UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
20-F








(Mark
      One)o
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
      OF 1934


ORx
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR (15d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year endedMarch 31,
      2008


ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


ORo
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934Date
      of event requiring this shell company
      report......................................





For
the transition period from __________________ to __________________




Commission
file number 000-27322




MOUNTAIN PROVINCE DIAMONDS
INC.


(Exact
name of Registrant as specified in its charter)




Not
Applicable


(Translation
of Registrant’s name into English)




Ontario


(Jurisdiction
of incorporation or organization)




401 Bay Street, Suite 2700,
PO Box 152, Toronto, Ontario Canada M5H 2Y4


(Address
of principal executive offices)




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




Title
      of each class
            Name
      of each exchange on which registeredNone
            Not
      Applicable


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




Common shares without par
value


(Title of
Class)





(Title of
Class)




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




None


(Title of
Class)




















Indicate
the number of outstanding shares of the issuer’s classes of capital or common
stock as of the close of the period covered by the annual
report.


59,870,881





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.




oYes          x     
No




If
this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.


oYes          x     
No




Note -
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.









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


xYes          o     
No


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







Large
      accelerated filer o
            Accelerated
      filer x
            Non-accelerated
      filer o




Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S.
      GAAP o
            International
      Financial Reporting Standards o
            Other
      xas
      issued by the International AccountingStandards
      Board





If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.




xItem
17           oItem 18





If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).


oYes          x     
No




(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)




Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.


oYes          o     
No


Not
Applicable







ii










TABLE
OF CONTENTS




GLOSSARY
                viGLOSSARY
      OF TECHNICAL TERMS
                ixPART
      IItem 1
                
                Identity
      of Directors, Senior Management and Advisors.
                1Item 2
                
                Offer
      Statistics and Expected Timetable.
                1Item 3
                
                Key
      Information.
                1A.
                
                Selected
      financial data.
                1B.
                
                Capitalization
      and indebtedness.
                2C.
                
                Reasons
      for the offer and use of proceeds.
                2D.
                
                Risk
      factors.
                2Item 4
                
                Information
      on the Company.
                9A.
                
                History
      and development of the Company.
                9B.
                
                Business
      Overview.
                11C.
                
                Organizational
      structure.
                15D.
                
                Property,
      plants and equipment.
                15Item
      4A
                
                Unresolved
      Staff Comments
                27Item
      5
                
                Operating
      and Financial Review and Prospects.
                27A.
                
                Operating
      results.
                27B.
                
                Liquidity
      and capital resources.
                29C.
                
                Research
      and development, patents and licenses etc.
                29D.
                
                Trend
      information.
                29E.
                
                Off-balance
      sheet arrangements.
                30F.
                
                Tabular
      disclosure of contractual obligations.
                30Item 6
                
                Directors,
      Senior Management and Employees.
                31A.
                
                Directors
      and Senior Management.
                31B.
                
                Compensation.
                33C.
                
                Board
      practices.
                35D.
                
                Employees.
                36E.
                
                Share
      ownership.
                36











iii







Item
      7
                  
                  Major
      Shareholders and Related Party Transactions.
                  37A.
                  
                  Major
      shareholders.
                  37B.
                  
                  Related
      party transactions.
                  37C.
                  
                  Interests
      of experts and counsel.
                  38Item 8
                  
                  Financial
      Information.
                  38A.
                  
                  Consolidated
      Statements and Other Financial Information.
                  38B.
                  
                  Significant
      Changes.
                  38Item 9
                  
                  The
      Offer and Listing.
                  38A.
                  
                  Offer
      and Listing Details.
                  38B.
                  
                  Plan
      of Distribution.
                  39C.
                  
                  Markets.
                  39D.
                  
                  Selling
      Shareholders.
                  40E.
                  
                  Dilution.
                  40F.
                  
                  Expenses
      of the Issuer.
                  40Item 10
                  
                  Additional
      Information.
                  40A.
                  
                  Share
      capital.
                  40B.
                  
                  Memorandum
      and articles of association.
                  40C.
                  
                  Material
      contracts.
                  43D.
                  
                  Exchange
      controls.
                  43E.
                  
                  Taxation.
                  45F.
                  
                  Dividends
      and paying agents.
                  53G.
                  
                  Statement
      by experts.
                  53H.
                  
                  Documents
      on display.
                  54I.
                  
                  Subsidiary
      Information.
                  54Item 11
                  
                  Quantitative
      and Qualitative Disclosures About Market Risk.
                  54Item 12
                  
                  Description
      of Securities Other than Equity Securities.
                  55
















iv












PART
      IIItem 13
            
            Defaults,
      Dividend Arrearages and Delinquencies.
            55Item 14
            
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds.
            55Item 15
            
            Controls
      and Procedures.
            55Item 16
            
            [Reserved]
            56Item 16A
            
            Audit
      Committee Financial Expert.
            56Item 16B
            
            Code
      of Ethics.
            56Item 16C
            
            Principal
      Accountant Fees and Services.
            56Item 16D
            
            Exemptions
      from the Listing Standards for Audit Committees.
            57Item 16E
            
            Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers.
            57PART
      IIIItem 17
            
            Financial
      Statements.
            57Item 18
            
            Financial
      Statements.
            58Item 19
            
            Exhibits.
            58SIGNATURES
            87EXHIBIT
      INDEX
            88





v







GLOSSARY






Affiliate
has the meaning given to affiliated bodies corporate under the Ontario Business Corporations
Act ;




AK
Property means the claims known as the "AK claims" held by the Gahcho Kué
Project;




AK-CJ Propertiesmeans, collectively, the AK Property and CJ Property Claims;




AMECmeans
AMEC E&C Services Ltd.




CJ
Property means the claims known as the "CJ claims", which have now
lapsed, previously held by MPV;




Arrangement
means the arrangement between the Company and Glenmore which was effected as of
June 30, 2000;




Arrangement
Agreementmeans the Arrangement
Agreement dated as of May 10, 2000, and made between MPV and Glenmore, including
the Schedules to that Agreement;




Business
Corporations Act [Ontario] means the R.S.O. 1990, CHAPTER B.16, as
amended from time to time;




CDNX means
the Canadian Venture Exchange Inc, formerly the Vancouver Stock Exchange, and
now known as the TSX Venture Exchange;




Camphormeans Camphor Ventures
Inc.;




Canadian National
Instrument 43-101means the National Instrument 43-101
(Standards of Disclosure for Mineral Projects)adopted by the Canadian
Securities Administrators;




Code means
the United States Internal
Revenue Code of 1986, as amended;




Company,
MPVor Registrant
means Mountain Province Diamonds Inc.;




De Beers
means De Beers Consolidated Mines Ltd.;




De Beers
Canada or Monopros
means De Beers Canada Inc., formerly known as De Beers Canada Exploration Inc.
and before that as Monopros Limited, a wholly-owned subsidiary of De
Beers;




Desktop
Study means the preliminary technical assessment of the Gahcho Kué
resource conducted by De Beers Consolidated Mines Ltd. in 2000 (updated in
2003), which considered an 18 million tonne mineable resource. AMEC provided an
Independent Qualified Persons’ review of the Desktop Study. Although the Desktop
Study incorporates “inferred mineral resources that are considered too
speculative geologically” to be categorized as “mineral reserves”, AMEC’s
assessment supports the financial model for the project developed by De Beers.
The capital and operating cost estimates are considered to be at scoping level,
with an expected range of accuracy of +/- 30 percent.




Exchange
Act means the U.S. Securities Exchange Act of
1934;




Gahcho Kué Joint
Venture Agreementmeans the joint venture agreement entered into by
Mountain Province Diamonds Inc., Camphor Ventures Inc., and De Beers Canada
Exploration Inc. on October 24, 2002, but which took effect from January 1,
2002.




Gahcho
KuéProject,located at Kennady Lake, is
the aboriginal name for the Kennady Lake Project involving the diamondiferous
kimberlite bodies in Kennady Lake located on the AK leased claims;







vi







Glenmore
means Glenmore Highlands Inc., a company incorporated under the Business Corporations Act
(Alberta) and which,
pursuant to the Arrangement, has amalgamated with the Company's wholly-owned
subsidiary, Mountain Glen Mining Inc., to form an amalgamated company, also
known as Mountain Glen Mining Inc.;




Glenmore
Shares means the common shares of Glenmore, as the same existed before
the Arrangement took effect and "Glenmore Share" means any of them;




Glenmore
Shareholder  means a holder of Glenmore Shares;




Joint Information
Circular means the joint information circular of the Company and Glenmore
dated May 10, 2000 for the Extraordinary General Meeting and Special Meeting of
the Company and Glenmore respectively to approve the Arrangement;




Letter
Agreement means the letter agreement dated March 6, 1997 among Mountain
Province Mining Inc., Camphor Ventures Inc., Glenmore Highlands Inc., 444965
B.C. Ltd. and Monopros as amended or supplemented by: an agreement dated April
10, 1997 among Mountain Province Mining Inc., Camphor Ventures Inc., Glenmore
Highlands Inc., 444965 B.C. Ltd. and Monopros, an assurance given to De Beers by
the other parties., dated July, 1997, an agreement given to De Beers by the
other parties dated November 1, 1997 and two agreements each dated December 17,
1999 among the parties.




Monopros
or De Beers
Canada means De Beers Canada Exploration Inc., formerly known as Monopros
Limited, a wholly-owned subsidiary of De Beers;




Mountain
Glen means Mountain Glen Mining Inc., a wholly-owned subsidiary (now
dissolved) of the Company;




MPV, Mountain
Province, Company or Registrantmeans Mountain Province Diamonds Inc.;




MPV
Sharesmeans the common shares
of MPV, and "MPV Share" means any of them;




Nasdaqmeansthe National Association
of Securities Dealers Automatic Quotation System;




Old MPVmeans MPV prior to its amalgamation with 444965 B.C. Ltd.;




OTCBB  means
the National Association of Securities Dealers over-the-counter bulletin
board;




PFIC  means
Passive Foreign Investment Company under the Code;




Qualified Personas defined by Canadian National Instrument 43-101 (Standards of
Disclosure for Mineral Projects), means an individual who




(a)
            is
      an engineer or geoscientist with a least five years 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 professional association (as that term is
      defined in Canadian National Instrument
43-101);




Registrant,
Company or MPV means
Mountain Province Diamonds Inc.;




Sightmeans an invitation to purchase a certain amount of rough diamonds ten
times a year from the De Beers' Diamond Trading Company in London;







vii







Sightholdermeans a diamantaire who purchases rough diamonds directly from the De
Beers' Diamond Trading Company;




TSX means
the Toronto Stock Exchange; and




VSE means
the Vancouver Stock Exchange, subsequently renamed the Canadian Venture
Exchange, and now known as the TSX Venture Exchange.







viii







GLOSSARY
OF TECHNICAL TERMS




Adit
            A
      horizontal or nearly horizontal passage driven from the surface for the
      working of a mine.Archean
            The
      earliest eon of geological history or the corresponding system of
      rocks.Area
      of Interest
            A
      geographic area surrounding a specific mineral property in which more than
      one party has an interest and within which new acquisitions must be
      offered to the other party or which become subject automatically to the
      terms and conditions of the existing agreement between the parties.
      Typically, the area of interest is expressed in terms of a radius of a
      finite number of kilometers from each point on the outside boundary of the
      original mineral property.Bulk
      Sample
            Evaluation
      program of a diamondiferous kimberlite pipe in which a large amount of
      kimberlite (at least 100 tonnes) is recovered from a
  pipe.Carat
            A
      unit of weight for diamonds, pearls, and other gems. The metric carat,
      equal to 0.2 gram or 200 milligram, is standard in the principal
      diamond-producing countries of the world.Caustic
      Fusion
            An
      analytical process for diamonds by which rocks are dissolved at
      temperatures between 450-600 C. Diamonds remain undissolved by this
      process and are recovered from the residue that
remains.Craton
            A
      stable relatively immobile area of the earth's crust that forms the
      nuclear mass of a continent or the central basin in an
    ocean.Diabase
            A
      fine-grained rock of the composition of gabbro but with an ophitic
      texture.Dyke
            A
      body of igneous rock, tabular in form, formed through the injection of
      magma.Feasibility
      Study
            As
      defined by Canadian National Instrument 43-101, means a comprehensive
      study of a deposit in which all geological, engineering, operating,
      economic and other relevant factors are considered in sufficient detail
      that it could reasonably serve as the basis for a final decision by a
      financial institution to finance the development of the deposit for
      mineral production.Gneiss
            A
      banded rock formed during high grade regional metamorphism. It includes a
      number of different rock types having different origins. It commonly has
      alternating bands of schistose and granulose material.Indicator
      mineral
            Minerals
      such as garnet, ilmenite, chromite and chrome diopside, which are used in
      exploration to indicate the presence of kimberlites.Jurassic
            The
      period of the Mesozoic era between the Triassic and the Cretaceous or the
      corresponding system of rocks marked by the presence of dinosaurs and the
      first appearance of birds.





ix












Kimberlite
            A
      dark-colored intrusive biotite-peridotite igneous rock that can contain
      diamonds. It contains the diamonds known to occur in the rock matrix where
      they originally formed (more than 100 km deep in the
    earth).Macrodiamond
            A
      diamond, two dimensions of which exceed 0.5
millimeters.Microdiamond
            Generally
      refers to diamonds smaller than approximately 0.5mm, which are recovered
      from acid dissolution of kimberlite rock.Mineral
      Reserve
            Means
      the economically mineable part of a Measured Mineral Resource 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.THE
      TERMS "MINERAL RESERVE," "PROVEN MINERAL RESERVE" AND "PROBABLE MINERAL
      RESERVE" USED IN THIS REPORT ARE CANADIAN MINING TERMS AS DEFINED IN
      ACCORDANCE WITH NATIONAL INSTRUMENT 43-101 - STANDARDS OF DISCLOSURE FOR
      MINERAL PROJECTS WHICH INCORPORATES THE DEFINITIONS AND GUIDELINES SET OUT
      IN THE CANADIAN INSTITUTE OF MINING, METALLURGY AND PETROLEUM (THE "CIM")
      STANDARDS ON MINERAL RESOURCES AND MINERAL RESERVES DEFINITIONS AND
      GUIDELINES ADOPTED BY THE CIM COUNCIL ON AUGUST 20, 2000. IN THE UNITED
      STATES, A MINERAL RESERVE IS DEFINED AS A PART OF A MINERAL DEPOSIT WHICH
      COULD BE ECONOMICALLY AND LEGALLY EXTRACTED OR PRODUCED AT THE TIME THE
      MINERAL RESERVE DETERMINATION IS MADE.Under
      United States standards:"Reserve"
      means that part of a mineral deposit which can be economically and legally
      extracted or produced at the time of the reserve
      determination."Economically,"
      as used in the definition of reserve, implies that profitable extraction
      or production has been established or analytically demonstrated to be
      viable and justifiable under reasonable investment and market
      assumptions."Legally,"
      as used in the definition of reserve, does not imply that all permits
      needed for mining and processing have been obtained or that other legal
      issues have been completely resolved. However, for a reserve to exist,
      there
      should be a reasonable certainty based on applicable laws and regulations
      that issuance of permits or resolution of legal issues can be accomplished
      in a timely manner.Mineral
      Reserves are categorized as follows on the basis of the degree of
      confidence in the estimate of the quantity and grade of the
      deposit.





x












"Proven
      Mineral Reserve" means, in accordance with CIM Standards, the economically
      viable 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.The
      definition for "proven mineral reserves" under Canadian standards differs
      from the standards in the United States, where proven or measured reserves
      are defined as reserves for which (a) quantity is computed from dimensions
      revealed in outcrops, trenches, workings or drill holes; grade and/or
      quality are computed from the results of detailed sampling and
      (b) the sites for inspection, sampling and measurement are spaced so
      closely and the geographic character is so well defined that size, shape,
      depth and mineral content of reserves are well
  established."Probable
      Mineral Reserve" means, in accordance with CIM Standards, 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 is
    justified.The
      definition for "probable mineral reserves" under Canadian standards
      differs from the standards in the United States, where probable reserves
      are defined as reserves for which quantity and grade and/or quality are
      computed from information similar to that of proven reserves (under United
      States standards), but the sites for inspection, sampling, and measurement
      are further apart or are otherwise less adequately spaced. The degree of
      assurance, although lower than that for proven reserves, is high enough to
      assume continuity between points of observation.Mineral
      Resource
            Under
      CIM Standards, Mineral Resource is 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
      TERMS "MINERAL RESOURCE", "MEASURED MINERAL RESOURCE", "INDICATED MINERAL
      RESOURCE", "INFERRED MINERAL RESOURCE" USED IN THIS REPORT ARE CANADIAN
      MINING TERMS AS DEFINED IN ACCORDANCE WITH NATIONAL INSTRUMENT 43-101 -
      STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS UNDER THE GUIDELINES SET OUT
      IN THE CIM STANDARDS. THE COMPANY ADVISES U.S. INVESTORS THAT WHILE SUCH
      TERMS ARE RECOGNIZED AND PERMITTED UNDER CANADIAN REGULATIONS, THE U.S.
      SECURITIES AND EXCHANGE COMMISSION DOES NOT RECOGNIZE THEM. THESE ARE NOT
      DEFINED TERMS UNDER THE UNITED STATES STANDARDS AND MAY NOT GENERALLY BE
      USED IN DOCUMENTS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE
      COMMISSION BY U.S. COMPANIES. AS SUCH, INFORMATION CONTAINED IN THIS
      REPORT CONCERNING DESCRIPTIONS OF MINERALIZATION AND RESOURCES MAY NOT BE
      COMPARABLE TO INFORMATION MADE PUBLIC BY U.S. COMPANIES SUBJECT TO THE
      REPORTING AND DISCLOSURE REQUIREMENTS OF THE UNITED STATES SECURITIES AND
      EXCHANGE COMMISSION.





xi












"Inferred
      Mineral Resource" means, under CIM Standards, that part of a Mineral
      Resource for which quantity and grade or quality can be estimated on the
      basis of geological evidence and limited sampling and reasonably assumed,
      but not verified, geological and grade continuity. The estimate is based
      on limited information and sampling gathered through appropriate
      techniques from locations such as outcrops, trenches, pits, workings and
      drill holes. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ANY PART OR
      ALL OF AN INFERRED RESOURCE EXISTS, OR IS ECONOMICALLY OR LEGALLY
      MINEABLE."Indicated
      Mineral Resource" means, under CIM Standards, 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. U.S. INVESTORS ARE CAUTIONED NOT TO
      ASSUME THAT ANY PART OR ALL OF THE MINERAL DEPOSITS IN THIS CATEGORY WILL
      EVER BE CONVERTED INTO RESERVES."Measured
      Mineral Resource" means, under CIM standards 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 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 drillholes that are spaced closely enough to
      confirm both geological and grade continuity. U.S. INVESTORS ARE CAUTIONED
      NOT TO ASSUME THAT ANY PART OR ALL OF THE MINERAL DEPOSITS IN THIS
      CATEGORY WILL EVER BE CONVERTED INTO RESERVES.Operator
            The
      party in a joint venture which carries out the operations of the joint
      venture subject at all times to the direction and control of the
      management committee.Ordovician
            The
      period between the Cambrian and the Silurian or the corresponding system
      of rocks.Overburden
            A
      general term for any material covering or obscuring rocks from
      view.





xii












Paleozoic
            An
      era of geological history that extends from the beginning of the Cambrian
      to the close of the Permian and is marked by the culmination of nearly all
      classes of invertebrates except the insects and in the later epochs by the
      appearance of terrestrial plants, amphibians, and
  reptiles.Pipe
            A
      kimberlite deposit that is usually, but not necessarily,
      carrot-shaped.Preliminary
      Feasibility Study
            Under
      the CIM Standards, means a comprehensive study of the viability of a
      mineral project that has advanced to a stage where the mining method, in
      the case of underground mining, or the pit configuration, in the case of
      an open pit, has been established, and which, if an effective method of
      mineral processing has been determined, includes a financial analysis
      based on reasonable assumptions of technical, engineering, operating,
      economic factors and the evaluation of other relevant factors which are
      sufficient for a Qualified Person acting reasonably, to determine if all
      or part of the Mineral Resource may be classified as a Mineral
      Reserve.Proterozoic
            The
      eon of geologic time or the corresponding system of rocks that includes
      the interval between the Archean and Phanerozoic eons, perhaps exceeds in
      length all of subsequent geological time, and is marked by rocks that
      contain fossils indicating the first appearance of eukaryotic organisms
      (as algae).Reverse
      Circulation Drill
            A
      rotary percussion drill in which the drilling mud and cuttings return to
      the surface through the drill pipe.Sill
            Tabular
      intrusion which is sandwiched between layers in the host
    rock.Stringers
            The
      narrow veins or veinlets, often parallel to each other, and often found in
      a shear zone.Tertiary
            The
      Tertiary period or system of rocks.Till
      Sample
            A
      sample of soil taken as part of a regional exploration program and
      examined for indicator minerals.Xenolith
            A
      foreign inclusion in an igneous
rock.





xiii







NOTE
REGARDING FORWARD LOOKING STATEMENTS




This
report contains forward-looking statements within the meaning of the United
States Private Securities Litigation Reform Act of 1995 concerning the Company's
exploration, operations, planned acquisitions and other matters. These
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
management.




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




•
            risks
      and uncertainties relating to the interpretation of drill results, the
      geology, grade and continuity of mineral
  deposits;




•
            results
      of initial feasibility, pre-feasibility and feasibility studies, and the
      possibility that future exploration, development or mining results will
      not be consistent with the Company's
  expectations;




•
            mining
      exploration risks, including risks related to accidents, equipment
      breakdowns or other unanticipated difficulties with or interruptions in
      production;




•
            the
      potential for delays in exploration activities or the completion of
      feasibility studies;




•
            risks
      related to the inherent uncertainty of exploration and cost estimates and
      the potential for unexpected costs and
expenses;




•
            risks
      related to commodity price
fluctuations;




•
            the
      uncertainty of profitability based upon the Company's history of
      losses;




•
            risks
      related to failure to obtain adequate financing on a timely basis and on
      acceptable terms;




•
            risks
      related to environmental regulation and
  liability;




•
            political
      and regulatory risks associated with mining and exploration;
      and




•
            other
      risks and uncertainties related to the Company's prospects, properties and
      business strategy.




Some of
the important risks and uncertainties that could affect forward looking
statements are described further in this Annual Report under the headings "Risk
Factors", "History and Development of Company," "Business Overview," "Property,
plants and equipment," and "Operating and Financial Review and Prospects".
Should one or more of these risks and uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in forward-looking statements. Forward looking statements are
made based on management's beliefs, estimates and opinions on the date the
statements are made and the Company undertakes no obligation to update
forward-looking statements if these beliefs, estimates and opinions or other
circumstances should change. Investors are cautioned against attributing undue
certainty to forward-looking statements.







xiv







NOTE
REGARDING FINANCIAL STATEMENTS AND EXHIBITS




The
financial statements and exhibits referred to herein are filed with this report
on Form 20-F in the United States. This report is also filed in Canada as an
Annual Information Form and the Canadian filing does not include the financial
statements and exhibits listed herein. Canadian investors should refer to the
annual financial statements of the Company as at March 31, 2008, which are
incorporated by reference herewith, as filed with the applicable Canadian
Securities regulators on SEDAR (the Canadian Securities Administrators' System
for Electronic Document Analysis and Retrieval) under "Audited Annual Financial
Statements - English".




METRIC
EQUIVALENTS




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




To
      Convert From Metric
            To
      Imperial
            Multiply
      byHectares
            Acres
            2.471Metres
            Feet
      (ft.)
            3.281Kilometres
      (km.)
            Miles
            0.621Tonnes
            Tons
      (2000 pounds)
            1.102Grams/tonne
            Ounces
      (troy/ton)
            0.029








xv





PART
I




Item
1.                 Identity
of Directors, Senior Management and Advisors




Not
Applicable




Item
2.                 Offer
Statistics and Expected Timetable




Not
Applicable




Item
3.                 Key
Information




A.
            Selected financial
      data.




The
selected financial data set forth below should be read in conjunction with “Item
5 - Operating and Financial Review and Prospects”, and in conjunction with the
consolidated financial statements and related notes of the Company included
under “Item 17, Financial Statements."  The Company's consolidated
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles. Material measurement differences between
accounting principles generally accepted in Canada and the United States,
applicable to the Company, are described in Note 9 to the consolidated financial
statements. The Company's financial statements are set forth in Canadian
dollars.




The
following chart summarizes certain selected financial information for the
Company as at and for its fiscal years ended March 31, 2008, 2007, 2006, 2005,
and 2004.  Except as otherwise indicated, dollar amounts presented are
equivalent under Canadian and United States generally accepted accounting
principles.




12
      Months Ended March 31,All
      in CDN$1,000's except Earnings (loss) per Share and Number of Common
      Shares
            2008
            
            2007
            
            2006
            
            2005
            
            2004Operating
      Revenue
            nil
            
            nil
            
            nil
            
            nil
            
            nilInterest
      Revenue
            62
            
            24
            
            12
            
            13
            
            12Working
      Capital
            1,567
            
            180
            
            808
            
            1,041
            
            701Net
      Earnings (loss) -Under
      Canadian GAAP:
            166
            
            (1,961)
            
            (2,200)
            
            1,531
            
            (1,813)Under
      U.S. GAAP: (restated)
            152
            
            (2,049)
            
            (1,948)
            
            1,836
            
            (1,223)Basic
      and diluted earnings (loss) per share -Under
      Canadian GAAP:
            -
            
            (0.04)
            
            (0.04)
            
            0.03
            
            (0.04)Under
      U.S. GAAP: (restated)
            -
            
            (0.05)
            
            (0.04)
            
            0.04
            
            (0.02)Total
      Assets -Under
      Canadian GAAP:
            66,764
            
            41,616
            
            34,874
            
            36,038
            
            33,514Under
      U.S. GAAP (restated)
            35,733
            
            10,925
            
            4,971
            
            3,683
            
            1,030Total
      Liabilities
            6,122
            
            419
            
            181
            
            95
            
            273Share
      CapitalUnder
      Canadian GAAP:
            85,582
            
            66,579
            
            58,253
            
            57,608
            
            56,595Under
      U.S. GAAP:
            85,515
            
            66,559
            
            58,233
            
            57,587
            
            56,595Net
      Assets -Under
      Canadian GAAP:
            60,642
            
            41,197
            
            34,693
            
            35,943
            
            33,241Under
      U.S. GAAP (restated)
            29,611
            
            10,506
            
            4,790
            
            3,588
            
            757Number
      of Common Shares issued
            59,870,881
            
            55,670,715
            
            53,075,847
            
            52,610,847
            
            *51,202,111




*The 16,015,696
shares held by Mountain Glen, were cancelled and returned to treasury on March
30, 2004.




Restated
figures include 2006 and prior years’ amounts under U.S. GAAP for the following:
Net Earnings (loss) for 2004 and; Basic and diluted earnings (loss) per share
for 2004, 2005, and 2006; Total Assets under U.S. GAAP for 2004, 2005, and 2006;
and Net Assets under U.S. GAAP for 2004, 2005, and 2006.  These
restatements are as a result of an accounting error for U.S. GAAP
purposes.  Please see the audited consolidated financial statements of the
Company for the year ended March 31, 2007 for more information.




No
dividends have been declared in any of the years presented above.







1







Currency and Exchange
Rates




All
dollar amounts set forth in this report are in Canadian dollars, except where
otherwise indicated. The following tables set forth, for the five most recent
financial years, (i) the average rate (the "Average Rate") of exchange for the
Canadian dollar, expressed in U.S. dollars, calculated by using the average of
the exchange rates on the last day for which data is available for each month
during such periods; and (ii) the high and low exchange rate during the previous
six months, in each case based on the noon buying rate in New York City for
cable transfers in Canadian dollars as certified for customs purposes by the
Federal Reserve Bank of New York.




The
Average Rate is set out for each of the periods indicated in the table
below.




2008
            2007
            2006
            2005
            2004US$1.0327
            US$0.8785
            US$0.8376
            US$0.7842
            US$0.7412




The high
and low exchange rates for each month during the previous six months are as
follows:




Month
            High
            LowDecember
      2007
            1.0216
            0.9784January
      2008
            1.0294
            0.9905February
      2008
            1.0188
            0.9717March
      2008
            1.0275
            0.9841April
      2008
            1.0268
            1.0021May
      2008
            1.0187
            0.9840




On June
27, 2008, the noon buying rate in New York City for cable transfer in Canadian
dollars as certified for customer purposes by the Federal Reserve Bank of New
York (the "Exchange Rate") was $1 Canadian = US$1.012.




B.
            Capitalization and
      indebtedness.




Not
Applicable




C.
            Reasons for the offer and use
      of proceeds.




Not
Applicable




D.
            Risk
      factors.




Risks of Exploration and
Development




The
Company, and thus the securities of the Company, should be considered a highly
speculative investment and investors should carefully consider all of the
information disclosed in this Annual Report prior to making an investment in the
Company. In addition to the other information presented in this Annual Report,
the following risk factors should be given special consideration when evaluating
an investment in any of the Company's securities.







2




(a)
            The
      Company's limited operating history makes it difficult to evaluate the
      Company's current business and forecast future
  results.




The
Company has only a limited operating history on which to base an evaluation of
the Company's current business and prospects, each of which should be considered
in light of the risks, expenses and problems frequently encountered in the early
stages of development of all companies. This limited operating history leads the
Company to believe that period-to-period comparisons of its operating results
may not be meaningful and that the results for any particular period should not
be relied upon as an indication of future performance.




(b)    
Speculative business




Resource
exploration and development is a speculative business, characterized by a number
of significant risks including, among other things, unprofitable efforts
resulting not only from the failure to discover mineral deposits but from
finding mineral deposits which, though present, are insufficient in quantity and
quality to return a profit from production. Diamonds acquired or discovered by
the Company may be required to be sold to The Diamond Trading Co., a
wholly-owned subsidiary of De Beers, as per the Gahcho Kué Joint Venture
Agreement (see “Item 4D - Property, plant and equipment - Principal Properties -
The AK Property”), at a price which is reflective of the market at that
time.




(c)The Company has no
significant source of operating cash flow and failure to generate revenues in
the future could cause the Company to go out of business.




The
Company currently has no significant source of operating cash flow. The Company
has limited financial resources. The Company's ability to achieve and maintain
profitability and positive cash flow is dependent upon the Company's ability to
generate revenues.




(d)     
Exploration and Development




The
Company's properties are primarily in the advanced exploration and permitting
stage. Drilling of the 5034, Hearne and Tuzo kimberlite pipes has been extensive
and has now been completed.. There are no estimates of reserves. Estimates of
mineral deposits, development plans and production costs, when made, can be
affected by such factors as environmental permit regulations and requirements,
weather, environmental factors, unforeseen technical difficulties, unusual or
unexpected geological formations and work interruptions. In addition, the grade
of diamonds ultimately discovered may differ from that indicated by bulk
sampling results. Mine plans and processing concepts developed under the scoping
and pre-feasibility studies are preliminary in nature. The estimated capital and
operating costs developed under scoping and pre-feasibility studies are also
preliminary in nature. Historically, pre-feasibility studies have tended to
underestimate capital and operating costs.




(e)     
Process Testing




Process
testing is limited to small scale testing based on a number of laboratory test
programs, trade-off studies and design evaluations conducted in 2002 and 2004.
Ore dressing study technical investigations were performed on kimberlite from
the 5034 and Hearne pipes. A database of operating information developed during
the 1999/2000 bulk sample processing of 2,000 tonnes of kimberlite was used to
supplement the ore dressing study data. Limited processing data is available for
the Tuzo and Telsa kimberlites. Process plant studies were conducted during the
course of 2005. There can be no assurance that diamonds recovered in small scale
tests will be duplicated in large scale tests under on-site conditions or in
production scale. Difficulties may be experienced in obtaining the expected
diamond recoveries when scaling up to a production scale process
plant.














3












(f)Project
Funding




De Beers
Canada is now paying for all exploration of the AK Property, and can be called
on to pay all development costs of the AK Property and, with regard to that
property, there is currently no risk to the Company in respect of the further
exploration, permitting and development costs. Any separate and additional
exploration done by the Company on its other properties may not result in
discovery of any diamondiferous kimberlite.




(g)History of Losses or
Earnings




The
Company has a history of losses and may continue to incur losses for the
foreseeable future. During the years ended March 31, 2008, 2007, and 2006, the
Company incurred net losses or earnings during each of the following
periods:




•
            $0.166
      million net earnings for the year ended March 31,
  2008.




•
            $1.961
      million net loss for the year ended March 31,
  2007.




•
            $2.200
      million net loss for the year ended March 31,
  2006.




As of
March 31, 2008, the Company had an accumulated deficit of $25.9 million. There
can be no assurance that the Company will ever be profitable.




None of
the Company's properties have advanced to the commercial production stage, and
the Company has no history of earnings or cash flow from operations and, as an
exploration company, has only a history of losses. The Company has paid no
dividends on its shares since incorporation and does not anticipate doing so in
the foreseeable future.




(h)Recoverability of
capitalized mineral property costs




The
recoverability of the amounts capitalized for mineral properties in the
Company's consolidated financial statements, prepared in accordance with
Canadian generally accepted accounting principles, is dependent upon the ability
of the Company to complete exploration and development, the discovery of
economically recoverable reserves, and, if warranted, upon future profitable
production or proceeds from disposition of some or all of the Company's mineral
properties.




(i)      
Additional Funding Requirements




As of
March 31, 2008, the Company had cash and term deposits of approximately $1.582
million and working capital of approximately $1.567 million. During the past
three fiscal years ended March 31, 2008, the Company has used approximately $2.9
million in cash flows in operating activities including approximately $1.230
million during the fiscal year ended March 31, 2008, $0.978 million during the
fiscal year ended March 31, 2007, and $0.727 million during the fiscal year
ended March 31, 2006.




The
Company's administrative and other expenses are expected to be approximately
$1.3 million for the next year. The Company has sufficient working capital for
administrative purposes for the next year, but may be required to raise
additional capital through equity and/or debt financings on terms that may be
dilutive to its shareholders' interests in the Company and to the value of their
common shares. The Company may consider debt financing, joint ventures,
production sharing arrangements, disposing of properties or other arrangements
to meet its capital requirements in the future. Such arrangements may have a
material adverse affect on the Company's business or results of
operations.




(j)      
No Proven Reserves




The
properties in which the Company has an interest are all in the advanced
exploratory and permitting stage and at this point, there are only indicated and
inferred resources in four kimberlite bodies in Kennady Lake. See “Item 4D -
Property, plants and equipment - Principal Properties”. The Company has not yet
determined whether its mineral properties contain mineral reserves that are
economically recoverable. Failure to discover economically recoverable reserves
will require the Company to write-off costs capitalized in its financial
statements.







4





(k)     Title Matters




While the
Company has investigated title to all of its mineral properties and, to the best
of its knowledge, title to all of its properties and properties in which it has
the right to acquire or earn an interest are in good standing, this should not
be construed as a guarantee of title. The properties may be subject to prior
unregistered agreements or transfers and title may be affected by undetected
defects.




(l)      
Diamond Prices




The
market for rough diamonds is subject to strong influence from the world's
largest diamond producing company, De Beers, of South Africa, and from The
Diamond Trading Co., (formerly known as the Central Selling Organization), a
marketing agency controlled by De Beers. The price of diamonds dropped sharply
after September 11, 2001 and has now recovered, but future prices cannot be
predicted. , Between 2003 and 2006 diamond prices increased on average by
approximately 15%. In 2007 rough diamond prices increased by an average of 25 %
and in the first five months of 2008 by a further 11 percent. Current trends
suggest an over demand for rough diamonds in the near to mid-term.




(m)    
Compliance with Environmental and Government Regulation




The
current and anticipated future operations of the Company, including development
activities and commencement of production on its properties, require permits
from various federal, territorial and local governmental authorities and such
operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased
costs, and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits. The Company's exploration
activities and its potential mining and processing operations in Canada are
subject to various Canadian Federal and Territorial laws governing land use, the
protection of the environment, prospecting, development, production, exports,
taxes, labour standards, occupational health, waste disposal, toxic substances,
mine safety and other matters.




Such
operations and exploration activities are also subject to substantial regulation
under these laws by governmental agencies and may require that the Company
obtain permits from various governmental agencies. The Company believes it is in
substantial compliance with all material laws and regulations which currently
apply to its activities. There can be no assurance, however, that all permits
which the Company may require for construction of mining facilities and conduct
of mining operations will be obtainable on reasonable terms or that such laws
and regulations, or that new legislation or modifications to existing
legislation, would not have an adverse effect on any exploration or mining
project which the Company might undertake.




Further
detail on governmental regulation may be found in Item 4 - Business Review -
Government Regulation, below.




Failure
to comply with applicable laws, regulations and permit requirements may result
in enforcement actions thereunder, including orders issued by regulatory or
judicial authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions. Parties engaged in mining operations
may be required to compensate those suffering loss or damage by reason of the
mining activities and may have civil or criminal fines or penalties imposed for
violation of applicable laws or regulations. The amount of funds required to
comply with all environmental regulations and to pay for compensation in the
event of a breach of such laws may exceed the Company's ability to pay such
amount.







5







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




(n)     
Climate and Transportation




The AK
Property is subject to climate and transportation risks because of its remote
northern location. Such factors can add to the cost of exploration, development
and operation, thereby affecting costs and profitability.




(o)     
Joint Venture Partner




The
Company, and the success of the AK Property, is dependent on the efforts,
expertise and capital resources of joint venture partner De Beers Canada and its
parent De Beers. De Beers Canada is the project operator and is responsible for
exploring, permitting, developing and operating the AK Property. The Company is
dependent on De Beers Canada for accurate information about the AK Property and
the proper and timely progress of exploration, permitting and
development.




(p)Operating Hazards and
Risks




Diamond
exploration involves many risks which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which the Company has a direct or indirect interest will be subject to all the
hazards and risks normally incidental to exploration, development and production
of resources, any of which could result in work stoppages, damage to property
and possible environmental damage. The Company maintains insurance policies
relating to directors and officers liability, but can give no guarantees that
such insurance will be sufficient to protect the Company from
losses.




(q)     
Numerous factors beyond the control of the Company affect the marketability of
any diamonds discovered.




Factors
beyond the control of the Company may affect the marketability of any diamonds
produced. Significant price movements over short periods of time may be affected
by numerous factors beyond the control of the Company, including international
economic and political trends, expectations of inflation, currency exchange
fluctuations (specifically, the U.S. dollar relative to the Canadian dollar and
other currencies), interest rates and global or regional consumption patterns.
The effect of these factors on the prices of diamonds and therefore the economic
viability of any of the Company's projects cannot accurately be
predicted.




(r)The Company's expectations
reflected in forward looking statements may prove to be incorrect.




This Form
20-F includes "forward looking statements". A shareholder or prospective
shareholder should bear this in mind when assessing the Company's business. All
statements, other than statements of historical facts, included in this annual
report, including, without limitation, the statements under and located
elsewhere herein regarding industry prospects and the Company's financial
position are forward-looking statements. Although the Company believes that the
expectations reflected in such forward looking statements are reasonable, such
expectations may prove to be incorrect.




(s)      
Competition




The
resource industry is intensely competitive in all of its phases, and the Company
competes with many companies possessing greater financial resources and
technical facilities. Competition could adversely affect the Company's ability
to acquire suitable producing properties or prospects for exploration in the
future. The Company may be required under the Gahcho Kué Joint Venture Agreement
(see “Item 4B - Information on the Company - Business Overview”) to sell its
rough diamonds at a price that is reflective of the market price, to The Diamond
Trading Co., a wholly-owned subsidiary of De Beers, which controls approximately
50% of the diamond market. There may therefore be no competition for diamonds
produced from the Company's properties. The Company only competes in the
acquisition of new properties.







6







(t)     
      Financing Risks




The
Company's current operations do not generate any cash flow. If the Company seeks
additional equity financing, the issuance of additional shares will dilute the
interests of the Company's current shareholders. The amount of the dilution
would depend on the number of new shares issued and the price at which they are
issued. The Company has successfully raised funds in recent years through share,
option and warrant issuances. As at June 27, 2008, the Company had approximately
$1.4 million in cash.  The Company’s annual operating costs are
approximately $1.3 million, and in twelve months, it intends to raise capital to
finance its operations through the private placement of shares.




(u)Dilution from Outstanding
Securities




As at
June 27, 2008, there were 400,000 options outstanding at exercise prices ranging
from $1.96 to $4.50 (expiring at various dates), and no warrants
outstanding.  The stock options, if fully exercised, would increase
the number of shares outstanding by 400,000. Such options, if fully exercised,
would constitute less than 1% (out of 60,332,381 shares (59,932,381 issued and
outstanding, plus total options) respectively) of the Company's resulting share
capital as at June 27, 2008. It is unlikely that options would be exercised
unless the market price of the Company's common shares exceeds the exercise
price at the date of exercise. The exercise of such options and the subsequent
resale of such Common shares in the public market could adversely affect the
prevailing market price and the Company's ability to raise equity capital in the
future at a time and price which it deems appropriate. The Company may also
enter into commitments in the future which would require the issuance of
additional common shares and the Company may grant new share purchase warrants
and stock options. Any share issuances from the Company's treasury will result
in immediate dilution to existing shareholders.




(v)    
Conflicts of Interest




At the
present time, except to the extent that Patrick Evans and Jennifer Dawson have
Consulting Agreements with the Company (see “Item 6C - Board Practices”), none
of the officers and directors are in a position of conflict of interest.
However, certain officers and directors of the Company are associated with other
natural resource companies that acquire interests in mineral properties. Such
associations may give rise to conflicts of interest from time to
time.




The
directors of the Company are required by law to act honestly and in good faith
with a view to the best interest of the Company and to disclose any interest
which they may have in any project or opportunity of the Company. If a conflict
of interest arises at a meeting of the board of directors, any director in a
conflict is required to disclose his interest and abstain from voting on such
matter. In determining whether or not the Company will participate in any
project or opportunity, the director will primarily consider the degree of risk
to which the Company may be exposed and its financial position at that
time.




(w)    
Dependence on Key Management Employees




The
nature of the Company's business, its ability to continue its exploration and
development activities and to thereby develop a competitive edge in its
marketplace depends, in large part, on its ability to attract and maintain
qualified key management personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be able to attract and
retain such personnel. The Company's development to date has depended, and in
the future will continue to depend, on the efforts of Patrick
Evans.  See “Item 7B -Related party transactions”, “Item 6C - Board
Practices”, and “Item 10C- Material Contracts”. Loss of the key person could
have a material adverse effect on the Company. The Company does not maintain
key-man life insurance on Patrick Evans.




(x)Fluctuations in Company Stock
Prices




Prices
for the Company's shares on the TSX and on the Amex, have been extremely
volatile. The price for the Company's common shares on the TSX ranged from $3.79
(low) and $5.93 (high) during the fiscal year ended March 31, 2008, and from
$3.05 (low) to $5.05 (high) during the fiscal year ended March 31,
2007.  The price on the Amex ranged from $3.54 US (low) and $5.49 US
(high) during the fiscal year ended March 31, 2008, and from $2.70 US (low) to
$4.40 US (high) during the fiscal year ended March 31, 2007.  Any
investment in the Company's securities is therefore subject to considerable
fluctuations in value.







7






(w)    Currency Rate Fluctuations




Feasibility
and other studies conducted to evaluate the Company's properties are denominated
in U.S. dollars, and the Company conducts a significant portion of its
operations and incurs a significant portion of its administrative and operating
costs in Canadian dollars. The exchange rate for converting U.S. dollars into
Canadian dollars has fluctuated in recent years. Accordingly, the Company is
subject to fluctuations in the rates of currency exchange between the U.S.
dollar and the Canadian dollar, and these fluctuations in the rates of currency
exchange may materially affect the Company's financial position, results of
operations and timing of the development of its properties. In particular,
the recent strong increase in the value of the Canadian dollar compared to the
U.S. dollar should be expected to have a material impact on projected future
capital and operating costs, which could impact on the economic viability of the
Gahcho Kué Project.




(y)     
The Mineral Resources Industry is intensely competitive and the Company competes
with many companies that have greater financial means and technical
facilities.




The
mineral resources industry is intensely competitive and the Company competes
with many companies that have greater financial means and technical facilities.
Significant competition exists for the limited number of mineral acquisition
opportunities available. As a result of this competition, the Company's ability
to acquire additional attractive mining properties, should it decide to do so in
the future, on terms it considers acceptable, may be adversely
affected.




(z)     
De Beers Support




The
exploration of the AK Property has been primarily funded by De Beers, and De
Beers Canada has made an equity investment in the Company. However, there is no
assurance that the level of support provided by De Beers will continue in the
future.




General




As the
Company is a Canadian company, it may be difficult for U.S. shareholders of the
Company to effect service of process on the Company or to realize on judgments
obtained against the Company in the United States.  Some of its directors
and officers are residents of Canada and a significant part of its assets are,
or will be, located outside of the United States. As a result, it may be
difficult for shareholders resident in the United States to effect service of
process within the United States upon the Company, directors, officers or
experts who are not residents of the United States, or to realize in the United
States judgments of courts of the United States predicated upon civil liability
of any of the Company, directors or officers under the United States federal
securities laws. If a judgment is obtained in the U.S. courts based on civil
liability provisions of the U.S. federal securities laws against the Company or
its directors or officers it will be difficult to enforce the judgment in the
Canadian courts against the Company and any of the Company's non-U.S. resident
executive officers or directors. Accordingly, United States shareholders may be
forced to bring actions against the Company and its respective directors and
officers under Canadian law and in Canadian courts in order to enforce any
claims that they may have against the Company or its directors and officers.
Subject to necessary registration, as an extra provincial company, under
applicable provincial corporate statutes in the case of a corporate shareholder,
Canadian courts do not restrict the ability of non-resident persons to sue in
their courts. Nevertheless it may be difficult for United States shareholders to
bring an original action in the Canadian courts to enforce liabilities based on
the U.S. federal securities laws against the Company and any of the Company's
Canadian executive officers or directors.







8







Item
4.             Information
on the Company




A.
            History and development of the
      company.




The Corporate
Organization




Mountain
Province Diamonds Inc., formerly Mountain Province Mining Inc., was formed on
November 1, 1997 by the amalgamation (the "MPV Amalgamation") of Mountain
Province Mining Inc. ("Old MPV") and 444965 B.C. Ltd. ("444965") pursuant to an
amalgamation agreement (the "MPV Amalgamation Agreement") dated as of August 21,
1997.




Under the
terms of the MPV Amalgamation Agreement, as at November 1, 1997, each Old MPV
share was exchanged for one MPV Share and each 444965 share was exchanged for
approximately 0.80 of one MPV Share. The conversion ratios reflect the
respective interests of Old MPV and 444965 in the AK-CJ Properties prior to the
date of the MPV Amalgamation.




Old MPV
was incorporated under the laws of British Columbia on December 2, 1986 under
the British Columbia Company
Act(the "Old Act") and was engaged in the exploration of precious and
base mineral resource properties until the date of the MPV Amalgamation. Prior
to the date of the MPV Amalgamation, Old MPV held an undivided 50% interest in
the AK-CJ Properties and an interest in each of the other properties which are
currently held by MPV, as described below.




444965, a
wholly-owned subsidiary of Glenmore Highlands Inc., (Glenmore being a former
controlling shareholder of the Company as defined under the Securities Act, British
Columbia) prior to the MPV Amalgamation, was incorporated under the laws of
British Columbia on August 20, 1993. Prior to the MPV Amalgamation, 444965's
only material asset consisted of a 40% undivided interest in the AK-CJ
Properties.




As of
March 31, 2000, the Company had one wholly-owned subsidiary, Mountain Province
Mining Corp. (USA), which has since been voluntarily dissolved.




On April
4, 2000, the Company incorporated a wholly-owned subsidiary, Mountain Glen
Mining Inc. in Alberta. Pursuant to an arrangement agreement (the "Arrangement
Agreement") with Glenmore dated May 10, 2000, Glenmore was amalgamated with
Mountain Glen effective as of June 30, 2000 to form a wholly-owned subsidiary
(also known as "Mountain Glen Mining Inc.") of the Company. All Glenmore Shares
were exchanged for common shares in the Company on the basis of 0.5734401 MPV
Shares to one Glenmore Share, and Glenmore Shares were concurrently cancelled.
All of the assets of Glenmore became assets of Mountain Glen, including
16,015,696 MPV Shares previously held by Glenmore.




Glenmore
had two wholly-owned subsidiaries, Baltic Minerals BV, incorporated in the
Netherlands, and Baltic Minerals Finland OY, incorporated in Finland. Pursuant
to the Arrangement Agreement, these companies became wholly-owned subsidiaries
of the Company.




The
Company changed its name from Mountain Province Mining Inc. to Mountain Province
Diamonds Inc. effective October 16, 2000. It commenced trading under its new
name on the TSX on October 25, 2000.




Pursuant
to an Assignment and Assumption Agreement dated March 25, 2004 between the
Company and Mountain Glen, Mountain Glen distributed its property and assets
in specie to the
Company with the object of winding up the affairs of Mountain Glen. The property
transferred included Mountain Glen's shares in Baltic Minerals BV and the
16,015,696 MPV Shares. On March 30, 2004, the 16,015,696 MPV Shares were
cancelled and returned to treasury.




Mountain
Glen was voluntarily dissolved on August 4, 2004.




Pursuant
to the repeal of the British Columbia Company Act and its
replacement by the British Columbia Business Corporations Act(the "New Act"), the Company transitioned to the New Act and adopted new
Articles of Incorporation. On September 20, 2005, the Company’s shareholders
approved a special resolution for the continuance of the Company into Ontario,
and the Company amended its articles and continued incorporation under the
Ontario Business Corporation Act, transferring from the Company Act (British
Columbia).







9







The
Company is domiciled in Canada.




The names
of the Company's subsidiaries, their dates of incorporation and the
jurisdictions in which they were incorporated as at the date of filing of this
Annual Report, are as follows:









Name
      of Subsidiary
            Date
      of Incorporation
            Juridiction
      of IncorporationBaltic
      Minerals BV
            January
      26, 1996
            The
      NetherlandsBaltic
      Minerals Finland OY
            May
      18, 1994
            FinlandCamphor
      Ventures Inc.
            May
      9, 1986 (as Sierra Madre Resources Inc.)
            British
      Columbia, Canada






The
subsidiaries of the Company, represented diagrammatically, are as
follows:











The
Company's registered, records and executive office is at 401 Bay Street, Suite
2700, PO Box 152, Toronto, Ontario, Canada M5H 2Y4.  The Company’s
administrative and executive office is at 401 Bay Street, Suite 2700, PO Box
152, Toronto, Ontario, Canada M5H 2Y4, the telephone number is (416) 361-3562,
and the fax number is (416) 603-8565.




The
Company's initial public offering on the Vancouver Stock Exchange ("VSE") was
pursuant to a prospectus dated July 28, 1988 and was only offered to investors
in British Columbia. The Company listed its shares on the Toronto Stock Exchange
("TSX") (Trading Symbol "MPV") on January 22, 1999 and on the Nasdaq Smallcap
Market (Trading Symbol "MPVIF") on May 1, 1996. Its shares were delisted from
the Vancouver Stock Exchange (now known as the TSX Venture Exchange and prior to
that, as the Canadian Venture Exchange ("CDNX")) on January 31, 2000 and from
the Nasdaq Smallcap Market on September 29, 2000. Presently, the Company's
shares trade on the TSX under the symbol "MPV" and also on the Amex under the
symbol MDM. Prior to April 4, 2005, the Company's shares traded on the OTCBB
under the symbol "MPVI". The Company is also registered extra-provincially in
the Northwest Territories, and is a reporting issuer in British Columbia,
Ontario and Alberta.The Company files
reports in the United States pursuant to Section 13 of the Securities Exchange
Act.




Principal Capital
Expenditures and Divestitures




There are
no principal capital expenditures and divestitures currently in
progress.







10







Takeover
offers




There
were no public takeover offers by third parties in respect of the Company's
shares or by the Company in respect of other companies' shares during the last
and current financial year, except as discussed under “Acquisitions and
Dispositions” relating to Camphor Ventures.




Acquisitions and
Dispositions




On
October 10, 2002, the Company granted an option for the acquisition by Vision
Gate Ventures Limited (now known as Northern Lion Gold Corp.) of a 70% interest
in its Haveri Gold Property, which was not considered to be a property that was
material to the Company. On October 4, 2004, the Company agreed to exchange the
Company's 30% interest in the Haveri Gold Property for 4,000,000 common shares
of Northern Lion Gold Corp. The shares were subject to a two-year hold period
and there were volume restrictions on re-sale thereafter.  The
4,000,000 common shares of Northern Lion Gold Corp. were sold in July
2007.




On July
5, 2006, the Company announced that it had entered into an agreement with
certain Camphor Ventures Inc. ( “Camphor” or “Camphor Ventures”) shareholders to
acquire approximately 33.5 percent of the issued and outstanding shares of
Camphor through a private agreement exempt share exchange on the basis of 0.3975
Mountain Province shares for each Camphor share. The acquisition was completed
on July 24, 2006.




On
January 19, 2007, the Company announced that Camphor had accepted an offer
letter from the Company in terms of which the Company offered, subject to
certain conditions, to acquire all of the outstanding securities of Camphor
Ventures on the basis of 0.41 Mountain Province common shares, options or
warrants (as the case may be) per Camphor common share, option, or warrant.
Offering documents and the Camphor Directors’ Circular were mailed to Camphor
shareholders on February 23, 2007, and the offer remained open until March 30,
2007, following which Mountain Province took up the Camphor shares tendered into
the offer increasing the Company’s interest in Camphor to over 90 percent. The
offer was subsequently extended until April 16, 2007, following which the
Company’s interest in Camphor increased to 96% percent on a fully diluted basis.
On April 19, 2007, the Company issued a Notice of Compulsory Acquisition to
acquire the balance of the outstanding shares of Camphor.  The Notice
expired June 19, 2007 and the Company took up the balance of the Camphor
shares.  Camphor Ventures has been de-listed and is now a wholly owned
subsidiary of Mountain Province.




B.
            Business
      overview.




1.1    
Introduction




The
Company is a natural resource property exploration and development company. The
Company has interests in several natural resource properties, the most
significant and principal property being a 49% interest (including the 4.9%
interest of Camphor) in the AK Property located in the Northwest Territories.
See "Item 4D - Property, plants and equipment".




The
Company, as yet, does not have any commercially viable resource properties.
Permitting, bulk sampling and drilling continues on the AK
Property.




1.2    
Historical Corporate Development




AK-CJ
Properties




In August
1992, the Company acquired a 100% interest in the AK-CJ Properties that
encompassed approximately 520,000 acres. Pursuant to an agreement dated November
18, 1993 (as amended), the Company optioned 40% of its interest in the AK-CJ
Claims to 444965, a subsidiary of Glenmore.




Pursuant
to an agreement dated August 16, 1994 (as amended), the Company also optioned
10% of its interest in the AK-CJ Claims to Camphor. Following the merger of the
Company with 444965, the Company held a 90% interest in the AK-CJ Claims, and
Camphor, the remaining 10%. Exploration work in the form of soil sampling,
aerial geophysical surveys and geochemical and geophysical analysis were
undertaken on these properties during the period from 1992 to 1995.







11







During
fiscal 1995, the Company focused the majority of its attention on the AK
Property. In February 1995, a diamondiferous kimberlite was discovered (the
"5034" kimberlite pipe) and a program of delineation drilling was undertaken.
Activity during this period on the Company's other properties was minimal
because of the focus on the AK Property.




During
1996, the Company completed a 104-tonne mini-bulk sample from the 5034
kimberlite pipe. The results indicated an average grade of 2.48 carats per
tonne. During 1997, the Company concluded a joint venture agreement (the "Letter
Agreement") with Monopros, a wholly-owned subsidiary of De Beers now known as De
Beers Canada Inc., Camphor Ventures Inc., and other parties, and further amended
it (as the Gahcho Kué Joint Venture Agreement) in 2002, to develop the AK-CJ
Properties. The Letter Agreement granted De Beers the sole and exclusive right
and option to acquire a 51% ownership interest in the Property in consideration
of incurring certain expenditures.




During
the 1997 exploration season, De Beers Canada discovered three new kimberlite
pipes on the AK property: Tesla, Tuzo and Hearne. All are
diamondiferous.




During
the spring of 1998, De Beers Canada conducted mini-bulk sampling on the three
new pipes as well as the 5034 kimberlite pipe, the original pipe discovery on
the AK Property. The results were positive enough for De Beers to commit to a
major bulk sample in 1999.




During
1999, De Beers Canada completed a major bulk sample of the four major pipes. For
the 5034 kimberlite pipe, a total of 1044 carats were recovered from 609 tonnes
of kimberlite. For the Hearne pipe, a total of 856 carats were recovered from
469 tonnes of kimberlite. For the Tuzo pipe, a total of 533 carats were
recovered from 523 tonnes of kimberlite. For the Tesla pipe, 64 carats were
recovered from 184 tonnes of kimberlite. The Tesla pipe was too low grade to be
considered as part of a mine plan.




On March
8, 2000, the Company agreed to extend the feasibility study decision date, and
De Beers Canada agreed to carry all exploration, development and other project
costs.




On August
4, 2000, De Beers Canada presented the desktop study to the Company. Upon
presentation, De Beers Canada was deemed to earn a 51% interest in the AK-CJ
Properties. Consequently, the Company was left with a 44.1% interest and Camphor
with a 4.9% interest in the AK-CJ Properties. The main conclusion of the desktop
study was that only a 15 percent increase in diamond revenues was needed for De
Beers Canada to proceed to the feasibility stage.




On May 4,
2001, De Beers Canada completed the bulk sample program of the Hearne and 5034
pipes. A total of approximately 307 tonnes and 550 tonnes of kimberlite were
recovered from the Hearne and 5034 pipes respectively. The modeled values of the
diamonds recovered from the Hearne and 5034 pipes were reported on December 18,
2001 and the results were encouraging enough for De Beers to commit to another
bulk sample during the winter of 2002. The main purpose was to recover more high
quality, top color diamonds, like the 9.9-carat diamond recovered in the 2001
program.




The CJ
Property claims substantially lapsed in November 2001 and the remaining CJ
Property claims lapsed on August 17, 2002.




During
2002, the Company concluded a new joint venture agreement (the “Gahcho Kué Joint
Venture Agreement”) among Mountain Province Diamonds Inc., Camphor Ventures
Inc., and De Beers Canada Exploration Inc. (now De Beers Canada
Inc.).  This agreement provides that De Beers Canada could earn up to
a 55% interest in the project by funding and completing a positive definitive
feasibility study. The agreement also provides that De Beers Canada could earn
up to a 60% interest in the project by funding development and construction of a
commercial-scale mine.







12







The
winter 2002 bulk sample program of the 5034 and Hearne pipes was completed on
April 20, 2002. The modeled grades and values per carat for both pipes were used
to update the desktop study. De Beers Canada's 2003 updated desktop study showed
that, due to the decrease in diamond prices since September 11, 2001 and a lower
U.S. dollar against the Canadian dollar, the projected return on the project
would be slightly less than that obtained previously. As a result of the
indicated Internal Rate of Return, well below the agreed hurdle rate of 15%, De
Beers decided to postpone a pre-feasibility decision until the next year when
the desktop study would be updated again.




At the
end of July 2003, De Beers notified the Company that they had started work on a
detailed cost estimate of a pre-feasibility study of the Kennady Lake diamond
deposits. They based their decision on the improving geo-political and economic
conditions which supported confidence in longer-term diamond price projections.
In November 2003, the Joint Venture Management Committee approved a budget of
approximately $25 million for a pre-feasibility study which started in January
2004.




The
pre-feasibility study was completed in mid-2005. The projected profitability
levels were sufficiently encouraging to support the Joint Venture’s decision to
proceed to the next phase of permitting and advanced exploration to improve the
resource confidence and input data for mine design to support a definitive
feasibility study. On July 11, 2005, De Beers reported an increase in the
modeled value of the diamonds for the Gahcho Kué Project with the modeled values
increasing by approximately 6, 7 and 8 percent for the Tuzo, Hearne and 5034
pipes respectively.




During
2006, 2007 and the winter of 2008, advanced exploration and permitting work
continued on the AK Project.  For further particulars, reference
should be made to “Item 4D - Property, plants and equipment - Principal
Properties - Resource Properties”.




Other
Properties




As of
June 30, 2000, the Company, through the amalgamation of its wholly-owned
subsidiary, Mountain Glen, with Glenmore, acquired the principal properties of
Glenmore, namely, the Haveri and Sirkka gold properties, which are located in
Finland, and indirect interests in the Telegraph and Springtime Property located
the United States. The Sirkka, Telegraph and Springtime claims all lapsed in
2002/2003. The Company's interests in the Ketza River Property and Molanosa
Projects have also lapsed. The Company has a 50% interest (acquired pursuant to
an option/joint venture agreement with Opus Minerals Inc., now known as First
Strike Diamonds Inc. on July 13, 1998) in claims held by Opus Minerals Inc. in
the northern end of the Baffin Island. The property values for these claims have
been written off and the Baffin Island property is no longer of interest to the
Company. The Company also acquired a group of seven claims in northeastern
Manitoba on March 20, 2001. Five of the seven claims lapsed in 2003, and the
remaining two, in 2004. The Company does not regard the properties, other than
the AK Property, as material, and they are only briefly discussed in this annual
report. The Haveri property was joint-ventured with Northern Lion Gold Corp.
(formerly known as Vision Gate Ventures Limited) and in October 2004, the
Company's remaining 30% interest in the Haveri property was exchanged with
Northern Lion Gold Corp. for 4,000,000 of the latter's common shares. For
further particulars, reference should be made to “Item 4D - Property, plants and
equipment - Other Properties”.




Acquisition
of Camphor Ventures Inc.




On July
5, 2006 the Company announced that it had entered into an agreement with certain
Camphor shareholders to acquire approximately 33.5 percent of the issued and
outstanding shares of Camphor through a private agreement exempt share exchange
on the basis of 0.3975 Mountain Province shares for each Camphor share. The
acquisition was completed on July 24, 2006.




On
January 19, 2007, the Company announced that Camphor had accepted an offer
letter from the Company in terms of which Mountain Province offered, subject to
certain conditions, to acquire all of the outstanding securities of Camphor on
the basis of 0.41 Mountain Province common shares, options or warrants (as the
case may be) per Camphor common share, option, or warrant. Offering documents
and the Camphor Directors’ Circular were mailed to Camphor shareholders on
February 23, 2007, and the offer remained open until March 30, 2007, following
which Mountain Province took up the Camphor shares tendered into the offer
increasing the Company’s interest in Camphor to over 90 percent. The offer was
subsequently extended until April 16, 2007, following which the Company’s
interest in Camphor increased to 96% percent on a fully diluted basis. On April
19, 2007, the Company issued a Notice of Compulsory Acquisition to acquire the
balance of the outstanding shares of Camphor.  The Notice expired June
19, 2007, and the Company took up the rest of the shares.  Camphor
Ventures has been de-listed and is now a wholly owned subsidiary of Mountain
Province.







13







Foreign
Assets




Until the
Arrangement with Glenmore Highlands Inc., with the exception of the Maris
Project (which has been dropped because the claims have lapsed), all of the
Company's assets were located in Canada (see Item 4D - Property, plants and
equipment - Principal Properties). Since the Arrangement, the Company has not
generated any revenue from operations. Pursuant to the Arrangement, the assets
of Glenmore, including properties in Finland, were acquired by Mountain Glen,
and are now held by the Company, pursuant to the winding up of Mountain Glen's
affairs. The Haveri Gold Property in Finland has now been transferred to
Northern Lion Gold Corp..  See “Item 4A - History and development of
the Company - Acquisitions and Dispositions”.




Competition




Competition
exists from other mining exploration and development companies in respect of the
acquisition of new natural resource properties. Many of the mining companies
with which the Company competes have operations and financial strength many
times that of the Company. Competition could adversely affect the Company's
ability to acquire suitable properties or prospects for exploration in the
future.




The
Company may be bound to sell its diamonds from the AK-CJ Properties to The
Diamond Trading Co., pursuant to the terms of the Gahcho Kué Joint Venture
Agreement (see “Item 4B - Business Overview - Description of Business - Historic
Corporate Development”). The Diamond Trading Company in turn sells its rough
diamonds to their customers.




On
October 17, 2007, the Company entered into an agreement with the Government of
the Northwest Territories pursuant to which it agreed to make available 10% of
its share of the diamonds from the Gahcho Kué Project to the Northwest
Territories diamond cutting and polishing facilities.




Government
Regulation




The
current and anticipated future operations of the Company, including development
activities and commencement of production on its properties, require permits
from various federal, territorial and local governmental authorities and such
operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines related facilities generally experience increased costs,
and delays in production and other schedules as a result of the need to comply
with applicable laws, regulations and permits. The Company's exploration
activities and its potential mining and processing operations in Canada are
subject to various laws governing land use, the protection of the environment,
prospecting, development, production, exports, taxes, labour standards,
occupational health, waste disposal, toxic substances, mine safety and other
matters.




In most
jurisdictions, mining is regulated by conservation laws and regulations. In the
Northwest Territories, the mining industry operates primarily under Canadian
federal law because the ownership of water, fisheries, and surface and
sub-surface rights to land are vested in the federal government. Accordingly,
federal legislation governs prospecting, development, production, environmental
protection, exports, and collective bargaining. Matters of a purely local or
territorial nature, such as mine safety standards, the establishment of a
minimum wage, education and local health services are matters for the
Territorial government. With respect to environmental matters, the Company's
properties are subject to federal regulation under, inter alia,the Canadian Environmental Protection
Act, the Fisheries
Act, the Northwest
Territories Waters Act, the Arctic Waters Pollution Prevention
Act, the Navigable
Waters Protection Act, the Mackenzie Valley Resource Management
Actand the Mackenzie
Valley Land Use Regulations. Territorial environmental legislation may
also apply for some purposes. The Mackenzie Valley Land and Water Board
established under the federal Mackenzie Valley Resource Management
Act has the responsibility to receive and to process applications for
water licenses under the Northwest Territories Waters
Act in most areas of the Northwest Territories. These licenses outline
the volume of water the mine may use, how tailings will be treated, the quality
and types of waste that my be deposited into the receiving environment and how
the quality and types of waste may be monitored and contain requirements
regarding the restoration of the tailings disposal and other affected areas. The
Mackenzie Valley Land and Water Board also issues land use permits applicable to
most areas of the Northwest Territories under the Mackenzie Valley Land Use
Regulations. Such permits govern the manner in which various development
activities on federal Crown and other lands may be undertaken. Applicable
territorial legislation and regulations include the Apprentice and Trade Certification
Regulations, Boilers
and Pressure Vessels Regulations, Business Licence Fire Regulations, Civil
Emergency Measures Act, Environmental Protection Act, Environmental Rights Act,
Explosives Use Act, Explosives Regulations, Fire Prevention Act, Fire Prevention
Regulations, Labour Standards Act, Mine Health and Safety Act, Mine Health and
Safety Regulations, Public Health Act, Wildlife Actand Workers Compensation
Act.







14







The Fisheries Act, Northwest Territories
Waters Act, Territorial Lands Act, Mackenzie Valley Land Use Regulations,
Transportation of Dangerous
Goods Act,and the Canada Mining Regulations are
federal legislation or regulations. Failure to comply with territorial and/or
federal legislation or regulations may result in cease work orders and/or
fines.




The
Company's operations and exploration activities are also subject to substantial
regulation under these laws by governmental agencies. The Company believes it is
in substantial compliance with all material laws and regulations which currently
apply to its activities. There can be no assurance, however, that all permits
which the Company may require for construction of mining facilities and conduct
of mining operations will be obtainable on reasonable terms or that such laws
and regulations, or that new legislation or modifications to existing
legislation, would not have an adverse effect on any exploration or mining
project which the Company might undertake.




Portions
of the Northwest Territories will also be subject to the jurisdiction of the Tli
Cho Government, a First Nations government which will have certain powers of
regulation in respect of "Tli Cho Lands" under the "Tli Cho Agreement", a land
claim agreement entered into between the Tli Cho First Nation and the federal
and territorial governments.




Failure
to comply with applicable laws, regulations and permitting requirements may
result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions. Parties engaged in mining operations
may be required to compensate those suffering loss or damage by reason of the
mining activities and may have civil or criminal fines or penalties imposed for
violation of applicable laws or regulations.




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




C.
            Organizational
      structure.




See “Item
4A - History and development of the Company - The Corporate
Organization”.




D.
            Property,
      plants and equipment.




Principal
Properties




In
this section on "Principal Properties", the reader should note that where
disclosures pertaining to mineral resources are made, these are not mineral
reserves and do not have demonstrated economic viability. The Company has only
one principal property, the AK Property also known as the Gahcho Kué project,
which is located in the Canada’s Northwest Territories, which is in the
permitting and advanced exploration stage, and there are no reserve estimates at
this time. All other estimates have been made by De Beers and De Beers
Canada.







15







A
"mineral resource" as defined under the Canadian Institute of Mining and
Metallurgy Guidelines (the "CIM Guidelines"), which are different from the SEC
guidelines (the "SEC Guidelines") set forth in Guide 7 under Item 802 of
Regulation S-K, means 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. See "Glossary of Technical Terms" in
this Report.




In this
Annual Report, because the Company is a Canadian company with mining properties
in Canada, the definitions and disclosures are made in accordance with the
Canadian Standards as required by Canadian law for disclosure of material
facts.




It should
be noted that the SEC Guidelines define "reserve" to mean "that part of a
mineral deposit which could be economically and legally extracted or produced at
the time of the reserve determination". No such reserves, as defined in the SEC
Guidelines or as defined in the CIM Guidelines, have been determined to exist at
the present time.




Unless
otherwise stated, the technical information in this section is based upon
Independent Qualified Person's Review and Technical Report dated as of June 16,
2003 (the "Technical Report") entitled "Gahcho Kué, Northwest
Territories, Canada" prepared for the Company by Malcolm L. Thurston,
Ph.D., M.Ausimm, which Technical Report is incorporated herewith by reference.
The Technical Report has been filed with the Securities Exchange Commission in
the United States and filed with the relevant Securities Commissions in Canada
on SEDAR.  Portions of the following information are based on
assumptions, qualifications and procedures which are not fully described
herein.  Reference should be made to the full text of the Technical
Report.




Description
of Property




Administrative
Offices




The
Company's administrative office is located at 401 Bay Street, Suite 2700, PO Box
152, Toronto, Ontario, Canada M5H 2Y4. The Company considers these premises
suitable for current needs.




Mineral Properties




Of the
Company’s properties, the AK Property or Gahcho Kué project is currently under
the most intense development because of the discovery of the Kennady Lake
Kimberlite Field and is considered to be the Company's only principal property.
The summary of the Gahcho Kué project, provided below, is from Malcolm L.
Thurston’s 2003 Technical Report. Disclosure of more recent work on the project
follows after the summary.




Mountain
Province Diamonds Inc. (“MPV”) engaged AMEC E&C Services Ltd. (“AMEC”) to
provide an independent Qualified Persons’ review of the 2003 Mineral Resource
estimate and Preliminary Assessment of the Gahcho Kué project, as reported by
MPV in the news release dated 15 April 2003. Located in the Northwest
Territories of Canada, Gahcho Kué is a joint venture of De Beers Canada
Exploration Inc. (“DBCEI” - formerly Monopros Ltd.), the wholly owned
exploration arm of De Beers Consolidated Mines Limited (“De Beers”), Mountain
Province Diamonds Inc., and Camphor Ventures Inc.. The work entailed the
preparation of a Technical Report as defined in National Instrument 43-101,
Standards of Disclosure for
Mineral Projects, and in compliance with Form 43-101F1 (the “Technical
Reports”). Dr. Malcolm Thurston, an employee of AMEC, served as the Qualified
Person responsible for preparing this Technical Report. Dr. Thurston visited the
project site between 10 and 16 February 1999.





16








The
Gahcho Kué project consists of four main diamondiferous kimberlite pipes: 5034,
Hearne, Tuzo, and Tesla. Only the first three pipes contain sufficient diamond
content to allow the estimation of mineral resources. The project is located at
Kennady Lake, approximately 300 km east-northeast of Yellowknife in the District
of Mackenzie, Northwest Territories, Canada. The property is 150 km
south-southeast of the main Dia Met Minerals Ltd. and BHP Diamonds Inc.
discoveries at Lac de Gras and 80 km east-southeast of the Snap Lake deposit.
The Gahcho Kué project falls within the AK group (AK Property) of 21­-year
mining leases and mineral claims. The total area under tenure is 30,528 ha
(74,128 acres). Except for the northernmost part of 5034, the main kimberlite
pipes lie beneath Kennady Lake.





Acquisition
- Joint Venture Agreement





Interest
in the Gahcho Kué project is governed by the updated and expanded JV Agreement
signed October 24, 2002 where DBCEI agreed to fund all ongoing exploration,
development and other project costs, and would earn a 51% interest upon
completion of a desktop study.  On August 4, 2000, the initial desktop
study was presented to MPV, and DBCEI was deemed to earn a 51% interest in the
project.  Consequently, MPV was left with a 44.1% interest and Camphor
Ventures Inc. with a 4.9% interest.





Regional
Geological Setting





The
Gahcho Kué project kimberlite cluster occurs in the southeast Slave Craton, a
small Archean nucleus within the North American Craton. Granite is the dominant
lithology in the region. The project area is interpreted as being characterized
by a granite-gneiss terrain intruded by a series of dykes. Along the eastern
edge of the area, a clear geological boundary is interpreted to represent
contact with meta-sediments that extend eastwards. The central portion is a
structurally complex zone of folding and possible shears. The 5034, Hearne,
Tuzo, and Tesla kimberlites all occur at the eastern edge of an interpreted
south-closing fold-nose that has developed a radial fold-nose cleavage. The
apparent south-closing fold is interpreted to open to the north-northeast; the
dip direction is not known. The core of the fold is composed of granite and
minor granodiorite. Northeast-trending axial-planar foliation associated with
the fold is developed in gneiss.





Detailed
Geological Setting





The
Gahcho Kué kimberlite pipes are characterized by contrasting external pipe
shapes and infill. The external shapes and internal geology of each body were
modelled in three dimensions using commercial mine planning software (Gemcom).
The variations in textures within the Gahcho Kué kimberlite pipe infills are
important and thus are used to describe the rocks. The different textures result
from different processes during the emplacement of the kimberlite magmas. The
contrasting physical properties of the rocks correlate with the different
textures and are reflected in various aspects of the project, ranging from DMS
concentrates weights to clay content to country rock dilution. It is important
to note that the textures can vary both within a single phase of kimberlite as
well as between different phases of kimberlite.





Two
textural end members dominate the pipe infills: hypabyssal kimberlite (HK) and
tuffisitic kimberlite breccia (TKB). Each of the pipes also contains a
significant amount of kimberlite displaying textures that are gradational
between the end members. The textural gradation has been subdivided into four
types: TKB, TKtB, HKt, and HK (t = transitional). The kimberlites grade from TKB
to HK with increasing depth, within single phases of kimberlite.





The three
main pipes at Gahcho Kué, 5034, Hearne and Tuzo, have contrasting pipe shapes.
Tuzo has a circular plan view shape and a surface area of about 1.4 ha. The body
is characterized by smooth, steep-sided pipe walls and is dominantly infilled
with tuffisitic kimberlite breccia. Hearne consists of two bodies. Hearne South
is a roughly circular pipe and is smaller than Hearne North, which is a narrow
elongate pipe. The total surface area for the two bodies is about 1.5 ha. Both
pipes have steep, smooth sidewalls. Hearne South is dominantly infilled with TKB
and Hearne North with approximately equal amounts of hypabyssal kimberlite (HK)
and TKB. The 5034 kimberlite has a very complex plan view shape and sub-surface
structure with irregular pipe walls. Three lobes are exposed at the present
surface, and the fourth, northern lobe is overlain by approximately 80 m of in
situ country rock. The total surface area of 5034 is about 1.95 ha. The 5034
pipe is dominantly infilled with HK.





17








The
composite geological model of the Gahcho Kué kimberlite pipes, as well as the
shape and infill of the individual kimberlite pipes, is similar to that of the
kimberlites in the Kimberley area of South Africa, but extremely different from
many other Canadian kimberlites such as those found at Fort à la Corne,
Attawapiskat, and Lac de Gras. The Gahcho Kué pipes are considered to be
root-to-diatreme transition zones and therefore must have undergone significant
erosion.





Drilling
at Gahcho Kué served two purposes: kimberlite delineation and bulk sampling.
Delineation work consisted of core drilling, generally NQ to HQ size, whereas
bulk sampling was conducted by large-diameter reverse circulation
drilling.





Work
History





Since
1997, a total of 24 core holes have been drilled to delineate the Hearne
kimberlite: 17 in Hearne North, six in Hearne South, and one that intersected
both pipes. Two of these holes did not intersect kimberlite. In 1998, 19 reverse
circulation (RC) test holes (140 mm diameter) were drilled into Hearne to
collect a mini-bulk sample. Of these, 16 were located in Hearne North, one in
Hearne South, and two holes intersected only granite. In 1999, another eight
large-diameter (311 mm) holes were drilled into Hearne North and two into Hearne
South. In 2001, three large-diameter (610 mm) holes were drilled into the
northern half of Hearne North, and five more 610 mm holes tested Hearne North in
2002.





In 1995
and 1996, Canamera Geological Ltd. drilled 69 core holes and 43 PQ holes into
5034. A further 11 core holes and 17 RC holes were drilled by DBCEI between 1997
and 2002. Bulk sampling, using large diameter drilling, was carried out by DBCEI
between 1998 and 2002. In 1998, seventeen holes (140 mm diameter) were drilled.
Pipe coverage for these holes was good over the Centre Lobe only. In 1999,
another thirteen holes (311 mm diameter) were drilled to a maximum depth of 300
m. These holes were drilled in a narrow corridor over the main part of the pipe.
In 2001, three large-diameter holes (610 mm) were drilled in the East Lobe and
one in the west neck of the Centre Lobe. In 2002, another six large-diameter
holes were drilled located very close to 1999 holes.





Eight
core holes were drilled between 1997 and 1999 at Tuzo. All of these were angled
holes that were collared outside the kimberlite body. In 2002, seven vertical
core holes were drilled into the pipe. Bulk sampling drilling took place in 1998
and 1999. Seventeen RC holes were drilled in 1998 to a maximum depth of 166 m
and 11 large-diameter holes were drilled in 1999 to a maximum depth of 300 m.
Since 1999, holes were surveyed by geophysical methods (calliper, magnetic
susceptibility, and natural gamma). Confirmatory surveys of selected core and
large-diameter drill holes of select boreholes were done by “Wellnav” gyroscopic
surveying in 2002.





Diamond
deposit grade and value are evaluated by their microdiamond and macrodiamond
data. Microdiamond samples are collected from core drilling. Macrodiamond data
are recovered from bulk samples from large-diameter drilling (LDD). The
macrodiamond data are more critical. Key quality assurance and control steps
implemented during the LDD work (1999, 2001, and 2002) consisted of caliper
surveyed drill holes (for volume determination), geological reference samples
taken at 1 m intervals, head feed granulometry samples collected and processed
on site, underflow samples collected at regular intervals, and LDDH locations
preceded by NQ core holes (2002 program only). A reverse-flood, airlift-assist
drilling method employing nominal 610 mm diameter tricones was used in the 2001
and 2002 bulk sampling evaluation programs. This process greatly reduced diamond
breakage during sample recovery in the LDD programs.





In
creating the resource model, diamond drilling is used to outline the 3-D shape
of the kimberlites, and large-diameter drilling (LDD) is used to assess grade.
Where insufficient or no LDD has been carried out, the grade is estimated
globally by rock type using microdiamond results from diamond drilling. Grade is
estimated in carats per cubic metre (ct/m3) and
then converted to cpht by applying a density value. For the West, Centre, and
East lobes of 5034, local block estimates were created within the 3-D block
model using the results of the LDD. A single estimate, based on microdiamond
sampling, was made for the North Lobe, North Pipe, and South Pipe.
Large-diameter drilling was used at Hearne. For Tuzo, an average grade per rock
type was created using the results from microdiamond sampling. The diamond size
distribution is obtained by modelling the micro and macrodiamonds from the
pipes. This approach for resource estimation is consistent with accepted
industry practice and is appropriate for the purposes of declaring a resource
and reserve at Gahcho Kué.








18





Resource
Estimate





The
mineral resource at Gahcho Kué is classified according to the CIM definitions
referred to in National Instrument 43-101 and conforms to the guidelines for
“Reporting of Diamond Exploration Results, Identified Mineral Resources and Ore
Reserves,” published by the Association of Professional Engineers, Geologists
and Geophysicists of the Northwest Territories (NAPEGG). In classifying the
resource, qualitative levels of confidence in volume estimation, sample quality,
sample representivity, and estimation technique were considered.





The
mineralization of the Gahcho Kué project as of March 2003 is classified as
Indicated and Inferred mineral resources. The resources are shown by pipe in
Table 1-1. The Gahcho Kué resources are summarized to an elevation of 110 masl.
The resource grades are based on a 1.5 mm bottom cutoff.








19







GAHCHO
KUÉ PROJECT LOCATION MAP (2007)










In August
2002, De Beers took 30 of the AK claims to lease. These claims contain all the
kimberlite discoveries at and in Kennady Lake, MZ Lake and in the Kelvin-Faraday
area.  In 2005, the Joint Venture decided to retain four leases for
the development of the Gahcho Kué Project; the Company decided to retain five
leases for future exploration; and 21 leases were transferred to GGL Diamond
Corp. in exchange for a 1.5 percent royalty.  The four leases retained
for the development of the Gahcho Kué Project are lease numbers 4341, 4199,
4200, and 4201.  These represent, respectively, claim numbers AK 89,
AK 90, AK 91, and AK 92.  These four claims represent about 10,295
acres.







20







Gahcho
Kué Project and Mountain Province Diamonds Claims









Mountain
Province (outside of the Joint Venture with De Beers) has the following five
claims with their respective claim numbers - AK 81, AK 84, AK 85, AK 86 and AK
93.  These five claims represent about 12,555 acres.





21












MAP
- LOCATION OF PIPES









At the
end of July 2003, De Beers notified the Company that they had started work on a
detailed cost estimate of a pre-feasibility study of the Kennady Lake diamond
deposits. They based their decision on the improving geo-political and economic
conditions which supported confidence in longer-term diamond price projections.
In November 2003, the De Beers board approved a budget of approximately $25
million for a pre-feasibility study which started in January 2004.




The
pre-feasibility study was completed in mid-2005. The projected profitability
levels were sufficiently encouraging to support the Joint Venture’s decision to
proceed to the next phase of permitting and advanced exploration to improve the
resource confidence and input data for mine design to support a definitive
feasibility study.







22







The
Company has issued press releases commenting upon recent results and activities
at the Gahcho Kué project.  Such disclosure has been prepared under
the supervision of Carl G. Verley, P.Geo. who serves as the Qualified Person in
relation to such disclosure.




As
originally reported by the Company in a news release dated November 16, 2005
titled “Mountain Province Diamonds Inc. Appoints New President and CEO”, De
Beers Canada, operator of the Gahcho Kué Project, has provided the following
summary of the Gahcho Kué Project:





Cautionary Note to U.S. Investors
concerning estimates ofIndicated and Inferred Resources.This section uses the terms "indicated" and "inferred resources." We
advise U.S. investors that while those terms are recognized and required by
Canadian regulations, the U.S. Securities and Exchange Commission does not
recognize them. "Inferred resources" have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an Inferred Mineral
Resource will ever be upgraded to a higher category. Under Canadian rules,
estimates of Inferred Mineral Resources may not form the basis of feasibility or
pre-feasibility studies, except in. rare cases.





U.S.
investors are cautioned not to assume that any part or all of mineral deposits
in these categories will ever be converted into reserves.





U.S.
investors are cautioned not to assume that part or all of an inferred resource
exists, or is economically or legally minable.




Table
1-1 (updated) - 2005 GAHCHO KUÉ RESOURCE STATEMENT




Pipe
              Resource
            Category
            Tonnes
            Carats
            Grade
              (cpht)(1)5034
            Indicated
              Inferred
            8,715,000
              4,921,000
            13,943,000
              8,366,000
            160
              170Hearne
            Indicated
              Inferred
            5,678,000
              1,546,000
            9,676,000
              2,373,000
            170
              153Tuzo
            Inferred
            10,550,000
            12,152,000
            115Summary
            Indicated
              Inferred
            14,392,000
              17,017,000
            23,619,000
              22,890,000
            164
              135


(1)Resource cutoff is 1.5 mm




On July
25, 2005, the Joint Venture announced that De Beers had approved a budget of
$38.5 million for the environmental assessment and permitting process and for an
advanced exploration program.




2006
Advanced Exploration Program - Bulk Sampling at Tuzo and 5034 North Lobe; Core
Drilling at Tuzo




On
January 12, 2006, the Company announced details of the advanced exploration
program at the Gahcho Kué project which commenced in February 2006 and was
completed by May 2006. Inadequacies on the part of the casing drill contractor
resulted in the failure of the 2006 bulk sampling programs at Tuzo and the 5034
North Lobe. The 2006 core drilling program was successful and laid the
groundwork for an extended core drilling program at Tuzo during the summer of
2006.  The 2006 core drilling program confirmed the presence of
flaring of the Tuzo kimberlite to depth. The program also confirmed the presence
of kimberlite between the 5034 South Lobe and the Wallace Anomaly and also
between the 5034 South Lobe and the 5034 West Lobe.




2006
Independent Diamond Valuation




Mountain
Province contracted WWW International Diamond Consultants to perform an
independent analysis of the bulk sample diamonds. The WWW report, which was
prepared in June 2006, indicated an average price of US$83 per carat for the
entire parcel. Mountain Province continues to use this WWW valuation of the
diamonds as the valuation of the Gahcho Kué diamonds. Although Mountain Province
has not updated its valuation of the Gahcho Kué diamonds since June 2006, it has
been noted by independent analysts that average rough diamond prices increased
by 25% during 2007 and by a further 11% during the first five months of
2008.







23







2007
Advance Exploration Program - Tuzo Core Drilling, Review of 2005 Pre-feasibility
Study, Advancement of Permitting




On
December 19, 2006, the Company announced the details of a $30.8 million 2007
work program designed to conduct extensive core drilling over the Tuzo
kimberlite pipe; complete a review of the 2005 pre-feasibility study; and
advance the permitting for the Gahcho Kué Project.




The Joint
Venture undertook an extensive core drilling program at the Tuzo kimberlite over
the winter of 2006/2007 as part of the $30.8 million 2007 budget for the Gahcho
Kué Project.  The Tuzo core drilling program, which comprised 26 drill
holes over 8,576 meters broadly covering a 35 meter grid pattern over the Tuzo
kimberlite pipe, was designed to more fully define the volume, geology,
dilution, density and grade of the Tuzo pipe and also to upgrade the Tuzo
resource.  Twenty core holes were drilled to 300 meter depths and six
holes were drilled to 400 meter depths. The results from the core drilling
program are expected to be adequate to upgrade the Tuzo geological model during
2008.





The 2007
Tuzo winter core drilling program was completed in mid-April 2007, and was
considered to be successful.  Preliminary results of the drill program
indicate substantial flaring to depth of the Tuzo kimberlite. In addition, four
of six deep (400 meter) drill holes terminated in kimberlite confirming
substantial flaring and continuity of the Tuzo kimberlite to depth.





In
addition, a five-hole core drilling program between the North and East lobes of
the 5034 kimberlite was also completed successfully confirming the continuity of
the kimberlite between the two lobes. According to De Beers Canada, confirmation
of the kimberlite continuity provides sufficient confidence to be able to
extrapolate the diamond revenue modeling from the 5034 East Lobe, which is in
the indicated mineral resource category, to the North Lobe with a much reduced
diamond parcel from the North Lobe.





2007
Summer Bulk Sampling Program of 5034 North Lobe





On June
1, 2007, the Company announced details of an $8.0 million 2007 summer bulk
sampling program, approved by the Joint Venture in May 2007. Under this program,
a land-based large diameter (5.75 inches) core drilling program at the 5034
North Lobe was undertaken.  This program was to be used to extract
approximately 100 carats to confirm micro to macro relationships being used to
evaluate the 5034 North Lobe.  Indications were that five large
diameter core holes over 1,500 meters would be sufficient to recover the
approximate 60 tonnes required for recovery of the 100 carat
sample.  In addition, geochemical analysis and thin section work was
to be completed on the five holes drilled into the East Lobe during the 2007
winter core drill program.  This analysis would be used to confirm
continuity between the two lobes. Confirmation of the kimberlite continuity
allowed the extrapolation of diamond revenue data from the 5034 East Lobe to the
North Lobe.  The results of the above work were to be used with
existing data to raise the resource confidence of the North Lobe from Inferred
to Indicated.





On
November 6, 2007, the Company announced, by way of a news release titled
“Mountain Province Diamonds provides Gahcho Kué Diamond Project Update”, that
the 2007 large diameter core drilling at the 5034 North Lobe concluded at the
end of October 2007.  Five of the originally planned six large
diameter core holes were completed, recovering approximately 33 tonnes of
kimberlite. Despite the smaller than expected recovery of kimberlite, the
project operator believes that sufficient diamonds were recovered to enable
revenue modeling of the 5034 North Lobe to be completed to support the upgrade
of the 5034 North Lobe to the “indicated mineral resource”
category.








24





Based on
the results of the 2007 core drilling program, announced by the Company on
November 6, 2007, the project operator has provided the following kimberlite
volume update for the Gahcho Kué Project:





Kimberlite
            2005
              Volume
              Estimate
              (‘000’s
      cubic meters)
            2007
              Volume
              Estimate
              (‘000’s
      cubic meters)
            Difference5034
              Indicated
              Inferred
            3,301
              1,934
            3,183
              2,192
            -4%
              +13%Hearne
              Indicated
              Inferred
            2,262
              594
            2,262
              594
            -
              -Tuzo
              Inferred
            4,337
            5,080
            +17%





•
            Reported
      above 121 masl


•
            Excludes
      5034 kimberlite south-west corridor





2008
Tuzo Large-Diameter Drilling Bulk Sampling Program





On
December 17, 2007, the Company announced that the 2008 Tuzo large-diameter
drilling bulk sampling program had commenced.  The program used two
24-inch drill rigs, and was to drill a total of nine large-diameter holes to
recover a diamond parcel of approximately 1,500 carats.  Seven of the
holes were to be drilled to depths of approximately 100 meters and the remaining
two holes to depths of approximately 300 meters.  The drilling
commenced in late January 2008 and was expected to be completed within 60
days.





On March
19, 2008, the Company announced that the 2008 Tuzo large-diameter drilling bulk
sampling program concluded successfully ahead of schedule, and that a total of
nine holes had been drilled, with four holes to depths of approximately 100
meters, three holes to depths of approximately 125 meters, and two holes to
depths of approximately 300 meters.  The Company also announced that
the processing of the drill core at De Beers’ Grand Prairie facility commenced
on February 23, 2008 and was expected to be completed by May 2008, at which
point the concentrated kimberlite will then be processed to recover macro
diamonds which, with the approximate 600 carats recovered from the prior year’s
exploration, should provide a sufficiently large sample of approximately 2,000
carats to enable the Joint Venture to do accurate diamond revenue modelling for
the Tuzo kimberlite.





Geology
and Resource Models of Tuzo, 5034, and Hearne Kimberlites





While the
Company announced on December 17, 2007 that De Beers Canada, the Gahcho Kué
Project operator, had advised that the geology and resource models for Tuzo,
5034 and Hearne kimberlites would be released early in the second quarter of
2008, the Company announced on May 13, 2008 that the project operator had
advised the Joint Venture that work on the updated geological and resource
models is ongoing, and when the work is complete, it will be considered
“interim” and will not be compliant with National Instrument 43-101 (“NI
43-101”), and thus in a form which will permit public disclosure to the
Company’s shareholders.  Once the updated geological and resource
models are available, the Company will consult with Mr. Carl Verley (the
Company’s qualified person under NI 43-101 and the Ontario Securities Commission
to establish what further work is required in order for the results of these
updates to be made available to the Company’s shareholders.








25





On May
13, 2008, the Company announced that the project operator, De Beers, had advised
that the concentration of the bulk sample had been completed ahead of schedule
and that diamond recovery from the Tuzo bulk sample is taking place at De Beers’
GEMDL facility in South Africa, following which the entire Tuzo diamond parcel
will be sent to the Diamond Trading Company (DTC) in London for cleaning and
valuation.  Results from this program will be released as soon as they
are available.





Conceptual
Study Update





In
mid-2006, the project Operator, De Beers, advised the Joint Venture that it
would be conducting a review of the 2005 Study Report with a view to reducing
the projected capital and operating costs. This review is ongoing.





On
December 17, 2007, Mountain Province announced that it had been advised by De
Beers that the update of the 2006 Gahcho Kué conceptual study would be completed
by the second quarter of 2008. De Beers advised the Joint Venture in April 2008
that work on the updated study is ongoing. De Beers has also advised the Company
that the updated study to be provided by the project operator will not be
compliant with NI 43-101. Once the updated study is available, Mountain Province
will address this issue with the Company’s technical advisors, JDS Mining, and
the Ontario Securities Commission to establish what further work is required in
order for the results of the update to be made available to Mountain Province
shareholders.





Permitting





In
November 2005, De Beers Canada, as operator of the Gahcho Kué Project, applied
to the Mackenzie Valley Land and Water Board for a Land Use Permit and Water
License to undertake the development of the Gahcho Kué diamond mine. On December
22, 2005, Environment Canada referred the applications to the Mackenzie Valley
Environmental Impact Review Board (“MVEIRB”), which commenced an Environmental
Assessment ("EA"). On June 12, 2006, the MVEIRB ordered that an Environment
Impact Review (“EIR”) of the applications should be conducted.





In July
2006, De Beers Canada filed an application for a judicial review of the
referral. De Beers Canada brought the application for judicial review of the
MVEIRB decision to the Supreme Court of the NWT. On April 2, 2007, the Supreme
Court of the Northwest Territories dismissed De Beers Canada’s application and
upheld the decision by the MVEIRB.





Following
the decision of the Supreme Court of the NWT, the MVIERB has now commenced the
EIR.  The MVEIRB published draft Terms of Reference and a draft Work
Plan for the Gahcho Kué Project in June 2007, and called for comments from
interested parties by July 11, 2007.  The EIR is designed to identify
all of the key environmental issues that will be impacted by the development of
the Gahcho Kué diamond mine and to facilitate participation by key stakeholders
in addressing these issues.  The draft Work Plan anticipated that the
EIR of the Gahcho Kué Project will be completed by mid-2009, although the MVEIRB
emphasized that the dates reported are target dates only, and the schedule is
subject to change.  On June 14, 2007, the Company announced its
attendance at the first of two work plan meetings in Yellowknife on June 11,
2007, conducted by the MVEIRB, where an overview of the draft Terms of Reference
for the Environmental Impact Study and draft Work Plan for the EIR were
discussed.  The impact of the EIR on the project’s development
schedule is not yet known.





On
December 17, 2007, the Company announced that the MVEIRB published the final
terms of reference for the Gahcho Kué Environment Impact Statement (“EIS”) on
October 5, 2007.  On May 9, 2008, the project operator, De Beers,
advised the MVEIRB that the Joint Venture deferred the filing of the EIS, and
now expects to file the EIS in late fall 2008.





On May 9,
2008, the project Operator, De Beers, addressed a letter to the MVEIRB stating:
“In our letter of December, 2007, De Beers Canada Inc. anticipated that the
Environmental Impact Statement (EIS) for the Environmental Impact Review of the
Gahcho Kué Project would be filed in June 2008. Since that time the Gahcho Kué
team has been focused on preparing an EIS that meets the Terms of Reference. The
preparation of a draft EIS is nearing completion. However, the Joint Venture has
taken the decision to defer filing of the EIS at this time. To assist with
planning the Panel’s activities, we will notify the Board in advance of the
expected filing date in the late fall of 2008.”





26







Project
Costs to Date




The
following table outlines the costs to date and their source of
funding.




Period
      of Time
            Amount
      (1)January
      1, 1997 to December 31, 2005
            $     80,097,784Expenses
      January 1, 2006 to December 31, 2006
            33,409,897Expenses
      January 1, 2007 to December 31, 2007
            38,372,876Approved
      Budget January 1, 2008 to December 31, 2008
            38,081,012


1)
information provided by project operator, De Beers Canada Inc., and other
disclosures




Other
Properties




No work
has been done on the Baffin Island Joint Venture since 2001 and the property was
written off in fiscal 2004.




Pursuant
to the amalgamation of Mountain Glen and Glenmore, the Company's wholly-owned
subsidiary, Mountain Glen, acquired mineral properties in Finland. These mineral
properties were transferred to the Company when Mountain Glen wound up its
affairs.




The
Company had one non-material property in Finland, the Haveri Gold Property. An
option was granted on October 10, 2002 to Northern Lion Gold Corp. (formerly
Vision Gate Ventures Limited) for the acquisition of a 70% interest in the
Haveri Property. On October 4, 2004, the Company agreed to exchange its
remaining 30% interest in the Haveri Property for 4,000,000 shares of Northern
Lion Gold Corp.




Item
4A.            Unresolved
Staff Comments




None.




Item
5.               Operating
and Financial Review and Prospects




A.
            Operating
      results.




The
following discussion of the financial condition and operating results of the
Company should be read in conjunction with the consolidated financial statements
and related notes to the financial statements which have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP").
Discussion and analysis set forth below covers the results obtained under GAAP
in Canada. A significant difference between Canadian and U.S. GAAP exists with
respect to accounting for mineral property acquisition and exploration costs
which have been capitalized under Canadian GAAP but are required to be expensed
under U.S. GAAP when incurred until such time as commercially mineable deposits
are determined to exist within a particular property. Material measurement
differences between accounting principles generally accepted in Canada and the
United States, applicable to the Company, are described in Note 9 to the
consolidated financial statements.




Fiscal Year ended March 31,
2008 compared to Fiscal Year ended March 31, 2007





The
Company’s net income for the year ended March 31, 2008 was $165,531, compared
with a net loss of $1,961,263 or $0.04 per share, for the year ended March 31,
2007.  Before the Company’s tax recovery of $222,166, the net loss was
$56,635. The net loss for the year ended March 31, 2008 includes the Company’s
gain on sale of its 4,000,000 common shares of Northern Lion of
$1,075,400.  Without the gain on sale, the Company had a net loss for
the year (before tax recovery) of $1,132,055, or $0.02 per share.





Operating
expenses were $1,194,210 for the year ended March 31, 2008 compared to
$1,361,937 for the prior year.





Professional
fees at $202,245 for the year ended March 31, 2008 include audit and tax
preparation accruals, and legal expenses, compared to $198,628 in the prior
year.








27





In the
year ended March 31, 2008, the Company incurred Promotion and investor relations
expenses in the amount of $86,380 compared to $124,467 for March 31, 2007
yearend.  The March 31, 2007 amount includes approximately $53,000 as
retainer for the Company’s investor relations firm in 2006.  The
investor relations retainer was terminated in November 2006.





During
the year ended March 31, 2007, the Company recognized $186,321 of stock-based
compensation expense related to options granted in November 2005 and January
2006, each vesting 50% immediately, and 50% at the one-year anniversary of their
granting.  All options are exercisable and there is no stock-based
compensation for the current year.





Other
expenses have generally increased over the prior year primarily due to increased
management and oversight activities undertaken with respect to the Company's
investment in the Gahcho Kué Project, particularly during the third
quarter.




Fiscal Year ended March 31,
2007 compared to Fiscal Year ended March 31, 2006




The
Company had a loss of $ 1,961,263 (or $0.04 per share) for the fiscal year ended
March 31, 2007, compared to a loss of $2,199,888 (or $0.04 per share) for the
same period ended March 31, 2006.





$480,000
of the loss was due to the Company’s write down of its long term investment
related to Northern Lion Gold Corp. in the quarter ending December 31, 2006, and
$143,266 represents the Company’s approximately 33.8% share of the loss of
Camphor.





Operating
expenses were $1,361,937 for the year ended March 31, 2007 compared to
$1,132,061 for the same period ended March 31, 2006.





Increased
consulting fees for the year (2007 - $476,754; 2006 - $309,217) include fees
paid to Patrick Evans as President & CEO for the year of $150,000, and to
Jennifer Dawson as CFO and Corporate Secretary of $94,200, as well as fees
associated with consulting by third parties for the Gahcho Kué Project,
consulting support services, and for regulatory requirements.  The
consulting fees for the year ended March 31, 2006 included fees paid to the
former President & CEO Jan Vandersande until November 2005 ($102,100,
including $17,200 of medical benefits paid), to Patrick Evans for his part-year
service as the new President & CEO ($56,100), for recruiting for the
President position ($45,000), to Elizabeth Kirkwood, the Chair of the Board, CFO
and a director for consulting ($12,000), for other consulting support services
($11,200), and for consulting by third parties for the Gahcho Kué Project
($81,400).





The
incremental professional fees of $198,628 for the year ended March 31, 2007
compared to $166,150 for the same period of the prior year included audit and
tax fee accruals and payments of $81,700 (2006 - $74,600), legal costs for
general corporate matters and the acquisition of approximately 33.5% of common
shares of Camphor Ventures in July 2006 in the amount of about $83,700 (2006 -
$75,000), and approximately $30,000 for outsourced accounting services (2006 -
$16,550).





Also
contributing to the net loss for March 31, 2007 is stock-based compensation
expense of $186,921 (2006 - $314,879) as a result of options granted in November
2005 and January 2006 which vested during the year.





Directors’
fees and benefits of $56,101 for the year ended March 31, 2007 include
directors’ fees of $37,500, net of an overaccrual of the year ending March 31,
2006 of $12,917, related payroll costs, as well as medical and dental benefits
paid on behalf of the former President & CEO in the amount of
$23,750.  The $37,500 for the year ended March 31, 2006 was an accrual
for directors’ fees for the year.





Promotion
and investor relations expense has increased from March 31, 2006’s level of
$108,184 to $124,467 for the year ended March 31, 2007 as a result of the
retainer paid until mid-November 2006 to an investor relations firm ($53,000),
printing and mailing costs for the annual general meeting materials
(approximately $48,000), and non-recurring charges for website development and
other investor relations work for approximately $24,000.








28





Transfer
agent and regulatory fees for the year ended March 31, 2007 are greater than
those of March 31, 2006 (2007 - $190,121; 2006 - $99,794) as a result of
increased TSX ($14,100) and Amex fees ($45,000) associated with the issuance of
Company shares in exchange for Camphor shares in July 2006, as well as increased
charges for increased communications in the form of press releases ($32,723),
and generally increase filing services and fees over the prior
year.





Office
and miscellaneous expenses (2007 - $80,998; 2006 - $54,053) reflect the
increased cost of rent for premises in the amount of approximately $12,000 for
the Company’s head office starting in December 2006, increased insurance costs,
and other general increases in costs associated with increased
activity.




B.
            Liquidity and capital
      resources.




Since
inception, the Company’s capital resources have been limited.  The
Company has had to rely upon the sale of equity securities to fund property
acquisitions, exploration, capital investments and administrative expenses,
among other things.





The
Company reported working capital of $1,566,948 at March 31, 2008 ($179,550 as at
March 31, 2007), and cash and term deposits of $1,582,127 ($454,970 at March 31,
2007).  The Company had no long-term debt at either March 31, 2008 or
March 31, 2007.  The Company does not currently incur any direct costs
in connection with the Gahcho Kué Project as these costs are currently being
funded by De Beers Canada without recourse to the Company.





The
Company has sufficient capital to finance its operations for the next twelve
months, after which it will be required to raise capital for future operations
through the private placement of shares which may include an equity stock
financing.





During
the year, the Company received $141,048 by issuing 147,350 shares upon the
exercise of various stock options (2007 - $888,450 issuing 650,000 shares upon
the exercise of options).





The
Company expects to continue incurring annual losses until it receives revenue
from production on the Gahcho Kué Project, if placed into production. 
There is no assurance that the property will be developed or placed into
production.




It is
anticipated that the cash and term deposits on March 31, 2008 provide the
Company with sufficient funds until mid-2009. Although the Company has received
funds from the exercise of stock options and warrants in the past, and the
exercise of some outstanding options, which are currently in the money, could
conceivably extend that date, there is no assurance that such stock options will
be exercised in which case the Company will consider undertaking an equity
financing.  It follows that there can be no assurance that financing,
whether debt or equity, will always be available to the Company in the amount
required at any particular time or for any particular period or, if available,
that it can be obtained on terms satisfactory to the Company. If the Company is
unable to receive additional funds through the issuance of its shares, it may be
required to suspend operations.




As at
June 27, 2008, the Company has 400,000 stock options outstanding which are
exercisable at prices between $1.96 and $4.50 per share.  If all of the
stock options were exercised, the Company would receive proceeds of $1.105
million,but there is no
assurance that these will be exercised and such exercise cannot be considered to
be part of the Company's financing strategy. If all of the options were
exercised, to which no assurance can be given that all or any will be exercised,
these funds would be available to the Company as working capital.




C.
            Research and development,
      patents and licenses, etc.




The
Company does not engage in any research and development activities and has no
patents or licenses.


D.
              Trend
      information.
  There are
no major trends which are anticipated to have a material effect on the Company's
financial condition and results of operations in the near future. The reduction
of expenses has been achieved in most areas. Management will continue its
efforts to reduce other expenses.







29








E.
            Off-balance sheet
      arrangements.




The
Company has no off balance sheet arrangements.




F.
            Tabular disclosure of
      contractual obligations.




The
Company has no contractual obligations relating to debt or lease obligations as
at March 31, 2008.




Critical Accounting
Estimates




The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Significant estimates and assumptions are used in
determining the application of the going concern concept, the continual deferral
of costs incurred for mineral properties and deferred exploration, assumptions
used to determine the fair value of stock-based compensation, and impairment of
long-term investment. The Company evaluates its estimates on an ongoing basis
and bases them on various assumptions that are believed to be reasonable under
the circumstances. The Company's estimates form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.




The
Company believes the policies for going concern, mineral properties and deferred
exploration are critical accounting policies that affect the significant
judgments and estimates used in the preparation of the Company's financial
statements.




The
Company considers that its mineral properties have the characteristics of
property, plant and equipment, and, accordingly defers acquisition and
exploration costs under Canadian generally accepted accounting principles. The
recoverability of mineral property acquisition and deferred exploration
expenditures is dependent upon the discovery of economically recoverable
reserves and on the future profitable production, or proceeds from disposition,
of the Company's properties. The Company is in the process of exploring its
mineral properties and has not yet determined whether the properties contain
mineral reserves that are economically recoverable. Development of any property
may take years to complete and the amount of resulting income, if any, is
difficult to determine with any certainty. The sales value of any mineralization
discovered by the Company is largely dependent upon factors beyond the Company's
control, such as the market value of the diamonds recovered.




Changes
in circumstances in the future, many of which are outside of management's
control, will impact on the Company's estimates of future recoverability of net
amounts to be realized from their assets. Such factors include, but are not
limited to, the availability of financing, the identification of economically
recoverable reserves, co-venturer decisions and developments, market prices of
minerals, the Company's plans and intentions with respect to its assets, and
other industry and competitor developments.




While the
Company believes that economically recoverable reserves will be identified,
there is no assurance that this will occur. Failure to discover economically
recoverable reserves will require the Company to write-off costs capitalized to
date and will result in further reported losses.




The
consolidated financial statements have been prepared on a going concern basis in
accordance with Canadian generally accepted accounting principles, which assumes
that the Company will continue in operation for the foreseeable future and be
able to realize its assets and discharge its liabilities and commitments in the
normal course of business.




The
Company believes that it has the ability to obtain the necessary financing to
meet commitments and liabilities as they become payable and that economically
recoverable reserves will be discovered. The costs of further exploration of the
AK Property claims are being borne by De Beers Canada.







30







The
Company uses the Black-Scholes option pricing model to determine the fair value
of stock-based compensation recognized. Estimates and assumptions are required
under the model, including those related to the Company's stock volatility,
expected life of options granted, and the risk free interest rate.  The
Company believes that its estimates used in arriving at stock-based compensation
are reasonable under the circumstances.




Effect of
Inflation




In the
Company's view, at no time during any of the last three fiscal years have
inflation or changing prices had a material impact on the Company's sales,
earnings or losses from operations, or net earnings.




U.S. Generally Accepted
Accounting Principles




U.S. GAAP
differs in some respects from Canadian GAAP, as applied to the Company.
Reference should be made to Item 3A - Selected Financial Data, and Note 9 to the
Consolidated Financial Statements of the Company for a description and
quantification of material measurement differences between Canadian GAAP and
U.S. GAAP.




Item
6.               Directors,
Senior Management and Employees






A.
            Directors and senior
      management.




The
following table lists, as of June 27, 2008, the names of the directors and
senior management of the Company. The directors and senior management have
served in their respective capacities since their election and/or appointment
and will serve until the next Annual General Meeting of Shareholders or until a
successor is duly elected, unless the office is vacated in accordance with the
Company's Articles or unless there is a prior resignation or
termination.




Name
            Position
      with Company
            Date
      of First Appointment
            AgeJonathan
      Comerford
            Chairman
      and Director(2)(3)
            Chairman
      of the Company since May 11, 2006 and Director since September 21,
      2001.
            36Patrick
      Evans
            President,
      Chief Executive Officer and Director
            President
      and director of the Company since November 15, 2005.
            53Jennifer
      Dawson
            Chief
      Financial Officer
            Chief
      Financial Officer since May 11, 2006.
            47D.
      Harry W. Dobson
            Director
            Director
      since November 1, 1997
            60Elizabeth
      J. Kirkwood
            Director(1)
            Director
      since September 21, 2001.
            58Peeyush
      Varshney
            Director(2)
            Director
      since April 13, 2007.
            41Carl
      Verley
            Director(1)(3)
            Director
      of Old MPV since December 2, 1986 and Director of the Company since
      November 1, 1997.
            58David
      E. Whittle
            Director(1)(2)(3)
            Director
      since November 1, 1997
            44





(1)    
Member of the Company's Corporate Governance Committee.


(2)    
Member of the Company's Audit Committee.


(3)    
Member of the Company's Compensation Committee.




The
following is a description of the Company's directors and senior management. The
information provided is not within the knowledge of the management of the
Company and has been provided by the respective directors and senior
officers.




Jonathan
Christopher James Comerford, B.A. (Econ.), M.B.S. (Finance)




A
director of the Company since September, 2001 and Chairman since April 2006. Mr.
Comerford is resident in Dublin, Ireland. Mr. Comerford obtained his Masters in
Business from the Michael Smurfit Business School in 1993 and his Bachelor of
Economics from University College, Dublin, in 1992. Mr. Comerford is Investment
Manager at IIU Limited (since August, 1995). Jonathan Comerford represents the
Company's largest shareholder, Bottin (International) Investments Ltd., on the
Company's board.







31







Patrick
C. Evans, B.A., B.Sc.




President,
CEO and a director of the Company since November 2005. He is a resident of
Arizona, USA.  Mr. Evans is a graduate of the University of Cape Town where
he received his Bachelor of Arts degree in 1977 and Bachelor of Science degree
in 1978. He was a career diplomat from 1979 to 1998. In 1999, he was appointed a
Vice President of Placer Dome Inc. and a non-executive director of SouthernEra
Resources Ltd.  In 2001 he was appointed President and CEO of SouthernEra
Resources Ltd. and Messina Limited. In 2004, he was appointed President, CEO and
a director of Southern Platinum Corp, which was acquired by Lonmin Plcin
June 2005. In September 2005, he was appointed President, CEO and a director of
Weda Bay Minerals Inc., which was acquired by Eramet S.A. in May 2006. Mr. Evans
is also the CEO and a director of Norsemont Mining Inc. and a non-executive
director of First Uranium Corp.




Jennifer
M. Dawson, B.B.A.




Chief
Financial Officer and Corporate Secretary since May 2006.  She is a
resident of Ontario, Canada.  Ms. Dawson is a graduate of St. Francis
Xavier University where she received her Bachelor of Business Administration in
1984.  Her work experience includes public accounting experience with
Touche Ross & Co. (now Deloitte), and financial management experience with
CCH Canadian Limited and Genesis Media Inc.  She provided financial
support to SouthernEra Resources Ltd. in its corporate reorganization in 2004,
and ongoing financial support to both SouthernEra Diamonds Inc. and to Southern
Platinum Corp. after the reorganization.  In addition to her CFO and
Corporate Secretary roles with the Company, she provides financial and
administrative services to Arizona Star Resource Corp. (now owned 100% by
Barrick Gold Corporation) and to Blacksands Petroleum, Inc. and it’s subsidiary,
Access Energy Inc.




D.
Harry W. Dobson




A
director of the Company since November 1997.  He is a resident of
Monaco. Mr. Dobson was the founder and chairman of American Pacific Mining
Company Inc. and a director of Breakwater Resources Ltd. until 1991. Subsequent
to 1991, Mr. Dobson served as Deputy Chairman of the Board and a director of
Lytton Minerals Limited. He is a former officer and director of 444965 B.C.
Ltd., and served as a director and Chairman of Glenmore Highlands
Inc.  Since October 2001, he has been a director and officer of
Kirkland Lake Gold Inc.




Elizabeth
J. Kirkwood




Ms.
Elizabeth J. Kirkwood has been a director of the Company since September, 2001
and was past Chairman of the Board of the Company from January 2003 until April
2006.  She was also Chief Financial Officer of the Company from September
2003 until May 2006, and Corporate Secretary from November 2003 until May 2006.
She is resident in Ontario, Canada, and a member of the Prospectors and
Developers Association of Canada. Ms. Kirkwood was the President and CEO of
First Nickel Inc. (November 2003 to June 2006).  She is also a director of
Everbright Capital Corporation (since June 2005). She has been a past director
of Canadian Shield Resources Inc. (June 2005-June 2007), Intrepid Minerals
Corporation (April 1999 - July 2006), Investor Links.com (March 1993-May 2001),
Canada's Choice Spring Water (July 1996-August 1999), Stroud Resources Ltd.
(August, 2000 - March 2002), and a past director and officer of O.S.E Corp.
(formerly Oil Springs Energy Corp. (July, 1993- June 2005), Hucamp Mines Limited
(May 2001-May 2002), and First Strike Diamonds Inc. (October 1995 - March
2004).




Peeyush
Varshney, LL.B.




Mr.
Varshney has been actively involved in the capital markets since 1996 and is a
principal of Varshney Capital Corp., a private merchant banking, venture capital
and corporate advisory firm. He is currently a director or officer of several
public companies listed on the TSX Venture Exchange and the Toronto Stock
Exchange, including Chief Executive Officer and Director of Mantle Resources
Inc.   He is also a director of The Varshney Family Charitable
Foundation and is a member of the Business Families Center Advisory Board at the
Sauder School of Business at UBC. Mr. Varshney obtained a Bachelor of Commerce
Degree (Finance) in 1989 and a Bachelor of Laws in 1993, both from the
University of British Columbia (UBC). He then articled at Farris, Vaughan, Wills
& Murphy, of Vancouver, British Columbia, from 1993 to 1994 and has been a
member of the Law Society of British Columbia since September 1994.








32








Carl
G. Verley, B.Sc., P. Geo.





A
director of Old MPV since December 1986 and a director of the Company since
November 1997. He is a resident of British Columbia, Canada. Mr. Verley is a
graduate of the University of British Columbia where he received his Bachelor of
Science Degree in May of 1974. From August of 1990 to January 2002, he has
served on the Board of Directors of Gee-Ten Ventures Inc.  He is a
registered Professional Geoscientist with both the Association of Professional
Geoscientists of Ontario and the British Columbia Association of Professional
Engineers and Geoscientists. He has been a self-employed geologist since 1982.
Since July 2003, he has been a director of La Plata Gold Corporation and a
director of African Metals Corporation since October 2007.





David
E. Whittle, B.Comm., C.A.





A
director of the Company since November 1997. He is a resident of British
Columbia, Canada. A Chartered Accountant, Mr. Whittle was employed with Coopers
& Lybrand, Chartered Accountants, from 1987 to 1992.  From 1992 through
2004, Mr. Whittle served as operator or partner of a financial consulting and
chartered accounting practice. From 1993 to June 2000, Mr. Whittle was President
and director of Glenmore Highlands Inc. and President and director of 444965
B.C. Ltd.  From November 1997 to April 1998, Mr. Whittle served as
Secretary of the Company. From 1994 to January 1998, Mr. Whittle was CFO and a
director of Lytton Minerals Limited.  From 1993 to January 1998, Mr.
Whittle was CFO, Corporate Secretary and a director of New Indigo Resources
Inc.  From 2004 to August 2007, Mr. Whittle was Chief Financial Officer of
Hillsborough Resources Limited.   From 2004 to the present, Mr.
Whittle has been and is a director of Image Innovations Holdings Inc.  From
October 2007 to the present, Mr. Whittle’s principal occupation has been and is
Chief Financial Officer of Alexco Resource Corp., a company in the business of
both undertaking mineral exploration and development and providing consulting
services to third parties in respect of environmental remediation and
permitting.







B.
            Compensation.




The
Company has two executive officers (collectively, the "Executive Officers"):
Patrick Evans, the President and CEO, and Jennifer Dawson, the Chief Financial
Officer and Corporate Secretary.  For particulars on these executive
officers, reference should be made to “Item 6A - Directors and Senior
Management”.




The
compensation paid to the executive officers and details of management contracts
and incentive options granted to the two executive officers of the Company for
the Company's most recently completed financial years is as
follows:




•
            Patrick
      Evans, President and Chief Executive Officer, earned other annual
      compensation of $155,000 in the most recent fiscal year including $150,000
      pursuant to a Consulting Agreement for his services as President and CEO,
      as well as a director’s fee of $5,000 for the year ended March 31,
      2008.  He has 200,000 stock options granted with 100,000 options
      granted November 1, 2005 with 50,000 vesting upon acceptance of the
      Consulting Agreement and 50,000 vesting on the first anniversary of
      acceptance of the Consulting Agreement - all have an exercise price of
      $2.63, and are exercisable for a period of 5 years; and 100,000 options
      granted on January 30, 2006 with an exercise price of $4.50 and with 50%
      of the options vesting immediately, and 50% vesting January 31,
      2007.  All 100,000 options granted January 30, 2006 are
      exercisable for a period of 5 years from
grant.







33












•
            Jennifer
      Dawson, Chief Financial Officer and Corporate Secretary, was paid $103,012
      pursuant to a Consulting Agreement for her services as CFO and Corporate
      Secretary for the year ended March 31, 2008.  There have been no
      stock options granted to her.




Compensation
for the directors has been approved effective April 1, 2005 at the following
levels: the Chairman of the Board receives $10,000 per annum, the Chairman of
the Audit Committee receives $7,500 per annum, and all other Directors receive
$5,000 per annum.  All are paid semi-monthly, in advance.




During
the year ended March 31, 2006, Elizabeth Kirkwood earned $10,000 for the
director's fees in her capacity as Chairperson of the Board. Director fees were
also earned by the following directors: David Whittle ($7,500 in his capacity as
Chair of the Audit Committee), Carl Verley ($5,000), Patrick Evans ($5,000
prorated for part year service), Harry Dobson ($5,000) and Jonathan Comerford
($5,000).




During
each of the years ended March 31, 2008 and March 31, 2007, director fees were
earned by the following directors: Jonathan Comerford ($10,000 as Chair of the
Board), David Whittle ($7,500 as Chair of the Audit Committee), Carl Verley
($5,000), Elizabeth Kirkwood ($5,000), Patrick Evans ($5,000) and Harry Dobson
($5,000, and for the year ended March 31, 2008 only, Peeyush Varshney
($5,000).  In the year ended March 31, 2008, three directors were
compensated for their work in the Company’s Gahcho Kué Project strategic
alternatives review (David Whittle $25,000, Jonathan Comerford $20,000 and
Peeyush Varshney $20,000).




The
Company has no Long-Term Incentive Plan ("LTIP) in place and therefore there
were no awards made under any long-term incentive plan to the Executive Officers
during the Company's most recently completed financial year. A "Long-Term
Incentive Plan" is a plan providing compensation intended to motivate
performance over a period of greater than one financial year, other than a plan
for options, SARs (stock appreciation rights) or compensation through shares or
units that are subject to restrictions on resale.




The
following table sets out incentive stock options exercised by the Executive
Officers during the most recently completed financial year, as well as the
financial year end value of stock options held by the Executive Officers. During
this period, no outstanding SARs were held by the Executive
Officers.




Name
            Securities,
              Acquired
      on
              Exercise(#)
            Aggregate
              Value
              Realized
      ($)(1)
            Unexercised
              Options
      at
              Financial
      Year-End
              Exercisable
      /
              Unexercisable
      (#)
            Value
      of
              Unexercised
              In-the-Money
              Options
      at Financial
              Year-End
              Exercisable
      /
              Unexercisable
      ($)(2)Patrick
      Evans
            Nil
            Nil
            200,000/0
            287,000/0Jennifer
      Dawson (since May 11, 2006)
            Nil
            Nil
            Nil/Nil
            Nil/Nil




(1)   
Based on the difference between the option exercise price and the closing market
price of the Company's shares on the date of exercise.




(2)   
In-the-Money Options are those where the market value of the underlying
securities as at the most recent financial year end exceeds the option exercise
price. The closing market price of the Company's shares as at March 31, 2008,
(ie. financial year end) was $5.00.




There
were no options or freestanding SARs held by the Executive Officers that were
re-priced downward during the most recently completed financial year of the
Company.




The
Company does not have a defined benefit/actuarial plan, under which benefits are
determined primarily by final compensation and years of service of the Company's
officers and key employees.




In
addition to the foregoing, some of the executive officers of the Company are
also entitled to medical and dental benefits, reimbursement of all reasonable
business expenses and, from time to time, the grant of stock
options.




No plan
exists, and no amount has been set aside or accrued by the Company or any of its
subsidiaries, to provide pension, retirement or similar benefits for directors
and officers of the Company, or any of its subsidiaries.







34














C.
            Board
      practices.




The
directors of the Company are elected annually and hold office until the next
annual general meeting of the shareholders of the Company or until their
successors in office are duly elected or appointed. The Company does not have an
executive committee. All directors are elected for a one-year term. All officers
serve at the pleasure of the Board. The next Annual General Meeting of the
shareholders of the Company has been scheduled for September 11,
2008.




The Board
has adopted a Charter under which it and the Board's committees operate. The
Company's board of directors has three committees- the Audit Committee, the
Nominating/Corporate Governance Committee and the Compensation
Committee.




Audit
Committee




The
members of the Audit Committee do not have any fixed term for holding their
positions and are appointed and replaced from time to time by resolution of the
Board of Directors. It is composed of at least three directors, and the Board
has determined that David Whittle, C.A. of the Audit Committee meets the
requirement of an "audit committee financial expert" as defined in Item 16A of
Form 20-F. Each member of the Audit Committee has the financial ability to read
and understand a balance sheet, an income statement and a cash flow
statement.




The
current members of the Audit Committee are Jonathan Comerford, Peeyush Varshney
and David Whittle. Elizabeth Kirkwood was appointed to the Audit Committee in
September 2007, but shortly thereafter, it was determined that she was not
considered an independent director and Jonathan Comerford assumed her position
on the Audit Committee.  There had been no business transacted by the
Audit Committee between the time Ms. Kirkwood had been appointed, and her
replacement was appointed.  Except for the chairman, David Whittle,
the Audit Committee members receive no separate remuneration for acting as such
and their appointments are not for any fixed term.




The Audit
Committee is appointed by the Board to assist the Board in fulfilling its
oversight responsibilities. Its primary duties and responsibilities are
to:




a.
            identify
      and monitor the management of the principal risks that could impact the
      financial reporting of the Company;




b.
            monitor
      the integrity of the Company's financial reporting process and system of
      internal controls regarding financial reporting and accounting
      compliance;




c.
            make
      recommendations regarding the selection of the Company's external auditors
      (by shareholders) and monitor their independence and
      performance;




d.
            provide
      an avenue of communication among the external auditors, management and the
      Board;




e.
            handle
      complaints regarding the Company's accounting practices;
    and




f.
            administer
      and monitor compliance with the Company's Ethics and Conflict of Interest
      Policy.




Corporate
Governance Committee




The
members of the Corporate Governance Committee are Elizabeth Kirkwood (Chair),
Carl Verley and Harry Dobson, a majority of whom are unrelated.




The
Corporate Governance Committee is responsible for assessing directors on an
ongoing basis and for developing the Company's approach to governance issues and
for the Company's response to the Sarbanes-Oxley Act of 2002, as implemented by
the U.S. Securities and Exchange Commission, and the Toronto Stock Exchange's
governance guidelines.







35







Compensation
Committee




The
Compensation Committee is composed of Carl Verley (Chair), David Whittle, and
Jonathan Comerford, a majority of whom are unrelated. The Committee, in
consultation with the Chairman and CEO of the Company, makes recommendations to
the Board on the Company's framework of executive remuneration and its cost and
on specific remuneration packages for each of the executives. The remuneration
of non-executives, including members of the Compensation Committee, is
determined by the Board.




D.
            Employees.




As at the
end of the fiscal years March 31, 2008, March 31, 2007, and March 31, 2006, the
Company had no full-time employees (not including the former President and CEO
Jan Vandersande; the current President and CEO, Patrick Evans; the former CFO
and Corporate Secretary, Elizabeth Kirkwood; and the current CFO and Corporate
Secretary, Jennifer Dawson).  The Toronto administrative and executive
office uses outsourced administrative assistance on an as-needed, part-time
basis.




De Beers
Canada employs personnel who conduct the exploration, permitting and other
activities on the AK Property.




E.
            Share
      ownership.




The
following table sets forth, as of June 27, 2008, the number of the Company's
common shares beneficially owned by (a) the directors and members of senior
management of the Company, individually, and as a group, and (b) the percentage
ownership of the outstanding common shares represented by such shares. The
security holders listed below are deemed to be the beneficial owners of common
shares underlying options and warrants which are exercisable within 60 days from
the above date.




Name
      of Beneficial Owner(11)
            Amount
              and
      Nature
            Percentage(9)(10)
              of
      ClassD.
      Harry Dobson(1)
            1,192,510
            2.0%Patrick
      C. Evans(2)
            303,400
            *%Carl
      G. Verley(3)
            215,250
            *%Jonathan
      Comerford(4)
            150,000
            *%Peeyush  Varshney(5)
            80,122
            *%Elizabeth
      Kirkwood(6)
            55,000
            *%David
      E. Whittle(7)
            25,600
            *%Officer
      and Directors as a Group(8)
            2,021,882
            3.4%




*     less than 1%




(1)
            Includes
      1,192,510 shares and nil options.




(2)
            Includes
      103,400 shares and 200,000 options (exercisable
      presently).  100,000 options are exercisable at a price of $2.63
      per share and expire on November 1, 2010.  100,000 options are
      exercisable at a price of $4.50 per share and expire on January 30,
      2011.




(3)
            Includes
      215,250 shares and nil options.




(4)
            Includes
      nil shares and 150,000 options (exercisable presently). The options are
      exercisable at a price of $1.96 per share and expire on October 1,
      2009.




(5)
            Includes
      80,122 shares and nil options.




(6)
            Includes
      5,000 shares and 50,000 options (exercisable presently or within 60
      days).  The options are exercisable at a price of $1.96 per
      share and expire on October 1,
2009.




(7)
            Includes
      25,600 shares and nil options.







36







(8)
            Includes
      400,000 options (exercisable).




(9)
            The
      calculation does not include stock options that are not exercisable
      presently or within 60 days.




(10)
            Total
      issued and outstanding capital as at the close of June 27, 2008 was
      59,932,381 shares.




(11)
            The
      Company has no actual knowledge of the holdings of each individual. The
      above information was provided by the respective individuals to the
      Company.




The
Company has a Stock Option Plan pursuant to which stock options may be granted
to its directors, officers and employees. Stock options are awarded by
resolution of the board of directors.




Item
7.               Major
Shareholders and Related Party Transactions




A.
            Major
      shareholders.




A major
shareholder is a shareholder beneficially owning more than 5% of the issued
shares of the Company.




As at
June 27, 2008, the Company's issued and outstanding capital was 59,932,381
shares.




The
Company is a publicly-owned corporation the majority of the common shares of
which are owned by persons resident outside the United States. To the best of
the Company's knowledge, the Company is not directly owned or controlled by
another corporation or any foreign government. As at June 27, 2008, the Company
believes that approximately 14,421,550 of the issued and outstanding common
shares were held by 74 shareholders with addresses in the United
States.  A number of these shares are held in "street" name and may,
therefore, be held by several beneficial owners.




The
following table shows, to the best knowledge of the Company, the number (as at
June 27, 2008) and percentage of shares, warrants and options held by the
Company's major shareholders on a partially diluted basis.




Name
      of Shareholder(1)
            No.
      of Shares Held
            Percentage
      of issued and
              outstanding
      share capital of
              59,932,381
      shares
              (as
      at June 27, 2008)Bottin
      (International) Investments
      Ltd.
              (controlled
      by Dermot Desmond)
            13,253,430
            22.11%Desmond
      P.
      Sharkey
              Dublin,
      Ireland
            5,206,001
            8.69%De
      Beers Canada Exploration Ltd. (formerly Monopros Limited)
            3,103,543
            5.18%




(1)     
      The Company has no actual knowledge of the above shareholdings. The above
      information was provided to the Company by the
      named  shareholders.




Major
shareholders of the Company do not have any special voting rights.




B.
            Related party
      transactions.




The
Company is not directly or indirectly controlled by any enterprise and does not
control, directly or indirectly, any other enterprises other than its
subsidiaries listed under “Item 4A. Bottin (International) Investments Ltd.”,
which is controlled by Dermot Desmond, has significant influence over the
Company as its largest single shareholder: see “Item 7A - Major shareholders”,
above.




Key
management personnel of the Company are Patrick Evans, who is President and CEO,
and Jennifer Dawson, who is Chief Financial Officer and Corporate Secretary.
Patrick Evans is also a director of the Company. See “Item 6B -
Compensation”.




Both Mr.
Evans and Ms. Dawson have Consulting Agreements with the Company. See Item 10C -
Material Contracts.







37







The
Company entered into a Corporate Services Agreement effective September 1, 2003
with 1014620 Ontario Inc.Elizabeth J. Kirkwood,
the Chairman, Chief Financial Officer, Secretary and a director of the Company
until May 10, 2006, is also the sole director, officer and shareholder of
1014620 Ontario Inc. which performed bookkeeping and accounting services and
corporate secretarial services for the Company.




The
two-year term of the Corporate Services Agreement expired on August 31, 2005.
During the term, 1014620 Ontario Inc. was paid a monthly fee of $3,000 ($36,000
per annum) for
providing the Corporate Services, and was also reimbursed for all reasonable
out-of-pocket expenses properly incurred in connection with the performance of
the Corporate Services. During the year ended March 31, 2006, the Company paid
$18,000 for corporate services to 1014620 Ontario Inc. before the Corporate
Services Agreement was terminated on September 30, 2005.  Ms. Kirkwood
was also paid $6,000 for consulting services in the year ended March 31,
2006.




During
the year ended March 31, 2006, Elizabeth Kirkwood, in her individual capacity,
also earned $10,000 for the director's fees in her capacity as Chairperson of
the Board.




During
the year ended March 31, 2006, the Company paid a total of $102,127 to Jan W.
Vandersande, the former President, Chief Executive Officer and a director of the
Company, for consulting, management, property evaluation and administration
services to the Company and for drug, medical and dental benefits. There are no
debts owing directly or indirectly to the Company or its subsidiaries by any
director or officer of the Company or vice versa.




There is
no indebtedness between the directors and the Company.




C.
            Interests of experts and
      counsel.




Not
Applicable




Item
8.               Financial
Information




A.
            Consolidated Statements and
      Other Financial Information




Listed in
Item 19 hereto are audited consolidated financial statements as at March 31,
2008 and 2007 and for the fiscal years ended March 31, 2008, 2007 and 2006,
accompanied by the report of our independent registered accounting
firm.




There are
no legal proceedings currently pending.




The
Company has not paid dividends in the past and does not expect to pay dividends
in the near future.




B.
            Significant
      Changes.




There
have been no significant changes to the Company since the end of last fiscal
year.




Item
9.               The
Offer and Listing.




A.       Offer and listing
      details.




The
common shares of the Company were listed and posted for trading on The Toronto
Stock Exchange (the "TSX") on January 22, 1999. The Company's shares were
delisted from the Vancouver Stock Exchange ("VSE", now known as the TSX Venture
Exchange and before that, the Canadian Venture Exchange ("CDNX")) on January 31,
2000, and from the Nasdaq Smallcap Market on September 29, 2000. The Company's
shares traded on the OTC-Bulletin Board ("OTCBB") under the symbol "MPVI" until
June 1, 2005. Commencing on April 4, 2005, the Company's shares were listed for
trading on the AMEX under the symbol "MDM".







38







The
following tables set forth the reported high and low prices on the TSX, and for
Amex, Nasdaq and/or OTCBB (combined for the period ended March 2006),for (a) the five most
recent fiscal years; (b) each quarterly period for the past two fiscal years,
and (c) for the most recent six months.




High
      and Low Prices for the Five Most Recent Fiscal YearsFiscal
      Year Ended
              TSX
              AMEX
      / NASDAQ (1)/ OTCBB


High
      (CDN$)
                Low
      (CDN$)
                High
      (US$)
                Low
      (US$)March
      31, 2008
                $5.93
                $3.79
                $5.49
                $3.54March
      31, 2007
                $5.05
                $3.05
                $4.40
                $2.70March
      31, 2006
                $4.90
                $2.26
                $4.26
                $1.90March
      31, 2005
                $2.68
                $1.61
                $2.00
                $1.19March
      31, 2004
                $3.00
                $0.60
                $2.25
                $0.37




(1) The
Company's shares were listed on the Nasdaq Smallcap Market on May 1, 1996 and
delisted from the Nasdaq Smallcap Market on September 29, 2000, at which time
they commenced trading on the OTCBB and continued through April 1, 2005. On
April 4, 2005, the Company's shares began trading on the AMEX.




High
      and Low Prices for Each Quarterly Period for thePast
      Two Fiscal YearsTSX
            Amex
      / OTCBBPeriod
      Ended:
            High
      (CDN$)
            Low
      (CDN$)
            High
      (US$)
            Low
      (US$)March
      31, 2008
            $5.10
            $4.12
            $5.12
            $4.07December
      31, 2007
            $5.10
            $4.00
            $5.23
            $4.07September
      30, 2007
            $5.51
            $3.79
            $5.26
            $4.15June
      30, 2007
            $5.93
            $4.17
            $5.49
            $4.34March
      31, 2007
            $4.46
            $3.40
            $3.79
            $2.93December
      31, 2006
            $4.65
            $3.30
            $4.10
            $2.89September
      30, 2006
            $4.20
            $3.35
            $3.73
            $3.06June
      30, 2006
            $5.05
            $3.05
            $4.40
            $2.70




High
      and Low Prices for the Most Recent Six MonthsTSX
      (CDN$)
            AMEX(1)Month
      Ended
            High
            Low
            High
            LowMay,
      2008
            $4.72
            $4.20
            $4.69
            $4.30April,
      2008
            $5.05
            $4.66
            $4.95
            $4.67March,
      2008
            $5.09
            $4.72
            $5.18
            $4.67February,
      2008
            $5.10
            $4.12
            $5.06
            $4.07January,
      2008
            $4.79
            $4.15
            $4.68
            $4.20December,
      2007
            $4.50
            $4.00
            $4.62
            $4.07




(1)On
April 4, 2005, the Company's Common Shares began trading on the American Stock
Exchange. On March 31, 2008, the closing price of the Common Shares on the TSX
was $5.00 and on June 27, 2008 was $4.25. The shares commenced trading on AMEX
on April 4, 2005 and the closing price of the Common Shares on March 31, 2008
was US$5.18 per share. The closing price on June 27, 2008 on the AMEX was
US$4.15 per share.




B.  Plan
of distribution.




Not
Applicable.




C.  Markets.
  The
Company's shares are listed on the Toronto Stock Exchange under the symbol "MPV"
and were also quoted on the over-the-counter (OTC) Bulletin Board pursuant to
Rule 6530(a) of the NASD's OTC Bulletin Board Rules under the symbol "MPVI.OB"
until April 1, 2005. Commencing April 4, 2005, the Company's shares commenced
trading on the AMEX under the symbol "MDM". The Common Shares are not registered
to trade in the United States in the form of American Depository Receipts or
similar certificates.





39









D.
Selling shareholders.




Not
Applicable.




E.
Dilution.




Not
Applicable.




F.
Expenses of the issue.




Not
Applicable.




Item
10.             Additional
Information.




A.
            Share
      capital.




This Form
20-F is being filed as an annual report and, as such, there is no requirement to
provide information under this sub-item.




B.
            Memorandum and articles of
      association.




Incorporation




The
Company was amalgamated in British Columbia under incorporation number 553442 on
November 1, 1997 under the name of Mountain Province Mining Inc. The
Company changed its name to Mountain Province Diamonds Inc. on October 16,
2000.




The
Company is also registered as an extra-territorial corporation in the Northwest
Territories (Registration no. E 6486, on February 25, 1998, amended October 16,
2000 for the name change).




The
Company does not have any stated "objects" or "purposes" as such are not
required by the corporate laws of the Province of British Columbia. Rather, the
Company is, by such corporate laws, entitled to carry on any activities
whatsoever, which are not specifically precluded by other statutory provisions
of the Province of British Columbia.




The
Company was amalgamated under the British Columbia Company Act(the "Company
Act"), which has now been replaced by the British Columbia Business Corporations Act(the "BCA"). The BCA came into effect on March 29, 2004. The Company has
completed its transition from the Company Act to the BCA and adopted new
Articles which reflect the provisions of the BCA. The Company's Memorandum of
Articles has been replaced by a Notice of Articles. Pursuant to the Shareholders
special resolution on September 20, 2005 approving the continuance of the
Company into Ontario, the Company continued under the laws of the Province of
Ontario pursuant to Articles of Continuance dated May 8, 2006.




Powers, functions and
qualifications of Directors




The
powers and functions of directors are set forth in the Ontario Securities Act
and in theBylaws
of the Company.




With
respect to the voting powers of directors, the Ontario Securities Act provides
that a director (or senior officer) has a disclosable interest in a contract or
transaction if the contract or transaction is material to the Company and the
director has a material interest in the contract.







40







The
Bylaws provide that a director or senior officer who has, directly or
indirectly, a material interest in an existing or proposed material contract or
transaction of the Company or who holds any office or possesses any property
whereby, directly or indirectly, a duty or interest might be created to conflict
with his duty or interest as a director or senior officer, has to disclose the
nature and extent of this interest or conflict with his duty and interest as a
director or senior officer, in accordance with the provisions of the Ontario
Securities Act.. A director is also prohibited from voting in respect of any
such proposed material contract or transaction and if he does so, his vote shall
not be counted, but he shall be counted in the quorum at the meeting at which
such vote is taken. Notwithstanding this, if all of the directors have a
material interest in a proposed material contract or transaction, any or all of
those directors may vote on a resolution to approve the contract or transaction.
However, in this case the directors must have the contract or transaction
approved by special resolution of the shareholders to avoid accountability for
any profits.




The
Bylaws further provide that, subject to the provisions of the Ontario Securities
Act, no disclosure is required of a director or senior officer, and a director
need not refrain from voting in respect of the following types of contracts and
transactions:




a)
            A
      contract or transaction where both the Company and the other party to the
      contract or transaction are wholly owned subsidiaries of the same
      corporation;




b)
            A
      contract or transaction where the Company is a wholly owned subsidiary of
      the other party to the contract or
transaction;




c)
            A
      contract or transaction where the other party to the contract or
      transaction is a wholly owned subsidiary of the
  Company;




d)
            A
      contract or transaction where the director or senior officer is the sole
      shareholder of the Company or of a corporation of which the Company is a
      wholly owned subsidiary;




e)
            An
      arrangement by way of security granted by the Company for money loaned to,
      or obligations undertaken by, the director or senior officer, or a person
      in whom the director or senior officer has a material interest, for the
      benefit of the Company or an affiliate of the
  Company;




f)
            A
      loan to the Company, which a director or senior officer or a specified
      corporation or a specified firm in which he has a material interest has
      guaranteed or joined in guaranteeing the repayment of the loan or any part
      of the loan;




g)
            Any
      contract or transaction made or to be made with, or for the benefit of a
      corporation that is affiliated with the Company and the director or senior
      officer is also a director or senior officer of that corporation or an
      affiliate of that corporation;




h)
            Any
      contract by a director to subscribe for or underwrite shares or debentures
      to be issued by the Company or a subsidiary of the
  Company;




i)
            Determining
      the remuneration of the director or senior officer in that person's
      capacity as director, officer, employee or agent of the Company or an
      affiliate of the Company;




j)
            Purchasing
      and maintaining insurance to cover a director or senior officer against
      liability incurred by them as a director or senior officer;
    or




k)
            The
      indemnification of any director or senior officer by the
      Company.




The
Ontario Securities Act provides that a contract or transaction with a company is
not invalid merely because a director or senior officer of the company has an
interest, direct or indirect, in the contract or transaction, a director or
senior officer of the company has not disclosed an interest he or she had in the
contract or transaction, or because the directors or shareholders of the company
have not approved the contract or transaction in which a director or senior
officer of the company has an interest.







41







The
Ontario Securities Actalso provides that a
director or senior officer with a "disclosable interest" in a contract or
transaction with the Company is liable to account for any profit made from the
contract or transaction unless disclosure of the director's interest in such
contract or transaction had been made and the director abstained from voting on
the approval of the transaction.




Subject
to the provisions of the Ontario Securities Act, the directors may vote on
compensation for themselves or any members of their body. A contract relating
primarily to a fiduciary's remuneration as a director, officer, employee or
agent of the Company or its affiliates is a permitted conflict of interest under
the Company's Corporate Governance Policy.




There are
no limitations on the exercise by the board of directors of the Company's
borrowing powers.




There are
no provisions for the retirement or non-retirement of directors under an age
limit.




There is
no requirement for any director to hold any shares in the Company.




Rights and Restrictions
Attached to Shares




As all of
the Company's authorized and issued shares are of one class, there are no
special rights or restrictions of any nature or kind attached to any of the
shares. All authorized and issued shares rank equally in respect of the
declaration and receipt of dividends, and the rights to share in any profits or
surplus on liquidation, dissolution or winding up of the Company. Each share has
attached to it one vote.




Alteration of Share
Rights




To alter
the rights of holders of issued shares of the Company, such alteration must be
approved by a majority vote of not less than two-thirds of the votes cast by
shareholders voting in person or by proxy at a meeting of the shareholders of
the Company.




Annual General
Meetings




Annual
general meetings are called and scheduled upon decision by the board of
directors. The directors may also convene a general meeting of shareholders at
any time. There are no provisions in the Company's Bylaws for the requisitioning
of special meetings by shareholders. However, the Ontario Securities Act
provides that the holders of not less than 5% of the issued shares of the
Company may requisition the directors to call a general meeting of the
shareholders for the purposes stated in the requisition. All meetings of the
shareholders may be attended by registered shareholders or persons who hold
powers of attorney or proxies given to them by registered
shareholders.




Foreign Ownership
Limitations




There are
no limitations prohibiting shares being held by non-residents, foreigners or any
other group.




Change of
Control




There are
no provisions in the Company's Bylaws that would have the effect of delaying,
deferring or preventing a change in the control of the Company, or that would
operate with respect to any proposed merger, acquisition or corporate
re-structuring of the Company.




At the
September 13, 2006 Annual and Special Meeting of the shareholders, a Shareholder
Rights Plan dated August 4, 2006 was approved, ratified, confirmed and adopted
by the shareholders of the Company in accordance with and subject to its terms
and conditions.  The objectives of the Rights Plan are to ensure, to
the extent possible, that all shareholders of the Company are treated equally
and fairly in connection with any Take-Over Bid for the Company.





The
Rights Plan is designed to discourage discriminatory or unfair Take-Over Bids
for the Company and gives the Board time, if appropriate, to pursue alternatives
to maximize shareholder value in the event of an unsolicited (or "hostile")
Take-Over Bid for the Company.  The Rights Plan will encourage a
person proposing to make, or who has made, a Take-Over Bid for the Company (an
"Offeror") to proceed by way of a Permitted Bid or to approach the Board with a
view to negotiation, by creating the potential for substantial dilution of the
Offeror's position.  The Permitted Bid provisions of the Rights Plan
are designed to ensure that, in any Take-Over Bid, all shareholders are treated
equally, receive the maximum value for their investment and are given adequate
time to properly assess the Take-Over Bid on a fully informed
basis.








42





The
Rights Plan may, however, increase the price to be paid by a potential Offeror
to obtain control of the Company and may discourage certain transactions,
including a Take-Over Bid for less than all the common shares of the
Company.  Accordingly, the Rights Plan may deter some Take-Over
Bids.





In
addition, the Rights Plan Agreement provides that the continued existence of the
Rights Plan must be ratified by a majority of the shareholders of the Company at
a meeting of shareholders of the Company to be held not earlier than January 31,
2010 and not later than the date on which the 2010 annual meeting of
shareholders of the Company terminate.




Share Ownership Reporting
Obligations




There are
no provisions in the Company's Bylaws requiring share ownership to be disclosed.
The securities laws of the Province of Ontario and other provinces in Canada
having jurisdiction over the Company require disclosure of shareholdings
by:




(a)
            insiders
      who are directors or senior officers of the Company;
  and




(b)
            a
      person who has direct or indirect beneficial ownership of, control or
      direction over, or a combination of direct or indirect beneficial
      ownership of and of control or direction over securities of the Company
      carrying more than 10% of the voting rights attached to all the Company's
      outstanding voting securities.




The
threshold of share ownership percentage requiring disclosure of ownership is
higher in the home jurisdiction of Ontario than in the United States where
United States law prescribes a 5% threshold for ownership
disclosure.




C.
            Material
      contracts.




The
following is a list of material contracts, other than contracts entered into in
the ordinary course of business, to which the Company or any member of the group
is a party, for the two years immediately preceding publication of the document,
including dates, parties, general nature of the contracts, terms and conditions,
and amount of any consideration passing to or from the company or any other
member of the group.




1.
            Consulting
      Agreement with Patrick Evans, as President and CEO and director, effective
      November 1, 2005 at a monthly rate of
  $12,500.00.




3.
            Consulting
      Agreement with Jennifer Dawson to act as Chief Financial Officer and
      Corporate Secretary, effective May 11, 2006 on a time-worked
      basis.




D.
            Exchange
      controls.




Exchange Controls and
Investment Canada Act




Canada
has no system of exchange controls. There are no exchange restrictions on
borrowing from foreign countries nor on the remittance of dividends, interest,
royalties and similar payments, management fees, loan repayments, settlement of
trade debts, or the repatriation of capital. Any such remittances to United
States residents, however, may be subject to a withholding tax pursuant to the
Canadian Income Tax Act as modified by the reciprocal tax treaty between Canada
and the United States. See "Item 10E, Taxation".







43







The
Investment Canada Act (the "Act"), enacted on June 20, 1985, requires prior
notification to the Government of Canada on the "acquisition of control" of
Canadian businesses by non-Canadians, as defined in the Act. Certain
acquisitions of control, discussed below, are also to be reviewed by the
Government of Canada. The term "acquisition of control" is defined as any one or
more non-Canadian persons acquiring all or substantially all of the assets used
in the Canadian business, or the acquisition of the voting shares of a Canadian
corporation carrying on the Canadian business or the acquisition of the voting
interests of an entity controlling or carrying on the Canadian business. The
acquisition of the majority of the outstanding shares is deemed to be an
"acquisition of control" of a corporation. The acquisition of less than a
majority, but one-third or more, of the outstanding voting shares of a
corporation is presumed to be an "acquisition of control" of a corporation
unless it can be established that the purchaser will not control the
corporation.




Investments
requiring notification and review are all direct acquisitions of Canadian
businesses with assets of CDN$5,000,000 or more (subject to the comments below
on WTO investors), and all indirect acquisitions of Canadian businesses (subject
to the comments below on WTO investors) with assets of more than CDN$50,000,000
or with assets of between CDN$5,000,000 and CDN$50,000,000 which represent more
than 50% of the value of the total international transaction. In addition,
specific acquisitions or new businesses in designated types of business
activities related to Canada's cultural heritage or national identity could be
reviewed if the Government of Canada considers that it is in the public interest
to do so.




The Act
was amended with the implementation of the Agreement establishing the World
Trade Organization ("WTO") to provide for special review thresholds for "WTO
investors", as defined in the Act. "WTO investor" generally means (i) an
individual, other than a Canadian, who is a national of a WTO member (such as,
for example, the United States), or who has the right of permanent residence in
relation to that WTO member, (ii) governments of WTO members, and (iii) entities
that are not Canadian controlled, but which are WTO investor controlled, as
determined by rules specified in the Act. The special review thresholds for WTO
investors do not apply, and the general rules described above do apply, to the
acquisition of control of certain types of businesses specified in the Act,
including a business that is a "cultural business". If the WTO investor rules
apply, an investment in the shares of the Company by or from a WTO investor will
be reviewable only if it is an investment to acquire control of the Company and
the value of the assets of the Company is equal to or greater than a specified
amount (the "WTO Review Threshold"). The WTO Review Threshold is adjusted
annually by a formula relating to increases in the nominal gross domestic
product of Canada. The 2006 WTO Review Threshold is
CDN$265,000,000.




If any
non-Canadian, whether or not a WTO investor, acquires control of the Company by
the acquisition of shares, but the transaction is not reviewable as described
above, the non-Canadian is required to notify the Canadian government and to
provide certain basic information relating to the investment. A non-Canadian,
whether or not a WTO investor, is also required to provide a notice to the
government on the establishment of a new Canadian business. If the business of
the Company is then a prescribed type of business activity related to Canada's
cultural heritage or national identity, and if the Canadian government considers
it to be in the public interest to do so, then the Canadian government may give
notice in writing within 21 days requiring the investment to be
reviewed.




For
non-Canadians (other than WTO investors), an indirect acquisition of control, by
the acquisition of voting interests of an entity that directly or indirectly
controls the Company, is reviewable if the value of the assets of the Company is
then CDN$50,000,000 or more. If the WTO investor rules apply, then this
requirement does not apply to a WTO investor, or to a person acquiring the
entity from a WTO investor.




Special
rules specified in the Act apply if the value of the assets of the Company is
more than 50% of the value of the entity so acquired. By these special rules, if
the non-Canadian (whether or not a WTO investor) is acquiring control of an
entity that directly or indirectly controls the company, and the value of the
assets of the Company and all other entities carrying on business in Canada,
calculated in the manner provided in the Act and the regulations under the Act,
is more than 50% of the value, calculated in the manner provided in the Act and
the regulations under the Act, of the assets of all entities, the control of
which is acquired, directly or indirectly, in the transition of which the
acquisition of control of the Company forms a part, then the thresholds for a
direct acquisition of control as discussed above will apply, that is, a WTO
Review Threshold of CDN$265,000,000 (in 2006) for a WTO investor or a threshold
of CDN$5,000,000 for a non-Canadian other than a WTO investor. If the value
exceeds that level, then the transaction must be reviewed in the same manner as
a direct acquisition of control by the purchase of shares of the
Company.







44







If an
investment is reviewable, an application for review in the form prescribed by
the regulations is normally required to be filed with the Director appointed
under the Act (the "Director") prior to the investment taking place and the
investment may not be consummated until the review has been completed. There
are, however, certain exceptions. Applications concerning indirect acquisitions
may be filed up to 30 days after the investment is consummated and applications
concerning reviewable investments in culture-sensitive sectors are required upon
receipt of a notice for review. In addition, the Minister (a person designated
as such under the Act) may permit an investment to be consummated prior to
completion of the review, if he is satisfied that delay would cause undue
hardship to the acquiror or jeopardize the operations of the Canadian business
that is being acquired. The Director will submit the application to the
Minister, together with any other information or written undertakings given by
the acquiror and any representation submitted to the Director by a province that
is likely to be significantly affected by the investment.




The
Minister will then determine whether the investment is likely to be of net
benefit to Canada, taking into account the information provided and having
regard to certain factors of assessment where they are relevant. Some of the
factors to be considered are (i) the effect of the investment on the level and
nature of economic activity in Canada, including the effect on employment, on
resource processing, and on the utilization of parts, components and services
produced in Canada; (ii) the effect of the investment on exports from Canada;
(iii) the degree and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part; (iv) the effect
of the investment on productivity, industrial efficiency, technological
development, product innovation and product variety in Canada; (v) the effect of
the investment on competition within any industry or industries in Canada; (vi)
the compatibility of the investment with national industrial, economic and
cultural policies taking into consideration industrial, economic and cultural
objectives enunciated by the government or legislature of any province likely to
be significantly affected by the investment; and (vii) the contribution of the
investment to Canada's ability to compete in world markets.




The Act
sets certain time limits for the Director and the Minister. Within 45 days after
a completed application has been received, the Minister must notify the acquiror
that (a) he is satisfied that the investment is likely to be of net benefit to
Canada, or (b) he is unable to complete his review, in which case he shall have
30 additional days to complete his review (unless the acquiror agrees to a
longer period), or (c) he is not satisfied that the investment is likely to be
of net benefit to Canada.




Where the
Minister has advised the acquiror that he is not satisfied that the investment
is likely to be of net benefit to Canada, the acquiror has the right to make
representations and submit undertakings within 30 days of the date of the notice
(or any further period that is agreed upon between the acquiror and the
Minister). On the expiration of the 30 day period (or the agreed extension), the
Minister must forthwith notify the acquiror (i) that he is now satisfied that
the investment is likely to be of net benefit to Canada or (ii) that he is not
satisfied that the investment is likely to be of net benefit to Canada. In the
latter case, the acquiror may not proceed with the investment or, if the
investment has already been consummated, must divest itself of control of the
Canadian business.




E.
            Taxation.




A brief
description of certain provisions of the tax treaty between Canada and the
United States, Canada-United
States Income Tax Convention (1980), as amended, (the
"Convention"),  is included below, together with a brief outline of
certain taxes, including withholding provisions, to which United States security
holders are subject under the Income Tax Act (Canada) (the
"Canadian Tax Act"). The consequences, if any, of provincial, territorial,
state, local or foreign taxes (other than Canadian federal income taxes) are not
considered.




The following information is general
and security holders should seek the advice of their own tax advisors, tax
counsel or accountants with respect to the applicability or effect on their own
individual circumstances of the matters referred to herein.







45







Certain Canadian Federal
Income Tax Consequences




The
discussion under this heading summarizes the principal Canadian federal income
tax consequences of acquiring, holding and disposing of shares of common stock
of the Company for a shareholder of the Company who, at all relevant times and
for purposes of the Canadian Tax Act, is solely a resident of the United States
for purposes of the Convention,  holds shares of common stock of the
Company as capital property, deals at arm's length and is not affiliated with
the Company, and, does not use or hold, is not deemed to use or hold shares of
the common stock of the Company in, or in the course of, carrying on business in
Canada. (a "U.S. Holder"). This summary is based on the current provisions of
the Canadian Tax Act and the regulations to it and on the Company's
understanding of the administrative practices of Canada Revenue Agency, in
effect as of the date hereof, and takes into account all specific proposals to
amend the Canadian Tax Act and regulations to it publicly announced by the
Minister of Finance of Canada prior to the date hereof. No assurances can be
given that such proposed amendments will be enacted in the form proposed, or at
all.  This summary is not exhaustive of all potential Canadian federal
income tax consequences to a U.S. Holder and does not take into account or
anticipate any other changes in law or administrative practices, whether by
judicial, governmental or legislative action or decision.. This discussion is
general only and is not a substitute for independent advice from a shareholder's
own Canadian and U.S. tax advisors.




The
provisions of the Canadian Tax Act are subject to income tax treaties to which
Canada is a party, including the Convention.




Dividends on Common Shares
and Other Income




Under the
Canadian Tax Act, a non-resident of Canada is generally subject to Canadian
non-resident tax at the rate of 25 percent on amounts that are paid or credited
or deemed under the Canadian Tax Act to be paid or credited as, on account or in
lieu of payment of, or in satisfaction of dividends to a U.S. Holder by a
corporation resident in Canada. The Convention limits the rate to 15 percent if
the shareholder is a resident of the United States and the dividends are
beneficially owned by and paid to such shareholder, and to 5 percent if the
shareholder is also a corporation that beneficially owns at least 10 percent of
the voting stock of the Canadian payor corporation.




The
Convention generally exempts from Canadian non-resident tax dividends paid to
certain religious, scientific, literary, educational or charitable organizations
and certain pension organizations that are resident in the United States and are
exempt from income tax under the laws of the United States.




The
non-resident tax payable on dividends is to be withheld at source by the Company
or people acting on its behalf.




Dispositions of Common
Shares




Under the
Canadian Tax Act, a U.S. Holder will generally not be subject to tax in respect
of capital gains realised on the disposition or deemed disposition of shares of
the common stock of the Company unless, at the time of disposition, the shares
constitute "taxable Canadian property."




Shares of
common stock of the Company will not constitute taxable Canadian property of a
U.S. Holder at a particular time unless at any time in the 60 months immediately
preceding the disposition of such shares 25% or more of the issued shares of any
class or series in the capital stock of the Company belonged to one or more
persons in a group comprising the U.S. Holder and persons with whom the U.S.
Holder did not deal at arm's length.




The
Convention relieves U.S. Holders from liability for Canadian tax on capital
gains derived on a disposition of shares that are "taxable Canadian property"
unless




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




(d)
            the
      shareholder was an individual resident in Canada for 120 months during any
      period of 20 consecutive years preceding the disposition of the shares,
      and at any time during the 10 years immediately preceding the disposition
      of the shares the individual was a resident of Canada, and the shares were
      owned by the individual when he or she ceased to be resident in
      Canada.







46







If a U.S.
Holder realizes a capital gain or capital loss from a disposition of a share of
common stock of the Company which constitutes taxable Canadian property for
purposes of the Canadian Tax Act and is not otherwise exempt under the
Convention, then the capital gain or capital loss is the amount, if any, by
which the U.S. Holder's proceeds of disposition exceed (or are exceeded by,
respectively) the aggregate of the U.S. Holder's adjusted cost base of the share
and reasonable expenses of disposition. The capital gain or loss must be
computed in Canadian currency using a weighted average adjusted cost base for
identical properties. Fifty percent of a capital gain (“taxable capital gain”)
is included in income for Canadian tax purposes. The amount by which one half of
a U.S. Holder's capital loss from the disposition of taxable Canadian property
exceeds the taxable capital gain in a year may generally be deducted for
Canadian tax purposes from taxable capital gains realized by the shareholder
from the disposition of taxable Canadian property in the three years previous or
any subsequent year, in the manner permitted under the Canadian Tax Act. A U.S.
Holder whose shares do not constitute taxable Canadian property for purposes of
the Canadian Tax Act should not be subject to Canadian income tax on any gain
realized on the disposition of a share of the capital stock of the
Company.




United States Federal Income
Tax Consequences




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




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




Circular
230 Disclosure




Any
tax statement made herein regarding any U.S. federal tax is not intended or
written to be used, and cannot be used, by any taxpayer for purposes of avoiding
any penalties.  Any such statement herein is written in connection
with the marketing or promotion of the transaction to which the statement
relates.  Each taxpayer should seek advice based on the taxpayer’s
particular circumstances from an independent tax advisor.




Scope
of this Disclosure




Authorities




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







47







U.S.
Holders




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




Non-U.S.
Holders




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




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




This
summary does not address the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares to U.S. Holders that
are subject to special provisions under the Code, including but not limited to
the following U.S. Holders: (a) U.S. Holders that are tax-exempt
organizations, qualified retirement plans, individual retirement accounts, or
other tax-deferred accounts; (b) U.S. Holders that are financial
institutions, insurance companies, real estate investment trusts, or regulated
investment companies or that are broker-dealers or dealers in securities;
(c) U.S. Holders that have a "functional currency" other than the U.S.
dollar; (d) U.S. Holders that are subject to the alternative minimum tax
provisions of the Code; (e) U.S. tax expatriates; (f) U.S. Holders that own
Common Shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (g) U.S. Holders that acquired Common Shares in connection with
the exercise of employee stock options or otherwise as compensation for
services; (h) partners of partnerships that hold Common Shares or owners of
other entities classified as partnerships or "pass-through" entities for U.S.
federal income tax purposes that hold Common Shares, (i) U.S. Holders that
hold Common Shares other than as a capital asset within the meaning of
Section 1221 of the Code. U.S. Holders that are subject to special
provisions under the Code, including U.S. Holders described immediately above,
should consult their own financial advisor, legal counsel or accountant
regarding the tax consequences of the acquisition, ownership, and disposition of
Common Shares.




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




This
summary does not address the U.S. state, local or foreign, tax consequences to
U.S. Holders of the acquisition, ownership, and disposition of Common Shares,
nor U.S. federal tax consequences other than income tax. Each U.S. Holder should
consult its own financial advisor, legal counsel, or accountant regarding these
and other tax consequences of the acquisition, ownership, and disposition of
Common Shares.




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




Distributions on Common
Shares




General
Taxation of Distributions




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







48







Reduced
Tax Rates for Certain Dividends




For
taxable years beginning after December 31, 2002 and before January 1, 2011, a
dividend paid  by the Company generally may be taxed at the
preferential tax rates applicable to long-term capital gains (generally, a 15%
federal tax rate) if (a) the Company is a "qualified foreign corporation"
(as defined below), (b) the U.S. Holder receiving such dividend is an
individual, estate, or trust, and (c) such dividend is paid on Common
Shares that have been held by such U.S. Holder for at least 61 days during the
121-day period beginning 60 days before the "ex-dividend date" (i.e., the first
date that a purchaser of such Common Shares will not be entitled to receive such
dividend).




The
Company generally will be a "qualified foreign corporation" under
Section 1(h)(11) of the Code (a "QFC") if (a) the Company is
incorporated in a possession of the U.S., (b) the Company is eligible for
the benefits of the Canada-U.S. Tax Convention, or (c) the Common Shares
are readily tradable on an established securities market in the U.S. However,
even if the Company satisfies one or more of such requirements, the Company will
not be treated as a QFC if the Company is a "passive foreign investment company"
(“PFIC”) (as defined below) for the taxable year during which the Company pays a
dividend or for the preceding taxable year.




As
discussed below, the Company believes that it is a "passive foreign investment
company" (see more detailed discussion at "Additional Rules that May Apply to
U.S. Holders-Passive Foreign Investment Company" below). Accordingly, the
Company does not believe that it will be a QFC. If the Company is not a QFC, a
dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is
an individual, estate, or trust, generally will be taxed at ordinary income tax
rates (and not at the preferential tax rates applicable to long-term capital
gains). As discussed below, additional U.S. tax consequences may arise on such a
dividend under the PFIC rules. The dividend rules are complex and each U.S.
Holder should consult its own financial advisor, legal counsel, or accountant
regarding the dividend rules.




Distributions
Paid in Foreign Currency




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




Dividends
Received Deduction




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




Disposition of Common
Shares




A U.S.
Holder will recognize gain or loss on the sale or other taxable disposition of
Common Shares in an amount equal to the difference, if any, between (a) the
amount of cash plus the fair market value of any property received and
(b) such U.S. Holder's tax basis in the Common Shares sold or otherwise
disposed of. Any such gain or loss generally will be capital gain or loss, which
will be long-term capital gain or loss if the Common Shares are held for more
than one year.




Although
preferential tax rates generally apply to long-term capital gains of a U.S.
Holder that is an individual, estate, or trust, such preferential tax rates are
not available if the Company is a PFIC, unless a QEF election is made, as
described below. There are currently no preferential tax rates for long-term
capital gains of a U.S. Holder that is a corporation. Deductions for capital
losses and net capital losses are subject to complex limitations. For a U.S.
Holder that is an individual, estate, or trust, capital losses may be used to
offset capital gains and up to U.S.$3,000 of ordinary income. An unused capital
loss of a U.S. Holder that is an individual, estate, or trust generally may be
carried forward to subsequent taxable years, until such net capital loss is
exhausted. For a U.S. Holder that is a corporation, capital losses may be used
to offset capital gains, and an unused capital loss generally may be carried
back three years and carried forward five years from the year in which such net
capital loss is recognized.







49







Foreign Tax
Credit




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




Complex
limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a U.S. Holder's U.S.
federal income tax liability that such U.S. Holder's "foreign source" taxable
income bears to such U.S. Holder's worldwide taxable income. In applying this
limitation, a U.S. Holder's various items of income and deduction must be
classified, under complex rules, as either "foreign source" or "U.S. source." In
addition, this limitation is calculated separately with respect to specific
categories of income known as "baskets". Dividends paid by the Company generally
will constitute "foreign source" income. In addition, a U.S. Holder that is a
corporation and that owns 10% or more of the voting stock of the Company may,
subject to complex limitations, be entitled to an "indirect" foreign tax credit
under Section 902 of the Code with respect to dividends paid by the
Company. Unused foreign tax credits generally can be carried back one year and
forward ten years. The foreign tax credit rules are complex, and each U.S.
Holder should consult its own financial advisor, legal counsel, or accountant
regarding the foreign tax credit rules.




Information Reporting;
Backup Withholding Tax




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




Additional
Rules that May Apply to U.S. Holders




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




Controlled Foreign
Corporation




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







50







If the
Company is a CFC, a 10% Shareholder generally will be subject to current
U.S. federal income tax with respect to (a) such 10% Shareholder's pro rata
share of the "subpart F income" (as defined in Section 952 of the Code) of
the Company and (b) such 10% Shareholder's pro rata share of the
earnings of the Company invested in "United States property" (as defined in
Section 956 of the Code). In addition, under Section 1248 of the Code,
any gain recognized on the sale or other taxable disposition of Common Shares by
a U.S. Holder that was a 10% Shareholder at any time during the five-year
period ending with such sale or other taxable disposition generally will be
treated as a dividend to the extent of the "earnings and profits" of the Company
that are attributable to such Common Shares.




The
Company does not believe that it has previously been, or currently is, a CFC.
However, there can be no assurance that the Company will not be a CFC for the
current or any future taxable year.




Passive Foreign Investment
Company




The
Company generally will be a "passive foreign investment company" under
Section 1297 of the Code (a "PFIC") if, for a taxable year, (a) 75% or
more of the gross income of the Company for such taxable year is passive income
or (b) 50% or more of the assets held by the Company either produce passive
income or are held for the production of passive income. "Passive income"
includes, for example, dividends, interest, certain rents and royalties, certain
gains from the sale of stock and securities, and certain gains from commodities
transactions.




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




The
Company believes that it was a PFIC for the taxable year ended March 31, 2008
and that it will be a PFIC for the taxable year ending March 31, 2009. There can
be no assurance, however, that the IRS will agree with a determination made by
the Company concerning its PFIC status.




Default
PFIC Rules Under Section 1291 of the Code




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




A
Non-Electing U.S. Holder will be subject to the rules of Section 1291 of
the Code with respect to (a) any gain recognized on the sale or other
disposition of Common Shares and (b) any excess distribution paid on the
Common Shares. A distribution generally will be an "excess distribution" to the
extent that such distribution (together with all other distributions received in
the current taxable year) exceeds 125% of the average distributions received
during the three preceding taxable years (or during a U.S. Holder's holding
period for the Common Shares, if shorter).




Under
Section 1291 of the Code, any gain recognized on the sale or other taxable
disposition of Common Shares, and any excess distribution paid on the Common
Shares, must be rateably allocated to each day in a Non-Electing U.S. Holder's
holding period for the Common Shares. The amount of any such gain or excess
distribution allocated to prior years of such Non-Electing U.S. Holder's holding
period for the Common Shares will be subject to U.S. federal income tax at the
highest tax applicable to ordinary income in each such prior year. A
Non-Electing U.S. Holder will be required to pay interest on the resulting tax
liability for each such prior year, calculated as if such tax liability had been
due in each such prior year. The amount of any such gain or excess distribution
allocated to the current year of such Non-Electing U.S. Holder's holding period
for the Common Shares will be treated as ordinary income in the current year
(but will not qualify for the preferential dividend rate previously discussed),
and no interest charge will be incurred with respect to the resulting tax
liability for the current year.







51







If the
Company is a PFIC for any taxable year during which a Non-Electing U.S. Holder
holds Common Shares, the Company will continue to be treated as a PFIC with
respect to such Non-Electing U.S. Holder, regardless of whether the Company
ceases to be a PFIC in one or more subsequent years. A Non-Electing U.S. Holder
may terminate this deemed PFIC status by electing to recognize gain (which will
be taxed under the rules of Section 1291 of the Code discussed above) as if
such Common Shares were sold on the last day of the last taxable year for which
the Company was a PFIC.




QEF
Election




A U.S.
Holder that makes a QEF Election generally will not be subject to the rules of
Section 1291 of the Code discussed above. However, a U.S. Holder that makes
a QEF Election will be subject to U.S. federal income tax annually on such U.S.
Holder's pro rata share of (a) net capital gain of the Company, which will
be taxed as capital gain to such U.S. Holder, and (b) the ordinary earnings
of the Company, which will be taxed as ordinary income to such U.S. Holder.
Generally, "net capital gain" is the excess of (a) net long-term capital
gain over (b) net short-term capital loss, and "ordinary earnings" are the
excess of (a) "earnings and profits" over (b) net capital gain. A U.S.
Holder that makes a QEF Election will be subject to U.S. federal income tax on
such amounts for each taxable year in which the Company is a PFIC, regardless of
whether such amounts are actually distributed to such U.S. Holder by the
Company. However, a U.S. Holder that makes a QEF Election may, subject to
certain limitations, elect to defer payment of current U.S. federal income tax
on such amounts, subject to an interest charge. A U.S. Holder that makes a QEF
Election also must report certain information concerning the Company to the
IRS.




A U.S.
Holder that makes a QEF Election generally also (a) may receive a tax-free
distribution from the Company to the extent that such distribution represents
"earnings and profits" of the Company that were previously included in income by
the U.S. Holder because of such QEF Election and (b) will adjust such U.S.
Holder's tax basis in the Common Shares to reflect the amount included in income
or allowed as a tax-free distribution because of such QEF Election. In addition,
a U.S. Holder that makes a QEF Election generally will recognize capital gain or
loss on the sale or other taxable disposition of Common Shares.




Each U.S.
Holder should consult its own financial advisor, legal counsel, or accountant
regarding the availability of, and procedure for making, a QEF Election. U.S.
Holders should be aware that there can be no assurance that the Company will
satisfy record keeping requirements that apply to a QEF, or that the Company
will supply U.S. Holders with information that such U.S. Holders are required to
report under the QEF rules, in the event that the Company is a PFIC and a U.S.
Holder wishes to make a QEF Election.  A U.S. Holder will not
recognize capital gain on the disposition of the shares and will be subject to
tax under section 1291 if the U.S. holder owned the shares for any period when
the Company was not a QEF with respect to the U.S. Holder, unless a purging
election has been made immediately prior to the QEF election.




Mark-to-Market
Election




A U.S.
Holder may make a Mark-to-Market Election only if the Common Shares are
marketable stock. The Common Shares generally will be "marketable stock" if the
Common Shares are regularly traded on (a) a national securities exchange
that is registered with the Securities and Exchange Commission, (b) the
national market system established pursuant to section 11A of the Securities and
Exchange Act of 1934, or (c) a foreign securities exchange that is
regulated or supervised by a governmental authority of the country in which the
market is located, provided that (i) such foreign exchange has trading
volume, listing, financial disclosure, and other requirements and the laws of
the country in which such foreign exchange is located, together with the rules
of such foreign exchange, ensure that such requirements are actually enforced
and (ii) the rules of such foreign exchange ensure active trading of listed
stocks.







52







A U.S.
Holder that makes a Mark-to-Market Election generally will not be subject to the
rules of Section 1291 of the Code discussed above. However, if a U.S.
Holder makes a Mark-to-Market Election after the beginning of such U.S. Holder's
holding period for the Common Shares and such U.S. Holder has not made a timely
QEF Election, the rules of Section 1291 of the Code discussed above will
apply to certain dispositions of, and distributions on, the Common
Shares.




A U.S.
Holder that makes a Mark-to-Market Election will include as ordinary income, for
each taxable year in which the Company is a PFIC, an amount equal to the excess,
if any, of (a) the fair market value of the Common Shares as of the close
of such taxable year over (b) such U.S. Holder's tax basis in such Common
Shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a
deduction in an amount equal to the lesser of (a) the excess, if any, of
(i) such U.S. Holder's adjusted tax basis in the Common Shares over
(ii) the fair market value of such Common Shares as of the close of such
taxable year or (b) the excess, if any, of (i) the amount included in
ordinary income because of such Mark-to-Market Election for prior taxable years
over (ii) the amount allowed as a deduction because of such Mark-to-Market
Election for prior taxable years.




A U.S.
Holder that makes a Mark-to-Market Election generally also will adjust such U.S.
Holder's tax basis in the Common Shares to reflect the amount included in gross
income or allowed as a deduction because of such Mark-to-Market Election. In
addition, upon a sale or other taxable disposition of Common Shares, a U.S.
Holder that makes a Mark-to-Market Election will recognize ordinary income or
loss (not to exceed the excess, if any, of (a) the amount included in
ordinary income because of such Mark-to-Market Election for prior taxable years
over (b) the amount allowed as a deduction because of such Mark-to-Market
Election for prior taxable years).




Each U.S.
Holder should consult its own financial advisor, legal counsel, or accountant
regarding the availability of, and procedure for making, a Mark-to-Market
Election.




Other
PFIC Rules




Under
Section 1291(f) of the Code, the IRS has issued proposed Treasury
Regulations that, subject to certain exceptions, would cause a U.S. Holder that
had not made a timely QEF Election to recognize gain (but not loss) upon certain
transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and
exchanges pursuant to corporate reorganizations).




An
individual U.S. Holder's estate may not receive a step-up in basis in the Common
Shares at the U.S. Holder's death, if the Company is or was a PFIC during the
U.S. Holder's period of ownership of the Common Shares.




Certain
additional adverse rules will apply with respect to a U.S. Holder if the Company
is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For
example under Section 1298(b)(6) of the Code, a U.S. Holder that uses
Common Shares as security for a loan will, except as may be provided in Treasury
Regulations, be treated as having made a taxable disposition of such Common
Shares.




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




F.
            Dividend and paying
      agents




Not
Applicable




G.
            Statement by
      experts.




Not
Applicable.







53







H.
            Documents on
      display.




Any
statement in this Annual Report about any of the Company's contracts or other
documents is not necessarily complete. If the contract or document is filed as
an exhibit to this Annual Report, the contract or document is deemed to modify
the description contained in this Annual Report. Readers must review the
exhibits themselves for a complete description of the contract or
document.




Readers
may review a copy of the Company's filings with the U.S. Securities and Exchange
Commission ("the "SEC"), including exhibits and schedules filed with it, at the
SEC's public reference facilities at 100 F Street, N.E., Washington, D.C. 20549.
Readers may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC maintains a Web site (http://www.sec.gov) that contains
reports, submissions and other information regarding registrants that file
electronically with the SEC. The Company has only recently become subject to the
requirement to file electronically through the EDGAR system most of its
securities documents, including registration statements under the Securities Act
of 1933, as amended and registration statements, reports and other documents
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).




Readers
may read and copy any reports, statements or other information that the Company
files with the SEC at the address indicated above and may also access them
electronically at the Web site set forth above. These SEC filings are also
available to the public from commercial document retrieval
services.




The
Company is required to file reports and other information with the SEC under the
Exchange Act. Reports and other information filed by the Company with the SEC
may be inspected and copied at the SEC's public reference facilities described
above. As a foreign private issuer, the Company is exempt from the rules under
the Exchange Act prescribing the furnishing and content of proxy statements and
the Company's officers, directors and principal shareholders are exempt from the
reporting and short-swing profit recovery provisions contained in section 16 of
the Exchange Act. Under the Exchange Act, as a foreign private issuer, the
Company is not required to publish financial statements as frequently or as
promptly as United States companies.




Any of
the documents referred to above can also be viewed at the offices of the
Company's solicitors, Hodgson Russ, 150 King Street West, Suite 2309, Toronto,
Ontario M5H 1J9.  All of the documents referred to above are in
English.




I.
            Subsidiary
      Information.




Not
applicable.




Item
11.             Quantitative
and Qualitative Disclosures About Market Risk.




The
Company owns shares of other listed companies. Certain of these shares are
listed under current assets on the Company's balance sheet as at March 31, 2008
as "Marketable Securities" at an amount of $37,569, which is their quote market
value.  Market risk represents the risk of loss that may impact the
financial position, results of operations, or cash flows of the Company due to
adverse changes in financial market prices, including interest rate risk,
foreign currency exchange rate risk, commodity price risk, and other relevant
market or price risks.




As the
Company is in the permitting and advanced exploration stage, it presently has no
activities related to derivative financial instruments or derivative commodity
instruments.




The
financial results are quantified in Canadian dollars. In the past, the Company
has raised equity funding through the sale of securities denominated in Canadian
dollars, and the Company may in the future raise additional equity funding or
financing denominated in Canadian dollars. The Company currently does not
believe it currently has any materially significant market risks relating to
operations resulting from foreign exchange rates. However, if the Company enters
into financing or other business arrangements denominated in currency other than
the Canadian or United States dollar, variations in the exchange rate may give
rise to foreign exchange gains or losses that may be significant.







54







The
Company currently has no long-term debt obligations. The Company does not use
financial instruments for trading purposes and is not a party to any leverage
derivatives. In the event the Company experiences substantial growth in the
future, the Company's business and results of operations may be materially
affected by changes in interest rates and certain other credit risk associated
with the Company's operations.




Item
12.             Description
of Securities Other than Equity Securities




Not
Applicable.




PART
II




Item
13.             Defaults,
Dividend Arrearages and Delinquencies.




There are
none.




Item
14.             Material
Modifications to the Rights of Security Holders and Use of
Proceeds.




Not
Applicable.




Item
15.             Controls
and Procedures.




(a)
            Disclosure Controls and
      Procedures.




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






(b)  
  Management’s Annual
Report on Internal Control Over Financial Reporting.




Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company.  Management has designed such
internal control over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with Canadian GAAP, and
reconciled to US GAAP, as applicable.




Because
of its inherent limitations, the Company’s internal control over financial
reporting may not prevent or detect all possible misstatements or
frauds.  Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with policies
or procedures may deteriorate.




To
evaluate the effectiveness of the Company’s internal control over financial
reporting, Management has used the Internal Control - Integrated Framework,
which is a suitable, recognized control framework established by the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO).  Management has assessed the effectiveness of the Company’s
internal control over financial reporting and concluded that such internal
control over financial reporting is effective as of March 31,
2008.




(c)   
Attestation Report
of the Company’s Registered Accounting Firm.




The
Registrant’s independent registered public accounting firm, KPMG LLP, has issued
an attestation report expressing an opinion on the Company’s internal control
over financial reporting as of March 31, 2008. For KPMG LLP’s report, see Item
19 of this Annual Report on Form 20-F.







55










(d)
            Changes
      in Internal Controls over Financial
Reporting.




There
      have not been any changes in the Company's internal controls over
      financial reporting or in other factors that have been identified in
      connection with the evaluation described above that occurred during the
      period covered by this Annual Report that has materially affected, or is
      reasonably likely to materially affect, the Company's internal controls
      over financial reporting.




Item
16.             [Reserved]




Item
16A.          Audit Committee
Financial Expert.




The
Company's Board of Directors has determined that there is at least one audit
committee financial expert, as defined under Item 16A of Form 20-F, serving on
its audit committee, namely, David Whittle, whose qualifications are set out in
Item 6, above.Mr.
Whittle is independent, as such term is defined by the listing standards of the
AMEX.




Item
16B.          Code of
Ethics.




The Board
of Directors, on February 2, 2003, adopted a Code of Ethics (the "Code")
entitled "Ethics and Conflict of Interest Policy" which applies to each of the
directors and officers of the Company and its affiliates. A copy of the 2003
Code has been previously filed. On May 29, 2006 the Board of Directors adopted
an updated and expanded set of Corporate Governance Policies, which replaced the
2003 Code.




The
Corporate Governance Policy governs the actions of and is applicable to all of
the directors and officers of the Company and its subsidiaries, and their
affiliates. The 2006 Corporate Governance Policies address the
following:




•
            compliance
      with all the laws and regulations identified therein and with the
      requirements of the U.S. Securities and Exchange Commissions as mandated
      by the Sarbanes-Oxley Act of 2002, and the requirements of the Toronto
      Stock Exchange;




•
            corporate
      opportunities and potential conflicts of
  interest;




•
            the
      quality of public disclosures;




•
            the
      protection and appropriate use of the Company's assets and
      resources;




•
            the
      protection of confidential
information;




•
            insider
      trading;




•
            fair
      behaviour; and




•
            reporting
      violations of the Policy or Board
Directives




The
Company has also adopted an Insider Trading Policy which applies to all
employees of the Company.




There
were no waivers to the 2006 Corporate Governance Policies during fiscal
2007.  A copy of the 2006 Corporate Governance Policies is filed as
Exhibit 11.1 to this Annual Report.




Item
16C.          Principal
Accountant Fees and Services.




A.
            Audit
    Fees




"Audit
Fees" are the aggregate fees billed by KPMG LLP for the audit of the Company's
consolidated annual financial statements, assistance with interim financial
statements, attestation services that are provided in connection with statutory
and regulatory filings or engagements, services associated with registration
statements, prospectuses, periodic reports and other documents filed with
securities regulatory bodies and stock exchanges and other documents issued in
connection with securities offerings and admissions to trading, and assistance
in responding to comment letters from securities regulatory bodies, and
consultations with the Company's management as to accounting or disclosure
treatment of transactions or events and/or the actual or potential impact of
final or proposed rules, standards or interpretations by the securities
regulatory authorities, accounting standard setting bodies, or other regulatory
or standard setting bodies.







56







Aggregate
audit fees billed in fiscal 2008 by KPMG were $57,978, and the Company was
billed $60,182 in the fiscal year 2007.  All such fees were approved
by the Audit Committee.




B.
            Audit-Related
      Fees




"Audit-Related
Fees" are fees that are or would be charged by KPMG for presentations or
training on accounting or regulatory pronouncements, due diligence services
related to accounting and tax matters in connection with potential
acquisitions/dispositions, advice and documentation assistance with respect to
internal controls over financial reporting and disclosure controls and
procedures of the Company, and if applicable, audits of financial statements of
a company's employee benefit plan. "Audit Related Fees" charged by KPMG during
the fiscal period ended March 31, 2008 were $nil and $55,820 for March 31,
2007.  All such services were approved by the Audit
Committee.




C.
            Tax
  Fees




"Tax
Fees" are fees for professional services rendered by KPMG for tax compliance,
tax advice on actual or contemplated transactions.




Aggregate
tax fees billed in fiscal 2008 by KPMG were $nil (2007 - $12,000) pertaining to
tax compliance.  These services were approved by the Audit
Committee.




D.
            All Other
      Fees




There
were no other fees charged by KPMG during the fiscal years ended March 31, 2008
and 2007.




The Audit
Committee pre-approves all audit services to be provided to the Company by its
independent auditors. The Audit Committee's policy regarding the pre-approval of
non-audit services to be provided to the Company by its independent auditors is
that all such services shall be pre-approved by the Audit Committee. Non-audit
services that are prohibited to be provided to the Company by its independent
auditors may not be pre-approved. In addition, prior to the granting of any
pre-approval, the Audit Committee must be satisfied that the performance of the
services in question will not compromise the independence of the independent
auditors. All non-audit services, performed by the Company's auditor, for the
fiscal year ended March 31, 2008, have been pre-approved by the Audit Committee
of the Company. No non-audit services were approved pursuant to the de minimis exemption to the
pre-approval requirement.




Item
16D.          Exemptions from
the Listing Standards for Audit Committees.




Not
Applicable.




Item
16E.          Purchases of
Equity Securities by the Issuer and Affiliated Purchasers.




There
were no purchases made by or on behalf of the Company or any affiliated
purchaser of shares or other units of the Company's equity
securities.




PART
III




Item
17.             Financial
Statements.




The
Company's consolidated financial statements are stated in Canadian dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP). Material measurement differences between GAAP in
Canada and GAAP in the United States applicable to the Company, are described in
Note 9 to the Consolidated Financial Statements.







57







The
financial statements and notes thereto as required under Item 17 are attached
hereto and filed as part of this Annual Report, are individually listed under
Item 19, and are found immediately following the text of this Annual Report. The
audit report of KPMG LLP, independent registered public accounting firm, is
included herein immediately preceding the financial statements.




For
audited financial statements for Fiscal 2008, Fiscal 2007 and Fiscal 2006,
please see Item 19 below.




Item
18.             Financial
Statements.




Not
Applicable.




Item
      19.
            Exhibits




Financial
Statements




The
Consolidated Financial Statements of the Company and exhibits listed below are
filed with this annual report on Form 20-F in the United States. This report is
also filed in Canada as an Annual Information Form and the Canadian filing does
not include the Consolidated Financial Statements and exhibits listed below.
Canadian investors should refer to the audited Financial Statements of the
Company for the years ended March 31, 2008 and 2007 filed with Canadian
Securities Regulators on SEDAR under "Audited Annual Financial Statements -
English" and incorporated herein by reference.




The
following financial statements are attached to and form a part of this report
filed with the SEC (see Appendix):




Consolidated
Financial Statements of the Company:




•
            Report
      of Independent Registered Public Accounting
  Firm.






•
            Consolidated
      Balance Sheets as of March 31, 2008 and
2007.






•
            Consolidated
      Statements of Operations and Deficit for the years ended March 31, 2008,
      2007 and 2006.






•
            Consolidated
      Statements of Cash Flows for the years ended March 31, 2008, 2007 and
      2006.






•
            Notes
      to the Consolidated Financial
Statements.












58














Consolidated Financial
Statements


(Expressed in Canadian
dollars)




Mountain Province Diamonds
Inc.




Years ended March 31, 2008, 2007 and
2006




















































REPORT
      OF MANAGEMENT








The
accompanying consolidated financial statements are the responsibility of
management. These statements have been prepared in accordance with generally
accepted accounting principles in Canada, and reflect management’s best
estimates and judgments based on currently available information.





Management
has developed and maintains systems of internal accounting controls in order to
ensure, on a reasonable and cost effective basis, the reliability of its
financial information and the safeguarding of assets.





The
Board of Directors is responsible for ensuring that management fulfils its
responsibilities through the Audit Committee of three independent directors
which meets with management and the auditors during the year, to review
reporting and control issues and to satisfy itself that each party has properly
discharged its responsibilities. The Committee reviews the financial statements
before they are presented to the Board of Directors for approval and considers
the independence of the auditors.





The
consolidated financial statements have been audited by KPMG LLP, an independent
firm of chartered accountants appointed by the shareholders at the Company’s
last annual meeting. Their report outlines the scope of their examination and
opinion on the consolidated financial statements.











“Patrick
      Evans”


Patrick
      C. Evans


President
      and Chief Executive Officer











“Jennifer
      Dawson”


Jennifer
      M. Dawson


Chief
      Financial Officer and Corporate
Secretary











June
      23, 2008






















REPORT
OF INDEPENDENT REGISTEREDPUBLIC
ACCOUNTING FIRM






To the
Board of Directors of Mountain Province Diamonds Inc.






We have
audited Mountain Province Diamonds Inc.'s ("the Company") internal control over
financial reporting as of March 31, 2008, based on the criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management's
Report on Internal Control over Financial Reporting with this Form
20-F.  Our responsibility is to express an opinion the Company's
internal control over financial reporting based on our audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audit also included performing such other procedures as we considered necessary
in the circumstances.  We believe that our audit provides a reasonable
basis for our opinion.




A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.









KPMG LLP, is a
      Canadian limited liability partnership and a member firm of the
      KPMG
              network of
      independent member firms affiliated with KPMG International, a Swiss
      cooperative.
              KPMG Canada
      provides services to KPMG LLP.











Page
2









In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of March 31, 2008, based on the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the
Companyas of
March 31, 2008 and March 31, 2007, and the related consolidated statements
of operations and deficit and cash flows for each of the years in the three-year
period ended March 31, 2008 and the consolidated statements of comprehensive
income and accumulated other comprehensive income for the year ended
March 31, 2008, and our report dated June 23, 2008, expressed an
unqualified opinion on thoseconsolidatedfinancial
statements.




KPMG signature


Chartered
Accountants, Licensed Public Accountants









Toronto,
Canada




June
23, 2008














REPORT
OF INDEPENDENT REGISTEREDPUBLIC
ACCOUNTING FIRM






To the
Board of Directors of Mountain Province Diamonds Inc.




We have
audited the accompanying consolidated balance sheets of Mountain Province
Diamonds Inc. ("the Company") as of March 31, 2008 and 2007 and the related
consolidated statements of operations and deficit and cash flows for each of the
years in the three-year period ended March 31, 2008 and the consolidated
statements of comprehensive income and accumulated other comprehensive income
for the year ended March 31, 2008.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.




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




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of March 31,
2008 and 2007 and the results of its operations and its cash flows for each of
the years in the three-year period ended March 31, 2008 in conformity with
Canadian generally accepted accounting principles.




Canadian
generally accepted accounting principles vary in certain significant respects
from U.S. generally accepted accounting principles.  Information
relating to the nature and effect of such differences is presented in note 8 to
the consolidated financial statements.




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of March 31, 2008, based on the criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated June 23,
2008 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.







Chartered
Accountants, Licensed Public Accountants









Toronto,
Canada




June
23, 2008


KPMG LLP, is a
      Canadian limited liability partnership and a member firm of the
      KPMG
                network of
      independent member firms affiliated with KPMG International, a Swiss
      cooperative.
                KPMG Canada
      provides services to KPMG LLP.


























COMMENTS
BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES






The
standards of the Public Company Accounting Oversight Board (United States)
require the addition of an explanatory paragraph when the financial statements
are affected by conditions and events that cast substantial doubt on the
Company's ability to continue as a going concern, such as those described in
Note 1 to the consolidated financial statements, when as a result of the
correction of an error in the reconciliation from Canadian generally accepted
accounting principles to U.S. generally accepted accounting principles has
been restated as described in note 8(c) to the consolidated financial
statements, and when there is a change in accounting principle that has a
material effect on the comparability of the Company's financial statements, such
as the change described in note 8(b).  Although we conducted our
audits in accordance with Canadian generally accepted auditing standards and
with the standards of the Public Company Accounting Oversight Board (United
States), our report to the shareholders dated June 23, 2008 is expressed in
accordance with Canadian reporting standards which do not permit a reference to
such conditions or events in the auditors' report when these are adequately
disclosed in the financial statements.







Chartered
Accountants, Licensed Public Accountants









Toronto,
Canada




June
23, 2008


KPMG LLP, is a
      Canadian limited liability partnership and a member firm of the
      KPMG
                network of
      independent member firms affiliated with KPMG International, a Swiss
      cooperative.
                KPMG Canada
      provides services to KPMG LLP.





MOUNTAIN
PROVINCE DIAMONDS INC.


Consolidated
Balance Sheets (Expressed in Canadian dollars) March 31, 2008 and 2007




2008
            
            
            2007AssetsCurrent
      assetsCash
            
            $
            144,750
            
            
            $
            179,970Term
      deposit
            
            
            1,437,377
            
            
            
            275,000Marketable
      securities (Note 3)
            
            
            37,569
            
            
            
            4,632Amounts
      receivable
            
            
            103,399
            
            
            
            127,487Advances and
      prepaid expenses
            
            
            56,932
            
            
            
            11,2601,780,027
            
            
            
            598,349Long-term
      investment (Note 3)
            
            
            -
            
            
            
            920,000Investment
      in Camphor Ventures (Note 4)
            
            
            -
            
            
            
            7,519,747Investment
      in Gahcho Kué Project (Note 5)
            
            
            64,984,140
            
            
            
            32,570,324Equipment
            
            
            -
            
            
            
            7,407Total
      assets
            
            $
            66,764,167
            
            
            $
            41,615,827Liabilities
      and Shareholders' EquityCurrent
      liabilitiesAccounts
      payable and accrued liabilities
            
            $
            213,078
            
            
            $
            418,799Long-term
      liabilitiesFuture
      income tax liabilities (Note 7)
            
            
            5,909,363
            
            
            
            -Shareholders'
      equity:Share
      capital (Note 6)
            
            
            85,581,729
            
            
            
            66,579,083Contributed
      surplus (Note 6)
            
            
            945,210
            
            
            
            701,626Deficit
            
            
            (25,918,150
            )
            
            
            (26,083,681
            )Accumulated
      other comprehensive income
            
            
            32,937
            
            
            
            -Total
      shareholders' equity
            
            
            60,641,726
            
            
            
            41,197,028Total
      liabilities and shareholders' equity
            
            $
            66,764,167
            
            
            $
            41,615,827


See
accompanying notes to consolidated financial statements
 Nature of operations
(Note 1)
 Going concern (Note
1)
 Subsequent event
(Note 6)


On behalf of the Board of
Directors:







“Jonathan
      Comerford”
            
            “Patrick
      Evans”Jonathan
      Comerford, Director
            
            Patrick
      Evans, Director


MOUNTAIN
PROVINCE DIAMONDS INC.


Consolidated
Statements of Operations and Deficit


(Expressed
in Canadian dollars)


Years
ended March 31, 2008, 2007, and 2006




2008
            
            
            2007
            
            
            2006Expenses:Amortization
            
            $
            (14,239
            )
            
            $
            (1,675
            )
            
            $
            (1,082
            )Consulting
      fees
            
            
            (474,704
            )
            
            
            (476,754
            )
            
            
            (309,217
            )Interest and
      bank charges
            
            
            (4,605
            )
            
            
            (1,200
            )
            
            
            (1,231
            )Office
      and administration
            
            
            (115,079
            )
            
            
            (80,998
            )
            
            
            (54,043
            )Professional
      fees
            
            
            (202,245
            )
            
            
            (198,628
            )
            
            
            (166,150
            )Promotion and
      investor relations
            
            
            (86,380
            )
            
            
            (124,467
            )
            
            
            (108,184
            )Salary
      and benefits
            
            
            (129,291
            )
            
            
            (56,101
            )
            
            
            (37,500
            )Stock-based
      compensation (Note 6)
            
            
            -
            
            
            
            (186,321
            )
            
            
            (314,879
            )Transfer agent
      and regulatory fees
            
            
            (106,343
            )
            
            
            (190,121
            )
            
            
            (99,794
            )Travel
            
            
            (61,324
            )
            
            
            (45,672
            )
            
            
            (39,981
            )Net
      loss for the period before the undernoted
            
            
            (1,194,210
            )
            
            
            (1,361,937
            )
            
            
            (1,132,061
            )Other
      earnings (expenses):Interest
      income
            
            
            62,155
            
            
            
            23,940
            
            
            
            12,173Write-down of
      long-term investment
            
            
            -
            
            
            
            (480,000
            )
            
            
            (1,080,000
            )Gain on
      sale of long-term investment (Note 3)
            
            
            1,075,420
            
            
            
            -
            
            
            
            -Share
      of loss of Camphor Ventures
            
            
            -
            
            
            
            (143,266
            )
            
            
            -1,137,575
            
            
            
            (599,326
            )
            
            
            (1,067,827
            )Net
      loss for the year before tax recovery
            
            
            (56,635
            )
            
            
            (1,961,263
            )
            
            
            (2,199,888
            )Future
      income tax recovery (Note 7)
            
            
            222,166
            
            
            
            -
            
            
            
            -Net
      income (loss) for the year
            
            
            165,531
            
            
            
            (1,961,263
            )
            
            
            (2,199,888
            )Deficit,
      beginning of year
            
            
            (26,083,681
            )
            
            
            (24,122,418
            )
            
            
            (21,922,530
            )Deficit,
      end of
      year
            
            $
            (25,918,150
            )
            
            $
            (26,083,681
            )
            
            $
            (24,122,418
            )Basic
      and diluted earnings (loss) per
      share
            
            $
            0.00
            
            
            $
            (0.04
            )
            
            $
            (0.04
            )Weighted
      average number of shares outstanding
            
            
            59,674,830
            
            
            
            55,092,966
            
            
            
            52,783,833


See
accompanying notes to consolidated financial statements


MOUNTAIN
PROVINCE DIAMONDS INC.


Consolidated
Statement of Comprehensive Income (Expressed in Canadian dollars) Year
ended March 31, 2008




2008Net
      income for the year
            
            $
            165,531Other
      Comprehensive IncomeUnrealized
      loss on marketable securities
            
            
            (14,239
            )Increase
      in value of long-term investment
            
            
            795,420Recycling
      of gain on sale of long-term investment (Note 3)
            
            
            (1,075,420
            )Recycling
      of opening unrealized gain on long-term investment
            
            
            280,000Comprehensive
      Income
            
            $
            151,292


Consolidated
Statement of Accumulated Other Comprehensive Income (Expressed in Canadian
Dollars) Year Ended March 31, 2008




2008Balance,
      on initial adoption of CICA 3855Marketable
      securities
            
            $
            47,176Long-term
      investment
            
            
            280,000Increase
      in value of long-term investment
            
            
            795,420Recycling
      of gain on sale of long-term investment through other comprehensive
      income
            
            
            (1,075,420
            )2008
      Other Comprehensive Loss
            
            
            (14,239
            )Balance,
      end of year
            
            $
            32,937


MOUNTAIN
PROVINCE DIAMONDS INC.


Consolidated
Statements of Cash Flows


(Expressed
in Canadian dollars)


Years
ended March 31, 2008, 2007, and 2006




2008
            
            
            2007
            
            
            2006Cash
      provided by (used in):Operating
      activities:Net
      income (loss) for the
      year
            
            $
            165,532
            
            
            $
            (1,961,263
            )
            
            $
            (2,199,888
            )Items
      not involving cash:Future
      income tax recovery
            
            
            (222,166
            )
            
            
            -
            
            
            
            -Amortization
            
            
            14,239
            
            
            
            1,675
            
            
            
            1,082Stock-based
      compensation (Note 6)
            
            
            -
            
            
            
            186,321
            
            
            
            314,879Write-down of
      long-term investment
            
            
            -
            
            
            
            480,000
            
            
            
            1,080,000Gain on
      sale of long-term investment (Note 3)
            
            
            (1,075,420
            )
            
            
            -
            
            
            
            -Share
      of loss of Camphor Ventures
            
            
            -
            
            
            
            143,266
            
            
            
            -Changes
      in non-cash operating working capitalAmounts
      receivable
            
            
            139,668
            
            
            
            (60,850
            )
            
            
            (40,313
            )Advances and
      prepaid expenses
            
            
            (45,672
            )
            
            
            (5,208
            )
            
            
            30,827Accounts
      payable and accrued liabilities
            
            
            (205,722
            )
            
            
            237,533
            
            
            
            86,290(1,229,541
            )
            
            
            (978,526
            )
            
            
            (727,123
            )Investing
      activities:Deferred
      exploration costs
            
            
            (13,496
            )
            
            
            (88,722
            )
            
            
            (63,379
            )Investment in
      term deposit
            
            
            (912,377
            )
            
            
            (275,000
            )
            
            
            -Purchase of
      equipment
            
            
            -
            
            
            
            (5,929
            )
            
            
            -Proceeds from
      sale of investment
            
            
            1,995,420
            
            
            
            -
            
            
            
            -Acquisition of
      Camphor Ventures, net of cash acquired (Note 4)
            
            
            (16,274
            )
            
            
            (205,755
            )
            
            
            -1,053,273
            
            
            
            (575,406
            )
            
            
            (63,379
            )Financing
      activities:Shares
      issued for cash
            
            
            141,048
            
            
            
            888,450
            
            
            
            634,850Increase
      (decrease) in cash and cash equivalents
            
            
            (35,220
            )
            
            
            (665,482
            )
            
            
            (155,652
            )Cash,
      beginning of year
            
            
            179,970
            
            
            
            845,452
            
            
            
            1,001,104Cash,
      end of
      year
            
            $
            144,750
            
            
            $
            179,970
            
            
            $
            845,452


Supplementary
non-cash investing and financing activities (Note 4) See accompanying
notes to consolidated financial statements


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006


1.          Nature
of operations:


The
Company is in the process of exploring and permitting its mineral properties
primarily in conjunction with De Beers Canada Inc. (“De Beers Canada”) (Note 5),
and has not yet determined whether these properties contain mineral reserves
that are economically recoverable. The underlying value and recoverability of
the amounts shown for mineral properties and deferred exploration costs is
dependent upon the ability of the Company and/or its mineral property partner to
complete exploration and development and discover economically recoverable
reserves, successful permitting, and upon future profitable production or
proceeds from disposition of the Company’s mineral properties. Failure to
discover economically recoverable reserves will require the Company to write-off
costs capitalized to date.


The
Company’s ability to continue as a going concern and to realize the carrying
value of its assets and discharge its liabilities is dependent on the discovery
of economically recoverable mineral reserves, the ability of the Company to
obtain necessary financing to fund its operations, and the future production or
proceeds from developed properties. These financial statements do not reflect
adjustments that would be necessary if the going concern assumption were not
appropriate.


2.
              Significant
      Accounting Policies and Future Accounting Policies
  Changes:


A.   Significant
      Accounting Policies


These
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles. A reconciliation of material
measurement differences between Canadian generally accepted accounting
principles and United States generally accepted accounting principles and
practices prescribed by the Securities and Exchange Commission, is included in
Note 8.


(a)         Basis
of consolidation:


The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All intercompany amounts and transactions have been
eliminated on consolidation.


(b)         Cash
and cash equivalents:


Cash
and cash equivalents consists of highly liquid short-term investments that are
readily convertible to known amounts of cash and have original maturities of
three months or less when acquired.


(c)         Marketable
securities:


Marketable
securities are considered to be available-for-sale securities and are carried at
fair market value. Prior to the adoption of CICA Handbook Section 3855
“Financial Instruments - Recognition and Measurement”, the Company carried
marketable securities at the lower of cost and quoted fair market
value.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


(d)        Long-term
investments:


(i) The
long-term investment arose on the sale of mineral property interests in exchange
for shares of the purchaser (Northern Lion Corp.) and was accounted for by the
cost method since the Company did not have significant influence over the
operating, investing and financing activities of the purchaser. Earnings from
long-term investment have been recognized only to the extent
received.


(ii)
The Company’s 34% investment in common shares of Camphor Ventures Inc.
(“Camphor”) as at March 31, 2007 was accounted for using the equity method, as
the Company had significant influence over Camphor's operating, investing, and
financing activities. Under the equity method, the investment in common shares
of Camphor was recorded at cost and was adjusted periodically to recognize the
Company's proportionate share of Camphor's net income or losses after the date
of the investment, additional contributions made, and dividends
received.


(e)        Mineral
properties and deferred exploration costs:


Direct
property acquisition costs, advance royalties, holding costs, field exploration
and field supervisory costs relating to specific properties are deferred until
the properties are brought into production, at which time, they will be
amortized on a unit of production basis, or until the properties are abandoned,
sold or considered to be impaired in value, at which time an appropriate charge
will be made. The recovery of costs of mining claims and deferred exploration is
dependent upon the existence of economically recoverable reserves, the ability
of the Company to obtain the necessary financing to complete exploration and
development, and future profitable production or proceeds from disposition of
such properties.


The
Emerging Issues Committee of the CICA issued EIC-126 - “Accounting by Mining
Enterprises for Exploration Costs” which interprets how Accounting Guideline No.
11 entitled Enterprises in the Development Stage - (AcG 11) affects mining
companies with respect to the deferral of exploration costs. EIC-126 refers to
CICA Handbook Section 3061 "Property, Plant and Equipment", paragraph .21, which
states that for a mining property, the cost of the asset includes exploration
costs if the enterprise considers that such costs have the characteristics of
property, plant and equipment. EIC-126 then states that a mining enterprise that
has not established mineral reserves objectively, and therefore does not have a
basis for preparing a projection of the estimated cash flow from the property,
is not precluded from considering the exploration costs to have the
characteristics of property, plant and equipment. EIC-126 also sets forth the
Committee’s consensus that a mining enterprise in the development stage is not
required to consider the conditions in AcG-11 regarding impairment in
determining whether exploration costs may be initially capitalized. With respect
to impairment of capitalized exploration costs, EIC-126 sets forth the
Committee’s consensus that a mining enterprise in the development stage that has
not established mineral reserves objectively, and therefore does not have a
basis for preparing a projection of the estimated cash flow from the property is
not obliged to conclude that capitalized costs have been impaired. However, such
an enterprise should consider the conditions set forth in AcG-11 and CICA
Handbook sections relating to long-lived assets in determining whether
subsequent write­down of capitalized exploration costs related to mining
properties is required. Any resulting writedowns are charged to the statement of
operations.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


(e)        Mineral
properties and deferred exploration costs (continued):


The
Company considers that exploration costs have the characteristics of property,
plant and equipment, and, accordingly, defers such costs. Furthermore, pursuant
to EIC-126, deferred exploration costs would not automatically be subject to
regular assessment of recoverability, unless conditions, such as those discussed
in AcG 11, exist.


AcG 11
also provides guidance on measuring impairment of when pre-operating costs have
been deferred. While this guidance is applicable, its application did not result
in impairment.


(f)         Equipment:


Equipment
is initially recorded at cost and amortized over their estimated useful lives on
the declining balance basis at the following annual rates:




Asset
            
            RateFurniture
      and equipment
            
            
            20
            %Computers
            
            
            30
            %


(g)      
 Asset retirement obligations:


The
fair value of a liability for an asset retirement obligation, such as site
reclamation costs, is recognized in the period in which it is incurred if a
reasonable estimate of the fair value of the costs to be incurred can be made.
The Company is required to record the estimated present value of future cash
flows associated with site reclamation as a liability when the liability is
incurred and increase the carrying value of the related assets for that amount.
Subsequently, these capitalized asset retirement costs will be amortized to
expense over the life of the related assets using the unit-of production method.
At the end of each period, the liability is increased to reflect the passage of
time (accretion expense) and changes in the estimated future cash flows
underlying any initial fair value measurements (additional asset retirement
costs).


As of
March 31, 2008 and 2007, the Company has determined that it does not have
material obligations for asset retirement obligations.


(h)       Stock-based
compensation:


The
Company expenses the fair value of all stock options awarded, calculated using
the Black-Scholes option pricing model, over the vesting
period.


Direct
awards of stock are expensed based on the market price of the shares at the time
of the granting of the award.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


(i)        Income
taxes:


The
Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Future tax assets and liabilities are measured using
enacted or substantively enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled. The effect on future tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The amount of future income tax assets recognized is limited to the amount that
is more likely than not to be realized.


(j)        Earnings
(loss) per share:


Basic
earnings (loss) per share is calculated by dividing the earnings (loss)
attributable to common shareholders by the weighted average number of common
shares outstanding during the year. For all periods presented, earnings (loss)
available to the common shareholders equals the reported earnings or loss. The
Company uses the treasury stock method to compute the dilutive effect of
options, warrants and similar instruments. Diluted earnings per share is similar
to basic earnings per share, except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the
potential dilutive common shares had been issued. The treasury stock method
assumes that the proceeds received on exercise of stock options is used to
repurchase common shares at the average market value for the
period.


(k)       Foreign
currency translation:


Monetary
assets and liabilities denominated in a currency other than the Canadian dollar
are translated at rates of exchange in effect at the balance sheet date. Revenue
and expense items are translated at the average rates for the months in which
such items are recognized during the year. Exchange gains and losses arising
from the translation are included in the statement of
operations.


(l)        Financial
instruments:


The
fair values of the Company's cash, term deposit, amounts receivable, advances
and accounts payable and accrued liabilities approximate their carrying values
because of the immediate or short term to maturity of these financial
instruments. The fair value of marketable securities and long-term investments
are disclosed in Note 3.


(m)      Use
of estimates:


The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of the assets, liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Significant areas requiring the use of management estimates relate to the
determination of impairment of mineral properties, deferred exploration, and
long-term investment, as well as the assumptions used in determining the fair
value of stock-based compensation. Actual results could differ from these
estimates.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


(n)       Comparative
figures:


Certain
of the prior year’s comparative figures have been reclassified to conform with
the current year’s presentation.


B.      
 Newly adopted accounting Standards


Effective
April 1, 2007, the Company adopted the new CICA Handbook Standards relating to
financial instruments. These new standards have been adopted on a prospective
basis with no restatement of prior period financial
statements.


a)       
Section 3855, “Financial Instruments - Recognition and Measurement” provides
guidance on the recognition and measurement of financial assets, financial
liabilities and derivative financial instruments. This new standard requires
that all financial assets and liabilities be classified as either:
held-to-maturity, held-for-trading, loans and receivables, available-for-sale,
or other financial liabilities. The initial and subsequent recognition depends
on their initial classification.


Held-to-maturity
financial assets are initially recognized at their fair values and subsequently
measured at amortized cost using the effective interest method. Impairment
losses are charged to net earnings in the period in which they
arise.


Held-for-trading
financial instruments are carried at fair value with changes in the fair value
charged or credited to net earnings in the period in which they
arise.


Loans
and receivables are initially recognized at their fair values, with any
resulting premium or discount from the face value being amortized to income or
expense using the effective interest method. Impairment losses are charged to
net earnings in the period in which they arise.


Available-for-sale
financial instruments are carried at fair value with changes in the fair value
charged or credited to other comprehensive income. Impairment losses are charged
to net earnings in the period in which they arise.


Other
financial liabilities are initially measured at cost or at amortized cost
depending upon the nature of the instrument with any resulting premium or
discount from the face value being amortized to income or expense using the
effective interest method.


All derivative financial
instruments meeting certain recognition criteria are carried at fair value with
changes in fair value charged or credited to income or expense in the period in
which they arise.


The standard requires the Company to
make certain elections, upon initial adoption of the new rules, regarding the
accounting model to be used to account for each financial instrument. This new
section also requires that transaction costs incurred in connection with the
issuance of financial instruments either be capitalized and presented as a
reduction of the carrying value of the related financial instrument or expensed
as incurred. If capitalized, transaction costs must be amortized to income using
the effective interest method. This section does not permit the restatement of
financial statements of prior periods.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


B.        
Newly Adopted Accounting Standards (continued):


The
following is a summary of the accounting model the Company has elected to apply
to each of its significant categories of financial instruments outstanding as of
April 1, 2007:




Cash
      and cash equivalents
            Held-for-tradingMarketable
      securities
            Available-for-saleAmounts
      receivable
            Loans
      and receivablesLong-term
      investments
            Available-for-saleAccounts
      payable and accrued liabilities
            Other
      liabilities


With
respect to embedded derivatives, the Company has elected to recognize only those
derivatives embedded in contracts issued, acquired or substantively modified on
or after January 1, 2003 as permitted by the transitional provisions set out in
section 3855. The Company did not identify any such embedded
derivatives.


The
impact of the initial adoption of this section resulted in the Company
increasing the value of marketable securities and long-term investment by
$47,176 and $280,000, respectively, to their fair values at April 1, 2007 with
an offsetting adjustment to accumulated other comprehensive
income.


b)            Section
3865, “Hedges” allows optional treatment providing that hedges be designated
as either fair value hedges, cash flow hedges or hedges of a self-sustaining foreign
operation.


There
was no impact to the Company upon initial adoption of this section on April 1,
2007.


c)            Section
1530, “Comprehensive Income”, along with Section 3251, “Equity” which amends
Section 3250, “Surplus”, requires enterprises to separately disclose
comprehensive income
and its components in the financial statements. Further, enterprises are
required to p resent
changes in equity during the period as well as components of equity at the end
of the
period, including comprehensive income. Major components of Other Comprehensive Income
include changes in fair value of financial assets classified as
available-for-sale, the changes
in fair value of effective cash flow hedging items, and exchange gains and
losses arising
from the translation of the financial statements of self-sustaining foreign
operations.


The
Company implemented this section on April 1, 2007.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):
 C. 
Future Accounting Policy Changes


The
Company will be required to adopt the following new accounting standards under
Canadian GAAP for interim and annual financial statements relating to its fiscal
year commencing April 1, 2008.


(a)        Capital
Disclosures


New
CICA Accounting Handbook Section 1535, “Capital Disclosures”,
establishes standards for disclosing information about an entity’s capital, and
how it is managed and requires the following disclosures:


(i)      qualitative
information about the entity’s objectives, policies and processes for managing
capital; (ii)     summary quantitative data about
what it manages as capital;
(iii)    whether during the period it complied with
any externally imposed capital requirements
to which it is subject; and (iv)    when it has not
complied with such externally imposed capital requirements, the consequences
of such non-compliance.


There
will be no impact on the Company’s financial statements from the adoption of
this standard as it affects only disclosure requirements.


(b)        Financial
Instruments


New
CICA Accounting Handbook Sections 3862, “Financial Instruments-Disclosures”, and 3863, “Financial Instruments-Presentation”, replace
existing Handbook Section 3861, “Financial Instruments-Disclosure and Presentation”,
revising and enhancing its disclosure requirements and carrying forward
unchanged its presentation requirements. The revised and enhanced disclosure
requirements are intended to enable users to evaluate the significance of
financial instruments for the entity's financial position and performance, and
the nature and extent of risks arising from financial instruments to which the
entity is exposed during the period and at the balance sheet date and how the
entity manages those risks. There will be no impact on the Company’s financial
statements from the adoption of these standards as the changes arising affect
only disclosure requirements.


(c)        Inventories


New
CICA Accounting Handbook Section 3031, “Inventories”, prescribes the
accounting treatment for inventories and provides guidance on the determination
of costs and its subsequent recognition as an expense, including any write-down
to net realizable value. It also provides guidance on the cost formulas that are
used to assign costs to inventories. The adoption of this standard is not
expected to have a material impact on the Company’s financial statements as it
has not held significant inventories in the past and does not anticipate holding
any in the period of initial application.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 2.          Significant
accounting policies (continued):


C.  
Future Accounting Policy Changes (continued):


(d)        Goodwill
and Intangible Assets


For
interim and annual financial statements relating to its fiscal year commencing
April 1, 2009, the Company will be required to adopt new CICA Accounting
Handbook Section 3064, “Goodwill and Intangible
Assets”, replacing existing Handbook Section 3062 “Goodwill and Other Intangible
Assets”. Section 3064 establishes revised standards for the recognition,
measurement, presentation and disclosure of goodwill and intangible assets. The
Company has not yet determined the effect if any that the adoption of this new
standard will have on its financial statements.


(e)        International
Financial Reporting Standards


The
Canadian Accounting Standards Board will require all public companies to adopt
International Financial Reporting Standards (“IFRS”) for interim and annual
financial statements relating to fiscal years beginning on or after January 1,
2011. Companies will be required to provided IFRS comparative information for
the previous fiscal year. The convergence from Canadian GAAP to IFRS will be
applicable for the Company for the first quarter of 2011 when the Company will
prepare both the current and comparative financial information using IFRS. The
Company expects the transition to IFRS to impact financial reporting, business
processes, and information systems. The Company will assess the impact of the
transition to IFRS and will continue to invest in training and resources
throughout the transition period to facilitate a timely
conversion.


3.          Marketable
Securities


In
July, 2007, the Company sold its 4,000,000 shares in Northern Lion Gold Corp.
(“Northern Lion”) for net proceeds of $1,995,420.


The
quoted market value of remaining marketable securities at March 31, 2008 was
$37,569 (March 31, 2007 - $51,808).


The
Company has assessed the risk associated with its available-for-sale securities
to include market risk, since the market value of the available-for-sale
securities is subject to fluctuations.


4.          Investment
in Camphor Ventures Inc.


During
the fiscal year ending March 31, 2007, the Company acquired 4,892,750 common
shares of Camphor Ventures Inc. (“Camphor”), representing approximately 33.5
percent of the issued and outstanding common shares of Camphor. The acquisition
was undertaken through a private agreement exempt share exchange with five
Camphor shareholders. The Camphor shares were acquired on the basis of 39.75
Mountain Province shares for each 100 Camphor shares, resulting in the issuance
of 1,944,868 Mountain Province common shares. The investment in Camphor was
valued at cost based on the closing price ($3.80) of Mountain Province common
shares on July 24, 2006, the date the shares were issued. The Company already
owned 100,000 common shares (previously reported under Marketable Securities) at
a cost of $66,760, bringing its total shareholdings in Camphor to 4,992,750
common shares.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 4.          Investment
in Camphor Ventures Inc. (continued):


During
the year, the Company acquired 9,884,915 common shares of Camphor Ventures Inc.
(“Camphor”), representing approximately 66 percent of the issued and outstanding
common shares of Camphor that the Company did not already own, and bringing the
Company’s holdings in Camphor to 100%, and the Company’s interest in the Gahcho
Kué project to 49%, with De Beers Canada holding a 51% interest. A total of
4,052,816 Mountain Province shares were issued in exchange for the Camphor
shares. The Company has valued the common shares issued in this transaction
based on the market price of the Company’s shares on the various dates the
consideration was exchanged.


In
addition to the issuance of common shares, the Company took up the 485,000 stock
options of Camphor, and exchanged them for 198,850 stock options of the Company.
These replacement stock options were valued at their estimated fair market value
using the Black-Scholes model with the following assumptions: dividend yield of
0%; expected volatilities of 34% to 64%; risk-free interest rate of 4.64% and
expected lives between 2.83 and 10.33 months.


The
allocation of the purchase price is summarized in the table
below.




Purchase
      price:4,052,816 Common shares issued
      in exchange for 9,884,915 Camphorcommon shares outstanding (net
      of 4,992,750 shares in Camphor heldby the Company)
            
            $
            18,330,842Value
      of replacement options issued
            
            
            774,340Transaction
      costs
            
            
            233,879Camphor
      shares previously owned by the Company
            
            
            7,313,992$
            26,653,053Purchase
      price allocationNet
      assets
            
            $
            384,262Mineral
      properties
            
            
            32,400,320Future
      income taxes
            
            
            (6,131,529
            )$
            26,653,053


5.           Investment
in Gahcho Kué Project:




2008
            
            
            2007Opening
      balance
            
            $
            32,570,324
            
            
            $
            32,481,602Mineral
      Acquisition Properties - Camphor acquisition
            
            
            32,400,320
            
            
            
            -Consulting
            
            
            -
            
            
            
            77,801Mining
      lease costs
            
            
            13,496
            
            
            
            10,921$
            64,984,140
            
            
            $
            32,570,324


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 5.          Investment
in Gahcho Kué Project (continued):


Gahcho
Kué Project:


The
Company holds a 49% interest (see Note 4) in the Gahcho Kué project located in
the District of Mackenzie, Northwest Territories, Canada, and De Beers Canada
(“De Beers Canada”) holds the remaining 51% interest. De Beers Canada may under
certain circumstances earn up to a 60% interest in the Gahcho Kué
project.


6.          Share
Capital and Contributed Surplus:


(a)        Authorized


Unlimited
number of common shares without par value


(b)       
Issued and fully paid:




Number
      of shares
            
            
            AmountBalance,
      March 31, 2005
            
            
            52,610,847
            
            
            $
            57,607,786Exercise of
      stock options
            
            
            465,000
            
            
            
            634,850Value
      of stock options exercised
            
            
            -
            
            
            
            11,027Balance,
      March 31, 2006
            
            
            53,075,847
            
            
            
            58,253,663Exercise of
      stock options
            
            
            650,000
            
            
            
            888,450Value
      of stock options exercised
            
            
            -
            
            
            
            46,472Issued
      shares in exchange for shares in Camphor Ventures (Note
      4)
            
            
            1,944,868
            
            
            
            7,390,498Balance,
      March 31, 2007
            
            
            55,670,715
            
            
            
            66,579,083Exercise of
      stock options
            
            
            147,350
            
            
            
            141,048Value
      of stock options exercised
            
            
            -
            
            
            
            530,756Issuance of
      shares upon investment in Camphor Ventures (Note 4)
            
            
            4,052,816
            
            
            
            18,330,842Balance,
      March 31, 2008
            
            
            59,870,881
            
            
            $
            85,581,729


(c)       Stock
options:


The
Company, through its Board of Directors and shareholders, adopted a November 26,
1998 Stock Option Plan (the “Plan”) which was amended on February 1, 1999, and
subsequently on September 27, 2002. The Board of Directors has the authority and
discretion to grant stock option awards within the limits identified in the
Plan, which includes provisions limiting the issuance of options to insiders and
significant shareholders to maximums identified in the Plan. The aggregate
maximum number of shares pursuant to options granted under the Plan will not
exceed 3,677,300 shares, and as at March 31, 2008, there were 1,337,432 shares
available to be issued under the Plan.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 6.         
Share Capital and Contributed Surplus
(continued):


(c)        
Stock options (continued):


The
following presents the continuity of stock options
outstanding:


Number
      of Options
            
            
            Weighted
              Average
              Exercise
      PriceBalance,
      March 31, 2005
            
            
            1,325,000
            
            
            $
            1.48Granted
            
            
            200,000
            
            
            
            3.57Exercised
            
            
            (465,000
            )
            
            
            1.37Balance,
      March 31, 2006
            
            
            1,060,000
            
            
            $
            1.90Exercised
            
            
            (650,000
            )
            
            
            1.37Balance,
      March 31, 2007
            
            
            410,000
            
            
            $
            2.73Granted
            
            
            198,850
            
            
            
            0.92Exercised
            
            
            (147,350
            )
            
            
            1.05Balance,
      March 31, 2008
            
            
            461,500
            
            
            $
            2.47


The
following are the stock options outstanding and exercisable at March 31,
2008.




Expiry
      Date
            
            Black
              Scholes
              Value
            
            
            Number
      of Options
            
            Weighted
              Average
              Remaining
      Life
            
            Exercise
      PriceApril
      30, 2008
            
            $
            254,610
            
            
            
            61,500
            
            0.08
      years
            
            $
            0.56October
      1, 2009
            
            
            189,400
            
            
            
            200,000
            
            1.50
      years
            
            
            1.96November
      1, 2010
            
            
            180,100
            
            
            
            100,000
            
            2.59
      years
            
            
            2.63January
      30, 2011
            
            
            321,100
            
            
            
            100,000
            
            2.84
      years
            
            
            4.50$
            945,210
            
            
            
            461,500
            
            1.84
      years


Subsequent
to March 31, 2008, 61,500 options with an exercise price of $0.56 each were
exercised for proceeds of $34,501.


The
fair value of the options granted has been estimated on the date of the grant
using the Black-Scholes option pricing model with the following
assumptions:




Fiscal
      Year:
            2008
            2006Dividend
      yield
            0%
            0%Expected
      volatility
            34%-64%
            84%-89.78%Risk-free
      interest rate
            4.64%
            3.9%Expected
      lives
            2.83-10.33
      months
            5
      years


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 6.          Share
Capital and Contributed Surplus (continued):


(d)        Contributed
surplus:




AmountBalance,
      March 31, 2005
            
            $
            257,925Recognition of
      stock-based compensation expense
            
            
            314,879Value
      on exercise of stock options transferred to share
      capital
            
            
            (11,027
            )Balance,
      March 31, 2006
            
            
            561,777Recognition of
      stock-based compensation expense
            
            
            186,321Value
      on exercise of stock options transferred to share
      capital
            
            
            (46,472
            )Balance,
      March 31, 2007
            
            
            701,626Value
      of options issued to Camphor option holders (Note 4)
            
            
            774,340Value
      on exercise of stock options transferred to share
      capital
            
            
            (530,756
            )Balance,
      March 31, 2008
            
            $
            945,210


(e)       
Shareholder Rights Plan:


On
August 4, 2006, the Board of Directors of the Company approved a Shareholder
Rights Plan (the “Rights Plan”). The Rights Plan is intended to provide all
shareholders of the Company with adequate time to consider value enhancing
alternatives to a take-over bid and to provide adequate time to properly assess
a take-over bid without undue pressure. The Rights Plan is also intended to
ensure that the shareholders of the Company are provided equal treatment under a
takeover bid.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 7.          Income
Taxes:


Income
tax recovery differs from the amounts that would have been computed by applying
the combined federal and provincial tax rates of 26.5% for the years ended March
31, 2008 (2007 - 34.25% and 2006 - 36.12%) to loss before income taxes. The
reasons for the differences are primarily as a result of the
following:




2008
            
            
            2007
            
            
            2006Loss
      before income taxes
            
            $
            56,635
            
            
            $
            1,961,263
            
            
            $
            2,199,888Tax
      recovery (payable) calculating using statutory rates
            
            
            15,000
            
            
            
            671,700
            
            
            
            794,600Earnings
      not subject to taxation/(expenses not deductible for
      taxation)
            
            
            207,166
            
            
            
            (195,000
            )
            
            
            (308,800
            )222,166
            
            
            
            476,700
            
            
            
            485,800Valuation
      allowance
            
            
            -
            
            
            
            (476,700
            )
            
            
            (485,800
            )$
            222,166
            
            
            $
            -
            
            
            $
            -


The
components that give rise to future income tax assets and future tax liabilities
are as follows:




2008
            
            
            2007
            
            
            2006Mineral
      properties and deferred exploration
            
            $
            (6,131,529
            )   $
            
            
            869,900
            
            
            $
            682,300Loss
      carry forwards
            
            
            872,259
            
            
            
            810,200
            
            
            
            1,962,200Equipment
            
            
            -
            
            
            
            143,000
            
            
            
            155,300Long-term
      investment
            
            
            -
            
            
            
            590,000
            
            
            
            503,100(5,257,270
            )
            
            
            2,413,100
            
            
            
            3,302,900Valuation
      allowance
            
            
            (652,093
            )
            
            
            (2,413,100
            )
            
            
            (3,302,900
            )Net
      future income tax asset (liability)
            
            $
            (5,909,363
            )
      $
            
            
            -
            
            
            $
            -


At
March 31, 2008, the Company has available losses for income tax purposes
totaling approximately $3.5 million, expiring at various times from 2009 to
2028. Of the available losses, $0.9 million are subject to acquisition of
control rules which may restrict their future deductibility. The Company also
has available resource tax pools of approximately $40 million, which may be
carried forward and utilized to reduce future taxable income. Included in the
$40 million of tax pools is $30 million which can only be utilized against
taxable income from specific mineral properties.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 8.          Reconciliation
to United States generally accepted accounting principles ("US
GAAP"):


As
disclosed in Note 2, these financial statements have been prepared in accordance
with Canadian generally accepted accounting principles (“Canadian GAAP”). A
description and reconciliation of material measurement differences to US GAAP
and practices prescribed by the US Securities and Exchange Commission (“SEC”)
follows:


(a)        Mineral
properties and deferred exploration costs:


Under
United States GAAP, exploration expenditures relating to mining interests prior
to the completion of a definitive feasibility study, which establishes proven
and probable reserves, must be expensed as incurred. Under Canadian GAAP these
costs may be deferred.


For
Canadian GAAP, cash flows relating to mineral property costs are reported as
investing activities. For US GAAP, these costs would be characterized as
operating activities.


(b)        Stock-based
compensation


On
April 1, 2006, the Company adopted the provisions of SFAS 123(R) on a modified
prospective application for stock options granted. The effect of applying SFAS
123(R) on this basis resulted in the same stock-based compensation cost as has
been recognized for Canadian GAAP.


Prior
to the adoption of SFAS 123(R), the Company accounted for stock-based
compensation using the intrinsic value method of accounting for stock-based
compensation as prescribed by APB Opinion 25.


For
Canadian GAAP purposes, the Company adopted the fair value based method to all
employee and director stock options granted on or after April 1, 2002, without
restatement of prior periods. An adjustment was made to contributed surplus and
deficit as at April 1, 2004 in the amount of $74,900 to reflect the cumulative
effect of the change in accounting policy. An amount of $20,314 was also
transferred from contributed surplus to share capital as at April 1, 2004 in
respect of employee and director options exercised during the years ended March
31, 2004 and 2003. In addition, the Company booked stock-based compensation
during the year ended March 31, 2006 of $314,879 for employee and director stock
options. Prior to the adoption of the fair value based method for Canadian GAAP,
the stock-based compensation expense in respect of stock options granted to
non-employees, under US GAAP determined using an option pricing model, would
cumulatively be $1,704,000 from the date of adoption of SFAS 123 to March 31,
2002.


(c)Unrealized holding gains and losses on marketable securities, long-term
investments:


Effective
April 1, 2007, changes to Canadian GAAP were harmonized with the FASB Statement
of Financial Accounting Standards Board No. 115, “Accounting for Investments in
Debt and Equity Securities” (“SFAS 115”) resulting in no continuing differences
between Canadian GAAP and U.S. GAAP.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 8.          Reconciliation
to United States generally accepted accounting principles ("US GAAP") (continued):


(c)Unrealized holding gains and losses on marketable securities, long-term
Investments
(continued):





SFAS
115 requires that the Company’s marketable securities be classified as
available-for-sale securities and that they be recorded at market value with
unrealized gains or losses recorded outside of income as a component of
shareholders’ equity unless a decline in value is considered to be other than
temporary. Prior to April 1, 2007, the Company’s marketable securities were
presented at the lower of cost or market value under Canadian GAAP. At March 31,
2007, there was a cumulative unrealized gain of $47,176 (2006 - $146,120)
between the carrying value and fair value of marketable securities which has
been recorded through comprehensive income for US GAAP purposes in the amounts
of $8,704 and $82,740 for each of the years ended March 31, 2007 and 2006
respectively.


The
Company's long-term investments are presented at the market value under Canadian
GAAP and as available-for-sale securities under US GAAP. During 2008, these
investments were disposed of for total proceeds of $1,995,420. At March 31,
2007, there is a cumulative unrealized gain of $280,000 (2006 - gain of
$880,000) between the carrying value and fair value of long-term investments
which has been recorded through comprehensive income for US GAAP purposes in the
amounts of $600,000 (2006-$880,000) for each of the years ended March 31, 2007
and 2006 respectively. The Company has restated the 2007 balance to reflect the
correct mark-to-market difference as at March 31, 2007.


(d)        Reporting
comprehensive income:


Statement
of Financial Accounting Standards No. 130 (“SFAS 130”) “Reporting Comprehensive
Income”, establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income equals net income (loss) for the period as adjusted for all
other non-owner changes in shareholders’ equity. SFAS 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement.


(e)        Recent
accounting pronouncements:


Statement
of Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”), was issued in February 2007. The
statement permits entities to choose to measure many financial instruments and
certain other items at fair value, providing the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without the need to apply hedge accounting provisions.
SFAS 159 is effective for fiscal years beginning after November 15, 2007, with
earlier adoption permitted. The Company is currently reviewing the impact of
this statement.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 8.          Reconciliation
to United States generally accepted accounting principles ("US GAAP") (continued):


(e)        
Recent accounting pronouncements (continued):


In June
2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Tax Positions,
an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 addresses the
recognition and measurement of all tax positions. The recognition process
involves determining whether it is more likely than not that a tax position
would be sustained on audit based solely on its technical merits. The amount of
benefit recognized in the financial statements is the maximum amount which is
more likely than not to be realized based on a cumulative probability approach.
FIN 48 is effective for the Company on April 1, 2007. The Company has determined
that the impact of FIN 48 is not material to its consolidated financial
statements.


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired. SFAS 141(R)
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. SFAS 141(R) is effective for
fiscal years beginning after December 15, 2008. The Company is currently
reviewing the impact of the adoption of this statement.


In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (SFAS 160), which is effective for fiscal
years beginning after December 15, 2008. Under SFAS 160, non-controlling
interests will be measured at 100% of the fair value of assets acquired and
liabilities assumed. Under current standards, the non-controlling interest is
measured at book value. For presentation and disclosure purposes,
non-controlling interests will be classified as a separate component of
shareholders’ equity. In addition, SFAS 160 changes the manner in which
increases and decreases in ownership percentages are accounted for. The Company
is currently reviewing the impact of this statement.


In
March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities - an amendment to FASB Statement No. 133”
(“SFAS 161”). SFAS 161 change the disclosure requirements for derivative
instruments and hedging activities. Entities will now be required to provide
enhanced disclosures about how and why an entity uses derivative instruments,
how the instruments are accounted for under SFAS 133, and how the instruments
and related hedged items affect an entity’s financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years beginning
after November 15, 2008. The Company is currently reviewing the impact of this
statement.


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 8.          Reconciliation
to United States generally accepted accounting principles ("US GAAP") (continued):


(f)         
Reconciliation:


The
effect of the differences between Canadian GAAP and US GAAP (including practices
prescribed by the SEC) on the consolidated balance sheets, statements of loss
and cash flows is summarized as follows:




As
      at March 31
            
            2008
            
            
            2007(i)  
      Total assets:Total
      assets, under Canadian GAAP
            
            $
            66,764,167
            
            
            $
            41,615,827Adjustment for
      deferred exploration costs (Note 8(a))
            
            
            (31,031,267
            )
            
            
            (31,017,771
            )Adjustment for
      change in fair value of available-for-sale marketable securities (Note
      8(c))
            
            
            -
            
            
            
            47,176Adjustment for
      change in fair value of long-term investments (Note 8(c))(restated - Note
      8(c))
            
            
            -
            
            
            
            280,000Total
      assets, under US GAAP (restated Note 8(c))
            
            $
            35,732,900
            
            
            $
            10,925,232(ii)  Shareholders’
      equity:Shareholders’
      equity, under Canadian GAAP
            
            $
            60,641,726
            
            
            $
            41,197,028Adjustment for
      deferred exploration costs (Note 8(a))
            
            
            (31,031,267
            )
            
            
            (31,017,771
            )Adjustment for
      fair value of available for sale marketable securities (Note
      8(c))
            
            
            -
            
            
            
            47,176Adjustment for
      fair value of long-term investments (Note 8(c))(restated - Note
      8(c))
            
            
            -
            
            
            
            280,000Shareholders’
      equity, under US GAAP (restated - Note 8(c))
            
            $
            29,610,459
            
            
            $
            10,506,433


MOUNTAIN
      PROVINCE DIAMONDS INC.Notes
      to Consolidated Financial Statements(Expressed
      in Canadian dollars)Years
      ended March 31, 2008, 2007, and
2006
 8.          Reconciliation
to United States generally accepted accounting principles ("US GAAP") (continued):


(f)         
Reconciliation (continued):




Years
      ended March 31
            
            2008
            
            
            2007
            
            
            2006(iii) 
      Income (loss) and loss per share for the year:Income
      (loss) for the year, under Canadian GAAP
            
            $
            165,531
            
            
            $
            (1,961,263
            )
            
            $
            (2,199,888
            )Adjustment for
      deferred exploration expenditures (Note 8(a))
            
            
            (13,496
            )
            
            
            (88,722
            )
            
            
            (63,379
            )Adjustment for
      stock-based compensation (Note 8(b))
            
            
            -
            
            
            
            -
            
            
            
            314,879Income
      (loss) for the year, under US GAAP
            
            
            152,035
            
            
            
            (2,049,985
            )
            
            
            (1,948,388
            )Other
      Comprehensive income:Change
      in fair value of available for sale marketable securities (Note
      8(c))
            
            
            (14,239
            )
            
            
            8,704
            
            
            
            82,740Change
      in fair value of long-term investments (Note 8(c))
            
            
            (280,000
            )
            
            
            (600,000
            )
            
            
            880,000Comprehensive
      loss for the year under US GAAP
            
            $
            (142,204
            )
            
            $
            (2,641,281
            )
            
            $
            (985,648
            )Basic
      and diluted income (loss) per share, under US GAAP
            
            $
            0.00
            
            
            $
            (0.05
            )
            
            $
            (0.04
            )(iv) 
      Cash used in operating activities:Cash
      used in operating activities, under Canadian GAAP
            
            $
            (1,229,541
            )
            
            $
            (978,527
            )
            
            $
            (727,123
            )Adjustment for
      deferred exploration costs (Note 8(a))
            
            
            (13,496
            )
            
            
            (88,722
            )
            
            
            (63,376
            )Cash
      used in operating activities, under US GAAP
            
            $
            (1,243,037
            )
            
            $
            (1,067,249
            )
            
            $
            (790,502
            )(v)  
      Cash provided (used) in investing activities:Cash
      provided (used) in investing activities under Canadian
      GAAP
            
            $
            1,053,273
            
            
            $
            (575,405
            )
            
            $
            (63,379
            )Adjustment for
      deferred exploration (Note 8(a))
            
            
            13,496
            
            
            
            88,722
            
            
            
            63,379Cash
      provided (used) in investing activities under US
GAAP
            
            $
            1,066,769
            
            
            $
            (486,683
            )
            
            $
            -









SIGNATURES
   The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
  Mountain Province Diamonds
Inc.
 (Company)
   By:   “Patrick
C. Evans”
 (Signature)*
   Date:
      June 30, 2008
                Patrick C.
      Evans
 President,
CEO and Director
  *Print
the name and title of the signing officer under this signature.
  
 87
 
  EXHIBIT
INDEX
  
 The
      following exhibits are attached to and form part of this Annual
      Report:
                
                Exhibit
              Remarks.1.1
              By-Laws
      of the Company
              (3)1.2
              Arrangement
      Agreement between the Company and Glenmore Highlands Inc. dated May 10,
      2000.
              (5)1.3
              Joint
      Information Circular of the Company and Glenmore Highlands
      Inc.
              (4)4.1
              Transfer
      agreement between MPV, Monopros and Camphor dated November 24, 1999
      pursuant to which MPV and Camphor transferred the GOR to
      Monopros.
              (3)4.2
              Letter
      Agreement between MPV, Monopros, Glenmore and Camphor dated December 17,
      1999 relating to acquisition of property, within the "Area of Interest" as
      defined in the agreement and acquisition of property through third party
      agreements.
              (3)4.3
              Letter
      Agreement dated December 17, 1999 between MPV, Monopros, Camphor and
      Glenmore amending the Monopros Joint Venture Agreement.
              (3)4.4
              Form
      of Subscription Agreement for the private placement described in item 1 of
      "Material Contracts".
              (3)4.5
              Agreement
      dated as of January 1, 2002 between the Company, Camphor Ventures Inc. and
      De Beers Canada Exploration Inc.
              (1)4.6
              Second
      Amendment Agreement dated January 1, 2002 between the Company and Paul
      Shatzko.
              (3)4.7
              Second
      Amendment Agreement dated January 1, 2002 between the Company and Jan
      Vandersande.
              (3)4.8
              Third
      Amendment Agreement dated December 13, 2002 between the Company and Jan
      Vandersande
              (3)4.9
              Letter
      agreement dated December 13, 2002 between the Company and Elizabeth
      Kirkwood
              (3)4.10
              Consulting
      Agreement dated January 1, 2004 between the Company and Jan W.
      Vandersande
              (3)4.11
              Consulting
      Agreement dated November 1, 2005 between the Company and Patrick
      Evans
              (3)4.12
              Revised
      Consulting Agreement dated January 31, 2006 between the Company and
      Patrick Evans
              (3)4.13
              Consulting
      Agreement dated May 11, 2006 between the Company and Jennifer
      Dawson
              (3)8.1
              List
      of Subsidiaries
              (2)11.1
              Corporate
      Governance Policies dated May 29, 2006.
              (3)12.1
              Section
      302 Certification of the Company's Chief Executive Officer
              -12.2
              Section
      302 Certification of the Company's Chief Financial Officer
              -13.1
              Section
      906 Certification of the Company's Chief Executive Officer
              -13.2
              Section
      906 Certification of the Company's Chief Financial Officer
              -14.1
              Independent
      Qualified Person's Review and Technical Report dated June 16, 2003
      entitled Gahcho Kué,
      Northwest Territories, Canada prepared by Malcolm L. Thurston,
      Ph.D., MAusimm
              (3)15
              Revised
      Charter of the Board of Directors and Committees thereof of Mountain
      Province Diamonds Inc.
              (3)
  (1)    
The Registrant has received approval for confidential treatment with respect to
certain portions of this Agreement, which have been omitted, pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.
  (2)    
See list of subsidiaries on page 11 of this Annual Report.
  (3)    
Previously filed and incorporated by reference.  11.1 was included in
the Company’s Form 20-F filing of June 30, 2006.
  (4)    
Previously furnished under cover of Form 6K dated June 2, 2000 and incorporated
by reference.
  (5)    
Attached as Appendix A to the Joint Information Circular of the Company and
Glenmore Highlands Inc. which information circular was previously furnished
under cover of Form 6K dated June 2, 2000, and incorporated by
reference.
  88