**Exhibit 1**

 

**QUEENSTAKERESOURCES LTD.**

 

**99918th Street, Suite 2940**

 

**Denver,Colorado, USA 80202**

 

**(303)297-1557**

 

**March 30,2006**

 

 

**RENEWALANNUAL INFORMATION FORM**

 

**For**

 

 

**thefinancial year ended December 31, 2005**

 

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**TABLE OF CONTENTS**

 
| PRELIMINARY  NOTES                                                            | 3      |
|-------------------------------------------------------------------------------|--------|
| Incorporation of Financial Statements and Management  Discussion and Analysis | 3      |
| Date of Information                                                           | 3      |
| Currency and Exchange Rates                                                   | 3      |
| Metric Equivalents                                                            | 3      |
| Forward-Looking Statements                                                    | 4      |
|                                                                          |   |
| GLOSSARY OF  TERMS                                                            | 6      |
|                                                                          |   |
| CORPORATE  STRUCTURE                                                          | 9      |
| Name and Incorporation                                                        | 9      |
| Intercorporate Relationships                                                  | 9      |
|                                                                          |   |
| GENERAL  DEVELOPMENT OF THE BUSINESS                                          | 10     |
| Three-Year History                                                            | 10     |
| Acquisitions and Dispositions                                                 | 11     |
|                                                                          |   |
| NARRATIVE  DESCRIPTION OF THE BUSINESS                                        | 13     |
| General                                                                       | 13     |
| Principal Operating Property – Jerritt Canyon Mine                       | 15     |
|                                                                          |   |
| RISK FACTORS                                                                  | 32     |
|                                                                          |   |
| CAPITAL  STRUCTURE                                                            | 37     |
|                                                                          |   |
| MARKET FOR  SECURITIES                                                        | 37     |
|                                                                          |   |
| DIRECTORS AND  OFFICERS                                                       | 38     |
| Name, Address, Occupation and Security Holding                                | 38     |
| Corporate Cease Trade Orders and Bankruptcies                                 | 40     |
| Conflicts of Interest                                                         | 42     |
|                                                                          |   |
| LEGAL PROCEEDINGS                                                             | 44     |
|                                                                          |   |
| INTEREST OF MANAGEMENT AND OTHERS  IN MATERIAL TRANSACTIONS                   | 44     |
|                                                                          |   |
| TRANSFER AGENT  AND REGISTRAR                                                 | 44     |
|                                                                          |   |
| MATERIAL  CONTRACTS                                                           | 44     |
|                                                                          |   |
| INTEREST OF  EXPERTS                                                          | 44     |
|                                                                          |   |
| ADDITIONAL  INFORMATION                                                       | 45     |

 

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# **PRELIMINARY NOTES**

 

**Incorporation of Financial Statements and ManagementDiscussion and Analysis**

 

Incorporated by reference into this RenewalAnnual Information Form (“AIF”) are the consolidated financial statementsof the Company for the year ended December 31, 2005, and the accompanyingmanagement’s discussion and analysis (“MD&A”) with respect to such year. Allfinancial information in this AIF has been prepared in accordance withgenerally accepted accounting principles (“GAAP”) in Canada. Copies of allmaterials incorporated by reference herein may be obtained from SEDAR,under the Company’s name, at www.sedar.com.

 

**Date of Information**

 

All information contained in this AIF is asof March 30, 2006, unless otherwise stated.

 

**Currency and Exchange Rates**

 

Effective December 31, 2003, the Companychanged its reporting currency from Canadian dollars to U.S. dollars. Accordingly,dollar amounts in this AIF are expressed in United States dollars unlessotherwise indicated. “Cdn” is used to indicate Canadian dollar values.

 

The following table sets forth the rate ofexchange for the Canadian dollar, expressed in United States dollars in effectat the end of the periods indicated, the average of exchange rates in effect onthe last day of each month during such periods, and the high and low exchangerates during such periods based on the noon rate of exchange as reported by theBank of Canada for conversion of Canadian dollars into United States dollars.

 
| ** **                           | ** ** | **Year Ended December 30** | ** ** |
|--------------------------------------|------------|---------------------------------|------------|
| **Canadian Dollars to U.S. Dollars** | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                 |       |                            |       |   |   |   |   |
| Rate at end of period                |       | US$                             | 0.85800    |   | US$ | 0.83030 |   | US$ | 0.77270 |   |
|                                 |       |                            |       |   |   |   |   |
| Average rate for period              |       | US$                             | 0.82622    |   | US$ | 0.77014 |   | US$ | 0.71629 |   |
|                                 |       |                            |       |   |   |   |   |
| High for period                      |       | US$                             | 0.87480    |   | US$ | 0.85320 |   | US$ | 0.77470 |   |
|                                 |       |                            |       |   |   |   |   |
| Low for period                       |       | US$                             | 0.78510    |   | US$ | 0.71380 |   | US$ | 0.63270 |   |

 

The noon rate of exchange on March 30, 2006 as reported by theBank of Canada for the conversion of Canadian dollars into United Statesdollars was Canadian $1.00 equals US$0.8601

 

**Metric Equivalents**

 

For ease of reference, the following factorsfor converting Imperial measurements into metric equivalents are provided:

 
| **To convert from Imperial** | ** ** | **To metric** | ** ** | **Multiply by** | ** ** |
|------------------------------|------------|---------------|------------|-----------------|------------|
|                         |       |          |       |            |       |
| Acres                        |       | Hectares      |       | 0.404686        |       |
|                         |       |          |       |            |       |
| Feet                         |       | Metres        |       | 0.30480         |       |
|                         |       |          |       |            |       |
| Miles                        |       | Kilometres    |       | 1.609344        |       |
|                         |       |          |       |            |       |
| Tons                         |       | Tonnes        |       | 0.907185        |       |
|                         |       |          |       |            |       |
| Ounces (troy)/ton            |       | Grams/Tonne   |       | 34.2857         |       |

 

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**Cautionary Statement**

 

**Forward-Looking Statements:**

 

This document contains “forward-looking statements” within the meaningof applicable Canadian securities regulations and Section 21E of theUnited States Securities Exchange Act of 1934, as amended and the PrivateSecurities Litigation Reform Act of 1995. All statements other thanstatements of historical fact herein including, without limitation, statementsregarding potential resources and reserves, exploration results, productionrates and future plans and objectives of Queenstake, are forward-lookingstatements that involve various risks and uncertainties. Such forward-lookingstatements include, without limitation, (i) estimates and projections offuture gold production and cash operating costs, (ii) estimates of savingsor cost reductions, (iii) estimates related to financial performance,including cash flow and capital expenditures, (iv) estimates and projections of reserves and resources, (v) estimatesand opinions regarding geologic and mineralization interpretation, (vi) estimatesof exploration investment and scope of exploration programs and (vii) estimatesof reclamation and closure costs. There can be no assurance that suchstatements will prove to be accurate, and actual results and future eventscould differ materially from those anticipated in such statements, in particularthe estimates do not include input cost increases or gold price variations thatcould occur in future. Important factors that could cause actual results todiffer materially from Queenstake’s expectations are disclosed in Queenstakedocuments filed from time to time with Canadian Regulatory authorities onSEDAR, the U.S. Securities and Exchange Commission (SEC) and other regulatoryauthorities. Forward-looking statements are based on the estimates and opinionsof management on the date the statements are made, and Queenstake does notundertake any obligation to update forward-looking statements should conditionsor management’s estimates or opinions change. Forward-looking statements aresubject to risks, uncertainties and other factors, including gold and othercommodity price volatility, political and operational risks, which aredescribed in the Company’s 2005 Annual Information Form filed on SEDAR(www.sedar.com) and 2005 Annual Report on Form 40-F on file with the SEC(www.sec.gov) as well as in the Company’s other regulatory filings.

 

**Cautionary Notes to U.S. Investors ConcerningReserve and Resource Estimates:**

 

***Proven and Probable Reserves*.**The estimates of proven and probable mineral reserves shown in this AnnualInformation Form have been prepared in accordance with National Instrument43-101 of the Canadian Securities Administrators (NI 43-101). The definitionsof proven and 

 

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probable reserves used in NI 43-101 differ from the definitions inIndustry Guide 7 of the U.S. Securities and Exchange Commission (SEC). Accordingly,the Company’s disclosure of mineral reserves in this Annual Report may notbe comparable to information from U.S. companies subject to the SEC’s reportingand disclosure requirements.

 

***Measured and Indicated Resources.***ThisAnnual Information Form uses the terms “measured and indicated resources”.The Company advises U.S. investors that while these terms are recognized andrequired by Canadian regulations, the SEC does not recognize them. U.S.investors are cautioned not to assume that any part or all of mineraldeposits in these categories will ever be converted into reserves. Mineralresources that are not “mineral reserves” do not have demonstrated economicviability. Disclosure of “contained ounces” is permitted under Canadianregulations; however, the SEC normally only permits the reporting ofnon-reserve mineralization as in-place tonnage and grade.

 

***Inferred Resources.***ThisAnnual Report uses the term “inferred resources”. The Company advises U.S.investors that while this term is recognized and required by Canadianregulations, the SEC does not recognize it. “Inferred resources” have a greatamount of uncertainty as to their existence, and great uncertainty as to theireconomic and legal feasibility. It cannot be assumed that all or any part ofan inferred mineral resource will ever be upgraded to a higher category. UnderCanadian rules, estimates of inferred mineral resources may not form thebasis of feasibility or prefeasibility studies, except in rare cases. U.S.investors are cautioned not to assume that any part or all of an inferredresource exists or is economically or legally mineable.

 

For further information, please refer to the definitions of reservesand resources and discussion under the heading “Risk Factors” in the AnnualInformation Form and in the Management’s Discussion and Analysis, includedherein as Exhibits 1 and 3, respectively.

 

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# **GLOSSARY OF TERMS**

 

Except as otherwise defined, the followingterms, when used herein, shall have the following meaning

 
| **“Company” or “Queenstake”**           | ** ** | Queenstake Resources Ltd., including,  unless the context otherwise requires, the Company’s subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                  | ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“carbonaceous”**                                |       | Containing  carbon or coal or other rock containing small particles of carbon distributed  throughout the whole mass.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| ** **                                                  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“deposit”**                                     |       | A  mineralized body which has been physically delineated by sufficient drilling,  trenching, and/or underground work, and found to contain a sufficient average  grade of metal or metals to warrant further exploration and/or development  expenditures; such a deposit does not qualify as a commercially mineable ore  body or as containing ore reserves, until final legal, technical, and  economic factors have been resolved.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** **                                                  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“development” or “mine development”** |       | Driving  openings to access the mineral reserves in an underground mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| ** **                                                  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“diamond drill**”                               |       | A type of  rotary drill in which the cutting is done by abrasion rather than percussion.  The cutting bit is set with diamonds and is attached to the end of a long  hollow rods through which water is pumped to the cutting face. The drill cuts  a core of rock, which is recovered in long cylindrical sections, an inch or  more in diameter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                                                  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“feasibility study”**                           |       | A detailed  report showing the feasibility of placing a prospective ore body or deposit  of minerals within a mineral property into production, which report typically  includes, inter alia, the specific portion or portions of the property that  should be included in a development block, conclusions and recommendations  regarding any adjustments that should be made to the boundaries of a  development block, a description of the work to be performed in order to  develop the mineral resources within the development block and to construct a  mine or mines and related facilities on the development block, the estimated  capital and operating costs thereof, a proposed schedule for the timing  of development and mine construction, and an assessment of the impact of the  operation and the information obtained and evaluations made in respect  thereof. |
| ** **                                                  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“indicated mineral resource”**                  |       | That part of  a mineral resource for which quantity, grade or quality, densities, 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”**                   | ** ** | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                                                  | ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“measured mineral resource”**                   |       | That part of  a mineral resource for which quantity, grade or quality, densities, shape and  physical characteristics are so well established that they can be estimated  with confidence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

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| ** **                                             |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“mineral reserve”**                        |   | The  economically mineable part of a measured or indicated mineral resource  demonstrated by at least a preliminary feasibility study. This 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 may occur when the material is  mined and processed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                   |   | The terms “mineral  reserve”, “proven mineral reserve” and “probable mineral reserve” used in  this AIF are Canadian mining terms as defined in accordance with NI 43-101  under the guidelines set out in the Canadian Institute of Mining, Metallurgy  and Petroleum (the “CIM”), Standards on Mineral Resource and Mineral Reserves  Definitions and guidelines adopted by the CIM Council on August 20, 2000  (the “CIM Standards”).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“mineral resource”**                       |   | 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 from  specific geological evidence and knowledge. The term “mineral resource”  covers mineralization and natural material of intrinsic economic interest  which has been identified and estimated through exploration and sampling and  within which mineral reserves may subsequently be defined by the  consideration and application of technical, economic, legal, environmental,  socio-economic and governmental factors. The phrase “reasonable prospects for  economic extraction” implies a judgment by the Qualified Person in respect of  the technical and economic factors likely to influence the prospect of  economic extraction. A mineral resource is an inventory of mineralization  that under realistically assumed and justifiable technical and economic  conditions might become economically extractable. The term “mineral resource”  used in this AIF is a Canadian mining term as defined in accordance with NI 43-101  — under the guidelines set out in the CIM Standards. |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“mineralization”**                         |   | Mineral-bearing  rock; the minerals may have been either a part of the original rock  unit or injected at a later time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“mineralized”**                            |   | Metallic  mineral-bearing material; the minerals may have been either a part of  the original rock unit or injected at a later time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“NI 43-101”**                              |   | Canadian  National Instrument 43-101 - Standards of Disclosure for Mineral Projects of  the Canadian Securities Regulators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“net smelter return royalty/NSR royalty”** |   | A payment  made by a producer of metals based on the value of the gross metal production  from the property, less deduction of certain limited costs including  smelting, refining, transportation and insurance costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“net proceeds interest”**                  |   | The right to  receive a portion of the net proceeds, based on gross revenues less all  operating, capital and similar expenses, from the production and sale of  metal from the property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ** **                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“ounces”**                                 |   | Troy ounces.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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| **“probable mineral reserve”**            |       | The  economically mineable part of an indicated, and in some circumstances a  measured mineral resource demonstrated by at least a preliminary feasibility  study. This 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“proven mineral reserve”**              |       | The  economically mineable part of a measured mineral resource demonstrated  by at least a preliminary feasibility study. This study must include adequate  information on mining, processing, metallurgical, economic and other relevant  factors that demonstrate, at the time of reporting, that economic extraction  is justified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“put option”**                          | ** ** | An option  contract that gives the holder the right to sell a certain quantity of an  underlying security or commodity to the writer of the option, at a specified  price (strike price) up to a specified date (expiration date). Also called a “put”.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **                                          | ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“Qualified Person**”                    |       | An  individual who, in accordance with NI 43-101:

 

(a)                                  is an engineer or geoscientist with at least five years of  experience in mineral exploration, mine development or operation or mineral  project assessment, or any combination of these;

 

(b)                                 has experience relevant to the subject matter of the mineral  project and the technical report; and

 

(c)                                  is a member in good standing of a recognized professional  association. |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“ramp”**                                |       | An inclined  underground tunnel that provides access to an ore body for exploration,  ventilation and/or mining purposes in an underground mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“refractory”**                          |       | Mineralized  material in which gold is not amenable to recovery by conventional cyanide  methods due to either encapsulation by other minerals or the presence of  elemental carbon.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“roast”**      |       | The  treatment of ore by heat in order to oxidize those elements causing the ore  to be refractory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“share”**                     |       | A common  share without par value of the Company. Historical references to numbers of  shares have been adjusted to reflect the share exchange ratio of 0.4993 to  one used in the July 19, 1999 amalgamation with Santa Cruz Gold Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“tailings”**                            |       | Waste  material from a mineral processing mill after the metals and minerals of a  commercial nature have been extracted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ** **                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **“ton” or “t”**                |       | A short ton  (2,000 pounds).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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# **CORPORATE STRUCTURE**

 

**Name andIncorporation**

 

Queenstake Resources Ltd. (the “Company”) wasincorporated under the laws of the province of British Columbia on May 3,1977 under the name “Queenstake Resources Ltd.” by registration of itsMemorandum and Articles with the British Columbia Registrar of Companies. Tofacilitate a business combination of the Company and Santa Cruz Gold Inc. (“SantaCruz”) on June 24, 1999, the Company continued its corporate jurisdictionfrom British Columbia to the Yukon Territory under the Business CorporationsAct (Yukon), as amended (the “YBCA”). Effective July 19, 1999, the Companymerged with Santa Cruz through an amalgamation by way of statutory plan ofarrangement under the YBCA to form one continuing company with the name “QueenstakeResources Ltd.”

 

The registered office of the Company islocated at Suite 200, 204 Lambert Street, Whitehorse, Yukon Y1A 3T2. Theexecutive offices of the Company are located at 999 Eighteenth Street, Suite 2940,Denver, Colorado U.S.A. 80202.

 

**Intercorporate Relationships**

 

Unless the context otherwise requires, allreferences herein to the Company include the Company and its subsidiaries. Thefollowing chart illustrates the inter-corporate relationships of the Companyand its principal subsidiaries and their jurisdictions of incorporation, aswell as the ownership of the Company’s principal asset, the Jerritt Canyonmine.

 

 

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# **GENERAL DEVELOPMENTOF THE BUSINESS**

# ** **

**Three-Year History**

 

Effective with the Santa Cruz businesscombination in July, 1999 (see “Corporate Structure – Name and Incorporation”),the Company acquired Santa Cruz’s 100% interest in the Magistral gold depositlocated in Sinaloa, Mexico. The Company’s activities in 2000 and 2001concentrated on studying the feasibility of the Magistral project, performingadditional exploration drilling on the project and evaluating financingalternatives. In 2001, the Company partially financed the Magistral projectthrough the formation of a joint venture known as the Magistral Joint Venture (“MJV”)with the financing party, Midwest Mining Inc. (“Midwest”). Terms of the jointventure financing included preferential loan payback to Midwest and precludedthe Company from voting on certain matters concerning the MJV, until thepreferential loan amounts were repaid to Midwest. The Magistral mine wasconstructed through 2002 and began small-scale commercial production on January 1,2003. Because the Company had no significant influence over the operation ofthe MJV, the Company’s interest in the MJV was accounted for on the cost basis,as a long-term investment, until November 2003. The accounts of the MJVwere therefore not consolidated in the Company’s financial statements.

 

On June 30, 2003, the Company acquired100% of the operating Jerritt Canyon gold mine, 50 miles north of Elko, Nevada,and thus transformed itself from an emerging small-scale gold producer to amid-tier gold producer. The Jerritt Canyon mine is a large-scale undergroundgold mining operation with significant exploration potential. Full details ofthis acquisition and related financing transactions are discussed under “GeneralDevelopment of the Business - Acquisitions and Dispositions - Jerritt CanyonAcquisition”.

 

In September 2003, based on an upwardtrend in costs at the Magistral mine and the apparent need for significantadditional capital, the Company wrote off its investment in the MJV andMagistral mine. In November 2003, based on a decision to focus itsresources on the recently acquired Jerritt Canyon mine, the Company determinedthat it would no longer participate in the MJV. Accordingly, the Company committedto a plan to sell its interest in the MJV. In order to facilitate this sale,the Company recognized the need to eliminate the MJV preferential loan paybackto Midwest, and consolidate ownership of the MJV. On December 15, 2003,the Company acquired Midwest’s entire interest in the MJV. As part of thetransaction, Midwest agreed to eliminate the preferential loan repaymentobligations to Midwest. On December 19, 2003, the Company agreed to arm’s-lengthterms proposed by Nevada Pacific Gold Ltd. (“NPG”) to sell Pangea ResourcesInc. (“Pangea”), the Company’s 100% owned subsidiary that owned the Magistralmine, to NPG. On February 2, 2004, the Company completed the sale ofPangea and all related assets including the Magistral mine to NPG. Full detailsof these transactions are discussed under “General Development of the Business- Acquisitions and Dispositions - Magistral Mine”.

 

In July 2004, the Company entered intoan agreement with a syndicate of underwriters to complete a private placementof 34,254,000 special warrants at a price of Cdn $0.50 per special warrant forgross proceeds of $13.0 million (Cdn $17.1 million). Each special warrantentitled the holder to acquire one common share and one-half of one commonshare purchase warrant of the Company. The private placement closed on August 10,2004 and on October 7, 2004, the Company issued 34,254,000 common sharesand 17,127,000 common share purchase warrants. Each whole common share purchasewarrant was exercisable at a price of Cdn $0.65 until February 10, 2006. Thepurchase warrants expired unexercised. The Company paid the underwriters a cashcommission equal to 5.0% of the gross proceeds of the offering, orapproximately $0.6 million. In addition, the Company issued the underwriterscompensation warrants exercisable, without payment of additional compensation,into compensation options (the “Compensation Options”). The CompensationOptions were exercisable to acquire 1,712,700 units of the Company at a priceof Cdn $0.50 per unit until October 8, 2005. The Compensation Optionsexpired unexercised. Each unit consisted of one common share and one-half ofone warrant with the warrants having the same terms as the private placementwarrants described above.

 

During December 2004, the Company’scommon shares were approved for listing on the American Stock Exchange (“AMEX”)and commenced trading under the ticker symbol “QEE”.

 

On March 23, 2005, the Companysuccessfully completed an equity financing at the maximum offering amount (the “Offering”)through a syndicate of agents (the “Agents”) for aggregate cash proceeds of$24.8 million (Cdn $30.0 

 

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million). The aggregate cash proceedsincluded Cdn $10.0 million raised pursuant to the exercise by the Agents of anover-allotment option. The total Offering consisted of 100 million units (the “Units”),including those issued pursuant to the Agents’ over-allotment option, with eachUnit consisting of one common share and one half of one common share purchasewarrant at a price of Cdn $0.30 per Unit. Each whole common share purchasewarrant (50 million warrants in total) can be exercised to acquire oneadditional common share at a price of Cdn $0.40 until March 23, 2007. Ifat any time after six months from the closing of this Offering, the weightedaverage trading price of the Common Shares on the Toronto Stock Exchange (the “TSX”)(or such other exchange or trading market on which the Common Sharesprincipally trade) is Cdn $0.52 or more per Common Share for a period of thirtyconsecutive trading days then, upon notice by the Company, the holders of suchwarrants must exercise their warrants within thirty days or they will expireand will no longer be valid. The Agents received a 5% commission on the grossproceeds of the offering.

 

On June 22, 2005 the Company issued 25,987,200 common sharespursuant to an equity financing for $5.9 million through a syndicate ofunderwriters (“Underwriters”). The offering was priced at Cdn $0.28 per share. TheUnderwriters received a 4% commission on the gross proceeds of the offering.

 

On March 29, 2006, the Company entered into an agreement with NewmontCanada Limited (“Newmont”) whereby Newmont will purchase 28.51 millionQueenstake common shares at Cdn $0.41 per share for gross proceeds of US $10.0million through an equity private placement. As part of the private placement, Newmont will receive warrants that canbe exercised to acquire up to 28.51 million common shares of Queenstake at aprice of Cdn $0.55 for a four-year period, which would generate Cdn $15.7million in cash if exercised.  Afterclosing, Newmont will own approximately 4.9% of Queenstake’s outstanding commonshares.  If Newmont were to exercise allof its warrants and maintain its holdings of Queenstake’s common shares,Newmont would hold approximately 8.5% of Queenstake’s fully diluted outstandingcommon shares.  For a period of two yearsfrom closing, Newmont will have the right to participate in future equityofferings by Queenstake to preserve its fully diluted shareholding percentageand will have certain additional rights to participate in debt financings.  The private placement, which remains subjectto certain closing conditions, including regulatory approvals, is expected toclose in the second quarter of 2006. Gross proceeds of the private placement ofUS $10.0 million will be used to fund exploration and for other corporateuses.  See *2006 PrivatePlacement, Ore Processing and Property Lease Agreements* Section inthis AIF.

 

**Acquisitions and Dispositions**

 

*Jerritt Canyon Acquisition*

 

On May 30, 2003, the Company enteredinto a definitive asset purchase and sale agreement (the “Purchase and SaleAgreement”) with subsidiaries of AngloGold Limited (“AngloGold”) and MeridianGold Inc. (“Meridian”) (collectively the “Sellers”) pursuant to which theCompany agreed to acquire the Sellers’ respective 70% and 30% interests in theassets comprising the operating Jerritt Canyon gold mine (“Jerritt Canyon”),located in the Independence Mountain Range of Nevada, USA, 50 miles north ofElko, Nevada. The acquisition closed on June 30, 2003.

 

The Jerritt Canyon mine is an operating goldproperty with four producing underground mines and ore stockpiles, currentlyfeeding ore to a 1.5 million ton per year capacity processing plant. TheCompany acquired and integrated the Jerritt Canyon mine without interruption tomining operations.

 

The Jerritt Canyon acquisition was an arm’s-lengthtransaction. Under the terms of the Purchase and Sale Agreement, the Companypaid to the Sellers $1.5 million cash, together with the issuance of 32 millioncommon shares of the Company with an estimated fair value of $4.1 million. Inaddition, the Company agreed to pay $6 million to the Sellers in quarterlyinstalments of $1 million and a deferred net smelter return royalty on JerrittCanyon production, capped at $4.0 million, following which the royalty wouldconvert to a 1% net proceeds interest royalty.

 

On August 26, 2004 the Company settledthe $6.0 million of deferred quarterly instalments with a lump sum payment of$5.6 million and settled the deferred $4.0 million capped net smelter royaltywith a lump sum payment of $3.5 million. This settlement excluded the 1% netproceeds interest royalty payable to AngloGold, which in management’s opinion,based on current reserve estimates and operating cost assumptions representsnominal, if any, future payments.

 

Under the terms of the Purchase and SaleAgreement, the Company also assumed $4.2 million of the Sellers’ operatingliabilities and the Sellers’ entire Jerritt Canyon mine related reclamation andenvironmental liabilities. The fair value of the Jerritt Canyon minereclamation and environmental liabilities, at the time of acquisition, wasindependently estimated at $25.8 million. This amount was funded through anenvironmental risk transfer program (the “ERTP”) underwritten by AmericanInsurance Group Environmental (“AIG”), a division of American InternationalCompanies. Under the terms of the ERTP, the Company deposited $25.8 millioninto an interest-bearing account with AIG (the “Commutation Account”). TheCommutation Account principal, plus interest earned, will be used to pay formine closure and reclamation liabilities. The ERTP also includes a closure costcap insurance policy which will serve to fund reclamation and post-closure sitemanagement by the Company. The insurance 

 

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component provides insurance coverage in theevent that reclamation costs exceed those provided for by the CommutationAccount. If the ultimate reclamation costs are less than the amount in theCommutation Account, the Company would be refunded the excess cash. In theevent that the reclamation cost is more than the Commutation Account balance,the insurance portion of the ERTP is activated and AIG would pay the excesscosts up to a defined maximum.****The ERTP alsoincludes pollution legal liability insurance coverage for third-party damageclaims against the Company for both pre-existing pollution conditions and newpollution conditions for a period of five years commencing June 30, 2003. Inaddition to reclamation insurance, AIG has posted a total of $35.5 million insurety bonds with the U.S. Forest Service and the Nevada Division ofEnvironment Protection. For these services, the Company paid AIG premiumstotalling $5.9 million in addition to establishing the Commutation Account. Managementof the Company believes that the ERTP effectively limits the Company’s JerrittCanyon reclamation and mine closure liabilities to the amount of theCommutation Account with respect to obligations existing at June 30, 2003.

 

*MagistralMine Disposition*

 

TheMagistral Joint Venture (“MJV”) was formed in 2001 to facilitate financing forthe construction and development of the Magistral mine in Sinaloa, Mexico.Terms of the financing included preferential loan payback to Midwest as thefunding joint venture partner, and precluded the Company from voting on certainmatters concerning the MJV, until the preferential loan amounts were repaid.

 

TheMagistral mine was constructed and developed through 2002, and begansmall-scale commercial production on January 1, 2003. Because the Companyhad no significant influence over the operation of the MJV, the Company’sinterest in the MJV was accounted for on a cost basis, as a long-terminvestment, until November 2003. The accounts of the MJV were thereforenot consolidated in the Company’s financial statements.

 

By September 2003,it had become evident that the upward trend in repair costs for the miningequipment at the mine together with a decreasing trend in gold production,mainly as a result of low equipment availability, required management to assessthe carrying value of the investment. After considering the resulting operatingdeficits, the apparent need for significant additional capital, and therequired preferential loan payback to Midwest, the Company concluded that itslong-term investment in the MJV was impaired and wrote down its investment by$6.2 million.

 

In November 2003,based on a decision to focus its resources on the recently acquired JerrittCanyon mine, the Company determined that it would no longer participate in theMJV nor provide additional capital. Accordingly, the Company committed to aplan to sell its interest in the MJV. In order to facilitate this sale, theCompany recognized the need to eliminate the MJV debt, including thepreferential loan payback to Midwest, and consolidate ownership of the MJV.

 

On December 15,2003, the Company paid Midwest $0.9 million, issued to Midwest 11,200,000common shares of the Company, with an estimated fair value of $6.1 million and2,000,000 warrants exercisable over a two year period at Cdn $1.00 per share,as consideration for Midwest’s interest in the MJV and its 15% equity interestin Pangea Resources Inc. (“Pangea”). As part of the transaction, Midwestagreed to eliminate the Company’s preferential loan repayment obligations dueto Midwest.

 

On December 19,2003, the Company agreed to arm’s-length terms proposed by Nevada Pacific Gold Ltd.(“NPG’) to sell 100% of Pangea and all its related assets including theMagistral mine to NPG. At December 31, 2003 the Company classified thegroup of assets to be sold by NPG as “assets to be disposed of by sale,” acurrent asset.

 

On February 2,2004, the Company completed the sale of Pangea and all related assets to NPG.In consideration of the sale, the Company received from NPG $4 million in cash,2,000,000 common shares of NPG and a $3 million promissory note (the “PromissoryNote”) payable on August 2, 2004, secured by a general security agreementover all of NPG’s assets. NPG has now fully paid the Promissory Note with cashpayments of $2.5 million and 669,485 common shares of NPG. The Company has sold2,644,485 of the NPG shares and as of December 31, 2005 holds 25,000shares. The shares of NPG trade on the TSX Venture Exchange.

 

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# **NARRATIVEDESCRIPTION OF THE BUSINESS**

 

**General**

 

*The Company*

 

Queenstake is a gold mining and explorationcompany. The Company’s principal asset and only current source of goldproduction is the 100% owned Jerritt Canyon gold mine in Nevada, U.S.A,acquired on June 30, 2003. See “General Development of the Business –Acquisitions and Disposals – Jerritt Canyon Acquisition”. Jerritt Canyon is anoperating gold complex with four producing underground mines and a 1.5 millionton per year capacity processing plant. The Jerritt Canyon mine acquisitioneffectively transformed the Company from an emerging small-scale gold producerto a mid-tier gold producer with anticipated gold production of approximately200,000 to 220,000 ounces in 2006. In addition, the approximately 119-squaremiles that comprise the Jerritt Canyon property offer a significant number ofadvanced, early stage and district-scale exploration targets, and potential toexpand the currently defined reserves and resources proximal to the producingmines.

 

*Uses of Gold*

 

Product fabrication and bullion investmentare the two principal uses of gold. Within the fabrication category there are awide variety of end uses, the largest of which is the manufacture of jewellery.Other fabrication purposes include official coins, electronics, miscellaneousindustrial and decorative uses, dentistry, medals and medallions.

 

*Sales and Refining*

 

Gold can be readily sold on numerous marketsthroughout the world and it is not difficult to ascertain its market price atany particular time. Since there are a large number of available goldpurchasers, the Company is not dependent upon the sale of gold to any onecustomer.

 

The Company’s gold production is currentlyrefined to market delivery standards by Johnson Matthey Inc., at a refinery inSalt Lake City, Utah. The Company believes that because of the availability ofalternative refiners, no material adverse effect would result if the Companylost the services of Johnson Matthey Inc.

 

At December 31, 2005, the Company held 82,500 gold put optionswith a strike price of $400****per ounce withexpiry dates through the fourth quarter of 2006 and 64,500 gold put optionswith a strike price of $425 per ounce with expiry dates in the first and secondquarters of 2007. The purchase of gold put options provides the Company withdownside price protection for future gold sales and provides some assurance offuture revenue and cash flows for production and planning in the future.

 

*Employees*

 

At December 31, 2005, the Company hadapproximately 424 full-time employees in the United States, of which  approximately 417****wereat the Jerritt Canyon mine and****7****at the Company’s executive offices in Denver, Colorado. Noneof the Company’s U.S. employees are unionized. The Company believes that labourrelations at both locations are good.

 

*Social and Environmental Policies*

 

Queenstake’s success is firmly entrenched in the concept of multipleuse of lands which integrates land use for mining, agriculture, ranching,wildlife and sustainable public development. The Company is committed to landuse that strengthens and enhances the social and environmental quality of northernNevada.

 

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Regulatory approvals and permits for the Jerritt Canyon mines wereseamlessly transferred to Queenstake on July 1, 2003. Since that dateQueenstake has continued all of the high standards of environmental performanceat Jerritt Canyon.

 

Consistent with changing permitting strategies from mine closureplanning to sustaining and increasing Jerritt Canyon production for theforeseeable future, all three major operating permits for the Jerritt Canyonmines were renewed or reissued in 2004. The Nevada mining permit whichregulates water pollution control was renewed on September 17, 2004 forfive years. A site wide Title V Air Quality Permit was issued on March 10,2004 for a five year term. On April 2, 2004 a site wide Reclamation Permitwas reissued to include all current activities ongoing at Jerritt Canyon. Inaddition to obtaining the three major operating permits Queenstake alsoobtained permits for the Steer mine portal and surface facilities area in January 2004and initiated the U.S. Forest Service permitting process for the next five-yearexploration plan. It was further honored by the State of Nevada when itreceived the 2004 Nevada Reclamation Award for closure and reclamation work atthe Burns Basin surface mine area. Through 2005, work progressed on anenvironmental assessment for the next five year exploration plan with the U.S.Forest Service. The Company maintained active participation in the NevadaVoluntary Mercury Emission Reduction Program and actively participated with theNevada Division of Environmental Protection and others in the development ofnew regulations regarding mercury air emission controls.

 

A large portion of the Jerritt Canyon Mine is located on public landadministered by the U.S. Forest Service. The Jerritt Canyon staff maintains aproactive relationship with the U.S. Forest Service Administrators, whichincludes weekly site inspections and updates. A majority of the Jerritt Canyonmining district has undergone formal National Environmental Policy Act (“NEPA”)review as part of the 25-year mining and exploration history of theDistrict. Environmental issues are well defined in this documentation andappropriate mitigation strategies are in place to support and expandoperations.

 

Reclamation projects are scheduled annuallyand are completed concurrent with the completion of mining activities. To date,over 1,500 acres of mined lands have been reclaimed. Reclamation and closureactivities are defined and associated costs are bonded with the FederalGovernment and the State of Nevada. These bonded activities are also insured bya reclamation and closure policy independently administered by AIG. Asreclamation is completed, payment for completing the insured activity is paidto the Company from a pre-funded Commutation Account administered by AIG. Thisprogram has shown to be workable during the 2005 reclamation season.

 

The Company is committed to conducting itsoperations with close consideration to environmental values and ethics as wellas to social issues. The Company will therefore:

 

•                  Comply with applicable laws, regulations, and permit conditions and,where appropriate, exceed their minimum requirements;

 

•                  Establish and maintain management systems to monitor allenvironmental aspects of its activities;

 

•                  Review these management systems regularly to evaluate theireffectiveness and modify them as appropriate to optimize their effectiveness;

 

•                  Proactively pursue and evaluate engineering alternatives to best addressclosure and reclamation issues;

 

•                  Assure that financial resources are available to meet environmentaland reclamation obligations;

 

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•                  Ensure that the Company’s employees and contractors are aware of theCompany’s environmental policies and understand their relevantresponsibilities;

 

•                  Participate in the ongoing public and private sector debate onenvironmental and social matters that relate to the mining industry.

 

The Company is continually striving toimprove its environmental performance.

 

*Environmental Protection Requirements*

 

For a discussion of the current and futureeffects of environmental protection requirements, see “Narrative Description ofthe Business - Operating Property – Jerritt Canyon Mine Environmental”, below. Seealso “Risk Factors” below.

 

**Principal Operating Property – Jerritt Canyon Mine**

 

*Introduction*

 

On June 30, 2003, the Company acquiredthe Jerritt Canyon mine, in Nevada. See “General Development of the Business -Acquisitions and Dispositions  - JerrittCanyon Acquisition”, The Jerritt Canyon mine is an operating gold property withfour  producing underground mines and orestockpiles, currently feeding ore to a 1.5 million ton per year capacityprocessing plant. Transition of the mine to Queenstake was effected withoutinterruption to mining operations, and as a result the Company was not exposedto any start-up or project completion risks.

 

The Jerritt Canyon area is a large andhistorically prolific gold producing district, having produced over sevenmillion ounces of gold over the past 25 years. The Jerritt Canyon acquisitioneffectively transformed the Company from an emerging small-scale gold producerto a mid-tier gold producer with anticipated gold production of 200,000 to220,000 ounces in 2006.

 

*Recent Operations*

 

Following the closing of the acquisition on June 30, 2003, theCompany integrated the Jerritt Canyon mines without interruption to mineoperations. The skilled work force and mine management team at Jerritt Canyonprovided the Company with sufficient operating depth. Mining during 2003covered the first six months of Queenstake’s ownership of the Jerritt Canyonmine. Production levels were similar to previous year results achieved underthe previous owners. Mined ore tonnage during 2004 began to decline in the faceof insufficient development, lack of sustaining capital investment, and matureore bodies. Mining during 2005 was derived primarily from the Murray, Smith,and SSX underground mines. Commercial production from the Mahala depositaccessed and mined through the Smith Mine began in August 2005, followingcommissioning of a ventilation and escape-way raise. The connection of the SSXand Steer mines was completed in October 2005 which allows for joint operationof these mines. Ore tons mined for Jerritt Canyon during 2005 were 16% lowerthan in 2004. Underground mining was affected by a shortage of experiencedminers and mechanics, continued dewatering activities at the Smith Mine,necessitated by heavy spring runoff and rainfall in June 2005, and plannedlower ore tonnage under the redevelopment plan described below.

 

*The 2005 Redevelopment Plan*

 

In August of 2005, the Company announced a redevelopment plandesigned to optimize operations and reduce operating costs in response todevelopment and production shortfalls at Jerritt Canyon and rising commoditycosts. The redevelopment plan represented a re-engineering 

 

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to optimize value and cash flow from the Jerritt Canyon mine assetsgiven constraints with manpower, mining equipment, and increasing commoditycosts. The plan was a substantial change in mine and processing practices atJerritt Canyon to focus on accelerated underground development, higher gradeproduction and reduced mill processing rate to align mill throughput with anoptimal mining rate. The mill processing rate was scaled back from operatingtwo roasters together to one roaster at a time for an average of between 2,500and 2,700 tons per day, approximately 25% lower than the processing rate in thefirst half of 2005. The average grade of ore being processed was as a resultincreased to approximately 0.25 ounce of gold per ton (opt) in the second halfof 2005, representing an approximate 20% increase from the first half 2005. Inaddition, daily batch crushing and grinding of mill feed was scheduled underthe redevelopment plan during off-peak hours for lower energy rates. The millprocessing rate can be increased in the future should Jerritt Canyon’s capacityto produce higher grade ore from underground mining improve or to accommodateadditional mill feed from third-party sources.

 

Cost reductions anticipated to be realized progressively under theredevelopment plan include lower energy and commodities consumption, lowercosts of labour, maintenance and other savings from improved operatingefficiencies. However, much of the anticipated operating cost savings in 2005were absorbed by unexpected increases in energy and certain commodity prices duringthe fourth quarter of 2005.

 

The redevelopment plan was a substantial change from historical miningand processing practices. Comparison to operating results from previous yearsshould be viewed in that context.

 

Fourth quarter 2005 operating results were essentially on track withthe redevelopment plan. Ore tons mined were 223,060, exceeding theredevelopment plan by 8% while tons milled were 211,587, slightly exceeding theredevelopment plan. Ore grade processed was 0.25 opt while ounces of gold producedwere 45,555 for the fourth quarter, both essentially in line with theredevelopment plan. Moisture in the ore from wet winter weather resulted in thesettling of high-grade ore fines into the ore pad, which is expected to berecovered in the spring and summer of 2006 when the ore pads can be scraped andthe ore processed. As a result of such seasonal factors, Jerritt Canyon hadaccumulated over 8,000 ounces of contained gold in ore stockpile at the end of2005. The ore stockpile at year-end is expected to be processed in the secondand third quarters of 2006.

 

Capitalized mine development of 2,412 feet was slightly ahead of theredevelopment plan during the fourth quarter. For the full year, capitalizedmine development totaled 9,412 feet, slightly exceeding the redevelopment plan.A mining contractor remains at Jerritt Canyon, dedicated to acceleratingunderground development.

 

*2005 Quarterly Production Summary*

 

Table 1 – Jerritt Canyon Quarterly ProductionStatistics

 

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| ** **                         | ** ** | **Three months ended**      | ** ** |
|------------------------------------|------------|-----------------------------|------------|
| ** **                         | ** ** | **December 31,  2005** | ** ** | **September 30,  2005** | ** ** | **June 30,  2005** | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** | **September 30,  2004** | ** ** | **June 30,  2004** | ** ** | **March 31,  2004** | ** ** |
| Gold ounces  produced              | ** ** | **45,555**                  |       | 49,613 |   | 54,156 |   | 54,767 |   | 60,384 |   | 73,070 |   | 61,247 |   | 48,632 |   |
| Gold ounces sold                   | ** ** | **46,828**                  |       | 54,446 |   | 50,560 |   | 50,850 |   | 64,723 |   | 71,210 |   | 63,983 |   | 45,735 |   |
|                               |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average sales  price per ounce     | ** ** | **$**                       | **485**    |   | $ | 442 |   | $ | 428 |   | $ | 427 |   | $ | 432 |   | $ | 402 |   | $ | 395 |   | $ | 406 |   |
| Cash operating  costs per ounce(1) | ** ** | **$**                       | **413**    |   | $ | 401 |   | $ | 372 |   | $ | 365 |   | $ | 336 |   | $ | 303 |   | $ | 337 |   | $ | 388 |   |
|                               |       |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ore tons mined                     | ** ** | **223,060**                 |       | 220,779 |   | 234,625 |   | 280,635 |   | 320,505 |   | 296,474 |   | 284,737 |   | 242,498 |   |
| Tons processed                     | ** ** | **211,587**                 |       | 267,116 |   | 316,800 |   | 311,434 |   | 331,619 |   | 358,600 |   | 323,782 |   | 291,832 |   |
| Grade processed  (opt)             | ** ** | **0.25**                    |       | 0.21 |   | 0.21 |   | 0.21 |   | 0.21 |   | 0.22 |   | 0.21 |   | 0.21 |   |
| Process recovery                   | ** ** | **86.8**                    | %          | 86.5 | % | 87.3 | % | 85.8 | % | 85.0 | % | 91.1 | % | 91.0 | % | 79.7 | % |

 

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(1)          The Company has adoptedthe Gold Institute Production Cost Standard (the “Standard”) to calculate andreport cash operating costs per ounce of gold produced. This is a non-GAAPmeasure, intended to complement conventional GAAP reporting; accordingly thesedata should not be considered a substitute for GAAP measures. Managementbelieves that cash operating costs per ounce is a useful indicator of a mine’sperformance. Where GAAP operating costs are adjusted to calculate per ouncedata consistent with the Standard, reconciliations to GAAP measures are provided.Where GAAP operating costs are adjusted to calculate per ounce data consistentwith the Standard, reconciliations to GAAP measures are provided in theCompany’s Management Discussion and Analysis for each respective period.

 

Gold production during the three-month periodended March 31, 2005 was 54,767 ounces or a 13% increase over the sameperiod in 2004. Production was negatively affected by unusually wet and heavysnowfall throughout the region, which interrupted delivery of ore from themines to the mill and adversely affected mill throughput.

 

Gold production during the three-month period ended June 30, 2005was 54,156 ounces, which was essentially unchanged from the previous quarterand, 12% less than the same period in the previous year. Production for theperiod, however, was still approximately 10% below expectations. Minedevelopment shortfalls through the end of the second quarter were the result ofdeferring development to conserve capital and the subsequent difficulty inaccelerating mine development work due to labour shortages. Mined tonnage wasfurther impacted by ground instability in one small stope at SSX and waterproblems at Smith during the second quarter.

 

Gold production for the three-month period ended September 30,2005 was 49,613 ounces, approximately 8% less than the previous quarter, andwas 32% less than the same period in the previous year. Gold production for thequarter was 4% greater than redevelopment plan targets principally due tohigher grade ores from Mahala and the SSX-Steer Mine Complex. Jerritt Canyonallocated more internal resources to mine development and engaged a miningcontractor in mid-August 2005 to accelerate mine development in order tomaintain production capacity. The addition of two new underground haul trucksand a rock bolting machine augmented mine development. The redevelopment planwas implemented in mid-August and represented a substantial change fromhistorical mining and processing practices.

 

Gold production for the three-month periodended December 31, 2005 was 45,555 ounces, a decrease of approximately 24%as compared to gold production for the same period in 2004. Gold production forthe period was, however, in line with redevelopment plan targets. Mill tonnageprocessed was slightly less than budgeted with heavier than normal winter snowsand moisture accumulation in the ore. Mined tons exceeded redevelopment plantargets resulting in a significant stockpiling of ore adjacent to the mill. Commercialproduction start-up of the Steer Mine commenced with the connection of Steerand SSX mines in October 2005. Cash operating costs were $413 per ounce ofgold for 2005 fourth quarter, higher than budgeted, attributable to risingcosts faced by the North American gold mining industry in general and JerrittCanyon specifically, including fuel, electricity, commodity and labour costsduring the quarter. Cash operating costs for 2005 were $386 per ounce of gold,consistent with the budget range under the redevelopment plan.

 

*Historical Operations Summary*

 

Immediately following the acquisition of the Jerritt Canyon mine, theCompany began to pursue two principal priorities: (1) the expansion ofunderground development at Jerritt Canyon to 

 

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provide the mines with more operating flexibility; and (2) beginningexploration focused on resource-to-reserve conversion and resource expansion aswell as on district-wide target generation and follow-up on the approximately119-square-mile Jerritt Canyon property.

 

Underground mine development at Jerritt Canyon had been severelycurtailed for several years and through the first half of 2003 by the formerowners, based on their plans to close the mine at the end of 2004, a decisionmade at a time when gold prices were significantly lower. The Company initiateda comprehensive analysis of resources accessible for conversion to reserves,and of areas with strong potential for extension of resources immediately afteracquisition. During the latter half of 2003, the Company invested approximately$5.1 million,**** in underground mine development to expand theinventory of resources and reserves, which included  approximately $1.4 million  for underground drilling proximal to currentworkings, and was focused on expanding resources and graduating measured andindicated resources to proven and probable reserves. During 2004, the Companyinvested an additional $17.6 million in underground mine development and $7.2million for sustaining capital. During 2005, the Company spent $13.9 millionfor underground development, major haulage-ways, ventilation raises, definitiondrilling, capital resource development and related activities to providelong-term infrastructure and stope access within the mines. In addition, theCompany spent $5.8 million for sustaining capital.

 

Mine development spending reductions in 2005 were the result ofdeferring development in the first quarter to conserve cash and the subsequentdifficulty in accelerating development due to labour shortages, groundinstability at the SSX mine and water problems at Smith mine during the secondquarter. Jerritt Canyon has allocated more internal resources to minedevelopment and engaged a mining contractor since mid-August 2005 toaccelerate mine development in order to maintain production capacity in 2006. Theaddition of two new underground haul trucks and a rock bolting machineincreased internal capacity for mine development. Capitalized mine developmentimproved in the second half of 2005 and totaled 9,412 feet for the year,slightly exceeding the redevelopment plan target and compared with 14,302 feetcompleted in 2004. The Mahala deposit began commercial production as anextension of the Smith Mine in August 2005 and the connection of the Steerand SSX mines was completed in October 2005.

 

Much of the exploration done throughout the Jerritt Canyon district inpast years was in search of either shallow open pit targets or multi-millionounce targets. During the few years prior to the Company’s acquisition ofJerritt Canyon, known reserves were not aggressively expanded and advancedstage targets were not aggressively followed up. Management of the Companybelieves that there is potential for significant reserve and resource expansionthat would essentially represent extensions of the known ore bodies. Inaddition, management of the Company believes that the property offers potentialfor discovery of significant new ore bodies resulting from systematic districtscale exploration.

 

Through thelatter six months of 2003,  extensivemine planning was performed in order to bring into the reserve category thatportion of resources that had sufficient drill density to meet reservecriteria, but lacked only a mine plan. This program was continued in 2004 In2005, exploration continued on near-mine and surface targets, with theobjective of replacing and targeting near-term mineable reserves and advancingthe Starvation Canyon exploration project.Surface drilling programs completed 130 holes totaling 102,816 feet in 2005. Undergrounddrilling was completed during 2005 at the SSX-Steer Mine Complex, the Mahala,West Dash, West Coulee and B-Pit deposits at the Smith Mine and at Murray Mineand comprised 2,797 holes totaling 348,148 feet of underground drilling. Positiveexploration results defined the first mineralreserves at the StarvationCanyon project and successfullyreplaced proven and probable reserves, net of depletion from production, atyear-end 2005.

 

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*Property Description and Location*

 

The Jerritt Canyon mine is located in ElkoCounty, Nevada within the Independence Mountain Range, approximately 50 milesnorth of the City of Elko, Nevada. Elko, has a population of approximately34,000 and is serviced by regular scheduled air service from Reno, Nevada andSalt Lake City, Utah. All services required by the Jerritt Canyon Mineoperation are readily available in the surrounding area. Access to the propertyis by means of State Road 225, a paved road, to the main entrance road to the minewhere the administrative offices are located.

 

Jerritt Canyon operations are conducted on acombination of public and private lands, with the mines and mining relatedsurface facilities located primarily on public lands and the process plant,administrative facilities and tailings impoundment located on private lands. TheCompany’s 100% owned Jerritt Canyon property interests cover an area ofapproximately 100 square miles, containing a total of 2,975 owned and leasedmineral claims, 12,433 acres of fee surface lands,  1,011 acres of patented mineral claims and10,671 acres of leased fee land with mineral rights.

 

The climate is characterized by winters withtemperatures between 0 and 40 degrees Fahrenheit and summer temperaturesbetween 35 and 85 degrees Fahrenheit. Average annual precipitation at thetailings impoundment area is estimated at 14 inches per year with an estimatedannual average evaporation of 43 inches. A significant amount of the totalprecipitation falls as snow and increases with elevation to the mining areas. Theadministration offices, process plant and tailings impoundment are located atan elevation of approximately 6,400 feet; the mines are located at elevationsup to 8,000 feet.

 

The primary regulatory oversight of theJerritt Canyon Mine is by the U.S. Forest Service (“USFS”), due to the miningactivity being located on a combination of public and private lands, and by theNevada Division of Environmental Protection (“NDEP”).

 

Since the initial Plan of Operations wasapproved in 1980, there have been at least 45 submittals to the USFS, includingthree subsequent Plans of Operation and Amendments or Modifications to approvedPlans of Operation. Development of identified ore bodies from the existingunderground mine surface facilities is expected to require only administrativeapproval.

 

The NDEP regulates the approval of theJerritt Canyon’s Water Pollution Control Permit, Air Quality Permit, StormwaterDischarge Permit, Underground Injection Control Permit, Dams Safety Permit andReclamation Permit. All permits are current and in good standing.

 

Sierra Pacific Power Company, the onlyelectric public utility in the area, provides electric power to the mine.

 

*Government Regulation*

 

Mining operations and exploration activitiesare subject to various federal and state laws and regulations in theUnited States which govern prospecting, development, mining, production,exports, taxes, labour standards, occupational health, waste disposal,protection of the environment, mine safety, hazardous substances and othermatters. The Company has obtained those licenses, permits or otherauthorizations currently required to conduct its exploration and otherprograms. The Company believes that it is in compliance in all materialrespects with applicable mining, health, safety and environmental statutes andthe regulations passed there under in jurisdictions in which the Companyoperates. There are no current orders or directions relating to the Companywith respect to the foregoing laws and regulations.

 

*Environmental Laws*

 

As is common for mining operations in Nevada,there are numerous environmental obligations associated with Jerritt Canyonthat are related to ongoing operations as well as mine closure and reclamation.Environmental management systems are in place and there are qualifiedenvironmental staff onsite at Jerritt Canyon. Various mitigation programs arein place as required under the various plans of operations that have been filedand approved for the project. No unusual costs associated with any of theseprograms have been identified. Approved reclamation plans 

 

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are in place and Jerritt Canyon isprogressing with concurrent reclamation in an orderly manner. Final reclamationobligations for the project include closure of the tailings impoundment andwaste rock dumps, reclamation of pits by partially backfilling the pits withmine waste from underground operations, sealing of underground portals anddismantling of buildings and structures. Current geochemical characterizationof the waste rock produced from mining operations has demonstrated the wasterock to be generally non-acid generating.

 

U.S. Federal Laws

 

The U.S. Forest Service requires that mining operations on landssubject to its regulation obtain an approved plan of operations subject toenvironmental impact evaluation under the *National EnvironmentalPolicy Act*. Any significant modifications to the plan of operations may requirethe completion of an environmental assessment or Environmental Impact Statementprior to approval. Mining companies must post a bond or other surety toguarantee the cost of post-mining reclamation. These requirements could addsignificant additional cost and delays to any mining project undertaken by theCompany.

 

Under the U.S. *Resource Conservation andRecovery Act*, mining companies may incur costs for generating,transporting, treating, storing, or disposing of hazardous waste, as well asfor closure and post-closure maintenance once they have completed miningactivities on a property. The Company’s mining operations may produce airemissions, including fugitive dust and other air pollutants, from stationaryequipment, storage facilities, and the use of mobile sources such as trucks andheavy construction equipment which are subject to review, monitoring and/orcontrol requirements under the Federal Clean Air Act and state air qualitylaws. Permitting rules may impose limitations on the Company’sproduction levels or create additional capital expenditures for pollutioncontrol in order to comply with the rules.

 

The U.S. *ComprehensiveEnvironmental Response Compensation and Liability Act of 1980*, asamended, (“CERCLA”) imposes strict joint and several liability on partiesassociated with releases or threats of releases of hazardous substances. Thoseliable groups include, among others, the current owners and operators offacilities which release hazardous substances into the environment and pastowners and operators of properties who owned such properties at the time thedisposal of the hazardous substances occurred. This liability could include thecost of removal or remediation of the release and damages for injury to thesurrounding property. The Company cannot predict the potential for futureCERCLA liability with respect to its Nevada property or surrounding areas.

 

Nevada laws

 

At the state level, mining operations in Nevada are also regulated bythe Nevada Department of Conservation and Natural Resources, Division ofEnvironmental Protection. Nevada state law requires the Jerritt Canyon Mine tohold Nevada Water Pollution Control Permits, which dictate operating controlsand closure and post-closure requirements directed at protecting surface andground water. In addition, the Company is required to hold Nevada ReclamationPermits required under NRS 519A.010 through 519A.170. These permits mandateconcurrent and post-mining reclamation of mines and require the posting ofreclamation bonds sufficient to guarantee the cost of mine reclamation. OtherNevada regulations govern operating and design standards for the constructionand operation of any source of air contamination and landfill operations. Anychanges to these laws and regulations could have an adverse impact on theCompany’s financial performance and results of operations by, for example,required changes to operating constraints, technical criteria, fees or suretyrequirements.

 

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*ERTP*

 

An integral element of the Jerritt CanyonMine acquisition was the ERTP, an innovative insurance/assurance productpurchased from AIG. The Company believes the ERTP effectively limits financialexposure for environmental and reclamation liabilities and risks associatedwith the Jerritt Canyon mine assumed on its acquisition in June 2003 tothe amount in the Commutation Account. The fair value of the total reclamationliability at Jerritt Canyon was independently estimated by AIG at $25.8 millionas at June 30, 2003. This amount was fully funded by the Company by meansof a cash Commutation Account in the amount of $25.8 million deposited withAIG. The cash plus interest earned in the Commutation Account will be used topay for Jerritt Canyon’s reclamation and mine closure liabilities. In addition,the ERTP provides to government regulators the surety bonds, totalling $35.5million, which allow the Company to operate the Jerritt Canyon mine under theexisting operating permits. The ERTP also includes a reclamation and mineclosure cost cap insurance policy which will serve to fund reclamation andpost-closure site management by the Company. This cost cap insurance providescoverage for future reclamation costs if they exceed those provided for by theCommutation Account. If the ultimate reclamation costs are less than the amountin the Commutation Account, the Company would be refunded the excess cash. Ifthe reclamation cost is more than the Commutation Account balance, the cost capinsurance, provided by AIG, will pay the excess costs up to a defined maximum. TheCompany does not currently anticipate that the covered reclamation costs willbe in excess of the defined maximum.

 

*History*

 

In 1972, FMC Gold (renamed Meridian Gold Inc.in 1996) discovered a disseminated gold deposit in the Jerritt Canyon area. In1976, FMC Gold formed a joint venture with Freeport McMoRan Inc., to exploreand develop the area, and mining at Jerritt Canyon commenced in 1981. In 1990,Freeport McMoRan Inc. sold its interest in Jerritt Canyon to a predecessor ofAngloGold. Since inception, mining has continued uninterrupted at JerrittCanyon, producing over 7 million ounces of gold to date. Open pit miningoccurred from 1981 through 1999; underground mining started in 1993. Annualproduction, prior to the Company’s acquisition, had historically averagedbetween 300,000 and 350,000 ounces of gold, at historical cash operating costsranging from $245 to $270 per ounce. The previous owners of the Jerritt Canyonmine had planned to shut the operation down by the end of 2004.

 

Pursuant to the Purchase and Sale Agreement,the Company acquired the Jerritt Canyon Mine from the Sellers. See “GeneralDevelopment of the Business – Acquisitions and Dispositions – Jerritt CanyonAcquisition”.

 

*Geology*

 

The Jerritt Canyon district deposits arehosted by a Paleozoic sedimentary sequence that underlies the IndependenceMountain range and consists of four distinct assemblages:  (1) the western facies (upper plate ofthe Roberts Mountain thrust fault), (2) the eastern facies (lower plate ofthe Roberts Mountain thrust fault), (3) the Schoonover sequence, and (4) theAntler overlap sequence. The western facies consists of chert, argillite,siltstone, shale, quartzite, and limestone-greenstone complex and is consideredto be a deep-water sequence. The eastern sequence is a Cambrian to Siluriancontinental shelf carbonate sequence that includes the Hanson Creek Formation,and the Roberts Mountains Formation, which are the main hosts to the goldmineralization in the district.

 

Within the Jerritt Canyon area, gold canlocally occur within all sedimentary formations, but is preferentially hostedby the Roberts Mountains and Hanson Creek Formations of the eastern facies. TheRoberts Mountains Formation consists of calcareous to dolomitic siltstones andsilty limestones. The Hanson Creek Formation is divided into five members andconsists of medium-grained limestone, dolomitic limestone, carbonaceousmicrites, and chert beds.

 

Gold mineralization at Jerritt Canyon ispreferentially found within the base of the Roberts Mountains Formation and theUpper Hanson Creek Formation. Gold mineralization is structurally controlled byhigh angle northwest and northeast trending structures that acted as conduitsfor mineralizing fluids. Much of the higher grade, more continuous goldmineralization occurs where two sets of high angle structures intersect and cutthe favourable stratigraphic intervals that contain high proportions ofclay-sized materials. The deposits are considered to be Carlin-type,sediment-hosted, replacement fine-grained gold in carbonaceous sediments. Goldoccurs as very fine-grained micron size particles deposited in carbonates andfine-grained, calcareous, clastic sedimentary rocks.

 

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*Mineral Reserve and Resource Estimates*

 

Proven and probable mineral reserves totalled 877,900 ounces of goldcontained in 3.7 million tons at an average grade of 0.24 opt at December 31,2005, based on a three-year average gold price of $410 per ounce. Measured andindicated resources, including reserves, were estimated at 2.1 million ouncesof gold contained in 8.8 million tons at an average grade of 0.24 opt. TheCompany also estimated inferred resources of 2.7 million tons at 0.23 opt for605,600 ounces of gold. The Company’s proven and probable reserves and measuredand indicated resources were audited and verified by SRK Consulting (U.S.), Inc.as satisfying the standards of Canadian National Instrument 43-101.

 

At the Starvation Canyon project, the Company defined first timeprobable reserves of 121,100 ounces of gold contained in 400,500 tons at anaverage grade of 0.30 opt. In addition, measured and indicated resources atStarvation Canyon increased 22% from year-end 2004 to 190,700 ounces of gold(contained in 676,400 tons), while the grade improved 4% to 0.28 opt. Theimprovement of continuity, grade and size of the resource in 2005 enhances theoverall confidence in resources and mineralization remains open in severaldirections.

 

The new reserves at Starvation Canyon and reserve additions at theMurray and Smith mines offset reserve depletion from production. Mineralizationremains open at SSX and Steer mines with new targets in the greater SSX area tobe drilled in 2006. The improvement in the Smith Mine reserves was attributableto the expansion of the high-grade Mahala and West Dash deposits. Mahala, whichbegan commercial production in August 2005, had 223,600 tons at 0.33 optfor approximately 73,300 contained ounces of gold in reserves. West Dash added37,800 contained gold ounces to reserves and increased its measured andindicated resources, including reserves, to 70,300 ounces in 2005. A driftbeing developed from the main decline for the Smith Mine is anticipated toreach West Dash for initial production by mid 2006.

 

Measured and indicated resources at December 31, 2005 were lowerthan in 2004 largely due to a tightening of the geologic models used in theredevelopment plan initiative. The application of smaller, narrower blocks inmine planning enhanced the overall quality of the resources and reserves. Infact, the proven reserve component of total proven and probable reservesimproved from 24% to 36% in 2005. Expenditures for district exploration andsurface drilling were $3.9 million in 2005, compared to $6.6 million in 2004. Therewas also $2.6 million of capitalized resource conversion drilling for near-mineexploration in 2005.

 

Reserve and resource estimates have been developed from extensivesurface and underground drilling data using geology-constrained standard krigingand polygonal methods using MineSight modeling and planning software. Mineralresources are contained in about 20 mineral deposits in the Jerritt Canyon area.Block modeling techniques supported by relatively small block sizes are used. Cutoffgrades have been calculated for each of the mines using cost estimates andplant recovery estimates derived from December 2005 actual year-to-datevalues. Factors for mining dilution were included.

 

Most of the assays on which these estimates are based were performed byindependent assay labs for surface drilling using standard fire assaytechniques and subject to internal Quality Assurance/Quality Control (“QA/QC”)procedures; samples from underground drilling are 

 

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analyzed by Jerritt Canyon’s laboratory using standard fire assaytechniques and industry accepted QA/QC procedures.

 

As a result of the Company’s success in adding to existing reservesduring its first 30 months of operation of Jerritt Canyon, management considersthat a minimum mine life of five years may be expected from existingreserves and a reasonable and consistent continuation of converting resourcesto reserves, with potential extension if additional resources are defined andconverted to reserves. In order to continue to operate the Jerritt Canyon mineefficiently and to provide the mill with approximately 0.9 million tons of oreper year, additional capital expenditures are required in order to develop newareas of mineralization for mining and to replace some of the equipment fleet.

 

**Table 2**(1),(2),(3),(4),(5)

 

**JERRITT CANYON PROVEN &PROBABLE GOLD RESERVES - December 2005**

 
| ** **         | ** ** | **PROVEN**     | ** ** | **PROBABLE** | ** ** | **TOTAL**    | ** ** |
|--------------------|------------|----------------|------------|--------------|------------|--------------|------------|
| **Deposit**        | ** ** | **Tons (000)** | ** ** | **oz/st**    | ** ** | **Oz (000)** | ** ** | **Tons (000)** | ** ** | **oz/st** | ** ** | **Oz (000)** | ** ** | **Tons (000)** | ** ** | **oz/st** | ** ** | **Oz (000)** | ** ** |
| Murray             |       | 108.7          |       | 0.24         |       | 26.5         |       | 134.7 |   | 0.27 |   | 36.8 |   | 243.3 |   | 0.26 |   | 63.3 |   |
| Smith Upper        |       | 142.2          |       | 0.30         |       | 42.9         |       | 479.0 |   | 0.25 |   | 122.2 |   | 621.2 |   | 0.27 |   | 165.0 |   |
| Smith Lower        |       | 68.1           |       | 0.36         |       | 24.3         |       | 259.7 |   | 0.32 |   | 83.3 |   | 327.8 |   | 0.33 |   | 107.7 |   |
| SSX                |       | 824.9          |       | 0.25         |       | 206.3        |       | 508.5 |   | 0.24 |   | 121.0 |   | 1,333.3 |   | 0.25 |   | 327.3 |   |
| Saval IV           |       | —         |       | —       |       | —       |       | 104.4 |   | 0.23 |   | 24.3 |   | 104.4 |   | 0.23 |   | 24.3 |   |
| Starvation  Canyon |       | —         |       | —       |       | —       |       | 400.5 |   | 0.30 |   | 121.1 |   | 400.5 |   | 0.30 |   | 121.1 |   |
| Wright  Window     |       | —         |       | —       |       | —       |       | 32.6 |   | 0.23 |   | 7.4 |   | 32.6 |   | 0.23 |   | 7.4 |   |
| **Sub  Total**     | ** ** | **1,143.8**    | ** ** | **0.26**     | ** ** | **300.0**    | ** ** | **1,919.5** | ** ** | **0.27** | ** ** | **516.1** | ** ** | **3,063.3** | ** ** | **0.27** | ** ** | **816.1** | ** ** |
| ** **         | ** ** | ** **     | ** ** | ** **   | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Stockpiles         | ** ** | **67.5**       | ** ** | **0.17**     | ** ** | **11.7**     | ** ** | **592.2** | ** ** | **0.08** | ** ** | **50.0** | ** ** | **659.7** | ** ** | **0.09** | ** ** | **61.8** | ** ** |
|               |       |           |       |         |       |         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **TOTAL**          | ** ** | **1,211.3**    | ** ** | **0.26**     | ** ** | **311.7**    | ** ** | **2,511.7** | ** ** | **0.23** | ** ** | **566.2** | ** ** | **3,723.0** | ** ** | **0.24** | ** ** | **877.9** | ** ** |

 

Table 3, below, summarizes the estimatedmeasured, indicated and inferred resources, calculated in accordance withNational Instrument 43-101. Mineral reserves, as shown in Table 2 above, areincluded in measured and indicated resources. Underground resources arecalculated using a cut-off grade of 0.150 ounces of gold per ton (“opt”); openpittable resources are calculated using a cut-off grade of 0.075 opt.

 

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**Table3**(1),(2),(3),(4),(5)

 

**JERRITTCANYON GOLD MINERAL RESOURCES - December 2005**

**( includesProven and Probable Reserves)**

 

 
| ** **            | ** ** | **MEASURED**   | ** ** | **INDICATED** | ** ** | **MEASURED + INDICATED** | ** ** | **INFERRED**   | ** ** |
|-----------------------|------------|----------------|------------|---------------|------------|--------------------------|------------|----------------|------------|
| **DEPOSIT**           | ** ** | **Tons (000)** | ** ** | **oz/st**     | ** ** | **Oz (000)**             | ** ** | **Tons (000)** | ** ** | **oz/st** | ** ** | **Oz (000)** | ** ** | **Tons (000)** | ** ** | **oz/st** | ** ** | **Oz (000)** | ** ** | **Tons (000)** | ** ** | **oz/st** | ** ** | **Oz (000)** | ** ** |
|                  |       |           |       |          |       |                     |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Murray (incl. Zone 9) |       | 560.2          |       | 0.29          |       | 164.7                    |       | 229.0          |       | 0.28 |   | 64.3 |   | 789.2 |   | 0.29 |   | 229.1 |   | 167.2 |   | 0.22 |   | 36.8 |   |
| SSX-Steer Complex     |       | 1,830.4        |       | 0.28          |       | 508.6                    |       | 767.1          |       | 0.27 |   | 205.0 |   | 2,597.5 |   | 0.28 |   | 713.6 |   | 1,052.2 |   | 0.23 |   | 244.1 |   |
| Smith                 |       | 636.5          |       | 0.29          |       | 184.7                    |       | 1,226.9        |       | 0.28 |   | 342.8 |   | 1,863.4 |   | 0.28 |   | 527.5 |   | 677.0 |   | 0.24 |   | 161.2 |   |
| Saval                 |       | —         |       | —        |       | —                   |       | 460.5          |       | 0.25 |   | 112.9 |   | 460.5 |   | 0.25 |   | 112.9 |   | 270.0 |   | 0.25 |   | 66.2 |   |
| Starvation Canyon     |       | —         |       | —        |       | —                   |       | 676.4          |       | 0.28 |   | 190.7 |   | 676.4 |   | 0.28 |   | 190.7 |   | 51.4 |   | 0.31 |   | 15.8 |   |
| Wright Window         |       | —         |       | —        |       | —                   |       | 97.8           |       | 0.16 |   | 15.2 |   | 97.8 |   | 0.16 |   | 15.2 |   | 19.0 |   | 0.23 |   | 4.3 |   |
| Subtotal              |       | 3,027.1        |       | 0.28          |       | 858.0                    |       | 3,457.7        |       | 0.27 |   | 931.0 |   | 6,484.9 |   | 0.28 |   | 1,789.1 |   | 2,236.8 |   | 0.24 |   | 528.4 |   |
| Stockpiles            |       | 67.5           |       | 0.17          |       | 11.7                     |       | 1,175.3        |       | 0.06 |   | 69.2 |   | 1,242.7 |   | 0.07 |   | 80.9 |   | — |   | — |   | — |   |
| **Pit Resources**     |       |           |       |          |       |                     |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burns Basin           |       | —         |       | —        |       | —                   |       | 29.7           |       | 0.13 |   | 3.9 |   | 29.7 |   | 0.13 |   | 3.9 |   | — |   | — |   | — |   |
| California Mtn.       |       | —         |       | —        |       | —                   |       | 8.0            |       | 0.11 |   | 0.9 |   | 8.0 |   | 0.11 |   | 0.9 |   | — |   | — |   | — |   |
| Coyote                |       | —         |       | —        |       | —                   |       | —         |       | — |   | — |   | — |   | — |   | — |   | 20.1 |   | 0.10 |   | 2.0 |   |
| Pie Creek             |       | —         |       | —        |       | —                   |       | 190.2          |       | 0.16 |   | 29.9 |   | 190.2 |   | 0.16 |   | 29.9 |   | 28.3 |   | 0.14 |   | 4.0 |   |
| Road Canyon           |       | —         |       | —        |       | —                   |       | 148.6          |       | 0.14 |   | 21.2 |   | 148.6 |   | 0.14 |   | 21.2 |   | 74.3 |   | 0.13 |   | 9.7 |   |
| Mill Creek            |       | —         |       | —        |       | —                   |       | 78.4           |       | 0.12 |   | 9.7 |   | 78.4 |   | 0.12 |   | 9.7 |   | — |   | — |   | — |   |
| **U/G Resources**     |       |           |       |          |       |                     |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burns Basin           |       | —         |       | —        |       | —                   |       | 30.7           |       | 0.19 |   | 5.9 |   | 30.7 |   | 0.19 |   | 5.9 |   | 50.6 |   | 0.23 |   | 11.5 |   |
| California Mtn.       |       | —         |       | —        |       | —                   |       | 32.1           |       | 0.38 |   | 12.1 |   | 32.1 |   | 0.38 |   | 12.1 |   | 9.4 |   | 0.33 |   | 3.1 |   |
| Coyote Zone 10        |       | —         |       | —        |       | —                   |       | 45.2           |       | 0.21 |   | 9.6 |   | 45.2 |   | 0.21 |   | 9.6 |   | 2.7 |   | 0.18 |   | 0.5 |   |
| MCE                   |       | —         |       | —        |       | —                   |       | 4.4            |       | 0.20 |   | 0.9 |   | 4.4 |   | 0.20 |   | 0.9 |   | 7.8 |   | 0.19 |   | 1.5 |   |
| Waterpipe II          |       | —         |       | —        |       | —                   |       | —         |       | — |   | — |   | — |   | — |   | — |   | 37.4 |   | 0.21 |   | 7.7 |   |
| West Mahala           |       | —         |       | —        |       | —                   |       | 368.1          |       | 0.22 |   | 82.4 |   | 368.1 |   | 0.22 |   | 82.4 |   | 141.9 |   | 0.21 |   | 29.7 |   |
| Winters Creek         |       | —         |       | —        |       | —                   |       | 148.9          |       | 0.22 |   | 32.5 |   | 148.9 |   | 0.22 |   | 32.5 |   | 37.2 |   | 0.20 |   | 7.4 |   |
| **Total**             | ** ** | **3,094.6**    | ** ** | **0.28**      | ** ** | **869.7**                | ** ** | **5,717.4**    | ** ** | **0.21** | ** ** | **1,209.4** | ** ** | **8,812.0** | ** ** | **0.24** | ** ** | **2,079.1** | ** ** | **2,646.5** | ** ** | **0.23** | ** ** | **605.6** | ** ** |

 

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(1)  Based on a gold price of $410 perounce.

 

(2) Contained metal estimates are subject to recoverylosses. “Resources” or “resource” used in this Annual Information Form areas defined in National Instrument 43-101 of the Canadian SecuritiesAdministrators and are not terms recognized or defined by the U.S. Securitiesand Exchange Commission (SEC). Mineral resources are not reserves and do nothave demonstrated economic viability. For further information, please refer tothe risk factors and definitions of reserves and resources in the Company’sfilings on SEDAR and with the SEC as filed on the SEC’s EDGAR database, whichcan also be accessed through the Company’s website, www.queenstake.com. Referalso to the Cautionary Statement on page four on this document. Keyassumptions and methods used in deriving proven and probable reserves, andmeasured and indicated resources are as described in this document and theCompany’s 2005 Annual Report on Form 40-F filed on EDGAR and its NationalInstrument 43-101 Report.

 

(3) U.S. investors are advised to read the CautionaryStatement on page four in this document. It cannot be assumed that part orall of the mineral deposits termed “resources” may ever demonstrateeconomic viability to become reserves and the term “inferred resources” is notrecognized by the SEC and it cannot be assumed that part or all of aninferred resource will ever be upgraded to a higher category.

 

(4) For Queenstake, the Qualified Persons for the technicalinformation contained in this Annual Information Form are Messrs. DorianL. (Dusty) Nicol, President and Chief Executive Officer, Robert Todd, Managerof Technical Services, and Donald G. Colli, Manager of Mineral Resources.

 

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(5) For SRK Consulting (U.S.), Inc., inpreparation of Queenstake’s National Information 43-101 report, the QualifiedPerson is Mr. Landy Stinnet, Associate Mining Engineer.

 

Although the Company has carefully preparedand verified the mineral resource and reserve figures above (and elsewhere inthis document), such figures are estimates, and there can be no assurance giventhat the indicated amount of gold will actually be mined and processed. Seealso “Risk Factors”.

 

The net change in reserves relative to thepreviously estimated reserves at December 31, 2004 is comprised ofdepletion due to production, additions due to increased definition drilling andinclusion of some blocks of resource which previously met reserve drill densitycriteria but which were not included in the December 31, 2004 reserveestimate because they were not included in the mine plan.

 

The rate of reserve depletion was lower thanthat of the production amount as some resource material and some material thatwas neither resource nor reserve was mined during the period. Historically,some 20% or more of gold production at Jerritt Canyon comes from mineralizationthat has never been formally classified as proven or probable reserves. This isbecause it is discovered by underground drilling and frequently developed andmined before being included in annual reserve estimates.

 

Except for ore stockpiles, substantially allthe current reserves at Jerritt Canyon are contained in deposits beingdeveloped, or to be developed, and mined by underground methods. Once themineralized envelopes and gold grades are estimated the mine geologists drawgrade envelopes (based on cutoff grade), using the block model values, existingadjacent development and the cutoff grades provided by engineers for each mine.In order to determine the portion of the measured and indicated resource thatwould qualify for proven and probable mineable ore reserve status, it isnecessary to configure the measured and indicated resource into mineable shapesfor the selected mining method, and then apply tests for economic viability andinclude factors for mining dilution and recovery.

 

Resources at Jerritt Canyon have beendeveloped from the extensive drilling data, using geology-constrained standardkriging and polygonal methods and using a mine modeling and planning softwarepackage. Mineral resources are contained in 16 mineral deposits in the JerrittCanyon area. The operation employs block modeling techniques supported byrelatively small block sizes.

 

Exploration drilling programs at JerrittCanyon are predominantly reverse circulation surface drilling and occasionally,surface core drilling, followed by underground drilling with core holes.Underground production sample drilling consists of reverse circulation androtary percussion drilling.

 

All assaying at Jerritt Canyon followsaccepted industry standards using industry practices at recognizedlaboratories. Samples from surface drilling both core and reverse circulationare sent to an outside laboratory for assaying. Blanks or standards areroutinely submitted with these samples. Underground drill samples are sent tothe Jerritt Canyon laboratory (the “JC Laboratory”) on site. The JC Laboratoryhas all the normal sample preparation equipment and facilities. The JCLaboratory operates continually with a crew of 16 and does about 500 fireassays per day with a 24-hour turnaround from receipt of sample to reporting ofassays. Several programs are followed to track assay quality including internalchecks, check samples sent in by the mine department, weekly dispatch ofsamples to other laboratories, and participation in a round-robin program withother mining laboratories in the area where random samples are sent out andothers received. Blanks, standards, and/or pulps are routinely submitted withthe sample stream. Check samples of core holes (pulps) are sent to outsidelaboratories for analysis. Pulps and coarse rejects form one outsidelaboratory are routinely submitted to another outside laboratory for analysis.

 

The vast majority of drill holes (exceptrotary percussion holes) are measured for downhole deviations and recorded inthe database. Very few exploration holes do not get measured for deviation.This may occur in shallow vertical holes, when holes collapse or whenlogistics are such that timely measurement is not permitted.

 

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The geological data is normally maintained inMineSight software for interpretation and mine plan modeling at each mine.

 

*Mining*

 

The Jerritt Canyon mine currently consists ofthe Murray, Smith, and SSX-Steer Complex underground mines, all located severalmiles west of an ore processing plant and administration complex. Access to allunderground mines is by inclined ramp. Typical openings underground are 15 feetx 15 feet in cross-section, with ramps of 12% to 15% inclination. All openingsunderground must be supported with rockbolts and wire mesh, and shotcrete whereconditions are more severe, or where traffic is concentrated. Generally, themines are relatively dry, except for the Smith mine which has underground waterinflows of about 850 gallons per minute (gpm). A dewatering system with thecapacity to handle 1,500 gpm has been installed and the water table in theSmith mine is being lowered. Interior development includes haulage levels,stope access ramps, crosscutting, and drifting alongside the ore. Ventilationboreholes connect the underground mine workings with the surface.

 

Mechanized, trackless underground mining isemployed together with cemented backfill for ground control and to increase orerecovery. Almost half the ore is mined by long-hole benching, the remainder ismined by drift-and-fill methods. Underground trucks deliver ore to windrows onthe surface at each mine portal, where the ore is sampled before beingdelivered by 150-ton haul trucks to the processing plant. Good, wide, haulroads connect the individual mines to the processing plants and to theadministration area next to the plant. All of the mines feed the sameprocessing plant, with the four mines typically producing and trucking about3,200 tons per day to the plant.

 

Mine drilling, mucking, and hauling equipmentmaintenance is typically performed in small surface shops located at each mine,or at the central shop located adjacent to the processing plant.

 

*Processing*

 

The ore processing facility at JerrittCanyon, as originally built, processed oxide and mildly refractory ores byconventional cyanide leaching in conjunction with chlorine-gas pre-oxidation ofthe mildly refractory fraction. This process continued to operate until 1997. Withores becoming more carbonaceous and refractory, and with the introduction ofhigher-grade ore from underground operations, a dry mill with dual ore roastingcircuits was added in 1989 and is currently in operation. Mill feed issubjected to primary and secondary crushing before being dried, milled androasted to prepare the refractory ores for gold recovery in a carbon-in-leachcircuit. Gold is recovered using a Merrill-Crowe process, is smelted on siteand shipped to the refinery as high quality doré bars. The plant has aprocessing capacity of 1.5 million tons per year.

 

*Capital Costs*

 

The level of capital expenditures made by theformer owners at Jerritt Canyon in the immediate period prior to the sale ofthe mine reflected that the mines were scheduled to shut down at the end of2004. Underground development and reserve expansion drilling, critical to thelong-term sustainability of the operation, had been curtailed. Consequently,the Company began an aggressive underground development and reserve andresource expansion program. Drilling and mine development into highlyprospective resource areas has been given highest priority. Primary targets forconversion of resources to reserves include areas immediately adjacent tocurrent operations primarily at the SSX, Smith and Murray mines.

 

During fiscal 2005, the Company spent $13.9million for underground development, major haulage-ways, ventilation raises,definition drilling, capital resource development and related activities toprovide long-term infrastructure and stope access within the mines. Inaddition, the Company spent $5.8 million for sustaining capital. This comparesto capital investments during 2004 of $17.6 million for development and $7.2million for sustaining capital. The Company anticipates investing approximately$11.0 million in additional capital for mine development and capitalizedresource development in 2006. In addition, the Company anticipates investingapproximately $6.0 million in sustaining capital during 2006. The Companyexpects to fund these programs from cash generated from operating activitiesand existing working capital.

 

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*Production Outlook –Redevelopment Plan*

 

During the third quarter of 2005, the Company announced a redevelopmentplan designed to optimize operations and reduce operating costs in response todevelopment and production shortfalls at Jerritt Canyon and rising commoditycosts. The redevelopment plan represented a re-engineering to optimize valueand cash flow from the Jerritt Canyon mine assets given constraints withmanpower, mining equipment, and increasing commodity costs. The plan was asubstantial change in mine and processing practices at Jerritt Canyon to focuson accelerated underground development, higher grade production and reducedmill processing rate, in order to align mill throughput with an optimal miningrate. The average grade of ore being processed was increased to approximately0.25 ounce of gold per ton (opt), representing an approximate 20% increase fromthe first half of 2005. The mill processing rate was scaled back in the secondhalf of 2005 from operating two roasters together to one roaster at a time foran average between 2,500 and 2,700 tons per day, approximately 25% lower thanthe processing rate in the first half. In addition, daily batch crushing andgrinding of mill feed was scheduled during off-peak hours for lower energyrates. The processing rate can be increased in the future should Jerritt Canyon’scapacity to produce higher grade ore from underground mining improve or toaccommodate additional mill feed from third-party sources.

 

Cost reductions anticipated to be realized progressively under theredevelopment plan included lower energy and commodities consumption, lowercosts of labour, maintenance and other savings from improved operatingefficiencies. However, much of the anticipated operating cost savings for 2005were absorbed by unexpected increases in energy and certain commodity pricesduring the fourth quarter of 2005.

 

The redevelopment plan was a substantial change from historical miningand processing practices. Comparison to operating results from previous years shouldbe viewed in that context.

 

*Production Outlook First Quarter of 2006*

 

During the first quarter of 2006, the Jerritt Canyon mill unexpectedlyhad two failures of a pinion gear, requiring temporary shutdowns of the mill. Inthe first event, the pinion gear breakdown was due to a lubrication failure,requiring a mill shutdown for repair and gear replacement. Following therepair, the mill resumed normal processing. In the second event, thereplacement pinion gear broke one tooth; this was caused by rapidly acceleratedwear on a new pinion gear against the older worn bull gear. After evaluation bymill gear experts, a spare pinion was installed and the mill has resumedoperations with close monitoring to avoid further issues. During the plannedeight- to 10-day annual mill maintenance shutdown scheduled for April, the bullgear will be turned over to more closely match the new pinion gear to ensurecontinuous operation.

 

During the 2006 first quarter, the mines continued to produce ore inline with the redevelopment plan, with mined ore being accumulated in an orestockpile adjacent to the mill. The overall impact of the temporary millinterruptions will be in rescheduling processing of stockpiled ore to laterperiods of the year. Jerritt Canyon estimates it will accumulate at least16,000 ounces contained in the ore stockpile at the mill at the end of the 2006first quarter. The second and third quarters of 2006 are expected to haveprogressively and significantly higher production than the first quarter as themill processes through the ore stockpile.

 

Gold production for the first quarter of 2006 will be approximatelyone-third lower than the 2005 fourth quarter due to the delays in processing.Costs of the gear replacements and accelerated 

 

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annual mill maintenance will impact results for the 2006 first quarter,with cash operating costs for the 2006 first quarter expected to beconsiderably higher than the 2005 fourth quarter.

 

*Production Outlook Full Year 2006*

 

The Company expects 2006 gold production to be approximately 200,000 to220,000 ounces with approximately 45% of the production occurring in the firsthalf of 2006 and 55% in the latter half of 2006. The Company’s expected 2006gold production represents a slight increase over 2005 production. Goldproduction in 2006 will primarily occur from the SSX Mine with additionalcontributions from the Smith, Mahala and Steer mines. The Murray Mine will bemined-out and is expected to be shut-down by mid-2006. Mining equipment andstaff at the Murray Mine will be transferred to SSX, Smith, Mahala and Steermines.

 

The Company expects to mill approximately 0.9 million tons of ore at anaverage grade of 0.257 opt in 2006. Under the assumptions of the redevelopmentplan, the mill will maintain approximately 40% excess capacity to provideflexibility for additional ore sources, allow processing of mined orestockpiles accumulated during the first quarter and, potential marginal-gradestockpile incremental feed. Mill capacity during the summer and fall istypically 20% to 40% higher than winter, largely because the dry mill capacityis adversely affected by high moisture in the feed, due to snowfall and ice. Inan effort to minimize the seasonal impacts on mining and processing, theCompany plans to continue concentrating on underground development during thewinter months to ensure sufficient ore availability to maximize production inthe summer months. It is expected that total development drifting footage willbe 40,000-45,000 feet in 2006 to achieve the 2006 production estimates and toprepare for mining in 2007. Capitalized mine development is expected to be7,000-7,500 feet in 2006.

 

On March 29, 2006, the Company entered in an agreement with anaffiliate of Newmont Canada Limited (“Newmont”) whereby Newmont will sell toQueenstake concentrates and ore from its Nevada operations for processing atQueenstake’s Jerritt Canyon roasting and milling facility.  The contract calls for Queenstake to purchaseat least 500,000 tons per year over two years. Queenstake will pay Newmont for the recoverable ounces in the purchasedconcentrates and ore, and Queenstake will charge Newmont commercial terms forprocessing and refining. Ore purchases with Newmont may continue for up tothree additional years if Queenstake has the spare processing capacity.  The purchase of Newmont’s concentrates andore for processing of at least 500,000 tons per year over two years willincrease the Jerritt Canyon mill throughput to approximately 95% of its pastdemonstrated capacity of approximately 1.5 million tons per year, which isexpected to reduce the Company’s unit operating costs.  See *2006 Private Placement,Ore Processing and Property Lease Agreements* Section in this AIF.

 

*Explorationand Development*

 

The Company intends to expand its mineralresources and reserves at Jerritt Canyon through focused exploration on itsapproximately 119-square mile Jerritt Canyon district landholdings. Managementof the Company believes much of the exploration work done in past years underthe previous owners was in search of either shallow open pit targets ormulti-million ounce underground targets and that known reserves and advancedstage targets were not aggressively expanded or systematically followed-up.

 

In 2005,exploration continued on near-mine and surface targets, with the objective ofreplacing and targeting near-term mineable reserves and advancing theStarvation Canyon project.

 

The Company continues topursue a district-wide evaluation and exploration process in 2006 using currenttarget concepts and geologic understanding. The objective remains to identifyand prioritize targets for follow-up drilling. Several dozen distinct targetshave been identified. These targets broadly fall into 4 categories.

 

1.     Targets where work by previous ownersidentified mineralization that was so clearly high priority that Queenstakebegan aggressive follow-up during 2004 and continued in 2005. The best exampleof this type of target is Starvation Canyon, where an aggressive drillingprogram led to the recognition of a high-grade mineralized system that remainsopen.

 

2.     Targets in the southern part of thedistrict, where drilling by prior owners identified continuous mineralizationwhich not only remains open, but which may be controlled by verticalstructures that have yet to be tested by angle holes. Some of these targets areWaterpipe Canyon, and Pie Creek.

 

3.     Numerous areas where one or more drill holesby previous owners have identified mineralization in favorable geologicsettings, such as Winters Creek Window and Mahala Creek, where there ispotential to 

 

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establish both continuity and extension byfurther drilling. These targets are on structural trends from orebodies thatare currently in production or have previously been mined.

 

4.     Numerous areas where surface geochemicalanomalies coincide with favorable geology, or extrapolation of favorablegeology. In some cases, some additional work is required to define specificdrilling targets.

 

The near mine program was successful in slightly increasing the Company’sproven and probable reserves net of depletion during the year. Surface drillingprograms completed 130 holes totaling 102,816 feet in 2005. Undergrounddrilling was completed during 2005 at the SSX-Steer Mine Complex, the Mahala,West Dash, West Coulee and B-Pit deposits at the Smith Mine and at Murray Mineand comprised 2,797 holes totaling 348,148 feet of underground drilling.

 

Positive exploration results defined the first mineral reserves at Starvation Canyon and successfully replacedproven and probable reserves, net of depletion from production, at year-end2005.

 

The district scale program tested a number of promising targets. The2006 development and exploration program will continue to focus on bothnear-mine exploration, with the objective of short-term reserve replacement,and subject to the availability of financing, district-scale exploration withthe objective of discovery of new ore bodies. A priority of district-scaleexploration during 2006 will be the Starvation Canyon deposit, where theCompany added the first mineral reserves during 2005. Other targets will alsocontinue to be explored.

 

*2006 Private Placement, Ore Processing and PropertyLease Agreements*

 

On March 29, 2006, the Company entered into an agreement withNewmont Canada Limited (“Newmont”) whereby Newmont will purchase 28.51 millionQueenstake common shares at Cdn $0.41 per share for gross proceeds of US $10.0million through an equity private placement. As part of the privateplacement, Newmont will receive warrants that can be exercised to acquire up to28.51 million common shares of Queenstake at a price of Cdn $0.55 for afour-year period, which would generate Cdn $15.7 million in cash if exercised. Afterclosing, Newmont will own approximately 4.9% of Queenstake’s outstanding commonshares. If Newmont were to exercise all of its warrants and maintain itsholdings of Queenstake’s common shares, Newmont would hold approximately 8.5%of Queenstake’s fully diluted outstanding common shares. For a period of twoyears from closing, Newmont will have the right to participate in future equityofferings by Queenstake to preserve its fully diluted shareholding percentageand will have certain additional rights to participate in debt financings. Theprivate placement, which remains subject to certain closing conditions,including regulatory approvals, is expected to close in the second quarter of2006. Proceeds will be used to fund exploration and for other corporate uses.

 

An affiliate of Newmont has also agreed to convey three of its Nevadaexploration properties to Queenstake on a lease-option basis. The propertiesare subject to a sliding scale net smelter royalty, dependent on the goldprice, of 3% to a maximum of 5% if gold is at or above $500 per ounce, andNewmont retains the right to back into a 51% joint venture interest in each ofthe properties.

 

In addition, another affiliate of Newmont has agreed to sellconcentrates and ore from its Nevada operations to Queenstake for processing atits Jerritt Canyon roasting and milling facility. The contract calls forQueenstake to purchase at least 500,000 tons per year over two years. Queenstakewill pay Newmont for the recoverable ounces in the purchased concentrates andore, and Queenstake will charge Newmont commercial terms for processing andrefining. Ore purchases with Newmont may continue for up to threeadditional years if Queenstake has the spare processing capacity. The purchaseof Newmont’s concentrates and ore for processing of at 

 

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least 500,000 tons per year over two years will increase the JerrittCanyon mill throughput to approximately 95% of its past demonstrated capacityof approximately 1.5 million tons per year, which is expected to reduce theCompany’s unit operating costs.

 

*Location of Jerritt Canyon*

 

The following mapillustrates the Jerritt Canyon property in Elko County, Nevada.

 

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# ****

 

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# **RISK FACTORS**

 

The operations of the Company are speculativedue to the high-risk nature of its business, which is the acquisition,financing, exploration, development and operation of mining properties. Therisks below are not the only ones facing the Company. Additional risks notcurrently known to the Company, or that the Company currently deems immaterial may alsoimpair the Company’s operations. The order in which the following risk factorsappear does not necessarily reflect management’s opinion of their order orpriority.

 

*Gold PriceVolatility*

 

The Company’s business is affected by theworld spot market price of gold. Gold prices are subject to volatile pricemovements over short periods of time and are affected by numerous factors, allof which are beyond the Company’s control. These include industry factors suchas: industrial and jewellery demand; the level of demand for gold as aninvestment; central bank lending, sales and purchases of gold; speculativetrading; and costs of and levels of global gold production by producers ofgold. Gold prices may also be affected by macroeconomic factors,including: expectations of the future rate of inflation; the strength of, andconfidence in, the US dollar, the currency in which the price of gold isgenerally quoted, and other currencies; interest rates; and global or regional,political or economic uncertainties. The profitability of the Company’soperations is directly related to the price of gold. If the world market priceof gold were to drop and the prices realized by the Company on gold sales wereto decrease significantly and remain at such a level for any substantialperiod, this would materially and adversely affect the Company’s profitabilityand cash flow.

 

A decline in the market price of gold may alsorequire the Company to write-down its mineral reserves, which would have amaterial and adverse effect on its earnings and financial position. Should anysignificant write-down in reserves be required, material write-downs of theCompany’s investment in the affected mining properties plus increasedamortization and asset retirement obligation charges may be required. Further,if revenue from gold sales declines, the Company may experience liquiditydifficulties. This may reduce its ability to invest in exploration anddevelopment, which would materially and adversely affect future production,earnings, and the Company’s financial position.

 

*PriceVolatility of Other Commodities*

 

The Company’s profitability is also affectedby the market prices of commodities, which are consumed or otherwise used inconnection with operations, such as diesel fuel, natural gas electricity andcement. Prices of such commodities are also subject to volatile price movementsover short periods of time and are affected by factors that are beyond theCompany’s control.

 

*MiningRisks and Insurance Risks*

 

The operations of the Company are subject tosignificant risks and hazards, incidental to the exploration, development andproduction of gold including environmental hazards, industrial accidents,unusual or unexpected rock formations, pressures, cave-ins and flooding, someof which are beyond the Company’s control. These risks and hazards could resultin: damage to, or destruction of, mineral properties or producing facilities;personal injury or death; environmental damage; delays in mining; and monetarylosses and possible legal liability for such damage. Although the Companymaintains and intends to continue to maintain insurance which it considersadequate to cover some of these risks and hazards to the extent available andconsistent with the industry practice, no assurance can be given that suchinsurance will continue to be available, or that it will be available ateconomically feasible premiums. The Company’s property, business interruptionand liability insurance may not provide sufficient coverage for lossesrelated to these or other risks or hazards. In addition, the Company may becomesubject to liability for hazards which it cannot insure against or which it may electnot to insure against because of premium costs or other reasons.

 

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*MineralReserves and Resources*

 

The Company’s mineral reserves and mineralresources are estimates, and no assurance can be given that the indicated levelof gold will be able to be mined and processed. Fluctuations in the price ofgold may render mineral reserves containing relatively lower grades ofgold mineralization uneconomic. Moreover, short-term operating factors relatingto the mineral reserves, such as the need for orderly development of ore bodiesor the processing of new or different ore grades, may cause mineralreserves to be reduced or the Company to be unprofitable in any particularaccounting period. Estimated reserves may have to be recalculated based onactual production experience. Market price fluctuations of gold, as well asincreased production costs or reduced recovery rates, may render the presentproven and probable reserves unprofitable to develop at a mine or mines. Thiscould cause the Company to reduce its reserves, which could have a negativeimpact on its operations and financial results. Failure to obtain necessarypermits or government approvals could also cause the Company to reduce itsreserves.

 

Mineral resources that are not mineralreserves do not have demonstrated economic viability. Due to the uncertainty ofinferred mineral resources, these mineral resources may never be upgradedto proven and probable mineral reserves.

 

There is no assurance that the Company willobtain the estimated levels of recovery of gold or the prices assumed indetermining gold reserves.

 

*MineDevelopment*

 

The Company’s ability to sustain or increase its present levels of goldproduction is dependent upon the successful development of new producing minesand/or identification of additional reserves at existing mining operations. Ifthe Company is unable to develop new ore bodies, it will not be able to sustainpresent production levels. Reduced production could have a material and adverseimpact on future cash flows, results of operations and financial condition.

 

*Productionand Cost Estimates*

 

The Company prepares estimates of future production and cash costs ofproduction for its operations. No assurance can be given that such estimateswill be achieved. The failure by the Company to achieve production or costestimates could have an adverse impact on any or all of the Company’s futurecash flows, results of operations and financial condition. The Company’s actualproduction may vary from estimates for a variety of reasons, including:actual ore mined varying from estimates of grade, tonnage, dilution andmetallurgical and other characteristics; short-term operating factors relatingto the ore reserves, such as the need for sequential development of ore bodiesand the processing of new or different ore grades; risks and hazards associatedwith mining; natural phenomena, such as inclement weather conditions, floods,and earthquakes; and unexpected labour shortages. Cash costs of production may beaffected by a variety of factors, including: ore grade, metallurgy, labourcosts, the cost of commodities, supplies and services. Such occurrences couldresult in damage to mineral properties, interruptions in production, injury ordeath to persons, damage to property of the Company or others, monetary lossesand legal liabilities. These factors may cause a mineral deposit that hasbeen mined profitably in the past to become unprofitable, forcing the Companyto cease production.

 

*Exploration*

 

Gold exploration is highly speculative innature. The Company’s exploration work involves many risks and may beunsuccessful. Substantial expenditures are required to establish proven andprobable reserves and to complete the related mine development. It may takeseveral years from the initial phases of drilling until production is possible.As a result of these uncertainties, there is no assurance that current orfuture exploration programs will be successful 

 

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and result in the expansion or replacement ofcurrent production with new reserves or result in the discovery of new orebodies.

 

*Environmental,Health and Safety Regulations*

 

The Company’s mining operations and exploration activities are subjectto extensive laws and regulations governing the protection of the environment,waste disposal, worker safety, mine development and protection of endangeredand protected species. Environmental legislation is evolving in a manner that may requirestricter standards and enforcement, increased fines and penalties fornon-compliance, more stringent environmental assessments of proposed projectsand a heightened degree of responsibility for companies and their officers,directors and employees. There is no assurance that existing or futureenvironmental regulation will not materially adversely affect the Company’sbusiness, financial condition and results of operations. Environmental hazards may existon the properties in which the Company holds interests and that are unknown tothe Company at present and that have been caused by previous existing owners oroperators of the properties. There may be costs and production delaysassociated with compliance with these laws and regulations. Bonds or otherforms of financial assurances are required for security for these reclamationactivities. The unknown nature of possible future additional regulatoryrequirements creates uncertainties related to future environmental, health andsafety costs. The Company has set aside cash to fund reclamation at the JerrittCanyon mine based on current assessments and has purchased insurance againstunexpected reclamation costs beyond the current estimated amounts. There can beno assurance, however, that actual environmental and reclamation obligationswill not exceed such provisions.

 

Bills proposing major changes to the mining laws of the United Stateshave been considered by Congress. If these Bills, which may includeroyalty fees or net profits interests, are enacted in the future, they couldhave a significant effect on the ownership and operation of patented andunpatented mining claims in the United States, including claims that theCompany owns or holds. Any amendment to current laws and regulations governingoperations and activities of mining companies, or more stringent implementationthereof, could have a material adverse impact on the Company’s financialcondition and results of operations.

 

*EmployeeRelations*

 

The Company’s ability to achieve its futuregoals and objectives is dependent, in part, on maintaining good relations withits employees. Although the Jerritt Canyon mine employees are not unionized,production at its mining operations is dependent upon the efforts of theCompany’s employees, and a prolonged labour disruption at Jerritt Canyon couldhave a material adverse impact on the Company’s operations as a whole.

 

In addition, relations between the Companyand its employees may be affected by changes in the scheme of labourrelations that may be introduced by the relevant government authorities inwhose jurisdictions the Company carries on business. Changes in suchlegislation or in the relationship between the Company and its employees may havea material adverse effect on the Company’s business, results of operations andfinancial condition.

 

*Title toProperties*

 

The validity of mining claims, whichconstitute most of the Company’s property holdings, can be uncertain and may becontested. Although the Company has attempted to acquire satisfactory title toits properties, some risk exists that some titles, particularly title toundeveloped properties, may be subject to prior unregistered agreements ortransfer or native land claims and title may be affected by otherundetected defects and may be defective.

 

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*Competition*

 

The mineral exploration and mining businessis competitive in all of its phases. The Company competes with other miningcompanies and individuals, including competitors with greater financial,technical and other resources than the Company for mining claims and leases onexploration properties, acquisition of gold mining assets, capital andqualified employees. The Company cannot assure that it will continue to be ableto compete successfully with its competitors in acquiring such properties,capital and employees or terms it considers acceptable, if at all.

 

*Dependenceon Management*

 

The success of the operations and activitiesof the Company is dependent to a significant extent on the efforts andabilities of its management, a small group of individuals. Investors must bewilling to rely to a significant extent on management’s discretion and judgment.The Company does not have in place formal programs for the succession ofmanagement and training of management. The Company does not maintain any keyman insurance on any of its employees. The loss of any one member of themanagement group could have a material adverse effect on the Company’sbusiness.

 

*Conflictsof Interest*

 

Certain of the directors and officers ofCompany are also directors and/or officers of other natural resource companies.Such associations may give rise to conflicts of interest from time to time.The Company’s directors are required by law to act honestly and in good faithwith a view to the best interests of the Company and to disclose any interest,which they may have in any project or opportunity of the Company. If aconflict of interest arises at a meeting of the board of directors, anydirector in a conflict must disclose his interest and abstain from voting onsuch matter in accordance with applicable corporate laws.

 

*Directorsand Assets outside Canada*

 

Since certain of the Company’s directors areresident outside of Canada it may not be possible to effect service ofprocess upon such directors and since all or a substantial portion of theassets of such directors are located outside Canada, there may bedifficulties in enforcing against such directors judgments obtained in Canadiancourts. Similarly, essentially all of the Company’s assets are located outsideCanada and there may be difficulties in enforcing against the Companyjudgments obtained in Canadian courts.

 

*Dilution*

 

The Company frequently issues common sharesto finance asset acquisitions and working capital, to settle liabilities, toacquire services and to compensate employees. As at March 27, 2006**,** approximately 550.0 million common shares wereoutstanding; approximately 50.1 million common shares were issuable upon theexercise of warrants and approximately 13.1 million common shares were issuableupon the exercise of stock options. If all of the current warrants and optionsare exercised, the number of outstanding shares would increase by approximately12%****to approximately 613.3 million shares.It is possible that the Company will enter into more agreements to issue commonshares and warrants and options to purchase common shares. The impact of theissuance of a significant amount of common shares from these warrant and optionexercises could place downward pressure on the market price of the Company’scommon shares.

 

On March 29, 2006, the Company entered in an agreement withNewmont Canada Ltd. (“Newmont”), whereby Newmont will purchase 28.51 millionQueenstake common shares. As part of the private placement, Newmont willreceive warrants that can be exercised to acquire up to 28.51 million commonshares of Queenstake for a four-year period. See *2006 PrivatePlacement, Ore Processing and Property Lease Agreements* Section inthis AIF.

 

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*Future Capital Requirements*

 

The Company anticipates investing additional capital in minedevelopment, new mining equipment and in capitalized reserve expansion programsin 2006. The Company intends to use cash on hand and cash generated fromoperating activities and equity and/or debt financing to fund theseexpenditures.

 

The Company may have other additional capital or explorationfunding requirements to the extent it decides to develop other properties ormakes additional acquisitions. The Company may also encounter significantunanticipated liabilities or expenses. The Company’s ability to continue itsplanned exploration and development activities depends in part on itsability to generate free cash flow from its operating mine, which is subject tocertain risks and uncertainties. The Company may be required to obtainadditional financing in the future to fund exploration and developmentactivities or acquisitions of additional projects. The Company has historicallyraised capital primarily through equity financing and in the future may raisecapital through equity or debt financing, joint ventures or other means. Therecan be no assurance that the Company will be able to obtain the necessaryfinancing in a timely manner, on acceptable terms or at all.

 

*Estimatesand Assumptions Employed in the Preparation of Financial Statements*

 

The preparation of its consolidated financial statements requires theCompany to use estimates and assumptions that affect the reported amounts ofassets, liabilities, revenues and expenses. The Company’s accounting policiesare described in Note 2 to its December 31, 2005 consolidated financialstatements. The Company’s accounting policies related to work-in-progressinventory valuation, depletion and depreciation of property, plant andequipment, capitalization of development costs and asset retirement obligationsare critical accounting policies, which are subject to estimates and assumptionsregarding reserves, process recoveries, future gold prices, environmental lawsand regulations and future mining activities.

 

The assumptions used in the valuation of work-in-progress inventoriesinclude estimates of gold contained in ore stockpiles and in the recoverycircuit and an assumption of the gold price expected to be realized when thegold is recovered and further costs to be incurred. If these estimates orassumptions prove to be inaccurate, the Company could be required to write-downthe recorded value of its work-in-progress inventories, which would reduce theCompany’s earnings and working capital.

 

A significant portion of the Company’s property, plant and equipment isdepleted and depreciated on a units-of- production basis, which bases itscalculations on the expected amount of recoverable reserves. If these estimatesof reserves prove to be inaccurate, or if the Company revises its mine plan dueto reductions in the price of gold or unexpected production cost increases, andas a result the amount of reserves expected to be recovered are reduced, thenthe Company would be required to write-down the recorded value of its property,plant and equipment or to increase the amount of future depletion anddepreciation expense, both of which would reduce the Company’s earnings and netassets.

 

The Company also assesses its property, plant and equipment forimpairment at the end of each accounting period. If prior estimates of futurecash flows prove to be inaccurate, due to reductions in the price of gold,increases in the costs of production, and/or reductions in the amount ofrecoverable reserves, the Company would be required to write-down the recordedvalue of its property, plant and equipment, which would reduce the Company’searnings and net assets.

 

36

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The Company has an obligation to reclaim itsproperties after the minerals have been fully depleted, and has estimated thecosts to comply with existing reclamation and accounting standards. The estimateof the fair value of these costs was based on existing environmental laws andregulations, the life of the various mines, interest rates and estimated futurecosts.

 

*PaymentObligations*

 

The Company is, or may in the futurebecome, a party to certain contractual agreements pursuant to which the Companyis or may become subject to payments and comply with other obligations. Ifsuch obligations are not complied with when due, in addition to any otherremedies, which may be available to other parties, this could result indilution or forfeiture of interests held by the Company. The Company may nothave, or be able to obtain, financing for all such obligations as they arise.

 

*Dividends*

 

No dividends on the common shares of the Company have been paid to date.The Company anticipates that it will retain all future earnings and other cashresources for the future operation and development of its business. The Companydoes not intend to declare or pay any cash dividends in the foreseeable future.Payment of any future dividends will be at the discretion of the Company’sboard of directors, after taking into account many factors, including theCompany’s operating results, financial condition and current and anticipatedcash needs.

 

# **CAPITAL STRUCTURE**

# ** **

The Company has one class of equity: common shares without parvalue. The Company is authorized to issue an unlimited number of common shares.Each common share is entitled to one vote and to participate equally on adistribution of assets or a winding up of the Company.

 

As at March 27, 2006, approximately 550.0 million common shareswere issued and outstanding. An additional 50.1****millioncommon shares were issuable upon the exercise of the warrants, and 13.1 millioncommon shares were issuable upon the exercise of stock options.

 

On March 29, 2006, the Company entered in an agreement withNewmont Canada Ltd. (“Newmont”), whereby Newmont will purchase 28.51 millionQueenstake common shares. As part of the private placement, Newmont willreceive warrants that can be exercised to acquire up to 28.51 million commonshares of Queenstake for a four-year period. See *2006 PrivatePlacement, Ore Processing and Property Lease Agreements* Section inthis AIF.

 

# **MARKET FOR SECURITIES**

 

The Company’s common shares are currently listedon the Toronto Stock Exchange (the “TSX”) under the trading symbol QRL. TheCompany’s common shares began trading on the American Stock Exchange (the “AMEX”)under the trading symbol QEE on December 14, 2004.

 

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Trading History on the TSX in 2005 is as follows:

 
| ** ** | ** ** | **Sales price (Cdn$)** | ** ** | ** ** | ** ** |
|------------|------------|------------------------|------------|------------|------------|
| **2005**   | ** ** | **High**               | ** ** | **Low**    | ** ** | **Average Daily Volume** | ** ** |
| January    |       | 0.48                   |       | 0.33       |       | 2,513,560 |   |
| February   |       | 0.46                   |       | 0.37       |       | 1,395,643 |   |
| March      |       | 0.43                   |       | 0.25       |       | 2,702,507 |   |
| April      |       | 0.28                   |       | 0.21       |       | 1,509,071 |   |
| May        |       | 0.30                   |       | 0.21       |       | 1,463,715 |   |
| June       |       | 0.33                   |       | 0.25       |       | 1,498,777 |   |
| July       |       | 0.29                   |       | 0.25       |       | 591,287 |   |
| August     |       | 0.27                   |       | 0.19       |       | 1,201,862 |   |
| September  |       | 0.27                   |       | 0.19       |       | 1,774,216 |   |
| October    |       | 0.26                   |       | 0.21       |       | 450,501 |   |
| November   |       | 0.25                   |       | 0.21       |       | 779,388 |   |
| December   |       | 0.25                   |       | 0.19       |       | 1,603,203 |   |

 

Trading History on the AMEX in 2005 is as follows:

 
| ** ** | ** ** | **Sales price (US$)** | ** ** | ** ** | ** ** |
|------------|------------|-----------------------|------------|------------|------------|
| **2005**   | ** ** | **High**              | ** ** | **Low**    | ** ** | **Average Daily Volume** | ** ** |
| January    |       | 0.39                  |       | 0.27       |       | 544,695 |   |
| February   |       | 0.38                  |       | 0.29       |       | 553,663 |   |
| March      |       | 0.34                  |       | 0.21       |       | 590,323 |   |
| April      |       | 0.23                  |       | 0.17       |       | 423,005 |   |
| May        |       | 0.24                  |       | 0.17       |       | 267,119 |   |
| June       |       | 0.27                  |       | 0.20       |       | 360,886 |   |
| July       |       | 0.24                  |       | 0.20       |       | 328,835 |   |
| August     |       | 0.23                  |       | 0.15       |       | 436,617 |   |
| September  |       | 0.23                  |       | 0.16       |       | 537,419 |   |
| October    |       | 0.22                  |       | 0.18       |       | 272,338 |   |
| November   |       | 0.21                  |       | 0.17       |       | 436,424 |   |
| December   |       | 0.21                  |       | 0.17       |       | 910,375 |   |

 

# **DIRECTORS AND OFFICERS**

 

## **Name, Address, Occupation and Security Holding**

 

The names, province or state,  country of residence, positions held andprincipal business occupations in which each of the Company’s current directorsand executive officers of the Company has been engaged during the immediatelypreceding five years is as follows:

 

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| **Name, Province or State and  Country(1)**              | ** ** | **Position &  Term of Service**                                                        | ** ** | **Principal Occupation or  Employment for Past Five Years(1)**                                                                                                                                                                                                    |
|----------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| DORIAN  (DUSTY) NICOL(5)  Colorado, USA                  |       | President and Chief Executive  Officer since March 2005, and Director since July 1999 |       | President and Chief Executive  Officer of Queenstake, March 2005 to present; Executive Vice President  of Queenstake, 2003 to 2005; Vice President Exploration of Queenstake, 1999  to 2003; and Vice President of Santa Cruz, 1998 to 1999.                 |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| ERIC EDWARDS  Colorado, USA                              |       | Vice President Finance and  Chief Financial Officer since March 2005                       |       | Vice President Finance and  Chief Financial Officer of the Company, March 2005 to present; Manager,  Administration of Kinross Gold Corporation, 2002 to 2005; and Vice President  Finance of EHS Capital Partners, LLP, 2001 to 2002.                       |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| WENDY YANG  Colorado, USA                                |       | Vice President of Investor Relations since December 2005                                   |       | Vice President, Investor  Relations, August 2005 to present; and Director, Investor Relations of  Newmont Mining Corporation, 2000 to 2005.                                                                                                                  |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| PETER BOJTOS(2) (3)  Colorado, USA                  |       | Director since June 2000                                                                   |       | Director of the Company, June 2000  to present; a Professional Engineer, and director of several public mining  companies.                                                                                                                                   |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| MICHAEL SMITH(2) (5)British Columbia, Canada        |       | Director since May 2004                                                                    |       | Director of the Company, May 2004  to present; a Chartered Accountant, and Partner of PricewaterhouseCoopers  LLP, 1982 to 2004.                                                                                                                             |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| ROBERT  L. ZERGA(3) (4)Nevada, USA                  |       | Non-Executive Chairman,  Director since April 2004                                         |       | Director of the Company, April 2004  to present; and a retired mining executive.                                                                                                                                                                             |
|                                                     |       |                                                                                            |       |                                                                                                                                                                                                                                                              |
| DORIS MEYER(2) (3) (5)British Columbia, Canada |       | Director since May 2005                                                                    |       | Director of the Company, May 2005  to present; President and Owner of Golden Oak Corporate Services Ltd., which  provides financial and corporate compliance services to publicly traded  mining companies; and director of several public mining companies. |

 

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| **Name, Province or State and  Country(1)** | ** ** | **Position &  Term of Service** | ** ** | **Principal Occupation or  Employment for Past Five Years(1)**                                                                                                                                                                                                                                                                                                    |
|---------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                        |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                              |
| JOHN ELLIS(4)  Nevada, United States        |       | Director since May 2005             |       | Director of the Company, May 2005 to  present; Independent Consultant with respect to mines, mills and smelters for  Inco, Queenstake, and others, 2003 to present; and Founder of Ellis Consultants,  a private company providing consulting services principally to the AngloGold  group of companies, 2000 to present.                                    |
|                                        |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                              |
| JOHN HICK(4)  Ontario, Canada               |       | Director since March 2006           |       | Director of the Company, March 2006  to present; Chief Executive Officer of Rio Narcea, 2004 to 2005; Vice  Chairman of Rio Narcea, 2004 to present; Director of Rio Narcea, 1997 to  present; President and Chief Executive Officer of Defiance Mining Corp. and  its predecessor company, 2001 to 2004; and director of several other resource  companies. |

 

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(1)   The information as to province or stateand country of residence and principal business occupation during the past fiveyears is not within the Company’s knowledge and has been furnished by therespective directors and officers.

 

(2)   Denotes a member of the Audit Committee;

 

(3)   Denotes a member of the CorporateGovernance and Nominating Committee;

 

(4)   Denotes a member of the Compensation andManagement Development Committee;

 

(5)   Denotes a member of the DisclosureCommittee

 

As at the date of this AIF, the directors andexecutive officers of the Company as a group beneficially own, directly orindirectly, or exercise control or direction over approximately 0.1 millioncommon shares, representing less than 1% of the issued common shares of theCompany. In addition, such individuals hold stock options to acquire anadditional 6.6 million common shares of the Company.

 

The term of the directors of the Companyexpires at each annual general meeting of the shareholders and the term of theofficers expires at the discretion of the board of directors, or uponresignation from the position.

 

## **Corporate Cease Trade Orders and Bankruptcies**

## ** **

Other than as set out below, no director ofthe Company, executive officer of the Company or shareholder holding enoughsecurities to materially affect the control of the Company, has:

 

(a)           at the date of this AIF or has been within the 10 years before thedate of the AIF, been a director or executive officer of any company (includingthe Company), that while that person was acting in their capacity:

 

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(i)            was the subject of a cease trade order or similar order that deniedsuch issuer access to any  exemption  under securities legislation for a period ofmore than 30 consecutive days.

 

(ii)           was subject to an event that resulted, after the director orexecutive officer ceased to be a director or executive officer, in thecompany  being the object of a ceasetrade or similar order or an order that denied the relevant company access toany exemption under securities registration for a period of more than 30consecutive days; or

 

(iii)          within a year of that personceasing to act in that capacity, became bankrupt  made a proposal under any legislationrelating to bankruptcy or insolvency or was subject to or instituted anyproceedings, arrangement, or compromise with creditors, or had a receiver,receiver manager, or trustee appointed to hold its assets.

 

(b)           within the 10 years before the date hereof, become bankrupt, made aproposal under any legislation relating to bankruptcy or insolvency, or becomesubject to or instituted any proceedings, arrangement or compromise withcreditors, or had a receiver, receiver manager or trustee appointed to hold theassets of the director, officer or shareholder.

 

In June 2000, the Ontario SecuritiesCommission ordered that the management and certain insiders of Link MineralsVentures Inc. (“Link”), be prohibited from trading in securities until Link’sannual financial statements were filed. As a director of Link at the time, Mr. PeterBojtos, a director of Queenstake, was subject to the order.

 

The British Columbia Securities Commissionissued a cease trade order against Link Minerals Ventures Inc. (“Link”) inAugust, 2001 for the failure to file annual financial statements. Mr. PeterBojtos, a director of Queenstake, was a director of Link at the time.

 

Mr. Bojtos was a director of SahelianGoldfields Inc. (“Sahelian”) when it was the subject of a proposal under theBankruptcy and Insolvency Act (Canada), which proposal was approved by thecreditors and by the courts in August 2001. Sahelian is now reorganized.

 

Mr. Bojtos was a director of Sahelian inMay, 1999 when a cease trade order was issued by the British ColumbiaSecurities Commission, and in June, 2000 when the Ontario Securities Commissionissued a cease trade order against Sahelian for failure to file annualfinancial statements for its 1998 fiscal year, and first quarter interimfinancial statements, within the time required. Sahelian was reorganized underthe Bankruptcy and Insolvency Act (Canada) in 2002, and both the cease tradeorders have since been lifted.

 

The foregoing information, not being withinthe knowledge of the Company, has been furnished by the respective directors,officers and shareholders holding a sufficient number of securities of theCompany to affect materially control of the Company.

 

No director or executive officer of the Company, or a shareholderholding a sufficient number of securities of the Company to affect materiallythe control of the Company, has been subject to:

 

(a)       anypenalties or sanctions imposed by a court relating to securities legislation orby a securities regulatory authority or has entered into a settlement agreementwith a securities regulatory authority; or

 

(b)      anyother penalties or sanctions imposed by a court or regulatory body that wouldlikely be considered important to a reasonable investor in making an investmentdecision regarding the Company.

 

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The foregoing information, not being withinthe knowledge of the Company, has been furnished by the respective directors,officers and shareholders holding a sufficient number of securities of theCompany to affect materially control of the Company.

 

## **Conflicts of Interest**

 

Certain directors and officers of the Company are also directors,officers or shareholders of other companies that are similarly engaged in thebusiness of acquiring, developing and exploiting natural resource properties.The directors and officers of the Company, are also directors of othercompanies that are similarly engaged in the business of acquiring, developingand exploiting natural resource properties. These associations to other publiccompanies in the resource sector may give rise to conflicts of interestfrom time to time. The directors and senior officers of the Company arerequired by law to act honestly and in good faith with a view to the bestinterests of the Company and to disclose any interest which they may havein a contract or c. transaction if the contract or transaction is material tothe Company, the Company has entered, or proposes to enter, into the contractortransaction, and either the director or senior officer has a material interestin the contract or transaction or the director or senior officer is a directoror senior officer of, or has a material interest in, a corporation which has amaterial interest in the contractor transaction. If a conflict of interestarises at a meeting of the board of directors, any director in a conflict isrequired to disclose his interest and abstain from voting on such matter.

 

**AUDITCOMMITTEE**

 

Pursuant to the provisions of section 173of the *Yukon Business Corporations Act*, theCompany is required to have an Audit Committee. The Company must also, pursuantto the provisions of Multilateral Instrument 52-110 Audit Committees (“MI52-110”), which came into force on March 30, 2004, have a written charterwhich sets out the duties and responsibilities of its audit committee.

 

**The Audit Committee Charter**

 

The Audit Committee Charter is attachedhereto as Schedule “A”.

 

**Composition of the Audit Committee**

 

The Audit Committee, at the present time, iscomprised of Messrs. Bojtos and Smith and Ms. Meyer. All members ofthe Audit Committee are financially literate and all members are independentdirectors.

 

**Relevant Education and Experience**

 

Michael Smith, Audit Committee Chairman, is aChartered Accountant and a retired partner from PricewaterhouseCoopers, LLP, apublic accounting firm where he was employed from 1967 to 2004.

 

Peter Bojtos, Audit Committee Member, is a****Professional Engineer and a director of several publicmining companies.

 

42

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Doris Meyer, Audit Committee Member, is aCertified General Accountant in British Columbia and the President and Owner ofGolden Oak Corporate Services Ltd., which provides financial and corporatemining compliance services to publicly traded mining companies.

 

**Reliance on Certain Exemptions**

 

At no time since the commencement of theCompany’s most recently completed fiscal year has the Company relied on theexemptions in section 2.4 *(De Minimis Non-auditServices)*, section 3.2 *(Initial Public Offerings*),section 3.4 *(Events Outside Control of Member)*,section 3.50 *(Death, Disability or Resignation of AuditCommittee Member)* or Part 8 *(Exemptions*).

 

**Reliance on the Exemption in Subsection 3.3(2) orSection 3.6**

 

At no time since the commencement of theCompany’s most recently completed fiscal year has the Company relied on theexemption in subsection 3.3(2) *(Controlled Companies)*or section 3.6 *(Temporary Exemption forLimited and Exceptional Circumstances).*

 

**Reliance on Section 3.8**

 

At no time since the commencement of theCompany’s most recently completed fiscal year has the Company relied on section 3.8*(Acquisition of Financial Literacy)*.

 

**Audit Committee Oversight**

 

At no time since the commencement of theCompany’s most recently completed fiscal year was a recommendation of the AuditCommittee to nominate or compensate an external auditor not adopted by theBoard of Directors.

 

**Pre-Approval Policies and Procedures**

 

The Audit Committee has adopted specificpolicies and procedures for the engagement of non-audit services. Pursuant toits Charter, the Audit Committee is required to pre-approve all auditingservices and related fees and the terms thereof, including the scope of theauditors’ audit examination plan, procedures and timing of the audit, andpre-approve any non-audit services (i.e., any services provided other than inconnection with the audit or review of financial statements) to be rendered bythe Company’s auditors, including the terms thereof, and the fees to be paid inconnection therewith. The Committee may delegate to one or more members of the Committeethe authority to pre-approve services to be provided by the auditors. Any suchpre-approval by one or more members of the Committee must be reported to thefull Committee at the next scheduled meeting. The pre-approval of auditing andnon-auditing services can be done with input from, but no delegation ofauthority to, management. All of the engagements and fees for 2005 werepre-approved by the Audit Committee.

 

**External Auditor Service Fees (By Category)**

 
| **Fiscal Year End** | ** ** | **Audit Fees** | ** ** | **Audit Related Fees(1)** | ** ** | **Tax Fees(2)** | ** ** | **All Other Fees(3)** | ** ** |
|---------------------|------------|----------------|------------|---------------------------|------------|-----------------|------------|-----------------------|------------|
| 2005                |       | $              | 204,859    |                      | $          | 0               |       | $                     | 27,659     |   | $ | 0 |   |
| 2004                |       | $              | 147,289    |                      | $          | 6,931           |       | $                     | 44,071     |   | $ | 0 |   |

 

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(1)   Fees charged for assurance and relatedservices reasonably related to the performance of an audit, and not includedunder “Audit Fees”.

 

(2)   Fees charged for tax compliance, tax adviceand tax planning services.

 

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(3)   Fees for services other than disclosed in anyother column.

 

**LEGAL PROCEEDINGS**

 

There are no legal proceedings to which theCompany is a party to or to which any of its property is subject, and no suchproceedings are known to be contemplated.

 

**INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**

 

The Company believes no director or executiveofficer of the Company or any person or company that is the direct or indirectbeneficial owner of, or who exercise control or direction over, more than 10%of any class or series of the Company’s outstanding voting securitiesor any associate or affiliate of any of the persons or companies referred toabove has any material interest, direct or indirect, in any transactions whichmaterially affected or would materially affect the Company or any of itssubsidiaries, occurring during the years ended December 31, 2005, 2004 and2003 except for the fact that certain of the directors or officers of theCompany are also directors and/or officers and/or securityholders of otherpublicly traded companies of which the Company is the largest shareholder.

 

# **transfer agent and registrar**

# ** **

The Company’s transfer agent and registrar is CIBC Mellon TrustCompany, 1066 West Hastings Street, Suite 1600, Vancouver, BritishColumbia, Canada.

 

**MATERIAL CONTRACTS**

 

Except for contracts entered into in the ordinarycourse of business, the Company has not entered into any material contractsduring the most recently completed financial year, or since January 1,2002, and which are still in full force and effect, and which may reasonablybe regarded as presently material.

 

**INTERESTS OF EXPERTS**

 

The following prepared or certified a statement, report or valuationdescribed or included in a filing, or referenced in a filing made by theCompany under National Instrument 51-102 – Continuous Disclosure Obligationsprescribed by the Canadian Securities Administrators, during or relating to theCompany’s most recently completed financial year ended December 31, 2005:

 
| **Name**                          | ** ** | **Qualified Person with Respect to**                                                                                                                                                                                                                                            | ** ** | **# of Securities  Held** |
|-----------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|
| Staley, Okada & Partners |       | The audit report dated March 30, 2006,  relating to the financial statements of the Company for the financial year  ended December 31, 2005.                                                                                                                          |       | 0%                        |
|                              |       |                                                                                                                                                                                                                                                                            |       |                      |
| SRK Consulting (U.S.) Inc.        |       | Consent to disclosure with respect to the  technical report titled “Jerritt Canyon Mine, Elko County, Nevada – Technical  Report” which is currently being prepared in accordance to National  Instrument 43-101 (collectively, the “Technical Report” |       | 0%                        |

 

44

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**ADDITIONAL INFORMATION**

 

Additional information relating to theCompany is available under the Company’s profile on the SEDAR website atwww.sedar.com. Financial information relating to the Company is provided in theCompany’s comparative financial statements and management’s discussion andanalysis for the most recently completed fiscal year ended December 31,2005.

 

Additional information, including directors’and officers’ remuneration and indebtedness, principal holders of the Company’ssecurities and securities authorized for issuance under equity compensationplans, if applicable, is contained in the Company’s information circular dated April 25,2005 for its annual general meeting of shareholders held on May 31, 2005,and once completed, will be available in its information circular for itsupcoming annual general meeting of shareholders for 2006.

 

If you wish to receive a copy of the Company’sannual financial statements, interim financial statements, related managementand discussion analysis, or previous copies of Annual Information Forms, pleasecontact the Company (see the cover page for contact information) and acopy of the documents you requested will be forwarded to you without charge.

 

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**Schedule A**

 

**AuditCommittee Charter**

 

The Board of Directors (the “Board”) of Queenstake Resources Ltd. (the “Corporation”)has established an Audit Committee (the “Committee”) comprised of at leastthree directors appointed by the Board. The membership qualifications,authority, responsibility and specific duties of the Committee are describedbelow:

 

### *Membership Qualifications*

###  

To serve on the Committee, a director must be independent. To beconsidered independent, a director must meet the criteria for independence (a) requiredby the Toronto Stock Exchange and any applicable laws and regulations, and (b) establishedby the Board in the Corporation’s Corporate Governance Guidelines or otherwise.In addition, the director should receive no compensation from the Corporationor any of its affiliates (including fees paid directly or indirectly for anyconsulting or any legal, financial or other advisory services), other thandirector’s fees for service as a member of the Board and any committeesthereof.

 

Committee members shall serve until their successors shall be dulydesignated and qualified. Any member may be removed at any time, with orwithout cause, by a majority of the Board then in office. Any vacancy in theCommittee occurring for any cause may be filled by a majority of the Boardthen in office.

 

The Board may suggest the Committee’s chairperson, otherwise, theCommittee will select the chairperson. A majority of the members of theCommittee shall constitute a quorum for the transaction of business and the actof a majority of those present at any meeting at which there is a quorum shallbe the act of the Committee.

 

The Committee may form and delegate authority tosubcommittees when appropriate.

 

In addition, to serve on the Audit Committee, a director must befinancially literate (or must become so within a reasonable period of timeafter being appointed to the Committee), as the Board of Directors interpretssuch qualification in its business judgment.

 

### *Authority*

###  

The Board of Directors has granted the Committee the authority hereinprovided, as well as the authority to investigate any activity of theCorporation and its subsidiaries. The Committee has been, and shall be, grantedunrestricted access to all information and all employees have been, and shallbe, directed to cooperate as requested by members of the Committee. TheCommittee has the authority to retain, at the Corporation’s expense, personshaving special competencies (including, without limitation, legal, accountingor other consultants and experts) to assist the Committee in fulfilling itsresponsibilities.

 

**Purpose and Responsibilities**

 

The primary responsibility for financial andother reporting, internal controls, and compliance with laws and regulationsand ethics rests with the management of the Corporation. The Committee’sprimary purposes are:

 

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(a)   toassist the Board in its oversight of the integrity of the Corporation’sfinancial statements and management discussion and analysis, the Corporation’scompliance with legal and regulatory requirements and corporate policies andcontrols, the independent auditor’s selection, retention, qualifications andindependence, and

 

(b)   toprepare the “Report of the Audit Committee” to be included in the Corporation’sannual proxy statement. The Committee will assist the Board by reviewing thefinancial information that will be provided to the shareholders and others, thesystems of internal controls that management and the Board of Directors haveestablished, and the audit process.

 

The Committee is responsible for overseeing the integrity of thefinancial reporting process and that the financial statements and managementdiscussion and analysis adequately represent the Corporation’s financialcondition, results of operations and cash flows. Secondly, the Committee isresponsible for overseeing the Corporation’s compliance with corporatefinancial policies that provide processes, procedures and standards to followin accomplishing the Corporation’s goals and objectives. Thirdly, the Committeeis responsible for understanding the Corporation’s financial reporting risksand the internal control structure.

 

The Committee is also responsible for confirming the independence andobjectivity of the auditors.

 

Each of the auditors, the chief financial officer and the controllershall have direct and unrestricted access to the Committee as well as theopportunity to meet with the entire Board.

 

The Committee shall meet no less than four times annually. Additionalor special meetings may be held at the Committee’s discretion.

 

### *Specific Duties*

###  

In discharging its responsibilities, theCommittee shall have the sole authority to, and shall, do the following:

 

1.     retainand, where appropriate, dismiss the Corporation’s auditors,

 

2.     pre-approveall auditing services and related fees and the terms thereof, including thescope of the auditors’ audit examination plan, procedures and timing of theaudit, and

 

3.     pre-approveany non-audit services (i.e., any services provided other than in connectionwith the audit or review of financial statements) to be rendered by theCorporation’s auditors, including the terms thereof, and the fees to be paid inconnection therewith, and

 

4.     TheCommittee may delegate to one or more members of the Committee theauthority to pre-approve services to be provided by the auditors. Any such 

 

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pre-approval by one or more members of theCommittee shall be reported to the full Committee at the next scheduledmeeting. The pre-approval of auditing and non-auditing services can be donewith input from, but no delegation of authority to, management.

 

The Committee is also expected to perform the following additionalduties:

 

5.     Priorto the audit, review the experience and qualifications of the senior members ofthe auditors’ audit team and the quality control procedures of the independentpublic accountant.

 

6.     Reviewwith the auditors, the chief financial officer and management the Corporation’spolicies and procedures relative to the adequacy of internal accounting andfinancial reporting controls, including controls over quarterly and annualfinancial reporting, computerized information systems and security.

 

7.     Makeall necessary inquiries of management and the auditors concerning compliancewith established standards of corporate conduct.

 

8.     Reviewwith management and the auditors the accounting and reporting principles andpractices applied by the Corporation in preparing its financial statements andmanagement discussion and analysis, including:

 

a.     majorissues regarding accounting principles and financial statement presentationsincluding any significant changes in the Corporation’s selection or applicationof accounting principles, and major issues as to the adequacy of theCorporation’s internal controls and any special audit steps adopted in light ofmaterial control deficiencies;

 

b.     analysesprepared by management and/or the auditors setting forth significant financialreporting issues and judgments made in connection with the preparation of the financialstatements, including analyses of the effects of alternative GAAP methods onthe financial statements;

 

c.     identificationof each critical accounting estimate used by the Corporation including adescription of the accounting estimate, the methodology used; underlyingassumptions and range of estimates from which the estimate was selected, andany known trends, commitments, events or uncertainties that may materiallyaffect the methodology or the assumptions described;

 

d.     theeffect of regulatory and accounting initiatives, as well as off-balance sheetstructures, on the financial statements of the Corporation; and earnings pressreleases (paying particular attention to any use of “pro forma,” or “adjusted”non-GAAP, information), as well as financial information and earnings guidanceprovided to analysts.

 

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9.     Priorto the release of each quarterly earnings press release discuss with managementand the auditors the results for the quarter, including any significanttransactions which occurred during the quarter, any significant adjustments,management judgments and accounting estimates, new accounting policies and anydisagreements between management and the auditors.

 

10.   Priorto submission to the Board of Directors for approval, and prior to the releaseof the annual financial statements, review with management and the auditors,upon completion of their audit, the financial results for the year and theresults of the audit, including

 

a.     theCorporation’s annual financial statements and related footnotes;

 

b.     management’sdiscussion and analysis of the financial condition and results of operations;

 

c.     theresults of the audit, including the nature and amount of unrecorded adjustmentsresulting from the audit;

 

d.     theauditors’ management recommendations;

 

e.     anysignificant transactions which occurred during the year;

 

f.      anysignificant adjustments;

 

g.     managementjudgments and accounting estimates;

 

h.     newaccounting policies;

 

i.      allalternative treatments of financial information within generally acceptedaccounting principles, ramifications of the use of alternative disclosures andtreatments, and the treatment preferred by the auditors; and

 

j.      anydisagreements between management and the auditors.

 

11.   Priorto submission to the Board of Directors for approval, and prior to the releaseof quarterly financial statements, review with management and the auditors, theCorporation’s quarterly financial statements for such quarter, including

 

a.     thefinancial statements and related footnotes,

 

b.     management’sdiscussion and analysis of the financial condition and results of operations,

 

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c.     theresult of the quarterly review, including the nature and amount of unrecordedadjustments resulting from the review,

 

d.     anysignificant transactions which occurred during the quarter,

 

e.     anysignificant adjustments,

 

f.      criticalaccounting policies and practices,

 

g.     newaccounting policies,

 

h.     allalternative treatments of financial information within generally acceptedaccounting principles, ramifications of the use of alternative disclosures andtreatments, and the treatment preferred by the auditors, and

 

i.      anydisagreements between management and the auditors.

 

12.   Atleast annually,

 

a.     obtainand review from the auditors a written statement delineating all theirrelationships with the Corporation, consistent with the Independence StandardsBoard Standard I, which is to include all non-audit services provided andrelated fees, and

 

b.     discusswith the auditors any disclosed relationships or services that may impacttheir objectivity and independence and take appropriate action to satisfyitself as to the independence of the auditors.

 

13.   Meetperiodically and separately with each of management, the internal auditors andthe auditors.

 

14.   Reviewand evaluate the chief financial officer’s work throughout the year, andpresent the Committee’s conclusions to the full Board.

 

15.   Determinethat the Company’s hiring policies for employees or former employees of theauditors are in accordance with applicable laws and regulations.

 

16.   Takesuch action as necessary to assure the rotation of the lead audit partner atleast every five years or such other period as may be required underapplicable law.

 

17.   Establishprocedures for processing internal complaints regarding accounting, internalcontrols or auditing matters, and the confidential anonymous submission 

 

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        byemployees of concerns regarding questionable accounting or operating practices.

 

18.   Conductan annual performance self-evaluation of the Committee.

 

19.   Apprisethe Board of Directors regularly of significant developments in the course ofperforming the above duties, including reviewing with the full Board any issuesthat arise with respect to the quality or integrity of the Corporation’scompliance with legal or regulatory requirements, the performance andindependence of the company’s auditors.

 

20.   Reviewand reassess the adequacy of this charter on a regular basis and submit anyproposed revisions to the Board for consideration and approval.

 

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