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

                                    FORM 20-F

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

                                       OR

   XXX  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
   ---  THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

        TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
   ---  EXCHANGE  ACT OF 1934  For the  transition  period  from        to


                         Commission File Number: 0-27322

                          MOUNTAIN PROVINCE MINING INC.
             (Exact name of Registrant as specified in its charter)

                            British Columbia, Canada
                 (Jurisdiction of incorporation or organization)

            1205-789 West Pender Street, Vancouver, British Columbia
                                 Canada V6C 1H2
                    (Address of principal executive offices)

     Securities to be registered pursuant to Section 12(b) of the Act: None

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

                        Common Shares, without par value
                                (Title of Class)


Securities for which there is a reporting  obligation  pursuant to Section 15(d)
of the Act:                                                                 None

Indicate the number of  outstanding  shares of each of the  issuer's  classes of
capital  or common  stock as of the close of the  period  covered  by the annual
report.                                                               42,376,810

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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 ninety days.                            Yes ___ No XXX

Indicate by check mark which financial statement item the registrant has elected
to follow:                                               Item 17 XXX Item 18 ___



                                  Page 1 of 87
                          Index to Exhibits on Page 71

<PAGE>


                          MOUNTAIN PROVINCE MINING INC.

                                TABLE OF CONTENTS

                              PART I                       Page

Item 1.   Description of Business.........................    2

Item 2.   Description of Property.........................   13

Item 3.   Legal Proceedings...............................   31

Item 4.   Control of Registrant...........................   32

Item 5.   Nature of Trading Market........................   34

Item 6.   Exchange Controls and Other Limitations
          Affecting Security Holders......................   36

Item 7.   Taxation........................................   38

Item 8.   Selected Financial Data.........................   48

Item 9.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations...   50

Item 10.  Directors and Officers of Registrant............   58

Item 11.  Compensation of Directors and Officers..........   61

Item 12.  Options to Purchase Securities from Registrant
          or Subsidiaries.................................   63

Item 13.  Interest of Management in Certain Transactions..   64

                                     PART II

Item 14.  Description of Securities to be Registered......   65

                                    PART III

Item 15.  Defaults Upon Senior Securities.................   69

Item 16.  Changes in Securities and Changes in Security
          for Registered Securities.......................   69

                                     PART IV

Item 17.  Financial Statements............................   69

Item 18.  Financial Statements............................   69

Item 19.  Financial Statements and Exhibits...............   70






<PAGE>
                                     PART I
ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

Introduction
------------

Mountain Province Mining Inc.  (hereinafter also referred to as the "Registrant"
or the  "Company")  is a natural  resource  property  exploration  company.  The
Company has several natural resource properties represented by a 90% interest in
the AK and CJ Claims  located in the Northwest  Territories;  a 100% interest in
the Ketza River Project;  a 50% interest in the Molanosa Diamond Project;  a 50%
interest in 11 of the 598909  Saskatchewan  Claims;  a 25%  interest in 4 of the
598909 Saskatchewan  Claims; a 100% interest in 11 of the Northern  Saskatchewan
Claims; a 50% interest in 32 of the Northern Saskatchewan Claims; a 25% interest
in mineral claim S-105084 located in the Tobin Lake Area; a 100% interest in the
Mary Dale  Property,  and a 100%  interest  in the Maris  Project in Nye County,
Nevada.

The Company,  as yet, does not have any resource  properties on which commercial
mining operations exists.

The Company's U.S. office is located at Empire Towers I, 3633 East Inland Empire
Blvd.,  Suite 265,  Ontario,  California  91764.  The telephone  number is (909)
466-1411 and the facsimile number is (909) 466-1409.

The Company's Canadian office is located at 789 West Pender Street, Suite #1205,
Vancouver,  British Columbia V6C 1H2. The telephone number is (604) 687-0122 and
the facsimile number is (604) 684-7208.

The  contact  persons  are  Dr.  Paul  Shatzko,   Chairman  and/or  Dr.  Jan  W.
Vandersande, President.

The Company has 500,000,000  shares of common stock  authorized;  as of 3/31/98,
the end of the Company's most recent fiscal year,  there were 42,376,810  shares
of common stock  outstanding.  As of 10/02/98  there were  42,444,760  shares of
common stock outstanding.

The Company's  common stock trades on the  Vancouver  Stock  Exchange  under the
symbol "MPV" and within the NASDAQ system under the symbol "MPVIF".


















                                        2
<PAGE>
The Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian  Generally Accepted  Accounting  Principles
(GAAP),  the application of which,  in the case of the Company,  conforms in all
material  respects  for the

periods  presented  with US GAAP except as noted in footnotes  to the  financial
statements.

References in this document to "$" and "Cdn$" refer to Canadian dollars,  unless
otherwise specified; references to "US$" refer to U.S. dollars.

In this Registration Statement,  unless otherwise specified,  all dollar amounts
are expressed in Canadian  Dollars  (CDN$).  The  Government of Canada permits a
floating exchange rate to determine the value of the Canadian Dollar against the
U.S. Dollar (US$).

Table No. 1 sets forth the rate of exchange for the  Canadian  Dollar at the end
of the five most recent fiscal  periods ended March 31st;  the average rates for
the period; and, the range of high and low rates for the period.

For purposes of this table,  the rate of exchange  means the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes  by the  Federal  Reserve  Bank of New York.  The table  sets forth the
number of Canadian  Dollars  required under that formula to buy one U.S. Dollar.
The average rate means the average of the exchange rates on the last day of each
month during the period.

                                   Table No. 1
                           U.S. Dollar/Canadian Dollar

                                    Average        High         Low        Close
Fiscal Year Ended 3/31/98              1.41        1.45        1.37         1.41
Fiscal Year Ended 3/31/97              1.36        1.38        1.33         1.38
Fiscal Year Ended 3/31/96              1.36        1.42        1.34         1.36
Fiscal Year Ended 3/31/95              1.38        1.41        1.34         1.40
Fiscal Year Ended 3/31/94              1.32        1.38        1.26         1.38

The value of the U.S.  Dollar  relative  to the  Canadian  Dollar was 1.52 as of
9/30/98.

Background
----------

Incorporation Data
------------------

The Company was  incorporated  under the laws of British Columbia on December 2,
1986 by registration of its Memorandum and Articles.










                                        3
<PAGE>
Initial Public Offering
-----------------------

The  Company's  initial  public  offering on the  Vancouver  Stock  Exchange was
pursuant to a  prospectus  dated July 28, 1988 only to investors in the Province
of  British  Columbia,  Canada.  The  Company  issued  600,000  shares,  raising
$189,000.

Business  Combination
---------------------

Pursuant to an  amalgamation  agreement  dated August 21, 1997,  the Company and
444965 B.C. Ltd. agreed to merge under the name of Mountain Province Mining Inc.
to consolidate their respective  interests in the AK/CJ claims.  The transaction
was  completed  on November 1, 1997 through the issue of one common share of the
new  amalgamated  company for each existing  common share in the former company,
and 16,951,696  common shares of the new company for 1,450,000  shares of 444965
B.C. Ltd. As a result of the  amalgamation,  the Company holds a 90% interest in
the AK/CJ claims in the Northwest Territories.

Historical Corporate Development
--------------------------------

Since incorporation,  the Company has been involved in the exploration and, when
warranted, the development of natural resource properties.

During  Fiscal 1993,  the Company  increased  its land  holdings and embarked on
several  exploration  programs.  In August it acquired the CJ and AK  properties
which encompass  approximately  600,000 acres.  Exploration  work in the form of
soil sampling and aerial geophysical surveys were undertaken on these properties
during this  period.  The Company  optioned a 40% interest in both the AK and CJ
claims to a private  company in exchange for $680,000 and an agreement to expend
sufficient  capital on the  properties  to  complete  a 200 ton bulk  sample and
optioned  another 10% interest in the claims to a public company in exchange for
shares and payment of a portion of exploration expenditures.

During the second half of Fiscal 1993, the Company  obtained a 37.5% interest in
a  72,000  claim  block  in  the  Fort  a la  Corne  area  of  the  province  of
Saskatchewan,  and also  acquired  a 50%  interest  in 27 claims  located in the
Molanosa Arch area of Saskatchewan.

During  Fiscal  1994,  the  Company  continued  with  its  exploration  programs
expanding them to include geochemical and geophysical  analysis. In January, the
Company  entered into a joint venture  agreement  with Camphor  Ventures Inc. (a
public  company  trading on the  Vancouver  Stock  Exchange)  whereby  the joint
venture  purchased a number of claim  blocks  adjacent  to the War Eagle  Mining
discovery  site near  Candle  Lake,  in the central  portion of the  province of











                                        4
<PAGE>
Saskatchewan.  The joint  venture  also  purchased  a claim in  another  diamond
exploration region in central Alberta.

During Fiscal 1995, the Company  focused the majority of its attention on the AK
Claim. In February  diamondiferous  kimberlite was discovered here and since the
discovery a program of delineation  drilling and soil sampling has been ongoing.

Additional  exploration  consisting  of regional  sampling and  high-sensitivity
magnetometer  surveying  was also  undertaken  on other  areas of the AK  Claim.
Activity  during  this  period on the  Company's  other  properties  was minimal
because of the focus on the AK Claim.

During  Fiscal  1996,  the  Company  drilled  104 holes into the  AK-5034  pipe,
including  37 for  exploration,  42 for  bulk  sampling  and 25 for  delineation
drilling.  A total of 5,800 kg of  exploration  drill hole  kimberlite  has been
processed  by caustic  fusion.  A 10,000 foot  delineation  drilling  program is
underway with completion scheduled for 1996.

Results, announced during Fiscal 1996, from the first 25 tonnes of the 100 tonne
mini-bulk  sample,  as processed by Canamera  Geological  Limited's  dense media
separation  plant,  showed 75.9  carats in a total of 24.6  tonnes of  processed
kimberlite. This equates to a grade of 3.09 carats per tonne. The kimberlite was
recovered  from nine drill holes in the Southern and Central  parts of the pipe.
The grade was  roughly  uniform  from  drill  hole to drill hole and from top to
bottom in each of the holes.

During  Fiscal  1997,  the Company  concluded  a joint  venture  agreement  with
Monopros  Limited,  a  wholly-owned  subsidiary of De Beers  Consolidated  Mines
Ltds., to develop the AK/CJ property.  This agreement provided that Monopros can
earn a 60% interest in the project by conducting continuing exploration and bulk
sampling on one or more new kimberlite deposits. As well, Monopros must complete
a feasibility study and fund development and construction of a  commercial-scale
mine.

Also during Fiscal 1997, the Company completed a 104-tonne mini-bulk sample from
the AK-5034  pipe.  The results  indicated  an average  grade of 2.48 carats per
tonne.

During the 1997  exploration  season,  Monopros  discovered three new kimberlite
pipes on the AK property:  Tesla, Tuzo and Hearne. All are  diamondiferous.  The
Company  reported that initial  tonnage and grade  estimates place both the Tuzo
and Hearne pipes among the world's  higher grade pipes.  Tesla is  considered of
lower grade but is expected to contribute to overall tonnnage.















                                        5
<PAGE>
During the spring of 1998, De Beers  conducted  mini-bulk  sampling on the three
new  pipes  as  well as the  AK-5034,  the  original  pipe  discovery  on the AK
property.  The 62-tonne  Hearne sample  contained 205 carats grading 3.28 carats
per tonne.  A 60-tonne  sample from the Tesla pipe  produced  25.9 carats and an
overall  grade of 0.43 carats per tonne.  The 5034 pipe produced 101 carats from
56 tonnes grading 1.81 carats per tonne, while the Tuzo pipe produced 108 carats
from 48 tonnes, grading 2.24 carats per tonne.

For at least the last three  years,  the Company has  financed  its  operations,
property   acquisition,   and  property   exploration   primarily   through  the
distribution of equity capital.  The six most recent significant  financings are
described in the next six paragraphs.

In October of 1996, the Company  completed a private  placement  financing which
consisted of 1,650,000  Series A Units and 1,025,000 Series B Units at $4.90 per
unit.  Each  Series A Unit  consisted  of one common  share and  one-half of one
non-transferable  share purchase warrant. Each whole warrant entitled the holder
to purchase  one  additional  common  share at an exercise  price of $5.75 until
December 31, 1997.  Each Series B Unit consisted of one common share  designated
as a "flow  through" share under the income Tax Act (Canada) and one-half of one
share purchase  warrant.  Each whole warrant entitled the holder to purchase one
additional  common  share of the  Company at an  exercise  price of $5.75  until
December 31, 1997.

On December 29, 1995, the Company  completed a private placement whereby it sold
1,300,000  units  and  193,000  flow  through  shares  at $4.40 per unit or flow
through share, which netted the Company $5,159,000 after commissions. $2,459,000
of the net funds have been released to the Company and the balance of $2,700,000
will be released with the filing and acceptance of a Statement of Material Facts
with the  Vancouver  Stock  Exchange.  Each unit will be comprised on one common
share and one-half non-transferable share purchase warrant exercisable for a two
year  period  entitling  the holder of each full  warrant to acquire  one common
share at a price of $4.40 per share in the first  year and at $5.25 per share in
the second year.

The  offerings  described in the preceding  paragraph  commenced on December 20,
1995 and closed on December 29, 1995.  The offerings were priced on December 20,
1995 and on that day the market price of the Company's stock was $4.45. The only
intermediary  involved in the offering was Loewen Ondaatje McCutcheon Limited, a
Canadian investment banking firm. Loewen Ondaatje McCutcheon Limited acted


















                                        6
<PAGE>
as agents for the Special Warrant Offering;  for the flow-through offering there
was no agent or intermediary.  All of the flow-through  shares were purchased by
Canadian citizens resident in Canada and the entire Special Warrant Offering was
purchased by Societe Generale of Paris,  France.  None of the securities sold by
the  flow-through  share  offering have been resold in the United  States.  Upon
receipt of a  prospectus  filed on April 25,  1996,  with the  British  Columbia
Securities Commission, 1,300,000 shares and 650,000 share purchase warrants were
issued as the special warrants were exercised.

Effective March 29, 1995 the Company issued  1,000,000 units for $0.44 per unit.
Each unit consisted of one common share and one non-transferable  share purchase
warrant.  The  warrant is  exercisable  for a two year  period  and the  holders
thereof  require one warrant to acquire on common  share at a price of $0.44 per
share in the first year and at a price of $0.50 per share in the second year.

On July 26,  1993 the  Company  completed  a private  placement  whereby it sold
1,571,590  units at a price of $0.88 per unit.  1,164,497 of the units consisted
of one  flow-through  common  share  and  one  two-year  non-transferable  share
purchase warrant  entitling the holder thereof to purchase one additional common
share for  Cdn$0.88  at any time on or before July 22, 1994 and for $1.01 at any
time after  July 22,  1994 and on or before  July 22,  1995.  Any shares  issued
pursuant to an exercise of the warrants  occurring on the first anniversary date
of their issue could become,  at the  discretion of the holder of such warrants,
"flow-through"  shares. 111,900 of the units were "finders fee" units which were
comprised of one common share and one two-year  non-transferable  share purchase
warrant  entitling the holder thereof to purchase on additional common share for
$1.10 at any time on or before  July 22,  1994 and for  $1.26 at any time  after
July 22, 1994 and on or before July 22, 1995. The balance of the units consisted
of one common share and one two-year  non-transferable  share  purchase  warrant
entitling the holder thereof to purchase one  additional  common share for $0.88
at any time on or before  July 22, 1994 and for $1.01 at any time after July 22,
1994 and on or before July 22, 1995.

On April 28, 1993,  the Company  completed a private  placement  whereby it sold
200,000 units at $0.66 per unit. Each unit consisted of one common share and one
non-transferable Series "K" share purchase warrant with each warrant exercisable
at a price of $0.66  per  share at any time on or before  April  19,  1994,  and
thereafter  at a price of $0.76 per share on or before April 19, 1995.  The hold
period for these shares expired on April 20, 1994.



















                                        7
<PAGE>
On January 20, 1993, the Company  completed a private  placement whereby it sold
200,000 units at $0.50 per unit. Each unit consisted of one common share and one
non-transferable Series "J" share purchase warrant with each warrant exercisable
at a price of $0.50 per share at any time on or before  December 31,  1993,  and
thereafter  at a price of $0.60 per share on or before  December 31,  1994.  the
hold  period  for the  shares  expired  on  December  31,  1993.  The units were
comprised solely of flow-through  shares and warrants which entitled the holder,
at his option,  to acquire  additional

flow-through  shares.  The flow-through  shares and any additional  flow-through
shares  issued on the  exercise of the  warrants  entitled  the holders of those
shares  to the  benefit  of the  exploration  expense  incurred  with the  funds
received by the Company on the sale of those shares.

During the fiscal year ended  3/31/97,  1,074,000  share  purchase  options were
exercised netting the Company $4,644,498,  and 1,300,000 share purchase warrants
were exercised netting the Company $5,266,658. An additional 166,875 shares were
issued  pursuant to the  exercise of agent's  options and  warrants  netting the
Company $781,531.

As of March 31, 1998,  the end of the Company's  most recent fiscal year,  there
were 42,376,810  shares of common stock  outstanding.  As of 10/02/98 there were
42,444,760 shares of common stock outstanding.

Competition
-----------

There is competition  from other mining  exploration and  development  companies
with operations similar to those of the Company's.  Many of the mining companies
with which the Company  competes have  operations  and  financial  strength many
times that of the Company.  Nevertheless,  the market for the Company's possible
future  production  of  minerals  tends to be  commodity  oriented,  rather than
company  oriented.  Accordingly,  the  Company  expects  to  compete  by  taking
advantage of the market for all minerals present in its properties to offset the
primarily  fixed  costs of  mining  any one of the  jointly-occurring  minerals.
Commodity  prices  fluctuate and there is no guarantee that market prices at any
one time will be higher than production costs.





















                                        8
<PAGE>
Risks of Mining
---------------

Regulations and Government Rules
--------------------------------

The mining  industry  has been  subject to  increasing  government  controls and
regulations in recent years. The Company has obtained all the necessary  permits
for  exploration  work performed to date and  anticipates  no material  problems
obtaining the necessary permits to proceed with further development.

Risks Inherent in Mining
------------------------

Exploration  for  economic  deposits  of minerals is subject to a number of risk
factors.  While the  rewards  for  mining  companies  can be  substantial  if an
economically  viable discovery is made, few of the properties which are explored
are ultimately developed into producing mines.

There is no known body of ore on the Company's mineral property.  The purpose of
the current work program is to carry out  exploration  on the property  with the
objective of establishing an economic body of ore.

The Company's ability to continue  exploration and development of its properties
will be dependent upon its ability to raise significant  additional funds in the
future.  Should the Company not be able to obtain such  financing,  a portion of
its interest in properties may be needed to be  transferred  to potential  joint
venture partners,  or its properties may be lost entirely.  Refer to Item #2 for
discussion of mining properties.

The Company's  mining  operations will be subject to  governmental  legislation,
policies  and  controls  relating  to  prospecting,   development,   production,
environmental  protection,  mining taxes and labor standards.  In addition,  the
profitability of a particular mining prospect will be affected by the market for
base,  strategic,  and precious  metals,  which  entails the  assessment of many
factors,  some of which include changing production costs, the supply and demand
for base, strategic and precious minerals,  the rate of inflation,  the capacity
of base,  strategic and precious mineral producing  corporations,  the political
environment and changes in international investment patterns.

If the Company's exploration programs are successful, additional capital will be
required  for the  development  of an  economic  ore  body  and to  place  it in
commercial  production.  The only sources of future funds presently available to
the Company are the sale of














                                        9
<PAGE>
equity capital, or the offering by the Company of an interest in its property to
be earned by another  party or  parties  carrying  out  further  exploration  or
development thereof.

There is also the  possibility  that the Company's  properties may be subject to
prior  unregistered  agreements  or transfers  or land claims,  and title may be
affected by undetected defects.

Exploration  for minerals is a speculative  venture  necessarily  involving some
substantial  risk. There is no certainty that the expenditures to be made by the
Company in the acquisition of the interest in its mineral properties will result
in discoveries of commercial quantities of ore.

Resource  exploration and  development is a speculative  business and involves a
high  degree  of risk.  The  marketability  of  natural  resources  which may be
acquired  or  discovered  by the Company  will be  affected by numerous  factors
beyond the control of the Company.  These factors  include market  fluctuations,
the proximity and capacity of natural resource markets and processing equipment,
government  regulations,   including  regulations  relating  to  prices,  taxes,
royalties,  land  tenure,  land use,  importing  and  exporting  of minerals and
environmental protection. The exact effect of these factors cannot be accurately
predicted,  but the  combination  of these factors may result in the Company not
receiving an adequate return on invested capital.  Mining  operations  generally
involve a high degree of risk. Hazards such as unusual or unexpected  formations
and other  conditions are involved.  The Company may become subject to liability
for  pollution,  cave-ins or hazards  against  which it cannot insure or against
which it may elect not to insure.  The  payment of such  liabilities  may have a
material,  adverse effect during  several phases of property  exploration on the
Company's financial position.

While the Company has been  successful  in raising  the  necessary  funds in the
past,  there can be no  assurance it can continue to do so. In such funds cannot
be secured,  the Company will be forced to curtail its exploration  efforts to a
level for which funding can be secured or relinquish  certain of its  properties
or allow its  interest  to be diluted  pursuant  to the terms of the  respective
joint venture agreements.






















                                       10
<PAGE>
Plan of Operations
------------------

Source of Funds for Fiscal 1999
-------------------------------

The Company had a working  capital  balance of  $6,217,243  as of the end of the
first three months of Fiscal 1999  (6/30/98).  The Company  believes that it has
sufficient working capital for the remainder of Fiscal 1999.

Use of Funds for Fiscal 1999
----------------------------

At year end Fiscal 1998  (3/31/98)  and through the first three months of Fiscal
1999  (ending  6/30/98),  the Company had met all its  expenditure  requirements
under  the  various  mineral  agreements  it holds or has  interests  in.  These
expenditure  requirements  are more fully  discussed in ITEM 2,  "DESCRIPTION OF
PROPERTIES".

During the balance of Fiscal 1999, the Company anticipates that
exploration  on the AK/CJ  Property will continue by its joint venture  partner,
Monopros Limited.  A major bulk sampling program is planned during the winter of
1998-1999.  Initial plans call for the  extraction of  approximately  500 tonnes
from each of the  Hearne,  Tuzo and 5034  pipes,  with a lesser  amount from the
Tesla pipe.  This tonnage is expected to produce  between 1,000 and 2,000 carats
for each of the three pipes and form the basis of a pre-feasibility study.

Anticipated Changes to Facilities/Employees
-------------------------------------------

There  are no plans to add any  additional  personnel,  other  than  independent
contractors  retained  to assist in the  exploration  of the  Company's  mineral
properties.

























                                       11
<PAGE>
USA vs. Foreign Sales/Assets
----------------------------

At 3/31/98,  nearly all of the Company's assets were located in Canada, with the
exception of an interest  comprising  less than 1% located in Nevada,  U.S.A. At
3/31/97, all of the Company's assets were located in Canada.

During Fiscal  1998/1997/1996  ended March 31, the Company  generated no revenue
from operations.

Staffing
--------

As of 10/02/98, the Company had seven full time and six part time employees,  in
addition to six directors (of which three were officers of the Company). None of
the Company's employees are covered by a collective bargaining agreement.

Manufacturing/Marketing
-----------------------

Not Applicable.

Research and Development
------------------------

Not Applicable.

Reliance Upon Significant Customers/Suppliers
---------------------------------------------

Not Applicable.

Seasonality
-----------

Not Applicable.






















                                       12
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

Executive Offices
-----------------

The Company's  executive offices are located in rented premises of approximately
1,870  sq.  ft. at 789 West  Pender  Street,  Suite  #1205,  Vancouver,  British
Columbia
V6C 1H2. The Company considers these premises suitable for current needs.

The Company  also  maintains  an office in the United  States at Empire Tower I,
3633 E. Inland Empire Blvd., Suite 265, Ontario, California 91764.

AK/CJ Claims
------------

The AK Property
---------------

The AK Property is the subject of a summary  report dated November 11, 1996 (the
"Evans Report") entitled  "Summary Report on the AK Property"  prepared by Bruce
T. Evans.  The following  discussion of the AK Property is based,  in part, upon
information  set forth in the Evans Report and all of the  following  discussion
has been approved by Mr. Evans.

As the Company acquired the AK and CJ Properties together, and has since entered
into a  number  of  agreements  relating  to both  properties,  portions  of the
following discussion relate to both properties.

Location and Access

The  AK  Property  is  located  in  the  Mackenzie  District  of  the  Northwest
Territories, centered at latitude 63' 30' north; longitude 109' 30' west, and is
situated between Fletcher and Walmsley Lakes to the east, Kirk Lake to the north
and Margaret Lake to the west. The property lies 115 km southeast of Lac de Gras
and 320 km northeast of Yellowknife.

Two exploration camps have been established to service the property.  Both camps
are accessible by light float or wheel equipped planes. Larger aircraft can land
at an  airstrip  at  Tundra-Salmita,  approximately  120  km  northwest  of  the
property.  The Echo Bay  Mines'  winter  road to the  Lupin  mine site runs from
Yellowknife along MacKay Lake, approximately 35 km northwest of the property.
















                                       13
<PAGE>
The AK Property presently consists of 119 contiguous mining claims (mining claim
nos. AK 1 through AK 119 inclusive)  totaling  301,119.5  acres. The AK Property
originally  comprised  144 mining  claims  (mining claim nos. AK 1 though AK 144
inclusive),  however 25 of these mining claims lapsed  (mining claim nos. AK 120
though AK 144 inclusive).

The expiry  date for mining  claims  nos.  CJl to CJ34  inclusive,  CJ36 to CJ44
inclusive,  CJ49 to CJ68  inclusive,  CJ84 to  CJIO4  inclusive,  CJ127 to CJI44
inclusive  (collectively,  the "CJ Property") and AK5, 5, 7, 11, 14, 15, 17, 18,
19,  24, ' )4 to 37  inclusive,  41,  44,  46,  47,  48,  52,  55,  56, 58 to 61
inclusive,  71, 84 and 89 was  August  17,  1996.  Reports of Work in respect of
these claims have been filed. Due to a backlog in the Mining Recorder's  Office,
a  Certificate  of Work for 1996 has not yet been  issued  in  respect  of these
claims and  therefore  the date to which the expiry date for these mining claims
may have been  extended  is  uncertain.  However,  to the best of the  Company's
knowledge,  the Reports of Work show that the Company has completed  enough work
in respect of each of the  claims to extend the expiry  date to at least  August
17, 1997.  The remainder of the claims have expiry dates between August 17, 1997
and August 17, 2002.

In April 1995,  Inukshuk  Capital Ltd.  ("Inukshuk")  staked  mining claims nos.
AK145  through  AK157  inclusive.  Inukshuk  provided the Company with  executed
transfer  documents  for these 13  claims  and the  Company  filed for the legal
transfer  to the Company of an  undivided  60%  interest in these  claims at the
Mining Recorder's  Office.  The remaining 40% undivided interest in these claims
were transferred by Inukshuk to 444965. The additional mining claims are subject
to the terms of the  Triparty  Agreement  (as  defined  below),  the AK-CJ Joint
Venture  Agreement (as defined below),  the Camphor Option Agreement (as defined
below),  the Glenmore  Sub-Option  Agreement (as defined below) and the Monopros
Option Agreement (as defined below).

Ownership

The  Company  holds a 90%  interest  in each  of the AK and CJ  Properties.  The
balance of each is owned by Camphor, as to 10%.

The majority of the claims  comprising  the AK and CJ Properties  were staked in
the summer of 1992 by Inukshuk.  The AK 145 through AK 157 claims were staked in
April 1995.

Under an option agreement (the "Company Option Agreement") dated August 18, 1992
and  amended  November  13,  1992 and  January 8, 1993













                                       14
<PAGE>
between the Company and Inukshuk,  a company at arm's length to the Company, the
Company  purchased  an  option  to  acquire  a  100%  interest  in the AK and CJ
Properties.  The Company  subsequently earned its interest in both properties by
paying to  Inukshuk a total of  $380,000,  issuing to  Inukshuk  200,000  common
shares of the Company,  and spending  $1,500,000  on the  properties.  Under the
terms of the Company Option Agreement, both properties are subject to a 3% gross
overriding royalty (the "Gross Overriding  Royalty") in favor of Inukshuk with a
minimum advance royalty of $200,000 per year commencing  November25,  1999. This
royalty may be purchased for $5 million at any time until November 25, 1999. The
Company,  Camphor and 444965 purchased the Gross Overriding Royalty in June 1997
in the course of settlement of the litigation with Inukshuk.  See the discussion
below concerning the Monopros Option Agreement.

The Company granted an option to acquire up to 50% of its interest in the AK and
CJ  Properties  to 444965,  a subsidiary  of Glenmore  under an  agreement  (the
"Glenmore  Sub-Option  Agreement")  dated  August 9,  1993.  Under the  Glenmore
Sub-Option Agreement, 444965 acquired a 40% interest in the AK and CJ Properties
and had a right to acquire an  additional  1 0% interest in such  properties  by
spending  certain amounts on exploration  work on such  properties.  In a letter
agreement dated June 17, 1994, between the Company and 444965, 444965 waived its
right to earn an additional 10% interest in the AK and CJ Properties.

On November 18, 1993, the Company, Inukshuk and 444965 entered into an agreement
(the "Triparty  Agreement")  providing for the further development of the AK and
CJ  Properties.  The  Triparty  Agreement  was  amended  on  January 4, 1994 and
February 25, 1996. The Triparty  Agreement  clarified the relationship among the
parties  and amended  some of the terms of the  Glenmore  Sub-Option  Agreement.
Attached as schedules to the Triparty  Agreement  were the forms of operator and
joint venture agreements which were subsequently entered into by the Company and
444965.  The  Triparty  Agreement  provides  that any  proposed  transfer  of an
interest in the AK or CJ  Properties  by either the  Company or 444965  shall be
subject to a right of first refusal in favor of the other party.

In accordance with the terms of the Triparty  Agreement,  the Company and 444965
entered into a joint venture agreement  effective  November 18, 1993 (the "AK-CJ
Joint Venture  Agreement")  setting forth the basis on which further exploration
work on the AY, and CJ Properties  would be undertaken.  The AK-CJ Joint Venture
Agreement  provides that each party must contribute to























                                       15
<PAGE>
exploration  expenditures in accordance with each party's proportionate interest
in the properties. If a party fails to make required expenditures,  that party's
interest in the  properties  will be reduced  and, if a party's  interest in the
joint venture is reduced to 10%, its interest will be automatically converted to
a 5% net profits interest which will entitle such party to receive 5% of the net
profits generated from the AK and CJ Properties as calculated in accordance with
a specified formula set forth in the AK-CJ Joint Venture Agreement.

Under  the  terms  of  a  purchase  and  sale  agreement  (the  "Camphor  Option
Agreement")  dated  August 16,  1994,  as amended  February 10, 1995 between the
Company and  Camphor,  the Company  granted to Camphor an option to acquire from
the  Company  a 10%  interest  in  the  AK  and  CJ  Properties.  Camphor  is an
exploration and  development  company based in Vancouver,  British  Columbia and
listed  on the VSE.  Camphor  earned  its  interest  under  the  Camphor  Option
Agreement  by issuing an aggregate  of 400,000  common  shares of Camphor to the
Company; spending $200,000 towards exploration on the AK and CJ Properties;  and
agreeing  to fund 10% of future  exploration  work on the AK and CJ  Properties.
Under the terms of the Camphor Option Agreement,  Camphor's  interest is held in
trust by the  Company.  Certain  directors  and officers of the Company are also
directors and officers of Camphor.

Following the  acquisition  by Camphor of its 10% interest in the properties the
Company,  Camphor,  Inukshuk  and 444965  entered into a letter  agreement  (the
"Camphor Agreement") dated May 5, 1995 under which, among other things,  Camphor
acknowledged  that its interest in the properties would be subject to the rights
of 444965  and  Inukshuk  under  the  Company  Option  Agreement,  the  Glenmore
Sub-Option  Agreement,  the  Triparty  Agreement  and the  AK-CJ  Joint  Venture
Agreement.

On March 6, 1997, the Company,  Mountain  Province,  444965 and Glenmore entered
into the  "Monopros  Option  Agreement"  with  Monopros,  whereby  Monopros  was
appointed as the  operator of the joint  venture with respect to both the AK and
CJ Properties.  The Monopros Option Agreement contemplates a number of stages of
exploration and development of the AK and CJ Properties as follows:

(a)  Stage #1 consists of prospecting and  exploration for new kimberlite  pipes
     in addition to the 5034 kimberlite pipe.

(b)  Stage #2  consists  of  preliminary  evaluation  of any  additional  pipes,
     including  minibulk  sampling.  Monopros is entitled at any time to abandon
     the project. The

















                                       16
<PAGE>
     anticipated cost of Stages 91 and #2 is $5,000,000. Stages #1 and #2 are to
     be concluded no later than May 31, 2000.  The existing  joint  venture (the
     "Existing Joint Venture") among the Company,  Mountain  Province and 444965
     is  obliged to  contribute  the cost of Stages #1 and #2 in  proportion  to
     their existing  interests (the Company:  50%; 444965:  40%; Camphor:  1O%),
     with Monopros paying any amount in excess of $5,000,000.

(c)  If Monopros elects to proceed further, Stage #3' ) involves full evaluation
     of any additional pipes,  including bulk sampling, to be completed within a
     further two years.  The cost of Stage #3, which is estimated  not to exceed
     $18,000,000,  will  be paid  by  Monopros  with  any  excess  to be paid by
     Monopros (51%) and the Existing  Joint Venture (49%).  On the completion of
     Stage #3,  Monopros will be entitled to a 51% undivided  interest in the AK
     and CJ  Properties,  while the  combined  interest  of the  Existing  Joint
     Venture is reduced to 49% (the  Company:  24.5%;  444965:  19.6%;  Camphor:
     4.9%).

(d)  If Monopros elects not to proceed to Stage #4, the  co-ownership  interests
     of Monopros and the Existing  Joint Venture are adjusted such that Monopros
     will have a O% interest  and the  Existing  Joint  Venture  will have a 70%
     interest. If Monopros elects to proceed to Stage #4, Stage #4 consists of a
     fall  feasibility  study for  development  of a mine.  The  Existing  Joint
     Venture is entitled to  contribute  its share of related  costs (49%),  but
     otherwise  the  interest  of  Monopros  increases  from  51%  to 55 %  upon
     completion  of  Stage  #4  (with  the  Existing  Joint  Venture's  interest
     declining from 49% to 45%).

(e)  If the  feasibility  study  (Stage #4) is  positive in the sense that a 15%
     internal  rate of return can be  realized,  the parties  will  proceed with
     Stage 45, being the  development of a mine on the AK and CJ Properties,  to
     be financed  by  Monopros.  Upon  completion  of Stage #5, the  interest of
     Monopros would be increased by 5% (i.e. to 56% or 60%, depending on whether
     the Existing  Joint  Venture has  contributed  to the Stage 44  feasibility
     study), with a corresponding decrease in the interest of the Existing Joint
     Venture (i.e. 44% or 40%).

On March 26,  1997,  Inukshuk  commenced an action in British  Columbia  Supreme
Court against the Company,  Camphor, 444965 and Monopros,  asserting that it was
entitled to a right of first



















                                       17
<PAGE>

refusal (the "Right of First  Refusal") to acquire any interest in the AK and CJ
Properties  from the  Company,  Camphor  and  444965.  This  action and  related
arbitration  proceedings  were  settled  and  resolved  under  the  terms  of an
agreement  (the  "Sale and  Settlement  Agreement")  dated  June 18,  1997 among
Inukshuk,  Canamera.  Muskox Holdings Ltd.  ("Muskox") (an affiliate of Inukshuk
and Canamera), John Dupuis, the Company, Camphor, 444965 and Glenmore. Under the
terms of the Sale and Settlement Agreement:

(a)  the  Company,  Camphor  and 444965  acquired  certain  fixed  assets at the
     Kennedy Lake Camp from Canamera;

(b)  the Company,  Camphor and 444965 acquired the Gross Overriding Royalty from
     Muskox for $3,000,000;

(c)  the Company,  Camphor and 444965  acquired the Right of First  Refusal from
     Inukshuk for $500,000;

(d)  the Company, Camphor and 444965 paid to Canamera the sum of $250,000 by way
     of  termination  fee in respect of the  termination  of  Canamera  Operator
     Agreement;

(e)  the Company,  Camphor and 444965 paid to Mr.  Dupuis the sum of $250,000 by
     way of compensation for alleged loss of reputation;

(f)  the  Company,  Camphor and 444965  paid to Canamera  the sum of $200,000 in
     settlement  of any actual or  anticipated  expenses  incurred  by  Canamera
     respecting camp demobilization and other expenses;

(g)  the B.C.  Supreme  Court action and related  arbitration  proceedings  were
     dismissed by consent and abandoned; and

(h)  the parties exchanged comprehensive releases.

The Company, Camphor and 444965 have granted to Monopros the option to acquire a
51% interest in the Gross Overriding Royalty for 51% of $3,000,000,  such option
exercisable  on or before  November 30, 1997. If Monopros does not exercise this
option  within such time,  its  purchase  price for a 51%  interest in the Gross
Overriding Royalty would revert to 51% of $5,000,000 as governed by the Monopros
Option Agreement.

In November 1997, the Company  completed its  amalgamation  with 444965 BC Ltd.,
which held 40% of the AK/CJ  claims.  As a result,  the Company now holds 90% of
the AK/CJ property with 10% held by














                                       18
<PAGE>
Camphor  Ventures.  Monopros  has the right to earn up to a 60%  interest in the
property by bringing it to production.

History

The first  systematic  geological  investigation  of the Walmsley  Lake area was
reconnaissance  geological  mapping conducted by the Geological Survey of Canada
in 1949. Historically,  mineral exploration in the southeastern Slave Structural
Province  focused  on  gold  and  base  metals  within  Yellowknife   Supergroup
metavolcanic and metasedimentary rocks in the MacKay, Aylmer, and Clinton-Golden
Lake areas.  The initial claims  comprising the AK and CJ Properties were staked
in June 1992.  The  properties  cover terrain in the Slave  Structural  Province
which, at the time they were staked, were thought to be prospective for diamonds
based on the then recent discoveries to the north of Lac de Gras made by Dia-Met
Minerals Ltd. and the Canadian  subsidiary of Broken Hill Pty. Co. Ltd. in 1991.
Prior to the staking of the AK Property,  there had been no significant recorded
exploration activity on the AK Property.

Exploration Activity

During 1996 a total of 1842 heavy  mineral  till  samples  were  collected  from
throughout  the AK  Property  on a  follow  - up  basis  to  previously  defined
anomalous  areas.  1574  samples  were  analyzed  and 171 samples  were found to
contain kimberlite indicator minerals,  predominantly pyrope garnet. The results
of heavy  mineral till  sampling  has refined  target areas in addition to 5034,
these areas are referred to as AK East,  50-'14  North,  N5-A and N5-B,  AK West
(N5-C & N5-D), and 7101 (AK Central).

Following  the heavy  mineral  till  sampling  programs,  continued  ground  and
airborne  geophysical  surveys were conducted over areas  previously  defined by
airborne geophysics as possible kimberlite targets. Detailed ground magnetometer
surveys  were  completed  with line spacing  between 25 and 50 metres,  and data
collection  every 12.5 metres.  A total of 19 ground surveys were completed over
26 individual targets for 23' ).8 line kilometres of survey. The original Dighem
airborne  geophysical  survey was flown at line  spacing of 250 metres.  The 250
metre line  spacing  was  determined  by the  partners  to be too  "coarse"  and
therefore an airborne  geophysical  program which covered five continuous  grids
across the southern half of the AK Property was completed.  The airborne program
utilized a high sensitivity magnetometer which was flown a very low level and on
grid lines with 50 metre  spacing.  A total of 9,491  kilometres  of survey were
flown.

















                                       19
<PAGE>
During the first half of 1996 a "mini" bulk  sample test of the 5034  kimberlite
was completed.  The method  employed to collect the bulk sample at the 5034 pipe
was by use of large core diameter  diamond.  The program was  conducted  between
February and June 1996. A total of 43 large  diameter holes were completed for a
total meterage of 11,494 metres of drilling. From this drilling a sample weight
of 104  tonnes  was  collected.  The  "drilling"  bulk  sample  tested  the 5034
kimberlite to a vertical depth of 3 5 0 metres.

Analysis  of the  kimberlite  drill core from the  delineation  and "mini  bulk"
sample drilling was conducted by Canamera at its North Vancouver laboratory. The
sample material treated totaled 103,700  kilograms.  The analytical  method used
was by dense media  separation.  An initial  25,000  kilograms  of material  was
subjected to a rigorous crushing and processing designed to optimize recovery of
diamonds 0.5mm and larger,  while the remaining  78,700 kilograms were processed
in manner to: (a) optimize recovery of diamonds greater in size than 1.0 mm; and
(b) optimize cost  efficiency of recovery of larger diamonds deemed to have more
economic  significance.  At the end of the 1996 5034  kimberlite bulk sample the
diamond  grade  stands at 2.67  carats  per tonne for  macro-diamonds  0.5mm and
larger and 2.56 carats per tonne for macrodiamonds 1.0 mm and larger.

4,738 diamonds  which  measured  greater than 1.0 mm in size were recovered from
the 103,700 kilograms of sample processed by the Canamera DMS method.  From this
group of diamonds, three were recovered which weighed more than 2.0 carats each,
eight were recovered  which weighed more than 1.5 carats each, 43 were recovered
which weighed more than 0.5 carats each,  and 566 were  recovered  which weighed
more than 0.1 carats each. The largest stone recovered from this sample weighted
2.88 carats.

Between  April  and  August of 1996  exploration  drilling  continued  on the AK
property  independent  of the 5034 pipe. A total of 29  exploration  drill holes
were  completed  for 6,800  metres of  drilling.  The  exploratory  drilling was
conducted at four target areas (5034,  5034 North, AK East, and N5-A),  however,
no new kimberlite occurrences were discovered.

After the completion of the Evans Report the Company  received  results from its
fall  drilling  program on the central  part of the AK Property  which had never
been  drilled  before.  Four drill holes which were drilled up ice from the most
prominent  indicator  mineral  trains  intersected  several (up to seven) narrow
kimberlite  dykes at depths  of  approximately  30 to 60  metres  with a maximum
thickness of 2.65  metres.  Several  micro  diamonds  were


















                                       20
<PAGE>
recovered by caustic  fusion from a very small  sample  (several  kilograms)  of
kimberlite  from  one of  the  dykes.  In  April,  1997,  Monopros  conducted  a
helicopter airborne survey, both magnetic and electromagnetic, on closely spaced
(50 meters) flight lines over the complete  southern half of the AK Claim block,
covering  approximately  50 km  by  15  km.  This  area  contains  many  of  the
kimberlitic  indicator  minerals  recovered  so  far  as  well  as a  number  of
well-defined  indicator mineral trains. One of the purposes of the survey was to
locate geophysical anomalies,  using infield processing and interpretations,  at
the heads of these trains.  Land-based targets will be drilled during the course
of the summer when Monopros will also carry out additional  till  sampling.  The
helicopter  survey was  completed  in early May, at which time  drilling of lake
based targets started.

In  addition,  Monopros  started with an in-depth  review of all previous  work,
including the 5034 pipe. It is  anticipated  that, for the reasons of economy of
scale, any future bulk sampling of the 5034 pipe will be carried out at the same
time as bulk  sampling  of any newly  discovered  kimberlites.  The need for and
extent of further sampling of 5034 will be decided  following  Monopros' review.
The  diamonds   recovered  from  the  5034  mini-bulk  sample  were  shipped  to
Johannesburg for evaluation. The results of the Monopros evaluation and analysis
will be reported when available.

A total of 857 garnets  recovered from glacial sediment samples taken during the
previous  prospecting  programs on the AK and CJ claim blocks have been analyzed
by  electron   microprobe  at  the  Anglo  American  Research   Laboratories  in
Johannesburg,  South  Africa.  A  significant  proportion  of the analysis  (169
grains) plots within the high interest GIO garnet field.  More detailed analysis
of the results in relation to specific  anomalous  areas within the claim blocks
is being carried out by Monopros.

On May 26, 1997,  Monopros  advised the Company that  kimberlite was intersected
while drilling a lake-based geophysical target generated from the recently flown
high resolution  helicopter magnetic and electromagnetic  survey of the southern
AK claim block. The target is located  approximately  1.8 km northwest of the AK
5034 kimberlite pipe. The drill hole was inclined at 50' and intersected at 51.5
meters of  continuous  kimberlite.  The drill hole was stopped in  kimberlite at
187.5 meters due to difficult ground conditions.  Samples of the kimberlite were
forwarded  by  Monopros  to  the De  Beers  Laboratories  in  South  Africa  for
microdiamond,   mineral  chemistry  and  other  analysis.  The  results  of  the
microdiamond  analysis  was  reported  on July 15,  1997.  Monopros  advised the
Company that caustic  fusion  analysis

















                                       21
<PAGE>
by De Beers  of 66 kgs of  kimberlite  from  the  Telsa  pipe  has  yielded  109
microdiamonds.  The diamonds  were  recovered  from three samples of 22 kgs each
taken at different  intervals in the drill hole.  The results are  summarized as
follows:

               Sample
                (kg)            Total Diamonds         Kimberlite Weight
               ------           --------------         -----------------
                 1                    22                       62
                 2                    22                       10
                 3                    22                       37

The variation in the number of diamonds from sample to sample is very likely due
to the small size of the samples. De Beers classifies microdiamonds according to
various square mesh aperture screen sizes.  Eight of the diamonds recovered were
larger than the 1/2x V2nun  screen  size.  However,  this should not be confused
with the commonly  used  definition  of macros:  those  diamonds  whose  largest
dimension  exceeds  Y2mm.  Some  such  macros  may pass  through a 1/2 by 1/2 mm
screen.

Based  on these  good  results,  Monopros,  in early  August,  commenced  with a
drilling  program  from the shore  into the  Telsa  pipe to  recover  additional
kimberlite for analysis and to better delineate the pipe.

The summer  exploration  program is nearing  completion.  400  glacial  sediment
samples  have been  collected on the CJ claims and to date 300 samples have been
taken on the AK claims where sampling is continuing. Approximately 2,000 samples
will be taken during the field season. The results from these samples plus those
of  approximately  1400 previously  untreated or partially  treated samples will
help to better define the many indicator mineral trains identified so far.

Interpretation  of the recently  flown,  14500 line  kilometre,  high resolution
helicopter  magnetic and  electromagnetic  survey of the southern part of the AK
claim block is nearly  completed.  Besides numerous lake based targets,  23 land
targets  have been  identified  so far on the eastern  part of the claim  block.
Additional  targets  are  expected to be  identified  on the central and western
parts.  The  geophysical  results  will be combined  with the  sampling  results
(indicator  mineral  trains) to choose the most promising  targets.  Drilling of
these targets started in early August,  1997 using a RC  heliportable  drill and
conventional diamond drilling. Drilling will continue throughout the summer.


















                                       22
<PAGE>
The  1998  winter  program,   which  commenced  on  January  12,   consisted  of
delineation,  exploration,  and test sample  drilling.  On April 21,  1998,  the
Company  announced  that  Monopros  had  completed  a test sample of four pipes:
Hearne,  Tesla,  Tuzo and 5034,  ahead of schedule.  Approximately  50 tonnes of
kimberlite were recovered from each of the pipes.  The kimberlite was treated in
Monopros' DMS plant at Grand Prairie,  Alberta.  The concentrates  produced

were  then  shipped  to  South  Africa  for  diamond  recovery  and  preliminary
evaluation.  The number of diamonds  recovered and resulting grades for the four
pipes are summarized as follows:

Hearne Pipe:  205 carats were  recovered  from 62.5  tonnes,  at a grade of 3.28
carats per tonne. The two largest diamonds  recovered were 1.87 and 1.80 carats.
Also recovered were seven diamonds equal to or greater than 1 carat,  24 greater
than 50 points (0.5 carat),  and 160 diamonds greater than 20 points (0.2 carat)
in weight.

5034 Pipe: 101 carats were  recovered  from 55.8 tonnes of  kimberlite,  grading
1.81 carats per tonne.  The two largest  diamonds  recovered  were 1.90 and 1.69
carats.  Also recovered  were five diamonds  greater than 80 points (0.8 carat).
Based on the results of a previous  mini-bulk  sample,  Monopros  estimated  the
grade and value of the 5034 pipe to be 1.5  carats  per  tonne,  with a value of
U.S.$55 per carat.

Tesla Pipe: 25.9 carats were recovered from 60 tonnes of kimberlite, for a grade
of 0.43  carats per tonne.  Results  were  consistent  with  Monopros'  modeling
predictions  based  on  previously  reported  caustic  fusion  results  from the
exploration  drill holes. The Tesla pipe is considered to be the smallest of the
four pipes, however further delineation is considered necessary to establish the
exact sizes of all four pipes.

Tuzo  Pipe:  108  carats  were  recovered  from the  processing  of 48 tonnes of
kimberlite  from the Tuzo pipe for a grade of 2.24  carats  per  tonne.  The two
largest  diamonds  were 2.34 and 1.85 carats.  Also  recovered  were 10 diamonds
greater than 80 points (0.8 carat).

Both the Company and Monopros, the operator, believe that the results from these
four pipes warrant  advancement of the project to the bulk sampling stage, which
is expected to commence in early 1999.

Currently, the commercial viability of the extraction of diamonds from the AK/CJ
claims has not been proven and the claims are without a known body of commercial
ore.















                                       23
<PAGE>
Ketza River Project
-------------------

Acquisition of Interest
-----------------------

The Company is the  registered  owner of certain  mining claims  situated in the
Ketza River Gold Camp,  Watson Lake Mining District,  Yukon  Territory,  Canada,
otherwise knows as the "Ketza River Project".

The claims  comprising the Ketza River Project were staked by the Company during
the fiscal year ended 3/31/88 at a total cost of $30,582.

Ketza River Project Property Description
----------------------------------------

Location:
---------

The Ketza River Project  consists of two separate  properties  of  approximately
8,100 acres situated in the Ketza River Gold Camp, Ketza River Area, Watson Lake
Mining District,  Yukon Territory,  Canada  approximately 45 kilometers south of
Ross River, Yukon Territory.  These claims are known as the White Claims and the
Wild-Eve Property.

History:
--------

Exploration  was  initiated  in the  Ketza  River  area  in the  late  1940s  by
prospectors working for Hudson Bay Mining and Smelting.  Exploration work in the
mid  1950s  by  Conwest  Exploration  Co.  Ltd.  resulted  in the  discovery  of
auriferous   lenses   of   massive    pyrrhotite-arsenopyrite    mineralization.
Contemporaneous with Conwest's discovery, other groups located silver-lead veins
in the area.  Exploration  resulted in the definition of one mineable reserve at
the Ketza River Mine.

The Ketza River Project claims cover favorable  structural and geological trends
extending  westerly from the  mineralized  zones on the Ketza River Mine.  Since
1987 the  Company  has  incurred  expenditures  of  $725,000  on the  project in
conducting   exploration  and   development   work  consisting  of  prospecting,
geological mapping, geochemical soil and rock sampling, induced polarization and
magnetometer surveys, trenching, and diamond drilling.

The White Claims
----------------

The  exploration  work  performed on the White Claims has produced the following
results:  discovery  of the East  zone  where  trenching










                                       24
<PAGE>
uncovered a zone that assayed 0.356 ox/ton gold across 2.10 meters; discovery of
the Lake zone where trenching located silver-lead  mineralization assaying up to
36.64 oz/ton  silver,  0.013  oz/ton gold and 57.9% lead;  discovery of the West
zone where trenching  uncovered  oxidized  material assaying 0.173 oz/ton across
1.0 meters.  The West zone was found to be surrounded  by a  gold-arsenic-copper
soil anomaly  approximately  400 meters by 1,000  meters in size.  Stratigraphic
correlation's  indicate  that  the  East,  Lake  and  West  zone are in the same
formation  as that  which  hosts gold  deposits  on the  adjacent  ground of YGC
Resources Inc.

During the 1995 field season a program of limited hand trench was  undertaken at
the West zone.  The results of this work  uncovered  two oxide zone samples from
which analyzed up to 720 ppb gold and 53,301 ppm As. Further follow-up trenching
is recommended for these zones in the 1996 field season.

Wild-Eve Property
-----------------

This  property was first  acquired by Cyprus Anvil Mining Corp.  in August 1976.
During  the 1977 field  season a program of soil  sampling  and  geophysics  was
undertaken on the property. In 1978 one vertical diamond drill hole was put into
the property. Cyprus Anvil subsequently allowed these claims to lapse.

In 1986 the  Company  acquired  the ground by staking it and  conducted  further
geochemical soil sampling and geophysics on the claims in 1987 and 1989. Results
of this work  outlined a ferricrete  gossan and an  associated  zone  containing
anomalous  Pb,  Zn,  Ag,  Cu, As and Au in soil.  The  source of the  gossan and
anomalous  geochemistry has not been determined.  In 1993, the drill core of the
Cyprus Anvil hole was relogged by the Company.  One of the  conclusions  of this
work was that the drilling may have passed through the oxidized sulphide horizon
without  recovering any core. In September 1994, an additional 36 mineral claims
were added to the claim block to cover possible northern extensions of the Ketza
River Project.

The  ground  is   situated   in  an  area   underlain   by  Upper   Cambrian  to
Devono-Mississippian    shales   and   Mississippian    volcanics.    A   strong
silver-lead-zinc soil anomaly is associated with Devon-Mississippian  shales and
volcanics at the North zone.  Diamond  drilling in 1978 by the previous  mineral
tenure holder was not  successful in explaining  the anomalous  geochemistry.  A
weathered  sulphide zone may have been  penetrated  during drilling and mistaken
for  overburden.   The  highly   anomalous  soil  combined  with  the  favorable
stratigraphic   setting   suggests  that  there  is  potential
















                                       25
<PAGE>
for locating a volcanogenic  polymetallic  massive sulphide deposit at the North
zone.

In 1995 a program of limited  soil  sampling  was  undertaken  to  evaluate  the
Wild-Eve claims and to determine a geochemical  cut-off point at the North zone.
The work was successful in locating  float from pyritic tuff horizons,  however,
more  detailed  sampling  will be required in order to determine  the extent and
source area of the North zone anomaly.

Approximately  $725,000 in  exploration  costs has been spent on the  properties
through August 1995.

The Company  entered into an  agreement  dated  November 11, 1995 with  Artemius
Ventures Inc.  ("Artemius")  pursuant to which Artemius will be entitled to earn
an undivided 50% interest in the Ketza River Properties.

At this time, the Company does not have any specific  exploration  plans for the
Ketza  River  Project.  The Ketza  River  Project  is  without  a known  body of
commercial ore.

Molanosa Diamond Project
------------------------

Acquisition of a 50% Interest
-----------------------------

The Company is the  beneficial  owner of a 50% right,  title and  interest in 27
mineral dispositions located in the Northern Mining District, Saskatchewan.

Pursuant to an earning  option  agreement  with  Consolidated  Pine Channel Gold
Corp.  ("Pine  Channel")  dated 3/8/93 the Company  acquired a 50% interest in 5
mineral  claims   situated  in  the  Northern  Mining   District,   Province  of
Saskatchewan.  As  consideration,  the Company advanced $220,000 for exploration
expenditures.  In addition the Company staked 22 additional mineral claims which
have been added to this option.

The Company and Pine Channel  operate the Molanosa  claims under a joint venture
agreement  between the Company and Pine Channel  dated  3/8/93,  which  contains
standard dilution and other joint venture operating provisions.

The Molanosa claims are part of a larger 22,762 hectare claim block held by Pine
Channel  in  Saskatchewan  in respect of which Pine  Channel  has  entered  into
various  earning  option and joint  venture















                                       26
<PAGE>
agreements  similar to the Molanosa option with other mining  companies  besides
the Company.

Molanosa Diamond Project Property Description
---------------------------------------------

Location:
---------

The Molanosa  Diamond  Project is located in the  Molanosa  Arch area of central
Saskatchewan,  Canada.  The area lies just east of the  Molanosa  Arch,  along a
well-defined  linear magnetic low, probably a splay fault related to major fault
systems  to the  west.  The  east  side  of the  area is  near  Ballantyne  Bay,
Deschambeault  Lake,  and the west side  impinges on the  eastern  slopes of the
Wapawekka  Hills.  It is centered  about 85 kilometers  southeast of the Town of
LaRonge.

Access to the  general  area can be  gained  along  Highway  165,  an  east-west
connector  between  Highways  2  and  106.  Several  claims  are  directly  road
accessible, however, the greater number are only accessible by helicopter.

The  eastern  2/3 of the  property  is  underlain  by outwash  plain on a gentle
eastward  slope down to  Deschambeault  Lake.  It is a  relatively  featureless,
swampy area interspersed  with low glacial ridges and hills.  Beach deposits and
offshore  bars form long  ridges in the  southwest  portion.  The western 1/3 is
along the eastern slopes of the Wapawekka  Hills,  a highland  rising 1,200 feet
above the  surrounding  lands.  The whole  area is heavily  forested  with white
spruce,  aspen, and jackpine on the higher ground,  while black spruce and alder
predominate lower areas.

History:
--------

The first diamond find in Saskatchewan was reported in newspapers in March 1948.
The latest phase of diamond  exploration  began in 1988, with a find at Sturgeon
Lake, about 30 kilometers  northwest of Prince Albert. A second  kimberlite body
was discovered by Corona Corp. about 3 kilometers northwest that discovery,  and
a joint  venture  drill-tested  the target.  The Molanosa Arch area is about 140
kilometers up-ice from the Sturgeon Lake body.

Other  sampling  has been done in Fort a la Corne  area,  resulting  in De Beers
becoming a joint venture partner with Cameco Corporation and Uranerz Exploration
and Mining, both of Saskatoon.

Information coming into the public domain now suggests that the diatremes in the
Fort a la Corne area are  preserved to very high  erosion  levels with their age
now  thought  to be  Upper  Cretaceous.











                                       27
<PAGE>
There is also a  suggestion  of the  possibility  of older  (Devonian)  diatreme
activity,  which opens the  possibility  of  encountering  pipes in the Devonian
carbonates and/or paleoplacer diamonds in the Mannville sandstones. The Molanosa
Project  claims  are  underlain  mainly by Lower  Cretaceous  sandstones  of the
Mannville Formation.

During the period 4/18/93  through  5/17/93,  Pine Channel  commissioned a total
field, high resolution magnetic survey over the entire Molanosa Arch properties.
Magnetic  ground surveys were carried out from 3/8/93  through  4/27/93 on these
properties.  On the Company's joint venture  properties,  28 anomalies have been
surveyed. Geophysical interpretation has indicated that the target anomolies are
moderately magnetic, falling within the magnetic parameters of known kimberlites
in  Saskatchewan,  and that they are at a relatively  shallow  depth.  Seventeen
first  priority,  and one  second  priority  holes  have  been  recommended  for
drilling.

During  1994,  diamond  drilling  in 5 holes  was  undertaken  to test  magnetic
anomalies for kimberlite. This work failed to intersect kimberlite.

Approximately  $615,000 in  exploration  costs has been spent on the  properties
through August 1995 by the Company and Pine Channel.

Further drill holes are recommended,  however, the Company and Pine Channel have
currently  suspended  operations on the Molanosa claims and the program is being
reviewed. The Molanosa claims are without known commercial mineralization.

Other Saskatchewan Claims
-------------------------

598909 Saskatchewan Claims and Northern Saskatchewan Claims
-----------------------------------------------------------

Pursuant to an agreement dated 1/17/94,  the Company  acquired a 50% interest in
15 mineral claims located in the Province of  Saskatchewan,  known as the 598909
Saskatchewan  claims.  As  consideration,  the Company  paid  $15,000 and issued
100,000  shares.  In  addition,  the Company is required to incur  approximately
$24,000 of exploration expenditures.  The claims are subject to a 1% net smelter
return and a 3% gross overriding royalty.

Subject to  agreements  dated  2/22/94,  the Company  acquired a 100%  undivided
interest in 43 mineral claims located in the Province of Saskatchewan,  known as
the Northern Saskatchewan claims. As consideration, the Company paid $25,000 and
issued 200,000 shares. The claims are subject to a 1% net smelter return and a 3
% gross overriding royalty.














                                       28
<PAGE>
Pursuant to agreements dated 4/8/94 and 3/15/95, the Company optioned 90% of its
interest  in 4 of  the  598909  Saskatchewan  claims  and  32  of  the  Northern
Saskatchewan  claims. As  consideration,  the Company has received 35,000 common
shares of War Eagle  Mining  Company  Inc.  and  35,000  common  shares of Great
Western Gold Corp.  The Company will receive an additional  40,000 common shares
of each company upon discovery of a diamondiferous  kimberlite on the claims and
an  additional  20,000 common  shares of each company upon the  preparation  and
release of a feasibility study giving positive  recommendation for entering into
production.  The result is a partnership,  Candle Lake Joint Venture Partnership
in which the Company and its partners,  Camphor  Ventures Inc., War Eagle Mining
and Great Western Gold, each held a 25% interest.

Under a new  agreement,  Kennecott  Canada Inc.  will earn a 60% interest in the
claims  leaving  each  of the  four  other  joint  venture  partners  with a 10%
interest.  After  Kennecott has earned its

interest,  each  company  could  further  reduce its  interest to a 7.5% carried
interest  through  a  positive   feasibility  study.   Kennecott  has  begun  an
exploration program.

Tobin Lake Area Claim
---------------------

Pursuant to an agreement dated 1/24/94, the Company acquired a 25% interest in a
mineral   claim  in  the  Tobin  Lake  Area,   Province  of   Saskatchewan.   As
consideration,  the  Company  issued  38,400  shares  and  agreed  to  issue  an
additional  38,400 shares in the event that kimberlite is intersected at bedrock
on the property.  The claim is subject to a 3% gross overriding  royalty.  Under
the terms of the  agreement,  the  Company  has the right to acquire  50% of the
gross overriding royalty for $1.5 million.

At this time, the Company does not have any specific  exploration  plans for the
Tobin Lake Area claim and it is without a known body of commercial ore.

Mary Dale Property
------------------

Pursuant to an agreement dated 6/13/94,  the Company acquired a 100% interest in
three  mineral  claims  located in the  Northern  Mining  District,  Province of
Saskatchewan.  As  consideration,  the Company paid  $10,000 and issued  100,000
shares. The claims are subject to a 3% gross overriding royalty.

















                                       29
<PAGE>
At this time, the Company does not have any specific  exploration  plans for the
Mary Dale Property and it is without a known body of commercial ore.

Maris Project
-------------

The Company owns a 100% interest in 99 Lode claims totaling  approximately 2,045
acres,  located in Nye  County,  Nevada.  The  claims are  subject to a 1.5% net
smelter  return  royalty  payable to a company  belonging  to a director  of the
Company, and two other persons. Under the terms of an agreement, the Company can
acquire the royalty for $1,500,000.















































                                       30
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-------------------------

The Company knows of no material,  active or pending,  legal proceedings against
them; nor is the Company  involved as a plaintiff in any material  proceeding or
pending litigation.

The Company knows of no active or pending  proceedings against anyone that might
materially adversely affect an interest of the Company.

















































                                       31
<PAGE>
ITEM 4. CONTROL OF REGISTRANT
-----------------------------

The Registrant is a publicly owned corporation, the shares of which are owned by
Canadian  residents,  US  residents,  and  residents  of  other  countries.  The
Registrant is not  controlled  directly or indirectly by another  corporation or
any foreign government, except as described below.

Table No. 2 lists, as of 10/02/98,  persons and/or companies holding 10% or more
beneficial  interest in the Registrant's  outstanding  common stock.

                                   Table No. 2
                          10% or Greater Shareholders

Title                                        Amount and Nature        Percent
 of          Name and Address                    of Beneficial             of
Class        of Owner                                Ownership        Class #
-----------------------------------------------------------------------------
Common       Glenmore Highlands Inc. (1)            16,441,696         38.74%

(1) David Whittle, a director of the Company, is the President and a director of
Glenmore Highlands Inc. and D.H.W.  Dobson, a director of the Company, is also a
director of Glenmore Highlands Inc.

# Based on  42,444,760  shares of common  stock  outstanding  as of 10/02/98 and
currently exercisable stock options owned by each beneficial holder.
































                                       32
<PAGE>
Table  No. 3  lists,  as of  10/02/98,  Directors  and  Executive  Officers  who
beneficially  own the  Registrant's  voting  securities  and the  amount  of the
Registrant's  voting securities owned by the Directors and Executive Officers as
a group.

                                   Table No. 3
                Shareholdings of Directors and Executive Officers

Title                                       Amount and Nature        Percent
  of                                          Beneficial               of
Class    Name of Beneficial Owner              Ownership             Class #
----------------------------------------------------------------------------

Common   Paul Shatzko, M.D.(1)                    992,000             2.3%
Common   Jan W. Vandersande (2)                   550,100             1.3%
Common   Jesus R. Martinez (3)                    389,000             0.9%
Common   Carl Verley (4)                          223,521             0.5%
Common   D.H.W. Dobson (5)                        200,000             0.4%
Common   David Whittle (6)                        200,000             0.4%
Common   Pradeep Varshney (7)                      32,100             0.0%

                  Total Directors/Officers      2,586,721

(1)  630,000 of these shares represent currently exercisable stock options.
(2)  537,000 of these shares represent currently exercisable stock options.
(3)  74,000 of these shares represent currently exercisable stock options.
(4)  10,000 of these shares represent currently exercisable stock options.
(5)  200,000 of these shares represent currently exercisable stock
     options.
(6)  200,000 of these shares represent currently exercisable stock options.
(7)  23,000 of these shares represent currently exercisable stock options.

# Based on  42,444,760  shares of common  stock  outstanding  as of 10/02/98 and
currently exercisable stock options owned by each beneficial holder.
























                                       33
<PAGE>
ITEM 5. NATURE OF TRADING MARKET
--------------------------------

The Company's  common shares trade on the Vancouver  Stock  Exchange  ("VSE") in
Vancouver,  British Columbia,  Canada, having the trading symbol "MPV" and CUSIP
#62426E105. The Company's common shares commenced trading on the VSE on 7/28/88.

Table No. 4 lists the volume of trading and high,  low and closing  sales prices
on the VSE for  shares of the  Company's  common  stock for the last ten  fiscal
quarters.

                                   Table No. 4
                 Vancouver Stock Exchange Stock Trading Activity

                                                         - Sales -
  Period                                             Canadian Dollars
   Ended             Volume                       High     Low   Closing
-------------------------------------------------------------------------
 6/30/98          2,443,950                      $5.60   $3.20     $3.55
 3/31/98          2,435,767                      $5.90   $3.80     $5.00
12/31/97          3,720,610                      $6.50   $3.95     $4.50
 9/30/97          7,850,891                      $6.30   $2.50     $4.60

 6/30/97          3,471,878                      $3.30   $2.15     $2.50
 3/31/97          2,509,698                      $5.60   $3.05     $3.30
12/31/96          2,458,399                      $5.10   $3.90     $4.20
 9/30/96          3,590,577                      $5.35   $3.80     $4.60

 6/30/96          5,599,900                      $9.75   $5.00     $5.25
 3/31/96          7,328,100                      $9.00   $4.70     $9.00

Price Fluctuations:  Share Price Volatility
-------------------------------------------

In recent years,  securities  markets in Canada have experienced a high level of
price and volume  volatility,  and the market price of many resource  companies,
particularly   those  considered   speculative   exploration   companies,   have
experienced  wide  fluctuations in price which have not necessarily been related
to  operating  performance  or  underlying  asset  values on  prospects  of such
companies.  In particular,  the Company's shares  fluctuated from a low of $2.50
during  Fiscal  1997 to a high of  $6.50,  and  from a high of $5.90 to a low of
$3.55 during Fiscal 1998.  Exploration  for diamonds is considered high risk and
highly  speculative in the resource  industry and the trading market for diamond
exploration companies is characteristically  volatile, with wide fluctuations of
price and volume only in part related to progress of  exploration.  There can be
no assurance that continual fluctuations in the Company's share price and volume
will not occur.











                                       34
<PAGE>
The  Registrant's  common stock is issued in  registered  form and the following
information  is from the  Registrant's  registrar and transfer  agent,  Montreal
Trust Company, located in Vancouver, British Columbia, Canada.

The Registrant has researched the indirect  holdings by  depositories  and other
financial  institutions and believes it has in excess of 600 shareholders of its
common stock.

The  Company's  common shares began trading on the Nasdaq market on May 1, 1996,
under the  trading  symbol  "MPVIF".  During the  period of May 1, 1996  through
August  31,  1996,  1,386,767  shares  traded on Nasdaq  with a high price of US
$6.125, a low price of US $2.75, and a closing price of US $3.73.

The  Registrant  has not declared any dividends for the last five years and does
not anticipate that it will do so in the foreseeable  future. The present policy
of the Registrant is to retain future earnings for use in its operations and the
expansion of its business.









































                                       35
<PAGE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
--------------------------------------------------------------------------

There are no  governmental  laws,  decrees  or  regulations  in Canada  relating
restrictions on the export or import of capital,  or affecting the remittance of
interest,  dividends or other payments to non-resident  holders of the Company's
common  shares.  Any  remittance  of dividends to United States  residents  are;
however,  subject  to a  15%  withholding  tax  (10%  if  the  shareholder  is a
corporation owning at least 10% of the common shares of the Company) pursuant to
Article X of the reciprocal treaty between Canada and the United States.

Except as provided in the Investment  Canada Act, there are no limitations under
the laws of Canada,  the  Province  of British  Columbia  or in the  Articles of
Incorporation  of the  Company  on the right of  foreigners  to hold or vote the
common shares of the Company.

The  Investment  Canada Act (the  "ICA"),  which  became  effective  on 6/30/85,
regulates the  acquisition by  non-Canadians  of control of a Canadian  business
enterprise.  In effect, the ICA required review by Investment Canada, the agency
which  administers the ICA, and approval by the Canadian  government in the case
of an acquisition of control of a Canadian business by a non-Canadian where: (i)
in the case of  acquisition  (for  example,  through a share  purchase  or asset
purchase),  the assets of the business are $5 million or more in value;  or (ii)
in the case of an indirect  acquisition  (for example,  the  acquisition  of the
foreign parent of the Canadian  business) where the Canadian business has assets
of $50 million or more in value or if the Canadian business represents more than
50% of the assets of the original group and the Canadian  business has assets of
$5  million or more in value.  Review and  approval  are also  required  for the
acquisition or  establishment  of a new business in areas  concerning  "Canada's
cultural heritage or national identity" such as book publishing, film production
and  distribution,  television and radio,  production and distribution of music,
and the oil and natural gas industry, regardless of the size of the investment.

In the context of the Company, in essence, three methods of acquiring control of
a Canadian  business are  regulated by the ICA:  (i) the  acquisition  of all or
substantially all of the assets used in carrying on the Canadian business;  (ii)
the  acquisition,  directly  or  indirectly,  of  voting  shares  of a  Canadian
corporation  carrying on the Canadian business;  (iii) the acquisition of voting




















                                       36
<PAGE>
of an entity which controls, directly or indirectly,  another entity carrying on
a Canadian business.  An acquisition of a majority of the voting interests of an
entity, including a corporation, is deemed to be an acquisition of control under
the ICA.  An  acquisition  of less than  one-  third of the  voting  shares of a
corporation  is deemed not to be an  acquisition  of control.  An acquisition of
less  than a  majority,  but  one-third  or  more,  of the  voting  shares  of a
corporation  is  presumed  to be an  acquisition  of  control  unless  it can be
established that on the acquisition the corporation is not, in fact,  controlled
by the  acquirer  through the  ownership  of voting  shares.  For  partnerships,
trusts, joint ventures or other unincorporated  entities, an acquisition of less
than a majority of the voting  interests is deemed not to be an  acquisition  of
control.

In 1988, the ICA was amended  pursuant to the Free Trade  Agreement dated 1/2/88
between  Canada and the United States to relax the  restriction of the ICA. As a
result  of these  amendments,  except  where  the  Canadian  business  is in the
cultural,  oil and gas, uranium,  financial services or transportation  sectors,
the  threshold  for direct  acquisition  of control by U.S.  investors and other
foreign investors  acquiring control of a Canadian business from U.S.  investors
has been raised from $5 million to $150  million of gross  assets,  and indirect
acquisitions are not reviewable.

In addition to the foregoing,  the ICA requires that all other  acquisitions  of
control  of  Canadian   businesses  by  non-Canadians   are  subject  to  formal
notification  to the Canadian  government.  These  provisions  require a foreign
investor to give notice in the required form, which notices are for information,
as opposed to review, purposes.































                                       37
<PAGE>
ITEM 7. TAXATION
----------------

The following summary of the material Canadian federal income tax considerations
generally  applicable  in respect of the common  stock  reflects  the  Company's
opinion. The tax consequences to any particular holder of common stock will vary
according to the status of that holder as an individual,  trust,  corporation or
member of a  partnership,  the  jurisdiction  in which that holder is subject to
taxation,  the place where that holder is resident and, generally,  according to
that  holder's  particular  circumstances.  This summary is  applicable  only to
holders  who are  resident  in the United  States,  have never been  resident in
Canada,  deal at arm's  length  with the  Company,  hold their  common  stock as
capital  property  and who will not use or hold the common  stock in carrying on
business in Canada.  Special rules, which are not discussed in this summary, may
apply to a United  States  holder that is an issuer that  carries on business in
Canada and elsewhere.

This  summary is based upon the  provisions  of the Income Tax Act of Canada and
the  regulations  thereunder  (collectively,  the  "Tax  Act" or  "ITA")and  the
Canada-United States Tax Convention (the "Tax Convention") as at the date of the
Registration  Statement  and the  current  administrative  practices  of Revenue
Canada,  Taxation. This summary does not take into account provincial income tax
consequences.

This summary is not exhaustive of all possible  income tax  consequences.  It is
not intended as legal or tax advice to any particular holder of common stock and
should not be so construed.  Each holder should consult his own tax advisor with
respect to the income tax  consequences  applicable to him in his own particular
circumstances.

Disposition of Common Stock.

If a  non-resident  were to  dispose of common  stock of the  Company to another
Canadian  corporation  which  deals or is deemed to deal on a  non-arm's  length
basis with the non-resident  and which,  immediately  after the disposition,  is
connected with the Company (i.e., which holds shares  representing more than 10%
of the  voting  power and more than 10% of the  market  value of all  issued and
outstanding shares of the Company), the amount by which the fair market value of
any consideration  (other than any shares of the purchaser  corporation) exceeds
the paid-up  capital of the common  stock sold will be deemed to be taxable as a
dividend paid by the purchasing corporation, either immediately or eventually by
means  of a
















                                       38
<PAGE>
deduction in computing the paid-up  capital of the purchasing  corporation,  and
subject to withholding taxes as described below.

Under the Tax Act, a gain from the sales of common stock by a non-resident  will
not be subject to Canadian tax, provided the shareholder  (and/or persons who do
not deal at arm's  length  with the  shareholder)  have not held a  "substantial
interest"  in the  Company  (25% or  more  of the  shares  of any  class  of the
Company's  stock)  at any  time in the five  years  preceding  the  disposition.
Generally,  the Tax  Convention  will exempt from Canadian  taxation any capital
gain realized by the resident of the United  States,  provided that the value of
the common  stock is not  derived  principally  from real  property  situated in
Canada.

Dividend.  In the case of any dividends paid to non-residents,  the Canadian tax
is withheld by the Company, which remits only the net amount to the shareholder.
By virtue of Article X of the Tax Convention,  the rate of tax on dividends paid
to  residents  of the  United  States is  generally  limited to 15% of the gross
dividend (or 10% in the case of certain corporate  shareholders  owning at least
10% of the Company's  voting shares).  In the absence of the treaty  provisions,
the rate of  Canadian  withholding  tax imposed on  non-residents  is 25% of the
gross dividend.  Stock dividends  received by non-residents from the Company are
taxable by Canada as ordinary dividends.

Where a holder  disposes  of common  stock to the  Company  (unless  the Company
acquired the common stock in the open market in the manner in which shares would
normally  be  purchased  by any member of the  public)  will  result in a deemed
dividend to the U.S. holder equal to the amount by which the consideration  paid
by the Company  exceeds the  paid-up  capital of such stock,  the amount of such
dividend will be subject to withholding tax as described above.


Capital Gains

A  non-resident  of Canada is not  subject  to tax under the ITA in respect of a
capital gain realized upon the  disposition of a share of a class that is listed
on a prescribed  stock exchange unless the share  represents  "taxable  Canadian
property" to the holder  thereof.  A common share of the Company will be taxable
Canadian property to a non-resident  holder if, at any time during the period of
five years  immediately  preceding the  disposition,  the  non-resident  holder,
persons with whom the non-resident  holder did not deal at arm's length,  or the
non-resident  holder and persons  with whom he/she did not deal at arm's  length
owned 25% or more of the issued
















                                       39
<PAGE>
shares  of any class or series  of the  Company.  In the case of a  non-resident
holder to whom shares of the Company represent taxable Canadian property and who
is resident in the United  States,  no Canadian tax will be payable on a capital
gain  realized on such shares by reason of the  Canada-United  States Income Tax
Convention  1980)  (the  "Treaty")  unless  the value of such  shares is derived
principally  from real property  situated in Canada or the  non-resident  holder
previously  held the shares while resident in Canada.  However,  in such a case,
certain transitional relief under the Treaty may be available.

Certain United States Federal Income Tax Consequences

The following is a discussion of certain  possible  United States Federal income
tax  consequences,  under the law,  generally  applicable  to a U.S.  Holder (as
defined below) of common shares of the Company. This discussion does not address
all  potentially  relevant  Federal  income tax  matters and it does not address
consequences peculiar to persons subject to special provisions of Federal income
tax law, such as those described below as excluded from the definition of a U.S.
Holder. In addition,  this discussion does not cover any state, local or foreign
tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code
of 1986, as amended  ("the  Code"),  Treasury  Regulations,  published  Internal
Revenue Service ("IRS) rulings,  published  administrative  positions of the IRS
and court decisions that are currently applicable,  any or all of which could be
materially and adversely changed,  possible on a retroactive basis, at any time.
In  addition,  the  discussion  does not consider the  potential  effects,  both
adverse and  beneficial,  or recently  proposed  legislation  which, if enacted,
could be applied,  possibly on a retroactive  basis,  at any time. The following
discussion is for general information only and is not intended to be, nor should
it be construed to be, legal or tax advice to any holder or  prospective  holder
of common shares of the Company and no opinion or representation with respect to
the  United  States  Federal  income  tax  consequences  to any such  holder  or
prospective  holder is made.  Accordingly,  holders and  prospective  holders of
common shares of the Company  should  consult  their own tax advisors  about the
federal,  state,  local, and foreign tax consequences of purchasing,  owning and
disposing of common shares of the Company.

U.S. HOLDERS

As used  herein,  a ("U.S.  Holder")  includes a holder of common  shares of the
Company who is a citizen or resident of the United

















                                       40
<PAGE>
States,  a  corporation  created or organized in or under the laws of the United
States or of any  political  subdivision  thereof and any other person or entity
whose  ownership of common shares of the Company is  effectively  connected with
the conduct of a trade or business in the United States.  A U.S. Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt  organizations,  qualified retirement plans, financial  institutions,
insurance  companies,   real  estate  investment  trusts,  regulated  investment
companies,   broker-dealers,   non-resident   alien   individuals   or   foreign
corporations  whose ownership of common shares of the Company is not effectively
connected  with the  conduct of a trade or  business  in the  United  States and
shareholders  who acquired  their stock  through the exercise of employee  stock
options or otherwise as compensation.

Distribution on Common Shares of the Company

U.S. Holders receiving dividend distributions (including constructive dividends)
with  respect to common  shares of the Company are  required to include in gross
income for United  States  Federal  income tax purposes the gross amount of such
distributions to the extent that the Company has current or accumulated earnings
and profits,  without  reduction for any Canadian  income tax withheld from such
distributions.  Such  Canadian tax withheld may be credited,  subject to certain
limitations,  against  the  U.S.  Holder's  United  States  Federal  Income  tax
liability  or,  alternatively,  may be deducted in computing  the U.S.  Holder's
United States Federal taxable income by those who itemize deductions.  (See more
detailed  discussion  at  "Foreign  Tax  Credit"  below).  To  the  extent  that
distributions exceed current or accumulated earnings and profits of the Company,
they  will be  treated  first as a return  of  capital  up to the U.S.  Holder's
adjusted  basis in the  common  shares and  thereafter  as gain from the sale or
exchange of the common  shares.  Preferential  tax rates for  long-term  capital
gains are applicable to a U.S.  Holder which is an individual,  estate or trust.
There are currently no preferential tax rates for long-term  capital gains for a
U.S. Holder which is a corporation.

Dividends  paid on the  common  shares  of the  Company  will not  generally  be
eligible for the dividends received  deduction provided to corporations.  A U.S.
Holder which is a corporation may, under certain circumstances, be entitled to a
70% deduction of the United States source portion of dividends received from the
Company (unless the Company qualifies as a "foreign personal holding company" or
a "passive foreign  investment  company",  as defined below) if such U.S. Holder
owns  shares  representing  at least  10% of the  voting  power and value of the
Company.  The  availability  of

















                                       41
<PAGE>
this deduction is subject to several  complex  limitations  which are beyond the
scope of this discussion.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions)  Canadian income tax
with respect to the  ownership of common  shares of the Company may be entitled,
at the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit  because  a  credit  reduces  United  States  Federal  income  taxes on a
dollar-for-dollar  basis, while a deduction merely reduces the taxpayer's income
subject to tax. This election is made on a year-by-year basis and applies to all
foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from)
the U.S. Holder during the year.  There are significant and complex  limitations
which apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate  share of the U.S. Holder's United States income
tax liability that the U.S.  Holder's  foreign source income bears to his/her or
its  application of this  limitation.  The various items of income and deduction
must be classified into foreign and domestic sources.  Complex rules govern this
classification  process. There are further limitations on the foreign tax credit
for certain  types of income such as "passive  income",  "high  withholding  tax
interest",  "financial  services income",  "shipping income",  and certain other
classifications  of income.  The  availability of the foreign tax credit and the
application  of the  limitations on the credit are fact specific and holders and
prospective holders of common shares of the Company should consult their own tax
advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

A U.S.  Holder will recognize gain or loss upon the sale of common shares of the
Company equal to the difference, if any, between (I) the amount of cash plus the
fair market value of any property received, and (ii) the shareholder's tax basis
in the common  shares of the Company.  This gain or loss will be capital gain or
loss if the common  shares are capital  assets in the hands of the U.S.  Holder,
which will be a short-term or long-term  capital gain or loss depending upon the
holding  period of the U.S.  Holder.  Gains and losses  are netted and  combined
according to special rules in arriving at the overall capital gain or loss for a
particular  tax  year.   Deductions  for  net  capital  losses  are  subject  to
significant  limitations.  For U.S.  Holders which are  individuals,  any unused
portion of such net  capital  loss may be  carried  over to be used in


















                                       42
<PAGE>
later tax years  until  such net  capital  loss is thereby  exhausted.  For U.S.
Holders which are corporations (other than corporations  subject to Subchapter S
of the Code),  an unused net capital  loss may be carried  back three years from
the loss year and  carried  forward  five  years from the loss year to be offset
against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following  circumstances,  the above  sections of the  discussion may not
describe the United States  Federal income tax  consequences  resulting from the
holding and disposition of common shares of the Company.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined  voting
power or the total value of the Company's  outstanding shares is owned, actually
or constructively, by five or fewer individuals who are citizens or residents of
the United  States and 60% or more of the  Company's  gross income for such year
was derived from certain passive sources (e.g. from dividends  received from its
subsidiaries),  the  Company  would be treated as a  "foreign  personal  holding
company." In that event,  U.S.  Holders  that hold common  shares of the Company
would be  required  to  include in gross  income  for such year their  allowable
portions  of such  passive  income to the extent the Company  does not  actually
distribute such income.

Foreign Investment Company

If 50% or more of the  combined  voting  power or total  value of the  Company's
outstanding  shares  are  held,  actually  or  constructively,  by  citizens  or
residents  of  the  United  States,   United  States  domestic  partnerships  or
corporations,  or estates or trusts  other  than  foreign  estates or trusts (as
defined by the Code Section 7701(a)(31),  and the Company is found to be engaged
primarily in the business of investing,  reinvesting,  or trading in securities,
commodities,  or any interest therein,  it is possible that the Company might be
treated  as a "foreign  investment  company"  as defined in Section  1246 of the
Code,  causing  all or part of any gain  realized  by a U.S.  Holder  selling or
exchanging  common shares of the Company to be treated as ordinary income rather
than capital gains.




















                                       43
<PAGE>
Passive Foreign Investment Company

As a foreign  corporation with U.S.  Holders,  the Company could  potentially be
treated as a passive foreign investment company ("PFIC"),  as defined in Section
1296 of the Code, depending upon the percentage of the Company's assets which is
held for the purpose of producing passive income.

Certain  United States income tax  legislation  contains rules  governing  PFICs
which  can  have  significant  tax  effects  on  U.S.  Shareholders  of  foreign
corporations. These rules do not apply to non-U.S. shareholders. Section 1296 of
the Code defines a PFIC as a corporation that is not formed in the United States
and,  for any  taxable  year,  either  (i) 75% or more of its  gross  income  is

"passive  income",  which  includes  interest,  dividends  and certain rents and
royalties  or (ii) the  average  percentage,  by fair  market  value  or, if the
Company is a controlled  foreign  corporation or makes an election,  by adjusted
tax basis, of its assets that produce or are held for the production of "passive
income", is 50% or more.

A U.S.  shareholder who holds stock in a foreign  corporation during any year in
which such  corporation  qualifies as a PFIC is subject to U.S.  Federal  income
taxation under one of two  alternative  tax regimes at the election of each such
U.S.  shareholder.  The  following is a discussion of such two  alternative  tax
regimes applied to such U.S. shareholders of the Company.

A U.S.  shareholder  who  elects in a timely  manner to treat the  Company  as a
Qualified  Electing  Fund  ("QEF"),  as defined in the Code (an  "Electing  U.S.
Shareholder"),  will be  subject,  under  Section  1293 of the Code,  to current
federal income tax for any taxable year in which the Company qualifies as a PFIC
on his pro-rata share of the Company's (i) "net capital gain" (the excess of net
long-term capital gain over net short-term capital loss), which will be taxed as
long-term  capital  gain to the Electing  U.S.  Shareholder  and (ii)  "ordinary
earnings" (the excess of earnings and profits over net capital gain), which will
be taxed as ordinary income to the Electing U.S. Shareholder,  in each case, for
the  shareholder's  taxable year in which (or with which) the Company's  taxable
year ends, regardless of whether such amounts are actually distributed.

The  effective QEF election  also allows the Electing  U.S.  Shareholder  to (i)
generally  treat any gain realized on the  disposition  of his Common Shares (or
deemed to be realized on the pledge of his Common Shares) as capital, (ii) treat
his share of

















                                       44
<PAGE>
the Company's  net capital  gain,  if any, as long-term  capital gain instead of
ordinary  income,  and (iii) either avoid interest  charges  resulting from PFIC
status altogether,  or make an annual election,  subject to certain limitations,
to defer payment of current taxes on his share of the Company's  annual realized
net capital gain and ordinary earnings subject,  however,  to an interest charge
on the deferred  taxes.  If the Electing U.S.  Shareholder is not a corporation,
such an interest charge would be treated  generally as "personal  interest" that
can be  deducted  only when it is paid or accrued an is only 10%  deductible  in
taxable  years  beginning  in 1990 and not  deductible  at all in taxable  years
beginning after 1990.

The  procedures a U.S.  Shareholder  must comply with in making an effective QEF
election  will depend on whether  the year of the  election is the first year in
the U.S.  Shareholder's  holding  period

in which the Company is a PFIC. If the U.S.  Shareholder makes a QEF election in
such first year, i.e. a timely QEF election,  then the U.S. Shareholder may make
the QEF election by simply filing the appropriate  documentation at the time the
U.S.  Shareholder  files its tax return for such first year.  If,  however,  the
Company  qualified as a PFIC in a prior year during such  shareholder's  holding
period, then in addition to filing documents, the U.S. Shareholder must elect to
recognize (i) (under the rules of Section 1291 discussed  below),  any gain that
he would  otherwise  recognize  if the U.S.  Shareholder  sold his  stock on the
application date or (ii) if the Company is a controlled foreign corporation, and
such shareholder so elects, his/her allocable portion of the Company's post-1986
earnings and profits.

When a timely QEF election is made, if the Company no longer qualifies as a PFIC
in a subsequent year,  normal code rules will apply. It is unclear whether a new
QEF election is necessary if the Company thereafter re-qualifies as a PFIC. U.S.
Shareholders  should  seriously  consider  making a new QEF election under those
circumstances.

If a U.S.  Shareholder  does not make a timely QEF election in the year in which
it holds (or is deemed to have held) the shares in question and the Company is a
PFIC (a  "Non-resident  U.S.  shareholder"),  then special  taxation rules under
Section  1291 of the Code will apply to (i) gains  realized on  disposition  (or
deemed to be  realized  by reason by of a pledge) of his/her  common  shares and
(ii) certain "excess contributions", as specially defined, by the Company.

Non-electing U.S. shareholders generally would be required to pro-rata all gains
realized  on  the   disposition   of  his/her   common  shares
















                                       45
<PAGE>
and all  excess  distributions  over the  entire  holding  period for the common
shares. All gains or excess  distributions  allocated to prior years of the U.S.
shareholder  (other  than years prior to the first  taxable  year of the Company
during such U.S.  Shareholder's  holding  period and beginning  after January 1,
1987 for which it was a PFIC)  would be taxed at the  highest  tax rate for each
such prior year applicable to ordinary income. The Non-electing U.S. Shareholder
also would be liable for interest on the  foregoing  tax liability for each such
prior year calculated as if such tax liability had been due with respect to each
such prior year. A Non-electing U.S.  Shareholder that is not a corporation must
treat this interest charge as "personal  interest" which, as discussed above, is
partially  or  wholly  non-deductible.  The  balance  of the gain or the  excess
distribution  will be treated as ordinary  income in the year of the disposition
or  distribution,  and no interest  charge will be incurred with respect to such
balance.

If the Company is a PFIC for any taxable year during which a  Non-electing  U.S.
Shareholder holds common shares, then the Company will continue to be treated as
a  PFIC  with  respect  to  such  common  shares,   even  if  it  is  no  longer
definitionally a PFIC. A Non-electing U.S. Shareholder may terminate this deemed
PFIC status by electing to recognize a gain (which will be taxed under the rules
discussed above for Non-electing U.S. Shareholders) as if such common shares had
been sold on the last day of the last taxable year for which it was a PFIC.

Under  Section  1291(f) of the Code,  the  Department of the Treasury has issued
proposed regulations that would treat as taxable certain transfers of PFIC stock
by Non-electing  U.S.  Shareholders that are generally not otherwise taxed, such
as gifts,  exchanges  pursuant to corporate  reorganizations,  and  transfers at
death.

Certain special,  generally adverse, rules will apply with respect to the common
shares  while the Company is a PFIC  whether or not it is treated as a QEF.  For
example under Section  1297(b)(6) of the Code, a U.S.  shareholder who uses PFIC
stock as security for a loan  (including  a margin loan) will,  except as may be
provided in regulations, be treated as having made a taxable disposition of such
stock.

The foregoing  discussion is based on existing  provisions of the Code, existing
and proposed regulations thereunder, and current administrative ruling and court
decisions,  all of which are subject to change. Any such change could affect the
validity of this discussion.  In addition, the implementation of certain aspects
of the PFIC rules requires the issuance of  regulations  which in many instances
have not been promulgated and which may have retroactive
















                                       46
<PAGE>
effect.  There can be no assurance  any of these  proposed  regulations  will be
enacted or  promulgated,  and if so, the form they will take or the effect  that
they may have on this discussion.  Accordingly, and due to the complexity of the
PFIC rules,  U.S. persons who are shareholders of the Company are strongly urged
to consult their own tax advisors  concerning the impact of these rules on their
investment in the Company.

Controlled Foreign Corporation

If more than 50% of the voting  power of all classes of stock or the total value
of the stock of the  Company is owned,  directly or  indirectly,  by citizens or
residents  of  the  United  States,  United  States  domestic  partnerships  and
corporations or estates or trusts other than foreign estates or trusts,  each of
whom own 10% or more of the total combined  voting power of all classes of stock
of the Company or the total value of the stock of ("United States  Shareholder")
the  Company,  could be  treated as a  "controlled  foreign  corporation"  under
Subpart F of the Code.  This  classification  would effect many complex  results
including the required inclusion by such United States shareholders in income of
their pro rata shares of "Subpart F income" (as  specially  defined by the Code)
of the Company and the Company's earnings invested in U.S. property and earnings
invested  "excess  passive  assets" (as  specifically  defined by the Code).  In
addition,  under  Section  1248 of the Code,  gain from the sale or  exchange of
common  shares of the  Company by a U.S.  person  who is or was a United  States
shareholder  (as  defined in the Code) at any time  during the five year  period
ending with the sale or exchange is treated as ordinary  dividend  income to the
extent of earnings and profits of the company  attributable to the stock sold or
exchanged.  Because of the complexity of Subpart F., and because it is not clear
that the Company is a controlled foreign corporation,  a more detailed review of
these rules is outside of the scope of this discussion.





























                                       47
<PAGE>
ITEM 8. SELECTED FINANCIAL DATA
-------------------------------

The selected financial data of the Company for Fiscal 1998 and Fiscal 1997 ended
March 31 was derived from the  financial  statements  of the Company  which have
been  audited  by Minni,  Bella &  Company,  certified  general  accountants  as
indicated  in their  report  which is included  elsewhere  in this  Registration
Statement.  The selected  financial data of the Company for Fiscal 1996,  Fiscal
1995,  and Fiscal 1994 ended March 31st was derived  from the audited  financial
statements, not included herein.

The information in Table No. 5 was extracted from the more detailed consolidated
financial  statements  and related notes  included  herein and should be read in
conjunction  with such financial  statements and with the information  appearing
under the heading "ITEM 9 -  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS".

Reference is made to Note 13 of the  consolidated  financial  statements  of the
Company  included  herein for a discussion of the material  differences  between
Canadian  GAAP and U.S.  GAAP,  and  their  effect  on the  Company's  financial
statements.

To date, the Company has not generated  sufficient  cashflow from  operations to
fund ongoing  operational  requirements  and cash  commitments.  The Company has
financed its operations  principally  through the sale of its equity securities.
While the Company  believes it has  sufficient  capital and liquidity to finance
current  operations,   nevertheless,  its  ability  to  continue  operations  is
dependent on the ability of the Company to obtain additional financing. Refer to
"ITEM  1,  PLAN OF  OPERATIONS"  and see  ITEM 9  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".




























                                       48
<PAGE>
<TABLE>
<CAPTION>
                                   Table No. 5
                             Selected Financial Data
                      (CDN$ in 000, except per share data)

                           Year      Year      Year      Year      Year     Year
                          Ended     Ended     Ended     Ended     Ended     Ended
                         3/31/98   3/31/97   3/31/96   3/31/95   3/31/94   3/31/93
<S>                      <C>       <C>       <C>       <C>       <C>       <C>
Revenue                     $299      $255       $98       $29       $10        $2
Net Income (Loss) (1)    ($3,277)  ($1,768)    ($961)    ($864)    ($639)    ($534)
Earn (Loss) per Share     ($0.10)   ($0.08)   ($0.05)   ($0.07)   ($0.06)   ($0.09)
Dividends per Share            0         0         0         0         0         0
Wtg. Avg. # of Shares               21,234    17,865    12,348    10,646     6,779

Working Capital           $6,780   $11,960   ($1,818)   $1,549    $1,194      $268
Resource Properties(2)   $34,727   $15,286    $8,012    $3,262    $2,202    $1,558
Long Term Debt                 0         0         0         0         0         0
Shareholders' Equity     $41,614   $27,363    $6,248    $4,855    $3,423    $1,828
Total Assets                                 $12,852    $5,381    $3,585    $1,987

Net Income(Loss)                   ($1,768)    ($961)    ($864)    ($639)    ($534)
U.S. GAAP (3)
EPS - U.S. GAAP (3)                 ($0.08)   ($0.05)   ($0.06)   ($0.05)   ($0.08)
</TABLE>

(1)  Cumulative Net Loss from date of incorporation has been ($8,479,927).

(2)  Mineral  properties,  exploration  and  development  costs are  deferred as
     exploration  expenditures until the property to which they relate is placed
     into production, sold, or abandoned.  Deferred costs will be amortized over
     the useful life of the orebody  following  commencement  of  production  or
     written off if the property is sold or abandoned.

(3)  See Note 13 to the Audited Financial Statements for Fiscal 1998/1997.






















                                       49
<PAGE>
ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
         CONDITION AND RESULTS OF OPERATION
         ----------------------------------

The Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian  Generally Accepted  Accounting  Principles
(GAAP),  the application of which,  in the case of the Company,  conforms in all
material  respects for the periods  presented with United States GAAP. The value
of the  U.S.  Dollar  in  relationship  to the  Canadian  Dollar  was 1.52 as of
9/30/98.

The  Company has for the past five years  financed  its  activities  through the
distribution of equity capital.  The timing of such  distributions was dependent
on the  requirements  of the  Company  and the  economic  climate.  The  Company
anticipates  having to raise  additional  funds by equity  issuance  in the next
several years, as the Company does not expect to generate  material revenue from
mining operations or to achieve self-sustaining commercial mining operations for
several  years.  Nevertheless,  the Company  anticipates  that existing  working
capital  will be  sufficient  to carry out  operations  during  the next  twelve
months.

The six most  recent  significant  financings  are  described  in the  following
paragraphs.

In October of 1996, the Company  completed a private  placement  financing which
consisted of 1,650,000  Series A Units and 1,025,000 Series B Units at $4.90 per
unit.  Each  Series A Unit  consisted  of one common  share and  one-half of one
non-transferable  share purchase warrant. Each whole warrant entitled the holder
to purchase  one  additional  common  share at an exercise  price of $5.75 until
December 31, 1997.  Each Series B Unit consisted of one common share  designated
as a "flow  through" share under the income Tax Act (Canada) and one-half of one
share purchase  warrant.  Each whole warrant entitled the holder to purchase one
additional  common  share of the  Company at an  exercise  price of $5.75  until
December 31, 1997.

On December 29, 1995, the Company  completed a private placement whereby it sold
1,300,000  units  and  193,000  flow  through  shares  at $4.40 per unit or flow
through share, which netted the Company $5,159,000 after commissions. $2,459,000
of the net funds have been released to the Company and the balance of $2,700,000
will be released with the filing and acceptance of a Statement of Material Facts
with the  Vancouver  Stock  Exchange.  Each unit will be
















                                       50
<PAGE>
comprised  on one common  share and  one-half  non-transferable  share  purchase
warrant  exercisable  for a two year  period  entitling  theholder  of each full
warrant to acquire  one common  share at a price of $4.40 per share in the first
year and at $5.25 per share in the second year.

Effective  March 29, 1995 the Company  issued  1,000,000  units for Cdn$0.44 per
unit.  Each unit  consisted of one common share and one  non-transferable  share
purchase  warrant.  The  warrant is  exercisable  for a two year  period and the
holders  thereof  require one  warrant to acquire on common  share at a price of
Cdn$0.44 per share in the first year and at a price of Cdn$0.50 per share in the
second year.

On July 26,  1993 the  Company  completed  a private  placement  whereby it sold
1,571,590  units  at a price  of  Cdn$0.88  per  unit.  1,164,497  of the  units
consisted of one  flow-through  common  share and one two-year  non-transferable
share purchase  warrant  entitling the holder thereof to purchase one additional
common  share  for  Cdn$0.88  at any time on or  before  July  22,  1994 and for
Cdn$1.01  at any time after July 22, 1994 and on or before  July 22,  1995.  Any
shares  issued  pursuant to an exercise of the  warrants  occurring on the first
anniversary date of their issue could become, at the discretion of the holder of
such warrants,  "flow-through"  shares.  111,900 of the units were "finders fee"
units which were comprised of one common share and one two-year non-transferable
share  purchase  warrant  entitling the holder thereof to purchase on additional
common  share  for  Cdn$1.10  at any time on or  before  July  22,  1994 and for
Cdn$1.26  at any time after July 22, 1994 and on or before  July 22,  1995.  The
balance  of  the  units   consisted   of  one  common  share  and  one  two-year
non-transferable share purchase warrant entitling the holder thereof to purchase
one additional  common share for Cdn$0.88 at any time on or before July 22, 1994
and for Cdn$1.01 at any time after July 22, 1994 and on or before July 22, 1995.

On April 28, 1993,  the Company  completed a private  placement  whereby it sold
200,000 units at Cdn$0.66 per unit.  Each unit consisted of one common share and
one  non-transferable  Series  "K" share  purchase  warrant  with  each  warrant
exercisable  at a price of Cdn$0.66  per share at any time on or before April 5,
1994,  and  thereafter  at a price of Cdn$0.76  per share on or before  April 5,
1995. The hold period for these shares expired on April 20, 1994.

On January 20, 1993, the Company  completed a private  placement whereby it sold
200,000 units at Cdn$0.50 per unit.  Each unit consisted of one common share and
one  non-transferable  Series  "J"


















                                       51
<PAGE>
share purchase warrant with each warrant exercisable at a price of Cdn.$0.50 per
share at any time on or before  December 31, 1993,  and thereafter at a price of
Cdn.$0.60  per share on or before  December  31,  1994.  The hold period for the
shares  expired  on  December  31,  1993.  The units  were  comprised  solely of
flow-through  shares and warrants which entitled the holder,  at his option,  to
acquire  additional   flow-through  shares.  The  flow-through  shares  and  any
additional  flow-through  shares issued on the exercise of the warrants entitled
the holders of those shares to the benefit of the exploration  expense  incurred
with the funds received by the Company on the sale of those shares.

On January 29, 1993 the Company  completed a private  placement  whereby it sold
350,000 units at Cdn$0.50 per unit.  Each unit consisted on one common share and
one  non-transferable  Series  "I" share  purchase  warrant  with  each  warrant
exercisable  at a price of Cdn$0.50  per share at any time on or before  January
14, 1994,  and  thereafter at a price of Cdn$0.60 per share on or before January
14, 1995. The hold period for these shares expired on January 15, 1994.

During the Fiscal year ended  3/31/97,  1,074,000  share  purchase  options were
exercised  netting the  Company  Cdn$4,644,498,  and  1,300,000  share  purchase
warrants  were  exercised  netting  the  Company  Cdn$5,266,658.  An  additional
2,675,000  shares  were  issued  pursuant  to a  prospectus  netting the Company
$12,189,975  and 166,875 shares were issued  pursuant to the exercise of agent's
options and warrants netting the Company $781,531.

During the Fiscal year ended  3/31/98,  the Company  completed its  amalgamation
with 444965 B.C.  Ltd.  The  transaction  was  accounted  for using the purchase
method  whereby the  Company  was  identified  as the  acquirer.  The net assets
acquired,   in  consideration  of  the  issuance  of  16,951,696   shares,   was
$12,100,000.

During the Fiscal year ended  3/31/98,  1,100,350  share  purchase  options were
exercised netting the Company Cdn$3,462,580,  and 50,000 share purchase warrants
were exercised netting the Company  Cdn$2875,266.  An additional  209,644 shares
were issued pursuant to a private placement  netting the Company  $1,000,000 and
138,500  shares were  issued  pursuant  to the  exercise of agent's  options and
warrants netting the Company $678,650.

Subsequent  to  the  Fiscal  year  ended  3/31/98,  67,950  stock  options  were
exercised, netting the Company $190,260.



















                                       52
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company's  primary source of funds since  incorporation has been through the
issue of its common stock and the sale of common stock  options and common stock
share purchase warrants. The Company has no revenue from mining to date and does
not anticipate mining revenues in the foreseeable future.

In  Fiscal  1998 and  1997,  the  Company  raised  $17,528,730  and  $22,882,668
respectively,  through the issue of common  stock and  through  the  exercise of
options and warrants.

The Company's cash position at 3/3/198 was $6,680,164 compared to $11,812,265 at
3/31/97.  Aside from such cash, the Company has marketable securities entered on
the  balance  sheet on 3/31/98  at the lower of cost or market  value of $58,674
compared to $145,604 of marketable securities on 3/31/97.

The  Company  recorded a net loss for Fiscal  1998 of  ($3,277,104)  compared to
($1,768,267) in Fiscal 1997.  After  subtracting  the non-cash  component of the
Fiscal  1998 loss  ($29,856  in  amortization,  a loss  from the  write  down of
marketable  securities  to  market  value of  ($86,930),  and the  write-off  of
$113,808 in acquisition costs and deferred  exploration costs on the Pipe Claims
in the  Northwest  Territories)  the net  reduction  of cash  for the  operating
components of the Company was $3,046,510 for Fiscal 1998, compared to $1,697,799
for Fiscal 1997.

Deferred  exploration  costs  required  $4,723,676  in Fiscal  1998  compared to
$7,272,165 in Fiscal 1997, representing a decrease of $2,548,489.

At 3/31/98,  the Company had a positive  working capital position of $6,680,401,
and at 3/31/97, a positive working capital position of $11,960,227.

Subsequent  to Fiscal 1998,  67,950 stock  options were  exercised,  netting the
Company $190,260.

During the three  months  ended June 30, 1998 the Company  incurred  $158,101 in
expenditures  on  mineral  properties.  Of this  amount,  $109,847  was spent on
drilling;  $24,927 was spent on technical and  geological  consulting  services;
$16,283 was spent on travel and  supplies;  and $5,044 was spent on sampling and
processing.


















                                       53
<PAGE>
At 6/30/98 the Company had working  capital of $6,217,243  and a cash balance of
$6,097,551.

At year end Fiscal 1998 (3/31/98) and through  6/30/98,  the Company has met all
its expenditure  requirements  under the various mineral  agreements it holds or
has interests in. These  expenditure  requirements  are more fully  discussed in
"ITEM 2, DESCRIPTION OF PROPERTIES" above.

During Fiscal 1999 the Company anticipates  concentrating its exploration on the
AK/CJ Property.

The Company had a working capital balance of over $6,000,000 as of 6/30/98.  The
Company  anticipates  that it has sufficient  working capital to meet all of its
requirements through the end of Fiscal 1999.

The  Company  does not  know of any  trends,  demands,  commitments,  events  or
uncertainties  that will result in, or that are reasonably  likely to result in,
the Company's liquidity either materially increasing or decreasing at present or
in the  foreseeable  future.  Material  increases or decreases in the  Company's
liquidity  are  substantially  determined  by  the  success  or  failure  of the
Company's exploration programs or the future acquisition of projects.

Significant Uncertainties

The Company plans to invest substantial funds in developing mining properties in
Canada.  These  projects  may be  subject  to  substantial  regulatory  hurdles,
financing  needs,  and economic  uncertainties.  There is no assurance  that the
Company can finance the additional  funds  necessary to complete the development
work and, if warranted, to bring the property into production.  There is also no
assurance  that the  properties  will prove to be profitable if they are brought
into production.


RESULTS OF OPERATIONS
---------------------

The Company is in the business of acquiring  and  exploring  mineral  properties
with the aim of  developing  them to a stage  where they can be  exploited  at a
profit.  At that  stage,  the  Company's  operations  would  to some  extent  be
dependent on the world market prices of any minerals mined. The Company does not
have producing  properties  and  operations on its  properties  are  exploratory
searches for minable deposits.
















                                       54
<PAGE>
Three Months Ended 6/30/98 (Unaudited)

For the three months ended 6/30/98, the Company incurred a loss of ($592,107) on
revenues of $38,416. The revenues consisted of interest income.  Expenses during
the period  were  $630,523.  As a

result of the loss,  the deficit as a 6/30/98  increased to  $9,072,034.  In the
corresponding three month period ended 6/30/97,  the Company had interest income
of $83,986, expenses of $535,852, and a loss of ($951,866). Deferred exploration
costs for the three months ended  6/30/98 were  $158,101  compared with $653,162
for the three months ended 6/30/97.

Fiscal Years Ended 3/31/98, 3/31/97, and 3/31/96

During fiscal years 1994,  1995,  and 1996, the Company  steadily  increased its
land position in Canada's  diamond  exploration  regions.  In 1992,  the Company
acquired holdings in all three of Canada's major diamond discovery areas; Lac de
Gras in the Northwest  Territories (the AK/CJ  Property),  and the Molanosa Arch
(the  Molanosa  Diamond  Property)  and  Fort a la Corne  in  Saskatchewan.  The
activities  during  Fiscal 1997 have been  focused on  exploration  of the AK/AJ
Property.

The  activities of the Company can be seen as generally  increasing  during this
time  as the  properties  were  acquired  and  exploration  activities  started.
Deferred exploration costs were $1,514,862 in Fiscal 1994,  $1,159,028 in Fiscal
1995,  $5,024,958 in Fiscal 1996,  $7,272,165 in Fiscal 1997,  and $4,723,676 in
Fiscal 1998.  Expenses  showed a similar  increase with $596,517 in Fiscal 1994,
$601,887 in Fiscal 1995,  $1,284,796  in Fiscal 1996,  $1,975,163 in Fiscal 1997
and  $2,475,929 in Fiscal 1998.  These expense  increases  follow the pattern of
increased  Company  activity in acquisition and exploration  beginning in Fiscal
1994.

During the first half of Fiscal 1995, exploration comprised of regional sampling
and  high-sensitivity   magnetometer  surveys  was  carried  out  on  the  AK/CJ
Properties in the Northwest  Territories.  In February 1995 a discovery was made
of diamondiferous kimberlite on the 5034 AK claim.

Since that discovery,  the Company's activities are focused on this property and
activity  was  limited  on the  Company's  other  properties.  In  Saskatchewan,
management  consolidated  the  Company's  landholdings  as  geophysical  testing
revealed that certain claims carried  insufficient  potential to warrant further
work.  Also in  Saskatchewan,  an  amendment to the joint  venture  agreement at
Candle















                                       55
<PAGE>
Lake lowered the Company's working interest on several claims in the area.

The loss for Fiscal 1998 ended 3/31/98 was  ($3,277,104),  compared to a loss of
($1,768,267)  for Fiscal 1997 ended  3/31/97,  and a loss of $960,613 for Fiscal
1996 ended  3/31/96.  The loss for Fiscal 1998  includes a write-off  of mineral
properties and related

deferred  exploration  costs  of  $113,808  and a loss  from the  write-down  of
marketable securities of $86,930.

During  Fiscal  1998,  the  Company  paid  $2,700,000  for its 90%  share of the
purchase of the 3% gross overriding  royalty pursuant to the sale and settlement
agreement  regarding the AK/CJ claims,  as described in ITEM 2  "DESCRIPTION  OF
PROPERTIES".

Expenses  increased in most  activities  in Fiscal 1998 compared to Fiscal 1997,
reflecting the increased activities of the Company, as it sought to heighten its
visibility through investor relations. Most of the increased expenses for Fiscal
1998 compared to Fiscal 1997 came in the following  areas:  trade and road shows
of $124,053 compared to nil for Fiscal 1997;  investor relation fees of $114,160
compared to nil for Fiscal 1997;  wages up $96,218;  consulting fees up $72,003;
and travel expenses up $68,233.

Loss was $0.10 per share for Fiscal 1998,  $0.08 per share for Fiscal 1997,  and
$0.05 per share for Fiscal 1996.

Variation in Operating Results

The Company is presently  exploring its properties  for  sufficient  reserves to
justify   production.   None  of  its  properties  are  yet  in  production  and
consequently,  the  properties do not produce any revenue.  As a result there is
little variation  expected in operating  results from year to year and little is
to be expected until such time, if any, as a production  decision is made on one
of its properties.

The Company derives  interest  income on its bank deposits,  which depend on the
Company's ability to raise funds.

Management  periodically through the exploration  process,  reviews results both
internally and externally  through  mining related  professionals.  Decisions to
abandon,  reduce or  expand  exploration  efforts  is based  upon  many  factors
including general and specific  assessments of mineral deposits,  the likelihood
of increasing  or decreasing  those  deposits,  land costs,  estimates of future
mineral  prices,  potential  extraction  methods and costs,  the  likelihood  of














                                       56
<PAGE>
positive or negative changes to the environment, permitting, taxation, labor and
capital costs.  There cannot be a predetermined  hold period for any property as
geological or economic circumstances render each property unique.

The Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian  Generally Accepted  Accounting  Principles
(GAAP),  the application of which,  in the case of the Company,  conforms in all
material  respects for the

periods  presented  with United  States GAAP except as noted in footnotes to the
financial  statements.  The  value of the U.S.  Dollar  in  relationship  to the
Canadian Dollar was 1.52 as of 9/30/98.

The  Company has for the past five years  financed  its  activities  through the
distribution of equity capital.  The timing of such  distributions was dependent
on the  requirements  of the  Company  and the  economic  climate.  The  Company
anticipates  having to raise  additional  funds by equity  issuance  in the next
several years, as the Company does not expect to generate  material revenue from
mining operations or to achieve self-sustaining commercial mining operations for
several years.

US GAAP Reconciliation
----------------------

Under U.S.  GAAP,  the Company would  classify its  marketable  securities  with
respect to a holding period, determined by management. This method requires that
temporary  investments  are carried at the lower of cost and market  value.  The
marketable  securities held by the Company are considered a temporary investment
and are carried at the lower of cost and market which is in accordance with U.S.
GAAP.

Also under U.S.  GAAP,  the Company would be required to write down or write off
capitalized  amounts  when a property is not  economically  supportable  for all
financial  statements  issued  subsequent to December 31, 1995.  This method may
require the Company to write down its mineral properties in subsequent  periods.
The effect of this  write  down that may be  required  from  generally  accepted
accounting principles applicable to subsequent periods has not been determined.





















                                       57
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
-------------------------------------------------

Table No. 6 lists as of 10/02/98 the names of the Directors of the Company.  The
Directors have served in their  respective  capacities  since their election and
will serve until the next Annual  General  Meeting or until a successor  is duly
elected, unless the office is vacated in accordance with the Articles/By-Laws of
the Company.

                          Table No. 6
                           Directors

                                                     Date First
Name                                Age                 Elected
---------------------------------------------------------------

Paul Shatzko (1)                     65                12/02/86
Jan W. Vandersande                   52                 5/22/96
Jesus R. Martinez                    60                12/02/86
Carl Verley (1)                      48                12/02/86
David Whittle (1)                    34                11/01/97
D.H.W. Dobson                        50                11/01/97

(1) Members of the Audit Committee of the Board of Directors.


Table No. 7 lists as of  10/02/98  the names of the  Executive  Officers  of the
Company.  The Executive  Officers are appointed by the Directors and serve until
the  earlier  of their  resignation  or  removal  with or  without  cause by the
Directors.

                          Table No. 7
                      Executive Officers

Name                   Age  Title         Date First Affiliated
---------------------------------------------------------------

Jan W. Vandersande      51  President                   5/22/96
Jesus R. Martinez       59  Secretary                  09/30/91


Paul Shatzko,  M.D., Chairman of the Company, is a resident of British Columbia,
Canada.  Dr. Shatzko is a graduate of The University of British Columbia Medical
School.  He received his medical  degree in May of 1960.  From 1961 to 1966,  he
practiced  as a  family  physician.  From  1966 to 1970  he did a  residency  in
radiology  and in  November  1970 he  received  the  designation  of  Diagnostic
Radiologist. Since that time he has been a practicing radiologist in the city of
Vancouver. In addition to his work as a physician, Dr. Shatzko has been involved
in the mining  industry









                                       58
<PAGE>
since 1987. Since March 2, 1987 he has served as the Corporate  Secretary and on
the Board of Directors of Valpar  Resources  Inc.  From  November 10, 1986 until
November 2, 1990,  he served as the  President  and on the Board of Directors of
Trans-Asian  Resources Ltd. From March 4, 1987 until October 12, 1992, he served
on the Board of Directors of Excellon  Resources  Inc. Since August 20, 1990, he
has been the  Corporate  Secretary  and  served  on the  Board of  Directors  of
Ricafuerte  Mining Corp. From October 2, 1990 until March 28, 1992, he served on
the Board of Directors of Quattro  Resources  Ltd.  Since May 1994 he has been a
director of Camphor  Ventures Inc. and since January 1995 he has been a director
of Blue Sky Resources Ltd. Dr. Shatzko  currently  spends 90% of his time on the
affairs of the Company.

Jan W. Vandersande,  President and a Director of the Company,  is a U.S. citizen
and has a BA from Swarthmore College, a M.Sc.  (Physics) from Cornell University
and a Ph.D.  (Solid State  Physics) from the  University  of the  Witwatersrand,
South Africa.  His thesis was on the  properties of natural  diamonds.  While in
South Africa, he worked closely with De Beers Diamond Research Laboratory. He is
a former Associate Professor of Physics at Cornell University and the University
of the Witwatersrand where he performed research relating to the conductivity of
rocks and minerals,  including  diamonds.  He is the author of over 30 published
articles,  including book  contributions,  on the properties of natural diamonds
and diamond films. He is a former financial and scientific consultant and mining
analyst. He has provided financial advice to brokerage firms, money managers and
private clients on natural resource companies and commodities. Dr. Vandersande's
responsibilities  include  overseeing the Company's day to day  operations,  the
development of the AK-5034 diamondiferous  kimberlite, and the Company's mineral
exploration programs. He spends approximately 100% of his time on the affairs of
the Company.

Jesus R.  Martinez,  Secretary  and a Director of the Company,  is a resident of
British  Columbia,  Canada.  He received a Bachelor of Science  Degree in Mining
Engineering  from the Mapua  Institute of Technology in the Philippines in 1961.
He received a Bachelor of Science  Degree in Geology from the  University of the
Philippines  in  1963.  He  received  a  Master  of  Science  Degree  in  Mining
Engineering  from McGill  University in 1971.  Mr.  Martinez holds the following
professional  designations:  Professional Engineer granted by the Association of
Professional  Engineers of British Columbia and Professional Engineer granted by
the  Association of  Professional  Engineers and  Geophysists  of Alberta.  From
November of 1986 until  November of 1990,  he was the  Secretary and a member of
the Board of Directors of Pacific  Falkon  Resources  Corp. He has served as the


















                                       59
<PAGE>
president and a member of the Board of Directors of Valpar Resources, Inc. since
March of 1987.  From March of 1987 until  October of 1992,  he was the Secretary
and a member of the Board of  Directors of Excellon  Resources  Inc.  And,  from
April  of 1987 he has  served  as the  President  and  member  of the  Board  of
Directors of Gee-Ten  Ventures Inc. Mr. Martinez spends about 33% of his time on
the affairs of the Company.

Carl G.  Verley,  P. Geol.  a Director  of the  Company 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. Since August of
1990, he has served on the Board of Directors of Gee-Ten Ventures Inc. In August
of 1991 the Association of Professional  Engineers and  Geoscientists of British
Columbia awarded him the professional  designation of Professional Geologist. He
has been a self-employed geologist since 1982. Mr. Verley spends 40% of his time
on the affairs of the Company.

David  Whittle,  a Director of the Company,  is a resident of British  Columbia,
Canada.  A Chartered  Accountant,  Mr.  Whittle was  associated  with  Coopers &
Lybrand,  Chartered Accountants,  from 1987 to 1992. Since 1992, Mr. Whittle has
served as Operator of a financial  consulting and chartered accounting practice;
President and Director of Glenmore Highlands Inc.; and President and Director of
444965 B.C. Ltd.,  one of the Company's  amalgamating  companies.  From November
1997 to April 1998, Mr. Whittle served as Secretary of the Company.

D.H.W. Dobson, a Director of the Company, is a resident of Scotland.  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 Ltd. He
is a former  officer  and  director of 444965 B.C.  Ltd.,  one of the  Company's
amalgamating companies; and serves as a director of Glenmore Highlands Inc.

There are no family relationships between any two or more Directors or Executive
Officers.  There are no material arrangements or understandings  between any two
or more Directors or Executive Officers.
























                                       60
<PAGE>
ITEM 11. COMPENSATION
---------------------

The Company has no formal plan or standard  arrangements  for  compensating  its
Directors  for their  service  in their  capacity  as  Directors  other than the
granting of stock  options;  refer to item #12  "Options to Purchase  Securities
from Registrant or Subsidiaries". As per Canadian law the difference between the
exercise  price of the option and the market  closing  price of the stock on the
date the option is  exercised is deemed as  employment  income of the person who
exercises the options. As per Canadian law the Company is required to inform the
government  about this deemed  employment  income  earned by all the persons who
exercise the options.

The Company may grant stock options to Executive  Officers and employees;  refer
to Item #12 "Options to Purchase Securities from Registrant or Subsidiaries".

Pursuant to a management  services  agreement  with Paul Shatzko,  Dr.  Shatzko,
Chairman/Director  for the Company,  receives  compensation  of U.S.$14,000  per
month.

Pursuant  to  a  consulting   services  agreement  with  Jan  Vandersande,   Dr.
Vandersande,  President/Director  for  the  Company,  receives  compensation  of
U.S.$10,600 per month for consulting services.

Pursuant  to  a  management   services  agreement  with  Jan  Vandersande,   Dr.
Vandersande,  President/Director for the Company, receives U.S.$14,000 per month
for management and administrative services.

During Fiscal 1998 ended 3/31/98,  no Director and/or Executive Officer received
and/or  accrued  compensation  (cash or otherwise) in excess of US$60,000  other
than that described above.

No funds were set aside or accrued by the Company  during Fiscal 1998 to provide
pension, retirement or similar benefits for Directors
or Executive Officers.

The Company has no plans or arrangements in respect of remuneration  received or
that may be  received  by  Executive  Officers of the Company for Fiscal 1998 to
compensate  such officers in the event of termination of employment (as a result
of resignation,  retirement,  change of control) or a change of responsibilities
following  a change of  control,  where the value of such  compensation  exceeds
US$60,000 per Executive Officer.
















                                       61
<PAGE>
No Executive  Officer or Director  received other  compensation in excess of the
lesser of  US$25,000  or 10% of such  officer's  cash  compensation  as reported
above, and all Executive Officers and Directors as a group did not receive other
compensation  which exceeded  US$25,000 times the number of persons in the group
or 10% of the compensation reported above.





















































                                       62
<PAGE>
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
-----------------------------------------------------------------------

Incentive  Stock Options to purchase  securities from the Registrant are granted
to Directors and Employees of the Company on terms and conditions  acceptable to
the regulatory  authorities in Canada, notably the Vancouver Stock Exchange. The
Company has no formal written stock option plan.

Under the stock option  program,  incentive  stock  options for up to 10% of the
number of issued and outstanding shares of common stock may be granted from time
to time,  provided that  incentive  stock options in favor of any one individual
may not exceed 5% of the  issued  and  outstanding  shares of common  stock.  No
incentive stock option granted under the stock option program is transferable by
the  optionee  other than by will or the laws of descent and  distribution,  and
each incentive  stock option is exercisable  during the lifetime of the optionee
only by such optionee.

The exercise price of all incentive stock options granted under the stock option
program must be at least equal to the fair market value of such shares of common
stock on the date of grant,  and the maximum term of each incentive stock option
may not exceed five years.

The exercise  prices for incentive  stock options were  determined in accordance
with Vancouver Stock Exchange ("VSE") guidelines and reflect the average closing
price  of the  Company's  common  stock  for  the  ten  trading  days on the VSE
immediately  preceding  the day on which  the  Directors  granted  and  publicly
announced the incentive stock options.

The names and titles of the Directors and Executive  Officers of the  Registrant
to whom  outstanding  stock  options  have been granted and the number of common
shares  subject to such options are set forth in Table No. 8 as of 10/02/98,  as
well as the number of options granted to Directors and all employees as a group.
The exercise price of the options is stated in Canadian Dollars.

























                                       64
<PAGE>

                                   Table No. 8
                            Stock Options Outstanding

                              Number of Shares    Exer.    Expiration
Name                            of Common Stock   Price          Date
---------------------------------------------------------------------
Paul Shatzko                          480,000     $2.80      07/17/02
                                      150,000     $5.83      11/03/02
Jan W. Vandersande                    387,000     $2.80      07/17/02
                                      150,000     $5.83      11/03/02
Jesus R. Martinez                      64,000     $2.80      07/17/02
                                       10,000     $5.83      11/03/02
Carl G. Verley                         10,000     $5.83      11/03/02
David Whittle                         200,000     $5.83      11/03/02
D.W.H. Dobson                         200,000     $5.83      11/03/98
Pradeep Varshney                       13,000     $2.80      07/17/02
                                       10,000     $5.83      11/03/02

Total Officers/Directors            1,674,000


Outstanding Warrants

The Company  issued a total of 209,644 share purchase  warrants,  each entitling
the holder thereof to purchase one additional common share in the capital of the
Company at an exercise price of $6.36 until March 6, 1999.

The Company,  Glenmore,  444965 and Camphor  have  entered into a joint  venture
agreement  with  Monopros  dated March 6, 1997,  pursuant to which,  among other
things,  Monopros has  subscribed for 209,644 units of the Company at a price of
$4.77 per unit.  Each unit  consists  of one common  share in the capital of the
Company  and  one  non-transferable  common  share  purchase  warrant  entitling
Monopros to purchase one  additional  common share at a purchase  price of $6.36
per share at any time during the two year term of the warrant.


ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
-------------------------------------------------------

None of the persons who where  directors  or officers of the Company at any time
during the  Company's  last  fiscal  year,  the  insiders  of the Company or the
associates or affiliates of those persons has had any material interest,  direct
or indirect, by way of beneficial ownership of securities or otherwise.














                                       64
<PAGE>
Pursuant to a management  services  agreement  with Paul Shatzko,  Dr.  Shatzko,
President/Director for the Company, receives compensation of $14,000 per month.

Pursuant  to  a  consulting   services  agreement  with  Jan  Vandersande,   Dr.
Vandersande receives compensation of U.S.$10,600 per month.

Pursuant  to  a  management   services  agreement  with  Jan  Vandersande,   Dr.
Vandersande,  President/Director for the Company, receives U.S.$14,000 per month
for management and administrative services.

















































                                       65
<PAGE>
                                    PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
---------------------------------------------------

The  authorized  capital of the Company is  500,000,000  shares of common  stock
without par value.  As of 3/31/98,  the end of the  Company's  last fiscal year,
42,376,810  shares were  outstanding.  As of  10/02/98,  42,444,760  shares were
outstanding.

All of the  authorized  shares of common  stock of the  Company  are of the same
class and,  once  issued,  rank  equally as to  dividends,  voting  powers,  and
participation  in assets.  Holders of common  stock are entitled to one vote for
each share held of record on all  matters to be acted upon by the  shareholders.
Holders  of common  stock are  entitled  to  receive  such  dividends  as may be
declared from time to time by the Board of Directors, in its discretion,  out of
funds legally available therefore.

Upon  liquidation,  dissolution or winding up of the Company,  holders of common
stock are entitled to receive pro rata the assets of Company,  if any, remaining
after payments of all debts and liabilities.  No shares have been issued subject
to call or  assessment.  There are no  preemptive  or  conversion  rights and no
provisions for redemption or purchase for cancellation, surrender, or sinking or
purchase funds.

Provisions as to the  modification,  amendment or variation of such  shareholder
rights or  provisions  are  contained  in the Company  Act of British  Columbia.
Unless  the  Company  Act or the  Company's  Articles  or  memorandum  otherwise
provide,  any action to be taken by a resolution  or the members may be taken by
an  ordinary  resolution  or by a vote  of a  majority  of  more  of the  shares
represented at the shareholders' meeting.

The Company's Articles and the B.C. Company Act contain provisions which require
a "special resolution" for effecting certain corporate actions.  Such a "special
resolution"  requires a three-quarters vote of shareholders rather than a simple
majority for passage.  The principle  corporate  actions that require a "special
resolution" include:

a.   Transferring  the Company's  jurisdiction  from British Columbia to another
     jurisdiction;
b.   Giving financial assistance under certain circumstances:
c.   Certain conflicts of interest by Directors;
















                                       66
<PAGE>
d.   Disposing of all or substantially all of the Company's undertakings;
e.   Removing a Director before the expiration of his term of office;

f.   Certain  alterations  of share  capital;
g.   Changing the Company name;
h.   Altering  any  restrictions  of the  Company's  business;  and,
i.   Certain reorganizations of the Company.

There are no  restrictions  on the  repurchase  or  redemption  of shares of the
common  stock of the Company  while there is any  arrangement  in the payment of
dividends or sinking fund installments.















































                                       67
<PAGE>
Principal Escrow Shares
-----------------------

Not applicable

Debt Securities to be Registered
--------------------------------

Not applicable.

American Depository Receipts
----------------------------

Not applicable.

Other Securities to be Registered
-----------------------------------

Not applicable.







































                                       68
<PAGE>
                                    PART III

ITEM 15. DEFAULTS UPON SENIOR SECURITIES
----------------------------------------

  Not Applicable.

ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
--------------------------------------------------------------------------------

  Not Applicable.



                                    PART IV

ITEM 17. FINANCIAL STATEMENTS
-----------------------------

The Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian  Generally Accepted  Accounting  Principles
(GAAP),  the application of which,  in the case of the Company,  conforms in all
material  respects for the periods  presented with United States GAAP. The value
of the  U.S.  Dollar  in  relationship  to the  Canadian  Dollar  was 1.52 as of
9/30/98.

The financial statements as required under Item 17 are attached hereto and found
immediately  following the text of this Registration  Statement.  The reports of
Minni,  Bella  &  Co.,  Certified  General  Accountants,   are  included  herein
immediately preceding the financial statements.

Audited Financial Statements
for Fiscal 1998/1997/1996 Ended March 31st

ITEM 18. FINANCIAL STATEMENTS
---------------------------------------

The Registrant has elected to provide financial statements pursuant to Item #17.




















                                       69
<PAGE>
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
------------------------------------------

(A) The financial  statements as required under Item 17 are attached  hereto and
found  immediately  following  the  text of  this  Registration  Statement.  The
Auditors Report of Minni,  Bella & Co.,  Certified  General  Accountants for the
audited  financial  statements  are included  herein  immediately  preceding the
audited financial statements.

A-1  Audited Financial Statements:

   (a) Auditor's Report, dated 7/5/98

       Balance Sheets at 3/31/98 and  3/31/97

       Statements of Loss and Deficit
       for the Years ended 3/31/98, 3/31/97 and 3/31/96
       and Cumulative Since Incorporation

       Statement of Changes in Cash Flows for the Years ended  3/31/98,  3/31/97
       and 3/31/96 and Cumulative Since Incorporation

       Statements of Deferred Exploration
       for the Years ended 3/31/98, 3/31/97 and 3/31/96
       and Cumulative Since Incorporation

       Notes to Financial Statements































                                       70
<PAGE>
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS (CONT.)
--------------------------------------------------

(B) Exhibits:

      1.   Incorporated by reference to Form 20-F Registration Statement
           (as amended) and Form 6-K's.
      2.   Refer to Exhibit No. 1
      3.   Incorporated by reference to Form 20-F Registration Statement
           (as amended) and Form 6-K's.
      4.   Not Applicable
      5.   Not Included
      6.   Incorporated by reference to Form 20-F Registration Statement
           (as amended) and Form 6-K's.

SIGNATURE PAGE                                              Page 87






















                                       71
<PAGE>
                          MOUNTAIN PROVINCE MINING INC.

                              FINANCIAL STATEMENTS

                             MARCH 31, 1998 AND 1997





















AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF LOSS AND DEFICT

CONSOLIDATED STATEMENTS OF DEFERRED EXPLORATION

CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






<PAGE>


MINNI, BELLA & CO.                                SUITE 1104-750 WEST PENDER ST.
CERTIFIED GENERAL ACCOUNTANTS                        VANCOUVER, BRITISH COLUMBIA
                                                                  CANADA V6C 2T8


                                                       TELEPHONE: (604) 683-0343
                                                             FAX: (604) 683-4499

                                AUDITORS' REPORT


To the Shareholders,
Mountain Province Mining Inc.

We have audited the consolidated balance sheets of MOUNTAIN PROVINCE MINING INC.
as at  March  31,  1998 and 1997  and the  consolidated  statements  of loss and
deficit,  deferred exploration and changes in financial position for each of the
years in the three year period then ended, and in addition,  cumulative  amounts
from  the  Company's   inception  for  each  of  the  years  then  ended.  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 audit.

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

In our opinion these  consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of the Company as at March 31, 1998
and 1997 and the  results of its  operations  and the  changes in its  financial
position  for each of the years in the three  year  period  then  ended,  and in
addition,  cumulative amounts from the Company's inception for each of the years
then ended,  in accordance  with  generally  accepted  accounting  principles in
Canada. As required by the Company Act of British  Columbia,  we report that, in
our opinion,  these principles have been applied on a basis consistent with that
of the preceding year.

                                                   /s/MINNI, BELLA & CO.
                                                   CERTIFIED GENERAL ACCOUNTANTS
Vancouver, B.C.
July 5, 1998


COMMENTS FOR UNITED STATES READERS ON CANADA-UNITED STATES REPORTING DIFFERENCES

In the United States,  reporting  standards for auditors require the addition of
an explanatory  paragraph  (following the opinion  paragraph) when the financial
statements are affected by significant  uncertainty  such as that referred to in
Note 1 of these  financial  statements.  Our opinion is expressed in  accordance
with  Canadian  reporting  standards  which do not permit a reference to such an
uncertainty in the auditors' report when the uncertainty is adequately disclosed
in the consolidated financial statements.

                                                   /s/MINNI, BELLA & CO.
                                                   CERTIFIED GENERAL ACCOUNTANTS
Vancouver, B.C.
July 5, 1998

<PAGE>
                          MOUNTAIN PROVINCE MINING INC.
            CONSOLIDATED BALANCE SHEETS AS AT MARCH 31, 1998 AND 1997
                              (In Canadian Dollars)


                                     ASSETS
                                                   1998                 1997
                                                   ----                 ----
CURRENT
 Cash                                      $    6,680,164       $   11,812,265
 Trust funds                                            -               41,860
 Accounts receivable                               61,740              206,762
 Marketable securities (Note 4)                    58,674              145,604
 Advances and prepaid expenses                     49,164               32,139
                                           --------------       --------------
                                                6,849,742           12,238,630

MINERAL PROPERTIES (Note 5)                     4,003,818              455,900

DEFERRED EXPLORATION (Note 5)                  30,717,844           14,830,212

CAPITAL ASSETS, at cost net of accumulated
     amortization of $75,414 (1997 - $45,558)     110,279              114,377

INCORPORATION COSTS                                 2,099                2,099
                                           --------------        -------------

                                           $   41,683,782       $   27,641,218
                                           ==============       ==============

                                   LIABILITIES
CURRENT
 Accounts payable and accrued liabilities          50,863       $      168,563
 Due to related parties                                 -              109,840
 Taxes payable                                     18,478                    -
                                           --------------       --------------
                                                   69,341              278,403
                                           --------------       --------------

                              SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 6)
     Authorized:
        500,000,000 common shares (1997-100,000,000) without par value
     Issued and fully paid:
        42,376,810 common shares (1997 - 23,926,620
        common shares)                         50,094,368           32,565,638

DEFICIT                                        (8,479,927)          (5,202,823)
                                           ---------------       -------------
                                                41,614,441          27,362,815
                                           ---------------       -------------

                                           $    41,683,782      $   27,641,218
                                           ===============      ==============

APPROVED BY THE DIRECTORS:
/s/Paul Shatzko
------------------------------
/s/Jesus Martinez
------------------------------


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


<PAGE>

<TABLE>
<CAPTION>
                          MOUNTAIN PROVINCE MINING INC.
                   CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                              (In Canadian Dollars)

                                                                                       (Note 10)
                                                                                       Cumulative
                                                1998          1997          1996     (December 2, 1986)
                                                ----          ----          ----     ------------------
<S>                                        <C>           <C>             <C>             <C>
REVENUE                                    $   299,563   $   254,744     $  97,870       $   699,427
                                           -----------   -----------     ---------       -----------

EXPENSES
 Amortization                                   29,856        22,620        12,295            75,414
 Consulting                                    349,591       277,588        79,006           963,517
 Large corporation and capital taxes            57,821        22,718         7,577            93,897
 Interest and bank charges                       2,578         2,444         1,500            21,890
 Investor relations                            114,160             -             -           114,160
 Loan fee                                            -             -             -            15,576
 Management fees                               160,000       174,920        75,000           615,420
 Office and telephone                          295,173       268,975       230,169         1,085,574
 Professional fees                             281,904       452,446       334,841         1,451,223
 Printing                                       80,660        45,591        20,712           206,803
 Project evaluation costs                       16,486             -             -            85,200
 Promotion and shareholder relations           204,165       154,761       238,204           866,076
 Rent                                           86,438        74,155        32,267           270,162
 Trade and road shows                          124,053             -             -           124,053
 Transfer agent and regulatory fees             95,450        65,802        37,244           295,270
 Travel                                        304,279       236,046       182,615           895,594
 Wages and benefits                            273,315       177,097        33,366           483,778
                                           -----------   -----------     ---------       -----------
                                             2,475,929     1,975,163     1,284,796         7,663,607
                                           -----------   -----------     ---------       -----------
 (LOSS) BEFORE THE UNDERNOTED ITEMS         (2,176,366)   (1,720,419)   (1,186,926)       (6,964,180)

GAIN (LOSS) FROM WRITE DOWN OF
     MARKETABLE SECURITIES                     (86,930)            -       316,313           182,597

SETTLEMENT COSTS (Note 7)                     (900,000)            -                        (900,000)

(LOSS) FROM WRITE-OFF OF MINERAL
      PROPERTIES AND RELATED
      DEFERRED EXPLORATION                    (113,808)      (47,848)      (90,000)        (798,344)
                                           -----------   -----------     ---------       -----------

NET (LOSS) FOR THE YEAR                     (3,277,104)   (1,768,267)     (960,613)       (8,479,927)

DEFICIT, BEGINNING OF YEAR                  (5,202,823)   (3,434,556)   (2,473,943)                -
                                           -----------   -----------     ---------       ------------

DEFICIT, END OF YEAR                       $(8,479,927)  $(5,202,823)  $(3,434,556)      $(8,479,927)
                                           ===========   ===========   ===========       ============

LOSS PER SHARE                             $     (0.10)  $     (0.08)  $     (0.05)
                                           ===========   ===========   ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
                          MOUNTAIN PROVINCE MINING INC.
                 CONSOLIDATED STATEMENTS OF DEFERRED EXPLORATION
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                              (In Canadian Dollars)


                                                                                                        (Note 10)
                                                                                                        Cumulative
                                                           1998            1997            1996     (December 2, 1986)
                                                           ----            ----            ----     ------------------
<S>                                               <C>                 <C>            <C>            <C>
EXPLORATION
    Camp demobilization                           $      100,000               -     $         -     $    100,000
    Consulting and other professional service            265,677               -               -          265,677
    Geophysical and airborne survey                    2,124,169         151,469         325,053        3,269,790
    Environmental work                                         -         119,253          23,398          142,651
    Sampling and assaying                                374,247       1,830,793       1,605,026        5,092,218
    Geological consulting and supplies                         -               -               -          486,348
    Drilling                                             800,032         410,088       2,681,464        8,580,645
    Equipment rental and miscellaneous                         -               -               -           18,487
    Line cutting                                               -               -                          125,532
    Travel, supplies and support cost                    445,815         732,438         350,902        1,744,685
    Report and filing fees                                22,933          28,124          39,115          179,727
    Camp site office and general expenses                590,803               -               -          590,803
                                                  --------------    ------------    ------------     ------------

                                                       4,723,676       7,272,165       5,024,958       20,596,563
    Less:  Incentive grant                                     -               -               -          (23,014)
                                                  --------------    ------------    ------------     ------------
                                                       4,723,676       7,272,165       5,024,958       20,573,549

DEFERRED EXPLORATION TRANSFERRED
    ON AMALGAMATION (Note 3)                          11,163,956               -               -       11,163,956
                                                  --------------    ------------    ------------     ------------

DEFERRED EXPLORATION FOR THE YEAR                     15,887,632       7,272,165       5,024,459       31,737,505

DEFERRED EXPLORATION , BEGINNING
     OF YEAR                                          14,830,212       7,596,474       2,571,516                -

WRITE-OFF OF DEFFERED EXPLORATION                              -         (38,427)              -         (132,873)

RECOVERY OF EXPLORATION EXPENDITURES
      FOR  AK/CJ CLAIMS (Note 5(c))                            -               -               -         (886,788)
                                                  --------------    ------------    ------------     ------------

DEFERRED EXPLORATION, END OF YEAR                   $ 30,717,844    $ 14,830,212    $   7,596,474    $ 30,717,844
                                                  ==============    ============    =============    ============









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


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          MOUNTAIN PROVINCE MINING INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                              (In Canadian Dollars)
                                                                                                                (Note 10)
                                                                                                               Cumulative
                                                           1998               1997                1996      (December 2, 1986)
                                                           ----               ----                ----      ------------------
<S>                                                 <C>                <C>                 <C>               <C>
OPERATING ACTIVITIES
   Net loss for the year                            $  (3,277,104)     $  (1,768,267)      $    (960,613)    $   (8,479,927)
   Deferred exploration costs (net of recovery)        (4,723,676)        (7,272,165)         (5,024,958)       (19,686,761)
                                                    -------------      -------------       -------------      -------------
                                                       (8,000,780)        (9,040,432)         (5,985,571)       (28,166,688)
   Add items not involving cash:
      Amortization                                         29,856             22,620              12,295             75,414
      Loss from write-off of mineral properties
        and related deferred exploration                  113,808             47,848              90,000            780,082
      Loss from write-down of marketable securities        86,930                  -                   -             86,930
                                                    -------------      -------------       -------------     --------------
                                                       (7,770,186)        (8,969,964)         (5,883,276)       (27,224,262)
   Add (deduct) items involving cash:
      Accounts receivable                                 145,022            122,628            (115,629)           (61,740)
      Marketable securities                                     -                  -                   -            (98,575)
      Advances and prepaid expenses                       (17,025)            12,997              23,396            (49,164)
      Accounts payable and accruals                      (117,700)        (1,022,822)            746,019            226,193
      Due to related parties                             (109,840)            17,189              12,100                 (4)
      Taxes payable                                        18,478                  -                   -             18,478
                                                    -------------      -------------       -------------     --------------
                                                       (7,851,251)        (9,839,972)         (5,217,390)       (27,189,074)
                                                    --------------    --------------       -------------     --------------
FINANCING ACTIVITIES
  Share subscriptions                                           -         (5,319,600)          5,319,600                  -
  Shares issued for cash, net of commissions            5,428,730         22,882,662           2,353,911         37,112,857
  Shares issued for non-cash consideration (Note 3)    12,100,000                  -                   -          2,100,000
  Proceed from sale of marketable securities                3,000                  -                   -              3,000
  Marketable securities received for
     mineral properties                                         -                  -             137,971            137,971
                                                    -------------      -------------       -------------     --------------
                                                       17,531,730         17,563,062           7,811,482         49,353,828
                                                    -------------      -------------       -------------     --------------
INVESTING ACTIVITIES
  Business combination (Note 3)                       (12,100,000)                 -                   -        (12,100,000)
  Acquisition of mineral properties                    (2,728,682)           (50,000)                  -         (3,196,798)
  Acquisition of capital assets                           (25,758)           (84,188)            (22,895)          (185,693)
  Incorporation costs                                           -                  -                   -             (2,099)
                                                    -------------      -------------       -------------     --------------
                                                      (14,854,440)          (134,188)            (22,895)       (15,484,590)
                                                    -------------      -------------       -------------     --------------
(DECREASE) INCREASE IN CASH                            (5,173,961)         7,588,902           2,571,197          6,680,164
   CASH, BEGINNING OF YEAR                             11,854,125          4,265,223           1,694,026
                                                    -------------      -------------       -------------     --------------

CASH, END OF YEAR                                   $   6,680,164      $  11,854,125       $   4,265,223     $    6,680,164
                                                    =============      =============       =============     ==============

SUPPLEMENTAL DISCLOSURE OF CASH
   FLOW INFORMATION
     Cash paid during the year for:
     Interest                                       $           -      $           -       $           -     $        6,488
     Taxes                                                 39,343             22,718               7,577             75,419

SUPPLEMENTAL SCHEDULE ON NON-
   CASH FINANCING ACTIVITIES
      Shares issued for mineral properties          $  12,100,000      $           -       $           -     $   12,806,185
      Shares issued for settlement of debt                      -                  -                   -            159,000
      Shares issued for loan fee                                -                  -                   -             16,326
                                                    -------------      -------------       -------------     --------------
                                                    $  12,100,000      $           -       $           -     $   12,981,511
                                                    =============      =============       =============     ==============
</TABLE>
    The accompanying notes are an integral part of the financial statements.

<PAGE>



                          MOUNTAIN PROVINCE MINING INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             MARCH 31, 1998 AND 1997





1.    ORGANIZATION AND NATURE OF OPERATIONS

      As described in Note 3, on November 1, 1997, Mountain Province Mining Inc.
      merged with 444965 B.C.  Ltd.,  resulting in the formation of a new entity
      which is operating under the name of Mountain Province Mining Inc.

      The Company is in the process of exploring its mineral  properties and has
      not yet determined  whether these properties contain mineral reserves that
      are economically  recoverable.  The recoverability of the amount shown for
      mineral  properties  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  upon  future
      profitable production or proceeds from disposition of such properties.


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a)     Basis of Presentation
             ---------------------

     The consolidated  financial  statements include the accounts of the company
     and its wholly-owned subsidiary, Mountain Province Mining Corp. (U.S.A.)

      b)     Deferred Exploration
             --------------------

             Exploration costs relating to mineral properties are deferred until
             the property is brought into production, at which time the deferred
             costs are to be amortized on a unit of production basis over proven
             probable  reserves,  or until the property is abandoned or sold, at
             which time the deferred costs are to be written off.

             The amounts shown as mineral  properties  and deferred  exploration
             represent  unamortized costs to date and do not necessarily reflect
             present or future values.

      c)     General and Administrative Expenses
             -----------------------------------

             The Company  charges all general and  administrative  expenses  not
             directly  related  to  exploration   activities  to  operations  as
             incurred.

      d)     Amortization
             ------------

             Capital assets are amortized over their  estimated  useful lives at
             20% - 30% declining basis.  Further, only one-half the amortization
             is taken on assets acquired during the year.


<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 2



      e)     Joint Ventures
             --------------

             Joint ventures are accounted for using the equity method.

      f)     Foreign Currency Translation
             ----------------------------

             Monetary assets and liabilities  expressed in foreign  currency are
             translated  at rate of  exchange  in effect at the end of the year.
             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 operation.


3.    BUSINESS COMBINATION

      Pursuant to an  amalgamation  agreement  dated August 21,  1997,  Mountain
      Province  Mining Inc.  ("MPV") and 444965 B.C. Ltd.  agreed to merge under
      the name of Mountain Province Mining Inc. The transaction was completed on
      November 1, 1997  through the issue of one common share of the new company
      for each existing MPV common share,  and  16,951,696  common shares of the
      new company for 1,450,000 shares of 444965 B.C. Ltd.

      The  transaction  has been accounted for using the purchase method whereby
      Mountain  Province  Mining Inc. was  identified as the  acquirer.  The net
      assets acquired and consideration given were as below:

             Net assets acquired:

                   Mineral property                      $         936,044

                   Deferred exploration costs                   11,163,956
                                                         -----------------
                                                                12,100,000
                   Liabilities assumed                                   -
                                                         -----------------
                                                         $      12,100,000
                                                         =================
             Consideration given:

                   Issuance of 16,951,696
                       common  shares (Note 6)           $      12,100,000
                                                         =================

      The 16,951,696  shares which were issued to Glenmore  Highlands  Inc., are
      restricted  as to  trading  in that no more than one  third of the  shares
      could be sold or transferred  within the first year from November 1, 1997,
      and no more than two thirds within the second year.


4.    MARKETABLE SECURITIES

      Marketable securities are carried at the lower of cost and market.

<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 3




5.    MINERAL PROPERTIES AND DEFERRED EXPLORATION

      Acquisition Costs:
                                                    1998                1997
                                                    ----                ----

      Ketza River Project                    $     27,582       $      30,582
      Molanosa Diamond Project                      5,000               5,000
      AK/CJ Claims                              3,847,553             211,510
      598909 Saskatchewan & Northern
         Saskatchewan Claims                       95,000              95,000
      Tobin Lake Area Claims                            -              23,808
      Mary Dale Property                                -              90,000
      Maris Project                                28,683                   -
                                             ------------       -------------

                                             $  4,003,818       $     455,900
                                             ============       =============

      Deferred Exploration:

      Ketza River Project                    $    777,186       $     777,186
      Molanosa Diamond Project                    614,428             614,428
      AK/CJ Claims                             29,171,171          13,405,392
      598909 Saskatchewan & Northern
          Saskatchewan Claims                      33,206              33,206
      Maris Project                               121,853                   -
                                             ------------       -------------

                                             $ 30,717,844       $  14,830,212
                                             ============       =============

      a)     Ketza River Project
             -------------------

             The  Company  is the  registered  owner of  certain  mining  claims
             situated in the Ketza River Gold Camp, Watson Lake Mining District,
             Yukon Territory. These claims were staked by the Company during the
             year ended March 31,  1988,  at a total cost of $30,582.  The Ketza
             River Project covers approximately 11,000 acres.

             The Company  entered  into an  agreement  dated  November  29, 1995
             pursuant  to  which  Artemis  Ventures  Inc.   (Formerly   Eurotech
             Technologies  Inc.)  will be  entitled  to earn  an  undivided  50%
             interest by expending  $1,000,000 on the  exploration,  development
             and mining of the Ketza River claims, and by issuing to the Company
             a total of 200,000 of its common shares.

             During the year,  the  Company  received  25,000  shares of Artemis
             Ventures Inc., which were disposed of for $3,000. (See Note 11).



<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 4



      b)     Molanosa Diamond Project
             ------------------------

             Pursuant to an agreement dated March 8, 1993, the Company  acquired
             a 50% interest in 5 mineral claims  situated in the Northern Mining
             District, Province of Saskatchewan.  As consideration,  the Company
             advanced  $220,000 for  exploration  expenditures.  In addition the
             Company  staked 22 additional  mineral claims which have been added
             to this option.

             The Company formed a joint venture with the optionor pursuant to an
             agreement  dated  March  8,  1993,  which  agreement  contains  the
             standard dilution and other joint venture operating provisions.

      c)     AK/CJ Claims
             ------------

             Pursuant to an agreement dated August 18, 1992 and amended November
             13, 1992 and January 8, 1993,  the Company  entered  into an option
             with Inukshuk Capital Ltd. ("Inukshuk") to acquire a 100% undivided
             interest  in certain  mineral  claims  located in the  District  of
             Mackenzie,  Northwest  Territories.  As consideration,  the Company
             paid  $380,000,  issued  200,000  shares and spent  $1,500,000  for
             exploration  on the  properties.  The claims  were  subject to a 3%
             gross overriding royalty with a minimum advance royalty of $200,000
             per year commencing five years from the date the Company earned its
             option in the  claims.  The Company had the right to acquire the 3%
             gross overriding  royalty for $5,000,000 at any time until November
             25,  1999.  During  the year  ended  March 31,  1997 an  additional
             finder's fee of $50,000 was paid by the Company.

             Pursuant to an agreement  dated November 18, 1993 and  subsequently
             amended,  the  Company  optioned  40% of its  interest in the AK/CJ
             claims to 444965 B.C. Ltd. As  consideration  the Company  received
             $1,151,144.

             Pursuant to an  agreement  dated  August 16, 1994 and  subsequently
             amended,  the Company  assigned  another 10% of its interest in the
             AK/CJ  claims to Camphor  Ventures  Inc. As  consideration  Camphor
             Ventures  Inc.  issued  400,000 of its shares to the  Company,  and
             contributed $200,000 towards exploration expenditures and agreed to
             fund 10% of future exploration work on the AK/CJ properties.

             Pursuant to a joint venture  agreement  dated March 6, 1997 between
             the  Company,   444965  B.C.   Ltd.  and  Camphor   Ventures   Inc.
             (Collectively  the "MP" Group) and Monopros  Limited  ("Monopros"),
             Monopros  was granted the right to earn up to a 60% interest in the
             AK/CJ claims.  As  consideration  Monopros  subscribed  for 209,644
             units at a price of $4.77  each.  Each unit  consists of one common
             share of the Company and one  non-transferable  warrant to purchase
             one  additional  common  share of the  Company  at $6.36  per share
             exercisable  before  March 6,  1999.  Further,  Monopros  agreed to
             conduct an exploration program on the property,  to complete a bulk
             sampling  program  and a  feasibility  study  on  one or  more  new
             kimberlites,  and to fund the  development  and  construction  of a
             commercial mine.

             During the year the Company  paid  $2,700,000  for its 90% share of
             the  purchase of the 3% gross  overriding  royalty  pursuant to the
             sale and settlement agreement dated June 18, 1997 and the amendment
             to the joint venture  agreement dated September 17, 1997. (See Note
             7).

             As a result of the amalgamation as described in Note 3, the Company
             holds a 90% interest in the AK/CJ Claims.
<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 5


      d)     598909 Saskatchewan Claims & Northern Saskatchewan Claims
             ---------------------------------------------------------

             Pursuant  to an  agreement  dated  January  17,  1994,  the Company
             acquired  a 50%  interest  in 15  mineral  claims  located  in  the
             Province of Saskatchewan. As consideration the Company paid $15,000
             and  issued  100,000  shares.  In  addition  the  Company  incurred
             approximately $24,000 of exploration  expenditures.  The claims are
             subject  to a 1%  net  smelter  return  and a 3%  gross  overriding
             royalty. Pursuant to agreements dated February 22, 1994 the Company
             acquired a 100%  undivided  interest in 43 mineral  claims known as
             Northern   Saskatchewan   claims   located  in  the   Province   of
             Saskatchewan.  As consideration the Company paid $25,000 and issued
             200,000  shares.  The claims are subject to a 1% net smelter return
             and a 3% gross overriding royalty.

             Pursuant to the  agreements  dated April 8, 1994 and March 15, 1995
             the  Company  optioned  50% of  its  interest  in 4 of  the  598909
             Saskatchewan claims and 32 of the Northern  Saskatchewan claims. As
             consideration  the Company  received  35,000  common  shares of War
             Eagle Mining Company Inc. and 35,000 common shares of Great Western
             Gold Corp. ("Candle Lake Joint Venture").  The Company will receive
             an additional  40,000 common shares of each company upon  discovery
             of a  diamondiferous  kimberlite  on the claims  and an  additional
             20,000  common  shares of each  company  upon the  preparation  and
             release of a feasibility study giving a positive recommendation for
             entering into production. Further, Kennecott Canada Inc. has agreed
             to incur  expenditures  on these  claims as part of the Candle Lake
             Joint Venture to earn a 60% interest  which would leave the Company
             with a 10% interest. Total work commitment by Kennecott Canada Inc.
             on the Candle  Lake Joint  Venture is  $8,000,000.  During the year
             Kennecott Canada Inc. abandoned the project.

      e)     Tobin Lake Area Claims
             ----------------------

             Pursuant  to an  agreement  dated  January  24,  1994,  the Company
             acquired a 25% interest in mineral  claim  S-105084  located in the
             Tobin Lake Area,  Province of Saskatchewan.  As  consideration  the
             Company  issued  38,400  shares and  agreed to issue an  additional
             38,400  shares in the  event  that  kimberlite  is  intersected  at
             bedrock  on the  property.  The  claim  is  subject  to a 3%  gross
             overriding royalty.  Under the terms of the agreement,  the Company
             has the right to acquire  50% of the gross  overriding  royalty for
             $1,500,000. During the year management had decided to abandon these
             claims.  Accordingly,  the acquisition  cost of $23,808 was written
             off.

      f)     Mary Dale Property
             ------------------

             Pursuant to an agreement dated June 13, 1994, the Company  acquired
             a 100%  interest in three  mineral  claims  located in the Northern
             Mining  District,  Province of Saskatchewan.  As consideration  the
             Company  paid  $10,000 and issued  100,000  shares.  The claims are
             subject  to  a  3%  gross  overriding  royalty.   During  the  year
             management had decided to abandon this property.  Accordingly,  the
             acquisition cost of $90,000 was written off.

      g)     Maris Project
             -------------

             The  Company  owns a 100%  interest  in 99 Lode  claims,  totalling
             approximately 2045 acres, located in Nye County, Nevada, U.S.A. The
             claims are subject to a 1.5% net smelter return royalty  payable to
             a company belonging to a director, and two other persons. Under the
             terms of the  agreement  the  Company  can  acquire the royalty for
             $1,500,000.


<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 6




6.    SHARE CAPITAL

      a)  Authorized

          500,000,000 Common shares without par value.


      b)  Issued and fully paid
                                                         Number of
                                                          Shares        Amount

          Balance, March 31, 1996                       18,710,745   $ 9,682,976

          Issued pursuant to exercise
             of special warrants                         1,300,000     5,266,658

          Issued pursuant to prospectus                  2,675,000    12,189,975

          Issued pursuant to exercise of
              of stock options                           1,074,000     4,644,498

          Issued pursuant to exercise of
              agents options and warrants                  166,875       781,531
                                                      ------------   -----------

          Balance, March 31, 1997                       23,926,620    32,565,638

          Issued pursuant to a private placement           209,644     1,000,000

          Issued pursuant to amalgamation (Note 3)      16,951,696    12,100,000

          Issued pursuant to exercise of stock options   1,100,350     3,462,580

          Issued pursuant to exercise of warrants           50,000       287,500

          Issued pursuant to exercise of special
             compensation options and warrants             138,500       678,650
                                                      ------------   -----------

          Balance, March 31, 1998                       42,376,810   $50,094,368
                                                      ============   ===========

          See Note 11.

<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 7


      c)     Stock Options

             As at March 31, 1998 the following stock options were outstanding:

             Number of Shares         Exercise Price          Expiry Date
             ----------------         --------------          -----------
                   50,000                $ 2.72             April 15, 1999
                   55,650                  2.80             July 17, 1999
                1,083,000                  2.80             July 17, 2002
                  130,000                  5.83             November 3, 1999
                  720,000                  5.83             November 3, 2002
                   30,000                  5.05             February 23, 2000
                   25,000                  5.05             February 23, 2003

      d)     Share Purchase Warrants

             As at March 31, 1998 the  following  share  purchase  warrants were
             outstanding:

             Number of Shares          Exercise Price            Expiry Date
             ----------------          --------------            -----------

                  209,644               $  6.36                 March 6, 1999

7.    SALES AND SETTLEMENT AGREEMENT

      On March 27, 1997, Inukshuk Capital Ltd. ("Inukshuk") issued a petition in
      the Supreme Court of British Columbia asserting that it held a valid right
      of first refusal to purchase any interest in the AK/CJ claims and that the
      MP Group had  breached  this  right by  entering  into an  agreement  with
      Monopros Limited  ("Monopros")  whereby it could earn up to a 60% interest
      in the property.  Inukshuk also obtained an injunction  restraining the MP
      Group and Monopros from disposing of the property.

      On April 18, 1997 Inukshuk commenced  arbitration  proceedings against the
      Company.  The  arbitration  held in favour of  Inukshuk,  finding that its
      right of first refusal was valid and subsisting. The petition,  injunction
      and  arbitration  were dismissed and cancelled in pursuance of a sales and
      settlement  agreement dated June 18, 1997 under which comprehensive mutual
      releases were exchanged as follows:

      o  the MP  Group  paid  $3,000,000  for  the  purchase  of  the  3%  gross
         overriding  royalty and  $500,000  for the right of first  refusal from
         Inukshuk;

      o  the MP Group paid to Canamera Geological Ltd.  ("Canamera") $250,000 by
         way of termination fee in respect of the termination by the MP Group of
         the operator  agreement,  and $200,000 in full and final  settlement of
         actual or anticipated expenses relating to camp demobilization etc.;

      o  the MP Group  paid John  Dupuis  $250,000  by way of  compensation  for
         alleged loss of reputation; and

      o  Canamera  will convey to the Company good and  marketable  title to the
         camp assets.

      See Note 5 (c).


<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                  Page  8


8.    LEASING COMMITMENTS

      The Company's total minimum rentals for two operating leases, which expire
      on May 31, 1999 and July 15, 2001 are as follows:

                   1998                          $          43,277
                   1999                                     46,798
                   2000                                     38,738
                   2001                                      9,685
                                                 -----------------

                                                 $         138,498
                                                 =================

9.    RELATED PARTY TRANSACTIONS

      o  During  the  year the  Company  paid  $160,000  (1997 -  $174,920)  for
         management services to a director of the Company.

      o  During  the  year  the  Company  paid  $47,355  (1997  -  $72,688)  for
         secretarial and public relations services to third parties related to a
         director of the Company.

      o  During  the  year the  Company  paid  $243,352  (1997 -  $205,335)  for
         consulting, management and administration services to a director and to
         a company in which another director has an interest.

      o  The Maris  Project  property  acquired  during the year is subject to a
         1.5% net smelter royalty in which a director has an interest.  See Note
         5(g)).

      o  Included  under  accounts  receivable is $8,490 (1997 - Nil) due by two
         companies in which there are common directors.


10.   COMPARATIVE FIGURES

      The comparative  figures for the year ended March 31, 1997 were in respect
      of Mountain Province Mining Inc. prior to the amalgamation.

      Cumulative  amounts  from  the  Company's  inception  (December  2,  1986)
      included  the  accounts  of  Mountain  Province  Mining  Corp.  (U.S.A.) a
      wholly-owned  subsidiary written off during the year ended March 31, 1994.
      (See Note 2(a)).  The  Subsidiary  was  reactivated  during the year ended
      March 31, 1998.


11.   SUBSEQUENT EVENTS

      o  Subsequent to March 31, 1998,  67,950 stock  options were  exercised to
         net the Company $190,260.

      o  Subsequent to March 31, 1998,  Artemis Ventures Inc. had terminated the
         joint venture agreement on the Ketza River project.




<PAGE>
MOUNTAIN PROVINCE MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997                                                   Page 9



12.   INCOME TAXES

      The Company has non-capital loss carry forwards available to reduce future
      taxable income as follows:

                   Year of Expiry                    Amount

                        1999                      $    87,588
                        2000                          397,322
                        2001                          428,999
                        2002                          586,350
                        2003                          593,266
                        2004                        1,659,784
                        2005                        1,888,755
                                                  -----------

                                                  $ 5,642,064
                                                  ===========

      No  recognition  has  been  given  in  the  consolidated  accounts  to the
      potential future benefits that may arise on utilization of tax losses.

      The  Company has filed for  Canadian  Exploration  Expenditures  totalling
      $22,138,265 and Canadian  Development  Expenditures  totalling  $4,697,168
      which are available to reduce future taxable income.


13.   DIFFERENCE BETWEEN GENERALLY ACCEPTED ACCOUNTING  PRINCIPLES IN CANADA AND
      THE UNITED STATES.

      The Company follows  Canadian  generally  accepted  accounting  principles
      which are different in some  respects from those  applicable in the United
      States and from practices  prescribed by the United States  Securities and
      Exchange  Commission.  Under United States generally  accepted  accounting
      principles  the Company  would  classify its  marketable  securities  with
      respect to holding period, determined by management.  This method requires
      that  temporary  investments  are  carried at the lower of cost and market
      value.  The  marketable  securities  held by the Company are  considered a
      temporary investment and are carried at the lower of cost and market which
      is  in  accordance  with  United  States  generally  accepted   accounting
      principles.

      Also, under United States  generally  accepted  accounting  principles the
      Company would be required to write down or write off  capitalized  amounts
      when  a  property  is  not  economically  supportable  for  all  financial
      statements issued subsequent to December 31, 1995. This method may require
      the Company to write down its mineral  properties in  subsequent  periods.
      The effect of this write down that may be required from generally accepted
      accounting  principles  applicable  to  subsequent  periods  has not  been
      determined.