SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended January 31, 2004

                                       OR

                 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
         For the transition period from ______________ to ______________

                         Commission File Number: 0-13078

                            CAPITAL GOLD CORPORATION
        (Exact name of small business issuer as specified in its charter)

            NEVADA                                               13-3180530
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                76 Beaver Street, 26TH floor, New York, NY 10005
                    (Address of principal executive offices)

                    Issuer's telephone number: (212) 344-2785


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

                                 Yes |X| No |_|

Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.

                Class                               Outstanding at March 5, 2004
                -----                               ----------------------------
Common Stock, par value $.001 per share                      53,606,952

Transitional Small Business Format (check one); Yes |_| No |X|


<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

      The accompanying financial statements are unaudited for the interim
periods, but include all adjustments (consisting only of normal recurring
accruals), which we consider necessary for the fair presentation of results for
the three and six months ended January 31, 2004.

      Moreover, these financial statements do not purport to contain complete
disclosure in conformity with generally accepted accounting principles and
should be read in conjunction with our audited financial statements at, and for
the fiscal year ended July 31, 2003.

      The results reflected for the three and six months ended January 31, 2004
are not necessarily indicative of the results for the entire fiscal year.


                                      -2-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                JANUARY 31, 2004
                                   (Unaudited)

PRELIMINARY DRAFT
                                     ASSETS

   Current Assets:
     Cash and Cash Equivalents                                     $    606,354
     Loans Receivable - Related Party                                    26,787
     Loans Receivable - Others                                           17,715
     Other Current Assets                                                12,993
     Prepaid Expenses                                                    15,556
     Marketable Securities                                               70,000
                                                                   ------------
        Total Current Assets                                            749,405
                                                                   ------------

   Mining, Milling and Other Property and Equipment
     (Net of Accumulated Depreciation of $358,230)                      344,780
                                                                   ------------

   Other Assets:
     Other Investments                                                   19,413
     Mining Reclamation Bonds                                            35,550
     Security Deposits                                                    9,599
                                                                   ------------
        Total Other Assets                                               64,562
                                                                   ------------

   Total Assets                                                    $  1,158,747
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

   Current Liabilities:
     Accounts Payable                                              $     70,454
     Accrued Expenses                                                    52,957
                                                                   ------------
        Total Current Liabilities                                       123,411
                                                                   ------------

   Minority Interest                                                   (150,382)
                                                                   ------------

   Commitments and Contingencies

   Stockholders' Equity:
     Common Stock, Par Value $.001 Per Share;
       Authorized 150,000,000 shares; Issued and
       Outstanding 53,026,956 Shares                                     53,027
     Additional Paid-In Capital                                      23,264,666
     Deficit Accumulated in the Development Stage                   (22,232,238)
Accumulated Other Comprehensive Income (Loss)                           100,263
                                                                   ------------
        Total Stockholders' Equity                                    1,185,718
                                                                   ------------

   Total Liabilities and Stockholders' Equity                      $  1,158,747
                                                                   ============

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


                                      -3-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                    For The Period
                                                       Three Months Ended                Six Months Ended         September 17, 1982
                                                          January 31,                       January 31,               (Inception)
                                                 -----------------------------     -----------------------------          To
                                                     2004             2003             2004             2003       January 31, 2004
                                                 ------------     ------------     ------------     ------------  ------------------
<S>                                              <C>              <C>              <C>              <C>              <C>
Revenues:
  Interest Income                                $        706     $      5,828     $        880     $     26,994     $    750,321
  Miscellaneous                                         6,905               --            6,905            7,701           39,582
                                                 ------------     ------------     ------------     ------------     ------------
       Total Revenues                                   7,611            5,828            7,785           34,695          789,903
                                                 ------------     ------------     ------------     ------------     ------------
Costs and Expenses:
  Mine Expenses                                       137,812          285,381          284,142          448,980        6,423,626
  Write-Down of Mining, Milling and Other
    Property and Equipment                                 --               --               --               --          999,445
  Selling, General and Administrative Expenses        195,273          165,106          334,528          304,211        8,504,735
  Stock Based Compensation                                 --           75,353           33,034           75,353        8,876,004
  Depreciation                                             --               --               --               --          367,726
                                                 ------------     ------------     ------------     ------------     ------------
        Total Costs and Expenses                      333,085          525,840          651,704          828,544       25,171,536
                                                 ------------     ------------     ------------     ------------     ------------
Loss Before Other Income (Expense)                   (325,474)        (520,012)        (643,919)        (793,849)     (24,381,633)
                                                 ------------     ------------     ------------     ------------     ------------
Other Income (Expense):
  Gain on Sale of Property and Equipment                   --               --               --               --           46,116
  Gain on Sale of Subsidiary                               --               --               --               --        1,907,903
  Option Payment                                           --               --               --               --           70,688
  Loss on Write-Off of Investment                          --               --               --               --          (10,000)
  Loss on Joint Venture                                    --               --               --               --         (101,700)
  Loss on Option                                           --               --               --               --          (50,000)
                                                 ------------     ------------     ------------     ------------     ------------
         Total Other Income (Expense)                      --               --               --               --        1,863,007
                                                 ------------     ------------     ------------     ------------     ------------
Loss Before Minority Interest                        (325,474)        (520,012)        (643,919)        (793,849)     (22,518,626)
Minority Interest in Net Loss of Subsidiary            26,672           43,880           51,220           58,345          286,388
                                                 ------------     ------------     ------------     ------------     ------------
Net Loss                                         $   (298,802)    $   (476,132)    $   (592,699)    $   (735,504)    $(22,232,238)
                                                 ============     ============     ============     ============     ============
Net Loss Per Common Share - Basic and Diluted    $      (0.01)    $      (0.01)    $      (0.01)    $      (0.02)
                                                 ============     ============     ============     ============
Weighted Average Common Shares Outstanding         49,995,105       41,461,871       47,572,665       41,057,376
                                                 ============     ============     ============     ============
</TABLE>

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


                                      -4-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                    For The Six               For The Period
                                                                    Months Ended            September 17, 1982
                                                                     January 31,                (Inception)
                                                            -----------------------------           To
                                                                2004             2003        January 31, 2004
                                                            ------------     ------------   ------------------
<S>                                                         <C>              <C>               <C>
Cash Flow From Operating Activities:
  Net Loss                                                  $   (592,699)    $   (735,504)     $(22,232,238)
  Adjustments to Reconcile Net Loss to Net Cash
    (Used) By Operating Activities:
      Depreciation                                                    --               --           367,726
      Gain on Sale of Subsidiary                                      --               --        (1,907,903)
      Minority Interest in Net Loss of Subsidiary                (51,220)         (58,345)         (286,388)
      Write-Down of Impaired Mining, Milling and Other
        Property and Equipment                                        --               --           999,445
       Gain on Sale of Property and Equipment                         --               --           (46,116)
       Loss on Write-Off of Investment                                --               --            10,000
       Loss From Joint Venture                                        --               --           101,700
      Value of Common Stock Issued for Services                       --               --         2,812,993
      Stock Based Compensation                                    33,034           75,353         8,876,004
      Changes in Operating Assets and Liabilities:
        (Increase) in Other Current Assets                        (1,985)         (32,380)          (16,963)
        (Increase) in Security Deposits                           (1,164)              --            (9,599)
        Increase (Decrease) in Accounts Payable                  (61,563)        (103,752)           62,647
        (Decrease) in Accrued Expenses                           (69,325)         (45,153)          (69,597)
        Increase in Prepaid Expenses                              (5,529)              --           (15,556)
                                                            ------------     ------------      ------------
Net Cash (Used) By Operating Activities                         (750,451)        (899,781)      (11,353,845)
                                                            ------------     ------------      ------------
Cash Flow From Investing Activities:
  Purchase of Mining, Milling and Other Property and
    Equipment                                                         --               --        (1,705,650)
  Proceeds on Sale of Mining, Milling and Other Property
    and Equipment                                                     --               --            83,638
  Proceeds From Sale of Subsidiary                                    --        1,492,131         2,131,616
  Expenses of Sale of Subsidiary                                      --               --          (101,159)
  Advance Payments - Joint Venture                                    --               --            98,922
  Investment in Joint Venture                                         --               --          (101,700)
  Investment in Privately Held Company                                --               --           (10,000)
  Net Assets of Business Acquired (Net of Cash)                       --               --           (42,130)
  Purchase of Marketable Securities                                   --          (50,000)          (50,000)
  Purchase of Other Investments                                   (6,531)         (12,882)          (19,413)
                                                            ------------     ------------      ------------

Net Cash Provided (Used) By Investing Activities                  (6,531)       1,429,249           284,124
                                                            ------------     ------------      ------------
</TABLE>

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


                                      -5-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>
                                                              For the Six               For The Period
                                                              Months Ended            September 17, 1982
                                                               January 31,                (Inception)
                                                      -----------------------------           To
                                                          2004             2003        January 31, 2004
                                                      ------------     ------------   ------------------
<S>                                                   <C>              <C>               <C>
Cash Flow From Financing Activities:
  (Increase) Decrease in Loans Receivable -
    Related Party                                     $     (6,607)    $         --      $    (26,787)
  (Increase) Decrease in Loans Receivable - Others             650           (3,640)          (17,715)
  Increase in Loans Payable - Officers                          --               --            18,673
  Repayment of Loans Payable - Officers                         --               --           (18,673)
  Increase in Note Payable                                      --               --            11,218
  Payments of Note Payable                                      --               --           (11,218)
  Proceeds From Issuance of Common Stock                   947,597           27,300        11,730,698
  Commissions on Sale of Common Stock                           --               --            (5,250)
  Expenses of Initial Public Offering                           --               --          (408,763)
  Capital Contributions - Joint Venture Subsidiary         100,156           50,340           304,564
  Purchase of Certificate of Deposit - Restricted               --               --            (5,000)
  Purchase of Mining Reclamation Bond                           --               --           (30,550)
                                                      ------------     ------------      ------------
Net Cash Provided By Financing Activities                1,041,796           74,000        11,541,197
                                                      ------------     ------------      ------------
Effect of Exchange Rate Changes                             75,130           25,331           134,878
                                                      ------------     ------------      ------------
Increase In Cash and Cash Equivalents                      359,944          628,799           606,354

Cash and Cash Equivalents - Beginning                      246,410          149,433                --
                                                      ------------     ------------      ------------
Cash and Cash Equivalents - Ending                    $    606,354     $    778,232      $    606,354
                                                      ============     ============      ============
Supplemental Cash Flow Information:
  Cash Paid For Interest                              $         --     $         --                --
                                                      ============     ============      ============
  Cash Paid For Income Taxes                          $         --     $         --      $         --
                                                      ============     ============      ============
Non-Cash Financing Activities:
  Issuances of Common Stock as Commissions
    on Sales of Common Stock                          $         --     $         --      $    440,495
                                                      ============     ============      ============
  Issuance of Common Stock as Payment for Mining,
    Milling and Other Property and Equipment          $         --     $         --      $      4,500
                                                      ============     ============      ============
  Transfer of Joint Venture Advance Payments into
    Joint Venture Capital                             $         --     $     98,922      $     98,922
                                                      ============     ============      ============
</TABLE>

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


                                      -6-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2004
                                   (Unaudited)

NOTE 1 - Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements
include the accounts of Capital Gold Corporation and its subsidiaries, which are
wholly and majority owned. All significant inter-company accounts and
transactions have been eliminated in consolidation.

      The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of the Company's management, the accompanying
consolidated financial statements reflect all adjustments (which include only
normal recurring adjustments) necessary to present fairly the consolidated
financial position and results of operations and cash flows for the periods
presented.

      Results of operations for interim periods are not necessarily indicative
of the results of operations for a full year.

      The condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company is a
development stage enterprise and has recurring losses from operations and
operating cash constraints that raise substantial doubt about the Company's
ability to continue as a going concern.

NOTE 2 - Marketable Securities

      The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."

      Management determines the appropriate classification of all securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. The Company has classified its marketable equity securities as available
for sale securities and has recorded such securities at fair value. The Company
uses the specific identification method to determine realized gains and losses.
Unrealized holding gains and losses are excluded from earnings and, until
realized, are reported in a separate component of stockholders' equity.

      Marketable securities are classified as current assets and are summarized
as follows:

           Marketable equity securities, at cost            $ 50,000
                                                            ========

           Marketable equity securities, at fair value      $ 70,000
                                                            ========


                                      -7-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2004
                                   (Unaudited)

NOTE 3 - Other Comprehensive Income (Loss) - Supplemental Non-Cash Investing
Activities

      Other comprehensive income (loss) consists of accumulated foreign
translation gains and losses and net unrealized gain on available-for-sale
securities and is summarized as follows:

          Balance - July 31, 2003                $  53,633
            Equity Adjustments from Foreign
              Currency Translation                  26,630
            Unrealized Gain on Available-for-
              Sale Securities                       20,000
                                                 ---------

          Balance - January 31, 2004             $ 100,263
                                                 =========

NOTE 4 - Other Events - Joint Venture Agreement

      On January 7, 2004, Minera Santa Rita S. de R.L. de C.V. ("MSR"), one of
our wholly-owned Mexican affiliates, executed an amendment to its joint venture
agreement with Grupo Minero FG S.A. de C.V. ("FG") with regard to the El Chanate
project in Mexico. Pursuant to this amendment, FG has reduced its interest in
the venture from 31% to 30% and waived its right to earn up to an additional 14%
interest in the venture and agreed to pay us $10,850 (representing 30% of
certain funds provided by us that the MSR spent on Phase Two in excess of the
approved budget for Phase Two). In return, MSR has waived FG's obligation to
contribute $106,401, waived FG's obligation to contribute certain equipment
(Phase Three), waived MSR's right to dilute or to buy our FG's interest for FG's
failure to make the above Phase Two $106,401 payment. MSR has not waived its
right to dilute FG for FG's failure to make requisite future contributions.

      In addition, Phase Two will conclude on receipt of the first funds from
Royal Gold, with whom we are currently negotiating a financing arrangement for
the El Chanate Project, or Royal Gold's determination not to proceed with the
funding, whichever occurs first. With the elimination of Phase Three, Phase Four
will commence the day following receipt of the first funds from Royal Gold and
Phase Five will commence on the date "Optimal Level of Production" if achieved
at the El Chanate Project, as defined by MSR and FG.

      If funding for Phase Four is not obtained from Royal Gold or another
lender willing to provide funding for Phase Four (the "Lender") on or before
March 31, 2004, the joint venture will terminate unless MSR and FG (the
"Venturers") elect to continue funding the joint venture. If the joint venture
terminates, title to the concessions and the surface land at the El Chanate
Project will remain in Oro de Altar, another of our wholly-owned subsidiaries.


                                      -8-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2004
                                   (Unaudited)

NOTE 4 - Other Events - Joint Venture Agreement (Continued)

      Unless otherwise agreed to by the Venturers, until the commencement of
Phase Four, the Venturers will contribute to the venture in proportion to their
venture interest (30/70) in cash or in work or services, at the election of the
contributing party. Pursuant to the amendment, once Phase Four commences and
until the beginning of Phase Five, the Venturers will pay in cash only, in
proportion to their venture interests, expenditure and costs that cannot be
covered with funds from the Lender. During Phase Five, Venturers will contribute
proportionately cash only if expenditures and costs cannot be covered by income
generated in operation of the mine. In the 2004 budget, the Venturers have
varied slightly the periods during calendar 2004 when Venturers are permitted to
contribute work or services in lieu of cash. A failure of a Venturer to make its
required additional cash contributions will result in a dilution of that
Venturer's interest in the venture. A failure of a Venturer who contributes work
or services to timely provide such work or services will result in interest
accruing in favor of the other Venturer at the LIBOR rate plus 5.45 percent and
could result in dilution of that Venturer's interest in the venture.

      MSR has granted FG a right of first refusal to carry out certain works and
services required by the project provided FG at least matches the best bid
received for such works and services in terms of price, time and quality.

      To facilitate obtaining funding from a Lender, MSR has agreed that its
operating rights will be subject to the loan agreement with the Lender and the
Lender will be permitted to participate on the Technical Committee. The
Technical Committee provides non-binding technical advice on the project and
currently consists of three members from MSR and two members from FG. In
addition, the Venturers have agreed that (i) required payments to the seller
from whom we purchased the Mexican company that originally owned the El Chanate
Concessions and surface lands and (ii) required payments to the Lender will be
made prior to distribution of profits to the Venturers.

      The foregoing is qualified in its entirety by reference to the full test
of the amendment which is filed as Exhibit 10.1 to this Report and incorporated
herein by reference.

NOTE 5 - Financing Term Sheet

      The Company has executed a royalty financing term sheet with Royal Gold,
Inc., of Denver, Colorado to supply $13.8 million. Consummation of this funding
is subject to due diligence, execution of a definitive agreement, the
satisfaction of conditions to be contained therein, and approval by both
parties' Directors. Accordingly, no assurance can be given that we will
consummate the proposed financing.

NOTE 6 - Stockholders' Equity

      During the six months ended January 31, 2004, the Company sold 7,976,695
shares of common stock to unrelated third party investors for gross proceeds of
$930,997. Also, during the six months ended January 31, 2004 the Company issued
372,727 shares of common stock for gross proceeds of $16,600 to related parties
upon exercise of options.


                                      -9-
<PAGE>

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

Cautionary Statement on Forward-Looking Statements

Some information contained in or incorporated by reference into this report on
Form 10-QSB may contain "forward-looking statements," as defined in Section 21E
of the Securities and Exchange Act of 1934. These statements include comments
regarding exploration and mine development and construction plans, costs, grade,
production and recovery rates, permitting, financing needs, the availability of
financing on acceptable terms or other sources of funding, and the timing of
additional tests, feasibility studies and environmental permitting. The use of
any of the words "anticipate," "continue," "estimate," "expect," "may," "will,"
"project," "should," "believe" and similar expressions are intended to identify
uncertainties. We believe the expectations reflected in those forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk factors
set forth below and other factors set forth in, including the section "Issues
and Uncertainties" below, or incorporated by reference into, this report:

      o     worldwide economic and political events affecting the supply of and
            demand for gold;

      o     volatility in market prices for gold and other metals;

      o     financial market conditions, and the availability of debt or equity
            financing on terms acceptable to our company;

      o     uncertainties as to whether additional drilling, testing and
            feasibility studies will establish reserves at any of our
            properties;

      o     uncertainties associated with developing a new mine, including
            potential cost overruns and the unreliability of estimates in early
            states of mine development;

      o     uncertainties as to title to our properties and the availability of
            sufficient properties to allow for planned activities at Leadville
            in Colorado and at El Chanate in Mexico.

      o     variations in ore grade and other characteristics affecting mining,
            crushing, milling and smelting operations and mineral recoveries;

      o     geological, metallurgical, technical, permitting, mining and
            processing problems;

      o     the availability and timing of acceptable arrangements for power,
            transportation, mine construction, contract mining, water and
            smelting; the availability, terms conditions and timing of required
            government approvals;

      o     uncertainties regarding future changes in tax and foreign-investment
            legislation or implementation of existing tax and foreign-investment
            legislation;

      o     the availability of experienced employees; and

      o     political instability, violence and other risks associated with
            operating in a country like Mexico with a developing economy.


                                      -10-
<PAGE>

Many of those factors are beyond our ability to control or predict. You should
not unduly rely on these forward-looking statements. These statements speak only
as of the date of this report on Form 10-QSB. Except as required by law, we are
not obligated to publicly release any revisions to these forward-looking
statements to reflect future events or developments. All subsequent written and
oral forward-looking statements attributable to our Company and persons acting
on our behalf are qualified in their entirety by the cautionary statements
contained in this section and elsewhere in this report on Form 10-QSB.

                              Results of Operation

General

Sonora, Mexico

During the quarter ended January 31, 2004, we continued to analyze the El
Chanate concessions in Mexico. Our property holdings there consist of 14
contiguous, high priority concessions totaling approximately 3,497 hectares
(8,642 acres or 13.5 square miles). Further exploration and development of the
El Chanate project, assuming it is economically feasible, will mostly occur on
these concessions owned by us. We also own outright 466 hectares (1,151 acres or
1.8 square miles) of surface rights at El Chanate (except for our joint venture
agreement with Grupo Minero FG S.A. de C.V.) and no third party ownership or
leases exist on this fee land or the El Chanate concessions.

In August 2003, M3 Engineering of Tucson, Arizona completed a feasibility study
(the "Study") on the El Chanate concessions. Based on 253 drill holes and more
than 22,000 gold assays, the study provides details for an open pit gold mine.
The Study indicates that the initial open pit project contains proven and
probable reserves of 358,000 ounces of gold within 13.5 million metric tonnes of
ore with an average grade of 0.827 grams/tonne. It estimated that the mine could
recover approximately 48,000 - 50,000 ounces of gold per year over a five year
mine life.

The study assumes a production rate of 2.6 million tonnes of ore per year or
7,500 tonnes per day, operating at 345 days per year. The processing plan for
this open pit heap leach gold project calls for crushing the ore to 100% minus
3/8 inch. Carbon columns will be used to recover the gold. If financing for the
project is obtained and if the necessary plant, equipment and facilities are
acquired, an adequate water supply is secured, and power lines to the mine are
constructed, we anticipate, but cannot assure, that the mine will commence
commercial production in early 2005.

Based on the current reserve calculations, the mine life is estimated to be 62
months. The study forecasts initial capital costs of $13.8 million, which
includes $2.1 million of working capital. Average initial annual production is
planned at approximately 50,000 ounces per year at an average operating cash
cost of $229 per ounce. This cash cost may decrease as the production rate
increases. Total costs will vary depending upon the price of gold (due to the
nature of underlying payment obligations to the original owner of the property);
they are estimated to range between $292 per ounce at a gold price of $310/ounce
and $299 per ounce at a gold price of $370 per ounce. We will be working on
measures to attempt to reduce costs going forward. Reserves and production rates
are based on a gold price of $325 per ounce, which is the Base Case of the
study.


                                      -11-
<PAGE>

Management believes that the capital costs to establish a surface, heap leach
mining operation at El Chanate will be approximately $13.8 million. Financing is
being sought through bank loans, equity and/or royalty arrangements. In this
regard, we have executed a royalty financing term sheet with Royal Gold, Inc.,
of Denver, Colorado to supply the $13.8 million, as specified in the Study.
Consummation of this funding is subject to due diligence by Royal Gold,
execution of a definitive agreement, the satisfaction of conditions to be
contained therein, and approval by Royal Gold's Board of Directors. The due
diligence period ended in late February and Royal Gold and we are examining ways
to optimize the project's financial returns for both parties. We believe that
equity financing may provide certain attractive alternative sources of project
funding and we are exploring those possibilities while also continuing our
discussions with Royal Gold. Although, we continue discussions with Royal Gold,
we no longer consider Royal Gold to be a likely source for 100% of the
financing. Should we be unable to consummate this financing with Royal Gold we
will continue to look for other financing sources. Unless and until we obtain
adequate financing on acceptable terms, we will not be able to move forward with
full-scale construction of the mine. There can be no assurance that adequate
equity or debt financing can be attained.

Management believes the project will benefit substantially from rising gold
prices, which are currently in the $400 per ounce range. Mineralized material
previously below operating cut-off gold grades, could possibly become economic
if future engineering studies support lowering the cutoff grade due to gold
prices substantially above the $325 per ounce used in the feasibility study to
define the proven and probable reserves mentioned above. We are currently
looking at equipment and processing techniques that may be capable of supporting
higher production rates.

In March 2003, we obtained exclusive options to purchase an ore crusher and
related assets (spare parts for the crusher and certain transportable building
structures). The options expired and the owner of these assets sold his interest
to a third party. We had been in discussions with the new owner about the
possibility of acquiring the crushing system. The new owner recently informed us
that he intends to keep the equipment for use on his own property. We are
looking for similar equipment for use at El Chanate. We are optimistic about
being able to acquire additional equipment at comparable costs; however, there
can be no assurance that we will be successful in acquiring these assets.

In January 2004, we received the permits from the Mexican Department of
Environmental Affairs and Natural Resources necessary to begin construction of
the El Chanate gold mining project. These permits also cover the operation of a
heap-leach gold recovery system.

In January 2004, we amended our agreement with FG. For information on these
amendments, please see "Liquidity and Capital Resources; Plan of Operations"
below.

Leadville, Colorado

During the quarter ended January 31, 2004, as during the prior fiscal year ended
July 31, 2003, activity at our Leadville, Colorado properties consisted
principally of mine maintenance. Primarily as a result of our focus on El
Chanate, we temporarily reduced to a minimum activity in Leadville, Colorado.

Between November 1, 2002 and December 1, 2003, we conditionally acquired 61
properties in Leadville, Colorado having a gross acreage of approximately 623
acres. Some of the


                                      -12-
<PAGE>

properties are classified as residential and others are classified as mining.
All were purchased at the Lake County, Colorado, tax sale for the back taxes due
on the properties. We paid an aggregate of approximately $19,400 for the
properties. Of these properties, we let 9 lapse and, with regard to 8 of these
properties, we were paid off by the property owners and we received back our
payments for these properties, plus interest at 10%.

If a property owner does not pay his property taxes the county treasurer has the
right to put the property up for auction at an advertised county tax sale.
Sometimes, the property owner will ask the treasurer to postpone the auction of
the property for a year with the promise to pay soon. If taxes are still not
paid, the auction bidder will be required to pay two years of taxes. If we pay
the 'back taxes' and then 'current year' taxes for four consecutive years our
ownership of a given property purchased at tax sale is final, and the deed is
transferred to us. If the property owner can pay the back taxes, he is required
to pay us the back taxes plus interest. The current back tax interest rate is
12% in Lake County.

We acquired these properties, especially the residential properties, as an
investment. We are not required to commit to any work or maintenance on any of
the properties at this time. Management believes that these are good
investments. The mining properties are located in the general area of our other
mining properties. There is a possibility that at some future date the zoning
for the mining claims will be changed to allow residential development.
Management believes that, at such time, these properties will most likely become
more valuable due to their scenic location. In the time prior to any zoning
change, these properties may have mineral value; however, we have no current
plans to explore these mining properties.

Revenues

We generated no revenues from mining operations during the three or six months
ended January 31, 2004 and 2003. There were de minimis non-operating revenues
during the three months ended January 31, 2004 and 2003 of approximately $7,600
and $5,800, respectively. There were de minimis non-operating revenues during
the six months ended January 31, 2004 and 2003 of approximately $7,800 and
$35,000, respectively. These non-operating revenues primarily represent interest
income for the 2003 period.

Costs and Expenses

Over all, costs and expenses during the three months ended January 31, 2004
($333,085) increased by $14,466 (approximately 5%) from the three months ended
January 31, 2003 ($318,619).

Mine expenses during the three months ended January 31, 2004 ($137,812)
decreased by $8,518 (approximately 6%) from the three months ended January 31,
2003 ($146,330). We believe that the decrease in mine expenses resulted
primarily from less available capital.

Selling, general and administrative expenses during the three months ended
January 31, 2004 ($195,273) increased by $56,018 (approximately 40%) from the
three months ended January 31, 2003 ($139,255). This increase was primarily due
to increase in professional fees, public relations and travel.

Stock based compensation during the three months ended January 31, 2004 was $-0-
compared to $33,034 for the three months ended January 31, 2003.


                                      -13-
<PAGE>

Net Loss

As a result, our net loss for the three months ended January 31, 2004 was
$298,802, which was $4,905 greater than our $293,897 net loss for the three
months ended January 31, 2003.

Gains from Changes in Foreign Exchange Rates

During the three months ended January 31, 2004, we recorded equity adjustments
from foreign currency translations of approximately $2,930. These translation
adjustments are related to changes in the rates of exchange between the Mexican
Peso and the US dollar.

Liquidity and Capital Resources; Plan of Operations

As of January 31, 2004, we had working capital of $625,994. Our plans over the
next 12 months include the costs related to our joint venture with FG, primarily
the cost of construction of the El Chanate open-pit gold mine in Mexico,
administration and holding costs in Colorado and general administrative costs in
New York.

Our primary source of funds used during the quarter ended January 31, 2004 was
from the sale and issuance of common stock for gross proceeds of $930,997.

Phase two of our joint venture with FG was to culminate with a feasibility
study. Although we have obtained the feasibility study, Phase two was extended
as discussed below.

On January 7, 2004, Minera Santa Rita S. de R.L. de C.V. ("MSR"), one of our
wholly-owned Mexican affiliates, executed an amendment to its joint venture
agreement with FG. Pursuant to this amendment, FG has reduced its interest in
the venture from 31% to 30% and waived its right to earn up to an additional 14%
interest in the venture and agreed to pay us $10,850 (representing 30% of
certain funds provided by us that MSR spent on Phase Two in excess of the
approved budget for Phase Two). In return, MSR has

      1.    waived FG's obligation to contribute $106,401,

      2.    waived FG's obligation to contribute certain equipment (Phase
            Three),

      3.    waived MSR's right to dilute or to buy out FG's interest for FG's
            failure to make the above Phase Two $106,401 payment and

      4.    maintained its right to dilute FG for FG's failure to make requisite
            future contributions.

In addition, Phase Two will conclude on receipt of the first funds from Royal
Gold, with whom we are currently negotiating a financing arrangement for the El
Chanate Project, or Royal Gold's determination not to proceed with the funding,
whichever occurs first. With the elimination of Phase Three, Phase Four will
commence the day following receipt of the first funds from Royal Gold and Phase
Five will commence on the date "Optimal Level of Production" is achieved at the
El Chanate Project, as defined by MSR and FG.

If funding for Phase Four is not obtained from Royal Gold or another lender
willing to provide funding for Phase Four (the "Lender") on or before March 31,
2004, the joint venture will terminate unless MSR and FG (the "Venturers") elect
to continue funding the joint venture. If the joint venture terminates, title to
the concessions and the surface land at the El Chanate Project will remain in
Oro de Altar, another of our wholly-owned subsidiaries.


                                      -14-
<PAGE>

Unless otherwise agreed to by the Venturers, until the commencement of Phase
Four, the Venturers will contribute to the venture in proportion to their
venture interest (30/70) in cash or in work or services, at the election of the
contributing party. Pursuant to the amendment, once Phase Four commences and
until the beginning of Phase Five, the Venturers will pay in cash only, in
proportion to their venture interests, expenditures and costs that cannot be
covered with funds from the Lender. During Phase Five, Venturers will contribute
proportionately cash only if expenditures and costs cannot be covered by income
generated in operation of the mine. In the 2004 budget, the Venturers have
varied slightly the periods during calendar 2004 when Venturers are permitted to
contribute work or services in lieu of cash. A failure of a Venturer to make its
required additional cash contributions will result in a dilution of that
Venturer's interest in the venture. A failure of a Venturer who contributes work
or services to timely provide such work or services will result in interest
accruing in favor of the other Venturer at the LIBOR rate plus 5.45 percent and
could result in dilution of that Venturer's interest in the venture.

MSR has granted FG a right of first refusal to carry out certain works and
services required by the project provided FG at least matches the best bid
received for such works and services in terms of price, time and quality.

To facilitate obtaining funding from a Lender, MSR has agreed that its operating
rights will be subject to the loan agreement with the Lender and the Lender will
be permitted to participate on the Technical Committee. The Technical Committee
provides non-binding technical advice on the project and currently consists of
three members from MSR and two members from FG. In addition, the Venturers have
agreed that (i) required payments to the seller from whom we purchased the
Mexican company that originally owned the El Chanate concessions and surface
lands and (ii) required payments to the Lender will be made prior to
distribution of profits to the Venturers.

Although Phase Three, FG's contribution of equipment, has been eliminated from
the agreement, we are aware of alternate sources of equipment that appear to be
well suited for processing at the El Chanate project. We are currently
contacting equipment owners and equipment brokers regarding the availability and
cost of equipment for use at El Chanate. We cannot assume that we will be able
to acquire comparable equipment at a reasonable price.

In addition, we solicited and received bids from three experienced and qualified
contactors for mining El Chanate ores. These bids were higher than anticipated
and were rejected. We are reviewing certain ways to optimize blasting, hauling
and the amounts of pre-production mine stripping to reduce the mining costs. We
believe, but cannot guarantee, that there are certain cost savings to be made
which, if implemented, will improve the economic returns at El Chanate.

We believe, but cannot assure, that we have a credible funding source for a
portion of the construction of the El Chanate open-pit gold mine in Sonora,
Mexico. We have executed a royalty financing term sheet with Royal Gold, Inc. of
Denver, Co for supplying $13.8 million to fund the construction. However,
consummation of this funding is subject to due diligence by Royal Gold,
execution of a definitive agreement, the satisfaction of conditions to be
contained therein, and approval by Royal Gold's Board of Directors. The due
diligence period ended in late February and Royal Gold and we are examining ways
to optimize the project's financial returns for both parties. We believe that
equity financing may provide certain attractive alternative sources of project
funding and we are exploring those possibilities while also continuing our
discussions with Royal Gold. Although, we continue discussions with Royal Gold,
we no longer consider Royal Gold to be a likely source for 100% of the
financing. Should we be unable to consummate this financing with Royal Gold we
will continue to look for other


                                      -15-
<PAGE>

financing sources. Unless and until we obtain adequate financing on acceptable
terms, we will not be able to move forward with full-scale construction of the
mine. There can be no assurance that adequate equity or debt financing can be
attained.

However, since we have our government permits, we plan to begin construction of
certain small but essential structures in the very near future.

As explained in our annual report on form 10-KSB, historically, we have not
generated any material revenues from operations and have been in a precarious
financial condition. Should we not consummate the Royal Gold funding, no
assurance whatsoever can be given that we will be able to obtain any significant
funds in the near future or that we will be able to continue as a going concern
or that any of our plans with respect to our gold properties will, to a material
degree, come to fruition. In order to continue our program we will need to
obtain substantial financing. There is no assurance that we will be successful.

Our condensed consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. We are a development stage
enterprise and have recurring losses from operations and operating cash
constraints that raise substantial doubt about our ability to continue as a
going concern.

Environmental Issues

Management does not expect that environmental issues will have an adverse
material effect on our liquidity or earnings. Before any additional exploration
or any development or mining or construction of milling facilities could begin
at our Leadville properties, it would be necessary to meet all environmental
requirements and to satisfy the regulatory agencies in Colorado that our
proposed procedures fell within the boundaries of sound environmental practice.
We currently are bonded to insure reclamation of any areas disturbed by our past
activities. The current amount of this bond is $35,550. In Mexico, we are not
aware of any significant environmental concerns or existing reclamation
requirements at the El Chanate properties. We received the required Mexican
government permits for construction, mining and processing the El Chanate ores
in January 2004.

Part of the Leadville Mining District has been declared a federal Superfund site
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, and the Superfund Amendments and Reauthorization Act of 1986. Several
mining companies and one individual were declared defendants in a possible
lawsuit. We were not named a defendant or Possible Responsible Party. We did
respond in full detail to a lengthy questionnaire prepared by the Environmental
Protection Agency ("EPA") regarding our proposed procedures and past activities
in November 1990. To our knowledge, the EPA has initiated no further comments or
questions.

We do include in all our internal revenue and cost projections a certain amount
for environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $0.05 per metric tonne of material to be milled
on a continual, ongoing basis to provide primarily for reclaiming tailing
disposal sites and other reclamation requirements. At this time, there do not
appear to be any environmental costs to be incurred by us beyond those already
addressed above. No assurance can be given that environmental regulations will
not be changed in a manner that would adversely affect our planned operations.


                                      -16-
<PAGE>

Off-Balance Sheet Transactions

We do not have any transactions, agreements or other contractual arrangements
that constitute off-balance sheet arrangements.

                   Application Of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies for us include
impairment of long-lived assets, accounting for stock-based compensation and
environmental remediation costs.

In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of," we review our long-lived assets
for impairments. Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses then are measured by comparing the fair value of assets to
their carrying amounts. During the year ended July 31, 2002, we performed a
review of our Colorado mine and mill improvements and determined that an
impairment loss should be recognized. Accordingly, at July 31, 2002, we reduced
by $999,445 the net carrying value of certain assets relating to our Leadville,
Colorado facility to $300,000, which approximates management's estimate of fair
value. We recognized no additional impairment loss during the quarter ended
January 31, 2004.

We account for stock-based compensation to our employees using the intrinsic
value method in accordance with provisions of the Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations which requires the recognition of compensation expense over the
vesting period of the option when the exercise price of the stock option granted
is less than the fair value of the underlying common stock. Additionally, we
comply with the disclosure provisions of Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123") and
provide pro forma disclosure of net loss and loss per share as if the fair value
method has been applied in measuring compensation expense for stock options
granted. Stock-based compensation related to options granted to non-employees is
recognized using the fair value method in accordance with SFAS 123.

Environmental remediation costs are accrued based on estimates of known
environmental remediation exposure. Such accruals are recorded even if
significant uncertainties exist over the ultimate cost of the remediation. It is
reasonably possible that our estimates of reclamation liabilities, if any, could
change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring costs, are
expensed as incurred. There were no environmental remediation costs accrued at
January 31, 2004.


                                      -17-
<PAGE>

                            Issues And Uncertainties

The following issues and uncertainties, among others, should be considered in
evaluating our financial outlook.

      We have not generated any operating revenues. If we are unable to
      commercially develop our mineral properties, we will not be able to
      generate profits and our business may fail.

To date, we have no producing properties. As a result, we have no current source
of operating revenue and we have historically operated and continue to operate
at a loss. Our ultimate success will depend on our ability to generate profits
from our properties. Our viability is largely dependent on the successful
commercial development of the El Chanate project.

      We lack operating cash flow and rely on external funding sources. If we
      are unable to continue to obtain needed capital from outside sources, we
      will be forced to reduce or curtail our operations.

We do not generate any positive cash flow from operations and we do not
anticipate that any positive cash flow will be generated for some time. We have
limited financial resources. Leases and licenses that we hold as well as our
joint venture agreement with FG, impose financial obligations on us. We cannot
assure that additional funding will be available to allow us to fulfill such
obligations. Although we have executed a royalty financing term sheet with Royal
Gold, Inc. of Denver, Colorado for supplying $13.8 million to fund the
construction of the El Chanate open-pit gold mine in Sonora, Mexico, we cannot
assure that the funding will occur. Consummation of this funding is subject to
execution of a definitive agreement, the satisfaction of conditions to be
contained therein, and approval by Royal Gold's Board of Directors. We believe
that equity financing may provide certain attractive alternative sources of
project funding and we are exploring those possibilities while also continuing
our discussions with Royal Gold. Although, we continue discussions with Royal
Gold, we no longer consider Royal Gold to be a likely source for 100% of the
financing. Mining costs quotes were recently received from selected qualified
mining contractors and these bids range from 13% to 45% above feasibility study
costs. We are exploring ways to reduce these mining costs as quoted by the
potential contractors.

Further exploration and development of the mineral properties in which we hold
interests depends upon our ability to obtain financing through

      o     bank or other debt financing,

      o     equity financing, or

      o     other means.

Failure to obtain additional financing on a timely basis could cause us to
forfeit all or parts of our interests in some or all of (i) the El Chanate
concessions, (ii) the joint venture with FG and (iii) our Leadville properties,
and reduce or terminate our operations.


                                      -18-
<PAGE>

      Our year end audited financial statements contain a "going concern"
      explanatory paragraph. Our inability to continue as a going concern would
      require a restatement of assets and liabilities on a liquidation basis,
      which would differ materially and adversely from the going concern basis
      on which our financial statements included in this quarterly report have
      been prepared.

Our financial statements for the year ended July 31, 2003 included in our form
10-KSB for the year ended as of that date, and the financial statements for the
quarter ended January 31, 2004 contained in this quarterly report on form
10-QSB, and filed with the Commission, have been prepared on the basis of
accounting principles applicable to a going concern. Our auditors' report on the
financial statements contained in our Form 10-KSB includes an additional
explanatory paragraph following the opinion paragraph on our ability to continue
as a going concern. A note to these financial statements describes the reasons
why there is substantial doubt about our ability to continue as a going concern
and our plans to address this issue. Neither our July 31, 2003 financial
statements nor our January 31, 2004 quarterly unaudited financial statements
include any adjustments that might result from the outcome of this uncertainty.
Our inability to continue as a going concern would require a restatement of
assets and liabilities on a liquidation basis, which would differ materially and
adversely from the going concern basis on which our financial statements have
been prepared.

      Our ability on a going forward basis to discover viable and economic
      mineral reserves is subject to numerous factors, most of which are beyond
      our control and are not predictable.

Exploration for gold is speculative in nature, involves many risks and is
frequently unsuccessful. Any gold exploration program entails risks relating to

      o     the location of economic ore bodies,

      o     development of appropriate metallurgical processes,

      o     receipt of necessary governmental approvals and

      o     construction of mining and processing facilities at any site chosen
            for mining.

The commercial viability of a mineral deposit is dependent on a number of
factors including:

      o     the price of gold,

      o     exchange rates,

      o     the particular attributes of the deposit, such as its

            o     size,

            o     grade and

            o     proximity to infrastructure,

      o     financing costs,

      o     taxation,

      o     royalties,

      o     land tenure,

      o     land use,

      o     water use,

      o     power use,

      o     importing and exporting gold and

      o     environmental protection.

The effect of these factors cannot be accurately predicted.


                                      -19-
<PAGE>

Aside from our El Chanate concessions, the mineral properties in which we have
an interest or right are in the exploration stages and are without reserves of
gold or other minerals. We cannot assure that current or proposed exploration or
development on our other properties in which we have an interest will result in
the discovery of gold mineralization reserves or will result in a profitable
commercial mining operation.

      We have a limited number of prospects. As a result, our chances of
      commencing viable mining operations are dependent upon the success of one
      project.

Our only current properties are the El Chanate concessions and our Leadville
properties. At present, we are not doing any substantive work at our Leadville
properties. Our El Chanate concessions are owned by one of our wholly-owned
subsidiaries Oro de Altar. FG, our joint venture partner, has a 30% interest in
the operating profits of the El Chanate project. We currently do not have
operations on either of our properties, and we must commence such operations to
receive revenues. Accordingly, we are dependent upon the success of the El
Chanate concessions.

      If we are unable to obtain a crushing system and other equipment for our
      Mexican concessions at an acceptable cost, our ability to obtain requisite
      funding for our planned mining operations and our anticipated results of
      operations from mining at these concessions, once mining commences, may be
      adversely affected.

In March 2003, we obtained exclusive options to purchase an ore crusher and
related assets (spare parts for the crusher and certain transportable building
structures). The options expired and the owner of these assets sold his interest
to a third party. We had been in discussions with the new owner about the
possibility of acquiring the crushing system. The new owner recently informed us
that he intends to keep the equipment for use on his own property. We are
looking for similar equipment for use at our Mexican concessions. We are
optimistic about being able to acquire additional equipment at comparable costs;
however, there can be no assurance that we will be successful in acquiring these
assets. If we are unable to obtain this equipment at an acceptable cost, our
ability to obtain requisite funding for our planned mining operations and our
anticipated results of operations from mining at these concessions, once mining
commences, may be adversely affected.

      Gold prices can fluctuate on a material and frequent basis due to numerous
      factors beyond our control. If and when we commence production, our
      ability to generate profits from operations could be materially and
      adversely affected by such fluctuating prices.

The profitability of any gold mining operations in which we have an interest
will be significantly affected by changes in the market price of gold. Gold
prices fluctuate on a daily basis and are affected by numerous factors beyond
our control, including:

      o     the level of interest rates,

      o     the rate of inflation,

      o     central bank sales,

      o     world supply of gold and

      o     stability of exchange rates.

Each of these factors can cause significant fluctuations in gold prices. Such
external factors are in turn influenced by changes in international investment
patterns and monetary systems and political developments. The price of gold has
historically fluctuated widely and, depending on


                                      -20-
<PAGE>

the price of gold, revenues from mining operations may not be sufficient to
offset the costs of such operations.

      Changes in regulatory or political policy could adversely affect our
      exploration and future production activities.

Any changes in government policy may result in changes to laws affecting:

      o     ownership of assets,

      o     land tenure,

      o     mining policies,

      o     monetary policies,

      o     taxation,

      o     rates of exchange,

      o     environmental regulations,

      o     labor relations,

      o     repatriation of income and

      o     return of capital.

Any such changes may affect our ability to undertake exploration and development
activities in respect of present and future properties in the manner currently
contemplated, as well as our ability to continue to explore, develop and operate
those properties in which we have an interest or in respect of which we have
obtained exploration and development rights to date. The possibility,
particularly in Mexico, that future governments may adopt substantially
different policies, which might extend to expropriation of assets, cannot be
ruled out.

      Compliance with environmental regulations could adversely affect our
      exploration and future production activities.

With respect to environmental regulation, environmental legislation generally is
evolving in a manner which will require:

      o     stricter standards and enforcement,

      o     increased fines and penalties for non-compliance,

      o     more stringent environmental assessments of proposed projects and

      o     a heightened degree of responsibility for companies and their
            officers, directors and employees.

There can be no assurance that future changes to environmental legislation and
related regulations, if any, will not adversely affect our operations. We could
be held liable for environmental hazards that exist on the properties in which
we hold interests, whether caused by previous or existing owners or operators of
the properties. Any such liability could adversely affect our business and
financial condition.

      Mining Risks and Potential Inadequacy of Insurance Coverage could
      adversely affect us


                                      -21-
<PAGE>

If and when we commence mining operations at any of our properties, such
operations will involve a number of risks and hazards, including:

      o     environmental hazards,

      o     industrial accidents,

      o     labor disputes,

      o     metallurgical and other processing,

      o     unusual and unexpected rock formations,

      o     ground or slope failures,

      o     cave-ins,

      o     acts of God,

      o     mechanical equipment and facility performance problems and

      o     the availability of materials and equipment.

Such risks could result in:

      o     damage to, or destruction of, mineral properties or production
            facilities,

      o     personal injury or death,

      o     environmental damage,

      o     delays in mining,

      o     monetary losses and

      o     possible legal liability.

Industrial accidents could have a material adverse effect on our future business
and operations. Although as we move forward in the development of any of our
properties we plan to maintain insurance within ranges of coverage consistent
with industry practice, we cannot be certain that this insurance will cover the
risks associated with mining or that we will be able to maintain insurance to
cover these risks at economically feasible premiums. We also might become
subject to liability for pollution or other hazards which we cannot insure
against or which we may elect not to insure against because of premium costs or
other reasons. Losses from such events could have a material adverse effect on
us.

      Calculation of reserves and metal recovery dedicated to future production
      is not exact, might not be accurate and might not accurately reflect the
      economic viability of our properties.

Reserve estimates may not be accurate. There is a degree of uncertainty
attributable to the calculation of reserves, resources and corresponding grades
being dedicated to future production. Until reserves or resources are actually
mined and processed, the quantity of reserves or resources and grades must be
considered as estimates only. In addition, the quantity of reserves or resources
may vary depending on metal prices. Any material change in the quantity of
reserves, resource grade or stripping ratio may affect the economic viability of
our properties. In addition, there can be no assurance that mineral recoveries
in small scale laboratory tests will be duplicated in large tests under on-site
conditions or during production.

      We are dependent on the efforts of certain key personnel and contractors,
      the loss of whose services could have a materially adverse effect on our
      operations.

We are dependent on a relatively small number of key personnel, the loss of any
one of whom could have an adverse effect on us. In addition, while certain of
our officers and directors have experience in the exploration and operation of
gold producing properties, we will remain highly


                                      -22-
<PAGE>

dependent upon contractors and third parties in the performance of our
exploration and development activities. As such there can be no guarantee that
such contractors and third parties will be available to carry out such
activities on our behalf or be available upon commercially acceptable terms.

      There are uncertainties as to title matters in the mining industry. We
      believe that we have good title to our properties; however, defects in
      such title could have a material adverse effect on us.

We have investigated our rights to explore, exploit and develop our various
properties in manners consistent with industry practice and, to the best of our
knowledge, those rights are in good standing. However, we cannot assure that the
title to or our rights of ownership of either the El Chanate concessions or our
Leadville properties will not be challenged or impugned by third parties or
governmental agencies. In addition, there can be no assurance that the
properties in which we have an interest are not subject to prior unregistered
agreements, transfers or claims and title may be affected by undetected defects.
Any such defects could have a material adverse effect on us.

      Should we successfully commence mining operations in the future, our
      ability to remain profitable, should we become profitable, will be
      dependent on our ability to find, explore and develop additional
      properties. Our ability to acquire such additional properties will be
      hindered by competition.

Gold properties are wasting assets. They eventually become depleted or
uneconomical to continue mining. The acquisition of gold properties and their
exploration and development are subject to intense competition. Companies with
greater financial resources, larger staffs, more experience and more equipment
for exploration and development may be in a better position than us to compete
for such mineral properties.

      Our property interests in Mexico are subject to the risks of doing
      business in foreign countries.

We face risks normally associated with any conduct of business in foreign
countries with respect to our El Chanate project in Sonora, Mexico, including
various levels of political and economic risk. The occurrence of one or more of
these events could have a material adverse impact on our efforts or future
operations which, in turn, could have a material adverse impact on our future
cash flows, earnings, results of operations and financial condition. These risks
include the following:

      o     labor disputes,

      o     invalidity of governmental orders,

      o     uncertain or unpredictable political, legal and economic
            environments,

      o     war and civil disturbances,

      o     changes in laws or policies,

      o     taxation,

      o     delays in obtaining or the inability to obtain necessary
            governmental permits,

      o     governmental seizure of land or mining claims,

      o     limitations on ownership,

      o     limitations on the repatriation of earnings,

      o     increased financial costs,

      o     import and export regulations, including restrictions on the export
            of gold, and

      o     foreign exchange controls.


                                      -23-
<PAGE>

These risks may limit or disrupt the project, restrict the movement of funds or
impair contract rights or result in the taking of property by nationalization or
expropriation without fair compensation.

      Gold is sold in the world market in U.S. dollars; however, we may incur a
      significant amount of our expenses in Mexican pesos. If and when we sell
      gold, if applicable currency exchange rates fluctuate our revenues and
      results of operations may be materially and adversely affected.

If and when we commence sales of gold, such sales will be made in the world
market in U.S. dollars. We may incur a significant amount of our expenses in
Mexican pesos. As a result, our financial performance would be affected by
fluctuations in the value of the Mexican peso to the U.S. dollar. At the present
time, we have no plan or policy to utilize forward contracts or currency options
to minimize this exposure, and even if these measures are implemented there can
be no assurance that such arrangements will be available, be cost effective or
be able to fully offset such future currency risks.

Item 3. Controls and Procedures.

Gifford A Dieterle, our Chief Executive Officer and our Chief Financial Officer,
has evaluated, as of the end of the period covered by this report, the
effectiveness of the design and operation of our disclosure controls and
procedures with respect to the information generated for use in this report.
Based upon that evaluation, taking into account our limited resources and
current business operations, he concluded that the disclosure controls and
procedures were effective to provide reasonable assurances that information
required to be disclosed in the reports filed or submitted under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There have been no changes in our internal
control over financial reporting that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.


                                      -24-
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

            None.

Item 2. Changes in Securities

During the quarter ended January 31, 2004, we issued the following shares of our
Common Stock pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933: We sold 7,976,695 shares for $865,197 to 38
persons.

Item 3. Defaults Upon Senior Securities

            None.

Item 4 Submission of Matters to a Vote of Security Holders

            None.

Item 5. Other Information

            None.

Item 6. Exhibits and Reports on Form 8-K

Exhibits:

      31.1  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Executive Officer

      31.2  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Financial Officer

      32.1  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Executive Officer

      32.2  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Financial Officer

Reports on Form 8-K:

Report filed on January 21, 2005. Item 5. Other Events and Regulation FD
Disclosure.


                                      -25-
<PAGE>

                                   SIGNATURES

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

                                            CAPITAL GOLD CORPORATION
                                                   Registrant


                                            By:   /s/  Gifford A. Dieterle
                                                --------------------------------
                                                  Gifford A Dieterle
                                                  President/Treasurer

Date: March 15, 2004