UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


FORM
10-Q





(Mark
One)


T
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended September 30, 2008





£
            TRANSITION
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from _ _ _ _ _ _ _ _ _ _  to _ _ _ _ _ _ _ _ _
_





Commission
file number 0-27355





CIGMA
METALS CORPORATION


(Exact
name of registrant as specified in its charter)





Florida
            98-0203244(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification No.)








18, 80 Furmanova Str,
Almaty, Republic of Kazakhstan


(Address
of principal executive offices)





+7 327 2611
026


(Registrant’s
telephone number, including area code)





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





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


YES T NO £





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


YES T NO £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
accelerated filer £ Accelerated
filer £
Non-accelerated filer £ (do not check
if a smaller reporting company) Smaller reporting company T





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


YES £ NO T





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS





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


YES £ NO £








APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date: 53,500,000 shares of Common Stock
were outstanding as of February 17, 2010.










CIGMA METALS CORPORATION





This
quarterly report contains statements that plan for or anticipate the future and
are not historical facts. In this Report these forward looking statements are
generally identified by words such as “anticipate,” “plan,” “believe,” “expect,”
“estimate,” and the like. Because forward looking statements involve future
risks and uncertainties, these are factors that could cause actual results to
differ materially from the estimated results. These risks and uncertainties are
detailed in Part 1 – Financial Information - Item 1. “Financial Statements” and
Item 2. “Management’s Discussion and Analysis of Financial Condition and Results
of Operations.”





The
Private Securities Litigation Reform Act of 1995, which provides a “safe harbor”
for such statements, may not apply to this Report.








PART
      1 – FINANCIAL INFORMATIONItem
      1.
            Financial
      StatementsInterim Consolidated Balance Sheets September 30, 2008
      (unaudited) and December 31, 2007 (unaudited)
            
            3Interim Consolidated Statements of Operations (unaudited) Three
      and nine months ended September 30, 2008 and 2007; and for the period from
      January 13, 1989 (Inception) to September 30, 2008
            
            4Interim Consolidated Statements of Cash Flows (unaudited) Nine
      months ended September 30, 2008 and 2007 and for the period from January
      13, 1989 (Inception) to September 30, 2008
            
            5Notes to Interim Consolidated Financial Statements
      (unaudited)
            
            6Item
      2.
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            
            13Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            
            25Item
      4T.
            Controls and Procedures
            
            25PART
      II – OTHER INFORMATIONItem
      1.
            Legal Proceedings
            
            27Item
      1A.
            Risk Factors
            
            27Item
      2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            
            27Item
      3.
            Defaults Upon Senior Securities
            
            27Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            
            27Item
      5.
            Other Information
            
            27Item
      6.
            Exhibits
            
            27SIGNATURES
            
            28


2
 Table of Contents


Item 1.
Financial Statements





CIGMA
      METALS CORPORATION(An
      exploration stage enterprise)Consolidated
      Balance SheetsSeptember
      30, 2008 and December 31, 2007(Expressed in U.S. Dollars)September 30
            
            
            December 312008
            
            
            2007(Unaudited)
            
            
            (Unaudited)ASSETSCurrentCash
            
            $
            14,248
            
            
            $
            1,148,702Available-for-sale
      securities
            
            
            88,444
            
            
            
            92,445Prepaid expenses and other
      assets
            
            
            89,300
            
            
            
            51,420Total
      current assets
            
            
            191,992
            
            
            
            1,292,567Equipment,
      net
            
            
            144,674
            
            
            
            115,709Mineral properties
            
            
            2,509,597
            
            
            
            2,676,096Total assets
            
            $
            2,846,263
            
            
            $
            4,084,372LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts payable and accrued
      expenses
            
            $
            1,330,660
            
            
            $
            1,077,410Total
      current liabilities
            
            
            1,330,660
            
            
            
            1,077,410Long-term debt
            
            
            816,990
            
            
            
            1,166,056Total liabilities
            
            
            2,147,650
            
            
            
            2,243,466Non-controlling
      interest
            
            
            -
            
            
            
            526,651Stockholders'
      EquityCommon
      stockAuthorized100,000,000
      common shares, par value $0.0001Issued
      and outstanding:46,500,000
      (2007 - 39,700,000) common shares
            
            
            4,650
            
            
            
            3,970Additional
      paid in capital
            
            
            8,873,794
            
            
            
            6,810,474Accumulated
      deficit during the development stage
            
            
            (8,086,478
            )
            
            
            (5,418,938
            )Accumulated other comprehensive income
      (loss)
            
            
            (93,353
            )
            
            
            (81,251
            )Stockholders' equity
            
            
            698,613
            
            
            
            1,314,255Total liabilities and stockholders'
      equity
            
            $
            2,846,263
            
            
            $
            4,084,372





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


3
 Table of Contents




CIGMA
      METALS CORPORATION(An
      exploration stage enterprise)Consolidated
      Statements of Operations(Expressed
      in U.S. Dollars)
            
            Cumulative(Unaudited)
            
            January
      13
            
            
            Three months
            
            
            Three months
            
            
            Nine
      months
            
            
            Nine
      months1989 (inception)
            
            
            Ended
            
            
            Ended
            
            
            Ended
            
            
            EndedSeptember
      30
            
            
            September 30
            
            
            September 30
            
            
            September 30
            
            
            September 302008
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007ExpensesAdministrative
      and general
            
            $
            2,808,443
            
            
            $
            1,136,922
            
            
            $
            55,124
            
            
            $
            2,255,554
            
            
            $
            77,968Exploration
      costs-
      HaldeyGold Project - partnership
            
            
            796,261
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            --
      HaldeyGold Project - other
            
            
            185,126
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            --
      Tugojakovsk Project
            
            
            453,821
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            --
      Kazakhstan
            
            
            1,552,266
            
            
            
            (360,146
            )
            
            
            17,456
            
            
            
            140,001
            
            
            
            290,773Interest,
      bank charges and foreign currency exchange losses
            
            
            46,508
            
            
            
            21,716
            
            
            
            648
            
            
            
            25,382
            
            
            
            3,648Professional
      fees
            
            
            605,914
            
            
            
            735
            
            
            
            19,138
            
            
            
            39,986
            
            
            
            92,707Property
      investigation costs
            
            
            119,717
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Management and consulting
    fees
            
            
            1,584,180
            
            
            
            31,700
            
            
            
            79,683
            
            
            
            247,761
            
            
            
            220,884Loss before other items
            
            
            8,152,236
            
            
            
            830,927
            
            
            
            172,049
            
            
            
            2,708,684
            
            
            
            685,980Other
      income (loss)Writedown
      of available-for-sale securities
            
            
            (148,180
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Writedown
      of investment in partnership interest
            
            
            (190,601
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Gain
      (loss) on sale of assets
            
            
            35,717
            
            
            
            35,717
            
            
            
            -
            
            
            
            35,717
            
            
            
            -Interest income
            
            
            238,083
            
            
            
            428
            
            
            
            11,566
            
            
            
            5,426
            
            
            
            73,082Total other income (loss)
            
            
            (64,981
            )
            
            
            36,145
            
            
            
            11,566
            
            
            
            41,143
            
            
            
            73,082Net
      loss before non-controlling interest
            
            
            (8,217,217
            )
            
            
            (794,782
            )
            
            
            (160,483
            )
            
            
            (2,667,541
            )
            
            
            (612,898
            )Non-controlling interest
            
            
            130,739
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,518Net income (loss) for the
      period
            
            $
            (8,086,478
            )
            
            $
            (794,782
            )
            
            $
            (160,483
            )
            
            $
            (2,667,541
            )
            
            $
            (608,380
            )Basic and diluted loss per
      share
            
            
            
            
            
            $
            (0.02
            )
            
            $
            (0.00
            )
            
            $
            (0.06
            )
            
            $
            (0.02
            )Weighted average number of common shares
      outstanding
            
            
            
            
            
            
            46,500,000
            
            
            
            39,700,000
            
            
            
            42,237,729
            
            
            
            39,570,588





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


4
 Table of Contents




CIGMA
      METALS CORPORATION(An
      exploration stage enterprise)Consolidated
      Statements of Cash Flows(Expressed
      in U.S. Dollars)
            
            Cumulative(Unaudited)
            
            January
      13
            
            
            Nine
      months
            
            
            Nine
      months1989
      (inception)
            
            
            Ended
            
            
            Endedto September 30,
            
            
            September 30
            
            
            September 302008
            
            
            2008
            
            
            2007Cash
      flows used in operating activitiesNet
      loss for the period
            
            $
            (8,086,478
            )
            
            $
            (2,667,540
            )
            
            $
            (608,380
            )Adjustments
      to reconcile net loss to net cash used in operating
    activities-
      depreciation
            
            
            23,861
            
            
            
            12,851
            
            
            
            5,898-
      stock compensation expense on stock option grants
            
            
            366,844
            
            
            
            -
            
            
            
            --
      issuance of common stock for mineral property rights
            
            
            600
            
            
            
            -
            
            
            
            --
      expenses satisfied with issuance of common stock
            
            
            211,000
            
            
            
            114,000
            
            
            
            233,000-
      partnership exploration costs
            
            
            1,125,711
            
            
            
            -
            
            
            
            --
      writedown of investment in partnership interest
            
            
            190,601
            
            
            
            -
            
            
            
            --
      writedown of available for sale securities
            
            
            148,180
            
            
            
            -
            
            
            
            --
      minority interest in income (loss) of subsidiary
            
            
            (130,739
            )
            
            
            -
            
            
            
            (4,518
            )-
      realized loss on sale of equipment
            
            
            12,342
            
            
            
            12,342
            
            
            
            -Changes
      in working capital assets and liabilities, net of acquired
      subsidiary-
      decrease (increase) in prepaid expenses and other assets
            
            
            (88,853
            )
            
            
            (37,573
            )
            
            
            (58,724
            )-
      increase (decrease) in accounts payables and accrued
      liabilities
            
            
            1,237,206
            
            
            
            178,588
            
            
            
            (20,867
            )- increase (decrease) in accounts payables related
      party
            
            
            -
            
            
            
            -
            
            
            
            14,278Net cash used in operating
      activities
            
            
            (4,989,725
            )
            
            
            (2,387,332
            )
            
            
            (439,313
            )Cash
      flows used in investing activities-
      purchase equipment
            
            
            (216,363
            )
            
            
            (89,644
            )
            
            
            (125,239
            )-
      proceeds from sale of equipment
            
            
            35,717
            
            
            
            35,717
            
            
            
            --
      investment in available-for-sale securities
            
            
            (329,977
            )
            
            
            -
            
            
            
            --
      investment in partnership interest
            
            
            (1,316,312
            )
            
            
            -
            
            
            
            -- acquisition of mineral property
      costs
            
            
            (2,360,152
            )
            
            
            (360,152
            )
            
            
            (2,000,000
            )Net cash used in investing
      activities
            
            
            (4,187,087
            )
            
            
            (414,079
            )
            
            
            (2,125,239
            )Cash
      flows from financing activities-
      issuance of common stock
            
            
            8,300,000
            
            
            
            1,950,000
            
            
            
            -- loan proceeds
            
            
            758,035
            
            
            
            (402,220
            )
            
            
            1,158,873Net cash provided by financing
      activities
            
            
            9,058,035
            
            
            
            1,547,780
            
            
            
            1,158,873Effect of exchange rate changes on cash and cash
      equivalents
            
            
            133,025
            
            
            
            119,177
            
            
            
            10,043Increase
      in cash and cash equivalents
            
            
            14,248
            
            
            
            (1,134,454
            )
            
            
            (1,395,636
            )Cash and cash equivalents, beginning of
      period
            
            
            -
            
            
            
            1,148,702
            
            
            
            3,082,432Cash and cash equivalents, end of
      period
            
            $
            14,248
            
            
            $
            14,248
            
            
            $
            1,686,796





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


5
 Table of Contents


Notesto
Interim Consolidated Financial Statements (Unaudited)





1.
            Nature
      of Business and Going Concern





Cigma
Metals Corporation ("the Company") was formed on January 13, 1989 under the laws
of the State of Florida as Cigma Ventures Corporation. On April 17, 1999 the
Company changed its name to Cigma Metals Corporation and is in the business of
location, acquisition, exploration and, if warranted, development of mineral
properties.  The Company’s focus is on the exploration and development
of its exploration properties located in the Pavlodar Oblast Region in
Kazakhstan and the Tomsk Oblast Region, of the Russian Federation. The Company
has not yet determined whether its properties contain mineral reserves that may
be economically recoverable and has not generated any operating revenues to
date.





These
unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business.  The general
business strategy of the Company is to acquire mineral properties either
directly or through the acquisition of operating entities.   The
Company has incurred recurring operating losses since inception, has not
generated any operating revenues to date and used cash of $2,387,332 from
operating activities in 2008. The Company requires additional funds to meet its
obligations and maintain its operations.  These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in this regard are to raise equity financing through private
or public equity investment in order to support existing operations and expand
its business. There is no assurance that such additional funds will be available
to the Company when required or on terms acceptable to the Company. These
unaudited consolidated financial statements do not include any adjustments that
might result from this uncertainty.





2.
            Significant
      Accounting Policies





We follow
accounting standards set by the Financial Accounting Standards Board, commonly
referred to as the “FASB.”  The FASB sets generally accepted
accounting principles (GAAP) that we follow to ensure we consistently report our
financial condition, results of operations, and cash
flows.  References to GAAP issued by the FASB in these footnotes are
to the FASB Accounting Standards Codification, referred to as codification or
“ASC.”  The FASB finalized the codification effective for periods
ending on or after September 15, 2009.





(a)
            Principles
      of Accounting





The  interim  period
unaudited consolidated financial statements have been prepared by the
Company  pursuant  to  the  rules  and  regulations  of  the
U.S. Securities and
Exchange  Commission  (the  "SEC") and include the
accounts of the Company and its wholly-owned subsidiary, Cigma Metals BVI
Limited (“Cigma BVI”) and its wholly owned subsidiary Dostyk LLP. Collectively,
they are referred to herein as "the Company". Significant inter-company accounts
and transactions have been eliminated in consolidation. Cigma BVI is inactive.
Certain information and footnote disclosures
normally  included  in  consolidated financial
statements prepared in accordance
with  accounting  principles  generally  accepted
in the United States have been
condensed  or  omitted  pursuant  to
such SEC rules and regulations. The interim period  unaudited
consolidated  financial  statements  should  be  read  together
with the audited consolidated financial statements and accompanying notes
included in the Company's  consolidated  audited financial
statements for the years ended
December  31,  2007  and  2006.  In  the  opinion
of the Company, the unaudited
consolidated  financial  statements  contained  herein  contain  all
adjustments (consisting  of a normal recurring nature, with the
exception of the impairment adjustment  discussed  below in
"Long-Lived Assets Impairment") necessary to present a fair
statement  of  the  results  of  the  interim  periods  presented.


6
 Table of Contents


2.
            Significant
      Accounting Policies   (continued)





(b)
            Accounting
      Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates and assumptions.





(c)
            Cash
      Equivalents





Cash
equivalents comprise certain highly liquid instruments with a maturity of three
months or less when purchased.  The Company did not have any cash
equivalents at September 30, 2008 and December 31, 2007. No amounts were paid
for income taxes or interest in 2008 or 2007.





(d)
            Marketable
      Securities





The
Company's available-for-sale securities consist of shares of common stock of
three publicly traded companies at September 30, 2008 and 2007, and are stated
at fair value. The cost of these securities is $181,797, at September 30, 2008
(2007 - $181,797) and the net unrealized holding loss of $93,353 and (2007 -
$89,352) is included in accumulated other comprehensive income (loss) at
September 30, 2008. If a loss in value in the available-for-sale securities is
considered to be other than temporary, it is recognized in the determination of
net income. All unrealized holding losses at September 30, 2008 are on
securities that have a fair market value of $88,444 at September 30, 2008. Cost
is based on the specific identification method for the individual securities to
determine realized gains or losses.





Fair
values determined by Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities.  The following table
presents information about the Company’s financial assets that have been
measured at fair value as of September 30, 2008 and 2007, and indicates the fair
value hierarchy of the valuation inputs utilized to determine such fair
value.








Description
            
            Fair Value at September 30,
      2008
            
            
            Quoted Prices in Active
Markets
              (Level 1)Assets:Cash
            
            $
            14,248
            
            
            $
            14,248Available-for-sale
      securities
            
            
            88,444
            
            
            
            88,444Assets
      measured at fair value at September 30, 2008
            
            $
            102,692
            
            
            $
            102,692








Description
            
            Fair Value at December 31,
      2007
            
            
            Quoted Prices in Active
Markets
              (Level 1)Assets:Cash
            
            $
            1,148,702
            
            
            $
            1,148,702Available-for-sale
      securities
            
            
            92,445
            
            
            
            92,445Assets
      measured at fair value at December 31, 2007
            
            $
            1,241,147
            
            
            $
            1,241,147


7
 Table of Contents


2.
            Significant
      Accounting
Policies   (continued)





(e)
            Equipment





Depreciation
is based on the estimated useful lives of the assets and is computed using the
straight-line method.  Equipment is recorded at
cost.  Depreciation is provided over the following useful
lives:





Vehicles
            10
      years


Office
      equipment, furniture and fixtures
            2
      to 5 years





(f)
            Mineral
      Properties and Exploration Expenses





The
Company accounts for its mineral properties on a cost basis whereby all direct
costs, net of pre-production revenue, relative to the acquisition of the
properties are capitalized.  All sales and option proceeds received
are first credited against the costs of the related property, with any excess
credited to earnings. Once commercial production has commenced, the net costs of
the applicable property will be charged to operations using the
unit-of-production method based on estimated proven and probable recoverable
reserves. The net costs related to abandoned properties are charged to
operations.





Exploration
costs are charged to operations as incurred until such time that proven reserves
are discovered. From that time forward, the Company will capitalize all costs to
the extent that future cash flow from mineral reserves equals or exceeds the
costs deferred. Exploration activities conducted jointly with others are
reflected at the Company's proportionate interest in such
activities.





The
Company reviews the carrying values of its mineral properties on a regular basis
by reference to the project economics including the timing of the exploration
and/or development work, the work programs and the exploration results
experienced by the Company and others. The review of the carrying value of any
producing property will be made by reference to the estimated future operating
results and net cash flows. When the carrying value of a property exceeds its
estimated net recoverable amount, provision is made for the decline in value.
The deferred costs will be amortized over the recoverable reserves when a
property reaches commercial production. As of September 30, 2008 and 2007, the
Company did not have proven reserves.





The
recoverability of the amounts shown for mineral properties is dependent on the
confirmation of economically recoverable reserves, confirmation of the Company’s
interest in the underlying mineral claims, the ability of the Company to obtain
the necessary financing to successfully complete their development and the
attainment of future profitable operations or proceeds from
disposition.





Estimated
costs related to site restoration programs during the commercial development
stage of the property are accrued over the life of the project.





(g)
            Share-Based
      Payment





The
Company accounts for share-based payments under the fair value method of
accounting for stock-based compensation consistent with GAAP.





Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which is generally the vesting period.


8
 Table of Contents


2.
            Significant
      Accounting
Policies   (continued)





(h)
            Foreign
      Currency Translations and
Transactions





The
Company's reporting currency is the U.S. Dollar.  Dostyk LLP is a
foreign operation and its functional currency is the Kazakhstan Tenge (Tenge).
Certain contractual obligations in these consolidated financial statements are
stated in Kazakhstan Tenges. The Kazakhstan Tenge to U.S. dollar exchange rate
at September 30, 2008 was U.S. $0.00849 to 1 Tenge.





The
Company translates foreign assets and liabilities of its subsidiaries, other
than those denominated in U.S. dollars, at the rate of exchange at the balance
sheet date. Revenues and expenses are translated at the average rate of exchange
throughout the year. Gains or losses from these translations are reported as a
separate component of other comprehensive income (loss) until all or a part of
the investment in the subsidiaries is sold or liquidated. The translation
adjustments do not recognize the effect of income tax because the Company
expects to reinvest the amounts indefinitely in operations.





Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the local functional currency are included
in interest, bank charges, and foreign exchange loss in the consolidated
statements of operations and were not material in 2008 or 2007.





(i)
            Concentration
      of Credit Risk





The
Company places its cash with high credit quality financial institutions in
Canada and Kazakhstan. The Company had funds deposited in banks beyond the
insured limits as of September 30, 2008 and December 31, 2007.





(j)
            Long-Lived
      Assets Impairment





Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable, in accordance with
GAAP.  An impairment loss would be recognized when the carrying amount
of an asset exceeds the estimated undiscounted future cash flows expected to
result from the use of the asset and its eventual disposition.





The
amount of the impairment loss to be recorded is calculated by the excess of the
asset's carrying value over its fair value.  Fair value is generally
determined using a discounted cash flow analysis. The Company has not recognized
any impairment losses through September 30, 2008.





(k)
            Comprehensive
      income





The
Company has adopted, Reporting
Comprehensive Income, which establishes standards for reporting and
display of comprehensive income, its components and accumulated balances. The
Company is disclosing this information on its Consolidated Statement of
Stockholders’ Equity (Deficiency). Comprehensive income comprises equity except
those resulting from investments by owners and distributions to
owners.





Accumulated
other comprehensive income consists of the following at September 30, 2008 and
December 31, 2007:





Components
      of comprehensive income (loss)
            
            September 30,
              2008
            
            
            December 31,
              2007Net
      income (loss) for the period
            
            $
            (2,667,541
            )
            
            $
            (1,909,808
            )Foreign
      currency translation adjustments
            
            
            
            
            
            
            8,101Unrealized
      gains (loss) on available-for-sale securities
            
            
            (93,353
            )
            
            
            (73,864
            )Total
      comprehensive income (loss)
            
            $
            (2,760,894
            )
            
            $
            (1,975,571
            )


9
 Table of Contents


2.
            Significant
      Accounting
Policies   (continued)





(l)
            Fair
      Value of Financial Instruments and
Risks





Fair
value estimates of financial instruments are made at a specific point in time,
based on relevant information about financial markets and specific financial
instruments.  As these estimates are subjective in nature, involving
uncertainties and matters of significant judgment, they cannot be determined
with precision.  Changes in assumptions can significantly affect
estimated fair value.





The
carrying value of cash, accounts payable and accrued expenses, accounts payable
– related parties, and loan payable approximate their fair value because of the
short-term nature of these instruments. Available for sale securities are
recorded at the current market value.





Management
is of the opinion that the Company is not exposed to significant interest or
credit risks arising from these financial instruments.





The
Company operates outside of the United States of America (primarily in
Kazakhstan) and is exposed to foreign currency risk due to the fluctuation
between the currency in which the Company operates in and the U.S.
dollar.





(m)
            Income
      Taxes





The
Company has adopted ASC 740, Accounting for Income Taxes,
which requires the Company to recognize deferred tax liabilities and assets for
the expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns using the liability
method.  Under this method, deferred tax liabilities and assets are
determined based on the differences between the financial statement carry
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to
reverse.





In July
2006, the Financial Accounting Standards Board (“FASB”) issued an interpretation
which clarifies the accounting for uncertainty in income taxes recognized in a
company’s financial statements in accordance with GAAP.  This
interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken in a
tax return.  It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.





Recognition
criterion to a tax provision is effective for fiscal years beginning after
December 15, 2006.  The adoption of this interpretation did not have a
material impact on the Company’s results of operations or financial
position.  As such, the Company has not recorded any liabilities for
uncertain tax positions or any related interest and penalties.  The
Company’s tax returns are open to audit for the years ending December 31, 2004
to 2008.





(n)
            Earnings
      (Loss) Per Share





Earnings
(loss) per share is computed by dividing net income or loss available to common
stockholders by the weighted average number of common shares outstanding during
the year including common stock issued effective the date committed. Diluted
loss per common share is computed by dividing net loss by the sum of (a) the
basic weighted average number of shares of common stock outstanding during the
period and (b) additional shares that would have been issued and potentially
dilutive securities and is equivalent to basic loss per share for 2008 and 2007
because potentially dilutive securities were anti-dilutive due to the net losses
incurred in each year. Potentially dilutive securities outstanding consist of
800,000 stock options for 2008 (2007 – 800,000) and 0 warrants for 2008 (2007 –
8,000,000).


10
 Table of Contents


3.
            Equipment





September 30,
              2008
            
            
            December 31,
              2007Fixed
      assets
            
            $
            154,611
            
            
            $
            126,719Other
      intangible assets
            
            
            1,524
            
            
            
            -Fixed
      asset revaluation reserve
            
            
            12,400168,535
            
            
            
            126,719Accumulated
      depreciation
            
            
            (23,861
            )
            
            
            (11,010
            )$
            144,674
            
            
            $
            115,709





The
majority of equipment held at September 30, 2008 and December 31, 2007 is
located in Kazakhstan.





4.
            Loan
      Payable





The
Company’s subsidiary Dostyk had a loan payable to Eureka Mining PLC. The loan is
unsecured, non- interest bearing with repayment to begin when the Company shall
begin to generate profit as a direct or non direct result of exploration. On
March 15, 2007, the Company and Eureka signed an Assignment Agreement under
which the Company assumed responsibility for repayment of all amounts due under
the loan. The Company does not expect to generate funds from Dostyk’s operations
during the next five years to make any principal repayments on the loan. No
repayment of principal, interest and default interest has been made under the
Agreement. The loan balance at September 30, 2008 is $816,990 (2007 -
$1,166,056).





5.
            Available-for-sale
      securities





Cost
            
            
            Gross
      Unrealized Gains
            
            
            Gross
      Unrealized
              (Losses)
            
            
            Net
      Accumulated Unrecognized Gains
              (Losses)
            
            
            Market
      Value$
            
            
            $
            
            
            $
            
            
            $
            
            
            $December
      31, 2006, equity securities
            
            
            181,797
            
            
            
            36,504
            
            
            
            (51,992
            )
            
            
            (15,488
            )
            
            
            166,309Change during the year
            
            
            -
            
            
            
            -
            
            
            
            (73,864
            )
            
            
            (73,864
            )
            
            
            (73,864
            )December
      31, 2007, equity securities
            
            
            181,797
            
            
            
            36,504
            
            
            
            (125,856
            )
            
            
            (89,352
            )
            
            
            92,445Change during the period
            
            
            -
            
            
            
            31,681
            
            
            
            (35,682
            )
            
            
            (4,001
            )
            
            
            (4,001
            )September 30, 2008, equity
      securities
            
            
            181,797
            
            
            
            68,185
            
            
            
            (161,538
            )
            
            
            (93,353
            )
            
            
            88,444





6.
            Common
      stock





During
the quarter ended September 30, 2008 the Company had not issued any new common
stock.





7.
            Share
      Purchase Warrants





A summary
of the Company’s warrants outstanding at September 30, 2008 and December 31,
2007 and changes during the nine months September 30, 2008 is presented
below:





Number of warrants to Purchase
      shares
            
            
            Weighted Average Exercise
      PriceBalance,
      December 31, 2006
            
            
            8,000,000
            
            
            $
            0.713Warrants granted in 2007
            
            
            -
            
            
            
            -Balance,
      December 31, 2007
            
            
            8,000,000
            
            
            $
            0.713Warrants expire in 2008
            
            
            (8,000,000
            )
            
            $
            0.713Balance, September 30, 2008
            
            
            -
            
            
            
            -








1.
            Each
      warrant entitling the holder to purchase one additional common share of
      the Company at a price of US $0.675 per share for a period of one year
      from the May 12, 2006, closing date of the placement, and at a price of US
      $0.75 per share for a period of one year commencing on the first
      anniversary of the Closing
Date.


11
 Table of Contents


7.
            Share
      Purchase Warrants (continued)





2.
            Each
      warrant entitling the holder to purchase one additional common share of
      the Company at a price of US $0.675 per share for a period of one year
      from the May 26, 2005, closing date of the placement, and at a price of US
      $0.75 per share for a period of one year commencing on the first
      anniversary of the Closing Date





8.
            Related
      Party Transactions





Related
party transactions not disclosed elsewhere in these consolidated financial
statements include:





a.
            During
      the nine months ended September 30, 2008 Consulting Fees of $172,013 (nine
      months ended September 30, 2007 - $133,000) were incurred by the Company.
      The transactions were recorded at the exchange amount, being the value
      established and agreed to by the related
  parties.





b.
            Included
      in accounts payable - related parties at September 30, 2008 is $0 (2007 -
      $14,278) payable to directors of the Company and its subsidiary for
      consulting fees and various expenses incurred on behalf of the
      Company





9.
            Mineral
      Properties Dostyk LLP – Maykubensk area in the Pavodar Oblast of the
      Republic of Kazakhstan





During
2008 we have been evaluating our property holdings in order to determine whether
to implement exploration programs on our existing properties or to acquire
interests in new properties.





In
January 2007, the Company entered in an agreement with Eureka Mining PLC, a
company registered in the United Kingdom, to acquire an ownership interest in
the Dostyk Limited Liability Partnership, (the “Partnership” or "Dostyk"). The
Partnership holds the exploration rights to explore 14,000 square kilometers in
the Maykubensk area in the Pavodar Oblast of the Republic of Kazakhstan for
precious and base metals.





Under the
terms of the agreement with Eureka Mining PLC, the Company acquired a 51%
interest in the Partnership by paying US $300,000 (paid January 25, 2007) into
the charter capital of the Partnership. The acquisition is accounted for using
purchase accounting. As a result of the purchase, the Company acquired control
of Dostyk and consolidated the financial results of Dostyk including
consideration of a non-controlling interest. In June 2007, the Company increased
its ownership in the Partnership from 51% to 71% by contributing a further US
$700,000 (paid June 13, 2007) to the Partnership’s charter capital. On September
14, 2007, the Company increased its ownership interest in the Partnership from
71% to 90% by contributing a further US $1,000,000 to the Partnership’s charter
capital. In February 2008 the Company increased its ownership in the Partnership
from 90% to 100% by paying US $400,000 (paid February 13, 2008) to the owners of
the Partnership.





The
Company’s results of operations include Dostyk’s results of operations since the
date of acquisition. Pro forma results for the pre-consolidation period are not
presented as they are not materially different from the Company’s historical
consolidated financial statements.





As of
December 31, 2007, the Company held a 90% interest in Dostyk. The aggregate cost
of the acquisition through December 31, 2007 was $2,000,000. The following
represents a summary of the assets acquired and the liabilities assumed during
the year. Assets and liabilities at the dates of acquisition have been
translated from Dostyk’s functional currency, the Kazakhstan Tenge (“Tenge”).
The average effective exchange rate used was US$ 0.008462 to 1
Tenge.





Cash
            
            $
            1,040,115Prepaids
      and other assets
            
            
            39,540Mineral
      properties
            
            
            2,676,096Equipment
            
            
            119,341Accounts
      payable and accrued expenses
            
            
            (46,806
            )Long-term
      debt
            
            
            (1,168,818
            )Minority
      interest
            
            
            (659,468
            )Purchase
      price paid in 2007
            
            $
            2,000,000


12
 Table of Contents


9.
            Mineral
      Properties Dostyk LLP – Maykubensk area in the Pavodar Oblast of the
      Republic of Kazakhstan (continued)





During
the three month period ended March 31, 2008, the Company acquired an additional
10% interest in Dostyk for a purchase price of US$400,000. At that date, the
balance of non-controlling interest was in excess of the purchase price of
$166,499. This amount was credited against the capitalized balance in mineral
properties. As of that date, the Company owned 100% of Dostyk.





The 2008
acquisition of the remaining 10% interest in Dostyk was accounted for using the
purchase method. The aggregate allocation of purchase price to mineral
properties was $2,509,597.





During
January 2010, subject to shareholder approval, the Company agreed to sell its
ownership interest in its Kazakhstan subsidiary to a third party for $1,500,000
and other consideration.  The total value of the potential
consideration to be received has not been determined.  The only
significant asset owned by the subsidiary is the mineral exploration license
described in these financial statements.  Management continues to
believe that the value of the mineral property owned by the subsidiary has not
been impaired, however an agreement for the sale of the subsidiary for less than
its carrying value of $2,509,597 as of January 2010, would be an indication of
impairment and result in the Company recording a loss on the sale.





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





(A)
            General





This
portion of the Quarterly Report provides management's discussion and analysis of
the financial condition and results of operations to enable a reader to assess
material changes in financial condition and results of operations as at and for
the nine months ended September 30, 2008, in comparison to the corresponding
prior-year period. This MD&A has been prepared as of February 17, 2010. This MD&A is
intended to supplement and complement the unaudited interim consolidated
financial statements and notes thereto, prepared in accordance with US GAAP, for
the nine months ended September 30, 2008 and 2007 (collectively, the "Financial
Statements"), which are included in this Quarterly Report. The reader is
encouraged to review the Financial Statements in conjunction with your review of
this MD&A. This MD&A should be read in conjunction with both the annual
audited consolidated financial statements for the year ended December 31, 2007
and the related annual MD&A included in the December 31, 2007 Form 10-K on
file with the US Securities and Exchange Commission. Certain notes to the
Financial Statements are specifically referred to in this MD&A and such
notes are incorporated by reference herein. All dollar amounts in this MD&A
are in US dollars, unless otherwise specified.





For the
purposes of preparing this MD&A, we consider the materiality of information.
Information is considered material if: (i) such information results in, or would
reasonably be expected to result in, a significant change in the market price or
value of Cigma Metals Corporation's shares; or (ii) there is a substantial
likelihood that a reasonable investor would consider it important in making an
investment decision or if it would significantly alter the total mix of
information available to investors. Materiality is evaluated by reference to all
relevant circumstances, including potential market sensitivity.





This
document contains numerous forward-looking statements relating to our
business.  The United States Private Securities Litigation Reform Act
of 1995 provides a “safe harbor” for certain forward-looking
statements.  Operating, exploration and financial data, and other
statements in this document are based on information we believe reasonable, but
involve significant uncertainties as to future gold and silver prices, costs,
ore grades, estimation of gold and silver reserves, mining and processing
conditions, changes that could result from our future acquisition of new mining
properties or businesses, the risks and hazards inherent in the mining
business  (including environmental hazards, industrial accidents,
weather or geologically related conditions),  regulatory and
permitting matters,  and risks inherent in the ownership and operation
of, or investment in, mining properties or businesses in foreign countries.
Actual results and timetables could vary significantly from the estimates
presented. Readers are cautioned not to put undue reliance on forward-looking
statements. We disclaim any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.


13
 Table of Contents


We are a
mineral exploration company engaged in the exploration of base, precious metals
and industrial minerals worldwide.  We were incorporated under the
laws of the State of Florida on January 13, 1989, under the name "Cigma Ventures
Corp."





We have
no revenues, have sustained losses since inception, have been issued a going
concern opinion by our auditors and rely upon the sale of our securities to fund
operations. We will not generate revenues even if any of our exploration
programs indicate that a mineral deposit may exist on our properties.
Accordingly, we will be dependent on future
financings in order to maintain our operations and continue our exploration
activities. Funds raised in fiscal 2008 and 2007 were used for exploration of
our properties and general administration.





(B)
            Significant
      developments during the nine months  ended September 30, 2008
      and Subsequent Events





During
2008 we have been evaluating our property holdings in order to determine whether
to implement exploration programs on our existing properties or to acquire
interests in new properties.





In
January 2007, the Company entered in an agreement with Eureka Mining PLC, a
company registered in the United Kingdom, to acquire an ownership interest in
the Dostyk Limited Liability Partnership, (the “Partnership” or "Dostyk"). The
Partnership holds the exploration rights to explore 14,000 square kilometers in
the Maykubensk area in the Pavodar Oblast of the Republic of Kazakhstan for
precious and base metals.





Under the
terms of the agreement with Eureka Mining PLC, the Company acquired a 51%
interest in the Partnership by paying US $300,000 (paid January 25, 2007) into
the charter capital of the Partnership. The acquisition is accounted for using
purchase accounting. As a result of the purchase, the Company acquired control
of Dostyk and consolidated the financial results of Dostyk including
consideration of a non-controlling interest. In June 2007, the Company increased
its ownership in the Partnership from 51% to 71% by contributing a further US
$700,000 (paid June 13, 2007) to the Partnership’s charter capital. On September
14, 2007, the Company increased its ownership interest in the Partnership from
71% to 90% by contributing a further US $1,000,000 to the Partnership’s charter
capital. In February 2008 the Company increased its ownership in the Partnership
from 90% to 100% by paying US $400,000 (paid February 13, 2008) to the owners of
the Partnership.





The
Company’s results of operations include Dostyk’s results of operations since the
date of acquisition. Pro forma results for the pre-consolidation period are not
presented as they are not materially different from the Company’s historical
consolidated financial statements.





As of
December 31, 2007, the Company held a 90% interest in Dostyk. The aggregate cost
of the acquisition through December 31, 2007 was $2,000,000. The following
represents a summary of the assets acquired and the liabilities assumed during
the year. Assets and liabilities at the dates of acquisition have been
translated from Dostyk’s functional currency, the Kazakhstan Tenge (“Tenge”).
The average effective exchange rate used was US$ 0.008462 to 1
Tenge.








Cash
            
            $
            1,040,115Prepaids
      and other assets
            
            
            39,540Mineral
      properties
            
            
            2,676,096Equipment
            
            
            119,341Accounts
      payable and accrued expenses
            
            
            (46,806
            )Long-term
      debt
            
            
            (1,168,818
            )Minority
      interest
            
            
            (659,468
            )Purchase
      price paid in 2007
            
            $
            2,000,000





During
the three month period ended March 31, 2008, the Company acquired an additional
10% interest in Dostyk for a purchase price of US$400,000. At that date, the
balance of non-controlling interest was in excess of the purchase price of
$166,499. This amount was credited against the capitalized balance in mineral
properties. As of that date, the Company owned 100% of Dostyk.


14
 Table of Contents


The 2008
acquisition of the remaining 10% interest in Dostyk was accounted for using the
purchase method. The aggregate allocation of purchase price to mineral
properties was $2,509,597.





During
January 2010, subject to shareholder approval, the Company agreed to sell its
ownership interest in its Kazakhstan subsidiary to a third party for $1,500,000
and other consideration.  The total value of the potential
consideration to be received has not been determined.  The only
significant asset owned by the subsidiary is the mineral exploration license
described in these financial statements.  Management continues to
believe that the value of the mineral property owned by the subsidiary has not
been impaired, however an agreement for the sale of the subsidiary for less than
its carrying value of $2,509,597 as of January 2010, would be an indication of
impairment and result in the Company recording a loss on the sale.





(C)
            Exploration
      and Development





We
conduct our exploration and property acquisition activities from our head
office, which is located at 18, 80 Furmanova Str, Almaty, Republic of
Kazakhstan. The telephone number is +7 327 2611 026.





Our
general business strategy is to acquire mineral properties either directly or
through the acquisition of operating entities.  Our continued
operations and the recoverability of mineral property costs is dependent upon
the existence of economically recoverable mineral reserves, confirmation of our
interest in the underlying properties, our ability to obtain necessary financing
to complete the development and upon future profitable production. We are
currently concentrating our exploration activities in Kazakhstan.





Since
1989 we have acquired and disposed of a number of properties. We have not been
successful in any of our exploration efforts to establish reserves on any of the
properties that we owned or in which we have or have had an
interest.





Our
properties are in the exploration stage only and are without a known body of
mineral reserves. Development of the properties will follow only if satisfactory
exploration results are obtained. Mineral exploration and development involves a
high degree of risk and few properties that are explored are ultimately
developed into producing mines.  There is no assurance that our
mineral exploration and development activities will result in any discoveries of
commercially viable bodies of mineralization. The long-term profitability of our
operations will be, in part, directly related to the cost and success of our
exploration programs, which may be affected by a number of factors.





Russian
Federation





Haldeevskaya
License





The
Haldeevskaya exploration license covers an area of 576 km2 and is located
approximately 16 kilometers NE from Tomsk via paved highway. Excellent
infrastructure is currently in place, including, maintained tarmac access roads,
high tension power lines at 500 kilowatts per line, gravel vehicular access
roads over the project area with close-spaced, 100 meter, cut lines over the
target areas. The area is also close to the railheads in Tomsk, with links to
the Trans Siberian Railway, and all infrastructures associated with a regional
centre.





Geology
of Haldeevskaya area is represented by the mid Devonian volcanogenic-sedimentary
sediments of the Mitrofan suite, terrigenous (“black shale”) sediments of the
Jurginsk, Pachinsk, Salamat suites of upper Devonian, and the Yarsk,
Lagernosadsk stratus of the lower Carboniferous age.  The rock
formations are deformed into the linear folds with the north-north-eastern
strike and they are cut by the series of longitudinal, lateral and diagonal
fractures of different type and order.  The area is located at the
front zone of the Tomsk thrust above the granitoid intrusions that are inferred
by geophysics. Dolerite and Monzonite dikes intrude Paleozoic rocks forming the
series of dike zones with a north-western trend with an echelon-like arrangement
of some dikes and their groups.





Mineralization
is focussed into areas associated with the thrusting. Towards the end of 19th
and first half of the 20th centuries the region was one of the most prolific
gold mining spots in Russia. The coarse gold was panned from the Tom river and
the numerous drainage systems around the city of Tomsk. In late 1980 Geosphera
made its first gold discoveries in hard rock.  As a result of
the  geochemical and geophysical surveys a series of 6 highly
prospective gold soil anomalies have been outlined   Of the 6
large anomalies the area currently considered the most perspective are the
Semiluzhenskoye, Verkhnekamensk and Sukhorechenskoye prospects.  The
Verkhnekamensk anomaly is located in the eastern part of the Haldeiskaja license
on the tectonic contact between the clay shales and volcanics. As a result of
the litho-geochemical, geological and geophysical studies, conducted by Cigma,
two mineralized zones of east-west strike have been outlined and plotted at
1:20,000. These zones were traced across the area for 3 kilometres with widths
ranging from 250 to 700 meters. Within these zones 3 anomalies were found and
appear prospective for gold mineralization. The first diamond drilling program
has outlined vast areas of hydrothermal alteration, preliminary mineralogical
investigations have discovered free gold in drill core from the upper part of
the mineralization zone.


15
 Table of Contents


Tugojakovsk
License





The
Tugojakovsk exploration license covers an area of 164 km2 and
is located 25 kilometers SE from the regional centre of Tomsk via paved highway.
An excellent infrastructure is in place including excellent sealed roads, close
access to railheads and the infrastructure associated with the regional centre
of Tomsk.





The
geology of Tugojakovsk area is represented by the sedimentary rock formations of
Carboniferous age composed of carbonaceous shales, siltstones and sandstones
united under the common term "black shale". The rocks are deformed into linear
folds and cut by the series of longitudinal, lateral and diagonal faults. The
dolerite and monzonite dikes intrude Palaeozoic rocks forming a series of dike
zones controlling quartz stock works with gold mineralization.





The
Baturinsk occurrence, located within the Tugojakovsk license is composed of a
series silicified shear zones (mylonite zones) consisting of numerous, locally
intense, small quartz veinlets carrying gold. The surrounding geological units
are composed of mineralized carbonaceous shales.





Republic of
Kazakhstan





Dostyk
Area, Pavlodar Oblast





The
Company through its wholly owned subsidiary Dostyk Ltd holds high potential
Maykubinsk exploration and mining license located in Pavlodar Oblast Region in
Kazakhstan and two mineral exploration licenses in the Tomsk Oblast Region, of
the Russian Federation. In 2007 the Company was focused on exploration on
Maykubinsk license in Kazakhstan due to advanced exploration stage of this area
and high potential to discovery large-scale gold-copper porphyry
deposits.  The Company’s strategy is to concentrate its investigations
into: (i) Existing operations where an infrastructure already exists; (ii)
Properties presently being developed and/or in advanced stages of exploration
which have potential for additional discoveries; and (iii) Grass-roots
exploration opportunities.





The
region’s economy of Central Kazakhstan is predicated on mining, power generation
and agriculture. Mining consists of giant coal mining at Karaganda, Ekibastuz
and Maikube, mining of polymetallic, gold-rich volcanogenic massive sulphide
deposits at Abyz, Maikain, Alpys and Souvenir. Roads and trails criss-cross the
region to serve the agriculture and mining areas. Numerous high-tension power
lines radiate out of several power generation stations in Ekibastuz to serve
Kazakhstan and for power export to Russia.





Regional Geology and
mineralization





Central
Kazakhstan geological structure is represented by strong folded and dislocated
Cambrian-Ordovician submarine volcanic and sedimentary rocks, covered by
Silurian-Devonian sediments and Devonian felsitic volcanic suites with a whole
series of stocks, dikes and sills of various ages. Late Paleozoic rocks are
represented by Carboniferous and Jurassic marine and continental
suites.





Mineral
deposits are related in time and space to the various lithologies:


Gold-rich
volcanogenic massive sulphide (VMS) deposits associated with Ordovician
submarine volcanic rocks.


Porphyry
gold-copper deposits associated with altered sub-volcanic dioritic intrusives
presumable of Ordovician age.


16
 Table of Contents


Epithermal
gold deposits associated with quartz veins and quartz-sulphide stockworks in
Ordovician, Devonian and Permian intrusives of diorite to granite
composition.


Lead-zinc
mineralization associated with Silurian-Devonian siltstone and carbonate
beds.


Coal
deposits associated with Carboniferous marine and deltaic sedimentary
rocks.


Titanium
and zirconium-rich sands in Late Carboniferous beach sands.


Bauxite
and nickel laterite deposits formed from modern weathering of Paleozoic
limestones and Cambrian ultramafic rocks.





License and Contract
commitments





License
#785 of Central Kazakhstan area dated January 8, 1996 and Subsoil Contract #
759, dated Oct 11, 2001 belongs to Dostyk Ltd. Contract is valid until Jan 8,
2021. Exploration period expires on Dec 31, 2009. Dostyk has currently submitted
to Kazakh Government an application for exploration extension till Dec 2011. The
area of contract territory is at the present 2,774 sq km. The contract territory
will be returned to the State by December 2011 except areas, which Dostyk would
claim as commercial discoveries i.e. those prospects on which Kazakh style
resources of C1-C2 categories would be proved.





Exploration
Works 2008





March
2008 Quarter








Works
completed on each prospect in quarter March 2008


Prospect
            
            Drill
      holes
            
            
            Meters
      drilled
            
            
            Sample
      processing
            
            
            Assays
            
            
            Geological
      mapping
            
            
            USDFA,
      Au
            
            
            ICP,
      Cu,Mo
            
            
            km2Berezki
      East
            
            
            4
            
            
            
            1,398
            
            
            
            1,340
            
            
            
            1,340
            
            
            
            5,360
            
            
            
            0
            
            
            
            310,207TOTAL
            
            
            4
            
            
            
            1,398
            
            
            
            1,340
            
            
            
            1,340
            
            
            
            5,360
            
            
            
            0
            
            
            
            310,207








Berezki
East Gold-Copper Prospect





Primary Geology &
Infrastructure





Berezki
East is a part of a large-scale K-OZEK gold-copper-porphyry system with total
area of 15km2.


The
K-OZEK area is composed by strongly hydrothermaly altered volcanic and intrusive
formations with numerous geochemical gold-copper anomalies. The gold-copper
mineralization is associated with pyrite and chalcopyrite within wide-spread
zones of chlorite-epidotic alteration.





Dostyk
project is located in the North Eastern region of Kazakhstan near the Russian
and Chinese border. Infrastructure is just perfect with roads and railways
crossing the license area. The region has been mined for gold, base metals,
nickel, coal and others. Power lines with voltage up to 1,150 kW cross the
project area.





Berezki
East is located 22km away from Ekibastuz with perfect roads connection, 19km by
sealed road and 3km by dirt road. Ekibastuz is a town with 110,000 population, a
regional centre with well developed leaving infrastructure. It is the largest
coal industry centre in Central Asia with number of power stations supplying
energy to entire Kazakhstan and Asian part of Russia.


17
 Table of Contents


Exploration works &
results





Berezki
      East 2008Type
      of work
            
            Volume
            
            
            USDDrill
      holes
            
            drill
      holes
            
            
            
            8meters
      drilled
            
            m
            
            
            
            2,524
            
            
            
            369,251samples
      treatment
            
            sample
            
            
            
            2,545
            
            
            
            42,610Fire
      assays
            
            assay
            
            
            
            2,545ICP
      assays
            
            assay
            
            
            
            10,180Geol
      mapping
            
            sq
      km
            
            
            
            0
            
            
            
            0Data
      processing & administration
            
            
            
            
            
            
            
            
            
            45,200Berezki
      East total cost 2008
            
            
            
            
            
            
            
            
            
            457,061








Dostyk
      Total
            
            June
      30, 2008Volume
            
            
            USDDrilling
      (m)
            
            m
            
            
            
            7,019
            
            
            
            706,699Sample
      processing & assays
            
            sample
            
            
            
            7,245
            
            
            
            96,990Metallurgical
      tests
            
            sample
            
            
            
            
            
            
            
            0Surveys
            
            
            
            
            
            
            
            
            $
            0Data
      processing
            
            
            
            
            
            
            
            
            $
            4,625Consulting
      services, wages, taxes, administration & others
            
            
            
            
            
            
            
            
            $
            95,513TOTAL
            
            
            
            
            
            
            
            
            
            903,827








In March
2008 Quarter the Company has completed 4 diamond drill holes (DDH) for a total
of 1,398 meters with an average drill hole depth of 340 meters.





The
drilling has confirmed over 420 meters of continuity for the mineralization zone
along strike with an average width of approximately 50 meters and reaching 80
meters in places. The mineralization is characterized by the steep dipping. It
has been traced down to a depth of 350 meters and remains open both on strike
and depth. The oxidation zone extends from surface down to 40 meters and could
be suitable for free-milling and heap-leach gold-copper extraction.





·
            The
      most interesting results were obtained along drilling fence
      F2.





o
            In
      DDH Bz8, 69m grading 0.5g/t gold and 0.14% copper from 148m, including 19m
      at 1.45g/t gold and 0.2% copper





·
            Drilling Fence
      F3. Two drill holes of the fence intercepted the mineralization
      zone and confirmed that it extends from the surface to the depth of over
      180 meters below the surface with an average thickness of
    50m:





o
            In
      DDH Bz9 an interval of 80m grading 0.52g/t gold and 0.13% copper from
      surface, including 22.5m at 1.4g/t gold and 0.18%
  copper





o
            In
      DDH Bz16 an interval of 93m grading 0.51g/t gold and 0.18% copper from
      75m, including 35m at 1.11g/t gold and 0.19%
  copper


18
 Table of Contents


·
            Drilling Fence
      F10. Drilling fence F10was set to test
      the north eastern flank of the deposit and revealed the mineralization
      zone with the thickness of 60m and close proximity to the
      surface.





o
            In
      DDH Bz14 an interval of 136m grading 0.9g/t gold and 0.1% copper from 32m,
      including 52m at 2.1g/t gold and 0.2%
copper





June
2008 Quarter





The
Company continued infill and extension drilling on Berezki East, Quartzite Gorka
and Beskauga.





On
Berezki East four infill drill holes have returned same results as discussed in
March 2008 quarter and confirmed continuity of mineralization both on strike and
depth.





Quartzite
Gorka Prospect





Primary Geology &
Infrastructure





Quartzite
Gorka is a part of a large-scale K-OZEK gold-copper-porphyry system with total
area of 15km2 .The
K-OZEK area is composed by strongly hydrothermaly altered volcanic and intrusive
formations with numerous geochemical gold-copper anomalies. The gold-copper
mineralization is associated with pyrite and chalcopyrite within wide-spread
zones of chlorite-epidotic alteration. Beside Quartzite Gorka the K-OZEK area
comprises five other high-prospective gold-copper deposits with exploration
potential over three million ounces of gold equivalent.





Quartzite
Gorka is located 19 km away from Ekibastuz and 5 km away from Berezki East with
same infrastructure as Berezki East.





Exploration works &
results





Quartzite
      Gorka 2008Volume
            
            
            USDDrill
      holes
            
            drill
      holes
            
            
            
            11meters
      drilled
            
            m
            
            
            
            3,098
            
            
            
            452,308Trenching
            
            m3
            
            
            
            496
            
            
            
            2,000samples
      treatment
            
            sample
            
            
            
            3,482
            
            
            
            58,149Fire
      assays
            
            assay
            
            
            
            3,482ICP
      assays
            
            assay
            
            
            
            13,928Met
      tests
            
            sample
            
            
            
            2
            
            
            
            4,895Geol
      mapping
            
            sq
      km
            
            
            
            5
            
            
            
            167Data
      processing & administration
            
            
            
            
            
            
            
            
            
            45,200Quartzite
      Gorka total cost 2008
            
            
            
            
            
            
            
            
            
            562,719





In 2008
the Company has completed on Quartzite Gorka 11 diamond drill holes (DDH) for a
total of 3,098 meters. The drilling program was intended to explore both the
lateral and vertical extension of the gold-copper mineralization controlled by
north-west trending zone of hydrothermaly altered granodiorites. The most
representative interceptions were observed along drilling fences F3 and
F7.





The
drilling confirmed over the 750 meters continuity of the gold-copper
mineralization along strike with an average width of approximately 50-70m. The
gold-copper zone remains open on strike and to depth. The mineralization zone is
characterized by the steep dipping. It has been traced from the surface down to
a depth of 400 m and remains open. The mineralization zone usually maintains the
consistent width from the top to the bottom and varies from 30 to 120
meters


19
 Table of Contents


·
            Drilling
      Fence F0





o
            DDH Q19,119m grading
      0.36 g/t gold and 0.25% copper from 38.0m including 33.9m at 0.73 g/t gold
      and 0.41% copper from 0.1m





·
            Drilling
      Fence F1





o
            DDH Q10,143.6m grading
      0.71 g/t gold and 0.42% copper including 88.1m at 0.95 g/t gold and 0.42%
      copper from 106.0m





o
            DDH Q9,96.4m grading
      0.26 g/t gold and 0.08% copper from -45.0m including 13.8m at 0.5 g/t gold
      and 0.13 copper from -72.0m





o
            DDH Q15,72.0 m grading
      0.23 g/t gold and 0.11% copper from
172.0m





September 2008
Quarter





Dostyk
      Total
            
            September
      30, 2008Volume
            
            
            USDDrilling
      (m)
            
            m
            
            
            
            3,815
            
            
            
            370,533Trenching
      (m3)
            
            m3
            
            
            
            496
            
            
            
            2,000Sample
      processing & assays
            
            sample
            
            
            
            4,327
            
            
            
            77,850Metallurgical
      tests
            
            sample
            
            
            
            5
            
            
            
            12,238Surveys
            
            
            
            
            
            
            
            
            $
            12,892Data
      processing
            
            
            
            
            
            
            
            
            $
            31,409Consulting
      services, wages, taxes, administration & others
            
            
            
            
            
            
            
            
            $
            221,803TOTAL
            
            
            
            
            
            
            
            
            
            728,725








Works
      completed on each prospect in quarter September 2008Prospect
            
            Drill
      holes
            
            
            Meters
      drilled
            
            
            Trenching
            
            
            Sample
      processing
            
            
            Assays
            
            
            Met
      tests
            
            
            Geological
      mappingFA,
      Au
            
            
            ICP,
              Cu,
      Mo
            
            
            
            
            
            km2Beskauga
            
            
            3
            
            
            
            776
            
            
            
            0
            
            
            
            795
            
            
            
            795
            
            
            
            2,385
            
            
            
            2
            
            
            
            10Ushtogan
            
            
            7
            
            
            
            1,042
            
            
            
            0
            
            
            
            1,200
            
            
            
            1200
            
            
            
            4,800
            
            
            
            1
            
            
            
            0TOTAL
            
            
            10
            
            
            
            1,818
            
            
            
            0
            
            
            
            1,995
            
            
            
            1,995
            
            
            
            7,185
            
            
            
            3
            
            
            
            10








The
Company continued infill drilling on Beskauga with results similar to discussed
in June 2008 quarter and collected two metallurgical samples.


20
 Table of Contents


Drilling Fence
F11





The drill
holes of drilling fence F11 extended the results of the historical drilling by
intercepting a bulk mineralization zone that is characterized by impressive
dimensions:





­-
            Length
      over 2,000m


­-
            Width
      over 440m


­-
            Length
      in dip direction over 350m





o
            DDH Bg16,292m grading
      0.32g/t gold and 0.25% copper from 35m, including 52.8m at 0.35g/t gold
      and 0.29% copper





·
            Drilling Fence
      F12





On fence
F12the drill
holes have intersected down to a depth of 400 meters an extensive mineralization
zone consisting from three ore bodies. The total width of mineralization zone is
280 meters.





o
            DDH Bg15,160m grading
      0.21g/t gold and 0.24% copper from
52m





Beskauga Metallurgical
Tests





Two
metallurgical samples were processed in Almaty/Kazakhstan based KazMekhanObr
Ltd, a mineral service company with well experienced specialists and
international acceptance.





The
flotation test has returned quite encouraging results and confirmed capability
to return a commercial product. The flotation concentrate has achieved 19.7%
grade of copper and 25.6g/t of gold.








Product
            
            Yield,
            
            
            Grade
            
            
            Recovery
      %%
            
            
            Cu,
      %
            
            
            Au,
      g/t
            
            
            Ag,
      g/t
            
            
            Cu
            
            
            Au
            
            
            AgConcentrate
            
            
            2.28
            
            
            
            19.72
            
            
            
            25.80
            
            
            
            123.40
            
            
            
            88.60
            
            
            
            67.20
            
            
            
            54.78Tailings
            
            
            97.72
            
            
            
            0.05
            
            
            
            0.29
            
            
            
            2.32
            
            
            
            11.40
            
            
            
            32.80
            
            
            
            45.22Ore
            
            
            100.00
            
            
            
            0.43
            
            
            
            0.875
            
            
            
            5.13
            
            
            
            100.00
            
            
            
            100.00
            
            
            
            100.00





Beskauga
      2008Volume
            
            
            USDDrill
      holes
            
            drill
      holes
            
            
            
            6meters
      drilled
            
            m
            
            
            
            1,671
            
            
            
            243,966samples
      treatment
            
            sample
            
            
            
            1,630
            
            
            
            27,221Fire
      assays
            
            assay
            
            
            
            1,630ICP
      assays
            
            assay
            
            
            
            4,890Met
      tests
            
            sample
            
            
            
            2
            
            
            
            4,895Geol
      mapping
            
            sq
      km
            
            
            
            10
            
            
            
            334Data
      processing & administration
            
            
            
            
            
            
            
            
            
            45,200Beskauga
      total cost 2008
            
            
            
            
            
            
            
            
            
            321,616


21
 Table of Contents


Ushtogan
Gold Prospect





Primary Geology &
Infrastructure





Ushtogan
is situated in South-West corner of the license area and is represented by
320m-long linear system of quartz veining with gold mineralization discovered
and partially explored by trenches and drilling still in Soviet
times.





Ushtogan
is situated 94km southerly of Ekibastuz town with connection by gravel road. The
nearest high-voltage power line is 5 km away. There are a number of small lakes
for technical water supply.





Explorationworks &
results





The
Company has commenced drilling program on Ushtogan prospect in order to prove
historical exploration data and to collect core material for bulk metallurgical
samples. In total seven extension and infill drill holes have been completed
with following most representative results:





·
            24m
      at 1.5g/t Au from depth 34m in
DDH#U14


·
            19.8m
      at 1.4g/t in DDH#U4


·
            83m
      at 0.92g/t in DDH#U2





As a
result of this drilling program the zone been explored on its length of 250m and
remains open on strike. In dip direction the mineralization has been traced to
320m down and remains open as well.





One bulk
125kg metallurgical sample has been processed by column test with gold recovery
52% by crushing size 5mm.








Ushtogan
      2008Type
      of work
            
            Volume
            
            
            USDDrill
      holes
            
            drill
      holes
            
            
            
            7meters
      drilled
            
            m
            
            
            
            1,042
            
            
            
            152,132samples
      treatment
            
            sample
            
            
            
            1,200Fire
      assays
            
            assay
            
            
            
            1,200
            
            
            
            20,040ICP
      assays
            
            assay
            
            
            
            4,800Met
      tests
            
            sample
            
            
            
            1
            
            
            
            2,448Geol
      mapping
            
            sq
      km
            
            
            
            0
            
            
            
            0Data
      processing & administration
            
            
            
            
            
            
            
            
            
            45,200Ushtogan
      total cost 2008
            
            
            
            
            
            
            
            
            
            219,820








(D)
            Results
      of Operations





Nine
months Ended September 30, 2008 versus nine months Ended September 30,
2007





For the
nine months ended September 30, 2008 we recorded a net loss of $2,667,541 (2007
net loss - $608,380) or $0.06 per share (2007 - $0.02).





Expenses
– For the nine months ended September 30, 2008 we recorded expenses of
$2,708,684 (2007 - $685,980). This amount includes, professional fees -
accounting $3,033 (2007 - $14,373) and legal $36,953 (2007 - $78,334).
Management and consulting fees $247,761 (2007 - $220,884). Interest, bank
charges and foreign currency exchange losses were $25,382 (2007 -
$3,648).


22
 Table of Contents


For the
nine months ended September 30, 2008 we recorded exploration expenses of
$140,001 (2007 - $290,773). The following is a breakdown of the exploration
expenses by property: Maykubinsk license, Kazakhstan $140,001 (2007 - $290,773)
and Tomsk Oblast, Russian Federation $0 (2007 - $0).





Depreciation
expense – For the nine months ended September 30, 2008 we recorded depreciation
expense of $12,851 (2007 - $5,898).





(E)
            Capital
      Resources and Liquidity





September
30, 2008 versus September 30, 2007





At
September 30, 2008, we had cash of $14,248 (2007 - $1,686,796) and working
capital deficiency of $1,138,668 (2007 working capital - $1,807,965)
respectively. Total liabilities as of September 30, 2008 were $2,147,650 as
compared to $1,238,328 on September 30, 2007, an increase of
$909,322.





Our
general business strategy is to acquire mineral properties either directly or
through the acquisition of operating entities. Our consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States of America and applicable to a going concern
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. As discussed in note 1 to the
financial statements, the Company has incurred recurring operating losses since
inception, has not generated any operating revenues to date and used cash of
$2,387,332 from operating activities in 2008. The Company requires additional
funds to meet its obligations and maintain its operations.  We do not
have sufficient working capital to (i) pay our administrative and general
operating expenses through September 30, 2009 and (ii) to conduct our
preliminary exploration programs. Without cash flow from operations, we may need
to obtain additional funds (presumably through equity offerings and/or debt
borrowing) in order, if warranted, to implement additional exploration programs
on our properties. While we may attempt to generate additional working capital
through the operation, development, sale or possible joint venture development
of its properties, there is no assurance that any such activity will generate
funds that will be available for operations.  Failure to obtain such
additional financing may result in a reduction of our interest in certain
properties or an actual foreclosure of its interest. We have no agreements or
understandings with any person as to such additional financing.





Our
exploration properties have not commenced commercial production and we have no
history of earnings or cash flow from its operations. While we may attempt to
generate additional working capital through the operation, development, sale or
possible joint venture development of its property, there is no assurance that
any such activity will generate funds that will be available for
operations.





(F)
            Plans
      for Year 2008





During
the next 12 months we intend to raise additional funds through equity offerings
and/or debt borrowing to meet its administrative/general operating expenses and
to conduct work on our exploration properties. There is, of course, no assurance
that we will be able to do so.





In 2008
the Company intended to continue exploration works on prospects explored in 2007
and look for potential on further extensions as well as set a drill program on
Ushtogan prospect and others. We were planning also further metallurgical
studies to achieve commercial flotation concentrate. For purpose of resource
estimation proposed is a hydrogelogical study on three prospects submitted for
resource estimation.








Dostyk
      Exploration Program 2008Program
            
            Units
            
            
            Q-ty
            
            
            Price
            
            
            Total
      US$Diamond
      drilling
            
            m
            
            
            
            12,500
            
            
            
            107
            
            
            
            1,342,975core
      samples splitting, crushing, pulverization
            
            sample
            
            
            
            12,500
            
            
            
            11.00
            
            
            
            137,500Assays,
      incl metallurgy
            
            assay
            
            
            
            12,500
            
            
            
            15.60
            
            
            
            195,000Metallurgical
      test
            
            sample
            
            
            
            1
            
            
            
            2,850.00
            
            
            
            2,850Resource
      estimation, JORC standard
            
            prospect
            
            
            
            3
            
            
            
            25,000.00
            
            
            
            75,000Transportation
            
            month
            
            
            
            12
            
            
            
            4,500.00
            
            
            
            54,000Hydrogeology
            
            study
            
            
            
            1
            
            
            
            60,000.00
            
            
            
            60,000Subtotal
      drilling+assays+resource, etc
            
            $
            
            
            
            
            
            
            
            
            
            
            
            1,802,325Exploration
      staff salary
            
            $
            
            
            
            
            
            
            
            
            
            
            
            129,350Other
      on-site expenses
            
            $
            
            
            
            
            
            
            
            
            
            
            
            20,705Total
      exploration works
            
            $
            
            
            
            
            
            
            
            
            
            
            
            1,952,380Overheads
            
            $
            
            
            
            
            
            
            
            
            
            
            
            46,380Other
      administration expenses
            
            $
            
            
            
            
            
            
            
            
            
            
            
            67,800Sub
      total
            
            $
            
            
            
            
            
            
            
            
            
            
            
            2,066,560Sundries
      5 %
            
            $
            
            
            
            
            
            
            
            
            
            
            
            100,339Total
            
            $
            
            
            
            
            
            
            
            
            
            
            
            2,166,899


23
 Table of Contents


(G)
            Application
      of Critical Accounting Policies





The
accounting policies and methods we utilize in the preparation of our
consolidated financial statements determine how we report our financial
condition and results of operations and may require our management to make
estimates or rely on assumptions about matters that are inherently uncertain.
Our accounting policies are described in note 2 to our December 31, 2007
consolidated financial statements. Our accounting policies relating to
depreciation and amortization of property, plant and equipment are critical
accounting policies that are subject to estimates and assumptions regarding
future activities.





Depreciation
is based on the estimated useful lives of the assets and is computed using the
straight-line method.  Equipment is recorded at
cost.  Depreciation is provided over the following useful
lives:  vehicles 10 years and office equipment, furniture and fixtures
2 to 5 years.





Exploration
costs are charged to operations as incurred until such time that proven reserves
are discovered. From that time forward, the Company will capitalize all costs to
the extent that future cash flow from mineral reserves equals or exceeds the
costs deferred. The deferred costs will be amortized over the recoverable
reserves when a property reaches commercial production. As at September 30, 2008
and December 31, 2007, the Company did not have proven reserves.





Exploration
activities conducted jointly with others are reflected at the Company's
proportionate interest in such activities.





Costs  related  to  site  restoration  programs  are  accrued
over the life  of  the  project.





US GAAP
requires us to consider at the end of each accounting period whether or not
there has been an impairment of the capitalized property, plant and equipment.
This assessment is based on whether factors that may indicate the need for a
write-down are present. If we determine there has been impairment, then we would
be required to write-down the recorded value of its property, plant and
equipment costs which would reduce our earnings and net assets





(H)
            Off-balance
      Sheet Arrangements and Contractual
Obligations





We do not
have any off-balance sheet arrangements or contractual obligations that are
likely to have or are reasonably likely to have a material current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that have not been disclosed in our financial
statements.


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 Table of Contents


Item
      3.
            Qualitative
      andQuantitativeDisclosures About Market
    Risk





Our
exposure to market risk is confined to our cash equivalents and short-term
investments. We invest in high-quality financial instruments; primarily money
market funds, federal agency notes, and US Treasury obligations, with the
effective duration of the portfolio within one year which we believe are subject
to limited credit risk. We currently do not hedge interest rate exposure. Due to
the short-term nature of our investments, we do not believe that we have any
material exposure to interest rate risk arising from our
investments.





Item
      4T.
            Controlsand Procedures





Attached
as exhibits to this Interim Report on Form 10-Q are certifications of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), which are required
pursuant to Rule 13a-14 of the Exchange Act. This “Controls and Procedures”
section of this Interim Report on Form 10-Q includes information concerning the
controls and controls evaluation referenced in the certifications. This section
of the Interim Report on Form 10-Q should be read in conjunction with the
certifications for a more complete understanding of the matters
presented.





Evaluation
of disclosure controls and procedures





We
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this Interim
Report on Form 10-Q. Disclosure controls and procedures are designed to ensure
that information required to be disclosed in our reports filed under the
Exchange Act, such as this Interim Report on Form 10-Q is recorded, processed,
summarized and reported within the time periods specified by the SEC. Disclosure
controls are also designed to ensure that such information is accumulated and
communicated to our management, including the CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure.





Based on
the evaluation, our Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of our “disclosure controls and procedures” (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have concluded that,
subject to the inherent limitations noted in this Part II, Item 4, as of
September 30, 2008, our disclosure controls and procedures were not effective
due to the existence of several material weaknesses in our internal control over
financial reporting, as discussed below.





Limitations
on Effectiveness of Controls





Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls or our internal control over
financial reporting will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of a simple error or mistake.
Additional controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management override of the controls.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.


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 Table of Contents


Material
Weaknesses Identified





In
connection with the preparation of our consolidated financial statements for the
period ended September 30, 2008, certain significant deficiencies in internal
control became evident to management that represent material weaknesses,
including,





(i)
            Lack
      of a sufficient number of independent directors for our board and audit
      committee.  We currently only have one independent director on
      our board, which is comprised of two directors, and on our audit
      committee, which is comprised of two directors. As a publicly-traded
      company, we should strive to have a majority of our board of directors be
      independent.


(ii)
            Lack
      of an independent financial expert on our audit committee.  We
      currently do not have an independent audit committee financial expert on
      our audit committee as defined by the SEC.  Pursuant to Section
      407, we are required to disclose whether we have at least one "audit
      committee financial expert" on our audit committee in addition to whether
      the expert is independent of management. Since we do not have an
      independent audit committee financial expert, we have disclosed this fact;
      however, it is still the expectation that we obtain a financial expert on
      our audit committee.


(iii)
            Insufficient
      segregation of duties in our finance and accounting functions due to
      limited personnel.  During the period ended September 30, 2008,
      we had one person on staff at our executive office and two persons at our
      Kazakhstan office that performed nearly all aspects of our financial
      reporting process, including, but not limited to, access to the underlying
      accounting records and systems, the ability to post and record journal
      entries and responsibility for the preparation of the financial
      statements.  This creates certain incompatible duties and a lack
      of review over the financial reporting process that would likely result in
      a failure to detect errors in spreadsheets, calculations, or assumptions
      used to compile the financial statements and related disclosures as filed
      with the SEC.  These control deficiencies could result in a
      material misstatement to our interim or annual consolidated financial
      statements that would not be prevented or
  detected.


(iv)
            Insufficient
      corporate governance policies.  Although we have a code of
      ethics which provides broad guidelines for corporate governance, our
      corporate governance activities and processes are not always formally
      documented.  Specifically, decisions made by the board to be
      carried out by management should be documented and communicated on a
      timely basis to reduce the likelihood of any misunderstandings regarding
      key decisions affecting our operations and
  management.





Plan
for Remediation of Material Weaknesses





We intend
to take appropriate and reasonable steps to make the necessary improvements to
remediate these deficiencies. We intend to consider the results of our
remediation efforts and related testing as part of our year-end 2008 assessment
of the effectiveness of our internal control over financial
reporting.





We have
implemented certain remediation measures and are in the process of designing and
implementing additional remediation measures for the material weaknesses
described in this Quarterly Report on Form 10-Q. Such remediation activities
include the following:


•
            We
      continue to recruit one or more additional independent board members to
      join our board of directors.  We continue to recruit at least
      one additional financial expert to join as an independent board member and
      as an audit committee member.


•
            In
      addition, we will continue to update the documentation of our internal
      control processes, including formal risk assessment of our financial
      reporting processes.








Changes
in Internal Controls over Financial Reporting





There
were no significant changes in the Company’s internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the most recent fiscal quarter that materially affected, or are
reasonably likely to materially affect, our internal control over financing
reporting.


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 Table of Contents


PART
II.           OTHER
INFORMATION





Item
      1.
            Legal
      Proceedings





We are
not party to any litigation, and have no knowledge of any pending or threatened
litigation against us.





Item
      1A.
            Risk
      Factors





Not
Applicable





Item
      2.
            Unregistered
      Sales of EquitySecurities and Use of
    Proceeds





Not
Applicable





Item
      3.
            Defaults
      Upon SeniorSecurities





Not
Applicable





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





Not
Applicable





Item
      5.
            Other
      Information





None.





Item
      6.
            Exhibits





3.1.1
            Certificate
      of Incorporation incorporated by reference to the registration statement
      on Form 10SB filed on September 16, 1999 (SEC File No. 000-27355
      99712713). *





3.1.2
            Certificate
      of Amendment to the Certificate of Incorporation incorporated by reference
      to the Form 10SB12G filed on September 16, 1999 (SEC File No. 000-27355
      99712713).*





3.2.1
            By-laws
      incorporated by reference to the Form 10SB12G filed on September 16, 1999
      (SEC File No. 000-27355 99712713).
*





10.1.1
            Haldeevskaya
      Joint Activity Agreement dated August 30, 2004, incorporated by reference
      to the Form 10-KSB filed on June 6, 2006 (SEC File No.
      000-27355-06888704). *





10.1.2
            Amendment
      to Haldeevskaya Joint Activity Agreement dated April 22, 2005,
      incorporated by reference to the Form 10-KSB filed on June 6, 2006 (SEC
      File No. 000-27355-06888704). *





10.1.3
            Amendment
      to Haldeevskaya Joint Activity Agreement dated December 31, 2005,
      incorporated by reference to the Form 10-KSB filed on June 6, 2006 (SEC
      File No. 000-27355-06888704). *





10.1.4
            Amendment
      to Haldeevskaya Joint Activity Agreement dated July 7, 2006, incorporated
      by reference to the Form 10-QSB filed on August 14, 2006 (SEC File No.
      000-27355-061028644). *





10.2.1
            Tugoyakovka
      Joint Activity Agreement dated June 17, 2005, incorporated by reference to
      the Form 10-KSB filed on June 6, 2006 (SEC File No. 000-27355-06888704).
      *





10.2.2
            Amendment
      to Tugoyakovka Joint Activity Agreement dated December 31, 2005,
      incorporated by reference to the Form 10-KSB filed on June 6, 2006 (SEC
      File No. 000-27355-06888704). *





10.2.3
            Amendment
      to Tugoyakovka Joint Activity Agreement dated July 7, 2006, incorporated
      by reference to the Form 10-QSB filed on August 14, 2006 (SEC File No.
      000-27355-061028644). *


27
 Table of Contents


31.1
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of
2002





32.1
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002





99.1
            Corporate
      Governance Principles, incorporated by reference to the registration
      statement on Form 10KSB filed on November 4, 2004 SEC File No. 000-27355
      041117794). *





*
Previously filed








SIGNATURES





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





Cigma Metals CorporationRegistrantDate:
      February 17,
      2010
            BY:
            /s/ Agustin Gomez de
  SeguraAgustin
      Gomez de SeguraDirectorDate:
      February 17,
      2010
            BY:
            /s/ Waldemar MuellerWaldemar
      MuellerDirector






28