making payments totalling US$165,000, subject to a 2.75% net smelter
return royalty. In fiscal 2000, the Company purchased the 2.75% net smelter return
royalty by issuing 100,000 common shares of its capital stock to the vendor. In fiscal
2005, the Company granted Consolidated Odyssey Exploration Inc. (ODE) an
option to earn an initial 50% interest in the property. The Company paid a finders fee of
$10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its
rights under the agreement to Bonaventure Enterprises Inc. (Bonaventure).
Under the terms of the agreement, Bonaventure must incur US$2,000,000 in exploration
expenditures, issue 500,000 shares and make option payments totalling US$500,000 over a
4-year period (US$50,000 and 100,000 shares at a value of $24,617 received). Upon vesting
a 50% interest, Bonaventure may elect to earn an additional 10% interest by financing the
completion of a feasibility study. The property is comprised of 107 claims.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Slaven
Canyon, Lander County, Nevada
| | ------------------------------------

| | In
fiscal 2002, the Company acquired 51 claims by staking. In fiscal 2003, the Company
acquired 17 claims by staking and acquired an additional 642 acres of land contiguous to
the Companys claims by executing three lease agreements which provide for
escalating lease payments. In fiscal 2004, the Company acquired an additional 190 claims
by staking and acquired an additional 350 acres of land contiguous to the Companys
claims by executing seven lease agreements which provide for cash payments totalling
US$7,400 on signing and escalating lease payments thereafter. The underlying royalty
retained by the owners ranges from 1⁄2% of net smelter returns to 31⁄2% of net
smelter returns with a buy-down provision allowing the Company to reduce the underlying
royalty to a 2% net smelter return by paying US$1,500,000. In July, 2005, the Company
acquired an additional 320 acres of land contiguous to the Companys claims by
executing a lease agreement which provides for a cash payment of US$7,619 and
re-imbursement of fees of US$15,000 upon signing (both payments made), and escalating
lease payments thereafter. The underlying royalty retained by the owner is 2.75%.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Squaw
Creek, Elko County, Nevada
| | --------------------------------

| | Since
1996, the Company has held a 100% interest in 151 claims located in Elko County which
were acquired by staking. During the 2005 fiscal year, the Company granted ODE an option
to earn an initial 50% interest in the property. The Company paid a finders fee of
$10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its
rights under the agreement to Bonaventure. Under the terms of the agreement, Bonaventure
must incur US$2,000,000 in exploration expenditures, issue 500,000 shares and make option
payments totalling US$500,000 over a 4-year period (US$50,000 and 100,000 shares at a
value of $24,617 received). Upon vesting a 50% interest, Bonaventure may elect to earn an
additional 10% interest by financing the completion of a feasibility study.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

70

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. |  | MINERAL
PROPERTY INTERESTS (contd)
|-- |  | ------------------------------------

| | Other
Nevada Properties
| | -----------------------

| | In
fiscal 2002, the Company acquired a 100% interest by staking the South Cabin Creek and
Gold Bar Horst properties. In fiscal 2003, the Company acquired a 100% interest in the
Gold Pick property by staking. In fiscal 2004, the Company acquired the McClusky Pass,
Pat Canyon, Tonkin Summit, Benmark, and Goldstone properties. During the 2005 fiscal
year, the Company acquired the Ian and Knolls properties.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | DEFERRED EXPLORATION COSTS
|-- | --------------------------

|                               
|-------------------------------
|
|                               
|Assays                         
|Consulting                     
|Drafting and report preparation
|Drilling                       
|Field operations               
|Reclamation                    
|Recording                      
|Supervision                    
|Surveys                        
|Transportation                 
|Trenching and site preparation 
|Recovery                       
|Write-off                      
|                               
|Total                          
|                               

|                               
|-------------------------------
|
|                               
|Assays                         
|Consulting                     
|Drafting and report preparation
|Drilling                       
|Field operations               
|Reclamation                    
|Recording                      
|Supervision                    
|Surveys                        
|Transportation                 
|Trenching and site preparation 
|Recovery                       
|Write-off                      
|                               
|Total                          
|                               

71

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|4. |  | DEFERRED EXPLORATION COSTS (contd)
|-- |  | ------------------------------------

|                               
|-------------------------------
|
|                               
|Assays                         
|Consulting                     
|Drafting and report preparation
|Drilling                       
|Field operations               
|Reclamation                    
|Recording                      
|Supervision                    
|Surveys                        
|Transportation                 
|Trenching and site preparation 
|Recovery                       
|Write-off                      
|                               
|Total                          
|                               

|                       
|-----------------------
|
|                       
|Nevada Properties      
|Benmark                
|Celt                   
|Cottonwood             
|Fye Canyon             
|Gold Bar Horst         
|Gold Pick              
|Goldstone              
|Hunter                 
|Ian                    
|Indian Ranch           
|Knolls                 
|McClusky Pass          
|New Pass               
|Pat Canyon             
|Slaven Canyon          
|South Cabin Creek      
|Squaw Creek            
|Tonkin Summit          
|General exploration    
|                       
|Total Nevada Properties
|                       

72

---

WHITE KNIGHT RESOURCES
LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|5. |  | DEFERRED EXPLORATION COSTS (contd)
|-- |  | ------------------------------------

|                       
|-----------------------
|
|                       
|Nevada Properties      
|Benmark                
|Celt                   
|Cottonwood             
|Fye Canyon             
|Gold Bar Horst         
|Gold Pick              
|Goldstone              
|Hunter                 
|Indian Ranch           
|McClusky Pass          
|New Pass               
|Pat Canyon             
|Slaven Canyon          
|South Cabin Creek      
|Squaw Creek            
|Tonkin Summit          
|General exploration    
|                       
|Total Nevada Properties
|                       

|                                                 
|-------------------------------------------------
|
|                                                 
|Nevada Properties                                
|Cottonwood                                       
|Gold Bar Horst                                   
|Gold Pick                                        
|Hunter                                           
|Indian Ranch                                     
|New Pass                                         
|Quito                                            
|Slaven Canyon                                    
|South Cabin Creek                                
|Squaw Creek                                      
|General exploration (including 
        McClusky)
|                                                 
|Total Nevada Properties                          
|                                                 

73

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|6. |  | EQUIPMENT
|-- |  | ---------

|                   
|-------------------
|
|                   
|
|                   
|Vehicles           
|Technical equipment
|Office equipment   
|                   
|                   
|                   

|7. |  | RELATED
PARTY TRANSACTIONS
|-- |  | --------------------------

| | During
the year ended June 30, 2005, the Company entered into the following transactions with
related parties:
| | --------------------------------------------------------------------------------------------------------------

| | a) |  | Paid
or accrued $264,000 (2004  $210,000; 2003  $58,000) in
                    management fees to directors and officers of the Company and to
companies                     controlled by directors of the Company.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | Paid
or accrued $111,223 (2004  $115,879; 2003  $122,736) in
                    consulting fees to directors and officers of the Company and to
companies                     controlled by directors of the Company, of which $111,223
(2004  $115,879;                     2003  $108,736) is included in or
written-off to deferred exploration                     costs.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) |  | Paid
or accrued $8,815 (2004  Nil; 2003  Nil) in administrative fees
                    to companies controlled by a director of the Company.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

| | At
June 30, 2005, there is $17,754 (2004  $70,370) payable to directors and officers
of the Company and to companies controlled by directors of the Company. Included in
receivables at June 30, 2005 is a travel advance in the amount of $4,572 (2004  Nil)
to cover expenses incurred subsequent to year end paid to a company controlled by a
director. The amounts are unsecured and non-interest bearing.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
amounts charged to the Company for the services provided have been determined by
negotiation among the parties and, in certain cases, are covered by signed agreements.
These transactions were in the normal course of operations and were measured at the
exchange value which represented the amount of consideration established and agreed to by
the related parties.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | CAPITAL STOCK
|-- | -------------

| | Share
issuances
| | ---------------

| | During
the 2005 fiscal year the Company completed a private placement of 1,500,000 units at
$1.58, each unit consisting of one common share and one non-transferable share purchase
warrant, each warrant entitling the holder to purchase an additional share at $2.50 for
one year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

74

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|8. |  | CAPITAL
STOCK (contd)
|-- |  | -----------------------

| | During
the 2004 fiscal year the Company completed three private placements:
| | ---------------------------------------------------------------------------

| | a) |  | 2,500,000
units at $0.40, each unit consisting of one common share and one
          non-transferable share purchase warrant, each warrant entitling the holder to
          purchase an additional share at $0.60 for two years (435,000 warrants exercised
          during the year) with an additional provision that if the closing price of the
          Companys shares exceeds $0.95 for a period of more than 20 business days,
          the warrants must be exercised within two weeks of notice (triggered subsequent
          to year end). A finders fee of 125,000 units were issued as well as
          finders warrants valued at $47,304 entitling the holder to acquire
200,000           shares of the Company at a price of $0.60 for one year; subject to the
same           additional provision as for the placees (triggered subsequent to year
end),
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | 7,764,704
units at $0.85, each unit consisting of one common share and one
          non-transferable share purchase warrant, each warrant entitling the holder to
          purchase an additional share at $1.25 for 18 months. Brokers warrants
          valued at $239,567 were issued entitling the holder to acquire 543,529 shares
of           the Company at a price of $1.25, exercisable for 18 months;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) |  | 2,222,222
units at $0.90, each unit consisting of one common share and one-half
          non-transferable share purchase warrant, each one warrant entitling the holder
          to purchase an additional share at $1.25 for one year. Brokers warrants
          valued at $69,035 were issued entitling the holder to acquire 155,555 shares of
          the Company at a price of $1.25, exercisable for 1 year.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d) |  | Share
issuance costs related to private placements during the year totalled           $540,522.
| | -- |  | -----------------------------------------------------------------------------------------------

| | During
the 2003 fiscal year the Company had no share issuances other than those issued for
mineral property interests and stock options.
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | Stock
options
| | -------------

| | Under
the Companys stock option plan effective November 4, 2002 and amended December 12,
2003, the Company may grant options for up to 7,072,935 common shares to directors,
employees and consultants at exercise prices to be determined by the market value on the
date of grant. Vesting of options is made at the discretion of the Board of Directors at
the time the options are granted with the exception of options granted in relation to
investor relations. Options granted to consultants engaged in investor relations
activities vest no earlier than as to one-quarter upon the grant date and a further
one-quarter after each of the following three three-month periods. The options can be
granted for a maximum term of 10 years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
June 30, 2005, the following incentive stock options were outstanding:
| | -------------------------------------------------------------------------

|         
|---------
|
|         
|55,000   
|805,500  
|2,074,500
|300,000  
|50,000   
|100,000  
|3,385,000
|         

75

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|8. |  | CAPITAL
STOCK (contd)
|-- |  | -----------------------

| | Stock
options(contd)
| | ----------------------

| | Stock
option transactions and the number of stock options outstanding are summarized as
follows:
| | ------------------------------------------------------------------------------------------------

|                                                              
|--------------------------------------------------------------
|
|                                                              
|Balance, June 30, 2002                                        
|Options granted                                               
|Options expired/cancelled                                     
|Options exercised                                             
|                                                              
|Balance, June 30, 2003                                        
|Options granted                                               
|Options exercised                                             
|                                                              
|Balance, June 30, 2004                                        
|Options granted                                               
|Options expired/cancelled                                     
|Options exercised                                             
|                                                              
|Balance, June 30, 2005                                        
|                                                              
|Number of options currently exercisable                       
|                                                              
|Weighted average fair value of options granted during the year
|                                                              
|                                                              
|                                                              

| | Stock-based
compensation
| | ------------------------

| | Stock-based
compensation
| | ------------------------

| | Effective
July 1, 2003, the Company recognizes compensation expense for all stock options and
warrants granted using the fair value based method of accounting. During fiscal 2003, the
Company elected to measure compensation costs using the intrinsic value-based method for
employee and director stock options. Under this method, no compensation expense is
recognized when stock options are issued, as the exercise price of each option equals the
minimum of the market value at the date immediately preceding the grant. Had the
compensation costs during fiscal 2003 been determined based on the fair value of the
options and warrants at the grant date using the Black-Scholes option-pricing model,
additional compensation expense would have been recorded in the statement of operations
of the period, with pro forma results as presented below.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | 
|------------------------------------------------- | 
|Loss for the year as reported                     | 
|
|Compensation expense under Section 3870           | 
|
|Pro forma loss for the year                       | 
|
|Pro forma basic and diluted loss per common share | 
|

76

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|8. |  | CAPITAL
STOCK (contd)
|-- |  | -----------------------

| | Stock
options(contd)
| | ----------------------

| | The
following assumptions were used in the Black-Scholes valuation of stock options and
warrants granted during the years presented:
| | ------------------------------------------------------------------------------------------------------------------------------------

|                                         | 2005 | 2004 | 2003
|---------------------------------------- | ---- | ---- | ----
|                                         |      |      |     
|Weighted average risk-free interest rate |      |      |     
|Expected life of options and warrants    |      |      |     
|Weighted average annualized volatility   |      |      |     
|Dividend                                 |      |      |     

| | Warrants
| | --------

| | Warrant
transactions are summarized as follows:
| | -----------------------------------------------

|                               
|-------------------------------
|
|                               
|Balance, June 30, 2002 and 2003
|                               
|Warrants exercised             
|Warrants exercised             
|Warrants granted               
|Warrants granted               
|Warrants exercised             
|Warrants granted               
|Warrants granted               
|Warrants granted               
|                               
|Balance, June 30, 2004         
|Warrants exercised             
|Warrants expired               
|Warrants expired               
|Warrants granted               
|                               
|Balance, June 30, 2005         
|                               

| | The
number of warrants outstanding is summarized as follows:
| | ------------------------------------------------------------

|         
|---------
|
|         
|4,352,351
|3,367,647
|588,235  
|1,500,000
|9,808,233
|         

77

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|9. | INCOME TAXES
|-- | ------------

| | A
reconciliation of income tax recovery at statutory rates with the reported income tax
recovery is as follows:
| | ---------------------------------------------------------------------------------------------------------------

|                                                 
|-------------------------------------------------
|
|                                                 
|Loss before income tax recovery                  
|                                                 
|Expected income tax recovery                     
|Non-deductible expenses                          
|Differences in foreign tax rates                 
|Tax loss benefit not recognized for book purposes
|                                                 
|Actual income tax recovery                       
|                                                 

| | The
significant components of the Company's future tax assets are as follows:
| | -----------------------------------------------------------------------------

|                                   
|-----------------------------------
|
|                                   
|Net operating loss carry forwards  
|Mineral properties and other assets
|Share issuance costs               
|                                   
|                                   
|Less:  valuation allowances        
|                                   
|Net future tax assets              
|                                   

| | The
Company has non-capital losses of approximately $6,758,000 which may be carried forward
and applied against taxable income in future years. These losses, if unutilized, will
begin to expire in 2006. Subject to certain restrictions, the Company has further resource
development and exploration expenditures totalling approximately $1,730,000 available to
reduce taxable income of future years. Future tax benefits which may arise as a result of
these non-capital losses and resource deductions have not been recognized in these
financial statements and have been offset by a valuation allowance.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

78

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|10. | SEGMENTED INFORMATION
|--- | ---------------------

| | The
Companys one reportable operating segment is the exploration and development of
mineral properties. Geographic information is as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------

|             
|-------------
|
|             
|June 30, 2005
|Canada       
|United States
|             
|             
|             
|June 30, 2004
|Canada       
|United States
|             
|             
|             

|                        
|------------------------
|
|                        
|Loss before other items:
|Canada                  
|United States           
|                        
|                        
|                        

|11. | RESTRICTED RECLAMATION BONDS
|--- | ----------------------------

| | The
Company has secure funds in place with the United States government, a Canadian bank and
a United States bank as security for reclamation bonds on its mineral properties. These
restricted reclamation bonds were required by the local jurisdictions at the time
exploration activities commenced on the properties and do not represent an asset
retirement obligation (Note 2). Interest on the certificates of deposit with Canadian and
United States banks is paid on a periodic basis to the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. | SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
|--- | ---------------------------------------------------

| | Significant
non-cash transactions during the years ended June 30, 2005, June 30, 2004 and June 30,
2003 include the Company issuing 40,000 common shares each year at a value in the current
year of $28,400 (2004  $31,200; 2003  $8,000) for the acquisition of mineral
property interests. In the year ended June 30, 2004, the Company issued 125,000 common
shares as a finders fee related to a private placement. Included in accounts
payable are $153,756 (2004  $Nil) relating to deferred exploration costs.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13. | COMMITMENTS
|--- | -----------

| | The
Company has entered into lease agreements for its premises in Canada and the United
States. The annual lease commitments are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------

|     | United States Premises | Canadian Premises
|---- | ---------------------- | -----------------
|     |                        |                  
|2006 |                        | US$      24,041  
|2007 |                        | 24,245           
|2008 |                        | 25,070           
|     |                        |                  
|     |                        | US$      73,356  
|     |                        |                  

79

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|14. | FINANCIAL INSTRUMENTS
|--- | ---------------------

| | The
Companys financial instruments consist of cash and cash equivalents, temporary
investments, receivables, restricted reclamation bonds, accounts payable and accrued
liabilities, and due to related parties. It is managements opinion that the Company
is not exposed to significant interest, currency or credit risks arising from its
financial instruments. The fair values of these financial instruments approximate their
carrying values, unless otherwise noted.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has its cash primarily in one commercial bank in Vancouver, British Columbia,
Canada and one commercial bank in Reno, Nevada, United States.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

|15. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTEDACCOUNTING PRINCIPLES
|--- | --------------------------------------------------------------------------------------

| | These
financial statements have been prepared in accordance with Canadian GAAP. Material
variations in the accounting principles, practices and methods used in preparing these
financial statements from principles, practices and methods accepted in the United States
(United States GAAP) are described and quantified below.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
impact of the differences between Canadian GAAP and United States GAAP on the
consolidated balance sheets would be as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------

|                            
|----------------------------
|
|                            
|
|                            
|Temporary                   
|investments                 
|Other current assets        
|Mineral property            
|interests                   
|Deferred exploration        
|costs                       
|Equipment                   
|Restricted reclamation bonds
|                            
|                            
|                            
|Current liabilities         
|Shareholders' equity        
|                            
|                            
|                            

80

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|15. |  | DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(contd)
|--- |  | ------------------------------------------------------------------------------------------------

| | The
impact of the differences between Canadian GAAP and United States GAAP on the
consolidated statements of operations would be as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------

|                                                     
|-----------------------------------------------------
|
|                                                     
|Loss for the year, Canadian GAAP                     
|Adjustments:                                         
|Mineral property interests                           
|Deferred exploration costs                           
|Prior years' write-offs                              
|Increase in temporary investments                    
|                                                     
|Loss for the year, United States GAAP                
|                                                     
|Basic and diluted loss per share, United States GAAP 
|                                                     
|Weighted average number of common shares outstanding,
|United States GAAP                                   
|                                                     

| | The
impact of the  differences  between  Canadian  GAAP and United  States GAAP on the
 consolidated  statements of cash flows          would be as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                               
|-------------------------------------------------------------------------------
|
|                                                                               
|Cash flows used in operating activities, Canadian GAAP                         
|Mineral property interests                                                     
|Deferred exploration costs                                                     
|                                                                               
|Cash flows used in operating activities, United States GAAP                    
|                                                                               
|Cash flows  provided by  financing  activities,  Canadian  GAAP and            
|United States GAAP                                                             
|                                                                               
|Cash flows used in investing activities, Canadian GAAP                         
|Mineral property interests                                                     
|Deferred exploration costs                                                     
|                                                                               
|Cash  flows  provided  by (used in)  investing  activities,  United
States GAAP
|                                                                               
|Increase (decrease) in cash and cash equivalents during the year               
|                                                                               
|Cash and cash equivalents, beginning of year                                   
|                                                                               
|Cash and cash equivalents, end of year                                         
|                                                                               

81

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|15. |  | DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(contd)
|--- |  | ------------------------------------------------------------------------------------------------

| | Mineral
property interests and deferred exploration costs
| | ---------------------------------------------------------

| | Under
Canadian GAAP, mineral property interests and deferred exploration costs, including
acquisition and exploration costs, are carried at cost and written down if the properties
are abandoned, sold or if management determines there to be an impairment in value. Under
United States GAAP, mineral property interests and deferred exploration costs are
expensed as incurred. Once a final feasibility study has been completed, additional costs
incurred to bring the mine into production are capitalized as development costs. Costs
incurred to access ore bodies identified in the current mining plan after production has
commenced are considered production costs and are expensed as incurred. Costs incurred to
extend production beyond those areas identified in the mining plan where additional
reserves have been established are deferred as development costs until the incremental
reserves are produced. Capitalized costs are amortized using the unit-of-production
method over the estimated life of the ore body based on proven and probable reserves.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-based
compensation
| | ------------------------

| | Under
United States GAAP, Statements of Financial Accounting Standards No. 123, Accounting
for Stock-based Compensation (SFAS 123) requires companies to
establish a fair market value based method of accounting for stock-based compensation
plans. The Company has chosen to account for stock-based compensation using Accounting
Principles Board Opinion No. 25 Accounting for Stock Issued to Employees(APB
25). Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Companys stock at the date of grant over the
option price. Effective July 1, 2003 the Company elected to follow the fair value method
of accounting for stock based compensation.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New
accounting and disclosure standards were introduced under Canadian GAAP (Note 8) for the
fiscal year ending June 30, 2003. Accordingly, there were no differences between Canadian
GAAP and United States GAAP for the years ended June 30, 2005, 2004 and 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Asset
retirement obligations
| | ----------------------------

| | The
Company has determined that there are no asset retirement obligations as at June 30, 2005
and adopted new accounting and disclosure standards under Canadian GAAP (Note 2) for the
2005 fiscal year. Accordingly there were no differences between Canadian GAAP and United
States GAAP as at June 30, 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
Canadian GAAP, the Company was not required to record asset retirement obligations as at
June 30, 2004. The Company determined there were no asset retirement obligations as at
June 30, 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

82

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|15. |  | DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(contd)
|--- |  | ------------------------------------------------------------------------------------------------

| | Temporary
Investments
| | ---------------------

| | Under
Canadian GAAP, temporary investments are carried at the lower of aggregate cost or
current market value, with any unrealized gain or loss included in the statement of
operations. Long-term investments are carried on the cost or equity basis and are only
written down when there is evidence of a decline in value that is other than temporary.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
United States GAAP, Statement of Financial Accounting Standard No. 115, Accounting
for Certain Investments in Debt and Equity Securities (SFAS 115)
requires that certain debt and equity investments must be classified into
available-for-sale or trading securities and stated at fair market values. Any unrealized
holding gains or losses are reported as a separate component of shareholders equity
until realized for available-for-sale securities, and included in earnings for trading
securities. For United States GAAP purposes, the Companys investment in debt
securities have been classified as trading securities. Under SFAS 115, for the 2004
fiscal year there was no difference under Canadian GAAP or United States GAAP as these
debt securities have been written down to their fair market value, with an unrealized
loss of $42,999 included in the consolidated statement of operations. For the 2005 fiscal
year, an excess holding gain of $36,224 would be recognized under United States GAAP.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New
accounting pronouncements
| | -----------------------------

| | In
December 2004, Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 153, Exchanges of Nonmonetary Assets  an amendment
of APB Opinion No. 29 (SFAS 153) which amends Accounting Principles
Board Opinion No. 29, Accounting for Nonmonetary Transactions to eliminate
the exception for nonmonetary exchanges of similar productive assets and replaces it with
a general exception for exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash flows of
the entity are expected to change significantly as a result of the exchange. SFAS 153 is
effective for nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2004, FASB issued Statement of Financial Accounting Standards No. 123R, Share
Based Payment (SFAS 123R). SFAS 123R supersedes APB 25 and its related
implementation guidance by requiring entities to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant-date fair value
of those awards (with limited exceptions) and revises SFAS 123 as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | i) |  | Public
entities are required to measure liabilities incurred to employees in
               share-based payment transactions at fair value and nonpublic entities may
elect                to measure their liabilities to employees incurred in share-based
payment                transactions at their intrinsic value whereas under SFAS 123, all
share-based                payment liabilities were measured at their intrinsic value.
| |  | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ii) |  | Nonpublic
entities are required to calculate fair value using an appropriate
               industry sector index for the expected volatility of its share price if it
is                not practicable to estimate the expected volatility of the entitys
share                price.
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | iii) |  | Entities
are required to estimate the number of instruments for which the                requisite
service is expected to be rendered as opposed to accounting for
               forfeitures as they occur.
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | iv) |  | Incremental
compensation cost for a modification of the terms or conditions of                an
award is measured by comparing the fair value of the modified award with the
               fair value of the award immediately before the modification whereas SFAS
123                required that the effects of a modification be measured as the
difference                between the fair value of the modified award at the date it is
granted and the                awards value immediately before the modification
determined based on the                shorter of (1) its remaining initially estimated
expected life or (2) the                expected life of the modified award.
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

83

---

WHITE KNIGHT RESOURCES LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
(Expressed in Canadian Dollars) 
JUNE 30, 2005

---

|15. |  | DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(contd)
|--- |  | ------------------------------------------------------------------------------------------------

| | SFAS
123R also clarifies and expands guidance in several areas, including measuring fair
value, classifying an award as equity or as a liability and attributing compensation cost
to reporting periods. SFAS 123R does not change the accounting guidance for share-based
payment transactions with parties other than employees provided in SFAS 123 as originally
issued and Emerging Issues Task Force No. 96-18 Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling,
Goods and Services (EITF 96-18). SFAS 123R also does not address the
accounting for employee share ownership plans which are subject to Statement of Position
93-6, Employers Accounting for Employee Stock Ownership Plans. Public
entities (other than those filing as small business issuers) will be required to apply
SFAS 123R as of the first annual reporting period that begins after June 15, 2005. Public
entities that file as small business issuers will be required to apply SFAS 123R in the
first annual reporting period that begins after December 15, 2005. For nonpublic
entities, SFAS 123R must be applied as of the beginning of the first annual reporting
period beginning after December 15, 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2005, FASB issued Statement of Financial Accounting Standards No. 154, Accounting
Changes and Error Corrections  A Replacement of APB Opinion No. 20 and FASB
Statement No. 3 (SFAS 154) which is effective for fiscal years ending
after December 15, 2005. SFAS 154 requires that changes in accounting policy be accounted
for on a retroactive basis.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
adoption of these new pronouncements is not expected to have a material effect on the
Companys consolidated financial position or results of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

84

---

# ITEM 18:    FINANCIAL
STATEMENTS

Not applicable.  See Item 17 above.

# ITEM 19:    EXHIBITS

Exhibits as follows:

|Exhibit      
Number | Description
|-------------------- | -----------
|1                    | .1(2)      
|1                    | .2(2)      
|4                    | .1(1)      
|4                    | .2(1)      
|4                    | .3(1)      
|4                    | .4(1)      
|4                    | .5(1)      
|4                    | .6(1)      
|4                    | .7(1)      
|4                    | .8(1)      
|4                    | .9(1)      
|4                    | .10(1)     
|4                    | .11(2)     
|4                    | .12(2)     
|4                    | .13(2)     
|4                    | .14(2)     
|4                    | .15(2)     
|4                    | .16(2)     
|8                    | .1(2)      
|12                   | .1         
|13                   | .1         
|15                   | .1(2)      

_________________

|(1) |  | Incorporated
by reference to the Registrants Form 20-F Registration Statement filed on July 30, 2004.
|--- |  | ------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated
by reference to the Registrants Form 20-F Annual Report filed on December 30, 2005.
|--- |  | -------------------------------------------------------------------------------------------------

85

---

# SIGNATURES

The registrant certifies that it
meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.

Date:   February 23, 2006

| | WHITE KNIGHT RESOURCES LTD.
Per:   
John M. Leask
         John M. Leask 
         Chairman, President and 
         Chief Executive Officer
| | ----------------------------------------------------------------------------------------------------------------------------------------------

86

---