UNITED STATES


SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

x

[] Transition Report pursuant to 13
or 15(d) of the Securities Exchange Act of 1934
For the transition period to _________ to _________

Commission File Number 000-30965

KLONDIKE STAR MINERAL
CORPORATION

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(Exact name of small
Business Issuer as specified in its charter)



|**Delaware**                             | **91-1980708**                   
|---------------------------------------- | ---------------------------------
|(State or other jurisdiction of          | (IRS Employer Identification No.)
|incorporation or organization)           |                                  
|                                         |                                  
|P.O. Box 20116,
    1031- 10 Mile Road   |                                  
|**Whitehorse, Yukon, Canada**            | **Y1A 7A2**                      
|(Address of principal executive offices) | (Postal or Zip Code)             



Issuer's telephone number, including area code:

None

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

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [x] Yes [ ]No

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ]Yes [x]No

State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,000,000 shares of Series
A, convertible, and 27,462,782 shares of common stock, both $0.0001 par value
outstanding as of August 31, 2006

Transitional Small Business Disclosure Format (check one): [ ]Yes [x] No

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PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and Item 310 (b) of Regulation
S-B, and, therefore, do not include all information and footnotes necessary for
a complete presentation of financial position, results of operations, cash
flows, and stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the three months ended August 31, 2006 are not necessarily
indicative of the results that can be expected for the year ending February 28,
2007.



KLONDIKE STAR MINERAL CORPORATION FINANCIAL STATEMENTS
  
  August 31, 2006


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KLONDIKE STAR MINERAL CORPORATION

August 31, 2006



TABLE OF CONTENTS











FINANCIAL STATEMENTS

> BALANCE SHEETS . . . . . . . . . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . 1
>   STATEMENTs OF OPERATIONS  . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . 2
>   Statement of Stockholders' Equity 
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . 3
>   StatementS of Cash Flows  . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>   . . . . . . . . . 4



NOTES TO FINANCIAL STATEMENTS . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5



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KLONDIKE STAR
MINERAL CORPORATION

(An Exploration
Stage Company)

BALANCE SHEETS




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

1

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KLONDIKE STAR
MINERAL CORPORATION

(An Exploration
Stage Company)

STATEMENT OF
OPERATIONS










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

2

---

KLONDIKE STAR
MINERAL CORPORATION

(An Exploration
Stage Company)

STATEMENT OF
STOCKHOLDERS' EQUITY










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

3

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KLONDIKE STAR
MINERAL CORPORATION

(An Exploration
Stage Company)

STATEMENT OF
CASH FLOWS










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

4

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to
the Financial Statements

August 31, 2006




NOTE 1 - DESCRIPTION OF BUSINESS



Klondike Star Mineral Corporation (hereinafter "the Company")
is engaged in mineral exploration in the Yukon Territory, Canada. The Company
was originally incorporated in 1999 under the laws of the State of Delaware. The
Company was also registered in the Yukon Territory, Canada effective June 22,
2004. The Company maintains its head office in Whitehorse, Yukon Territory,
Canada.



The Company was originally incorporated as Cyberbiz, Inc.,
later changed its name to Urbanfind, Inc. and again in 2004 changed its name to
Klondike Star Mineral Corporation. The Company's fiscal year-end is the last
calendar day of February.



Historically, the Company has been principally engaged in an
internet-based business. Upon its acquisition of certain mining claims in
December 2003, the Company began a new exploration stage as a minerals
exploration company.



As the Company is in the exploration stage, it has not
realized any revenues from its planned operations.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The foregoing unaudited interim financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B as promulgated by the Securities and Exchange Commission ("SEC").
Accordingly, these financial statements do not include all of the disclosures
required by generally accepted accounting principles in the United States of
America for complete financial statements. These unaudited financial statements
should be read in conjunction with the audited financial statements for the year
ended February 28, 2006. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments, all of which are
of a normal recurring nature, necessary for a fair statement of the results for
the interim period presented. Operating results for the six-month period ended
August 31, 2006 are not necessarily indicative of the results that may be
expected for the year ending February 28, 2007.



This summary of significant accounting policies is presented
to assist in understanding the financial statements. The financial statements
and notes are representations of the Company's management, which is responsible
for their integrity and objectivity. These accounting policies conform to
accounting principles generally accepted in the U.S. and have been consistently
applied in the preparation of the financial statements.



Accounting Methods

The Company's financial statements are prepared using the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.



Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred.
Significant property acquisition payments for active exploration properties are
capitalized. If no minable ore body is discovered, previously capitalized costs
are expensed in the period the property is abandoned. Expenditures to develop
new mines, to define further mineralization in existing ore bodies, and to
expand the capacity of operating mines, are capitalized and amortized on a units
of production basis over proven and probable reserves.



Should a property be abandoned, its capitalized costs are
charged to operations. The Company charges to operations the allocable portion
of capitalized costs attributable to properties sold. Capitalized costs are
allocated to properties sold based on the proportion of claims sold to the
claims remaining within the project area.

Mineral Properties

Costs of acquiring mineral properties are capitalized by
project area upon purchase of the associated claims. Costs to maintain the
mineral rights and leases are expensed as incurred. When a property reaches the
production stage, the related capitalized costs will be amortized, using the
units of production method on the basis of periodic estimates of ore reserves.

5

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KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to
the Financial Statements

August 31, 2006






Mineral properties are periodically assessed for impairment
of value and any diminution in value is charged to operations at the time of
impairment. Should a property be abandoned, its unamortized capitalized costs
are charged to operations. The Company charges to operations the allocable
portion of capitalized costs attributable to properties sold. Capitalized costs
are allocated to properties abandoned or sold based on the proportion of claims
abandoned or sold to the claims remaining within the project area.



Use of Estimates

The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities known to exist as of the date
the financial statements are published, and the reported amounts of revenues and
expenses during the reporting period. Uncertainties with respect to such
estimates and assumptions are inherent in the preparation of the Company's
financial statements; accordingly, it is possible that the actual results could
differ from these estimates and assumptions which could have a material effect
on the reported amounts of the Company's financial position and results of
operations.



Going Concern

As shown in the financial statements, the Company incurred a
net loss of approximately $5,049,000 for the six months ended August 31, 2006
and has an accumulated deficit of approximately $46,525,000 since inception of
the Company's exploration stage (December 8, 2003). The Company currently has no
revenues and no operating mining properties.



These factors indicate that the Company may be unable to
continue in existence. The financial statements do not include any adjustments
related to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the Company cannot continue in existence. Management's plans include actively
seeking additional capital and management believes that new properties can
ultimately be developed to enable the Company to continue its operations.
However, there are inherent uncertainties in mining operations and management
cannot provide assurances that it will be successful in its endeavors.



The Company's management believes that it will be able to
generate sufficient cash from public or private debt or equity financing for the
Company to continue to operate based on current expense projections of
$11,000,000 for fiscal year ending in 2007. The Company has approximately
$4,429,000 in cash at August 31, 2006.



NOTE 3 - PROPERTY AND EQUIPMENT



Capital assets are recorded at cost. Depreciation is
calculated using the straight-line method over three to five years. The
following is a summary of property, equipment, and accumulated depreciation:



|                                    | Cost        | Accumulated Depreciation |           | Net Book Value
    August 31, 2006 |             | Net Book Value February 28, 2006
|----------------------------------- | ----------- | ------------------------ | --------- | ---------------------------------- | ----------- | --------------------------------
|                                    |             |                          |           |                                    |             |                                 
|Depreciable Capital Assets:         |             |                          |           |                                    |             |                                 
|Movable structures                  | $ 918,989   |                          | $ 161,288 |                                    | $ 757,701   |                                 
|Leasehold improvements              | 405,613     |                          | 110,733   |                                    | 294,880     |                                 
|Vehicles                            | 361,332     |                          | 100,696   |                                    | 260,636     |                                 
|Equipment                           | 227,008     |                          | 73,109    |                                    | 153,899     |                                 
|All-terrain vehicles                | 123,606     |                          | 56,556    |                                    | 67,050      |                                 
|Trailers                            | 112,369     |                          | 25,655    |                                    | 86,714      |                                 
|Heavy equipment                     | 93,597      |                          | 4,680     |                                    | 88,917      |                                 
|Computer equipment                  | 36,872      |                          | 17,735    |                                    | 19,137      |                                 
|Computer software                   | 19,333      |                          | 8,346     |                                    | 10,987      |                                 
|Furniture and fixtures              | 15,348      |                          | 4,234     |                                    | 11,114      |                                 
|Pack horses                         | 18,057      |                          | 5,620     |                                    | 12,437      |                                 
|Total Depreciable Assets            |             |                          |           |                                    |             |                                 
|                                    |             |                          |           |                                    |             |                                 
|Non Depreciable
    Capital Assets: |             |                          |           |                                    |             |                                 
|Gold samples                        | 56,010      |                          | -         |                                    | 56,010      |                                 
|Total Capital Assets                | $ 2,388,134 |                          | $ 568,652 |                                    | $ 1,819,482 |                                 



Total depreciation expense for the six months ending August
31, 2006 and 2005 is $243,969 and $138,099 respectively.

6

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to the
Financial Statements

August 31, 2006




NOTE 4 - RELATED PARTY TRANSACTIONS



On occasion, the Company's shareholders pay corporate
expenses and/or provide services to the Company. Related party payables are
unsecured and non-interest bearing, and are due on demand. Related party
payables totaled $136,475 and $14,465 at August 31, 2006 and February 28, 2006,
respectively. During the six months ended August 31, 2006 the Company included
in Mineral exploration expense $563,310 ($87,295 for the six months ended August
31, 2005) in transactions with a company controlled by an officer and director
of the Company. The transactions were recorded at fair market value.



Effective June, 2004, the Company signed an agreement for the
right of occupancy of a barn and property from one of the directors of the
Company and his spouse ("the Owner"), for the shelter of pack horses and an
office. The right of occupancy term is five years, renewable yearly thereafter.
Rent is $1 per month. Prior to the expiration of the right of occupancy, the
Owner may require the Company at the Company's sole cost and expense, to remove
any alterations, installations, additions or improvements made by the Company.
At the expiration of the lease, the Owner is obligated to pay to the occupier
the fair market value of the buildings less 75 % and shall be entitled to pay
such sum over a 20 year period in equal monthly installments.



Leaseholds improvements, which total approximately $406,000
as of August 31, 2006, have been made to the barn and office.

NOTE 5 - PREFERRED STOCK



The Company is authorized to issue 20,000,000 shares of
$0.0001 par value preferred stock. Each preferred share is convertible to 10
common shares of common stock, non-cumulative and non-dividend bearing. The
Company's board of directors will determine the specific features of each
additional issuance of preferred shares. At August 31, 2006 and February 28,
2006, the Company had 2,000,000 shares of preferred convertible stock issued and
outstanding.



NOTE 6 - COMMON STOCK



The Company is authorized to issue 80,000,000 shares of
$0.0001 par value common stock. Each holder of common stock has one,
non-cumulative vote per share on all matters voted upon by the shareholders. At
August 31, 2006 and February 28, 2006, the Company had 27,462,782 and 25,202,800
shares of common stock outstanding, respectively.



During the year ended February 29, 2004, the Company issued
3,800,000 shares at $1.25 per share of its common stock in connection with the
acquisition of certain mining claims in the Dawson Mining District of Yukon
Territory in Canada. Also, during the year ended February 29, 2004, the Company
sold in a private placement 1,040,000 shares of its common stock at $2.50 per
share for cash and subscriptions receivable of approximately $2,600,000.



7

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to
the Financial Statements

August 31, 2006




During the year ended February 29, 2004, certain Company
shareholders elected to forgive $31,500 of unsecured, long-term debt bearing
interest at 10% per annum. The shareholders also elected to forgive $5,756 of
accrued interest on the debt and $16,156 of accounts payable owed them. The
aggregate amount of $53,412 for shareholder forgiveness has been recorded as a
contribution of capital on the Company's statement of stockholders' equity.



During the year ended February 28, 2005, the Company sold
through private placements 1,090,000 shares of its common stock at $2.50 per
share for total net cash proceeds of $2,371,607.



During the year ended February 28, 2005, the Company issued
200,000 shares of common stock having an intrinsic value of $2.50 per share for
a total value of $500,000 as part of a mineral rights acquisition agreement.



During the year ended February 28, 2006, the Company sold
through private placements 50,000 common shares at $1.25 per share for total
cash proceeds of $62,500; 2,073,000 common shares at $2.50 per share for total
net cash proceeds of $4,574,600; and 1,300,000 common shares at $2.75 per share
for total net cash proceeds of $3,391,700.



During the six months ended August 31, 2006, the Company sold
through private placements 2,259,982 common shares and warrants at $2.75 per
unit for total net cash proceeds of $5,370,284



From inception as an exploration stage company, the Company
has paid commissions on sale of stock in the amount of $1,625,615.



Warrants

During the year ended February 28, 2006, the Company executed
a private placement memorandum to issue up to 4,000,000 shares of common stock
at $2.75 per share with one warrant attached to each share to purchase an
additional share at a minimum conversion price of $3.50. Each warrant must be
exercised within one year from date of the original investment. The following
assumptions were made to value the warrants for the six months ended August 31,
2006; risk-free interest rate of 4.5%; volatility of 31%; life of one year; no
dividends.



|                                               | Number of Warrants | Weighted Average Remaining Life | Average Exercise Price
|---------------------------------------------- | ------------------ | ------------------------------- | ----------------------
|Outstanding and exercisable, February 28, 2006 | 1,300,000          | 0.5 years                       | $ 3.50                
|Issued                                         | 2,259,982          | 0.7 years                       | 3.50                  
|Exercised                                      | -                  |                                 | -                     
|Rescinded or expired                           | -                  |                                 | -                     
|Outstanding and exercisable, August 31, 2006   | 3,559,982          | 0.6 years                       | $ 3.50                





NOTE 7 - STOCK-BASED COMPENSATION AND STOCK OPTIONS



During the year ended February 29, 2004, the Company's board
of directors approved the Stock Compensation Plan, subsequently renamed the
"2003 Stock Incentive Plan for Employees" ("the 2003 plan") to allow up to
2,800,000 shares of company stock to be issued. This plan enables the Company to
grant stock options to directors, officers, employees and eligible consultants
of the Company. With a duration of 10 years, the plan may be modified without
shareholders' approval. In 2005, the Company amended the 2003 Stock Incentive
Plan for Employees, and authorized a post-effective amendment to the Statement
of Form S-8 Securities.



During the year ended February 28, 2006, the Company's board
of directors approved the 2005 Stock Incentive Plan for Consultants and Advisors
("the 2005 Stock Incentive Plan") to allow up to 2,800,000 shares of company
stock to be issued. This plan enables the Company to grant stock options to
eligible consultants and advisors of the Company. The 2005 plan has a duration
of 10 years and may be modified without shareholders' approval.

8

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to
the Financial Statements

August 31, 2006








During the year ended February 28, 2005, the Company granted
options, under the 2003 plan, to purchase a total of 1,200,000 shares of common
stock to its employees and directors at $1.00 per share. During the year ended
February 28, 2006, the Company amended the terms of the stock options granted to
employees and directors to allow the options to fully vest upon award. During
the year ended February 28, 2006, the Company granted options to purchase a
total of 30,000 shares of common stock to an employee at $2.50 per share. These
shares are fully vested and exercisable over a five year term. The Company
recognized employee compensation expense of $2,793,010 during the year ended
February 28, 2006 for all vested options.



During the six months ended August 31, 2006, the Company
granted options to employees to purchase a total of 250,000 shares of common
stock at $2.50 per share. These shares are fully vested and exercisable over a
five year term. The Company recognized employee compensation expense of
$437,500. The Company also granted options to consultants to purchase a total of
100,000 shares of common stock at $2.50 per share and recognized $175,000
compensation expense during the six months.



In accordance with Statement of Financial Accounting
Standards No. 123, the fair value of the options granted was estimated using the
Black-Scholes Option Price Calculation. The following assumptions were made to
value the stock options:





|Risk-free Interest Rate | 4.5%   
|----------------------- | -------
|Expected Life           | 5 years
|Expected Volatility     | 30.8%  
|Dividends to be paid    | Nil    





The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options, which are fully
transferable.



In addition, option valuation models require the input of
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.



Following is a summary of the status of the stock options
during the six months ended August 31, 2006:





|                                                                                               | 2003 Stock Incentive Plan     | 2005 Stock Incentive Plan       | Total                        
|---------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------- | -----------------------------
|                                                                                               | Number of Shares Under Option | Weighted Average Exercise Price | Number of Shares Under Option
|Outstanding
    February 28, 2005                                                              | 1,200,000                     | $        1.00                   | -                            
|Granted                                                                                        | 30,000                        | 2.50                            | -                            
|Exercised                                                                                      | -                             | -                               | -                            
|Rescinded or
    expired                                                                       | -                             | -                               | -                            
|Outstanding
    February 28, 2006                                                              | 1,230,000                     | 1.04                            | -                            
|Granted                                                                                        | 350,000                       | 2.50                            | -                            
|Exercised                                                                                      | -                             | -                               | -                            
|Rescinded or
    expired                                                                       | -                             | -                               | -                            
|Outstanding at
    August 31, 2006                                                             | 1,580,000                     | $        1.36                   | -                            
|Exercisable at
    August 31, 2006                                                             | 1,580,000                     | $        1.36                   | -                            
|Weighted average
    fair value of options granted during the six months ended August 31, 2006 |                               | $        1.75                   |                              







9

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to the
Financial Statements

August 31, 2006




NOTE 8 - COMMITMENTS AND CONTINGENCIES



Consulting Agreements

On January 4, 2005, the Company entered into a consulting
agreement with Image Point Design ("IPD") to provide project management for
media and investor relation services. Under the terms of the agreement, the
Company will pay IPD up to a maximum of $81,000. Termination of the contract is
at the Company's sole discretion. In addition, the Company agreed to issue
100,000 shares at $2.50 per share as follows: 50,000 shares issued upon
signature of contract and 50,000 shares to be issued no earlier than June 1,
2005. During the year ended February 28, 2006, the Company amended the share
option offer to comply with the Company's 2005 Stock Incentive Plan. At February
28, 2006, no shares had been issued on account of this agreement. During the
period ended August 31, 2006, the Company modified the agreement to grant stock
options in lieu of shares.



During the year ended February 28, 2006, the Company approved
the granting of 300,000 share options at $2.50 per share for future investor
relations services.



During the year ended February 28, 2006, the Company issued a
private placement memorandum to issue 4,000,000 shares of common stock at $2.75
per share with one warrant attached to each share to purchase an additional
share at a minimum conversion price of $3.50. Each warrant must be exercised
within one year from date of the original investment. As of August 31, 2006 the
Company has sold 3,559,987 units.



During the year ended February 28, 2006, the Company acquired
a 100% interest in placer leases in the Indian River and Montana Creek area,
along the southern edge of the Klondike gold fields. The agreement is subject to
a one-time payment of $28,300 for staking costs and a 10% royalty on future
production.

During the year ended February 28, 2006, the Company amended
an agreement originating in October 2004, with a privately held company, which
received the first right of refusal to purchase the majority of gold produced by
Klondike Star from the Klondike Mining District at a 2% discount from the LME
spot price. The right of first refusal is subject to Klondike Star proceeding
through exploration, pre-feasibility, final feasibility and building of a
producing mine on mineral claims in the Klondike Mining District. In
consideration for such rights, the privately held company agreed to purchase
1,000,000 shares of the Company's common stock at $2.50 per share before
February 28, 2006. Klondike Star granted an extension to the privately held
company to purchase the 1,000,000 common shares. Further, subject to the
execution of agreements giving effect to the transactions contemplated in the
agreement, the privately held company shall receive the option to make further
subscriptions for shares, subject to the same terms and conditions, following
completion of the subscription of the first 1,000,000 shares, as follows:

1,000,000 shares at $3.50 by January 25, 2007 
1,000,000 shares at $4.50 by January 25, 2008
1,000,000 shares at $5.50 by January 25, 2009 
1,000,000 shares at $6.50 by January 25, 2010

The shares are subscribed for pursuant to the provisions of
Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
promulgated by the Securities and Exchange Commission. The offered shares are
restricted shares under the Securities Act of 1933 and the Exchange Act of 1934
and Rule 144 under the Securities Act of 1933. As of August 31, 2006, the
Company has not received any of the expected consideration related to this
agreement. Therefore the Company has deemed this agreement to be closed.
Although this agreement has a history of modification, the Company would expect
probable future negotiations but has no expectations that consideration and
proceeds from such modified agreement will be immediately forthcoming.

During the year ended February 28, 2006, the Company entered
into an agreement to acquire up to 75% interest in claims covering gold bearing
quartz pebble conglomerate in the Indian River area, along the southern edge of
the Klondike gold fields. The agreement requires cash payments totaling $145,000
over 5 years and certain work commitments to acquire a 55% interest. Producing a
bankable feasibility study and arranging project financing can earn a further
20% interest in the project.

10

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to
the Financial Statements

August 31, 2006




During the year ended February 28, 2006, the Company entered
into an agreement to acquire up to 75% interest in certain claims covering an
epithermal gold target in the Tintina Gold Belt, Yukon, Canada. The agreement
requires cash payments to Klondike Gold Corp. (TSXV:KG) totaling $200,000 over 4
years and work commitments totaling $500,000 to acquire a 55% interest.
Producing a bankable feasibility study and arranging project financing can earn
a further 20% interest in the project.



During the year ended February 28, 2006, the Company entered
into an agreement to acquire up to 75% interest in certain claims covering
several copper-zinc and nickel-platinum group targets in the Kluane Mineral
Belt, Yukon, Canada. The agreement requires cash payments to Klondike Gold Corp.
(TSXV:KG) totaling $265,000 over 5 years and work commitments totaling
$2,225,000 to acquire a 55% interest. Producing a bankable feasibility study and
arranging project financing can earn a further 20% interest in the project.

During the quarter ended May 31, 2006, the Company acquired
from Klondike Source Limited (NSX: KSL) subsidiary, KSL Exploration (Yukon)
Limited, the exclusive right to purchase an undivided 100% interest in one or
more claims in the DOM block located at Hunker Dome block located at Hunker Dome
in the eastern part of the Klondike goldfield. The purchase price for the entire
group of 56 claims is $500,000 CDN. Purchase of any claim or claims will entitle
KSL to a royalty of 2.5% of net smelter returns. At the headwaters of Dominion
Creek, these claims, along with 168 adjacent claims previously staked or held by
Klondike Star Mineral Corporation have been consolidated to establish a new
exploration project known as, the Dominion Project. Exploration is expected to
commence on these properties during the coming 2006 field season.



During the quarter ended May 31, 2006, the Board of Directors
modified the terms of the stock awards to certain consultants to granting of
stock options, fully vesting upon award. The Company has previously recognized
$250,000 expense against these stock awards.



During the quarter ended May 31, 2006, the Board of Directors
approved the granting of stock options to certain consultants, subject to filing
certain documentation with the Securities and Exchange Commission.



During the quarter ended August 31, 2006, the Company entered
into an agreement with JAE Resources Ltd to acquire a 100% option on certain
quartz claims within the Klondike region, Yukon Canada, with future cash
payments of $35,000 CDN by May 31, 2007; $50,000 CDN by May 31, 2008; $60,000CDN
by May 31, 2009; $80,000 CDN by May 31, 20101; and work commitments totaling
$300,000 CDN on the property before May 31, 2011. The Company is required to pay
a royalty equal to 3% of net smelter returns.



During the quarter ended August 31, 2006 the Company entered
into an agreement with joint ventures collectively referred to as 19651 Yukon
Inc. to acquire an option for a 49% interest in certain placer properties within
the Klondike region, Yukon Canada. The option agreement requires future annual
payments of $7,875 CDN by June 29 for the years 2007 to 2010. The Company is
entitled to charge a 15% administration fee on certain exploration work incurred
on the properties.

Compliance with Environmental Regulations

The Company's mining activities are subject to laws and
regulations controlling not only the exploration and mining of mineral
properties, but also the effect of such activities on the environment.
Compliance with such laws and regulations may necessitate additional capital
outlays, affect the economics of a project, and cause changes or delays in the
Company's activities.





11

---

KLONDIKE STAR MINERAL
CORPORATION

(An Exploration Stage
Company)

Condenses Notes to the
Financial Statements

August 31, 2006




NOTE 9 - SUBSEQUENT EVENTS



Subsequent to the quarter ended August 31, 2006, the Company
entered into an agreement to acquire certain diamond drilling equipment for
approximately $152,000 CDN ($137,000 US). The Company has made a deposit equal
to 1/2 of the contracted purchase price.









12

---



Management's Discussion
and Analysis

As of August 31, 2006, Klondike Star Mineral Corporation is an established
exploration and development company actively working on eight major properties,
totaling 463 km2 or 179 mi2 in the Yukon, located in the
northwest corner of Canada. The Company is developing extensive surface and
subsurface mineralized zones on a 370 km2 or 143 mi2 land
position underlying the site of the world-renowned Klondike gold producing
region. These holdings include, but are not limited to, properties known as the
Lone Star Project and the Indian River Placer Project.

Additionally, the Company holds strategic interests in 93 km2 or
36 mi2 of select high potential targets for gold, base and precious
metals in the Watson Lake and Whitehorse mining districts of the Yukon. These
include properties known as the Spice Project in the Watson Lake Mining District
and the Ultra Project in the Whitehorse Mining District.

Description of the Business

From inception as a mineral exploration stage and development enterprise in
December 2003, the Company has acquired mineral properties, negotiated joint
ventures, established financing arrangements, and planned and conducted
exploration activities.

Mineral exploration and mine development includes such activities as
conventional prospecting, geological/geophysical surveys, and research; as well
as excavation; diamond and auger drilling; analysis of core, soil, mini and bulk
samples; milling and testing of processing technologies, resource assessment,
scoping studies and environmental monitoring for potential mine development.

Klondike Star Mineral Corporation is listed on the NASD:OTCBB trading under
the symbol "KDSM".

Second Quarter Performance

Highlights of the quarter-ended August 31, 2006 include:

Operational

- Expanding the Dominion Project by 92 mineral claims totaling 22.4 km2
or 8.6 mi2 thereby increasing mineral claims since year-end February
28, 2006 by 105% and increasing the land position by 100%;

- Acquiring a 49% ownership interest and operational management of a
strategic block of 29 placer gold mineral claims in the heart of the Indian
River Placer Project increasing total claims by 16% and the land position by
5.7%;

- Preparing for the release of the first of a series of Lone Star Project
diamond drilling results early in the third quarter;

- Constructing expanded facilities at the Eldorado exploration complex that
supports most of the projects in the Klondike Region;

- Completing a plan to purchase new, flyable diamond drilling rigs and
recruit dedicated crews, thereby managing a risk for planned and future
exploration objectives;

- Commencing the planned exploration program on the Ultra Project with an
expanded prospecting and geology team;

- Procuring a fabricated 5' diameter trommel for planned bulk sampling and
testing of processing technologies at the Indian River Placer Project;

- Re-assuming management and operating responsibility for the Eldorado Placer
Project;

- Mobilizing and supporting the largest exploration program in the company's
history with about 60 employees, supplemented by various local contractors,
consultants and suppliers, while maintaining a positive health and safety and
environmental record throughout the quarter.



Financial

- Unaudited loss from continuing operations for the six months ending August
31was approximately $5,049,000 (loss of $0.20 per share) (August 31, 2005 -
approximately $3,147,000 loss from continuing operation and $0.14 loss per
share) and cash used in operating activities for the six months ended August 31,
2006 was approximately $3,603,000 ($0.14 per share) compared with approximately
$2,539,000 and $0.11 per share for the six months ended August 31, 2005;

- During the second quarter, the Company issued $3,139,000 of common stock
and warrants for cash, net of commissions and related expenses, which was used
to finance working capital for current exploration activities;

- The significant increase in loss from operations from the prior year is due
to increased exploration activities on an increased number of projects, with an
increased scope of activities.

- The changes in cash flow used in operations from August 2005 to August 2006
are related to the increased number of exploration projects underway in the
second quarter ending August 31, 2006 and the scope of activities on certain of
the projects as compared to August 31, 2005.

|Financial indicators                                                        |                         
|--------------------------------------------------------------------------- | ------------------------
|                                                                            | Q2 ended August 31, 2006
|Total expenses                                                              | $ 3,178,703             
|Net loss from
    continuing operations                                     | $ 3,190,774             
|Cash raised by
    financing activities                                     | $ 5,370,284             
|Cash used in
    operating activities                                       | $ 3,602,745             
|Cash and cash
    equivalents on hand                                       | $ 4,429,401             
|Net loss per
    common share: Basic and Diluted                            | $ (0.12)                
|Weighted average
    number of common shares outstanding: Basic and diluted | 26,764,789              
|Cash dividends
    declared per common share                                | Nil                     
|Property, plant
    and equipment, net                                      | $ 1,819,482             
|Long-term debt                                                              | Nil                     
|Shareholders'
    equity                                                    | $ 5,545,561             



|Investor relations indicators                                           
|------------------------------------------------------------------------
|                                                                        
|Common shares
    issued and outstanding                                
|Restricted shares                                                       
|Free trading
    shares                                                 
|Warrants
    outstanding                                                
|Share price range                                                       
|Share volume
    monthly high                                           
|Shareholders                                                            
|Share options
    authorized and unexercised (total in reporting period)



Share price over 2.75 years

(Source: Bell Globemedia Publishing Inc. 2006)

























|Ownership of mineral rights and resources |                                                                                                                                                                                                                
|----------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Project                                   | Q2 ended August 31, 2006                                                                                                                                                                                       
|Lone Star                                 | No change                                                                                                                                                                                                      
|Eldorado Placer                           | No change                                                                                                                                                                                                      
|Indian River Placer                       | 100% ownership of 185 claims and
    17 leases and 49% ownership of 29 claims                                                                                                                                  
|Indian River Conglomerate                 | No change                                                                                                                                                                                                      
|Spice                                     | No change                                                                                                                                                                                                      
|Ultra                                     | No change                                                                                                                                                                                                      
|Dominion                                  | -100% ownership of 148 claims
    - 55% ownership of 112 claims with exclusive option to purchase 75%
    - exclusive option to purchase 100% of 56 claims
    - exclusive option to purchase 100% of 29 claims
|Bonanza                                   | No change                                                                                                                                                                                                      



Future financial condition

Management expects to sustain continued growth in exploration financing, as
well as property acquisitions increasing the mineral rights and resources owned
by Klondike Star Mineral Corporation.

Since 2003, the Company has raised capital successfully by way of private
placements. Through recent placements and warrants, the Company expects to have
the resources necessary to expand its exploration program, acquire new
properties and move ahead with mining feasibility planning and development. The
Company has forged strong relationships with financial professionals in order to
provide adequate capital investment for its projects with the goal of bringing
new mining production on-stream in the future. Commencing a placer operation on
the Indian River Placer Project would create a positive cash flow and change the
status of the company to that of a producer.

Company policy is to expense mineral rights acquisitions and exploration
activities to prove up resources and reserves as mineral exploration
expenditures. At year-end, the Company owns the right to explore 394 km2
or 152.1 mi2 of mineral claims and leases. At the first quarter ended
May 31, 2006, the Company owns the right to explore 439 km2 or 169.2
mi2 of mineral claims and leases. At the second quarter ended August
31, 2006, the Company owns the right to explore 463 km2 or 179 mi2
of mineral claims and leases.

The mineral exploration industry is often cyclical, based upon the price of
commodities and the demand for certain metals. The Company considers that it has
entered this business at a time that is favorable within a long term commodity
inflation cycle, and that it can sustain an enterprise in the field of mineral
exploration and mining production.

Industry and economic factors affecting performance

The outlook for resource industries is becoming positive, as higher commodity
prices result in a return to profitability for corporations, particularly in the
mines and metals sector. As well, major mining companies are affected by
depletion of their reserves and resources, raising concerns about shortages of
metals for the future.

The outlook for gold is currently favorable, due to the present supply/demand
deficit. Management is of the current opinion that the condition of declining
world gold mine output may not find relief until approximately 2011, when enough
new mines can come on-stream to overcome the depletion of existing mines.









The increasing price of gold and precious metals may result in a new area of
favorable economics in the mining industry. At a time when gold was averaging
$390, subject to certain assumptions, management considered that 1 gram of gold
per tonne of ore may be sufficient to achieve profitability, provided sufficient
scale under specific conditions.  If the future price of gold maintains
current higher levels, it could mean a new understanding of the threshold of
economics for large-scale gold mining operations.

The normal cyclical nature of a metals cycle is often a boom/bust scenario,
often with a 5 year average. Characteristically, major mining companies do not
make capital investment at the top of these cycles, rather at the bottom. Major
mining companies are investing heavily, and repositioning through the
acquisition of other companies and properties, as if this is going to be an
extended long-term cycle. This suggests long-term demand for copper, zinc and
particularly gold.

During the first half of fiscal 2007, the generally sustained strength of the
Canadian dollar relative to the U.S. dollar continued to reduce the exchange
gain on the value of the total expenditures made on company properties in Canada
relative to prior years.

Risk factors including operational, environmental and regulatory requirements

The Company began active operations in 2004 as a mineral exploration company.
Although the mineral properties acquired have had substantial funds spent on
geological and geophysical research, exploration and development, including
infrastructure such as roads, exploration facilities, core shack and bulk
sampling test plant, the company expects to incur significant additional
development, exploration and communication expenses in connection with the
business. To date, the Company has generated no revenue. It is expected the
company will continue to incur operating losses for the foreseeable future, and
the company may never achieve or sustain profitability.

Mineral exploration and development involves a high degree of risk, and few
properties which are explored are ultimately developed into producing mines.
Company properties are still in the developmental and testing stages, and may
never reach a production stage. The company's revenue model is dependent upon
identifying and accessing viable ore bodies that can prove feasible for
production.

A practical operational risk factor relates to the timely availability of
necessary skills and resources through recruitment, contracting or joint
ventures. Although Klondike Star has and continues to invest proactively in
solutions to these risks, one risk that is pervasive in the mineral exploration
industry relates to the shortage of experienced diamond drillers in North
America. Demand is outstripping qualified supply of these technical services so
essential to advancing the understanding of potential mineral resources.
Klondike Star requires diamond drilling capability on a timely basis for the
Lone Star Project, the Ultra Project and the Spice Project currently.
Requirements may further increase in the future as the Dominion Project achieves
drill-ready status.

Health and safety for employees and contractors is a known risk factor for
any mineral exploration and development business. The company has established
policy, guidelines, implementation plans and employs industry best practices to
address this risk effectively and efficiently. Klondike Star Mineral Corporation
has an uncompromising commitment to superior safety performance and a healthy
work place.

During the second quarter, Management and the joint employer/employee Health
and Safety Committee implemented a variety of initiatives pursuant to the
Company's annual health and safety action plan. Measures taken include
introduction of mandatory participation of employees and designated contractors
in the national Passport to Safety Program (knowledge assessment and
certification), implementation of a first-aid training incentive increasing the
number of employees with standard and industrial first aid certification,
improvements in personal protective equipment practices, complete review and
updating of first aid equipment and emergency response capability in the
Klondike, co-chair training and start-up of the joint Health and Safety
Committee, commencement of a program to phase-in mandatory All-Terrain Vehicle
and off-road 4x4 driver training and national certification, bear safety
awareness, and construction of a fitness and recreation centre.

Company policy is based on the view that solid environmental performance
within a sustainable development approach is a leading indicator of a
well-managed, efficient and competitive corporation acting in the best interests
of its business, its shareholders, its employees and the communities in which it
operates.

During the second quarter, Management, with the services of an external
specialist, reviewed and addressed fuel-related environmental risks, identified
and cleaned-up two contaminated sites, updated fuel tank labeling and the
fuel-spill emergency response plan for the Lone Star Project. Improvements were
made in appropriate waste management practices and recycling. The process of
phasing in environmental excellence in exploration best practices commenced,
along with the third season of environmental monitoring on the Lone Star
Project. A wind energy resource monitoring station was installed as part of a
scoping study to identify feasible renewable energy options for potential mine
development.

The company also relies upon various mining land use permits and water
licenses to operate and grow the business. As the regulatory agencies change and
introduce new requirements, the company may incur difficulties in acquiring such
permits and licenses in the future, which could adversely affect future
development of the Company's properties. The J.A.E. claim block acquired as an
expansion of the Dominion Project during the second quarter came with an
existing mining land use permit. The Indian River placer properties acquired in
the second quarter came with the benefit of both mining land permits and water
use authorization.

Corporate governance matters

During the year-ended February 28, 2006, the Board of Directors and
management strengthened corporate governance through the establishment of
charters and guidelines for the Board of Directors, a new Audit Committee and a
new Environment, Health and Safety Committee. The company developed and adopted
new bylaws, new policies and introduced rigorous management practices, including
the Code of Business Conduct and Ethics. In the first quarter ended May 31,
2006, action plans were developed and approved for implementation of the Health
and Safety Policy and the Environment and Sustainable Development Policy.

The Audit Committee met during the second quarter to address the first
quarter 10-QSB filing, examples of the next phase of planned shareholder and
potential investor information materials, and plan agendas for meetings during
the balance of the fiscal year.

Early in the second quarter, the 2006 Year-End Report & Project Development
Update was issued, followed by the First Quarter Report 2006 ending May 31,
2006.

Exploration and development projects overview

During the second quarter ended August 31, 2006, following mineral claim
acquisitions in the first quarter, Klondike Star formally announced two new
exploration projects, known as the Dominion Project and the Bonanza Project.

The company is in the process of implementing active field exploration
programs on six of eight projects. The recently acquired Bonanza Project is in
an information gathering stage. The Eldorado Placer Project was previously
optioned to an experienced placer miner and that was expected to continue. A
review during the second quarter culminated in the cancellation of that
arrangement. This project is not currently active.

The exploration complex at Eldorado Creek that serves Klondike operations has
been expanded and improved with the construction of additional facilities. The
camp can now accommodate 65 workers - up from 50, and is supported by a new
fitness and recreation centre and enlarged kitchen and dining facilities. The
infrastructure for the stand-alone satellite camp serving the Dominion Project
was enhanced with the addition of a dedicated office facility and a site
selected for a fixed camp as the first steps in a step-by-step plan to establish
a full-scale exploration complex next year.

Management completed an assessment of options for increasing the company's
capacity to meet its planned and future diamond drilling requirements. A
decision was taken to investigate acquiring newly constructed, flyable diamond
drilling rigs and hire and train local crews on a phased basis. This initiative
is anticipated to give Klondike Star more capacity, flexibility and control over
its drilling programs. These resources would be in addition to those currently
provided by another supplier.

Klondike Star is continuing to work towards industry-standard mineral
resource assessments and scoping studies for the Lone Star and Indian River
Placer projects.

|Mineral rights indicators                       
|------------------------------------------------
|                                                
|Exploration
    projects                        
|                                                
|Quartz mining
    claims                        
|                                                
|Total area of
    quartz claims and crown grants
|                                                
|Placer mining
    claims                        
|                                                
|Total area of
    placer claims and leases      
|                                                



|Mineral
    resources and reserves
|----------------------------------
|Project                           
|Lone Star                         
|Indian River
    Placer           
|Dominion                          

|Bonanza                 | Surveys have
    identified several targets with potential for hosting large tonnage, primary
    gold mineralization |                                                                                                                                           |                                                             | New acquisition
|----------------------- | --------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------
|Spice                   | No change                                                                                                             | Surveys have
    identified targets for drilling                                                                                          | New acquisition                                             | None           
|Ultra                   | No change                                                                                                             | Surveys have
    identified targets for drilling                                                                                          | New acquisition                                             | None           
|Indian River
    Quartz | No change                                                                                                             | Extensive
    reconnaissance and geological mapping, bulk sampling, diamond drilling and
    core analysis, geochemical surveys completed | Exploration
    history and results being compiled          | None           
|Eldorado Placer         | No change                                                                                                             | No change                                                                                                                                 | Area has
    longstanding history of placer gold production | None           





|Operational indicators                                    |                                                                          
|--------------------------------------------------------- | -------------------------------------------------------------------------
|                                                          | Q2 ended August 31, 2006                                                 
|Exploration and development stage by project (Footnote 1) |                                                                          
|Lone Star                                                 | No change                                                                
|Indian River
    Placer                                   | No change                                                                
|Dominion                                                  | Intermediate
    exploration, additional staking and property acquisition
|Bonanza                                                   | No change                                                                
|Spice                                                     | No change                                                                
|Ultra                                                     | No change                                                                
|Indian River
    Conglomerate                             | No change                                                                
|Eldorado Placer                                           | No change and
    project repatriated                                    
|Drilling                                                  |                                                                          
|Diamond drill
    holes and total meters (feet)           | 17
    holes totaling 2,100 metersor 6,890 feet                          
|Auger drill holes
    and total meters (feet)             | Not
    available                                                        
|Surface
    trenching and sampling                       
|                                                          | Trenching not available, 1095 rock samples, and 1,592 soil samples       
|Assay and
    other analysis                             
|                                                          | 1,883
    core samples shipped for assay                                 
|Health and
    safety incidents                          
|                                                          | 1
    incident with no injury or lost time                               
|Environmental
    incidents                              
|                                                          | 0                                                                        

Footnote 1: Definitions of exploration stage

Where a project fits on the spectrum of exploration and development is in
part a matter of judgment exercised by management;

Early stage exploration - grass roots prospecting, mapping, analysis of
regional/site geology, trenching and chip sampling, staking of claims possibly
with a few holes drilled with useful results;

Intermediate stage exploration - exploration continues including
mini-bulk sampling, soil chemistry, geophysical surveys and analysis as
appropriate with more holes drilled with useful results;

Advanced stage exploration - full-scale bulk sampling, mineral assessment
establishes resource development potential, scoping or pre-feasibility study
completed or nearing completion with positive results, environmental baseline
research and assessment in progress;

Early development - bulk sampling and test mining, on-site testing of
processing technology for throughput and mineral recovery; decision made to
proceed with pre- or full feasibility study in progress or completed; scoping of
environmental assessment and permitting completed and necessary steps initiated;

Development - environmental assessment completed, permits obtained,
financing lined up, construction to begin in the next 6 - 12 months; or mine
under construction through commissioning;

Production - operating mine with sales and revenue.

LONE STAR PROJECT

Mineral target - Gold

Overview

The Lone Star Project is an advanced stage exploration property that is being
studied for mine development. The Project consists of 1056 mineral claims and
crown grants totaling 152 km2 or 58.7 mi2. Lone Star is
the largest project of the company's six in the gold producing Klondike region
of Yukon, Canada.

Location

The Lone Star Project is located 20 kilometers from Dawson City and is
accessible by summer maintained, graded gravel roads linking with the Klondike
Highway. The property is situated in the Tintina Gold Belt spanning Alaska and
the Yukon that includes producing mines, major deposits and exploration
properties.

History and geology of the property

First assembled by Canadian mine-finder Richard Hughes, the initial 500
mineral claims in the Klondike (now called the Lone Star Project) were optioned
to Klondike Star Mineral Corporation in December 2003. It is the site of the
former producing Lone Star Mine (1912-14) and decades of previous exploration.



Company progress

Since acquiring the property, Klondike Star Mineral Corporation has become
the majority owner and operator, increased the size of the project from 500 to
1056 mineral claims and crown grants, constructed a 65-person camp complex and
bulk sampling test plant infrastructure on site, and completed extensive soil,
chip and bulk sampling, as well as drilling, processing, and assay analysis.

On-site exploration infrastructure includes living accommodation, kitchen,
dining and fitness facilities, a bulk sampling test plant, core shack, ancillary
buildings and tent frames. A gravel airstrip exists on the claim block at
Eldorado Creek just below the main exploration facility.

|                                                           | Q2 ended August 31, 2006                                                                        | Q1 ended
    May 31, 2006 | Year-end February 28, 2006                                                                                                                         | Year-end February 28, 2005                                                            | Change from 2006 year-end to Q 2 ended August 31, 2006                                                                                                                
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Total claims and crown grants                              | No change                                                                                       | No change                 | 1056                                                                                                                                               | 500                                                                                   | None                                                                                                                                                                  
|Total area                                                 | No change                                                                                       | No change                 | 152 km2 or 58.7 mi2)                                                                                                                               | 100 km2 estimated or 38.6 mi2                                                         | None                                                                                                                                                                  
|Drilling - no. of diamond drill holes and
    total meters | 17 holes totaling 2,100 meters or 6,890 feet                                                    | No change                 | 32 holes totaling 4830 meters or 15,846 feet                                                                                                       | 0                                                                                     | Planned program in progress; total drilling may
    not achieve original target due to unavailability of diamond drilling
    capability and shortage of skilled labor
|Auger drilling - no. of holes and total
    meters         | Not available                                                                                   |                           |                                                                                                                                                    |                                                                                       | Auger drilling introduced for first time in Q2                                                                                                                        
|Surface trenching and sampling                             | Trenching not available, bulk samples not
    available, 470 rock samples, and 134 soil samples | No change                 | 14 trenches totaling 2858 m3 (3,738
    yd3),
    421 soil samples, 551 trench samples, 23 rock samples and 57 bulk chip
    samples               | 17 trenches totaling 1,300 m3 (1,700
    yd3), 1,024 rock samples, 1,165 soil samples | Rock sampling has increased                                                                                                                                           
|Assay and other analysis                                   | 1,883 core
    samples shipped for assay                                                        | No change                 | 5095 core samples from drilling and core fire
    assays (1st round) at 1250 samples, trench ICP totaled 551
    samples and 92 trench fire assays | 1165 soil samples by ICP; also refer to the
    2004 assessment report                | The threshold for assay requirements has been
    adjusted based on prior year experience, thus significantly reducing the
    volume of assay required.              
|Ownership                                                  | No change                                                                                       | No change                 | 55% with exclusive option up to 75%                                                                                                                | 55% with exclusive option up to 75%                                                   | None                                                                                                                                                                  

Exploration results and mineral resource assessment

Exploration results and professional analysis to date indicate the Lone Star
Project represents an extensive mineralized area with a large tonnage, low grade
gold resource augmented by higher grade zones that warrants an expanded
exploration effort and intensive evaluation for potential mine feasibility and
development.

Assay results from the 2005 exploration season were released sequentially
October 6, 2005 - January 24, 2006.

During the year-ended February 28, 2006, the stage of exploration moved to
advanced exploration including diamond drilling, bulk sampling and on-site
processing, and the initiation of a scoping study. The company is working
towards a mineral resource assessment consistent with industry and international
standards and best practices.

The Company anticipates being in a position to release the first of a series
of second quarter diamond drilling results commencing in the third quarter.

Status of the plan for year-ended February 28, 2007

The 2006 summer exploration program will run through October as planned.
Diamond drilling, bulk sampling, as well as a major geophysical survey are
proceeding alongside a scoping study to determine further delineate the
potential mineral resource/reserve and assess the economic viability of the
mineral deposit.

The work plan includes a drilling program currently in progress. This will
further delineate the extent of the known gold bearing ore body in the primary
zones of interest, including the Lone Star and extensions, the Buckland between
Gay Gulch and 27 Pup, and the Nugget zone above Oro Grande Gulch. Due to lack of
diamond drilling capability including skilled labor, diamond drilling has not
kept pace with the target of 11,000 meters and steps are being taken to address
this. Plans are being completed to acquire a company owned and operated drilling
capability that could be operational early in the third quarter. The intention
of completing one or more deep drill holes to extend resource analysis to depths
beyond 500 meters has been deferred. Active consideration is being given to, and
drill targets are being identified for, an extended diamond drilling season
running through December.

New infrastructure, including a camp accommodation annex, a fitness and
recreation centre, and expanded kitchen and dining facilities have been
constructed in the vicinity of the Eldorado Camp.

INDIAN RIVER PLACER PROJECT

Mineral target - Gold

Overview

The Indian River Placer Project is an advanced stage exploration property. It
is located 40 kilometers from Dawson City in the heart of the Klondike gold
producing region of the Yukon, Canada. During 2006, bulk sampling and testing of
processing technologies are proceeding alongside the initiation of a scoping
study to determine the economic viability of the mineral deposit and facilitate
expedited planning and decision-making.

History and geology of the property

The Indian River Placer Project consists of 214 mineral claims plus 17
leases, totaling 37 km2 or 14.3 mi2. The Indian River is
emerging as one of the most active areas of new investment and productive placer
mining in the Klondike region. Klondike Star Mineral Corporation holds 100%
ownership of 185 claims and 17 leases, as well as 49% interest in 29 additional
claims acquired in the second quarter.



Company progress and year-over-year comparison

|                                                         | Q2 ended August 31, 2006                                                      | Q1 ended May 31, 2006 | Year-end February 28, 2006                                                         | Year-end February 28, 2005                                                      | Change from 2006 year-end to Q 2 ended August 31, 2006
|-------------------------------------------------------- | ----------------------------------------------------------------------------- | --------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------
|Total claims                                             | 214 claims and 17 leases                                                      | No change             | 185 claims and 17 leases                                                           |                                                                                 | Increase of 29 claims or 16%                          
|Total area                                               | 37.0 km2 (14.3 mi2)                                                           | No change             | 35 km2 (13.5 mi2)                                                                  |                                                                                 | Increase of 2 km2 (0.8 mi2)
    or 5.7%               
|Drilling - no. of auger drill holes and
    total meters | Not available                                                                 | No change             | 184 holes totaling 2,426 meters or 7,959 feet
    (winter season December - April) | 90 holes totaling 811 meters or 2,661 feet
    (winter season December - April) |                                                       
|Ownership                                                | 100% ownership of 185 claims and 17 leases and
    49% ownership of 29 claims | No change             | 100%                                                                               |                                                                                 | Addition of 49% ownership in block of 29 claims       

Exploration results and mineral resource assessment

The Indian River Placer Project is an advanced stage exploration property.
During the recent winter drilling program, the company completed 184 holes
(double the 2005 drilling) for a cumulative total of 274 holes or 2,426 meters
(7,959 feet). Two winter drilling programs have been completed and the plan is
to shift from winter exploration to bulk sampling, test mining and
pre-production business planning.

The winter drilling recovered gold from 90% of the holes, with gold recovered
from 100% of the holes drilled in the main target area along the Indian River.
In 2005, drilling resulted in gold recovery from 87% of the holes drilled.

Status of plan for year-ended February 28, 2007

The Company is moving ahead with test mining and business planning on this
placer gold property. Exploration efforts have shifted to a new phase, with new
expenditures on a summer exploration, bulk sampling and test processing program
building on last winter's drilling and exploration activities. The objective is
to develop a large-scale placer mine.

2006 summer bulk sampling and test processing are being conducted on three or
more high-potential sites prepared for this purpose through stripping, clearing
and permitting. Additional upgrading of the access road has been completed, a
camp set-up, and further stripping of bulk sample test sites undertaken.

Test mining is being supervised by an established Canadian firm specializing
in mine engineering and processing technology. The goal is to obtain comparative
analysis of throughput and gold recovery.

After careful evaluation, the company is deploying one of two short-listed
processing technologies. The plan remains to refine the best approach for
possible production through testing of both technologies, subject to delivery of
the second, dry-separation equipment which is on order. The dry-separation
technology is used in mining operations elsewhere in the world in similar
conditions; the other is a conventional trommel system used extensively in the
Klondike (and in similar geological circumstances in New Zealand) that is
particularly suited to conditions along the Indian River. A trommel has been
acquired and delivered to site.



SPICE PROJECT

Mineral target - Gold

Overview

The Spice Project has moved to a drill-ready stage of exploration. As of
August 31, 2006, the Spice Project consists of 51 mineral claims totaling 10.9
km2 or 4.2 mi2.

History and geology of the property

The property is located 28 kilometers east of Ross River and 8 kilometers
south of the North Canol Road in the Watson Lake mining district, Yukon, Canada.
The Spice Project falls within the Tintina Gold Belt that hosts numerous gold
deposits, producing mines, notably the Fort Knox, Pogo and (former) Brewery
Creek, as well as active exploration projects.

Exploration results and mineral resource assessment

The property has only been explored since 2000, when a regional geochemical
survey conducted by the Yukon Geological Survey, Yukon Government, identified
strong, coincident gold, silver and epithermal pathfinder elements. Follow-up
geochemical sampling identified an open-ended anomalous zone. Samples assayed up
to 13.9 grams/tonne gold. An IP chargeability high and resistivity low coincides
with the highest geochem values.

Company progress

|                                                           | Q2 ended August 31, 2006 | Q1 ended May 31, 2006 | Year-end February 28, 2006               | Year-end February 28, 2005 | Change for 2006 year-end to Q2 ended August 31, 2006
|---------------------------------------------------------- | ------------------------ | --------------------- | ---------------------------------------- | -------------------------- | ----------------------------------------------------
|Total claims                                               | No change                | 51                    | 32                                       | 0                          | 19 additional claims or 59.4%                       
|Total area                                                 | No change                | 10.9 km2 or 4.2 mi2   | 6.7 km2 or 2.6 mi2                       | 0                          | Increase in area of 62.7%                           
|Drilling - no. of diamond drill holes and
    total meters | No change                | No change             | 0                                        | 0                          | 0                                                   
|Ownership                                                  | No change                | No change             | Exclusive option for up to 75% ownership | 0                          | New acquisition in 2006                             



Status of plan for year-ended February 28, 2007

A first quarter 2006 staking initiative on the Spice Project increased the
land base. The property is drill ready and a diamond drilling program of
identified targets will proceed in the fall. The target is a low-sulphidation
epithermal style gold deposit hosted by rhyolite, similar to the Grew Creek
property 60 kilometers to the west.

ULTRA PROPERTY

Mineral target - Base and Precious Metals

Overview

The Ultra Project has moved to a drill-ready stage in exploration. Following
additional staking in the fall of 2005, the Ultra Project consists of 404
mineral claims totaling 82 km2 (31.7 mi2).

History and geology of the property

The property is located in the Kluane Mountains, 42 kilometers northwest of
Haines Junction, Yukon, Canada, about 140 kilometers from a deepwater port. 10
kilometers west of the Alaska Highway, it is accessible by rough gravel road. It
is near the former nickel - platinum operating Wellgreen Mine and an area
optioned recently by Falconbridge Limited (a leading producer of copper and
nickel with investments in zinc). Ultra is also in the same geological zone as
the world-class zinc-copper-gold Windy Craggy deposit in northern British
Columbia.

Company progress

|                               | Q2 ended August 31, 2006 | Q1 ended May 31, 2006 | Year-end February 28, 2006               | Year-end February 28, 2005 | Change from 2006 year-end to Q 2 ended August 31, 2006
|------------------------------ | ------------------------ | --------------------- | ---------------------------------------- | -------------------------- | ------------------------------------------------------
|Total claims                   | No change                | No change             | 404 claims                               | 0                          | None                                                  
|Total area                     | No change                | No change             | 82 km2 or 31.7 mi2                       | 0                          | None                                                  
|Drilling                       | No change                | No change             | 0                                        | 0                          | None                                                  
|Surface trenching and sampling | Not available            | No change             | 86 rock and soil samples                 | 0                          |                                                       
|Ownership                      | No change                | No change             | exclusive option for up to 75% ownership | 0                          | None                                                  





Exploration results and mineral resource assessment

The property is drill-ready, based on a multi-year investment in prospecting,
mapping, sampling, airborne and ground geophysical surveys and geochemistry
analysis.

The first drilling target is key VMS copper-zinc-silver-gold anomalies that
will help to identify the source, distribution and scope of massive sulphide
boulders that are up to 19 tons with assays of 2.1% copper, 5.1% zinc and 25
grams/tonne silver. The second drilling target is for polymetallic magmatic
nickel-copper-platinum-palladium-gold. The Frohberg showing assayed up to 5.5
grams/tonne platinum, 13.5 grams/tonne palladium, 4.1% copper and 1.7% nickel.
Recent outcrop samples assayed at 4.4% nickel and 2.3 grams/tonne of platinum
group elements.

Status of plan for year-ended February 28, 2007

A strategic diamond drilling program was planned for the summer/fall to
assess two base and precious metal targets at three sites, along with additional
sampling and further assessments of the underlying regional geology. Diamond
drilling has had to be deferred due to unavailability of required technical
services including skilled labor. A modified exploration program is currently in
progress, along with other measures including the use of beep mat technology, to
refine drill targets and advance understanding of the mineral potential.

INDIAN RIVER CONGLOMERATE PROJECT

Mineral target - Gold

Overview

The Indian River Conglomerate Project is an early stage exploration property
for the company.

History and geology of the property

The property is located 40 kilometers from Dawson City in the heart of the
Klondike gold producing region of the Yukon, Canada. It is situated in the
Tintina Gold Belt spanning Alaska and the Yukon. Access to the region is by good
gravel road.

Company progress

|                                    | Q1 ended May 31, 2006 and Q2 ended August 31, 2006 | Year-end February 28, 2006                                                                  | Year-end February 28, 2005 | Change from 2006 year-end to Q2 ended August 31, 2006
|----------------------------------- | -------------------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------- | -----------------------------------------------------
|Total claims                        | No change                                          | 205 claims                                                                                  | 0                          | None                                                 
|Total area                          | No change                                          | 67.3 km2 or 26 mi2                                                                          | 0                          | None                                                 
|Drilling - no. of auger drill holes | No change                                          | 49 holes (winter season January - April)                                                    | 0                          | None                                                 
|Surface trenching and sampling      | 16 rock samples, 20 soil samples                   | 8 trenches totaling 1128 m3(1,475
    yd3), 12 test pits, 52 rock samples, 333 soil samples | 0                          | Modest exploration activity to date                  
|Assay and other analysis            | Not available                                      | 36 rock samples, 333 soil samples                                                           | 0                          |                                                      
|Ownership                           | No change                                          | Exclusive option for up to 75%                                                              | 0                          | None                                                 

Exploration results and mineral resource assessment

Additional geological mapping, rock and soil sampling and geochemistry
analysis, trenching and a magnetometer survey were completed May - September
2005. Auger drilling provided bedrock samples in January - April 2005. This work
builds on extensive reconnaissance and geological mapping, bulk sampling,
diamond drilling and core analysis, geochemical surveys completed by previous
exploration companies.

Status of plan for year-ended February 28, 2007

Auger drilling into the bedrock is planned as part of forward planning for
further assessment of the property. Additional baseline work will be undertaken
to consolidate and ground-truth previous exploration results.

ELDORADO PLACER PROJECT

Mineral target - Gold

Overview

Located 20 kilometers from Dawson City, Yukon, Canada, the Eldorado Placer
Project is located within the boundaries of the Lone Star Project. The placer
(surface) mineral claims overlap some of Lone Star's quartz (subsurface) mineral
claims.

History and geology of the property

The property is in the heart of a longstanding gold producing area. There are
many placer mines operating in the general vicinity. The claims were originally
assembled by Canadian mine-finder Richard Hughes and optioned to Klondike Star
Mineral Corporation in 2004.



Company progress

|             | Q1 ended May 31, 2006 and Q2 ended August 31, 2006 | Year-end February 28, 2006                    | Year-end February 28, 2005                    | Change from 2006 year-end to Q 2 ended August 31, 2006
|------------ | -------------------------------------------------- | --------------------------------------------- | --------------------------------------------- | ------------------------------------------------------
|Total claims | No change                                          | 115 claims                                    | 114 claims                                    | None                                                  
|Total area   | No change                                          | 6.9 km2 or 2.7 mi2                            | 6.5 km2 estimated or 2.5 mi2                  | None                                                  
|Ownership    | No change                                          | 55% and exclusive option to acquire up to 75% | 55% and exclusive option to acquire up to 75% | None                                                  

Exploration results and mineral resource assessment

The property has known placer gold potential. However, the company has not
itself conducted substantive exploration work to date.

Status of plan for year-ended February 28, 2007

Over the last two years the right to conduct placer mining on the property
has been optioned to an experienced Klondike placer miner and this arrangement
was expected to continue. None-the-less, following a second quarter assessment
the Company has terminated this arrangement and taken direct responsibility for
the project. An operating plan is under development.

DOMINION PROJECT

Mineral target - Gold

Overview

At the headwaters of Dominion Creek, the Dominion Project consists of 345
claims totaling 67.4 km2 (26 mi2). Klondike Star holds
100% or majority interest in 260 claims and the exclusive option to purchase 85
claims acquired in the first and second quarters ended August 31, 2006.

|Total claims | 345               | 224                | 168                | 112               | 177 claims or 105%            
|------------ | ----------------- | ------------------ | ------------------ | ----------------- | ------------------------------
|Total area   | 67.4 km2or 26 mi2 | 45 km2 or 17.4 mi2 | 33.5 km2 or 13 mi2 | 23.5 km2 or 9 mi2 | 33.9 km2 or 13 mi2 or
    100%

On April 27, 2006, Klondike Star announced the acquisition from Klondike
Source Limited (KSL) subsidiary, KSL Exploration (Yukon) Limited, of the
exclusive right to purchase an undivided 100% interest in up to 56 quartz claims
in the DOM block located on Hunker Dome in the eastern part of the Klondike
goldfield. 
On August 8, 2006, Klondike Star announced the acquisition of the exclusive
option to explore and purchase the J.A.E. claim group on King Solomon's Dome
bordering on mineral claims already held by the Company.

The Company has also staked an additional 92 claims to further consolidate
the property into a single contiguous area.

History, geology and infrastructure of the property

Since 1999, a portion of the property was explored by KSL Exploration (Yukon)
Limited, a wholly owned subsidiary of Klondike Source Limited including shallow
percussion drilling, soil sampling, and trenching. Before that, United Keno Hill
Mines Limited, longstanding operator of gold and silver properties, such as the
Elsa and Keno Hill mines, invested significant effort on the other portion of
the property. Significant exploration work has been conducted on the J.A.E.
claim block by successive owners.

Regional and project-specific infrastructure includes good seasonal road
access.

Company progress

|             | Q2 ended August 31, 2006                                                                                                                                                                                    | Q1 ended May 31, 2006                                                                                                                                                                                      | Year-end February 28, 2006                                                                   | Year-end February 28, 2005                                | Change from year-end 2006 to Q2 ended August 31, 2006                               
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------------------------------------------
|Total claims | 345                                                                                                                                                                                                         | 224                                                                                                                                                                                                        | 168                                                                                          | 112                                                       | 177 claims or 105%                                                                  
|Total area   | 67.4 km2or 26 mi2                                                                                                                                                                                           | 45 km2 or 17.4 mi2                                                                                                                                                                                         | 33.5 km2 or 13 mi2                                                                           | 23.5 km2 or 9 mi2                                         | 33.9 km2 or 13 mi2 or
    100%                                                      
|Ownership    | - 100% ownership of 148 claims- 55%
    ownership of 112 claims with exclusive option for up to 75%
    - exclusive option to acquire 100% of 56 claims
    - exclusive option to acquire 100% of 29 claims | - 100% ownership of 56 claims- 55% ownership
    of 112 claims with exclusive option for up to 75%
    - exclusive option to acquire 100% of 56 claims
    - exclusive option to acquire 100% of 29 claims | - 100% ownership of 56 claims - 55% ownership
    with exclusive option of 75% of 112 claims | 55% with exclusive option for up to 75% of 112
    claims | - 100% ownership of 148 claims- exclusive
    option for 100% ownership of 56 claims

Exploration results and mineral resource assessment

The area covers several mineralized vein systems, some shafts and a long
tunnel, and has been the subject of drilling, soil geochemistry and trenching.
Various broad zones of disseminated mineralization have not yet been examined in
detail.

Status of plan to year-end February 28, 2007

A comprehensive exploration program is in progress on this new major property
in the goldfields of the Klondike. The goal is to consolidate and ground-truth
previous exploration results, advance knowledge of the mineral resources, take
advantage of extensive trenching in situ, identify future drill targets on a
systematic and expedited basis and consolidate the property and mineral
interests through a strategic claim staking program.

The program is headed up by a dedicated team of senior geologists with
previous experience on the property. Activities include detailed mapping,
extensive chip/soil sampling, assessment of selected targets among the 65
existing trenches, bulk sampling and processing through the Eldorado test plant.
A satellite camp has been installed to support project operations.

BONANZA PROJECT

Mineral target

Gold

Overview

On May 19, 2006, Klondike Star acquired a controlling interest in 269 mineral
claims in the Klondike region of Yukon Canada. Known as the Bonanza Project, the
property totals 40.1 km2 (15.5 mi2). It is located in the
heart of the Klondike Gold Fields and proven gold producing ground, 10
kilometers from Dawson City, Yukon, Canada.  This new acquisition increases
the number of major exploration projects to eight.

History, geology and infrastructure of the property

Since 1999, building on previous exploration efforts, the property has been
explored by KSL and PacRim Resources Limited (formerly Barramundi Gold Ltd.)
using advanced exploration techniques, geological mapping and geochemical soil
surveys.



Company progress

|             | Q2 ended August 31, 2006 | Q1 to May 31, 2006   | Year-end February 28, 2006 | Year-end February 28, 2005 | Change from year-end 2006 to Q2 ended August 31, 2006
|------------ | ------------------------ | -------------------- | -------------------------- | -------------------------- | -----------------------------------------------------
|Total claims | No change                | 269                  | 0                          | 0                          | New acquisition                                      
|Total area   | No change                | 40.1 km2 or 15.5 mi2 | 0                          | 0                          | New acquisition                                      
|Ownership    | No change                | 100% registered      | 0                          | 0                          | New acquisition                                      



Exploration results and mineral resource assessment

KSL considers that property to have number prospects on the basis of
reasonably well-defined geochemical gold anomalies. In an independent
geologist's report, KSL reported that, "These surveys have identified several
prospective targets with potential for hosting large tonnage, primary gold
mineralization." (Roy Cox & Associates, November 10, 2003).Status of plan to year-end February 28, 2007

Although just acquired, Klondike Star has initiated a preliminary exploration
program including consolidation of mapping, sampling results, and all accessible
assessment work on the property. No field work is being conducted at this time.



Item 3. Control and Procedures



(a) Evaluation of Disclosure Controls and Procedures.

An evaluation made at the end of the period covered by this report was
performed under the supervision and with the participation of the Company's
president, chief executive officer ("CEO") and the chief financial officer
("CFO"), or persons performing similar functions, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures to
insure that the Company records, processes, summarizes and reports in a timely
and effective manner the information required to be disclosed in reports filed
with or submitted to the Securities and Exchange Commission. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective in timely
bringing to their attention material information related to the Company required
to be included in the Company's periodic Securities and Exchange Commission
filings. Since the date of this evaluation, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect those controls.

(b) Changes in Internal Controls Over Financial Reporting.

There have been no significant changes in internal control over financial
reporting that occurred during the fiscal period covered by this report that
have materially affected or are reasonably likely to materially affect the
Company's internal control over financial reporting.



PART 2 - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

Exhibits:

| | 31 | Certifications of Chief Executive Officer and
    Chief Financial Officer under Rule 13a-14(a)/15d-14(a) | Included
| | -- | -------------------------------------------------------------------------------------------------------- | --------
| | 32 | Certifications under Section 1350                                                                        | Included

Reports on Form 8-K: No current reports were filed during the quarter
ended August 31, 2006.



SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



KLONDIKE STAR MINERAL CORPORATION

Date: October 9, 2006

By:**

Hans Boge, President